Transcript of the start of the meeting:

Vladimir Putin: Mr Polezhayev, what can you tell me about the results of work over last year and your plans for this year? I looked at them and on the whole they are decent. The growth of industrial production matches Russia's average. The unemployment rate is even a little lower than the national average.

Leonid Polezhayev: It was 1.6%.

Vladimir Putin: Yes, the national average is 2%. You have increased the commissioning of housing, which is also good. But there are some issues. For instance, the cattle population has declined...

Leonid Polezhayev: This was in November...

Vladimir Putin: Have you improved the situation since then?

Leonid Polezhayev: Statistical reports have been produced for January-November. In December the cattle population increased by 2,000 heads.

Vladimir Putin: In other words, you won't have a negative figure in the end results for the year, will you?

Leonid Polezhayev: No, it simply doesn't exist. We are carrying out a plan for the entire range of agricultural produce – milk, meat, and eggs. We are fulfilling the plan coordinated with the Ministry of Agriculture. We only failed with grain but this is understandable because the draught affected us as well.

Vladimir Putin: I've looked at your major projects – you are really doing well here. Your plant for the production of microcrystalline silicone is 35 billion roubles and timber processing is 36 billion roubles.

Leonid Polezhayev: This is what we are calling a new economic platform. I'd like to show you, here I have (showing materials)...We cannot cling to the same economic foundation that took shape in the Omsk Reion during the Soviet years. It was entirely based on our former defence industry. We must create a completely different, new economic potential that will develop in the form of economic clusters.

We must establish a bio-cluster in our agro-industrial complex, an oil-and-chemistry cluster, a timber cluster...

Vladimir Putin: Mechanical engineering, nanotechnology...

Leonid Polezhayev: Yes, and polycrystalline silicon. Yes, I mean it -- polycrystalline silicon. Mr Putin, maybe you remember that I showed you these models in St. Petersburg and Sochi, for instance this bio-complex.

These are not just models but works in progress. In 2012, we will commission the first stage of this complex. And in the third quarter of this year we will put into operation a plant for the production of polypropylene. This is a serious move that will determine the new image of the economy of the Omsk Region. This is not to say that we have given up on mechanical engineering – we do develop it, but these are completely new, innovative types of production, completely new tasks that we have not yet pursued in our region.

Vladimir Putin: I see you have new mechanical engineering plants, too...

Leonid Polezhayev: Yes we do.

Vladimir Putin: Are there foreign partners involved in them?

Leonid Polezhayev: Yes. Vneshekonombank and foreign banks have invested in these projects. The investment climate is good, and we enjoy the trust of credit agencies. Therefore, we have no problems in financing these plants.

Vladimir Putin: And what about the development of infrastructure in your region?

Leonid Polezhayev: It goes without saying that we have some problems with the development of infrastructure. But first of all I'd like to speak about the power industry. And as you may have noticed, we are already putting one complex – a petrochemical one – on local generation. Today, we are short of almost 400 MW of electricity and have to buy it on the market. But, commissioning these projects certainly requires an additional supply of electricity that is sustained and significant. All of our projects -- microcrystalline silicone, oil and timber complexes are energy-intensive. I cannot say that our power industry is not doing anything in this area – they do understand the problem. This is why they are developing networks and building major distribution substations. But this is only one side of the effort – we also need to generate our own.

Vladimir Putin: The crisis has affected the construction sector, hasn't it?

Leonid Polezhayev: It has not collapsed. Its development has slowed down a bit in the city because of the large scale on which we developed it, especially in cooperative housing projects and the considerable investments we made, and this has created a crisis of solvency. In other words, we have built housing but about 6,000 flats are now empty. Needless to say, we now have the pleasure of dealing with all these defrauded interest holders. I have to use budget funds because nobody has the money. We must adopt a law on equity construction that will somehow protect the people taking part in it...

Vladimir Putin: From crooks.

Leonid Polezhayev: This is not easy. Well, since we have created a very large and well-developed foundation for the construction industry during these years of intensive construction, we have switched all our construction workers over to working in the countryside. In 2010, we built more housing there than in Omsk. The total amount is 350,000 square metres – we had never built so much decent and comfortable housing there. This year we plan to build 450,000 square metres. We are using every possible form of funding – personal and government mortgages, the Federal Fund for the Promotion of Housing Construction, the housing fund for young families, really every possible source.

Vladimir Putin: Do you have a programme to support the construction of housing for young families?

Leonid Polezhayev: Yes, of course.

Vladimir Putin: How do you do this? Do you subsidize the interest rates on loans?

Leonid Polezhayev: Yes, we do. We have established zero interest rates for public sector workers and young families. In other words, we give them an interest-free loan. If a couple gives birth to a second or third child, we pay for the whole loan. And this is how they receive housing.

Vladimir Putin: Very good. And this has been effective?

Leonid Polezhayev : Yes. And if you take the same birth rate, it is the highest in the Siberian Federal District.

Vladimir Putin: But the average monthly wages are a little below the national average.

Leonid Polezhayev: They are almost 18,000 roubles.

Vladimir Putin: A little bit less.

Leonid Polezhayev: There are reasons for this, Mr Putin.

Vladimir Putin: This is not significantly less than the national average but still a little less.

Leonid Polezhayev: There are two sectors from which you cannot get much. This is the countryside where the average is statistically lower. But in reality, they are making more....

Vladimir Putin: Are their real incomes higher?

Leonid Polezhayev: Yes, they are. Needless to say, defence enterprises do not make much, either. This is what accounts for the low level.

Vladimir Putin: Well, we'll see. You know, we are close to adopting a large-scale programme for developing modern weapons. Now we will be actively modernising our military-industrial complex.

Leonid Polezhayev: Incidentally, we had a feeling that this was your intention.

Vladimir Putin: We'll adopt it in the near future.

Leonid Polezhayev: The Khrunichev Centre (The Khrunichev State Research and Production Space Centre) and MMP Salyut are transferring their production to our Polyot Aerospace Association. They have given us all of Angara and part of the Proton upper stage rocket. And Salyut is also transferring their aircraft engine to us.

Vladimir Putin: Well, that is good. Now let's talk about goals for 2011.