Prime Minister Putin’s introductory remarks:

Good afternoon.

Today we will review current trends in the defence industry and our plans for its modernisation. We will also look at how well the Russian manufacturing industries and scientific centres are prepared for large-scale work through the state arms programme.

I’d like to remind you that we plan to allocate over 20 trillion roubles for this current programme through 2020, which is three times more than we allocated towards the previous one. These are very substantial funds, and as you can understand, they will have to come at the expense of other areas. But I believe that we are justified in investing in the defence industry inasmuch as it is by nature a high-tech industry. Thus, I expect that this investment will pay off for civil industries as well.

This is especially important given what is recently happening in the world. I just answered the question of a worker here in Votkinsk, and I had to admit that making decisions on the use of force has become too simple, which has been confirmed by recent developments in Libya. This is a timely indicator that our efforts to strengthen the defence industry are justified.

I’d like to emphasise that we will increase not only allocations for the defence industry but also strengthen the requirements on the quality, capability, and specifications of arms. We need truly advanced machinery and equipment. It would be silly to spend money on churning out obsolete equipment. This is why a significant share of the funds to be allocated through the state programme will be used to develop genuinely promising solutions and to create a strong technological basis for our military potential.

Our goal is to execute a comprehensive modernisation of the armed forces. Rather than just equipping select group of individuals, we need to build a truly efficient and integrated military – in the army, in the navy, and in the air force. We will overhaul air defence. All units will receive new S-400 Triumf (SAM) systems and Pantsir-S1 complexes. The navy will be provided with the largest amount of funds in Russian history to modernise its fleet and set up production. We will discuss this issue today. The army will receive new strategic and tactical missile systems, including the Yars, Bulava, and Iskander-M. In 2013, missile production is expected to increase twofold.

Naturally, our plans for strategic offensive arms and missile defence systems should be based on our current international agreements and contracts, including START, in which we see a guarantee of peace and stability in the world over the long term. I’d like to note that these agreements can in no way impede our plans for the modernisation of offensive arms or make them less effective.

There is a plan to increase the percentage of [active] modern equipment to 70% by 2020. To this end, we will purchase over 1,300 pieces of machinery and equipment through the state programme, providing the army with not just modern but cutting-edge equipment. To produce 220 units of the machinery I just mentioned, we will need to either build new facilities or expand operations at the current ones and strengthen cooperation between defence manufacturers and civil industries.

In order to overhaul the armed forces, we need to modernise the defence industry; introduce new technology; attract efficient managers, engineers, and workers; and create strong production facilities that can manufacture quality machinery and equipment on the contract schedule and at a fair and economically justified price. We believe that the profitability of such companies should be no lower than 15%. It is absolutely necessary that they keep to this target.

The government agencies that place orders with these companies must also fulfill their obligations to the letter – conclude their contracts, transfer funds, and make  down payments in a timely manner.

Last year, we made a thorough review of the industry in order to assess the real capability of each sector and to see whether companies can manufacture advanced machinery and equipment and, most importantly, handle massive serial orders. Clearly, the defence industry needs more investment in order to develop, which is why, along with the state arms programme, we drafted a federal targeted programme for defence modernization, the programme, which has will also run through 2020. In certain sectors, this programme should even outpace the arms programme in order to prepare the industry for the production of modern arms.

The defence industry has great potential. In 2010, military production grew by 13%. Many enterprises are currently developing promising solutions and manufacturing equipment that is rightly in high demand on the global arms market. Such enterprises  employ experienced, high-level specialists and are attracting increasingly more young people. We just met with many young workers here at the Votkinsk plant. The director said that the average age of employees is 40 years old. It’s great that more and more young people are choosing a career in this company. Every year, universities and colleges produce over 19,000 specialists in the industry, and in 2010, their wages rose by 16.3%.

As I just mentioned, we visited the Votkinsk plant, Russia’s major manufacturer of missile complexes. This enterprise has gained vast experience in research and development. At the same time, we have to admit that a large percentage of its equipment has become obsolete.

The government will provide a total of 1.7 billion roubles to the plant through state contracts up to 2013. These funds will be used to modernise its facilities. Workers have just raised this issue with me, and I reassured them that we will provide the aforementioned allocations over three years, as I here reiterate. Overall, this sector and related industries will receive 15 billion roubles over three years. After that, funding will gradually increase each year, as stipulated by the federal programme for the defence industry through 2020.

I can cite figures. A total of 77 billion roubles will be allocated for mass production of missile systems, of which the Votkinsk plant will receive 9.6 billion. So, in response to the workers’ questions, I can repeat that the plant will be busy with orders.

We will modernise all primary sectors of the defence industry, focusing on the development and production of missiles, military aircraft, communications, control and reconnaissance systems, ammunition, and shipbuilding. It is critically important to begin funding construction projects, purchasing equipment, and developing engineering documentation. We discussed these issues at a recent government meeting, at which the following was suggested: in order to expedite the launch of modernisation projects, we should start to fund them before the development programme for the defence industry is adopted. I would like the Ministry of Finance, the Ministry of Industry and Trade, the Ministry of Economic Development. and the Federal Space Agency to tell us today how such a format would work, including for the missile industry.

I've already mentioned the profitability of these enterprises. I said that, according to current opinion and my own convictions, not to mention the consolidated opinion of all federal bodies, we need to begin [operations] with a profitability of no less than 15%. But, of course, we are here referring to the production of goods without adjustments due to serial orders on said  equipment.

Let’s get down to work.