Vladimir Putin’s opening remarks:

Ladies and gentlemen,

We have been shown prospective road-building and other equipment to be manufactured here, at this plant in Tver. I hope you will start to manufacture it soon. We have also attended the signing of two agreements to produce this equipment with American and German partners. And now we will discuss the purpose to which it should be applied – road construction, which is one of the primary industries for which this equipment is manufactured. This is a very important issue, but I don’t need to tell that to this professional audience.

The first Social Business Forum was held in Moscow last week, at which we discussed the country’s development strategy. I will not tell you anything new. Everyone knows it, and business leaders and heads of regional administrations all spoke about this painful issue – namely, inadequate infrastructure, and in this case bad roads.

It is clear that bad roads objectively hinder Russia’s economic development and are having a negative impact on safety and the environment. Of course, we have been working recently to improve the situation. We have gathered good speed in road building, even in spite of the crisis. We allocated considerable funds towards the construction, modernisation, and maintenance of roads: as much as 2.7 trillion roubles from 2002 to 2010. This year, another 700 billion will be allocated from federal and regional funds, which is 40% more than last year.

You know that we have completed the Chita-Khabarovsk highway. I am pleased to repeat that it was a major event for the country. For the first time in its history, Russia’s territory from the Far East to Kaliningrad is linked by a single road network. That provides a great impetus to the development of our Far Eastern and Siberian territories. The beltway around St Petersburg and transport networks around Novosibirsk, Krasnoyarsk, Irkutsk, and other major cities have been completed. This year will see continued work to upgrade the roads in major administrative centres across the country. Funding for these purposes has already been allocated. Of course, the use of this money needs to be closely monitored and, in this regard, I urge you to establish effective citizens’ control.

I was recently in Pskov, where I met a group of young people who started out as an informal association, but have now, jointly with the governor, organised systematic monitoring of the progress of road construction. I urge all the heads of agencies, ministries, and regions to do everything in their power to support as many such informal groups as possible and to help them in their work.

Massive road construction has been launched as part of the preparations for the Universiade in Kazan, the APEC forum in Vladivostok, and the Olympic Games in Sochi.

Even so, we are aware that what has been done is not enough. We need a real and significant breakthrough here: not just big, one-off projects but steady development and drastic renewal across the country’s road networks – on federal, regional, rural, and city roads. The geographical range of new construction must be expanded (especially to the Far East and Siberia) and road approaches to the western and southern borders must be modernised, including on transcontinental transport corridors.

Special attention will be paid to the comprehensive development of transport hubs in major cities, above all in Moscow and the Moscow Region and St Petersburg and the Leningrad Region. I should stress that it is important that all neighbouring regions competently dovetail their construction plans to prevent absurd situations in which two neighbouring regions in the Russian Federation have each built roads, but there remains a gap of two or three kilometres between them, turning them into dead ends. Considering the size of the country (we have a colossal territory), building a road network is a challenge, but we must achieve a qualitative change for the better within the next five or ten years.

The available funds make it realistic to double the current amount of road construction. While in 2002-2010, about 25,000 km of federal and regional roads were built; by 2020, 18,000 km of roads should be completed under federal projects alone, and these will be roads of an entirely new class, with modern interchanges, a larger capacity, and more lanes. The plans are ambitious. They will undoubtedly require a boost in the qualified workforce, new technologies, modern machinery, and, of course, modern principles of organisation in road construction and maintenance. These modern principles must be put into practice. Of course, we should make sure that we are not applying random prices for one kilometre of road and that the road quality is up to the highest world standards.

Obviously, we need to improve the procedure for contracting construction and maintenance. It is a crucial question, in fact. We should select contractors who offer not only the best terms but have the necessary production base, technologies, and reputation on the market.

In order to concentrate funds on road building and maintenance, it has been decided to create federal and regional road funds. We estimate that by 2020, we will be able to accumulate more than 8 trillion roubles in these funds and use that money for construction. The federal road fund will amount to some 4.5 trillion roubles, 2.7 trillion of which will go towards construction and renovation and 1.8 trillion of which will be applied to repair and maintenance. The anticipated size of regional road funds is estimated at 3.9 trillion roubles. However, these sources alone will not suffice to address all our problems, so we should make active use of public-private partnerships. We are talking above all about concession schemes. Early positive examples can already be cited.

We are also going to switch to the modern model of life-cycle contracts:  i.e., long-term contracts for the building and subsequent operation of roads for a term of 10-30 years. The contractor uses his own and borrowed money to build a road and subsequently is responsible for its maintenance, while the state pays for this work in equal instalments throughout the effective period of the contract. That should eradicate the time-server mentality among contractors because the best companies would have a stake in high-quality construction so as to spend less on maintenance later. Of course, for its part, the state should ensure impartial control, so I am instructing the Transport Ministry to submit proposals on organising the comprehensive state monitoring of the country’s roads, including through the potential use of the GLONASS system.

Regulating the sector is a major topic. Many standards are outdated, inherently antiquated, and merely impede the implementation of projects and the start of new construction. These outdated schemes are an obstacle to the introduction of new technologies. What do we sometimes see? We want to use modern materials – new types of asphalt, bitumen – and we see these materials at every tour or exhibition of this kind, as we did today, but they are not mentioned in the relevant documents and old protocols. And that’s it. From that moment on, contractors have to go from door to door getting approval for everything they do, and it becomes an ordeal. Technical regulations must be adopted more quickly, and foreign experience should be used wherever possible.

Of course, the broad use of so-called unique specifications should be allowed. Indeed, why should one and the same standard design be approved ten times for each time a new construction project is started? It makes no sense, except for bureaucratic sense at its worst. I think that in order to speed up the implementation of new projects, a databank of such standard design solutions should be collected. You buy a prepared set of documentation, apply it to the terrain, and then you can begin construction. Such mechanisms, among other things, will make it possible to form a transparent system of pricing and quality standards.

Besides, state expert examination should take into account the whole life cycle of the road and avoid creating obstacles to the introduction of innovations in construction. I ask you to submit concrete proposals on that score. And, of course, it is necessary to eliminate factors that artificially inflate costs and prolong the time required for construction. For example, the current mechanisms of designating land for road construction will spawn speculation and abuses of all kinds. We have seen the same thing happen again and again. The road is only in its design stage, but the land has already been bought by a third party. By whom? Clearly, by someone who is aware of the planned construction. Ordinary working people, like the people I met at the factory today, do not buy anything. The buyers are those who have access to insider information.

On the other hand, it is hard to gain access to so-called common mineral resources, like sand and gravel quarries. That market is monopolised locally, and, consequently, prices jump sixfold at a time. In some places, prices increase by up to six times. I am instructing you to prepare proposals on cutting the time it takes to appropriate and reserve lands for the construction of new roads. Mr Levitin (Transport Minister), please think it through and introduce the necessary proposal. And also a proposal on simplifying the procedure for obtaining rights to extract common minerals when implementing major infrastructure projects and federal targeted programmes.

And finally, there is one more point. In implementing ambitious road development plans, we create massive demand for road-building machinery. Our machine builders should be ready. But make a note of this: it is wrong to force people to buy old and inefficient machinery. It should never be done.

To be the true masters of our own Russian market, our factories should renew their product ranges, do more to modernise their production, and introduce high-tech solutions and standards. We were just talking with experts – and workers – at the factory, and they asked us to secure the domestic market on their behalf. We cannot allow foreign producers to dump on our market. Yes, fair competition is possible and, indeed, necessary, but dumping cannot be tolerated. Mr Ivanov (addressing Sergei Ivanov), I ask you to give it thought and come up with corresponding proposals.

For our part, we must and will help our machine-building enterprises, for example, in creating joint ventures and in cooperating with our leading foreign partners.

As I have said, today we witnessed the signing of two major contracts on the creation of new production facilities, and we hope that within six or nine months, both projects will be up and running.

Besides, to replenish the fleet of road-building machinery, we need to more actively use leasing schemes, including the resources of the State Transport Leasing Company. It was created during the crisis, but we came up with the 10 billion roubles we needed, and the company started working. For your information, it leases out machinery at a rate of 8.5%, which includes both property tax and insurance. The bank’s interest rate amounts to a mere 5%. Better terms of leasing cannot be found in Russia.

On video conference, let’s take a look at how the work is proceeding in the Russian regions, and then we will come back to this room, and I will ask my colleagues, including Transport Minister Igor Levitin, to comment.

Let us start, say, with Novosibirsk.

Albert Kokoshin (chief executive, Sibmost JSC): Good day, Mr Putin. Good day, esteemed meeting participants.

We are on the construction site of the bridge across the Ob River in Novosibirsk. The 5.5 km bridge structure includes the bridge proper (2.1 km), two interchanges, four pedestrian bridges, and a highway section. The bridge serves a very real need because it takes a load off the two existing roadway bridges, which cannot cope with all the traffic passing through Novosibirsk and the region.

Most of the work is currently here… We are currently standing at the head of the bridge, looking across the Ob. The work is divided between three sites. Twenty of the thirty supports have been completed, and the rest are in the works. Already 600 running metres of metal structures have been assembled and installed. The installation of the main 380 running metres arch span will begin this year and be finished next year. The cost of the project is 14.8 billion roubles. Work is proceeding on schedule on another interchange and on approaches to the bridge.

I would like to point out two problems. First, the design envisages cement concrete surfacing. We believe that this is entirely justified because experience has shown that cement surfacing worked very well in the building and operation of the northern bypass in Novosibirsk. While cement concrete formerly cost about 30% more than asphalt concrete, today the prices are almost the same. However, cement surfaces last twice as long as asphalt before they require repair – i.e., 25 years.

There is one more thing. Today you mentioned the need to speed up the appropriation of quarry materials in the zones adjacent to road construction. I would also like to make this point because when general contractors win bids on construction, although the quarries are included in the project, we have to bid separately for the development of the subsoil – that is, another tender is held for access to and development of the quarry.

Yet another issue. We are becoming uneasy about the soaring prices of construction materials, especially metals. Considering the situation, we would like the Anti-Monopoly Service to oversee these matters and regulate prices; the cost of materials accounts for upwards of 50% of the total cost of building roads and bridges. You can see how much the rise in the prices of these materials affects our construction costs.

Finally, I would like to take this opportunity to tell you that this year, in early October, we are opening the northern bypass of Novosibirsk, and, if you have the opportunity, we invite you to commission it personally. Thank you.

Vladimir Putin: Thank you. That project is very important for Novosibirsk. For a city of 1.2 million people, two bridges is not enough, and a third bridge is needed for the development of the city and the convenience of its citizens. As for prices on bitumen and everything else, the reason, obviously, is the rise of global prices. But common sense still has a place, and prices should be set above all in response to the situation on the domestic market. We will look at these materials and other materials in the industry, and we will include instructions for the FAS today in the draft of our minutes. I have several questions for you. How many people are employed at the construction project?  

Albert Kokoshin: 1,400.

Vladimir Putin: And what is the average wage?

Albert Kokoshin: The average wage is 26,000 roubles a month.

Vladimir Putin: 26,000. When do you expect to complete the construction?

Albert Kokoshin: In 2014.

Vladimir Putin: What month?       

Albert Kokoshin: October 2014.

Vladimir Putin: Very well. Are you on schedule?

Albert Kokoshin: Yes. In fact, we are ahead of schedule.

Vladimir Putin: Good. I wish you success.

Albert Kokoshin: Thank you.

Vladimir Putin: Kaliningrad, please.

Alexander Rolbinov (Kaliningrad Region Minister of Infrastructure Development): Mr Putin, in accordance with your instructions, the government of the Kaliningrad Region has developed a road-building programme. One of the main elements of the programme is the construction of the 170 km Maritime Ring Road. The first stretch of the road, which runs from Kaliningrad to Zelenogradsk and connects to Khrabrovo Airport – the international airport that today is Kaliningrad’s calling card for all those who arrive here – was put into operation in November 2009 with your participation, for which we thank you. We are now at the site of the second stretch of the Maritime Ring, which is 26 km long and costs 10.2 billion roubles. Here, we can see the construction site of a bridge across the river, which is 100 metres long. We are planning to complete the road in the second stage of the project. We have learnt to build good quality roads, but unfortunately there are still problems. One of them (which you have mentioned today) is the problem of land: in particular, the appropriation of land for state needs. Sochi set a good example by cutting the time of this procedure to three months. But, in my opinion, another problem (which we discovered in the previous stage of the project) is the reservation of these lands. We would like to see similar changes introduced to the reservation procedure to make it possible to reserve land at the stage at which the road’s future route is being determined, which would greatly expedite the overall procedure.

Second. As I said, we have learnt to build good roads. But even as we build new roads, we have problems with the old ones. One of these problems is probably characteristic of all the regions, but especially of the Kaliningrad Region. You see, 90% or more (95%) of our roads were built by the Germans before the war. They were not designed for the freight or traffic volumes that exist today. In recent years, large (30 ton) trucks have appeared, carrying huge loads. There is no agency today that monitors the movement of large vehicles and heavy cargo on our roads. Until last New Year, this was the function of Rostransnadzor, but since then, they have been removed from state borders. That is a problem, of course. I think it would be useful to transfer supervisory powers over heavy cargo to Rostransnadzor.

Thank you.

Vladimir Putin: As regards the reservation of land, it is a very relevant issue. Igor Levitin will be reporting, and I would like you to respond to his proposal.

The control of cargo on roads is just as important. I would like you, Mr Levitin, to consider the issue, and, if you are ready, make a proposal during our meeting today. As for regional roads in general, including in Kaliningrad, it is up to the regional authorities to repair them in a timely manner. After all, we cannot just say, “The Germans built these roads, and now those scoundrels don’t want to repair them.” We should repair them ourselves. It is a region of the Russian Federation. I hope that the regional authorities and the governor are paying attention. We are helping you through the use of the federal budget, and we will continue to help. But you should do more to maintain the road networks in the region.

Sergey Ivanov: We now have our own road fund.

Vladimir Putin: Yes, there will now be a road fund. I very much hope that the money will be well spent. When do you expect to finish this 26 kilometre stretch?

Alexander Rolbinov: Under the contract, we are to complete it in November.

Vladimir Putin: Are you on schedule? Will you make the deadline?

Alexander Rolbinov: Yes, we are on schedule. But I would like to take this opportunity to ask the Transport Ministry to make sure that the subsidies get to the regions more quickly. And, once again, I am taking this opportunity, Mr Levitin, to ask you and you, Mr Putin, to support us and include the construction of the Maritime Ring in the Transport Ministry’s programme for 2012-2013.

Vladimir Putin: What is the remaining distance to be covered?

Alexander Rolbinov: About 120 km. The road that is being built (I forgot to tell you that it is a B-1 category road) includes four lanes and is fully lit.

Vladimir Putin: Yes, I’ve seen it. I understand that it will be the same as the section from the airport, correct?

Alexander Rolbinov: Yes, that is correct. It will be the same.

Vladimir Putin: It’s a decent road. Maintaining quality is the most important thing.

Alexander Rolbinov: The quality has not been compromised.

Vladimir Putin: Very good. As for subsidies, the ministry has the money, and we are not planning any cuts. It’s all about how quickly these issues can be resolved. I hope the minister pays attention and reacts appropriately. I wish you success.

Chita, please.

Sergei Ten (chief executive, Trud JSC): Mr Putin, colleagues, I am reporting from the 107th kilometre of the Amur federal highway from Chita to Khabarovsk. We are carrying out major repairs of the highway sections that were built in 1980s by military road builders.

The funds have been allocated by the Transport Ministry’s Federal Road Agency in compliance with your instructions following your trip last year from Khabarovsk to Chita. They held a tender, and in March we began implementing the project. Currently, we are replacing the pavement, widening the road, and paving it, and, by October, we are planning to complete the entire section of the highway, which is about six kilometres long.

Mr Putin, last year we asked for your assistance, and I would like to take this opportunity to thank you for your support. We worked for 15 years on the construction of the Chita-Khabarovsk federal highway, and today contractors continue to work on various road construction projects here in the Fast East, including the Lena highway (Bolshoy Never-Yakutsk), the Kolyma highway (Yakustsk-Magadan), and the Ussuri highway (Khabarovsk-Vladivostok). 

My company, Trud, is involved in the construction of the Lena federal highway. I would also like to take this opportunity to ask a question or, rather, make a suggestion. One of the major problems facing the road construction industry is, in my opinion, the inefficiency of Federal Law No. 94.   

Unfortunately, major contractors with extensive experience and highly qualified staffs find themselves completely unprotected against abuses that take place during open tenders. Today, there are many fraudulent companies that participate in these tenders and try to manipulate the market. Therefore, we think that, to protect large companies, the leading contractors you, Mr Putin, mentioned earlier today, we must introduce a very tight ranking system and serious qualifying procedures to select the best teams capable of performing their task.

This is our proposal. We understand that new legislation is being developed on state acquisitions, but, in my opinion, Federal Law No. 94 could also be amended to help resolve the aforementioned issues.

Finally, Mr Putin, I would like to convey the warmest regards of Oleg Trushin (in September 2010, when touring the newly commissioned Chita-Khabarovsk highway, Vladimir Putin gave the Lada Kalina he drove to Oleg Trushin, a highway construction worker).

The car is in good shape and running well. It’s a good car. Mr Trushin is very happy with it and sends you his regards. I think touring Russian highways in August is a good tradition, and we want to invite you to the Far East again to take a tour of the Lena highway. Thank you.    

Vladimir Putin: Thank you very much for the invitation. How long was the old section of the highway that we drove last year? The Chita-Khabarovsk highway is about 30 years old, isn’t it?

Sergei Ten: Yes. It runs for 96 kilometres through the Trans-Baikal Territory and was commissioned in the 1980s.

Vladimir Putin: How much time do you think it will take to complete the entire section?

Sergei Ten: Provided the funding is available, it should take about two years to complete the work meeting all the necessary requirements.  

Vladimir Putin: And how long is the Lena highway?

Sergei Ten: 1,100 kilometres.

Vladimir Putin: That’s quite a stretch. Which section are you working on currently?

Sergei Ten: We are currently at the section from kilometre 849 to kilometre 880, that is 300 kilometres south of Yakutsk. My company is responsible for a 30-kilometre section of the road.

Vladimir Putin: How much does it cost to build one kilometre on the Chita-Khabarovsk highway? 

Sergei Ten: About 25 million roubles.

Vladimir Putin: Per kilometre?

Sergei Ten: The highway is of the third technical category.

Vladimir Putin: What about the Lena highway, what’s the cost per kilometre there?

Sergei Ten: It’s a bit higher there. The road runs through the northern regions, and the climatic conditions are somewhat different, making for a higher cost.

Vladimir Putin: Where do you get the construction materials?

Sergei Ten: We get the inert materials, including soil and gravel, from local deposits along the highway. Metal and other materials are supplied from the Siberian regions (Yakutsk, the Krasnoyarsk Territory, the Kemerovo Region). And bitumen is shipped from the Angarsk Petrochemical Plant.

Vladimir Putin: What are your relations like with your contractors and colleagues?

Sergei Ten: Do you mean the local contractors?

Vladimir Putin: Yes, with the local metal suppliers?

Sergei Ten: We have positive and business-like relations. When working in other regions, we always seek to foster constructive and mutually beneficial partnerships with our contractors and suppliers.    

Vladimir Putin: Have you increased salaries this year?

Sergei Ten: Yes, salaries have been raised by about 20%. Back when we started working in the Trans-Baikal Territory, the only major transport infrastructure here was the Trans-Siberian Railway. Today, we are working in Yakutia, where conditions are more difficult and people require more money. Therefore, we increased salaries by at least 20%, depending on the performance of each individual worker and based on our flexible motivation system.  

Vladimir Putin: Very good. We are currently working to modify Federal Law No. 94. We are aware of the issues you have raised, and the Ministry of Economic Development is preparing the appropriate proposals. Hopefully, we will be able to resolve these issues with regard to this law and other documents very soon.  

I wish you success. Please send my warmest regards to your colleague driving the Lada Kalina and the rest of your staff. I remember our meetings on the highway well.

Sergei Ten: Thank you.

Vladimir Putin: You have very good people, true professionals, hard working and dedicated to their jobs. Once again, please send them my best regards.

Sergei Ten: I will surely do so.

Vladimir Putin: Mr Levitin, please go ahead.

Igor Levitin: Mr Putin, ladies and gentlemen! The number of vehicles in Russia has grown from 25 million in 2000 to 43 million at present – that’s a 70% increase. According to expert estimates, by 2020 there will be 60 million vehicles in Russia. That said, lorries account for 80% of cargo shipments. This exerts a definite influence on the status of our road networks.

Russia’s current road network consists of one million kilometres of roads, 6% of which are federal roads with only two lanes along almost their entire length. To be more precise, 90% of federal roads are two lanes wide, and 10% are four lanes wide (with two lanes in each direction). We have now started building six-lane highways, particularly on the sections where the traffic is heaviest.

Almost 50% of all cargo is transported on federal roads. Regrettably, only 38% of them meet the current requirements. Changes in traffic patterns have increased the number of heavy-duty lorries fivefold in the last 10 years. Heavy-duty lorries account for about 60%-70% of all vehicles on the M-10 motorway in the Tver Region (where we are now), due to traffic bound for Moscow from ports in St Petersburg and from the Baltic states.

The worst conditions have taken shape on federal roads passing through cities and villages. Previously, roads were built to pass through cities, but now they have created environmental problems for the urban areas through which they pass.

According to your instructions, we have set up two coordinating councils – one in Moscow and one in St Petersburg. Now Moscow and the Moscow Region, as well as St Petersburg and the Leningrad Region should jointly discuss their cooperation. It is only possible to resolve the issues facing these mega cities through a concerted effort.

There have been problems with defining the term “street and road network.” We are discussing this issue along with a number of regional governors and have proposals in this regard. The Construction Rules and Regulations have been in force since the 1980s, and we must clearly define this term because it is already being used for the allocation of funds for the upkeep of these roads.

In terms of results, you have mentioned the priority projects that are already being executed. I’d just like to mention that the lion’s share of funding for these roads was spent over the last three to four years and that rural roads are a new feature of our programme. We have fulfilled your instructions: now up to 7 billion roubles will be allocated from the federal road fund every year. We based this programme on the standard cost of about 10 million roubles per kilometre. We believe that given this cost, the share of co-financing by the regions will be kept to a minimum. We have requested that the regions build quality roads in line with current technology. There is one problem – we are required to build four lanes even on rural roads – this is the old rule. We suggest changing it. Why not build two-lane roads where traffic levels are lowest and include passing turnouts for buses and cars. This will make road construction much cheaper and, importantly, municipalities will have to pay fully for their maintenance. 

Practically 20% of all funding allocated for roads in the last few years has been spent on ground clearing. This includes the removal of communications infrastructure and community resettlements, and I think that this function must be divided. As for the appropriation of land (you have heard proposals from the audience), I’d like to say that we’ll discuss the instructions you have just made with the Ministry of Economic Development and the Ministry of Regional Development. Indeed, there are lives and communities along the areas where we plan to build roads, but we would prefer it if we could build roads without buying land and transferring existing communications infrastructure and then let it be built around the road once it’s been completed, rather than the other way around. The Kaliningrad Region has just made a proposal for reserving plots of land for this purpose. To sum up, we have a proposal, and we’ll submit it to the government, Mr Putin.

Needless to say, the division of expenditures involved in pre-construction preparations and construction proper will make the procedure for buying land more transparent. It will allow us to understand what land we are buying, who has acquired it as private property, and when. We have a proposal on this score, and we’ll formulate it.

As we have seen today, investment in roads has promoted the manufacture of road-building equipment. In the past few years, about 100,000 vehicles have been used in road construction and maintenance. The state leasing company helped domestic producers during the crisis and continues to help them now. Today, the orders exceed its capacity, and we have a request to consider the allocation of additional funding to the state transport leasing company for the domestic production of road equipment.

Vladimir Putin: How much?

Igor Levitin: Up to 8 billion roubles over the next three years. This is the minimum that currently… There are more orders, but we consider this the minimum because the leasing company is already receiving working capital.

Vladimir Putin: Let’s put it under today’s protocol not as an instruction to allocate funding but as the possibility…

Igor Levitin: …for consideration.

Vladimir Putin: As an instruction to the relevant ministries to consider this issue.

Igor Levitin: Yes, to consider the possibility of allocating… The share of production associated with road construction and services accounts for 15.5% of the GDP, and we believe that this is an important incentive for developing the economy. And, of course, construction materials have already been mentioned here – they present the biggest headache. It is very important for us to look seriously at the costs of materials in line with the instructions you will give today to the Federal Anti-Monopoly Service. We have calculated that, in the past ten years, road builders have used 34 million tonnes of bitumen, 245 million cubic metres of break-stone, and over 500 million cubic metres of sand. This is an enormous amount of material used under the programme that we completed in 2010. We have a stake in the introduction of new methods, technology and materials, and we do need permission to support the companies that deal with the innovative development of technology and materials. We have a proposal on this score, and we’ll formulate it. This is a separate segment of new construction technology that requires our permanent support.

I’d like to say a few words about bitumen. Regrettably, its quality has not risen with its price.  The construction of a connecting road is currently being completed in Novosibirsk. It will be constructed almost entirely of cement because the prices on cement have not grown as rapidly as on bitumen in the last few years.

The cost is the same practically all over Russia, but cement roads last for 20 years, and asphalt roads for five to seven years. I think that we should concentrate on the construction of such roads in the future, too.

I’d like to thank you for making a decision on road funds. Methods for distributing the Federal Road Fund have already been drafted. We hope that this fund will allocate money to the regions next year, thereby creating new opportunities for the construction and maintenance of roads.

Life-cycle contracts are very important for the owners of infrastructure facilities. That way, we can use one contractor for road construction and maintenance for an extended period of time. The first projects will start this year. A new contract format involving concession mechanisms is appearing. Thirty-year concession agreements have been signed for a number of roads with total private investment standing at 50 billion roubles. We are now drafting new concession projects.

The establishment of the Avtodor state company was a good decision because we can now use this company to develop innovative construction techniques. A series of fundamental laws have been drafted in order to run this work in a systematic way, such as the law On Roads and the law On the Russian Motor Roads State Company.” Spending standards for maintenance and repairs of federal roadways have also been approved.

Certain changes in construction norms have taken place as a result of the administrative reform. In 2000, the Ministry of Transport’s technical policy stipulated the development, agreement and approval of new technical requirements. In addition, road builders were to have their own expert analysis facility that would be used to review new decisions in road construction. Since neither the Transport Ministry, nor the Federal Road Agency have such authority now, we have a proposal duly agreed upon with the Ministry of Regional Development to invest industry-specific agencies with such authority. Currently, these agencies engage in the construction of infrastructural facilities and develop technical rules and standards. We should also consider making them eligible for financing such work. The list of such agencies will be approved by the Ministry of Regional Development, and expert reviews will also be performed by the ministry. However, the agencies could take up the task of developing new standards so that we are better able to provide prompt responses to changes in new road construction rules and norms.

I will not discuss Federal Law No. 94-FZ now. You have already mentioned that, unfortunately, we cannot choose our contractors under the current legislation. The lowest bidder wins the contract and then hires the same construction companies as subcontractors. As a matter of fact, it’s a contract sale. We analysed the situation with the World Bank and realised that Russia is the only country that follows such road construction regulations. We have mentioned that we have proposals to address this situation, and we will submit them for the consideration of the State Duma. We believe that these arrangements should be changed.

We are building a system that will enable customers to assess construction companies and access their track records using a software application. The customers will get information about the contractors’ previous jobs and the work they performed under warranty. They will also be able to evaluate their success and use of innovative technology. This is the kind of database we are now working on and expect to complete soon. It will be used for all infrastructural facilities in Russia, including roads, railways, and air transport.

With regard to the appropriation of land – a process that takes up to five years to complete under the concession agreements – I wish to support the proposals that we heard from our local contractors today. We really need to cut the time it takes to complete the process from twelve to three months. We have such proposals. Land reservation is the key issue because we run into it as soon as we decide to build a road from X to Y. Once the design engineer enters the picture, they just buy up all available land, and we have to pay for it later. We will submit such proposals.

Construction control is very important to us. Regrettably, we cannot hire independent technical inspectors today, and this function is performed by the customer. We would like to be able to hire independent inspectors using these funds. The Ministry of Regional Development has no objections. This will make it possible for us to use independent inspectors who supervise the entire construction process. We showed you today the equipment and labs that can be used to monitor construction.

Certainly, the type of vehicles traversing a given road affects its longevity. The vehicles that we saw on the Chita-Khabarovsk highway – those heavy-duty American trucks – are not safe for our roads. You can see on this slide that about 14% of Russian roads can support only 6 tonnes of live load; 57% can support 6-10 tonnes; and only 29% are equipped to support 10-11 tonnes. Our plan calls for upgrading these 14% of federal roads until 2020, so that they can be used by heavy-duty trucks.

According to current regulations, the carrier bears responsibility for excessive weight. Here’s the list of participants in the weight control arrangements. We have a proposal here. First, we submitted a draft law to the Duma stating that the shipper will be responsible for letting a truck with excessive weight on the highway. We hope that the Duma will adopt it before the end of 2011. Violators will pay a fine of 400,000 roubles. The steepness of the fine has more to do with deterrence than adding money to the budget. It’s important that such trucks do not destroy the roads because if they do, we will need to instantly find more money to fix them, etc.

Today, the Federal Service for Supervision of Transport (Rostransnadzor) and the Interior Ministry’s State Road Traffic Safety Inspectorate engage in such control functions, inspecting international and domestic carriers, respectively. However, we believe that Rostransnadzor should be given all authority over federal roads. It should be able to pull vehicles over for inspection, check their weight, and engage in legal and judicial procedures if the truck carries more cargo weight than is allowed. We would like to have permanent weighing stations on all roads, but they are expensive. Instead, we would like to have permission to operate mobile weighing stations. We have shown you what we have in mind today, and we are prepared to go even further. We would like to have this rule enforced by photograph monitoring, so that there’s no contact with the driver, and the shipper pays the fine. The State Road Traffic Safety Inspectorate supports our proposal. We believe that governors should be responsible for operating mobile weighing stations on regional roads.

Mr Putin, I would like to thank you on behalf of thousands of road workers for your support of road construction and maintenance. Thank you.

Vladimir Putin: Thank you, Mr Levitin. Weigh control is performed by the interior agencies, State Road Traffic Safety Inspectorate…

Igor Levitin: …and Rostransnadzor.

Vladimir Putin: Currently?

Igor Levitin: Yes, but only with regard to international carriers.

Vladimir Putin: Rostransnadzor cannot work all by itself. Mr Kirianov (deputy minister of the interior), what do you think of the proposals made by the minister of transport?

Viktor Kirianov: Mr Putin, we have discussed this issue on several occasions. A decision on the responsibility of the shipper is overdue, and the shipper should be truly responsible. I believe that if the law is enacted quickly, we’ll begin to enforce it, and the number of such vehicles on the roads will drop significantly. We should go ahead with the mobile weighing stations.

Vladimir Putin: That way, we will be giving road services the right to pull over and inspect vehicles?

Viktor Kirianov: I don’t think there’s anything wrong with that.

Vladimir Putin: In other words, you agree?

Viktor Kirianov: Yes.

Vladimir Putin: Mr Levitin, please have a joint proposal drafted. Thank you.

Mr Chabunin, please go ahead.

Anatoly Chabunin (head of the Federal Road Agency): Mr Putin, colleagues, the adoption of the decision to establish federal road funds helped us solve our perennial problem of funding and expanding the planning horizon. Today, we set a new goal for ourselves, which is to improve the efficiency of budgetary funds and enhance the quality of the results, such as major repairs and the construction of federal roads. We see two main areas of concern here: the development and introduction of pioneering technology to road construction and changes to existing regulations.

In order to be able to develop these areas effectively, we need a very flexible system for changing regulations, so that if a technological process or solution is developed on special technical terms today, it will become a standard procedure tomorrow and no longer require approval by the same processes all over again. The authority of the Federal Road Agency and the Ministry of Transport in this area is very limited as compared to the years before 2004.  Today, if we were to use the instructions issued by the Ministry of Transport before 2004 and the regulations developed by the Federal Road Agency (as it stands now, these technical regulations, construction norms, and standards require lengthy adoption and implementation procedures), I believe we could speed up the introduction of new standards significantly – that is, if we adopt certain departmental rules and invest the Ministry of Transport with such authority. Accordingly, the Ministry of Transport and the Ministry of Regional Development would agree upon such decisions with the appropriate agencies.

The issue of technical innovation can be settled rather easily. I’m speaking about innovative managerial solutions. The executive order that you signed on the construction of a federal road interchange without federal financing is being implemented. We have held the biddings, and, currently, the private investor is in the process of designing this interchange. Later on, it will start construction and transfer its ownership to the state. This innovative approach was used in Russia for the first time. I believe that we will continue to employ it in similar projects because private capital is often interested in developing certain areas, and there’s no way to build access roads without first building such interchanges on federal roads.

As Mr Levitin has already said, we are building multi-lane federal roads fully equipped with traffic dividers, proper lighting, and interchanges at different levels. Certainly, it all comes at a cost. However, this is an innovative product with pioneering consumer specifications, and it’s good for the national economy.

As for street and road maintenance, it is a critical issue. I even think it’s been a problem for too long, as Mr Levitin said. I cannot say there is antagonism between us [the Federal Road Agency] and the prosecutor’s office – but we do have issues, and our interpretations of the legal framework differ. Occasionally, the court assigns small town streets and roads to our jurisdiction, as was the case in Usolye-Sibirskoye in the Irkutsk Region. Court proceedings are underway in another town. In such instances, the court determines expenditures, thus assuming the duties granted by the Budget Code to the federal government. I think we could avoid such things if the legislation provided a more specific definition of the road network. I suppose it is possible to provide federal grants for cities crossed by federal transit highways for their maintenance. Certainly, we can also build roads bypassing these cities to avoid heavy traffic there.

As for upgrading the roads, the Federal Road Agency has adopted a concept for improving the quality, and we are working on a programme for quality improvement. You see, we have passed from an abstract concept to a practical programme. This is what we want to do. We attended a roundtable discussion at the Business Russia conference with Mr Belozerov (Deputy Transport Minister). We had a very productive dialogue there, and the participants proposed that we shift to the one contact principle. We have made this decision. The agency has revised and approved the statute of one of our affiliated offices, which will become a centre for managing innovation. It will assess innovations, launch them, monitor their implementation, and promote them while focusing on quality.

Mr Levitin also mentioned monitoring construction. We talked about it with our colleagues at the Ministry of Regional Development, and saw that there was a government decree to that affect that was passed last year. The Urban Development Code has been amended since, so the decree has to be brought into conformity with it, and authorise clients to hire independent construction inspectors.

We noticed another problem in our car ride from St Petersburg to Tver. That is the disposal of used tyres. It is really a major problem. Environmentalists have a grudge against us as we only collect old tyres in subcontractors’ depots but have no chance to dispose of them as there are no dumps that accept them. Road maintenance workers can only burn them, which is bad. The problem has to be handled comprehensively and as soon as possible if we want to solve it properly.

Vladimir Putin: What do you think should be done about it?

Anatoly Chabunin: I think we should cooperate with the Ministry of Natural Resources to oblige all dumps in every part of Russia to accept and process used car tyres. We can collect and remove them but there are no waste centres now to take them to.

Vladimir Putin: What do you think about this, Mr Trutnev?

Yury Trutnev: Mr Putin, all the relevant proposals have been drawn and submitted to the government. The draft legislative package I have told you about introduces a refund value for many commodities, including tyres. It will provide for building tyre processing facilities.

Vladimir Putin: When will they be built? We need to dispose of tyres now!

Yury Trutnev: The government is already…

Vladimir Putin: No, no. Even if we pass the decision soon, the facilities have to be built yet. And where will they get old tyres now? We need quite some time to find investors and to build these plants.

Yury Trutnev: There is no other way to do it. At any rate, we should not burn used tyres while there is no way to dispose of them in Russia. We need money to launch construction – and time, two or three years at least…

Vladimir Putin: I see. But what should be done with the old tyres for these two or three years?

Yury Trutnev: We can at least arrange  with the waste centres to stock tyres without recycling them.

Vladimir Putin: Good. They should at least be stocked up for further recycling. Do it please.

Konstantin Korolevsky (deputy minister of regional development): When we saw the development of Construction Industry Co at Moscow’s House-Building Factory No. 6 on April 25, the Eurocement speaker proposed recycling tyres at cement factories. Martin Shakkum approved the idea. In principle, we are ready to examine the idea in detail with Construction Industry Co and its cement factories for them to store used tyres even now before the recycling technology is worked out.

Vladimir Putin: And what will they do with all those tyres?

Konstantin Korolevsky: They can burn them in their incinerators, and they are interested in the job.

Vladimir Putin: Mr Trutnev, does your ministry agree?

Yury Trutnev: We must see their filtering systems first. We have factories reprocessing tyres into powder for further industrial use, but there are not enough such facilities.

Vladimir Putin: Let us include in our draft decision an order to the Ministry of Natural Resources and the other relevant agencies to look into the prospects of building tyre processing facilities and the opportunity to recycling them at available cement factories. We should also allow the available waste centres to store tyres for further recycling. Settled! Now we only have to give it explicit wording.

Let’s turn now to the proposal to pass the responsibility for norms and standards for road construction from the Ministry of Regional Development to the Transport Ministry. What do you think of it, Mr Korolevsky?

Konstantin Korolevsky: With our current process, the technical regulations on construction safety divide the drawing of technical documents into two parts, mandatory and optional documents. The mandatory documents include 90 construction rules and regulations, of which four concern road construction.

They are all being drawn now, and we are to finish them by the middle of next year. Particularly, the regulations for highway construction are scheduled for approval in September. The Soyuz DorNII road construction research institute, subordinate to the Transport Ministry, is working on them. There are no problems with the mandatory documents. We are organising the job. The deadline is next year, as I said. As for the optional documents, that Mr Levitin and Mr Chabunin mentioned, there are no problems with them at all. About 200 regulatory documents are being drafted by agencies and departments alone on their own initiative on a programme for 2013. That is why we approve the arrangement on which the Transport Ministry’s departments and agencies draw these documents while the Ministry of Regional Development merely approves them as coordinator. The preliminary talks are over, and we support the idea.

Vladimir Putin: Let’s agree on that. As for mandatory and optional documents, let us do it like this: the Transport Ministry will draft them, and their approval will be up to the Ministry of Regional Development. Agreed! And let’s record this today.

Mr Karavayev ( state secretary and deputy minister of industry and trade) has the floor.

I am sorry, I have another item marked here – subsidies to the regions whose cities are crossed by federal highways. Mr Novak (deputy finance minister), please comment. But then, we are subsidising all regions except ten. These are not targeted subsidies, so the question is what the regions spend them on. Speak up please.

Alexander Novak: Mr Putin, duties concerning highway holding are precisely defined at this point. Federal highways are funded by the federal budget and are on the federal balance sheet as federal property, while regional and municipal roads are owned and funded by the respective entities, the regions and municipalities. So the money goes straight to federal highways. Even when they cross regions, they must be entirely financed by the federal budget.

Vladimir Putin: See this is the question: a federal highway goes on and on without a problem until it enters a population centre. The part of the highway within the population centre is considered a regional highway.

Alexander Novak: The problem is that this stretch of the highway must be financed by the region from its road fund.

Vladimir Putin: But you just said “by the federal budget.”

Alexander Novak: Not when it is a regional highway.

Vladimir Putin: It might be considered a regional highway though it’s federal, in fact. So a federal highway crosses a municipal boundary – and is classified as regional.

Alexander Novak: I think it is a matter of property delineation. If this is a federal highway, we shall finance it from the federal budget according to federal standards, while a regional or municipal road is financed from local road funds.

Vladimir Putin: Every Russian region will be happy to cede its roads.

Alexander Novak: Mr Putin, if they do we will fund them from the federal budget. I don’t quite see why Mr Chabunin posed the question at all.

Vladimir Putin: Speak up, Mr Chabunin.

Anatoly Chabunin: Take a highway crossing a town, for instance, Usolye-Sibirskoye in the Irkutsk Region. It was actually a municipal road but a court verdict assigned it as a federal holding. Accordingly, we repaired the pavement through the town, but all the junctions remained below federal standards. I am then forced to either order half the town buildings demolished for a proper easement, and all the supply lines and half the intersections removed to adjust the road to federal standards, or we have to acknowledge that this street and road network is merely used by federal transport, for which the municipality must be paid.

Then the local authorities say that they could maintain the road all right without our help if they had the money. Now, the prosecutor’s officers do what we cannot. We appoint sites of federal importance and address the Finance Ministry for such sums for their maintenance – to which you say the projects cannot be passed into federal holding. Meanwhile, the prosecutor’s office made us overtake two towns through the court. More than that, the prosecutor’s office says in a Rossiiskaya Gazeta article that they have inadequate regulatory documents to blame for the situation. That’s the problem. There are no problems at all with small villages without supply lines. But there are large cities, too. Take Volgograd, with 90 kilometres of federal transit roads with tram lines, traffic lights, and so on. What kind of a federal highway is this? We need to consider these issues and help these cities with grants or otherwise while we are tackling the problem.

Vladimir Putin: Agreed.

Alexander Novak: We are willing to address the problem. Now, I would like only to make a comment.

Vladimir Putin: Do please.

Alexander Novak: Regional highways pass into federal holding every year. Possibly, we cannot coordinate it only when the passage is made within the year. On the contrary, when it agrees with the normal budget process, we are willing to consider it – let’s say, when the matter comes up today concerning 2012-2014. The question is that in any instance when subsidies are paid, they come from the road fund formed from the federal budget. No extra sums are required in these circumstances. We can agree to it and take part in drawing regulatory legal acts that would allow us to do so.

Vladimir Putin: Let us analyse duty delineation once again. The Transport Ministry should do the job together with the Finance Ministry and other interested agencies. We will add this order to our drafted decision today. It is necessary to regard the matter in detail and see just where regional duties finish and federal ones start. What Mr Chabunin said about roads adjacent to highways crossing cities and towns is very important. It is natural that the Finance Ministry refuses to address the problem. What have adjacent roads to do with it? The ministry will go on refusing unless the matter belongs to regional or even municipal duties. So let us bring our analysis to an end. Let us dot all the i’s and cross all the t’s. Thank you.

* * *

Sergei Ivanov: I will be concise. I hope that these will be practical proposals for the list of orders taking today’s discussion into account. The first thing our road workers from the provinces spoke about was access to mineral deposits in implementing major infrastructure projects. It is written here: “The Ministry of Regional Development and the Ministry of Natural Resources.” I would like to add the Federal Antimonopoly Service because road construction implies huge amounts of quarried minerals and inert matter… After all, we also have civil construction and so on, and it wouldn’t be fair to assign the responsibility for deposits of inert matter entirely to the road construction industry. That is why I would like the Federal Antimonopoly Service to extend the list of executors on this item.

Next, Item Five instructs the Transport Ministry and the Ministry of Industry and Trade to draw up and submit to the government, according to the established procedure, a proposal to grant the Transport Ministry the right to use funds earmarked for the modernisation of Russia’s transport network. This is absolutely correct.

There are allocations for the urgent implementation of innovation technology, bringing our technical legislation into compliance with international legislation in transport infrastructure construction… Here, I deem it necessary to add this, insofar as the matter concerns international standards for road construction: including separate accounting lines for land purchases for road construction, and road construction proper. I say this because Russia is the only country in the world where accountancy defines the cost of road construction as the total cost of land purchases, the transfer of all buildings and supply lines, and the road construction proper. It is no secret that the cost of land and supply line transfers make up more than a half of the road construction costs in the Moscow Region and in Sochi. I call your attention to this because, first, we have problems with quality and price calculation in road construction. Many of our citizens believe, through ignorance, that road construction costs are specially envisaged to exceed European costs by ten times. This has to be taken into account for an objective assessment of the situation. If we deduce the costs of land purchases and supply line transfers from the total, we will have a more objective view of the situation, and we will not be so hard pressed when negotiating with road construction experts on bloated construction costs because we will see everything laid out in the financial accounts.

Everything that was said here about compulsory land acquisition is correct. It is one of our major problems in general. When roads are built in Central Russia – I mean federal highways, especially that come from Moscow – land purchases take as long as five years, against two years for construction proper. That is how unevenly the schedule is distributed. Land acquisition must certainly become more transparent and, what matters even more, quicker. We earmark budget allocations for road construction even for three years but when this time elapses we see that the construction has not yet begun because land acquisition is just barely being wrapped up.

Now, let us talk about dumping. Our major foreign partners are involved in the industry, including Tver-based projects. I support their proposal to avoid a limitation on competition. They have come to our market to shift industrial assembly to Russia. Dumping is another pair of shoes. Mr Putin, that is why I deem it necessary to put down your order concerning dumping – the Ministry of Industry and Trade and the mayor should submit proposals on anti-dumping investigations and a tentative increase of customs duties on road construction            equipment imports from certain countries, which were mentioned here in passing. The cost of this equipment is evidently dropped on purpose because the world price of the metals from which the equipment is made only slightly exceeds the price of the equipment in total, which is offered to Russia even with 5% customs duties. It is impossible to put an end to this practice!

Vladimir Putin: We needn’t mention any countries – all must follow the same rules.

Sergei Ivanov: Right, the same rules for all. All must be entitled to the same terms of competition.

Now, let us turn to Federal Law No. 94. I have called it “notorious” for a long time because it evidently does not work for road construction. Everyone sees that. In road construction, it clearly leads to one result. Intermediaries benefit from formal compliance with this law as they resell to actual contractors the contracts they win at auctions. We have every reason to acknowledge this practice. I approve Mr Shakkum’s idea (chairman of the State Duma committee for construction and land relations) to amend the legislation on road construction. Otherwise, we will spend a long time amending Law No. 94 while huge allocations for road construction will be wasted.

I fully agree with proposals on mobile weigh stations, video recording, and on amending the Code of Administrative Misdemeanours. Inspectors – be it the Federal Transport Inspection, traffic inspectors or regional officials – should not come in contact with drivers. This arrangement would dramatically cut corruption. At any rate, fines should be big, and should be paid by consignors. When a driver is delivering grey market freight or a double load at one time, his employer will surely come down on him after getting a huge fine. But state agencies should deal with consignors not drivers. Mr Putin, what matters here is not only that there will be fewer oversized lorries on our roads - cargo of up to 80 tonnes is being carried along our roads now - what matters no less are budget revenues – if we bring inspections into line and appoint adequate fines, tens of billions of roubles will be added to our budget.

I would like to give you a piece of information in conclusion. A report was made here about the Chita-Khabarovsk highway. Mr Putin, I would like to make a parallel report to you concerning your order. The government commission for transport and communications twice discussed the prospect of providing mobile phone service along the 2,000 kilometre highway, which presently has no fixed-line telephone service, for that matter, to say nothing of cellular. In October, the Ministry of Communications will finish equipping the entire highway with a mobile phone provider.

Vladimir Putin: Thank you. Ladies and gentlemen, this is a crucial issue, I don’t need to explain why. It is clear that economic growth, and the security and wellbeing of millions of Russian citizens depend on infrastructure development. Many industries rely on road construction. This is a timely meeting. I mean that it is now that our previous decisions concerning the federal and regional funding of road construction are beginning to have a practical effect. It is especially important to consider how this work is organised, and how efficiently the generous federal and regional road construction grants are spent.

We have touched upon another critical industry connected with it. I mean special equipment manufacturing. The questions we have discussed here will be included in the decisions drafted prior to this meeting. I request that the Transport Ministry coordinate this. Its related duties concern the improvement of the regulatory framework, and decisions connected solely with the functions of the federal government. In one month exactly, you will report on how much of the job has been done, and make practical proposals on the implementation of the agreements made during this meeting. Thank you very much.