3 february 2011

Prime Minister Vladimir Putin meets with Kirov Region Governor Nikita Belykh

The two officials reviewed the results of the outgoing year and outlined plans for the year ahead. Mr Belykh said that his region had surpassed the national average in macroeconomic performance, albeit by a narrow margin.

Transcript of the beginning of the meeting:

Vladimir Putin: Good evening! How did your region perform last year, Mr Belykh? What are your plans for the year ahead?

Nikita Belykh: Last year's results are being reviewed as we speak, Mr Putin.

We performed quite well last year, surpassing the national average in macroeconomic performance, albeit by a narrow margin. Housing construction remained on the decline in most Russian regions, whereas our residential construction figures rose by 7% year-on-year. As for the industrial production rate, we saw it hit 109% last year, against the national average of 108%. We exceeded the average on many other indices as well.

We were also quite successful in budget execution. Our tax revenues grew considerably, both from the corporate profit tax and the income tax on private individuals. I'm really pleased that at year's end, the Finance Ministry ranked our region among those with exemplary budget management. In 2010, the Audit Chamber carried out a comprehensive inspection of our books and found no cases of financial abuse.

For people living in the Kirov Region, last year was special because they saw a whole number of long-awaited projects finally commissioned. The Ice Palace in Kirovo-Chepetsk, under construction since 1992, is one such project. At the time I took office, an idea was floated to convert this mothballed project into a trade centre. But it was then decided to follow through with the original plans.

We also got a centre for perinatal care up and running in December. To us, that's an important step in the advancement of healthcare. This centre is expected to assist in the delivery of up to 40% of the region's newborn babies. Women with pregnancy complications from all across the region will be provided with prenatal care and delivery assistance.

We also commissioned the Vazyuk-Oparino highway, which links the northwestern district with the region's centre. But we still have two more districts to integrate.

We achieved quite a lot on the labour market as well. The unemployment rate fell to 2.4%, down from 3.7%, year-on-year, and this downward trend continues.

As for wage arrears, we were at the bottom of national rankings at the beginning of last year, with a total of 260 million roubles in unpaid wages. Over the year, we reduced that amount by a factor of 2.5 –- thanks largely to measures taken at the Molot plant, in Vyatskiye Polyany. But we still have about 110 million roubles to go in back wages, and we are working toward further cuts by the end of the first quarter or the beginning of the second. The arrears we're trying to meet are part of the legacy of insolvent companies that went bankrupt. At many of these companies, the bankruptcy procedures should be completed by the year's second quarter.

Vladimir Putin: Have all the back wages been paid out to Molot's staff?

Nikita Belykh: Yes.

Vladimir Putin: We allocated more than 450 million for the purpose in 2009...

Nikita Belykh: Nearly 460 million.

Vladimir Putin: Exactly, 460 million. And an additional 600 million last year, as a subsidy.

Nikita Belykh: Yes. Quite a lot of money was allocated, actually. Most if it went to build an industrial park on the premises that were vacated following the Molot overhaul – 500 million roubles, all in all, with 40 million contributed from the regional coffers.

Work is now underway to make this park operational and create jobs that will employ qualified personnel who have found themselves out of work as a result of the company's restructuring.

Another 40 million has been channeled into the promotion of small businesses in the region.

Finally, we've invested in the development of infrastructure, including 60 million roubles towards the renovation of the Vyatskiye Polyany-Krasnaya Polyana highway.

We’ve got an IKEA plant in Krasnaya Polyana. Its production facilities are currently undergoing a major overhaul. The plant’s planned expansion will create additional jobs, so some of the people laid off in Vyatskiye Polyany, only 5.5. kilometres away, could be employed here.

Vladimir Putin: There’s some problem with Sberbank and VTB loans that needs to be resolved, right?

Nikita Belykh: Yes. Orders continue to be placed with Molot, including from foreign customers, and to be able to meet them…

Vladimir Putin: It gets salvage orders, among others, doesn’t it?

Nikita Belykh: It does. And, of course, [Molot’s] accounts need to be cleared so that the money received through the contracts could go to supplement the company’s floating assets rather than servicing its debts. Sberbank and VTB are Molot’s two main creditor banks. They are currently contemplating debt rescheduling, which would take some of the constraints off Molot.

Vladimir Putin: What needs to be done in this respect?

Nikita Belykh: As far as Sberbank goes, guarantees need to be provided for it either by Rostekhnologii, Molot’s parent company, or by the federal government. That’s to assure the bank that Molot will repay the loan within several years’ time if its debt is rescheduled.

Vladimir Putin: These are the main creditors, right?

Nikita Belykh: Exactly.

Vladimir Putin: Rostekhnologii and Sberbank will agree on Molot’s debt rescheduling next week then. I hope this deal gives an additional impetus to the plant.

Nikita Belykh: It’ll give a boost to the entire area, I think, since Vyatkskiye Polyany is an important hub.

Vladimir Putin: All right, they’ll strike the deal next week.

Nikita Belykh: Thank you, Mr Putin.

Vladimir Putin: What about the social sphere? Healthcare? Education?

Nikita Belykh: Regarding healthcare, we have defended the Healthcare Modernisation programme. It will cost 3.5 billion roubles. That is a significant amount. The money will be spent not only to refurbish and repair facilities, but also to provide incentives for medical professionals. By the end of 2012 and the beginning of 2013, medical workers may see their pay increase by 25% though the programme. As for the education system…

Vladimir Putin: Well, not only pay increases. Dozens of healthcare facilities will be repaired. District and municipal polyclinics…

Nikita Belykh: The priority is district clinics, the facilities that deliver medical services directly to the citizens. That is actually why every district defended its modernisation programme before the regional healthcare authorities. As for the programme that was defended at the Healthcare Ministry, it was essentially a combination of all the 45 municipal programmes that had been defended by our territories.

Vladimir Putin: So we are talking about repairs, equipment and salary increases for medical workers?

Nikita Belykh: Yes, and anyway we see this programme as an overall modernisation programme with a federal part and a regional part. During the last two years we have made great strides in modernisation in terms of repair, refurbishment and new equipment. I have mentioned the perinatal centre, and we have also refurbished the regional children’s polyclinic, installed the latest equipment at the oncology centre, we have renovated, indeed, built a new blood transfusion station. In general, the Kirov Region is among the leaders in Russia in terms of blood donation. Members of my cabinet and I regularly donate blood, we think it sets a positive example.

We have a similar programme for 2011-2012 because our task is to pool federal and regional money for maximum effect.

Vladimir Putin: And in education?

Nikita Belykh: In education the main problem is still low teachers’ salaries. The fact that from July 1 we will raise their salaries by 6.5%, like for other public-sector employees, is certainly a step forward, but, of course, this is not enough. For this reason we are considering very seriously the programmes and projects that will create material incentives for educational workers.

Vladimir Putin: Do you have any proposals?

Nikita Belykh: We have some ideas. I think they merit serious discussion. We propose to see if it is possible to have a transition period in terms of allocations to the wage fund also for those entities where the transition period will be in force for two years, and we are talking there about innovative entrepreneurship and entrepreneurship in the social sphere… In our opinion, education qualifies both as innovation (modern education) and the social sphere. If we could decide that these two years for them will also be in the transition mode, the money saved (because the current budget includes the full sums) could be used and we could add some regional money and then the increase would not be 6.5%, but 15-17%, and that would be a much greater effect.  

Vladimir Putin: You know that all the federal budget revenue from the increase of the social tax will go to finance healthcare reform. Are you proposing to cut your 3.5 billion rouble healthcare programme?

Nikita Belykh: We are talking about a transition period of sorts. We are well aware that the situation in healthcare and in the pension system calls for…

Vladimir Putin: Transition period…The 460 billion healthcare modernisation programme is intended for these two years. All the sums have been calculated and agreed with the regions. If you have any suggestions, they can only mean a reduction in the healthcare modernisation programme in the Kirov Region. Do you agree with that?

Nikita Belykh: We will prepare the numbers. Of course, part of the money from the increases will be returned to the budgets, although in the regions it will be in the form of income tax. The regional contribution could be increased by an equivalent sum, yes? We are proposing these ideas for discussion.

At present we are using the existing mechanisms mainly to provide grants to encourage teachers to introduce new education methods and deliver some results. As of January 1 this year (and I think it is the only such project in Russia so far) all the teachers in the Kirov Region have free Internet at home. That is not an awful lot of money. But it enables teachers to educate themselves and to prepare new courses for their pupils. Secondly, those who avail themselves of this benefit are saving family budget money.

Vladimir Putin:  What is the average teacher’s salary in the Kirov Region?

Nikita Belykh: About 9,000 roubles a month. They are actually among the lowest paid. Another public sector category that has even lower pay is cultural workers.

Vladimir Putin: Yes, I know.

Nikita Belykh: But their total number is much less. Basically, that problem could be solved…

Vladimir Putin: No, this is the responsibility of the regional authorities, the regional budget. And of course 9,000 roubles is not enough.

Nikita Belykh: Naturally, that is why we consider this to be the number one priority, although there are many other problems in the education system. About 70% of schools in the region have less than the standard number of pupils. That’s because of the distribution of the population, something we have mentioned several times today. 70% of the communities have fewer than 100 people.

Vladimir Putin: Did you open any new schools in recent years?

Nikita Belykh: Yes. This is one of our commitments. We open three or four new schools every year, we do it in the communities where we know the size of the population will be sufficient. Two parallel processes are under way.

Naturally, in the communities whose population is shrinking we have to shut down schools. Where the population is stable we open new schools.

This year we plan to open at least three schools. And I think the number will gradually increase. Not a year passes without a new school being opened.

Vladimir Putin: Great. What is the average wage in the economy at large?

Nikita Belykh: The average in the economy is 13,000 roubles.

Vladimir Putin: Teachers deserve a raise, and it can be done.

Nikita Belykh: We crunched the numbers. To raise teacher salaries to the average level would cost about 1.7 billion…

Vladimir Putin: At least the average salary should be raised a bit.

Nikita Belykh: We are working on that, Mr Putin. I think we will come up with some proposals this year.

Vladimir Putin: Very well.