Prime Minister Vladimir Putin chairs a meeting of the Government Presidium of the Russian Federation


"An analysis of the situation in Russia’s regions has shown once again that we have managed to maintain key positive trends in the country’s development despite the difficulties caused by the crisis <...> Yet, we cannot ignore our serious problems. Both federal and regional authorities must pay special attention to these problems and address them in the tasks they formulate for 2011."

During the meeting, Prime Minister Vladimir Putin announced that the government will provide additional funds to rebuild houses destroyed in the wildfires and pay 2.67 billion roubles in compensation from the federal budget to fire victims.

Speaking on the impact of the extreme heat and drought on agriculture, Mr Putin announced that a government resolution was signed today to subsidise interest on extended farm loans.

He also announced that he has appointed Viktor Maslyakov to lead the Federal Forestry Agency and that the possibility of placing that agency in direct subordination to the government is under consideration.

The prime minister spoke on the 67.6 billion roubles in additional funding provided to ensure that veterans of the Great Patriotic War placed on the waiting list after March 2005 will receive housing.

Speaking on the main agenda item for the day, the regional authorities' efficiency in 2009, Mr Putin said that Russia has maintained key positive trends in its development despite the crisis, though serious problems must be addressed, particularly inefficient budget spending, which is most notable in education and healthcare. On this point, he mentioned another serious problem, bloated regional and municipal administrative staffs.

Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon, colleagues.

Mr Shuvalov (addressing First Deputy Prime Minister Igor Shuvalov), could you tell us about the meeting of the Customs Commission of the Customs Union of Russia, Kazakhstan and Belarus that you attended on August 17? What was the outcome of the meeting?

Igor Shuvalov: As you know Mr Putin, the common Customs Code for the three countries, Belarus included, became effective on July 6. In Russia and Kazakhstan it had already come into force on July 1. The customs service has been working very intensively during the past few weeks, as I had reported to you. Individuals and businesses can call a hotline if they encounter any problems with the customs procedures.

At the August 17 meeting of the Customs Union Commission, we thoroughly reviewed customs clearance procedures and the processing of shipments. One of the documents the three countries signed, along with the decision to establish a single customs territory, was a protocol on confiscation. Under that protocol, the Russian customs service assumed responsibility for processing and clearing certain cargoes crossing the customs border. The list of these cargoes is quite long. There is a list of 409 items entering from Kazakhstan alone, not to mention other goods subject to antidumping and countervailing measures.

Now, since Russia has unified its customs policies with Kazakhstan and Belarus, we must also process and clear these goods. One example is used cars: we have coordinated and adopted certain policies to prevent used cars imported into Belarus and Kazakhstan from freely entering the Russian market. As a result, customs processing for shipments across the Russian-Belarusian or Russian-Kazakh border has became longer and more complex, rather than faster and easier, as we had planned. The new Customs Code and the extensive preparatory work we had done were intended to make things easier.

Russia's Customs Service also took part in the meeting, and we jointly developed the following rules, which were later approved by regulatory acts issued by the Customs Service. We established a simplified customs procedure for goods crossing into Russia from Belarus and Kazakhstan, in effect since August 18.

Goods that are permitted to freely circulate in the unified customs territory can cross into Russia without passing customs clearance in Belarus and Kazakhstan. They must, however, be accompanied by standard documents, such as a bill of lading and an invoice.

Goods manufactured in Belarus and Kazakhstan are also exempt from customs clearance when crossing into Russia, but these same documents are required.

Goods requiring customs clearance - the list of 409 products for which Kazakhstan charges a lower import tax than Russia - will be subject to simplified clearance procedures. The customs service has already developed these procedures.

The procedure for privately owned cars will be as follows. If a vehicle is properly registered in Belarus or Kazakhstan, it can cross into Russian territory unimpeded without any customs clearance if accompanied by the owner or a person with a power of attorney signed by the owner. If the vehicle is not registered - for example, if it has been taken off the register in Belarus or Kazakhstan - the owner will have to pay collateral or undergo full customs processing and pay the tax. This policy will prevent such vehicles from freely circulating in the Russian Federation.

We are preparing the relevant amendments to legal acts regulating power of attorney in Russia with regard to such vehicles, so as to ensure that the power of attorney does not include the right to sell the automobile unless the customs duty has been paid.

We believe that the problems that exporters and importers have encountered were resolved on August 18 by the joint decision of the three countries. Russia's Customs service has completed preparatory work with the customs services of Belarus and Kazakhstan. These issues were discussed at a meeting in Bryansk yesterday. The decisions were formalised by decisions of the Customs Union Commission.

Vladimir Putin: Good, thank you very much. Mr Shoigu could you now update us on the wildfire situation?

Sergei Shoigu: Mr Putin, colleagues. In the beginning of the fire-hazard period, the abnormally high temperature resulted in over 900 wildfires in Russia, covering a total area of 220,000 hectares.

Five thousand more fires broke out, with a total area of another 200,000 hectares. As of today, 98% of these fires have been extinguished.

As of August 20, there are 288 active fire zones burning on an area of 9,000 hectares, which is far below the average for previous years.

The fire situation has been stabilised nationwide; the only region where the state of emergency has not been lifted is the Ryazan Region.

A 166,000-strong force was mobilised and equipped with 35,000 pieces of equipment to fight the fires. Their efforts ultimately stabilised the situation and prevented the fires from intensifying.

Their effort has put an end to the fire threat in over 4,000 towns and villages with a population exceeding 500,000 people. They prevented the spread of wildfires to strategic facilities vital to national security.

Therefore, I propose downgrading the alert level at firefighting headquarters from emergency to high alert. The forces and equipment may return to their regular locations except the pipeline-laying brigades, which have orders to continue irrigation in the Moscow Region until there is a functional water supply system in place, complete with pump stations, to deliver water to local peat bogs.

Vladimir Putin: This work should certainly be continued, so as to minimise the threat that a disaster like this will happen again in the future, to protect the Moscow Region residents from another ordeal like the one they went through this summer. Therefore, you should continue spending wisely the funds allocated for this purpose. Also, as we had agreed, you and Moscow Region officials will draft proposals for further efforts and their financing. This should be a comprehensive systemic effort, along with implementing our earlier decisions to provide more equipment to the Emergencies Ministry brigades and administrative decisions to tighten control of forests.

As you know, we are working on a plan to make the Federal Agency for Forestry directly subordinate to the government. I also made a personnel decision today to appoint a new head, Viktor Maslyakov, to lead the agency.

I also signed a government resolution amending the July 30 executive order. We replaced certain wordings, as proposed by the Regional Development Ministry: we replaced "forest fires" with "wildfires," because considerable damage to people and property came from wildfires spreading across the grass rather than forest. That did not make much difference to the people though - they lost their homes anyway.

We have allocated an additional 2.67 billion roubles from the federal budget based on requests from the regions. I am asking the Regional Development Ministry to work closely with regional governors and ensure that the work is completed and all their plans are executed in full.

There is another issue related to the Regional Development Ministry - the provision of housing to WWII veterans who applied after March 2005. We expected their number to be around 30,000. Initially, we registered 28,000. But then the waiting list expanded to 119,000, which significantly exceeded our expectations.

As of today, there are still 66,681 people entitled to new housing. To meet all of our commitments to our war veterans, I signed another executive order, allocating additional 67.6 billion roubles for this purpose.

Now I would like to hear from Viktor Basargin. Could you tell us how this work is progressing? What is the outlook?

Viktor Basargin: Indeed, Mr Putin, the regions have been waiting for these instructions on additional funding. As I reported earlier, there was a disruption in funding in some of the regions at the end of June. The first tranche of 34.5 billion roubles had gone to finance housing construction, but then some of the regions started experiencing minor delays, while our goal was to keep up the momentum we had gained in providing housing for WWII veterans.

As you said, there were 119,000 people on the waiting list as of July 1. According to preliminary estimates, the number reached 128,000 by August 1. Nonetheless, we've already provided some 38,000 flats for those who applied after March 1, 2005. At this point, 63 regions are working ahead of schedule. The leaders include the republics of Mordovia and Tatarstan. Eighteen of the regions are lagging behind slightly, but I hope they will catch up soon.

For the first time in the past month, we've seen a decline in the number of WWII veterans applying for housing. This fact, as well as our current cooperation with the regions, gives us hope that we'll be able to deliver on our commitment to provide housing for 90% of all the veterans placed on the waiting list after March 1, 2005.

Since we've raised the issue of fires, I'd like to emphasise that the recent wildfire disaster will not affect the programme to provide housing for WWII veterans. Both of these challenges are being met in full measure.

Vladimir Putin: We recently held a meeting on progress in housing construction in Russia. It was pointed out at the meeting - and I'd like to reaffirm this point once again, echoing the minister - that despite the additional budget strain resulting from the need to restore housing damaged or destroyed by wildfires, all of our housing programmes for all categories of citizens, whom we've been talking about a lot in recent months (military personnel, WWII veterans, and so on), will be implemented in full.

While we're on the topic of wildfires, another problem related to these record-high temperatures is drought, and its consequences for agriculture. A resolution was signed earlier today on subsidising interest rates on extended loans to drought-affected agricultural companies. The full amount of these loans, estimated at 127 billion roubles, is eligible for an extension. In 2010, we'll allocate additional 2.6 billion roubles for this purpose; and over the next two years, 7.9 billion roubles will be released annually.

Mr Zubkov, please comment on this decision.

Viktor Zubkov: Mr Putin, colleagues, this resolution is indeed very important and it has been eagerly awaited by agricultural producers in Russia's regions. The document represents just a part of the measures that were approved at the Government Presidium meeting in early July and are currently being implemented by the government. The resolution you signed today authorises the government to subsidise part of the interest on short-term and investment loans that can be extended for up to three years. In the regions affected by the drought - and there are over 30 such regions - this will make it possible to reduce the debt burden on loan recipients, restore their ability to make payments and provide the necessary financial conditions for seasonal work - all in all, to secure the foundation for the next harvest.

Major banks that lend to agricultural producers, such as Rosselkhozbank, Sberbank, Vnesheconombank, VTB bank and Gazprombank, have confirmed their willingess to extend these loans for up to three years. Mr Putin, you have already mentioned the figures, with 2.6 billion roubles planned for this year and 7.9 billion to be allotted annually in 2011, 2012 and 2013. These are not additional funds from the federal budget. They will come from the Agriculture Ministry's budget for this year and from 2011 through 2013. I believe that these measures along with other support measures will have a positive impact on the stability of the agriculture sector.

I would also like to mention other measures to support the sector. To date, the regions have received a total of 14.4 billion roubles of the 20 billion planned, while regional authorities have allocated some 7 billion roubles to support rural areas. I believe another 5 billion roubles will be allocated as direct subsidies in August and the 20 billion roubles promised by the government will go to support the regions suffering from drought.

The next tranche, totalling 15 billion roubles, will be released in October and November. Given that we have developed measures concerning distribution of feed grain from the intervention fund, we will take this step as soon as we deem it necessary. All these efforts along with today's resolution will allow agricultural producers to work with greater confidence.

Vladimir Putin: Good. Mr Zubkov, I would ask to you to pay closer attention to the current situation in the industry and agricultural markets and develop proposals as the situation demands in your capacity as head of the interdepartmental working group. We have discussed a number of additional support measures. Would you please mention the major efforts.

Viktor Zubkov: The group holds its weekly meetings on Friday, normally as a video conference with regional officials. We are fully aware of the current situation in the regions. We take advice from regional authorities to develop corresponding measures. A series of measures is being implemented, but there may be additional proposals, which are currently in the works and may be presented to you for your approval.

Vladimir Putin: Good. Thank you. In July and August, the government carried out a planned pension indexation. (Addressing Health and Social Development Minister Tatyana Golikova) Ms Golikova, will you elaborate on this issue. How is the Pension Fund's collection of revenue and insurance premiums going? This function has been transferred from tax agencies to the fund. How is work going?

Tatyana Golikova: Mr Putin, colleagues, starting July 1 we increased social pensions starting 1, and we conducted our annual recalculation of the pension insurance component on August 1 in accordance with the law On Labour Pensions in the Russian Federation, depending on citizens' individual records and individual account receipts depending on the insurance premiums collected.

This is the second adjustment since January 1, 2010. While in the past this was a declarative measure, now it is obligatory. The effort has resulted in 12.4 million (or 35.4%) of Russia's pensioners receiving higher pensions. The average increase totalled 142 roubles, with the highest increase in pensions occurring in the Far East and Northwestern federal districts. The adjustment resulted in an average pension of 7,633 roubles as of August 1, 2010, while the average labour pension stood at 7,844 roubles, showing a 1,530 rouble increase compared to December 31, 2009. Regarding the average old-age pension, it totalled 8,212 roubles, which represents a 1,582 rouble increase compared to December 31, 2009.

Regarding the management of insurance premiums, which have been handled by state non-budget funds since January 1, let me remind everyone that insurance premiums paid to the Pension Fund and mandatory health insurance funds are handled by Russia's Pension Fund, while contributions to the Social Insurance Fund are managed by the fund itself. As for the Pension Fund, the premiums have grown by 47.6% compared to the first six months of 2009, which is partially due to amendments to the law and transferring the unified social tax to the Pension Fund budget. If we eliminate this amendment, the rise in insurance premiums was 3.4% compared to what we actually planned and received.

Regarding mandatory health insurance premiums, they have increased by 7.4% for the federal fund and 8.4% for regional funds compared to the corresponding period last year. In addition, we have managed to improve our collection of defaulted payment occurring from 2002 through 2009, which amounted to 92.8 billion roubles as of January 1, 2010. Now it stands at 87.7 roubles, with insurance premium debt reduced by 5.5%. We will continue this work. As of August 17, 2010, we collected 57.1% of the annual insurance premiums planned for the Pension Fund budget. We are implementing all the decisions planned for the fund's budget - both to increase and recalculate pensions. Also, I should note that despite the valorisation, or major recalculation, occurring on January 1, 2010, the measures are still in force.

Citizens who wish to receive detailed information on their pension calculation and who need to adjust the information in their employment record book can do so at the Pension Fund's local offices. This work is being carried out as planned.

Vladimir Putin: Good. (Addressing Vitaly Mutko) Mr Mutko, will you report on the FIFA Inspection Committee's visit.

Vitaly Mutko: Mr Putin, colleagues, FIFA's Inspection Committee was in Russia from August 16 till August 19. Russia was the second European country after Belgium and the Netherlands the committee has visited, and they will be visiting England, Spain and Portugal next. The committee of six people, headed by the president of the Chilean Football Federation, considered Russia's ability to host such large tournament.

During the almost three days, the committee visited St. Petersburg, Sochi, Kazan and Moscow. And during these three days - it was a very tight schedule - we provided them with the all the necessary information about Russia's capacity, the proposed schedule for the tournament, and infrastructure projects. We also introduced them to the Heritage World Cup programme.

And finally, the meeting with you, Mr Putin, was held on August 17. That was the key moment, during which Russia's guarantees on holding the tournament as well as two new guarantees were confirmed. The latter two, which include visa-free admission to the country and providing transportation to fans with tickets, had a huge impact on the perception of our application and Russia's capabilities.

FIFA's inspectors were quite satisfied with our work. I would like to mention that the regional governors and heads as well as city mayors played an important role in the visit. Demonstrating this kind of unity, as we have today, between federal and regional authorities to organise and hold the tournament is really important.

That's why I believe that the visit was a success. They will have to compile a thorough report on our capabilities in late September. I can assure you that the facilities we showed, the dynamics of our infrastructure development made a good impression.

This development includes the building of stadiums, renovating airports, and moving forward with other infrastructure projects. The committee was satisfied in general, and all their questions were answered. We saw the committee off yesterday.

I would like to add that the final part of the process awaits: we will have to represent our country during the meeting of FIFA's Executive Committee on December 2. But until then, Mr Putin, we will continue promoting our bid among the executive committee's members and at the international level as well. The committee received exhaustive information. And I hope they will report back to the Executive Committee with positive conclusions and recommendations.

Vladimir Putin: Good. Thank you. Now, let us say a few words about the agenda. I'd like to spend some time discussing the main topic in some detail. We will discuss today the report of the Ministry of Regional Development on the efficiency of regional authorities last year in their critical areas of responsibility: education, healthcare, housing and utilities, and creating the conditions necessary to reach economic and entrepreneurial targets, keep jobs and create new ones.

This is the third time we are evaluating the work of regional authorities. These evaluations give us comprehensive information, highlight the problems of regional development, and show who is showing the energy necessary and who is biding their time and, much to our regret, is reluctant to tackle practical reforms and clings to outdated managerial methods.

I would like to note that the report paid special attention to the pace of work in the regions. I am glad to say that many regions have caught up with our long-established leaders and made good progress the last two years in the development of key social and economic sectors and implementing cutting-edge managerial know-how. These are the Omsk and Voronezh regions, the Perm Territory, the Yaroslavl, Kemerovo, Ulyanovsk, Tambov and Pskov regions, and the republics of Bashkortostan and Adygea.

On the whole, an analysis of the situation in Russia's regions has shown once again that we have managed to maintain key positive trends in the country's development despite the difficulties caused by the crisis. Death rates are continuing to decline in the overwhelming majority of regions. There are more births, and life expectancy is growing. It has reached 69 years now.

Many regions have succeeded in raising real wages, reducing poverty and curbing unemployment.

The number of people working in small and medium-size businesses has for the first time exceeded 25% of the total economically active population. This is a very good sign, in my opinion.

Eighty percent of healthcare providers have transitioned to the new remuneration system in 38 regions. As for education, 79 regions have fully or partly introduced cutting-edge material incentives.

Per capita financing of education is expanding. Fifty-five regions have transferred over all their educational institutions to this system, and another twenty are finishing the process.

Teachers' and doctors' wages are growing and services are improving where such reforms are being actively implemented.

Yet, we cannot ignore our serious problems. Both federal and regional authorities must pay special attention to these problems and address them in the tasks they formulate for 2011.

What does this mean? First, despite all the measures we are taking, there is still far too much inefficient budget spending, as we have said on several occasions. This is especially conspicuous in education and healthcare, with a clear negative correlation: the more we allocate to these sectors the more money is spent with no effect.

In 2009, total inefficient regional and municipal spending - squandered money, essentially - was 415 billion roubles nationwide, education accounting for 142 billion of this! You know how it is: when it concerns small sums, it might appear all right - a small sum is misspent here and another there - but 142 billion roubles is enough to raise teachers' salaries by an average 27%, or to build just under 400 new schools.

Twenty-eight regions have not yet even started transitioning to the new remuneration system in healthcare. Forty-seven regions are not yet using single-channel funding in this sector. Eight regions have not begun to introduce per capita financing in education. Limited labour efficiency, inefficient employment patterns and obsolete managerial methods persist in the public sector, resulting in inadmissibly low wages and the deplorable quality of services in many regions. The occupational structure leaves much to be desired.

For instance, in the education sphere, so-called subsidiary personnel (administration, accounting, supply and other services) makes up half of the entire school staff. Things were quite different in healthcare and education in Soviet times. This means that a significant portion of funds is spent not on education proper but on maintenance and support.

We have spoken a great deal about efficient social welfare spending and the introduction of targeted aid. According to available estimates, more than 40% of social allowances and other benefits go to people who do not belong to disadvantaged groups, which means that welfare is distributed according to formal bureaucratic principles in many instances as before, while what we need is to work with people, with every family, to help those who need it, instead of spreading benefits like butter on a toast - the layer gets so thin you can't see it anymore.

There is a lot of inefficient spending of regional budgetary funds. As you know, housing and public utilities present one of the biggest problems. Such expenditures exceed 11% in this field, which was 99 billion roubles last year. So there is no improvement - the sum was the same in 2008. The wear and tear of the municipal infrastructure remains the same 60%. 39% of utility housing and providers are operating at a loss. They are mainly concentrated in the regions where the housing reform is proceeding at the slowest pace. According to polls, less than 25% of residents are content with the quality of municipal services, as you know quite well.

Let's discuss mass housing construction.

As you know, we recently had a meeting of the government commission on regional development in Volgograd. The subject of the meeting was removing administrative barriers in the construction industry. I asked our local colleagues, the Volgograd authorities, why so few land plots had been allotted for construction, and why it took so long to allot a land plot. The answer was typical: they referred to objective difficulties, the complicated situation in the sector, lack of interest from businesses, and so on, and so forth.

The general prosecutor's office conducted an audit. What were the results? The general prosecutor's office is of the opinion, and I think it is hard to disagree with them, that the main reason lies in bureaucrats' insatiable greed and the utterly corrupt and non-transparent process of allotting plots. It is striking that the Volgograd administration has allotted only 28 plots out of the total 600 on a competitive basis over the course of two and a half years! All the other plots were allotted on non-transparent personal decisions. Bureaucrats and people close to them got land en masse. When a plot was allotted for an investment project, interested companies had to shoulder extra burdens. Even after dealing with those forced obligations, they still did not receive the land. Such practices must be eradicated. I repeat, we intend to monitor every region implementing large-scale housing construction programmes, because if such management persists we will have no large-scale construction and no affordable housing in this country.

I have to mention another serious problem - bloated regional and municipal administrative staffs and the extravagant costs associated with maintaining them. A majority of last year's regional anti-crisis plans envisaged administrative optimisation. All told, the regional administrative staff has been reduced by 4% and municipal staff by 2.5%. It is the right thing to do, but it is proceeding at a snail's pace. It is worth noting that spending on staff increased by 6% though staff size decreased. Please take note of this. The reduction was 4% while costs rose by 6%, and inefficient spending on public management totalled 83 billion roubles.

I think that the work to make the managerial staff smaller and more efficient, and to optimise its costs, should go on. As to the federal administrative staff, we will reduce it by 20% within three years, as we have announced.

I want to say by way of a conclusion that we will continue to analyse the performance of regional authorities. We don't mean meticulous observation, though a reasonable degree of control is necessary. The heart of the matter lies elsewhere. First, objective evaluations are necessary so that others can emulate the best practices of the regions. Second, we need them to establish a just and flexible system of interbudgetary relations so as to encourage regional authorities to implement reforms.

I want to say that we will establish targeted grants based on the results of today's analyses. These grants will go to the twenty Russian regions that increased their efficiency the most last year.

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