2 february 2011

Prime Minister Vladimir Putin chairs a meeting of the Government Presidium

Vladimir Putin

At a meeting of the government presidium

“Our objective now is to encourage investment activity as much as we can, making it a key factor in re-establishing the national economy. Foreign direct investments will play a big role here, of course. Russia should be an attractive long-term strategic investment destination.”

Transcript of the beginning of the meeting:

Vladimir Putin: Ladies and gentlemen, let’s begin with what we know. Mr Fursenko (Andrei Fursenko, Minister of Education and Science), debates have already started on new educational standards. You know that I am a sports and physical fitness fan, but I think your experts have gone too far by deciding that physical fitness should be the only obligatory subject at school. Lawyers call it an “excessive act.” Jokes aside, what are your experts considering and suggesting?  

Andrei Fursenko: Mr Putin, first, this is only the beginning, and it was only the first suggestion. Much time will pass until we agree on a decision, as can be seen from our work on the previous standards. For example, seven months passed between the submission of the general school standards and their adoption. I don’t think we will manage to go faster this time.

As for the essence of the matter, there will be at least ten obligatory subjects at school. However, some of them, such as life safety basics and physical fitness, must be obligatory in any type of school, irrespective of the subject in which students decide to major, humanities or natural sciences. Everyone must attend physical fitness classes, and everyone must get some basics.

Students should have more freedom in choosing other subjects; there is a proposal to this effect. But no matter what they choose, Russian literature, math and natural sciences will remain a must. At the same time, there could be several levels of instruction in these subjects, depending on a student’s chosen specialty.

The only subjects where requirements will be the same for everyone are physical fitness and life safety basics. All children must be healthy.

Vladimir Putin: Schoolchildren are different from university students; making a decision is sometimes difficult at their age. We do not intend to replace the opinion of experts, but questions of fundamental importance to the country’s future should be discussed openly with the expert community and the public, which should possibly be followed by pilot programmes. In general, a hasty introduction of such fundamental changes is inadmissible. We must thoroughly prepare and consider the matter before making a decision.

Andrei Fursenko: There is some information I’d like to provide. We will start a trial curriculum with the new standards on September 1, 2013, and possibly even later, and we will introduce these standards only in 2020.

Vladimir Putin: The main thing here is not to do more harm, as the doctors say. Yes, we need the changes, but they should be thoroughly considered and tested.

Ms Skrynnik (Yelena Skrynnik, Minister of Agriculture), the Agriculture Ministry has started signing agreements with regions on financing state programmes of assistance for agricultural development. How far have you progressed?

Yelena Skrynnik: Mr Putin, acting in compliance with your instructions, the ministry is working to enhance the efficiency of the spending of state funds allocated for the agricultural development programme.

This year, our agreements on subsidies include, first, a timeframe for money transfers approved by regional governments, and second, a weekly schedule of regional reports on the transfer of such funds to farms. These measures have helped us enhance the responsibility of regional governments for transferring the funds to end users and for reaching the targeted figures. These are simple but effective measures.

Also, within a week we will finish signing agreements that will ensure the transfer of 30% of the state assistance funds, or 35 billion roubles, for the spring sowing season. The money will be used to subsidise the interest rate on short-term and investment loans and to buy elite seeds.

Vladimir Putin: How much do you plan to allocate to agribusinesses, including the money for spring sowing?

Yelena Skrynnik: Twenty-five billion roubles, including the 7 billion roubles for the farms that have preserved their livestock and for mineral fertilisers and elite seeds, the allocation of which you have approved.

Vladimir Putin: And how much will you provide this year, in 2011?

Yelena Skrynnik: A total of 145 billion roubles, including the 125 billion allocated directly to agribusinesses.

Vladimir Putin: What are the results of our participation in Green Week?

Yelena Skrynnik: It was the 17th time we took part in Green Week (a leading public exhibition for the food, agriculture, and gardening industry in Berlin), and this time 17 regions were presented. We have signed 14 agreements worth 300 million euros in total, for plant growing, livestock breeding, rural road construction, amelioration, and the supply of reindeer meat and honey to Europe.

We also took part in the investment projects exchange, for the first time ever; our projects were estimated at 400 million euros.

It is important that one of the key results of our participation in Green Week was an agreement with the World Organisation for Animal Health (OIE) on opening an OIE office in Russia. This will help us coordinate and harmonise veterinary and sanitary measures, especially within the framework of the Customs Union, and to export our products.

Vladimir Putin: Good. Ms Nabiullina (Elvira Nabiullina, Minister of Economic Development), new rules for industrial auto assembly came into force on February 1. Will you comment please?

Elvira Nabiullina: We discussed these changes at the meetings you chaired and coordinated them with the ministries and the automobile manufacturers. On February 1, the Justice Ministry registered a joint order of the Economic Development Ministry, the Ministry of Industry and Trade and the Finance Ministry, which introduces many changes to industrial assembly in Russia.

These changes attempt to further encourage auto manufacturers to increase domestic content in Russia and to expand their  research and development efforts here. As you probably remember, industrial, or SKD, assembly requirements were introduced in an order signed in 2005.

This mechanism has proved very effective: we have signed 27 agreements with auto manufacturers, and 17 of them are still in effect. Total investment under these agreements for the planned period is $6.8 billion (excluding AvtoVAZ). As much as $4 billion has been invested, and about 20,000 jobs have been created in SKD sectors. This has boosted the development of many regions, and we now have industrial assembly hubs in many regions.

Just for you to assess the results: nearly 25% of all cars sold in Russia were assembled here. Of course, we must not sit on our hands but encourage the production of auto components in Russia, which is why we have introduced the new rules. We discussed the required criteria for a long time, and here is what we have come to: existing agreements will be extended by eight years for those auto makers who assemble at least 300,000 vehicles, with a domestic content figure of 60% on components and up to 30% of the engines to be installed on these cars should be manufactured on Russian soil. In addition, R&D centres should also be established. Some of the automakers are already showing an interest, and we hope they will take advantage of this arrangement. I would also like to be clear that those who do not accept the new rules can continue under the current parameters – they are still in effect.

Vladimir Putin: Duty-free import of components will be guaranteed only for foreign producers or firms with 60% of localisation in Russia by 2020.

Elvira Nabiullina: Yes. This will mean a substantial drop in customs duties from the current average 12.5. In fact, this is the duty-free import of auto components.

Vladimir Putin: The quantity of cars, what is it? How many will these companies have to produce?

Elvira Nabiullina: 300,000 cars.

Vladimir Putin: And something like 200,000 engines? No?

Elvira Nabiullina: We have proposed a specific proportion: they turn out 300,000 cars, and 30% of them are made in Russia. The economies of scale is key here. With production based on volume, it makes sense to install engines here, in Russia.

Vladimir Putin: Good. We are monitoring the job market all the time and allocate sizeable resources to address these problems. On the whole, the outlook is improving. How do matters stand now?

Alexander Zhukov: They are pretty good, Mr Putin. In January, the number of registered jobless basically stayed at the levels reported at the beginning of year. The total unemployed number is now about 1.5 million people. In the same period last year, there were 600,000 more at the end of January. That is to say, the number of registered jobless fell by 600,000 during the year.

Vladimir Putin: A noticeable drop.

Alexander Zhukov:  It is. Generally, winter trends (January through to April) are up. But this year, January showed no increase, and over the past two weeks there has even been a reduction.

The number of staff on idle time or on forced leave through management decision, or part-time employment as we say, has fallen appreciably. Today it stands at 445,000 people, or 1,200,000 fewer than in the same period last year. This year, our regional programmes are continuing. We decided to keep them in place despite the positive trends on the job market. And they are doing well. We have made some adjustments, cutting out much of the public and temporary works programmes and focusing more on retraining and job creation in small and medium-sized businesses.

Vladimir Putin: What amount are we allocating for these purposes?

Alexander Zhukov: A total of 27 billion roubles this year.

Vladimir Putin: If we take these 27 billion roubles as a 100% benchmark, what percent will go into the training and retraining programmes? Has the proportion increased?

Alexander Zhukov: This year, it will be half and half, though we have decided to leave public and temporary works programmes in single-industry towns. The situation there, though we have adopted special programmes, still demands additional measures. We have therefore kept the public works programmes for such towns.

Vladimir Putin: Good. Thank you. Please carry on your monitoring of the situation in the regions. Now I would like to say a few words about the agenda for today’s meeting. First of all, I want us to focus on investment cooperation and the attraction of foreign capital and technology into key branches of the Russian economy. You may recall that at the meeting of the Government Commission on Foreign Investment last December we agreed to draft some amendments to these laws. These amendments are supposed to simplify investment in strategic sectors and abolish outdated or superfluous requirements which have no practical effect on national security but are barriers to cooperative business projects and involve lengthy and cumbersome coordination formalities.

The first package of such changes is already available. It covers the food, pharmaceutical and medical industries, banking, and subsoil use. This is important because investor interest in these areas is, I’d say, great if not considerable. Pepsi-Cola, for example, decided to buy Russia’s Wimm-Bill-Dann Group and plans to invest over 30 billion roubles in the Russian food industry over the next five years. Last summer, in the Orel Region, France’s Sanofi-Aventis pharmaceutical group launched the production of insulin pens used by diabetes patients. The list could be extended. There are many possible projects.

I want to remind you that we have also adopted a large-scale programme for the development of the medical and pharmaceutical industry through to 2020 and look to the broadest possible international cooperation, expecting foreign pharmaceutical firms and companies to establish production capacity in Russian regions, which is actually being done. There are deserving examples in many parts of Russia. What’s more, our colleagues are interested in increasing their localisation by creating new and prestigious jobs while bringing in advanced techniques and quality standards together with innovation. Incidentally, the federally targeted programme for pharmaceuticals includes plans to allocate over 120 billion roubles from the federal budget.

I can add that we will also keep improving investment legislation, and so I ask the Federal Anti-Monopoly Service to expedite the submission to the government of the second package of amendments for simpler procedures with foreign investors in the strategic sectors. Our objective now is to encourage investment activity as much as we can, making it a key factor in re-establishing the national economy. Foreign direct investments will play a big role here, of course. Russia should be an attractive long-term strategic investment destination. To make this happen we must establish the necessary legal and organisational foundation, which would include our international relationships.

Today we will also discuss the signing of an agreement between the governments of Russia and the United Arab Emirates on investment income taxation. The agreement establishes most-favoured status for major projects and clears the way for financial resources from investment funds and state banks.

Let’s now discuss all these things.

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