Transcript of the beginning of the meeting:
Vladimir Putin: Good afternoon, colleagues. Mr Kudrin was in South Korea, where he attended deliberations of G20 ministers of finance. Serious decisions have been taken. I cannot call all of them earth-shattering (the controlling interest in the IMF remains the same), but there has been some progress. Please, say a few words about these decisions.
Alexei Kudrin: Mr Putin, members of the government, a meeting of G20 ministers of finance was held in the South Korean city of Gyeongju last weekend.
Vladimir Putin: So a finance ministers' workweek never ends?
Alexei Kudrin: That's right, Mr Putin.
Vladimir Putin: How unfortunate for you!
Alexei Kudrin: These kinds of meetings are always held on weekends.
Vladimir Putin: How unfortunate!
Alexei Kudrin: Finance ministers have a lot of work to do during the week at home, so we always meet on weekends.
The focus of this meeting was on preparing materials for the G20 summit in Seoul this November. We discussed ongoing anti-crisis measures and the consolidation of countries' budgets with a view toward reducing risks to the world economy and correcting imbalances.
One issue that caused heated debate was the currency policy of a number of countries. It was acknowledged that the exchange rates of some countries are maintained artificially to make them more competitive.
Vladimir Putin: They keep them artificially low.
Alexei Kudrin: In this case, yes, they are kept artificially low to make them more competitive. Some countries suggested introducing limitations on the balance of payments current accounts and keeping them at a certain level, for example, 4% surplus or 4% deficit, as one of the options. If these thresholds are passed, national currencies will have to be supported, in the event that the currency influx and the difference between exports and imports is substantial. Considerable interest was expressed in this proposal, but no decisions have been taken yet, and it was proposed that we continue to consider various tools to resolve this matter, which does not rule out that some such control instrument will be implemented at a later date. So far, the countries believe it is still too early for this and further consideration is needed.
One of the most important issues was continuing to reform the IMF and its governing bodies in order to make the IMF a more legitimate institution in terms of representation and participation in the decision-making process by all leading countries, especially rapidly developing countries, which have made significant progress and have increased their share of global GDP. These include Russia and the other BRIC countries. Last year in Pittsburgh, G20 leaders agreed to a minimum 5% change in the quotas of various countries in order to increase the share of rapidly developing countries. At this meeting, countries with developing markets were seeking to increase the share of such countries even more, and this includes the BRIC countries. The countries agreed to a compromise redistribution scheme: more than 6% in favour of rapidly developing countries, which includes some developed countries. So for developing countries proper, the redistribution was only 2.75%, and the share of countries with developing markets currently amounts to 42.29% of the IMF capital. This is some increase, but not a significant one. Still, we think it's a step forward. The share of BRIC countries has been increased by 3.46% owing to a partial redistribution among developing markets: from the slower developing countries to more rapidly developing countries. Russia has raised its share by 0.22% to 2.71% of the IMF capital.
BRIC countries now have a 14.18% stake, which is close to 15%, allowing them to block decisions on key issues.
We have agreed to this compromise, even though it does not fully reflect the interests of developing markets, on the condition that a new redistribution formula is developed before January 1, 2013 that gives more weight to countries' GDP. This time redistribution was based on more traditional principles.
Redistribution will be repeated by January 1, 2014 using this future formula. The BRIC countries agreed to this position at the meeting. We agreed that this redistribution would be one step in a process of new redistribution in the future.
Other issues included the development of new regulations for financial market, which involves anti-cyclical measures, or the regulation of leading banks. What this means is that we want to avoid imposing tougher regulations at this time of crisis, so as not to restrict lending credits in economies - hence higher capital adequacy ratios, the establishment of buffer reserves to insure against crises, primarily bank balances, developing rules and regulations for trading derivatives and other instruments. We discussed these matters, and final documents will be ready by the end of this year. The next round of talks will take place at the G20 summit.
Vladimir Putin: Good. Thank you very much.
Now let's turn to domestic issues. A government executive order has been signed, awarding prizes in education for 2010. There are 20 prizes in total, each worth one million roubles. Mr Zhukov, could you please tell us more about this.
Alexander Zhukov: Mr Putin, colleagues. The resolution on awarding government prizes in education has been signed. I would like to remind you that the prizes will be awarded for writing high-quality textbooks, exceptional results in professional activity and the application of innovations in the field of education. The official interdepartmental committee has reviewed the candidates and submitted proposals based on this work. A total of 148 people have been nominated for the prize in 2010, including six members and twelve corresponding members of the Russian Academy of Sciences and national science academies. It's especially pleasing to see the names of many young scientists among the nominees. I would like to draw you attention to one example that stands out - a senior university student has received the prize this year for his contribution to a plan to develop educational science and technology centres for schoolchildren. His name is Sergei Slobodyanyuk, and he is a student of St Petersburg State University of Information Technology, Mechanics and Optics.
And, of course, many respected researchers and professors will be awarded the prize.
Vladimir Putin: Good. When will these awards be presented?
Alexander Zhukov: I believe that we will set the date and present the prizes soon.
Vladimir Putin: Good. Thank you. Mr Shmatko (addressing Minister of Energy Sergei Shmatko), I have asked you to look into energy issues on Kamchatka, including alternative energy sources, considering the region's features. I understand that you have held a meeting with your counterparts from Iceland. How is this work going?
Sergei Shmatko: Mr Prime Minister, colleagues. According to a government plan, the share of renewable sources in Russia's energy portfolio has to reach 4.5% by 2020. The most promising renewable source of energy for this country is probably the geothermal energy. RusHydro is working in this field and is already operating three geothermal power stations that use Russian equipment.
Following your instruction, I visited Iceland on October 16 and 17 together with the governor of Kamchatka and RusHydro executives, and we were showed a number of large-scale projects that were successfully implemented there. Iceland is, without a doubt, the global leader in the use of geothermal energy. Iceland is 100% powered by renewable energy sources. This is a unique achievement. Some 30 years ago they were importing oil products, mainly fuel oil.
We toured several energy-intensive facilities, including an aluminium plant, a geothermal power station and a hydro power station. Mr Putin, I should mention that many of Iceland's officials speak very well of Kamchatka and we were surprised at how many of them, including the country's foreign minister, had been to Kamchatka and have fond memories of it. They are eager to cooperate. We met with the president of Iceland and a few member of the cabinet and agreed to work toward a special intergovernmental agreement on cooperation in geothermal energy. We also agreed to hold an international conference on the prospects of geothermal energy in Moscow in the spring and to develop a roadmap for regional cooperation. I'm referring to cooperation between Iceland and Kamchatka. We are currently discussing a large-scale project to build a new geothermal power station and an energy-intensive metallurgy plant on Kamchatka.
Generally speaking, Mr Putin, I can say that Iceland has very high technological standards, and Iceland's experience will help us preserve the unique ecosystem of Kamchatka.
We will soon submit a detailed report with our proposals for cooperation.
Vladimir Putin: Are the prospects good?
Sergei Shmatko: We're very encouraged, Mr Putin.
Vladimir Putin: Good work.
Sergei Shmatko: Icelandic officials are very interested in working with us. They told us that cooperation with Russia is one of their priorities. This is why we came back very enthusiastic and hopeful.
Vladimir Putin: Good. Mr Shmatko, thank you. Ms Nabiullina, you have the latest data on industrial development, GDP growth and other statistics. Please.
Elvira Nabiullina: Mr Prime Minister, colleagues. I would like to inform you about economic growth trends in September, in the third quarter, and the period from January to September. In September, the Russian economy began recovering from the summer pause in growth. According to our estimates, GDP grew by 0.2% in September against August and by 1.8% against September of last year, taking into account all calendar and seasonal factors. Growth in the nine months from January to September reached 3.4%.
Most importantly, these are not isolated figures. They are part of a larger trend. The main factor in the recovery this September was investment demand, which we were monitoring closely. Investment grew by 0.9% last month. Compared with the baseline from last year, investment has been growing at an approximate rate of 10% year-on-year in August and September.
The construction sector is also recovering and grew by 0.8% in September against August. This recovery trend is also seen in the industrial sector. According to the Ministry of Economic Development, the sector grew by 1% in this September against August, taking into account all calendar and seasonal fluctuations. Overall industrial growth in the period from January to September reached 8.9%. I would like to emphasise that the growth leaders in the sector are the processing industries, including the food industry, the metallurgical complex, oil refining, car manufacturing and the paper and pulp industry. These processing industries grew by 12.6% in January-September, while overall industrial growth was slightly below 9%. In September, processing industries grew by 9.4%. This means that the economic growth in September was driven by processing industries, construction and the overall investment demand. We hope that these trends will continue.
This economic revival, especially that in construction and industrial sectors, helped reduce unemployment to 6.6% in September from 6.9% in August. This means that the downward trend in unemployment continues.
Vladimir Putin: Unemployment stood at 8.5% last year.
Elvira Nabiullina: Yes, unemployment peaked at 8.5% last year.
We are somewhat concerned with the trends in retail. This September was already the second month of decline in retail sales. One of the reasons for this was the higher inflation we saw after the unusual problems we faced this summer. Let me remind you that inflation was 0.8% in September. However, in the past two weeks of October we saw inflation rate decline to just 0.1%. We expect inflation to stay below 0.6% in October. Overall inflation since the beginning of this year is 6.7%. It is worth mentioning that it was 8.1% in the same period of last year, which means that there has been a decline in inflation year-on-year. Speaking about inflation for the whole year - we usually calculate this in September - we estimate inflation at 7.3%. This means that we will be able to stay within our forecast for this year.
All in all, the third quarter wasn't an easy one for us: GDP fell in the third quarter compared to the second quarter, but in September we see other growth factors come into play. Factors related to surges in oil prices and exports are almost exhausted. And it's important that the economy grow in August and September due to domestic factors, such as increased investment and industrial production. We expect these trends to get more pronounced, making growth more balanced.
It should be noted that banks currently issue more loans to private individuals and companies. This should also stimulate growth. We expect to see further growth in the fourth quarter.
Vladimir Putin: Good. Thanks for the good news.
Alexander Zhukov: Unregistered unemployment has now returned to pre-crisis levels.
Vladimir Putin: Back to pre-crisis levels? Good. Thank you.
As you known, the price of medicine, especially essential medicines, is a highly sensitive issue. Last year we developed a scheme for compulsory registration of prices and retail mark-up, and we introduced it at the beginning of this year. Now we are seeing a positive, albeit modest, downward trend in prices of some essential medications. Ms Golikova, please say a few words about the situation.
Tatyana Golikova: Mr Putin, ladies and gentlemen, let me remind you that from January 1 through April 1 2010, we worked to register the prices of essential medications, in accordance with resolutions of the Russian government. During the first quarter of 2010, the prices of 6,500 such medications were registered. This work is on-going, and we are now waiting for a new resolution to come along, one that would provide guidelines for addressing related issues in 2011.
Judging from data obtained through the monitoring programme launched in accordance with the government resolution, the average decline in prices by September 2010 was 6.2% for the outpatient treatment segment and 2.4% for inpatient treatment.
Also, the introduction by regions of varying mark-up rates under a Federal Tariff Service scheme has made it possible to reduce medication prices in various price ranges. For instance, within the 50 to 500 rouble range and in the 500-plus rouble category, prices have fallen by 4.1% and 6.8%, respectively. This is the first time we have seen such a substantial decrease since the monitoring programme began.
As for the price of imported medications, it dropped over the same period by 4.2% in the outpatient treatment segment and by 3.6% for inpatient treatment. And as far as Russian-made medications go, their prices were reduced by 2% and 1.1%, respectively. The difference in figures can be explained by the fact that the original price of domestic medications was much lower than that of imports, and major domestic producers of essential medications signed an agreement with us at the end of last year, stipulating they will not raise their prices in the event of an epidemic or an economic crisis, such as we saw in late 2008 and early 2009.
That said, I would like to point out that both the Federal Service for Oversight in Healthcare and Social Development and the Federal Tariff Service continue monitoring the pharmaceutical market under the authority vested in them by the government.
And while in the country as a whole, the pricing situation has changed for the better, not every region has been equally successful in bringing the prices down. Some of them have achieved even more substantial decreases that those I have just cited. But, unfortunately, over the monitoring period, we have seen price increases in the outpatient treatment segment in the Sakhalin and Chelyabinsk regions and in the inpatient segment in regions such as Penza, Kamchatka, Altai, Arkhangelsk, and Chelyabinsk. Unfortunately, we are now seeing price increases of 4.4 to 7.8% here. Usually it's a one-time increase on certain types of medications in isolated pharmacies. Supervisory agencies look into all such instances and may revoke retail licenses where appropriate. As for the choice of medications on sale, it hasn't changed much. Almost all the medications listed as essential remain available on the store shelves.
Vladimir Putin: We should make sure the relevant agencies promptly deal with price spikes. No retailer should be allowed to get away with such practices. It's great that many of the regions are posting a positive, downward trend in prices. But we are well aware that many more problems remain to be solved. Please continue monitoring the situation closely. Now, let us move on to treatment for alcohol and drug addiction. What's the situation like here?
Tatyana Golikova: Mr Putin, colleagues. In 2011, under a healthy living programme launched by the Ministry, we will for the first time allocate subsidies to the regions to establish drug addiction treatment centres. This programme is already in place, and each is using its own funds. We are in the same situation. But I would like to cite a few figures to throw more light on the subject here in Russia.
We have two groups of drug addicts. The first is people who use drugs but are not yet addicts. This is something like 198,000 people, according to medical statistics. Those who use and are addicts number 358,000. But if we look at the breakdown of all narcotics patients, the largest group is alcohol addicts, who are included in this group, too. They make up 2.1 million people. Those using but not addicted, and those using who are addicted, together total 555,000 people. Combined with alcoholics, they make up a sizeable figure, exceeding three million.
If we compare drug abuse according to type consumed, we will see that the opioids lead the field (together with heroin). Those using these drugs make up 8.7%.
It should be mentioned that before 2000 the number of drug addicts increased by 14% to 15% a year. Between 2000 and 2008, the rate dropped to 0.7% a year. Now we have registered a further fall, for the first time in 2009, according to medical statistics. It is insignificant, but shows that the efforts taken at federal and regional levels have produced some results.
Medical and social rehabilitation is the main focus of our effort, but this effort is suffering from serious drawbacks. Therefore, what I began with - subsidies to the regions to develop such rehabilitation - will be the focus of our work next year as well. Also, we have advised the regions to promote medical and social rehab services as part of a programme to modernise healthcare, which they will begin in 2011. I think concerted efforts will help us tackle the problem, which continues to grow.
Vladimir Putin: Good. Now a few words about the programme known as The Fundamentals of Healthy Eating.
Tatyana Golikova: Some time ago we submitted a programme for healthy eating for you to sign. I'd like to remind you that in 1998 the government had adopted a similar document. It ran its course in 2005, and I have to say that everything recommended and carried out by that document has had a positive impact. The ideas suggested by that concept helped us to draft and implement documents on the consumer basket for all categories of the population. The future was no exception.
The work done has also led to positive trends in food production. Food producers have introduced 1,200 new production processes and 4,000 new foods. And the important thing is that we have overcome vitamin C, Group B vitamins, iodine, iron, and calcium deficits in the diet. While in 1998 the deficit was 50% to 90% (depending on the region), by 2005 the figure was down to 11%. We have also introduced 350 new infant foods, and continue to do so. Compared with 2008, we see a downward trend in the overall sickness rate. Obesity is also down, by 3.7%. Paradoxically, being generally a slim nation, we still experienced a growth in obesity from 2000 to 2008. In 2008, it reached 16.1% a year.
The overall obesity picture is now as follows: a downward trend in 51 regions and an upward trend in 32 regions. These are all the effects of more serious diseases, and as a result, mortality, including at the working age.
The document now signed provides for extensive cooperation between ministries. It will last through 2020 and lists targets not only for sickness and death rates, but also for the development of farming and the food industry, because such documents are prepared by scientists from the Russian Academy of Medical Sciences, the Russian Academy of Agricultural Sciences and, naturally, by the federal agencies.
Vladimir Putin: Thank you. Colleagues, in conclusion I would like to introduce to you a person you all know well -- Vyacheslav Volodin. But I want to introduce him in a new capacity -- as deputy prime minister and chief of the government staff. You are well aware that the quality of work of the staff contributes both to a moral atmosphere in the government and to the results of its activity.
I would like to hope that Mr Volodin will draw on his positive experience gained in the previous years in his region and in the State Duma to discharge with dignity and effectiveness all the duties imposed on him. I wish you every success and would like to hand you your identification card.
Now let us move on to today's agenda. We are supposed to examine a number of issues and a number of draft laws to be submitted to the State Duma. I will single out several of them.
The first concerns amendments to the Tax Code to create favourable conditions for innovation. The tax changes are called upon to give a clear signal to business and to stimulate companies and firms to work more effectively and be more competitive in high-tech products. For that purpose, new and energy-efficient equipment is to be relieved from property tax for a period of three years. We also plan to adopt a zero profit tax on long-term investment in the stock of Russian plants and factories.
As repeatedly said before, this tax break will help Russian businesses, including venture businesses, to attract additional capital for development and to build new capacity with greater confidence, which is recognised as most important for enterprises that introduce high tech equipment and make investments in science. I ask our colleagues from the State Duma to support our proposals. I also ask the Ministry of Finance and the Ministry of Economic Development to closely monitor the effectiveness of the measures taken and see how they work in real life, in practice, and to make timely adjustments.
As you know, on Friday in the Rostov Region, we discussed the development of farming. In effect, we summed up the performance of the agro-industrial sector for this year. The harvest is practically complete, 97% of it, and crops have been sown in nearly every area. The important thing for us now is to support rural communities, helping them to overcome the aftermath of the drought, do the seasonal work due and preserve their livestock. We are introducing incentives, including bonuses to farms that will manage to maintain livestock numbers. We have allocated 5 billion roubles for the purpose. I described the additional steps of financial aid to support the agro-industrial complex in Rostov.
It goes without saying that we should back the efforts to create favourable conditions for the qualitative growth of rural entrepreneurship, for more successful projects to appear in the sector. We will therefore selectively abolish superfluous administrative barriers and slash costs for food and raw materials producers. By way of information, I can tell you farm producers currently pay something like 4 billion roubles to Rosselkhoznadzor for all sorts of certificates and references, and as much to the regional auditing bodies. And these are only the official fees paid without any brokers or advisers, or so-called experts. Moreover, all these certificates, as we well know, never guarantee anything. Surely, no one really needs such pseudo-control.
Instead, we should have a practical, functioning system, plus mechanisms for quick response to possible outbreaks of veterinary diseases. We discussed this subject at length in Rostov in order not to waste time on official correspondence in case of need. Within this context I am drawing the Ministry of Agriculture's attention to the need to promptly solve the issues discussed in Rostov and to improve legislation concerning sanitary and veterinary monitoring. Lastly, we must decide to whom we surrender the functions - to regional or federal agencies.
In March 2010, we approved a plan to reform sanitary and veterinary monitoring. If we require amendments, let's make them, but make them quickly. I ask the agriculture minister to report to me today what has been done to carry out the plan I just mentioned.
Let us get down to work.