Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon.

Mr Kudrin (addresing Finance Minister Alexei Kudrin), the elections of the International Monetary Fund managing director are just around the corner. We have initially agreed to support the nomination made by our partners in Kazakhstan. The situation has further developed, however, in accordance with the current distribution of forces within the IMF, although Russia certainly has some influence there, too.

When I was in Paris, my French partners asked whom Russia will support at the concluding stage of the election.

Alexei Kudrin: Mr Putin, the IMF managing director will be elected very soon. Russia is a member of the IMF Board of Governors; I attend the board meetings twice a year, and together with all developed and developing countries, we make all the key decisions about IMF work. We have recently altered the IMF Charter, quotas and the share of votes. We are increasing the share of emerging markets in IMF capital and the share of votes on all key issues. Therefore it is highly important for us where the IMF reform goes from here.

We have held consultations with Christine Lagarde, the French finance minister and one of the candidates. I have also had telephone conversations with other candidates – the head of Mexico’s Central Bank, who is also running for managing director. I have met with Grigory Marchenko, (the head of the National Bank of Kazakhstan).

At the concluding stage, we believe that Christine Lagarde’s policy and proposals are in the greatest accord with the IMF goals and objectives. In my opinion, she can impart forward momentum to this organisation and support its further reform, especially as concerns the quota system with regard to the interests of emerging markets.

We have discussed this with her on several occasions and therefore have absolute confidence in her approach. She has also met with Russia’s representative on the IMF's executive board, Alexei Mozhin. We therefore believe that she has all the necessary qualities, and will support her candidacy.

Vladimir Putin: Good. Now, about raising the salaries of public sector employees. Let’s get back to Russia and talk about current affairs here. Salaries at publically funded organisations will be raised 6.5%. We also negotiated assistance to regional budgets so that they would improve the situation at the publically funded organisations for which they are responsible.

Alexei Kudrin: Mr Putin, Russia’s regions also plan to raise salaries at publically funded organisations this year. Salaries were raised in 18 regions on January 1, sooner even that at the federal level. Another 55 regions raised salaries for such employees on June 1, simultaneously with the federal raise. Seven regions will do this on September 1, for the first time this year. In other words, nearly all regions have taken the decision to raise salaries, and either have raised them or will raise them on September 1.

It should be said that salary increases in the regions, just like at federal establishments, did not include civil servants and the municipal government staff. As a rule, the regions are refraining from raising their salaries at this stage. Only the salaries of the public sector employees – doctors, teachers, culture professionals and social workers – are being raised. The regions are now taking decisions to raise the salaries of the teaching staff as part of modernisation programmes.

Vladimir Putin: They will be raised on September 1?

Alexei Kudrin: Yes, a large number of regions have taken decisions to this effect, depending on their capabilities and the guidelines we discussed with them. The point at issue is that they must eventually raise salaries to the regional average. But if they are sufficiently high, the initial raise will be 20% to 30%. As a rule, the regions take these guidelines into account.

Overall, since some regions raised salaries at the beginning of the year (depending on their financial ability), the average raise is 6.5%, although some regions raised the salaries of their public sector employees by 10% and even 15%, if they had the requisite funds. Taken together, over 70 billion roubles have been allocated for this purpose. We provide budgetary allocations and subsidies to the regions that have financial problems. And we have calculated that the regions’ additional revenues (the weighted average considering the regions’ consolidated budgets) will reach some 150 billion roubles and possibly even more this year. This will help us achieve the goal we’ve set.

Vladimir Putin: Good, thank you. Mr Khristenko (addressing Industry Minister Viktor Khristenko), will you report on the car scrappage programme?

Viktor Khristenko: We have completed the first stage of the experimental programme. Utilisation certificates have been issued to 600,000 people and 484,000 of them have received their cars. Approximately 100,000 have made their choice and signed a contract for the new cars, and 16,000 are still choosing. Overall, the programme has proved very effective in budgetary and, most importantly, economic terms, and helped the automobile industry and the market recover at a difficult time. It should be said that the trend of positive market development has continued this year, and this programme has played a part.

New car sales in the first five months of this year grew 61%. The production of cars at plants in Russia went up 78% and Russian-made cars produced and sold in Russia currently constitute 68% of the total. So this is a sufficiently stable trend. Car diversity is growing, with new models made at Russian plants supplied to the market. The car scrappage programme involved 86 car models, and car diversity has grown considerably during the programme, encouraging the production of new models at Russian plants. As a result of this positive trend in car production in Russia and in the Russian market, Russia has become the third largest automobile market in Europe in the first five months of 2011.

Vladimir Putin: Do you mean in terms of sales?

Viktor Khristenko: Yes, the third largest in Europe in terms of sales. I’m absolutely confident that in 2014 we will become Europe’s largest car market. This captures the substantial interest of investors in continued work on their projects and the implementation of the recently signed agreements. In this context we hope to complete the car scrappage programme and all settlements with dealers before the end of the year. This period will allow us to smoothly promote the natural growth of the market and maintain demand.

Vladimir Putin: And what about contacts with producers, our foreign partners whom we have offered to work on the new assembly terms, to increase the number of Russian-produced cars to 300,000 and to localise the production of engine units, transmissions and so on?

Viktor Khristenko: We have signed four of these basic agreements.

Vladimir Putin: Could you please repeat with whom?

Viktor Khristenko: With the Ford Sollers Alliance, AvtoVAZ’s Renault-Nissan, GM and Volkswagen. In addition, we’ve signed additional territorial development agreements with Mazda on the Far East. The scrappage programme and the programme for the support of the car industry have made it possible to launch this car-making centre from scratch in the Far East. Sollers has transferred the Samsung production facilities to the Far East and Toyota and Mazda have followed. This will be a complete centre for the industrial development of the Primorye Territory and the entire Far East. We have signed agreements with these four companies.

I’ve just met with Ford and GM executives in Detroit and we discussed the implementation of these projects. The companies are absolutely sure that they have made the right choice and that the Russian government has adopted the right position. We do not simply want to carry out these agreements, but also to create competent jobs across all areas of production – from engineering involved in the development of new car components to global marketing. Importantly, the companies are emphasising their desire to set up engineering units in Russia that would take part in research and development and would be involved in the global technological research of these major players. In this context, the implementation of these agreements holds much promise and we understand clearly enough how to achieve our strategic goals.

Vladimir Putin: Very good. Ms Skrynnik (addressing Yelena Skrunnik, Minister of Adriculture), what about fuel and lubricants for agriculture? We discussed this at one of the government presidium meetings – we received complaints that the supply of discounted fuel and lubricants to agricultural producers was not adequate everywhere.

Yelena Skrynnik: Mr Putin, we are following up on this together with the Energy Ministry on your instructions. First, diesel fuel has been reserved for harvesting for 29 days and petrol for 21 days. Second, our working group has urgently transferred the autumn reserves to the harvesting period in June and July, on the request of 40 regions, for instance, the Rostov, Volgograd, Voronezh and Astrakhan Regions and the Krasnodar Territory. We have resolved this problem. We follow up every day and address all issues as they arise. Moreover, we have a hotline for our agricultural producers. We are monitoring fuel supplies, and they are stable. Every producer receives discounted fuel by request.

Vladimir Putin: Please be more attentive to this problem.

Yelena Skrynnik: Yes, we have it under control.

Vladimir Putin: Ms Skrynnik, we’ve just been to Rostov-on-Don, and as you know I’ve met with people who work on the ground. Not all of them know about our programme for supporting farms that have preserved their cattle population. We have allocated five billion roubles for this purpose and have practically transferred these funds to all regions but not all farms have received them. Strangely, they haven’t even heard of this programme.

Yelena Skrynnik: Mr Putin, 32 regions have preserved their cattle population. They have applied for aid but some of them have not prepared the regulatory framework and, regrettably, have not provided for co-financing, although we have discussed this with them more than once. Therefore, we have transferred 36% of these funds to those regions that have the regulatory framework and co-financing ready. However, this is not the case with the Rostov Region, Dagestan, North Ossetia, the Murmansk and Astrakhan Regions. Therefore, I hope for your support in drawing the attention of their governors to the need to prepare the relevant documents and transfer the money.

For our part, we are working with them all the time..

Vladimir Putin: But please, complete this procedure.

Yelena Skrynnik: Yes, Mr Putin, we’ll see to it.

Vladimir Putin: You should secure the co-financing and make sure the producers receive the money. After all, we have allocated this money from the federal budget. It turns out that some of this money got stuck

Yelena Skrynnik: Yes, Mr Putin, that is why we are asking you to lend us your support and draw the attention of the governors.

Vladimir Putin: Yes, yes, yes. Contact the regions that have not yet done this and talk to their governors with the help of Mr Zubkov… Mr Zubkov, would you please get involved and help them complete everything?

Yelena Skrynnik: Please.

Viktor Zubkov: Of course.

Vladimir Putin: Let’s look at the agenda of today’s presidium meeting. 

There is a large bloc of amendments to the existing legislation, primarily a package of new provisions designed to promote competition, pursue an effective anti-monopoly policy, and eventually curb the growth of prices on goods and tariffs.

We are carrying out this work consistently, and we are fully aware of the fact that real competition is indispensable to the dynamic development of business, the emergence of new companies in the market, deep-running economic modernisation, and the reduction of costs. It would be impossible without this work.

The comments and suggestions of the business community and leading Russian and foreign lawyers and experts were taken into consideration over the course of drafting this new package of initiatives. We’ve just discussed it with the director of the Federal Anti-Monopoly Service. The experience of the last few years, both in this country and abroad, has been taken into consideration. The general logic remains the same: we need to draft the most understandable and favourable rules possible for our economic players, while protecting the interests of both consumers and bona fide businesses. Tough sanctions will be imposed on those who try to take advantage of the rules of the game without raising their efficiency – by developing all kinds of dubious schemes, manipulating the market, crudely violating the rights of other companies, overrating and maintaining unreasonably high prices and tariffs, and so on.

I’d like to say a few words about the new proposals. One of them involves instituting criminal responsibility for collusions that limit competition – the so-called cartels. There will be a clear definition of what constitutes a cartel. In other words, the anti-monopoly bodies will not be allowed to make any arbitrary, broad interpretations on this score. Private companies will not encounter any additional administrative barriers.

First, sanctions must be commensurate with the damage done. This is also in line with our operating logic and, let me repeat, with the international practice of the last few years.

Second, the price of a commodity will not be considered high enough to constitute its monopolisation if it is the product of an exchange auction held under the observance of all necessary conditions and regulations. Such prices are considered objective.

At the same time, if the domestic price of, say, oil products, which we have spoken about so much recently, far exceeds the global price as a result of exchange trading without economic justification, it may qualify as a monopoly high price.

Furthermore, a bona fide leaser will receive the right to sign an agreement and extend the lease of government or municipal property without an auction. This is a real instrument of support for small and medium-sized companies, including innovative businesses.

The next issue on the agenda is linked with the higher effectiveness of government bodies and the quality of services they render. We are actively creating a base for the broad introduction of e-government mechanisms and the transition of all government institutions to the use of electronic documentation. The use of modern information technology makes it possible to considerably expedite and simplify administrative procedures and eliminate unnecessary budget expenditures. Most importantly, contacts with government agencies should become more convenient and less exhausting and distressful for our citizens. 

As I’ve already said, I hope it will no longer be necessary to waste time on getting all kinds of documentation and tiresome queuing.

We are planning to spend more than 80 billion roubles on information support for government institutions, and these funds must be put to the most effective use.

However, sometimes the budget is used either to fund the development of information systems that are shelved for years and are not used by anyone or outdated solutions that have already been tried and tested and are being presented as new ones. Sometimes sophisticated software is bought abroad when there is absolutely no use for it here. As a rule, this software cannot be integrated into Russia’s uniform documentation system.

I think the Communications Ministry must impose tougher control over the implementation of departmental plans for information support. In particular, it is necessary to draft uniform requirements and standards for the information systems of government institutions. I think we already spoke about this in the beginning of the year. Mr Shchegolev (addressing Minister of Communications and Mass Media), I’d like to ask you to pay close attention to this.

I’d like to mention one more issue that is closely linked with the formation of a uniform system of interdepartmental electronic communications that will be used for providing government and municipal services to our people. This is extremely important. If departments to not develop proper information exchanges, all that work will go down the drain. Departments must establish a smooth electronic system for processing documents. This is a complicated and very extensive effort. It is necessary to ensure the connection of different information systems to an integrated database. Digitising millions of paper documents will require time and big investments. This work must be done at a high level of quality.

On June 24 of this year, 41 federal agencies and two public extra-budgetary funds – the Pension Fund and the Social Insurance Fund – joined the electronic integration system; fifteen regions followed suit.

Let me repeat once more that this work must be carried out at the highest possible standard of quality. There is no need to procrastinate, but, Mr Shchegolev, if you see any problems, it is better to postpone than to sacrifice quality. But I’d like to ask you once again not to drag anything out without reason.

I’d like to ask the Government Commission on Information Technology to thoroughly monitor all developments and the Communications Ministry to work more actively and directly with federal agencies and regions, remaining in permanent contact with them.

Let’s get started with this issue.