Transcript of the beginning of the meeting:

Vladimir Putin: We recently met at a meeting in Syktyvkar and agreed to talk about your region's problems. What is the situation like?

Ilya Mikhalchuk: Mr Putin, first of all, I would like to say that at our previous meeting fair criticism was made of wage arrears. But first I want to report that since March of this year, the number of unemployed has fallen from nearly 20,000 to 15,000, or by about 25%. In March 2010, unemployment was 2.9% and today it is 2.3%.

Now for the wage arrears, which amounted to 113.4 million roubles; today, they are already down to 68 million roubles. I would say that 95% of such companies are either bankrupt or undergoing bankruptcy proceedings. Their number has decreased: in March, there were 21 of them and now there are 14. These companies have virtually no assets, but focused, comprehensive work is in progress with the bailiffs on competent control of the sale of property for priority debt repayment.

The government's decision to subsidise interest rates and lending was of great assistance to the region's companies, especially in the timber industry, as you pointed out at the meeting in Syktyvkar. On our side, we adopted a series of measures using the regional budget and following the example of the federal government. In order to attract investment, we enacted our own law on preferences for investors, which grants almost complete tax exemption to businesses that invest over 100 million roubles in one year, as well as a number of other measures. And today, industrial output has grown 121% year on year. This is very significant.

Vladimir Putin: Is this industrial production or regional products?

Ilya Mikhalchuk: This is the overall growth rate of industrial production. Today, both priority projects and the competent policy of the companies themselves have led to cellulose and sawn timber production reaching planned levels. I want to say that today, we are a little behind only in the production of plywood - 68% - but otherwise, we are commissioning new facilities, and renovating and modernising production, which gives us the right to an optimistic outlook for the present and the future.

In general, production and budget revenues are actually similar to last year's level. Of course, taking into account the indexation of costs, we still cannot do without subsidies; but nevertheless, in principle, there is noticeable improvement.

Vladimir Putin: How is the construction sector doing?

Ilya Mikhalchuk: The construction industry is on the rise, and we are making investments. Of course, we cannot yet reach our objectives, but I think that we will complete about 25,000 square metres of housing this year. I think we'll be at 80%.

We have introduced three of our own programmes to enhance rural development, focusing on the construction of housing for rural public sector employees. We have achieved a cost of 9,000 to 10,000 roubles per square metre without European-standard finishing. This year, we plan to deliver approximately 180 residential buildings for public sector employees in rural areas.

I would like to report that we have completed your assignment: gas has come to Arkhangelsk. As you have been informed, there are problems with the Arkhangelsk Thermoelectric Plant, but last week, we lit the first torch: two small boilers are already operating on natural gas. If the issues that were set out in our tripartite agreement between the region, Gazprom and TGK-2 are fulfilled, then I think with the New Year, or at the end of the first quarter at the latest, the Arkhangelsk Thermoelectric Plant will make the transition to gas. This will have a huge impact. And the Severodvinsk Thermoelectric Plant could be gasified as early as next year but for this, I think we need to introduce a number of organisational measures.

Vladimir Putin: We need to build low-pressure gas grids so that gas can be delivered to the people.

Ilya Mikhalchuk: That's right, but our main consumer is still the Arkhangelsk Thermoelectric Plant.

Vladimir Putin: That is clear but people do not really have a sense of what is going on there, but when you deliver it to their homes - this will have a different impact.

Ilya Mikhalchuk: Yes, you are setting an absolutely timely task for us - this is a task for our region and municipalities. There is a gasification programme, but we are still conducting an active transition to bio-fuels: we now have five boilers using them.

Vladimir Putin: And how much money are you allocating for this programme?

Ilya Mikhalchuk: For this programme, about 65 million roubles.

Vladimir Putin: It's good that you know these figures. Make sure that these programmes are actually realised in practice, so that people see and sense them.

Ilya Mikhalchuk: We need much more investment, so we are focusing on attracting investors. But I think that the very fact of the new boilers being built is an encouragement for us. This entails new jobs, addresses environmental issues and waste recycling. We have about five million cubic metres of waste lumber every year that can be used for bio-fuel production. Like I said, five boilers in the outskirts of Arkhangelsk are on pilot production.

Vladimir Putin: Are you in contact with the Healthcare Ministry regarding the modernisation programmes of the healthcare system in the region?

Ilya Mikhalchuk: This decision is absolutely right - the decision to transfer healthcare, with the exception of primary care, to government control. We are participating in it. We had a problem: due to the fact that our city hospital, which is very successful in the field of cardiac surgery, is municipal. Today, by law it cannot receive any quotas. But we have practically resolved this issue. We will open a cancer centre by the end of the year, co-financed by federal funds. The large regional hospital, which in general has been very quiet for seven to eight years, has intensified its work, and I think that the first phase will already be completed next year. And this is a big job.

Vladimir Putin: How many beds will it have?

Ilya Mikhalchuk: We are planning 450 beds, including high-tech units and, as I said, a surgical unit of the cancer centre. Naturally, as you drew our attention to this issue as well, construction and renovation of medical and obstetrical centres is in progress in our small towns. Here, the programme is working.

Vladimir Putin: Good.