30 april 2011

Prime Minister Vladimir Putin met with trade union representatives at the Research Institute of Physical Measurements in Penza

The conversation touched on a variety of issues, including the role trade unions play at the company, skill formation, space industry development and other important topics.

Transcript of the meeting:

Vladimir Putin: Mr Shmakov, (addressing Mikhail Shmakov, president of the Federation of Independent Trade Unions of Russia) friends and colleagues,

We have met here on the eve of May Day, and I especially want to congratulate you on the upcoming holiday. I wish you every success – creative, productive and personal. It's a traditional holiday in our country, celebrated for decades, associated with spring, incidentally, associated with the start of spring field work, and not only in agriculture but in a much wider sense, as it is also the beginning of the gardening season for millions and millions of people around the country. And certainly people present here or your family members have something to do with it one way or another. I wish you a happy holiday and all the best.

Now as for your company, the director has just described in detail how it functions. Indeed, keeping in mind your job profile and the amount of orders, we can see that it is large and will only increase. I was also told about your prospects for development. What is particularly gratifying is that you have so many young people who are nevertheless already experienced. You have gained enough experience not only to build on what is inherited from previous generations, but also design completely new and innovative products.

The space industry is one of our top priorities. This year, I think we have a more than 30% increase in public funding for the space industry. On average – I hope I’ve got the details right – some 150-153 billion roubles have been allocated for this purpose. And the space industry has not let us down even in the very difficult circumstances during the economic crisis in late 2008, 2009 and 2010. When the general volume of production fell – both industrial production and the gross domestic product – the space industry grew by as much as 18%. And this during a crisis!

Of course, this result was achieved with massive support from the state, but the industry did not disappoint us, and industry professionals did not disappoint us. This is one of our nation's competitive advantages in the global economy. I am referring both to the military and commercial aspects of the space industry. We have great schools and brilliant specialists. We will do everything to ensure that the industry continues to grow in the future. And I would like to end my monologue at this point.

This meeting is taking place on the eve of a national holiday, and if you have any question in this connection – and the head of our leading trade union association is present here as well – I will do my best to answer your questions, to comment on these issues and maybe talk them through with you. Please, Mr Shmakov, perhaps you can begin?

Mikhail Shmakov: Mr Putin, I would like to thank you on behalf of all of us present, on behalf of all union members, for your best wishes for the May Day holiday. I just want to remind you and everyone else that this year marks 125 years from the date of the event that served as the basis for this holiday. Yet the demands that workers made in the United States, in Chicago, at the time were practically the same as what we hear today: the eight-hour workday is non-negotiable. I know that you spoke about this.

We appreciate your support for our position. We strongly believe that it would be wrong to revise the Labour Code to increase the length of the working week, but even today we have to fight for this. But I must say that trade union organisations and all of us here are my colleagues, members of the workforce, and the head of the trade union committee – this is an organisation in which practically all workers are union members – 97.8% of the personnel are union members. And I think that the chairman of the trade union can tell you about this better than anyone.

Vladimir Putin: Go ahead, please.

Alexander Gerasin (chairman of the Institute’s Trade Union Committee): Mr Putin, to date trade unions indeed have a good standing with the central committee and Penza Region organisations are highly respected by the Federation of Independent Trade Unions of Russia. The company has a collective agreement as the basic document according to which our company is now working. In other words, we have a mutual social partnership. It currently provides almost all the employment and social guarantees in excess of existing legislation. In addition, the collective agreement covers all topics related to safety and labour relations. And it is now gratifying to note that the head of the company is doing everything necessary to ensure that the collective bargaining agreement is executed and that, accordingly, the social safeguards stipulated by the collective agreement are implemented. In addition, our trade union is involved in various competitions for the best trade union organisation, and for the past three years, we have been first among the general engineering trade unions as a research institute enterprise.

We are also participating in a contest called “The Best Labour Safety Commissioner.” The company has 34 business units, and each has a commissioner for healthcare and safety. In the recent period, the best labour safety commissioner,  nominated by a trade union organisation, was from our company. The Institute ranked second among all Russian companies, in other words, it was awarded 2nd place by the Federation of Independent Trade Unions of Russia. This year we have also nominated our candidate, and hope that the results will be even better.

It is gratifying to note that we are developing social infrastructure very well. The Institute’s leadership and trade union committee are very successful at dealing with social issues. First of all, the company has a wonderful canteen that seats more than 100. Prices in the canteen are quite moderate. Let me name a price. You can have a good meal for 70 to 100 roubles. This includes appetisers and the main course. Besides...

Vladimir Putin: What about desert?

Alexander Gerasin: Well, all of it, of course, all of it is included.

Vladimir Putin: You said appetisers and the main course.

Alexander Gerasin: Sorry, I meant a complete meal. In addition, we have a great medical centre. There is also a physiotherapy department and in terms of its equipment and the funds available, it even surpasses some of the clinics in the city of Penza.

There are sports activities and a fitness centre for our young employees – I want to point out that they are happy to get jobs at our company. There is a gym right on our company's premises, so we invite you to visit it, it is very good.

Vladimir Putin: Thank you.

Alexander Gerasin: We carry out a variety of activities aimed at the development of our employees both on the part of trade union and management, as a single team. We carry out major cultural, recreational and fitness work.

The company actively participates in all the activities of the Trade Union Federation of the Penza Region. We carry out many joint activities in the same context, including solidarity demonstrations on May Day and other holidays.

Here we can add that all the efforts of our company's unified workforce, which is like a friendly family, as they used to say, or a team, to use a more modern term, are an achievement of the head of the company and our union committee. Today, we are truly proud that the prime minister has paid a visit to our company.

The first question I would like to ask with your permission is this: Mr Putin, our trade union organisation and the company's management have great admiration for your personal attention and attitude towards the nation’s health. At the same time, trade union bodies of all levels, representing the interests of workers and labour groups, say that the government agencies are neglecting the issue of spa and resort treatment for adults and there is no funding programme to address this issue.

For our part, we propose that companies’ payments to the Social Insurance Fund, in excess of what is spent on corresponding goals, be accumulated in special accounts so that businesses could use them for spa treatment of their employees and their families.

We would like to hear your opinion on this issue. Thank you, and, as is the practice in the union, allow me, as the chairman of our company’s trade union committee, to refer the matter to you in writing.

Vladimir Putin: What a bureaucrat! Alright, good. Mr Gerasin, I'll presently formulate my opinion on this matter. I just wanted to clarify: you mentioned “money in excess, or unused money.” What is this unused money? 

Alexander Gerasin: Companies make contributions, don't they? They do. The money is spent on sick leaves, on maternity leaves, partly for social insurance, partly to repay debts of some companies, which in this case do not have the funds. But anyway, we propose that after all the payments are done, part of the money that we contribute to those ends could be spent on workers’ healthcare.

Vladimir Putin: Mr Gerasin, this is a very good proposal, and a noble one. The question is, we all know that the main objective of the Social Insurance Fund is to ensure payment of money in case of workers’ temporary disability and a maternity leave. The Social Insurance Fund is, unfortunately, saddled with a deficit. This is the main problem. But we cannot leave people without money, if a person is ill or a woman has taken a maternity leave. This main function of the Social Insurance Fund has to be performed. And as we continue to build the Fund, and build without the deficit I mentioned, this possibility may well be realised.

Alexander Gerasin: Thank you. And let me add one more thing, Mr Putin. I have neglected to mention a positive aspect here. Indeed, in the two years since the institute became a joint stock company, you may have noticed yourself that during this period we have positive aspects in all of our activities. Our director general shares our concern on this issue and allocates certain funds for spa and resort treatment for our colleagues, we pay for these tourist vouchers from our company's profits, but we have a slight shortfall.

Vladimir Putin: Yes. And you need to raise salaries – this is the main thing.

Alexander Gerasin: Absolutely.

Vladimir Putin: This is the general way to resolve this issue. Today, if I remember correctly, people working in hazardous industries have such a right...

Alexander Gerasin: Absolutely correct. There is 2%, which is partially refunded.

Vladimir Putin: As soon as the Social Insurance Fund is solvent, we will be able to expand its functions.

Alexander Gerasin: Thank you.

Vladimir Putin: May I ask you a question? You said that union members are involved in demonstrations, including those on May Day. I know that in Soviet times, there was no compensation for participation in demonstrations, but those who carried placards received a bonus or extra leave. How do you deal with this?

Alexander Gerasin: I'll be frank – we used to practice the same system, but now our members participate in demonstrations voluntarily. And I'll not hide that the trade union committee has certain incentives for this…

Vladimir Putin: Well, I hope they don't go against a healthy lifestyle?

Alexander Gerasin: Absolutely not. This is not in order to pay someone, but to provide incentives for this activity.

Vladimir Putin: Thank you very much. So, colleagues, do you have any other comments, proposals, ideas or questions?

Andrei Nikolayev (head of the Institute’s marketing department): Mr Putin, may I?

Vladimir Putin: Yes, go ahead, please.

Andrei Nikolayev: You have seen our company's exhibition and have probably come to regard us as an innovative company.

Vladimir Putin: Yes, I have.

Andrei Nikolayev: The company oversees projects from idea generation to full implementation and market launch. Moreover, there is now much talk about Russia's economic modernisation and the introduction of high technology and innovation. In this regard, I have a question: will there be any practical measures by the government to encourage innovation and, perhaps, state support for companies that invest in innovation and spend their own money to fund development?

Vladimir Putin: Fund development using their own funds?

Andrei Nikolayev: That’s right.

Vladimir Putin: We are pursuing a range of measures of support, with subsidies at the forefront. The entire economy is using borrowed resources, with companies spending their own funds quite sparingly. We are working on a whole package of support measures, mainly related to innovation, including subsidising loan interest rates. This is our most important task. Apart from that, we are also establishing other funds co-financed by the government.

Vnesheconombank, our key development institution, is involved in all major support programmes, providing large funds – comparable with the nationwide projects they are used for. We will certainly continue doing that. Our plans include professional training and other special programmes. These support measures will not only apply to large companies, but to small and medium-sized innovation businesses as well. There are different support options, such as direct government financing, or support through regional funds co-financed by the federal and regional governments. We have discussed this more than once, and agreed that this is essential. I am not saying that if we stop doing this we will all die tomorrow, but will lead a miserable existence.

The share of revenues from Russia’s natural resources – the revenues from the exports of oil and gas, metals and other commodities – is steadily declining in overall earnings. It is a very obvious trend. On the other hand, Russia’s earnings from non-oil, non-energy industries, unrelated to hydrocarbons or other mineral resources, are constantly growing. Mechanical engineering in Russia in fact showed a stronger growth than the oil and gas industry last year – you must have heard me talking about it in the Duma. That growth was partly due to the support measures the government has been pursuing. I would like to emphasise that modernisation of the industry is among the top priorities of Russia’s development programme until 2020.

Alexander Zhukov: We have introduced tax benefits for innovation companies, on profit taxes. All costs are now included.

Vladimir Putin: As you know, depreciation allowances have risen to 30%. As for taxation, we are still considering how we can ease the burden of social security contributions. But innovation companies have been exempted from the start. Next question please.

Yury Varyushin: I have a question about young professionals. We have had a small problem in selecting and training young professionals. I would like to discuss it with you. Until 2008 young men employed by defence sector companies enjoyed a draft determent. That helped us a lot. We picked the most talented students in their last couple of years at the university, trained them and helped them adapt at the company. But now they get drafted shortly after they graduate. Last year we lost four talented students and two more this year. They take away the best ones. We understand that the army needs intelligent people. But when they return after two years of service, they appear to have lost some of their enthusiasm, skill and potential. Is it possible to restore the old practice? Could our industry have this draft determent again?

Vladimir Putin: That’s a difficult issue. It also involves demographic problems and the problem of manning the armed forces. We reduced the term of service to 12 months, but that only created more problems.

At the same time, with the defence sector companies, I think we should consider the problem and see what we can do. But you must realise that it needs to be calculated. How many can we draft this year? If we do not have enough conscripts, we will have to hire more soldiers for contract service. This will take away the money also intended for the support of the aerospace industry. Let me emphasise – this needs to be calculated. We have overstretched our resources, including the resources for manning our armed forces. But, let me repeat that what you are talking about also directly affects Russia’s defence capabilities. We’ll think about it.

Mikhail Shmakov: Mr Putin, let me add something. Draft determent is a good idea and is certainly worth considering. But also it would be good to send the young men drafted from defence sector companies to the space forces, rather than, say, the infantry…

Vladimir Putin: That’s right. We’ll think about it.

D. Mokrousov (head of the Institute’s machine workshop): Mr Putin, I would like to add something about our personnel issues. We are facing a severe shortage of skilled workers. We have been forced to use university graduates who operate 70%-80% of the modern machine tools at our company. What are the government’s plans for vocational training?

Vladimir Putin: We have a lot of plans. We are working on this, although I must admit that the results are not too impressive so far. But we have the opportunity to change this situation now. President Dmitry Medvedev recently mentioned this problem, too. I can also say that it is one of the most important areas in professional training. It is obvious that the old education system functioned as a part of the Soviet economy. It was more or less viable then. Unfortunately, it is not working properly now.

There are several plans here. One of them is to work closely with businesses, to get companies directly involved. It is important that the interested companies take an active part in various arrangements for professional training. They could sign contracts with educational institutions, offer internships, and offer decent wages to their trainees to encourage talented young people to join them.

Another plan is what we call the applied undergraduate programme – joint programmes with universities. I mentioned it in my speech in the Duma. In fact, I didn’t invent it. It was proposed by the experts helping us refine and finalise our modernisation programme until 2020. This idea is worth discussing. It makes perfect sense, firstly, because it makes blue collar jobs more prestigious: a person attends a two-year programme at a university, then takes a short training course in the chosen profession and receives a vocational certificate.

Secondly, this should improve the quality of education. And thirdly, better education is especially important today in light of the task we are facing, one that Mr Nikolayev spoke about today: the need to modernise the national economy. A modern economy requires modern skilled workers. This is an important issue that must be addressed. In any case, we are not limited only to the ideas I mentioned. What is important is to train the skilled workers that our economy needs now and will need in the future. We must certainly combine efforts with businesses. This is a great area for public-private partnerships.

Sergei Isakov (head of the Institute’s R&D department): There is a discussion going on about re-arming or re-equiping the army. Which weapons will be preferred for state procurement? I am asking because our company is a major supplier of products for the defence industry.

Vladimir Putin: The Defence Ministry maintains an ongoing dialogue with the defence sector. The discussion goes on, sometimes in raised voices, if I may say so. Last year, we analysed the condition of nearly all defence-related industries – including aerospace, missiles, armoured vehicles, aircraft and ship/submarine building, the small arms industry, etc. We have analysed each of them. Let me stress that we have studied each of them in detail. I think you will all agree that we should primarily concentrate on the needs of our armed forces. I mean, it is not the fact that a company exists that is important. It is important that this company produces goods and services that meet modern standards – in the civilian sectors. In the defence sector, it is important that companies supply equipment that would meet the armed forces’ needs and help the country feel confident in the event of any conflict – local or international.

You are all professionals here, and you all must know as well as I that the general criteria are not complex at all. Our missile systems should have ranges at least as long as those of our potential enemies, because if they are shorter, we won’t be able to reach our enemy before they destroy us. Similarly, the precision of our systems must be greater, and they should be as powerful as modern combat requires. This isn’t easy to achieve.

We have a clear advantage in missile technology. Many of our partners still have a long way to go before they catch up with many of our systems’ parameters, so to speak. I think this is true of the equipment you produce here. But in some cases we are the ones who need to catch up. If you are asking me about the equipment the army will need, I can tell you that your equipment will certainly be in demand. From the standpoint of national security, the aerospace industry, including its military division has an absolute priority, along with the nuclear industry, the frontline of our defence sector.

Sergei Isakov: Absolutely correct.

Vladimir Putin: But we must not forget about conventional weapons: aviation, the navy, armour and artillery are also in demand. Everything is important, only this should be determined by specialists, mainly the General Staff. We will go by the opinion of the specialists above all.

Sergei Isakov: Thank you, Mr Putin.

Viktor Vavilov (deputy director-general of the Institute): You say that the General Staff should determine the requirements in modern weapons. But what about the functions of the consolidated customer… We use the term “military-industrial complex.” Why not the Defence Industry Ministry?

Vladimir Putin: The issue has long been mooted. Such an organisation could be created. The question is, what would it do? We have Rostekhnologii (Russian Technologies Corporation) which accumulates everything; there is also the Military-Industrial Complex (VPK) Commission. But my point is that they should not determine the priorities for the Armed Forces. It is up to the Armed Forces, the experts to determine what they need to effectively counteract a potential aggressor and to fight effectively. The Armed Forces, the General Staff should say what they need, and it is the business of the VPK Commission, Rostekhnologii, the ministries and agencies to organize the production of this equipment, to build harmonious financial relations between the agency that orders the hardware and the manufacturer.

Viktor Vavilov: Don’t you think there are too many customers?

Vladimir Putin: We could think about that too. I agree with you. It is not a simple system and it needs to be streamlined. It has to do with delays in financing. I understand what you mean; I am well into this topic.

This is something to think about. I am not sure that creating a new ministry is the answer. We must understand what it would do. But it is possible and necessary to think about improving the system of procurement, I agree with you here. 

Mikhail Shmakov: Could I just chip in here? I would like to say that the generals should be forbidden to undermine the competitiveness of the Russian defence industry. Because after they make their comments and say they will not take this equipment because it is bad we lose tenders in international markets for hardware, both armoured and aviation. And that accounts for a major share of the defence industry revenues. Some individuals are acting against national interests.  

Vladimir Putin: No, this reflects the tough polemics between the customer, the Defence Ministry and the producers of various types of military equipment. I have encouraged the polemic because it alone can establish who is right and who is wrong. These remarks are made in the flush of polemics. The equipment in question is fairly competitive. The question is that our Armed Forces need to be pro-active, they demand still better hardware, perhaps the kind of stuff that our potential enemy does not have and will not have for some time. But that is a different matter, this does not mean that what we have and produce is not competitive in world markets and that they are making a mistake. They are aware of this, their attention has been drawn to this and they are apologizing.

Antonina Papko (Chief of the Institute’s research department):  Мay I?

Vladimir Putin: Yes, please.

Antonina Papko: Mr Putin, As developers and suppliers of production instruments for Rosastom we would like to know the answer to the following question: will the Fukushima accident change or accelerate the plans for the development of the nuclear power industry and increase awareness of the safety of nuclear facilities in our country?

Vladimir Putin:  As for nuclear energy safety, this is a cornerstone of that type of energy. Surely you know as well as I do that the inspections of our power plants by the International Atomic Energy Agency have shown that our safety standards are the best in the world. I am proud to say this and I am saying it with full responsibility.

But there is always room for improvement. Of course we should constantly work towards that end. We are proceeding with our plans to increase nuclear energy’s share in total power generation. At present it is just 16%. We want to increase it to 25% within the coming decades (within 15 years, I think). By the way, that is not a lot. Our preliminary target is 25% of total energy generation. In France, nuclear power accounts for a whopping 80% of the total. We do not set ourselves such targets, but what we are going to do is significant. We will have to build about as many reactors as were built during the entire Soviet period. I mean large units. That’s a challenge, but we want our power industry to be balanced and to be based on several types of energy: nuclear, hydrocarbons (fuel oil, gas and coal), hydroelectric energy and renewable energy sources (wind power, solar panels, etc.). We must think about this. We will develop that area too. Again: we will not neglect nuclear energy, and safety issues come first.

As for the Japanese, they have a unique situation. I don’t know what motivates them, but this is their choice. They build their nuclear power plants in earthquake-prone zones, but of course their whole country is seismically dangerous. The accident there was caused by several things: first an earthquake which destroyed power facilities, without power one cannot feed water to cool the stations. Stand-by generators switched on, but the tsunami destroyed them. The generators were designed to withstand a 7 metre wave, but the wave that struck was 9 metres high and more and it destroyed the stand-by power generators. They had a third level of protection, batteries, and they worked, but they had to bring new portable sources from other regions, something they could not do in time, and so problems arose. But these are old 1970s American reactors, as you know.

Modern systems use the latest safety methods. Our nuclear reactors can operate without external power for three days. That is quite enough time to react. Specialists say they can make them run on their own for five days, only it would cost more. It’s a matter of cost, that’s all. We can do it, but your efforts in this area are helpful.       

Antonina Papko: May I make a brief remark?

Vladimir Putin: You are welcome.

Antonina Papko:  If Chernobyl helped us create effective safety systems, I hope Fukishima will motivate their system.

Vladimir Putin: Yes of course. I have issued instructions to our specialists to review all our nuclear reactors. In spite of the positive marks from the IAEA, Rosatom is currently reviewing all our reactors.

Antonina Papko: We have to answer calls in five minutes. Thank you.

Vladimir Putin: That means you are fulfilling my instructions. I think it’s time to wind up. The holiday is close. The way this discussion is going, we could sit here until May first. I would like to wish you success and to thank you once again for the discussion. Thank you very much.

* * *

Before meeting with the company's trade union activists, Vladimir Putin familiarised himself with the work of the research institute.

Director General of the research institute Alexei Dmitriyenko told the Prime Minister that the institute has experience of successful cooperation with the space agencies of India and China, as well as the European Space Agency, and is participating in the configuration of instrumentation for the Russian rocket engine RD-180 used in the first stage of the Atlas rocket family (USA).

Mr Dmitriyenko said that the institute has developed more than 850 engineering designs used in national and international space programmes.

The research institute is also developing equipment for the nuclear industry, including safety control systems for nuclear reactors at nuclear power stations, including foreign ones.

Vladimir Putin enquired about how much modern equipment is used at the research institute. Mr Dmitriyenko told Mr Putin that 50% of the equipment has been updated in the past two to three years. Mr Dmitriyenko said that the institute is among the multi-million-rouble companies in the Penza Region and is able to address many of its socio-economic issues on its own.