Prime Minister Vladimir Putin's introductory remarks:

Good afternoon, today we'll discuss our plans for the development of the North Caucasus. As you know, the current situation is very tough, and the recent events, the terrorist attacks, only confirm this. But this challenge makes our plans for the development of the region's economy and social services even more relevant. Today we'll focus on this.

In July, we gathered at a United Russia sponsored conference in Kislovodsk to discuss our plans for the North Caucasus, in particular, measures to strengthen the economy and social services. Several proposals put forward at that conference were incorporated in the strategy for the development of the North-Caucasian Federal District up to 2025, which we'll adopt today.

Through this strategy, we'll develop a state programme to integrate the biggest projects, implemented by the state and businesses, into federal targeted programmes. One of the priorities of this strategy is the creation of at least 400,000 new jobs in the North Caucasus.

We'll focus on construction, fuel and energy, agriculture, tourism and recreation (with a focus on resort services), as well as infrastructure, including electric power generation and transport.

In the social services, our main priorities remain education, healthcare, libraries and culture. We'll certainly back any initiatives by the public and youth associations to strengthen ties between ethnic groups and religions.

I have issued a series of instructions for this purpose. I'd like Mr Alexander Khloponin [Deputy Prime Minister and Presidential Envoy Plenipotentiary to the North-Caucasian Federal District] to report back on the progress made on these issues.

I'd like to emphasise that our strategic objective is to reverse the situation in the North Caucasus, to improve the quality of life and to make the region attractive for investors to implement far-reaching projects here. Much will depend on the development instruments we'll create here.

I'd like to remind you that we decided to increase the capital of the Investment Fund by 6 billion roubles. This money will go toward a series of projects in the North Caucasus. These include the construction of a refinery to process natural gas pumped in the northern Caspian Sea. The total cost of the project is estimated at 112 billion roubles, of which almost 3 billion roubles, 2.6 billion to be exact, will be allotted from the Investment Fund. The industrial parks of Nevinnomyssk and Budyonovsk will receive 18.7 billion roubles in total. Almost 10 billion roubles, that is 9.85 billion, will be allotted for a new plant in Kabardino-Balkaria.

In addition to this, a new branch of the Vnesheconombank will be established in the North Caucasus, and I'm asking you, Mr Dmitriyev [Chairman of Vnesheconombank] to report on your plans today. At the United Russia conference, we also discussed the projects developed by local authorities and businesses. They are ambitious and promising, but many of them are still raw, and I think your experts should provide assistance to businesses to make these projects meet the standards.

We made a decision to use state guarantees to stimulate economic activity in the region, notably to restore the agriculture and related industries in the Chechen Republic.

We've done a great deal to weaken extremism in Chechnya, and the republic is safer today than ever before, although destructive forces try to destabilise the situation every now and again, which is confirmed by their recent attempt to seize the village of Tsentoroi. Fortunately, this attempt failed. The courage that the local law enforcement agencies have shown repelling the attack shows that the situation is in safe hands. But I'd like to stress that our main focus should be the region's economy and social services.

The state guarantees I've mentioned will cover 70% of the projects. Today I'd like to hear proposals on this mechanism from the finance minister.

Receiving state guarantees should not become a bulky bureaucratic procedure. We have gained both positive and negative experience while implementing our anti-recessionary plans. As you might recall - and I'm sure you remember it pretty well - the system of state guarantees proved ineffective at the outset. I'd like everyone to consider these shortfalls and avoid them now. At the same time, we must minimise any possible risks for the federal budget.

Mr Gref (Chairman of the Board and CEO of Sberbank), I'd like you to tell us how the banks see prospective cooperation with the state on state guarantees.

Let's get down to work. Mr Khloponin, please.

Alexander Khloponin: Mr Prime Minister, taking into account the targets for the development of the North Caucasus that the president set in his Address to the Federal Assembly and following up on your instructions, the government has developed and initiated a comprehensive plan to address the region's key economic, political and social challenges, critical for national security.

The federal government and the regional authorities refined the draft for the Strategy for Social and Economic Development of the North-Caucasian Federal District up to 2025 and submitted it for government approval today. Its key objectives are expedited development of the North Caucasus, better quality of life, higher employment and stronger ties between different ethnic groups.

The development plan targets the region's key industries and infrastructure, including energy, transport, agriculture, construction and tourism, as well as public services (healthcare and education), housing, utilities, physical fitness and sports. While pursuing the plan, it is important to capitalise on the region's natural resources, climate and recreational potential. Ultimately, the strategy is aimed at strengthening a sense of national identity and the ties between ethnic groups.

Regarding the economy, local governments will be able to increase their revenue and use this money to maintain and develop public and engineering infrastructure. We plan to meet several ambitious objectives by 2025: the annual GRP growth is expected to reach 7.7% while local revenue will increase 300% and the average monthly salary by 150%, from 9,600 roubles to 23,800 roubles.

The development plan suggests the creation of over 400,000 new jobs in the region to reduce registered unemployment from 16% to 5% - quite a big challenge. I'd like to note that the average unemployment in Russia is expected to fall from 6% to 3% within the same period.

This plan will be implemented in two phases. The first phase will work to improve the local investment climate through new financial and economic stimuli, attract the resources of the Investment Fund of the Russian Federation, state-run banks and private investors to a series of projects in industry and infrastructure, and improve the system of public administration and legislation.

For the second phase, we will continue to support investment projects and embark on massive projects in public services.

Government initiatives will be implemented through a state programme, which will allow us to concentrate resources on priority projects, as well as manage and supervise the use of budget funds more effectively.

In addition to the following federal targeted programmes, The South of Russia, The Social and Economic Development of the Chechen Republic, The Social and Economic Development of the Republic of Ingushetia and 23 federal targeted programmes for separate industries, several large investment projects are underway in the region. Each of them is aimed at strengthening the economy and the public services of the North Caucasus.

In particular, the Anzhi Steklo glass container plant is being constructed in the Republic of Dagestan and an agricultural holding is being created in the Chechen Republic, which you mentioned. The latter will require about 10 billion roubles in investment.

LUKoil is managing the project for the natural gas refinery Stavrolen in the Stavropol Territory. Its total cost is about 112 billion roubles, of which 2.6 billion roubles will be allotted from the Investment Fund.

The Ural Mining and Metallurgical Company is upgrading its Electrozinc facility in North Ossetia - Alania. The investment in this project is estimated at 3 billion roubles. We plan to build the Alagir cement plant in the republic in 2012, with 6 billion roubles to be invested here.

A total of 13 billion roubles will go toward the development of the Khudes deposit of copper and pyrites in Karachay-Cherkessia in 2012 and 2013.

Plans for a series of projects were approved at the Kislovodsk conference sponsored by United Russia. Some of them are already underway, while others will be started in the near future. These projects suggest the creation of industrial parks in Nevinnomyssk and Budyonnovsk (the aggregate cost of these projects is 19 billion roubles), a facility to produce polyethylene packaging for food products in Kabardino-Balkaria (about 9.8 billion roubles), and several facilities to produce photoelectronic equipment in North Ossetia - Alania (some 2.8 billion roubles).

The government, the Bank for Development and financial authorities will soon review several initiatives, including a plan to create a complex of construction materials plants in Dagestan, which will require 1.3 billion roubles.

Rosneft's investment projects for 2011-2013 suggest the construction of an oil refinery in the Chechen Republic to process one million metric tons of oil annually. The investment for this project will total 17 billion roubles.

In addition to this, we are restoring the oil industry in the Republic of Ingushetia.

RusHydro is building spillways at the Zaramag hydroelectric power plants in North Ossetia-Alania, the Zelenchuk hydroelectric power plant in Dagestan and at a hydro plant on the Cherek River in Kabardino-Balkaria.

FGC is developing the power grid in the Chechen Republic, Dagestan, North Ossetia-Alania and the Stavropol Territory.

Gazprom has invested over 1.7 billion roubles in the region in 2010.

Leading Russian banks, including Vnesheconombank, Russian Agricultural Bank and Sberbank are involved in several projects in the region. Their credit portfolio in the North Caucasus stands at some 166 billion roubles. The banks have invested in 27 investment projects here.

Following up on presidential instructions, we shall carry out a series of measures to create tourist centers in the North Caucasus, capitalising on its natural resources, climate and recreational potential. The government plan lists several territories that offer good opportunities for the development of tourism. These include Mamison in North Ossetia-Alania, Elbrus in Kabardino-Balkaria, Matlas in Dagestan, Arkhyz in Karachay-Cherkessia and Lago-Naki in the Republic of Adygea and the Krasnodar Territory.

Based on preliminary estimates, the creation of tourist centers will require some 60 billion roubles from the federal government. In accordance with your directive, 3 billion roubles will be invested in the project this year. This money will go toward the authorised capital of the company Open Economic Zones.

In addition to the direct funding of infrastructural projects, it is planned to use other instruments of state support. For example, we will designate special tourist and recreation economic zones at several resorts and offer them tax breaks and duty benefits. This measure is expected to help us attract private investment worth over 400,000 billion roubles. We are coordinating a draft for a government resolution to create six tourist recreation zones. It is necessary to adopt this document in September. I'd like to ask you to raise this issue at one of the upcoming meetings of the Government Presidium and adopt the resolution as soon as possible.

Moving to other measures to expedite the social and economic development of the North Caucasus, we will set up the Institute for the Development of the North-Caucasian Federal District. We'll try to take advantage of the best practices gained by Vnesheconombank while implementing large investment projects that use state and off-budget funds. Mr Vladimir Dmitriyev will speak about this in detail today.

As you know, the Ministry of Finance is drafting the federal budget for 2011-2013. To attract more investment to the region, the ministry is preparing a proposal to provide special state guarantees for investment projects. This proposal also specifies additional requirements for collateral, including the regulations on transferring facilities and other assets, created during the implementation of the projects, to the Russian Federation.

The programme for state guarantees will require 60 billion roubles from the federal budget in 2011. Mr Prime Minister, I'd like to ask you to support this initiative. We discussed these issues with Mr Alexei Kudrin to enlist his support.

The government is discussing the future of Mineralnye Vody. Many facilities are almost complete, but we need an additional 3 billion roubles, of which a third is required in 2011. Construction could be funded through the federal target programme The South of Russia in 2011 and 2012. To implement the strategy, we must fight corruption and increase the efficiency of public administration.

I'd like to thank you for supporting the initiative to create a special administration system in the region, which will give local government bodies the status of district interregional entities strengthening the system of local government, increasing its transparency and rooting out corrupt practices and local interests.

The process of establishing these entities is underway. We do everything in our power to ensure the maximum accessibility of government services to ordinary people.

The Ministry of Regional Development has been charged with the coordination of the work of the federal executive bodies and their local branches. The ministry will soon establish an office in Pyatigorsk.

Turning our attention to the ongoing preparations for the 2014 Winter Olympics in Sochi, in accordance with your directive, the first annual Caucasian Games will take place in the North Caucasus in October. Their objective is to promote national sports and preserve the cultural heritage of various ethnic groups of the North Caucasus. This year the festival will be hosted by Karachay-Cherkessia.

To stimulate the development of culture and national sports in the North Caucasus, it is necessary that the Ministry of Sport and Tourism, the Ministry of Culture, the Ministry of Regional Development and the Ministry of Finance should prepare an investment plan for this event and budgeting funds for the development of the local sports infrastructure.

Personally I am all for this initiative. It has met with an enthusiastic response. Almost all republics will send their teams to the games. We didn't expect this event to attract so many athletes.

In closing, Mr Prime Minister, I'd like to report back on the progress made on the directives you gave at the United Russia conference in Kislovodsk on July 6.

I have spoken about your instructions on the strategy for the Institute for Development and state guarantees. As far as the rest of the instructions, the federal executive bodies are doing their best to implement them on schedule.

However, several of your directives require additional allocations from the federal budget, which should be provided for in the budget for 2011 and the planning period of 2012-2013. First of all, you asked the government to support primary and secondary schools. This will require 1 billion roubles. This is in addition to scholarships worth 100 million roubles, to go toward the projects of the Caucasian youth forum.

We need 800 million roubles to continue the reconstruction of Mineralnye Vody Airport in 2011, as well as 190 million roubles and 1.2 billion roubles in 2012 and 2013 respectively to build an airport in Nalchik.

 I'd like to ask you to support and authorise this initiative. The rest of your instructions are being implemented on schedule. I'll report back to you on each of them as soon as they are completed.

Thank you.

Vladimir Putin: Thank you very much.