Dear friends,

It has become a tradition for me to address this forum. It is my pleasure to say that the history of Troika Dialog is a good example of successful investment in Russia. We are confident that other investment banks, the banking sector in general, and investment projects also have good prospects. I expect to hear about more success stories soon.

I have good news for you: we expected the economy to grow by anywhere between 3.8% and 4% in 2010, and yesterday the Federal State Statistics Service reported a 4% growth in rough estimates. It is the ceiling value of our prognosis.

You should bear in mind that last year Russia went through a severe drought and a very hot summer, which caused a decline in agricultural production and an increase in the price of foodstuffs. This year we do not expect such weather complications, so the economy will probably grow more than in 2010. We are successfully increasing annual growth rates. Clearly, the government must meet basic economic targets to ensure macroeconomic stability and improve the accuracy of economic prognoses so that businesses can plan ahead even in a year of parliamentary elections in Russia.

We believe that the macroeconomic figures from last year were very good – particularly the budget deficit rate. In 2009 it reached 5.9%, or 6.2% if we take into account the figures for regional budgets. Last year we reduced the budget deficit to 3.9%. Our initial prognosis for 2011 placed the budget deficit at 3.6% given that the oil price is $75 per barrel. But certain factors, such as excessive liquidity and increased political risks in several oil-producing countries, are likely to drive prices up. The oil price will remain relatively high, keeping the budget deficit below 3%. This should only further demonstrate that we are operating under a balanced budget.

According to our budget consolidation plan, the government is to reduce federal budget spending by 1% of the GDP every year, from 2010 to 2012. The plan also suggests revising tax rates, which we have already seen this year in insurance premiums, gasoline excise duties, and the tax on mining.

Turning our attention back to basic macroeconomic indicators, before the crisis, the overall tax burden in the Russian economy totaled 37% of the GDP, which is an average European rate. This figure does not take into account the two main sources of budget revenues, the mining tax and export oil duties, absent in most European countries. The overall tax burden on all industries except the oil and gas sector is 28%, which is one of the lowest rates in Europe. Thus, Russia will retain its competitive edge in taxation even after several tax rates are increased this year.

We have yet another edge over other countries: the national debt rate, which currently stands at some 9.5%. In several developed economies, it has exceeded the secure limit, which in our estimate is 60% of the GDP. The Russian national debt rate demonstrates that our economy is strong. I'd like to highlight that in several of the largest economies, it is nearing 100%, and in Japan it has exceeded 200%. A low national debt rate makes Russia more attractive for investment.

Hopefully, investment will become another powerful growth factor. The government is creating additional investment incentives so as to boost economic growth. A 4% growth rate is possible only if investment increases somewhere between 7% and 10% annually. Clearly, growth by 7-8% will require an even higher increase in investment. For these purposes, we are developing several programmes, some of which have been submitted for discussion already.

One of the major incentives is the elimination of administrative barriers and the improved performance of government bodies – in particular, law-enforcement agencies. Obviously, the situation cannot change overnight simply because the law on police and certain other decrees have taken effect. We will be improving the investment climate gradually, over several years. You will hear about new initiatives and decisions over the next few months. We already have several plans.

One of them is the creation of a group of independent experts from the Higher School of Economics and the Academy of the National Economy in a follow-up to the prime minister's directive. This group will work out proposals for ongoing state reforms and discuss plans for new reforms with ministries and agencies. We are eager to discuss it openly. Hopefully, by the end of the year we will have a new action plan. Some decisions will already be made over the course of this year.

We are carrying out a programme to cut public spending, increase its effectiveness, and keep the tax burden low. Yesterday the commission for increasing the effectiveness of budget spending convened for a meeting at the Government House, approving an action plan and several other documents and obliging each ministry and agency to adopt their programmes for effective spending within the next six months.

The commission will review all basic parameters: spending, the entire activity of achieving results, and the administrative effectiveness of ministries and agencies in addressing key issues under their respective purviews. We will monitor the activities of each ministry for a period of six months.

I'd like to remind you that recently the president and the government have issued a decree and a resolution, respectively, to reduce the number of public servants by 20% over the next three years. Each ministry must reduce their staff by at least 5% this year. Several ministries have already cut it even lower and used the funds they saved on motivational programmes for their staff.

There is also a far-reaching plan to reduce state involvement in the economy. Last year we approved a three-year plan to privatise the state's majority shares in several large companies. I am referring to oil and gas companies, such as Rosneft, as well as Aeroflot and companies operating in the communications and banking sectors. This year we plan to sell a 20% share in VTB. Actually, we were going to sell 10% last year, but then decided to look for better offers. So this year we plan to sell 20%.

At a meeting that the prime minister held in January to discuss the future of the banking sector, we outlined new targets, specifying the targeted extent of state involvement. We will gradually reduce the state's share in Sberbank and the Russian Agricultural Bank to 50% plus one share. Our current privatisation plan will extend for three years. After it is fulfilled, we will continue to privatise state shares so as to make them smaller than majority shares. This is one of our main initiatives to encourage competition and to increase the influence of private business in the economy.

One of our key long-term objectives is to receive membership to the WTO and OECD, the primary institutions for ensuring high standards in trade and market regulation. Membership to these organisations will be a very tough test for us. We will need to prove that our legislation is up to key global standards. I believe this will provide answers to many questions that businesses might have, giving them additional incentives to operate in Russia.

In any case, I don't want to take up any more of your time; we'd rather move sooner to discussion. To conclude, Russia is committed to becoming more competitive and attractive for businesses. There is much yet to be done, but I am confident that we'll accomplish everything we have planned.

Thank you.