The meeting participants considered the draft law on licensing, which will considerably ease the procedure of license acquisition, increasing its transparency. The law will also significantly reduce licensable types of activity.
Speaking of the issue of land use fees, Vladimir Putin noted that the rates are unreasonably high in certain municipalities.
The prime minister also said he had signed the Strategy for Mortgage Lending Development through 2030. The Strategy aims to make housing affordable for at least 60% of Russian families by 2030 by ensuring adequate housing prices, favorable mortgage terms and high incomes, Deputy Prime Minister Alexander Zhukov said.
Economic Development Minister Elvira Nabiullina reported a drop in the unemployment rate in the country from 9.2% in January to 6.8% in late June.
Transcript of the beginning of the meeting:
Vladimir Putin: Mr Zhukov, I've just signed the Strategy for the Development of Mortgage Lending through to 2030. Your comments, please.
Alexander Zhukov: Mr Prime Minister, ladies and gentlemen, this strategy sets out the long-term objectives for the mortgage market and the basic measures to be taken in this area through 2030.
The strategy is designed at making housing, primarily economy class housing, more affordable. This programme will bring long-term financial resources into the mortgage market, including retirement savings, insurance companies' resources and money from other institutional investors.
The main objective of the strategy is to make housing affordable for 60% of Russian families by 2030 through higher incomes and more favourable mortgages. This will take time, of course. As of 2009, only 17% of families had an opportunity to take out a mortgage. But the percentage of such families should rise gradually, to 30% by 2015 and 50% by 2020. Our end goal is 60% in 2030.
The percentage of housing transactions that involve a mortgage should increase from today's 12% to 50%. The average interest should fall to just two or three percentage points above the inflation rate. At present this figure is about 5% or 6%. The mortgage payment period should increase from today's 16.5 years to 30 years in 2020.
Vladimir Putin: Twenty-five years would be good enough.
Alexander Zhukov: Both twenty-five and thirty years are within reach. These are the basic provisions of the strategy. We are working on measures to meet these objectives.
Vladimir Putin: Good. How high are average mortgage interest rates now?
Alexander Zhukov: First, I'd like to note that the mortgage market is recovering after the decline last year due to the financial crisis. Some 85,000 mortgage loans worth over 105 billion roubles have been issued in the first five months of 2010, which is 136% more than in the first five months of 2009. The average interest rate has fallen from 13.7% to 13.4%.
Vladimir Putin: From 13.7% to 13.4%?
Alexander Zhukov: Yes.
Vladimir Putin: That's not much.
Alexander Zhukov: That's true. However, interest rates on loans issued in foreign currency have seen a more significant decrease, from 12.7% to 11%.
Vladimir Putin: Sberbank executives told me they issue loans at between 10% and 12%...
Alexander Zhukov: Mr Prime Minister, I think interest rates will fall considerably in the second half of the year, and there are two reasons to assume so. First, inflation has fallen this year, and second, we have invested a great deal in this sector, through the Bank for Development. And the money has been received...
The percentage of mortgage loans issued by the five largest banks, notably Sberbank, is decreasing. Smaller banks are coming into the mortgage market. The second trend we have noted is that more lending agencies are lowering initial premiums. The reference point here is 30%, but in some programmes the initial premium has been cut to 20%, or even 15% and 10%. However, interest rates are still pretty high.
Vladimir Putin: An increase in real disposable incomes should also give a boost to this sector. Moreover, overall, we are still seeing good economic trends. There's an increase in industrial production, GDP and real incomes. Ms Nabiullina, what are the figures for the first six months of the year?
Elvira Nabiullina: In the first six months of the year the economy has grown by 4.2% compared with the first six months of 2009, which in principle is good for coming out of the downturn. Positive trends continued through June. Our ministry estimated that the economy grew 4.9% more in June 2010 than in June 2009. As far as the economic growth by month, the economy grew by 0.3% in June compared with May. This number takes into account all seasonal factors. Industrial production grew by 10.2% in the first six months of the year, with manufacturing increasing by 14.3%. These are good trends for industrial production.
Vladimir Putin: So manufacturing is growing more quickly.
Elvira Nabiullina: Yes. And the positive trend continued into June, when overall industrial growth reached 9.7%. This figure rises to 14% in the manufacturing sector if we take into account just June and not the first six months of the year as a whole.
The automotive, chemical and pulp-and-paper industries also grew significantly in June.
Nevertheless, the construction materials, steel and petrochemical industries experienced weak growth, and actually shrank slightly partly due to seasonal factors.
Exports have been one of the main factors behind the economic growth of these last months. They increased by 50.1% in the first six months of the year. Exports are a powerful engine for economic growth.
And now domestic demand, consumer spending and investment are becoming increasingly important as engines of economic growth. Consumer spending is growing steadily, as shown by the developments in retail, which grew by 3.4% in the first half of the year, and by 5.8% in June compared to the same month in 2009. Seasonal factors also play a role here, as does growth in real incomes, of course. Real wages grew by 4.4% and people's disposable incomes by 4.8% in the first half of the year.
Though investment has continued to increase, this growth is unstable. Investment increased only 1.3% in the first six months of this year as compared to the same period in 2009. This shows that our measures to improve the investment climate, reduce administrative barriers and determine the future trends in government investment in infrastructure are of critical importance.
Inflation is another important indicator. Prices increased by 4.4% in the first six months of the year, as compared to 7.4% in the first half of 2009. That has helped reduce interest rates on mortgages, as Mr Zhukov has mentioned.
I want also to say a few words about the situation in the labour market, which reflects changes in the overall economic situation. There were 5.2 million unemployed in the country by the end of June, which accounts for 6.8% of the entire workforce. In January that number was 9.2%. So unemployment has fallen dramatically. For example, registered unemployment decreased in 74 regions last week.
Vladimir Putin: Mr Sechin, I asked you to see how things were going at Uralmash. Did you visit the facility? Please.
Igor Sechin: Mr Prime Minister, I visited Yekaterinburg at your request, and took part in the opening ceremony for the Innoprom 2010 exhibition. The exhibition was a great success, and we think it should become a regular event. Please support it next year.
I also took advantage of my visit to Yekaterinburg to visit the Uralmash production facility, as you requested. The company is doing well, and has in fact regained its place as a major Russian oil derrick manufacturer. It has fulfilled its first contract to build an oil derrick for Gazpromneft. Moreover, additional contracts were signed while I was there: a contract with the Ariel Group and one with a Syrian oil and gas company. These contracts will provide the means to develop the production facility.
Building and installing the oil derrick accounts for roughly 70% of the contract, while future work makes up the other 30%. The company will go on with this work in order to acquire necessary technology and the opportunity to work unhampered.
The oil industry is very optimistic about the situation in Uralmash, and, Mr Prime Minister, we think the company can attract many more contracts.
Vladimir Putin: What sort of contracts does the company have?
Igor Sechin: The company's contract portfolio is generally diversified. It has foreign and Russian-based companies as clients. Previously there was no competition with, say, Chinese suppliers, but now with the commissioning ...
Vladimir Putin: You mean railway car production?
Igor Sechin: Yes. For instance, Surgutneftegaz is actively considering a possible contract with Uralmash, and this week a LUKoil delegation will visit the company for firsthand information and to work out their agreements. We will keep a close watch on this situation, Mr Putin, and report back to you about the prospects quite soon.
Vladimir Putin: Good. We have drawn up a preliminary plan to develop and support the company. Please keep a close watch on this situation as well.
Igor Sechin: I will, Mr Putin.
Vladimir Putin: Mr Zhukov, you have just visited Armenia and discussed, among other matters, the possibility of using their sport facilities to train our Olympic teams.
Alexander Zhukov: Yes, Mr Putin, I was just in Armenia, where I met with the president and the prime minister. I also signed a cooperation agreement between the Russian and Armenian Olympic committees.
I visited the Tsakhkadzor sport centre, which was chosen as the main centre for alpine training of athletes in the Soviet Union and proved to be very effective and extremely important for major competitions. Unfortunately, after the Soviet Union it turned out that Russia lacked an equivalent location.
We agreed to use the centre on a joint basis. Our Armenian colleagues are willing to give our athletes the opportunity to use the centre to train for major competitions.
In turn, the contract also allows Armenian athletes to train in Russia. I think it will be fruitful partnership.
Vladimir Putin: Nevertheless, we have similar facilities in the Caucasian Mineral Waters region. I ask the Defence Ministry and the Ministry of Sport and Tourism to sort out all the ownership issues. And I ask you, Mr Zhukov, to do everything you can to offer a development programme for this sport centre.
Alexander Zhukov: I will.
Vladimir Putin: The centre is at a medium altitude, and needs to be tidied up so that our athletes can use it.
Alexander Zhukov: Okay, Mr Putin. This facility is also very important for training, though it is a somewhat lower attitude than Tsakhkadzor.
Vladimir Putin: I discussed the matter recently with the defence minister. We should actively bring the Ministry of Sport and Youth Policy into this project. All administrative issues should be settled promptly so that we can repair and use the centre.
Alexander Zhukov: Good.
Vladimir Putin: And now let's turn to the agenda. Today we will discuss the draft Federal Law on Licensing. Let me repeat its key provisions once again. First, the law envisages further phased reduction of the number of business types subject to licensing requirements, from 110 to 49. By way of comparison, let me remind you that there were 1,200 types of business subject to licensing requirements in 1998, which meant that practically everything needed a license.
More than that, the new law will start the important process of harmonising our licensing law, which is still fragmented. The basic regulations for licensing are contained in 14 separate, industry-specific legislative acts.
The abrogated licensing procedures will be replaced by other, widely used economic regulations, especially mandatory liability insurance for manufacturers and the introduction of new technical regulations.
Second. There are certainly still areas where licensing is justified and necessary, but even here the procedure for obtaining a license will be greatly simplified and made more transparent. Businesses will have the right to choose the specific services they will provide within the scope of the licensed activity. This will reduce the time and financial costs associated with obtaining several comprehensive licenses at once.
Instead of oftentimes mindless and repetitive paperwork, we will focus on rigorous and effective methods of enforcing compliance with licensing requirements. We have discussed this in the context of healthcare and education, and now we must make it into law. All service fees to obtain a license, other than taxes that go to the state, will be prohibited, which is also of critical importance. We have talked about this long enough, and I want to say once again that we will make this into law very soon.
Last but not least, beginning on January 1, 2011, Russians will be able to complete a significant portion of licensing procedures electronically, allowing people to file applications and submit the relevant paperwork without camping out on the office doorstep.
I ask the Ministry of Economic Development to develop an effective system of oversight for government agencies' licensing procedures, and, if necessary, make further proposals to reduce licensing requirements.
The next item on our agenda involves setting fees for leasing land owned by the federal and municipal governments. Basically, this means leasing costs and land taxes.
Let me remind you that Russia has a total area of 1.7 billion hectares of land. And here's the important part: more than 92% of this land is owned by the state and the municipal governments, 7% is owned by individuals, and less than 1% belongs to legal entities. Seven percent of state-owned and municipal land - approximately 113 million hectares - is leased.
Obviously, proper management of revenues from the leasing of government-owned land is a major source of income for all levels of government to replenish their budgets. Such a resource demands thrift and responsibility; we cannot let it be wasted.
At the same time, we cannot follow the simple formula of collecting as much as we can from taxpayers. I believe that the use of government leases will have a far greater long-term effect as a tool to support small and medium-size businesses, bring government land into commercial circulation and encourage the construction of private housing. This means that leasing fees should be reasonable, appropriate for the economic situation and affordable for businesses and private persons. We need to establish a system that balances the need to replenish government budgets with the interests of those who lease the land.
What do we have in this area today? First, there are no clear procedures and no clear methodology in determining the value of land in the constituent entities, which in most cases serves as the basis for calculating leasing fees and land taxes. As the result, regions often make arbitrary, totally ungrounded decisions to increase land prices by 200% or even 400%. Believe it or not, the price of neighbouring land occasionally varies by several hundred percent.
That is why it is necessary to continue compiling all legislative acts and departmental regulations used to evaluate land value for the land cadastre, and develop the most objective methodologies and principles. More than that, federal agencies should provide constant oversight of the situation in this field. These sorts of transparent mechanisms should also be applied to calculating leasing fees.
At present, leasing fees differ significantly not only within the same region, but also within the same district or even municipality.
For nearly identical land, some tenants pay bargain prices while others must give the shirt off their backs. I think the Ministry of Economic Development and the Federal Anti-monopoly Service could do a lot of work on this situation. We must strictly punish any attempts to unjustifiably inflate leasing fees for federal or municipal land.
Now, let us talk about the land tax. It's easy to understand the desire of local governments to set the land taxes as high as possible, because the proceeds go to the municipal budget. However, this all too often increases the tax burden on businesses and hampers long-term investment projects. Thus, local governments gain a rouble today to lose dozens or perhaps even hundreds of thousand roubles tomorrow as they rob themselves of potential tax revenues.
So I call on our colleagues to be more flexible about land taxation, lower rates to support social projects, small and medium-size business initiatives and innovative industries. In the future, we will have to take all these nuances into consideration as we shift from the land tax to real estate taxes.
Let us get down to business.