Transcript of the beginning of the meeting:
Vladimir Putin: Good afternoon. We are now on the threshold of a new year, 2012. I remember how I came here for the first time in early 2000. We were quite close to Gudermes. We couldn't land in Grozny for many reasons. One of them was the airport's broken runway. We flew a copter from Makhachkala – it probably took us about an hour and a half or two hours. The weather was bad (it was night and there was a head wind) and we flew to Gudermes, where the unit was deployed. But we could not land in this weather and had to turn around and fly back to Makhachkala. Once we landed I said we must go back by car because the guys, army servicemen were waiting for us. I remember the president of Dagestan said: "Go ahead and take my car." We took his car and drove by car for two or three hours. It was dawn when we arrived. We met our servicemen and I wished them a happy New Year. We returned to Makhachkala and then flew back to Moscow.
I remember Gudermes and other cities in Chechnya looked different, not to mention Grozny. At that time some people said, including some in Chechnya, that it was not worth rebuilding Grozny and that it would be better and cheaper to build an even more beautiful city in a different place. Different places for the Chechen capital were suggested but the Chechen president at the time insisted on rebuilding Grozny. And today Grozny has turned into a wonderful city owing to federal aid and the perseverance of the Chechen people. I think that many can envy it not only in this country but also abroad where people live a much better and prosperous life than Chechens do. You have done a good job in the last few years by rebuilding Grozny and other cities, as well as the economy of Chechnya and the rest of the North Caucasus. But we're here today to talk about current problems and the future.
I'd like to begin with the live television Q&A session on December 15, during which we received many questions on the North Caucasus in writing. Some questions were asked live on air. One of them sounded particularly contentious. It was more an appeal than a question: "Stop feeding the Caucasus!" Let's think about what this means. Does it mean we shouldn't spend money on developing the North Caucasus republics or creating new jobs in the Caucasus? But we understand and everyone must know that in this case even more young people from the North Caucasus will start moving to other regions of Russia, primarily major cities, in search of jobs and a better life. Naturally, they will bring with them all the headaches caused by this migration. What should we do then? Kick them out? Then what? Where will they go? They will fill the ranks of illegal armed groups. What is to be done in this case? In this case guys from these major cities and other settlements of Russia will have to come here and fight against guys from the Caucasus, shoot at each other, and kill each other, thus continuing this fratricidal war, in the literal sense of the word.
But there are also other proposals that I consider simply preposterous – to separate the North Caucasus from Russia altogether. I'd like to draw the attention of the people who say such things that if this were to happen, in a matter of seconds people would call for the same for other ethnic territories. And that would spell the end of Russia – an enormous tragedy that would affect every citizen of our country without exaggeration. What is the solution? There is only one – to develop the economy of the North Caucasus republics and create new, decent jobs there. As for the slogan "Stop feeding Moscow!" suggested by some participants in the December 15 discussion, it is meaningless because Moscow is a huge and self-sufficient region (not a city but an entire region). Nobody needs to feed it; it will feed itself and help others. But what we should do is to achieve a more equitable distribution of taxes across the country. This primarily applies to our infrastructure monopolies and major companies that work nationwide, but set up their tax base and profit centre in Moscow. They do this for convenience's sake, for purely technical reasons. Without a doubt, we must change this state of affairs and make it fairer for regions and municipalities. They must have more sources of tax revenue in order to address their problems more effectively.
Let me remind you that quite recently we passed a law that will come in force on January 1, 2012 – the law on transfer pricing, which is designed to resolve this problem. It will compel our major corporations and all private companies working in Russia to pay taxes in the territories where they operate based on two criteria – the number of employees and the cost of material resources used in their work.
I'd like to draw the attention of the Finance Ministry, right at the outset of this process, to the need to thoroughly analyse future law-enforcement practice and make timely amendments to this law to make it more effective. And the greater equity we discussed will come in the form of higher revenues for the budgets of regions and then municipalities. This is a very important aspect of the territorial development of our country.
What is one of the most important things for the regions in general and the Caucasus in particular? I have just mentioned this – the main thing is to give people an opportunity to work and make an honest living at home. Meanwhile, the unemployment rate in the North Caucasus is about 14.3% of the working population. This is much higher than the national average. True, this figure is even higher in some West European countries. Regrettably, in Greece the unemployment rate has already reached 17.7%, which is higher than in the North Caucasus. At the same time, unemployment is 48.9% in Ingushetia and 27.2% in Chechnya. We understand that this figure is extremely high for Russia, where the national average is 6.1%.
I'm convinced all our projects in the North Caucasus must be measured primarily by the new jobs they create, and this means that we must form a modern and effective employment structure and increase the demand for qualified labour and business initiatives. Regional employment programmes have been effective. They have allowed more than 48,000 people in the North Caucasus to undergo professional retraining or practical training at enterprises and over 30,000 to start their own business with government assistance. Therefore, next year we will continue implementing programmes to reduce tensions in the labour market and we will introduce a new direction – certification of the professional skills of job seekers. We will allocate the necessary funds from the federal budget for this purpose. I'd like to ask the governors of the regions to speed up the drafting of relevant regional programmes. Together with federal agencies they should also quickly complete the elaboration of measures to increase employment in the North Caucasus Federal District.
Our main task is to create jobs in the North Caucasus. Small and medium companies can and must play a big role in this effort. The traditions of entrepreneurship and the ambition to start one's own business are very strong in the North Caucasus. If implemented properly, this potential will certainly yield tangible results. What we need to do is provide better support to entrepreneurs and use all vehicles that are available to us, ranging from direct financing and tax breaks to assisting aspiring business owners in putting together sets of documents that are required to start a business. Barriers that stand in the way of people who wish to open their own business, a production shop or a family business should be eliminated.
We have substantially increased the financing of small businesses in past years, including in the North Caucasus Federal Area, from 175 million roubles in 2005 to 1.8 billion roubles in 2011. In all, we spent 65.4 billion roubles to support small- and medium-sized businesses in Russia during the period from 2005 – 2011, of which 5.2 billion were distributed in the North Caucasus Federal District. Of course, this resulted in the establishment of tens of thousands of small- and medium-sized enterprises in the sphere of agriculture, retail business, services and manufacturing. This also means that people improved their chances of finding employment. This sector employs over 620,000 people, or 15% of the entire employed population. This is already a good figure, but the potential is clearly much larger.
With these positive trends in mind, I would like to ask the heads of regional authorities to make provisions for supporting small- and medium-sized businesses using budgetary funds in amounts no less than those in 2011. The work should focus on micro-financing organisations and guarantee funds, especially since federal authorities support these guarantee funds. These institutions are essential for supporting small- and medium-sized businesses. They can be utilised by entrepreneurs to expand their businesses and share the risks involved in development and start-up with the state. I would like to ask all regions to look into the possibility of substantially increasing the capitalisation of such financial institutions.
Other support vehicles, including material stimuli should be used more widely. Incidentally, the government is discussing amendments to federal regulations aimed at improving procedures governing the buyout of premises owned by municipal or regional authorities and leased by small- and medium-sized businesses.
Colleagues, a great deal depends on you. You are well aware of how tight-fisted, to put it mildly, the municipal authorities can be. There’s no need to be greedy or to try to save on these often humble premises, or to extort additional money from entrepreneurs. The better developed this sector is, the broader the taxation base will be, and the more effective your work.
I expect that the adoption of these programmes will serve as another step forward in the creation of comfortable conditions for small- and medium-sized businesses. I also have in mind new amendments governing procedures for the acquisition of property, which will be instrumental in eliminating all kinds of barriers and limitations that stand in the way of small- and medium-sized businesses.
Let me repeat: in order to turn around the situation in the economy of the North Caucasus and to change people’s lives for the better, we need to strengthen the real sector of the economy and provide favourable terms for investors. Such points of growth should include investment projects, and we will focus particular attention on supporting them. The issue primarily has to do with government guarantees and financing from the Investment Fund: 44 projects have already been selected. Once implemented, these projects will create over 17,000 jobs in the North Caucasus, increase the amount of taxes paid to budgets of all levels and stimulate improvements in the social sphere, including the construction of roads, housing, outpatient clinics and kindergartens.
Next year we will continue selecting investment projects that will be supported by state guarantees and the Investment Fund. Regions should also involve themselves to a greater extent in the implementation of these projects. Acting as outside observers or disassociating themselves from these projects is completely unacceptable. At the same time, the control over the effective use of government funds should be tightened, including by further integrating IT systems. In this regard, I propose creating a system to monitor investment activities in the North Caucasus Federal District. I hope that it will improve actions of the parties involved in the investment process, businesses, authorities at all levels, and that it will improve the investment climate in the North Caucasus.
That is all I wanted to say at the start. Now I would like to ask Tatyana Golikova to speak. Please go ahead, Ms Golikova.
Tatyana Golikova: Thank you. Prime Minister Putin, colleagues. For convenience’s sake a presentation has been included in your handouts. I would like to begin by giving an overview of the situation of the labour market in the North Caucasus in comparison with that of the Russian Federation. Then I would like to go over the results produced by regional programmes that have been implemented in the North Caucasus and their impact on the labour market, before moving on to talk about the measures that must be taken by the Russian Federation and the North Caucasus republics in 2012.
Currently the overall level of unemployment in the Russian Federation is estimated at 6.1% (in November 2011); registered unemployment is at 1.7%. Today the labour market tension ratio stands at 1, which suggests that unemployment in Russia is at the same level it was in 2008, during the financial crisis. What sets the labour market of the Northern Caucasus apart, are the specifics of the socio-economic development of the Northern Caucasus federal district. What are these specifics? They are high population density (high birth rate, higher than that in Russian Federation on average), a high percentage of the population is considered rural (50.9% of population reside in rural areas); a large proportion of the economically active population comprises young people (over 30%, while in the Russian Federation it is 25.6%); high unemployment among young people (over 50%); a high percentage of population that is able to work; certainly these points were also mentioned by Mr Putin, scant job vacancies, low labour mobility and low investment attraction.
What present day indicators best reflect the labour market situation in the North Caucasus federal district? In principle the unemployment level has decreased in all regions except for the Chechen Republic, compared to figures for 2008. However, in the Chechen Republic, unemployment levels have shown a significant decrease on 2010 levels. I must add that if we examine the apparent trends of the few last years, we will see that despite the high figures for overall and registered unemployment, there is also a consistent downward movement in both these figures across the board in the Northern Caucasus Federal district.
I mentioned earlier that the labour market tension ratio in the Russian Federation presently stands at 1. Unfortunately, at this time, ratio indicators for the Chechen Republic, Republic of Ingushetia and Republic of Dagestan remain high. Specifically, in Ingushetia the ratio is 185 unemployed to each vacancy, while in the Chechen Republic the ratio is 141.5 and in Dagestan 87.1 to each vacancy. These indicators, however, are much lower than those of the preceding period.
In 2011 the Russian Federation allocated 17.9 billion roubles to support programmes aiming to lower tensions on the labour market across Russia’s regions. 3.2 billion roubles were earmarked in support for these programmes in the North Caucasus federal district. The programmes engaged 500,000 unemployed individuals in the Russian Federation, 56,000 of them in the North Caucasus. I must add that in our assessment, all these objectives will be met by January 1, 2012.
Eight measures have been put in place to lower labour market tensions in the Russian Federation. These eight measures (I will not enumerate them now, you are all quite familiar with them) have been put in place in Dagestan. Other territories of the North Caucasus federal district selected certain measures that best meet the needs of those particular regions.
Moreover, I would like to state (as I mentioned earlier) that practically all the plans designed for the republics and territories have been implemented, except for two of the measures that were first introduced in 2011. Perhaps, here we should not expect these measures to result in any immediate significant changes in the republics and territories of the North Caucasus; these measures involve advanced professional development and training for women working in physically demanding and hazardous conditions, and promoting employment opportunities for parents with disabled children. These measures are not as relevant in these regions in comparison to other regions of the Russian Federation.
However, three additional measures have been devised for implementation in the North Caucasus federal district; these are professional training, retraining and professional development for the employees of federal district organisations in both Russian and foreign higher education institutions, applied training for those employees who can develop professional skills in other regions of the Russian Federation, and encouraging regions that are not part of the North Caucasus federal district to hire jobseekers from the North Caucasus. 5,700 individuals applied for the programme and as of November, 84% dealt with. Consequently there remains one unresolved implementation issue in the Kabardino-Balkarian Republic. Investment projects the republic scheduled for 2011 are experiencing delays in being implemented. It is clear that 2011 has been challenging and that many projects were behind schedule. In terms of small business jobs created through cooperation with unemployment agencies, 2009-2010 saw 83,541 jobs created or individuals involved in these measures. Employees were most in demand in agriculture, the wholesale and retail industries, and in the field of the utilities and social services. Territories across the North Caucasus responded most actively in these three areas. In addition I would like to add (on slide 12) that 79% of all unemployed individuals who opened their own business in 2009 remain employed. 99.6% of those who started their business in 2011 and 2010 are still working.
Some unemployed individuals who launched a business venture in 2009-2010 capitalised on the opportunity to apply for a start-up loan. There may not be very many of them, only 3, however, they do exist. Small business and entrepreneurship grants were given to 23 individuals. These individuals started from scratch. As you may know, that means they received approximately 60,000 roubles to develop their business. They later declared their income to the tax agencies and many of them recorded significant earnings in 2009 and 2010.
These results that we are speaking about are still tentative; however, as a result of programmes implemented in 2011 in association with International Labour Organization, the number of jobless people in the North Caucasus federal district has declined by 1,010,000, the number of individuals registered at unemployment agencies dropped by 366,500, while the number of vacancies and new jobs created increased by 281,300.
That said, I want to draw attention to a number of shortcomings that were detected in the course of work under those programmes. For instance, almost all the regions of the North Caucasus tend to be experiencing spending delays, and disproportionately heavy expenditures falling on the final quarter of a year, whether it be 2009, 2010 or 2011.
There is something else. Not enough is being done to help unemployed people in the North Caucasus find work elsewhere through placement programmes. However, I would like to note that Pyatigorsk’s Inter-Regional Resource Centre (see slide 16), set up precisely as an inter-regional institution, has been working hard to ensure progress in that direction.
Here, Mr Putin, we discussed another, related issue. As part of our efforts to optimise the division of powers between the federal government and the regions, we should ensure this inter-regional centre is preserved. It has already proved to be highly efficient, as can be seen in the fact that it arranged for as many as 7,361 jobless people in the North Caucasus region to be offered employment.
We must now work closely with the Finance Ministry (you, Mr Putin, made related instructions as we were submitting a draft budget to the State Duma earlier this year). Together, we must ensure that despite the redistribution of powers between the federal and regional authorities, the centre retains its inter-regional status, rather than being seen as a purely local, Stavropol Region, organisation. This would enable it to continue operating all over the North Caucasus Federal District.
Another programme I’d like to highlight here has been running for a few years now and its implementation certainly must continue into 2012 (slide 17). Under the programme, we’ve been working with the Education and Science Ministry to help school-leavers and college and university graduates find employment. Next year, Education and Science Ministry figures indicate that an estimated 3,237 new graduates in the North Caucasus regions may fail to find work.
We’d like therefore to call on the region’s leaders to collaborate more closely with executive authorities in regions outside their Federal District to organise work placement schemes for these young people with organisations based in other parts of Russia. In addition, cooperative relations were established with employers, and I will touch on that a little later. But, in working with employers, from the recruitment perspective, we should take into account the fact that some kind of accommodation, even temporary accommodation, should be offered to graduates, to ensure that they are in a position to accept the work placement, or job offered, wherever it is located. The Ministry of Industry and Trade is working with us on this – to help young people get jobs at large industrial corporations.
What does this mean? In association with regional authorities, Pyatigorsk’s Resource Centre has this year gathered completed questionnaires from 260 local unemployed people who were willing to work away from home, elsewhere in Russia, in major industrial corporations. These proposals were then sent on to 36 industrial heavyweights, including Norilsk Nickel, United Machinery Works, Sibur Holding, and Volkswagen Group, which all expressed interest in employing people from the North Caucasus Federal District. The programme has not made any spectacular progress so far, but we feel that these efforts must be continued into the coming year.
In addition, we are also working with a private recruitment agency, working to promote employment opportunities for people from the North Caucasus elsewhere in Russia. Through this agency’s efforts 151 applicants from the North Caucasus have found employment elsewhere, and are now set to move. Fifty-one companies have expressed their willingness to interview select candidates with a view to hiring them.
As for 2012, you have outlined this, but I wanted to draw attention to the following: a new law will be in force from January 1, 2012, giving regional authorities in Russia their own powers to act on employment issues; these are powers that until now were solely executed through the delegation of authority. The situation on the labour market remains tense across the North Caucasus, except for Stavropol, and they will have to be supported with funds from the public purse.
Vladimir Putin: Ms Golikova, I had a look at who, of these people from the North Caucasus, found work, and in which specialist areas, through that private agency. There were of course engineers, stonemasons, plasterers, and the like. But there were two stock-keepers, and it would be interesting to hear where these stock-keepers came from.
Tatyana Golikova: We have detailed information, we simply did not give it. It is available in the materials.
It is with regard to this I would like to draw your attention to the fact that all regions in the North Caucasus Federal District (and not only in this district, but in the whole Russian Federation) should adopt normative acts necessary for the law to be implemented, and they should do this in December 2011. Furthermore, the least amount which must be allocated by the North Caucasus Federal District regional budgets for the exercise of transferred powers this year and next totals 1.505 billion roubles. The breakdown is available through our ministry and the Finance Ministry, which made calculations based on the exchange of powers between the Russian Federation and its regions.
I want to draw your attention to the fact that we have already carried out a preliminary coordination with all regions, including the North Caucasus ones, which are experiencing a tight situation on the labour market. Our budget provides 1.5 billion roubles for these territories next year. The current preliminary figure, agreed for the North Caucasus Federal District, is 506.7 million roubles, which allows us to find employment for something like 10,000 people now jobless in the North Caucasus Federal District. All the rest is for the exclusive regional powers (in this case the North Caucasus regions), and I once again urge all executives to adopt the necessary normative documents because, beginning in November and traditionally until April, we have a seasonal growth in unemployment, and unless appropriate measures are taken – measures of a normative nature – we will again see a worsening of labour market indicators …
The socio-economic development strategy for the North Caucasus Federal District until 2025 presupposes three scenarios for the development of events: inertial, base and optimal scenarios. With regard to the inertial scenario: as 2011 draws to a close we have reached unemployment figures fixed in the inertial scenario, at 14.3%. Our November indicator was fixed in the inertial scenario at 14%. But all measures which are being taken both at the federal and regional levels to pursue this strategy are aimed at the optimal scenario, which presupposes the creation of 400,000 jobs and the reduction of unemployment down to 5% practically in every territory belonging to the North Caucasus Federal District. This also concerns the development of small and medium business and an appropriate increase in the number of small and mid-sized enterprises. This likewise concerns the number of staff employed by small and mid-sized companies.
I would like to conclude by saying that the financing of the North Caucasus Federal District has a three-way distinction: 1) the financing of logistical assistance for executive bodies delegated to the powers of the Russian Federation regions; 2) the financing of exercising the powers; and 3) the financing of active measures to promote the population’s employment. These three focal points account for 1.5 billion roubles, as I mentioned earlier, which must be provided for in the budgets of the territories belonging to the North Caucasus Federal District. Thank you.
Vladimir Putin: Thank you very much. Now Ms Nabiullina has the floor.
Elvira Nabiullina: Mr Putin, colleagues. In my report I would like to dwell on indicators describing the development of small and medium-sized business in the North Caucasus Federal District, the specific problems encountered here and ways by which we can fine-tune regional and federal support tools and aids so that small and medium-sized business could develop in a dynamic way.
In the distributed materials you have both memos and slides, therefore I will dwell only on some key data. Slide No.2 gives the number of small and medium-scale companies in the North Caucasus Federal District. In contrast to the average Russian figure, they show a greater proportion of individual entrepreneurs. If we take an overall view … The share of the North Caucasus Federal District in Russia’s economy is 2% (I am referring to the total regional gross product), while the share of legal entities among small and medium-scale business is 1.7% or approximately corresponds to the share in Russia’s economy; but the proportion of individual entrepreneurs here is 7.5%. In other words, locals prefer to conduct small and medium-scale business and act as individual entrepreneurs. These specifics are certain.
As far as basic indicators are concerned – that is, the share of small and medium-scale business in the economy and in employment – the figures here are unfortunately below the Russian average. On the whole, small and medium-scale companies account for 21% of the Russian Federation’s output, while here their proportion is 14.2%. Slide No.3 shows these data.
The same situation is to be seen in employment. In Russia, on the whole, one in four is employed in small and medium-scale companies, while here we see just over 14%, with the North Caucasus Federal District lagging behind in its basic indicators.
Regarding the branch-specific structure, it is more diversified here. By and large, in the Russian Federation we have a large percentage of small business engaged in trading both in numbers and in turnover, while here their proportion is slightly less, both numerically and in turnover terms (Slide No.5). More companies are engaged in construction, processing industries and farming: the figure is twice as large as Russia’s average. Of course, the situation varies from republic to republic, and Slide No.6 shows the sectoral breakdown of small and medium-scale companies. The figures are really very different. But this is what statistics show us. Each region chooses its own preferences, and each region has its own local specifics.
Regarding the overall specifics of small and medium-scale business development (demonstrated in Slide No.7), the first thing that strikes the eye is the few opportunities budgets have to co-finance small and medium-scale business development programmes. The second factor is the orientation of entrepreneurs on internal markets within their regions. This is generally a common feature of all small and medium-scale business, but here it is more pronounced. The third factor is the high level of unemployment (Ms Golikova mentioned that earlier), and, above all, the unemployment rate among young people. Here we must pay more attention to youth entrepreneurship. Also, capitalisation of the entire financial infrastructure of support for small and medium-scale business is insufficient. In his opening remarks Mr Putin spoke of the role of guarantee funds, but their capitalisation is low still, and there are few opportunities of supporting small and medium-scale business so far. The network of fiscal and lending institutions is also poorly developed, although banks are already branching out into this region and starting operations here. As many as 16 banks are implementing the VEB programme, though the percentage of leasing companies is very low, perhaps with the exception of the Stavropol Territory, where several leasing companies are in operation.
Slide No.8 enumerates the objectives that need in our view to be set up to develop small and medium-scale business – the first one is to maintain high enough rates of annual growth of small companies. In our view, they should grow at a rate of 10-15% to bridge the gap with the Russian average and create jobs in small and medium-scale companies. The second objective is to stimulate the growth of industrial companies, services companies and farming companies, as well as involve young people in entrepreneurship. The principal tool for solving these problems is regional development programmes for small and medium business, given that we only co-finance regional programmes from the federal level. I want to stress that we have a large enough volume of co-financing: we co-finance 80% of regional programmes costs. All the same, regional programmes are your programmes: you manage them and you choose your priorities.
Slide N.9 illustrates taxation issues. A large enough number of our companies work on a simplified taxation system, and we can see that in the North Caucasus Federal District, too. The number of companies switching over to the system in 2011 increased by 14.3% compared with 2010; individual entrepreneurs and legal entities increased by 10%. The tax payments grew by 39.6%. If we compare this with the average national indicator, where STS payers likewise demonstrate considerable tax payment growth rates (22.7%), we also find a sufficiently high indicator. This means that the small and medium-sized businesses are contributing sizable funds to the budgets.
Next point. Slide 10 analyses property support schemes for small and medium-sized businesses. Regrettably, just 452 premises were redeemed (there is a special law in force enabling small companies to redeem – outside competitive tenders and on an instalment plan – premises they have rented in previous years) by small companies on preferential terms across the regions, or 1% of the national figure.
Property support also exists in the form of targeted premises being set aside and leased out to small and medium-sized companies. Here, too, the proportion is very small – 1% – and only 600 premises (that is, for 600 companies) have been assigned to a targeted leasehold fund. One of the reasons for this is the overall shortage of premises. This is why many regions are building business incubators. A total of 93 incubators have been built to date under support programmes across Russia, and 16 of these are located in the North Caucasus Federal District. But the incubators cannot solve the problem everywhere. So, regional administration heads, please find an opportunity to set aside additional floor-space with a view to leasing it out to small businesses. Right now small and medium-sized companies are provided with premises at a rate of 0.5 sq m per person, which is not very much. The average national is 3.3 sq m, and that is not all that much, even though that figure is six times as large. Of course, we ought to ensure that these premises should be made available to small and medium-sized companies.
Slide 11. Mr Putin already mentioned the fact that we significantly built up the amounts of federal support for the regional programmes – from 175 million roubles in 2005 to 1.8 billion roubles, that’s over ten times as much. The North Caucasus Federal District’s share (slide 12) has grown significantly as well. If it was 4.6% of the general federal-supported programme in 2007, the current figure is 10.5%, or a more than two-fold increase. All affordable support measures have been implemented here, such as grant-giving schemes, leasing support, microfinancing, interest-rate subsidies, and others. These slides show the breakdown of how funding is assigned to different support tools in the North Caucasus Federal District. Please notice the following: we have significantly increased the funding available. The important thing right now is to select projects efficiently. We are unable to help every company. This is why it is so important to select funding-targeted projects in a transparent way.
We ask the region to carefully observe the requirements established at the federal level, to ensure that projects are selected by commissions including business associations, and to ensure that each decision to support a specific company is transparent and well-reasoned. The effective use of funds needs to be carefully controlled. We need to establish a system for this. Let me stress that this is a regional programme and it is only co-financed by the federal government.
I would like to cite Ingushetia as an example. This year, we cut support programmes upon the president’s initiative to build an effective management system. We are ready to expand these programmes again when this system becomes operational next year. This is truly important because we need every single rouble to work effectively.
Slide 13 shows the details of small- and medium-sized business support infrastructure development, such as guarantee funds and microfinance institutions. They have been established in nearly all of Russia's regions, but their capitalisation is too low to help all of the businesses that need support and loans through the bank guarantee mechanism or microfinance loans, which are the best solution for small- and medium-sized businesses.
At the same time – please look at Slide 14 – the volume of loans issued in the North Caucasus Federal District is growing rapidly. In 2010 – the most recent data that is fully available – the increment in the nominal value of the loans issued was 73% over the year. The nationwide increment in SME loans was 56%. Lending is growing even faster in the North Caucasus.
Now I would like to draw your attention to this last chart. The share of overdue loans – loans that borrowers fail to service or repay on time – is lower here than in other areas of Russia. I must say that this is an encouraging indicator for banks to further boost lending. Overdue loans in the SME sector account for 6.9% here, while the country’s average is 8.9%.
Slide 15 shows how Vnesheconombank’s programme works. Vnesheconombank opens credit lines to banks that work directly with small- and medium-sized businesses. Sixteen banks are working here in the regions. Their limit is over 6 billion roubles. However, barely 4 billion have been withdrawn this year, which means only 62% of the VEB credit limit have been used. Banks are ready to work, so more projects need to be developed – also under regional programmes – so that projects can be financed through these credit lines. The funding is available and local banks are accessible. It is important to develop projects that these banks can start financing now.
The next slide shows unemployment data including the share of youth unemployment. Tatiana Golikova has already discussed this. Youth unemployment is especially characteristic and typical of the North Caucasus, so it is important to support young entrepreneurs. There are three regions – Kabardino-Balkaria, Karachayevo-Circassia and North Ossetia – that have regional programmes to support young entrepreneurs. I suggest that you pay more attention to this in your regional programmes, and we are ready to co-finance these efforts.
Slide 17: Leasing support. Only two regions participated in our leasing programme in 2010, and four in 2011. Leasing support allocations are not great at this stage. In fact, they are rather small – 16 million roubles in 2010 and 94 million in 2011. We have analysed the reasons for this lag. Local leasing companies are not very active. Therefore, we suggest that VEB should look at the problem with us now and maybe use its VEB Leasing unit in a special effort to support SME leasing in the North Caucasus Federal District. We won’t be able to succeed otherwise because the situation won’t change on its own accord.
Slide 18: I would like to call your attention to our next issue for discussion. We will discuss large investment projects that need to be developed in various regions of the North Caucasus Federal District. This is very important for small- and medium-sized business development. We could focus on the services sector, but the local population’s paying capacity is not very high. Therefore, large investment projects should have the maximum effect for local small- and medium-sized business development. According to our estimates, the 10 investment projects that the North Caucasus Development Corporation will co-finance may provide as many as 20,000 new jobs with small and medium-sized businesses. If these projects continue to grow, the number of job openings may reach 50,000-70,000 by 2015. This work is very important because there is more to it than financial support or regional programmes. This involves the implementation of major investment projects.
The second-to-last slide sums up the priorities that we see for the SME support programme in 2012. As usual, we will distribute funds to support regional programmes on a competitive basis. In our view, it would be best to focus on targeted support for specific sectors, meaning that the funds will not be dispersed, but will instead support small businesses in specific industries that are priority industries in their regions – leasing, young entrepreneurs and business startup infrastructure, including business incubators, industrial parks and technology estates. This will also help to increase property support for small- and medium-sized businesses.
We should not just plan next year’s budget spending for these purposes. Draft programmes should be planned for three years ahead. This will create a more predictable environment for small and medium-sized businesses because they will know how much support they can count on over a three-year period. Thank you.
Vladimir Putin: Thank you.
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Closing remarks by Vladimir Putin:
Colleagues, the North Caucasus Federal District is a very important and extremely sensitive Russian region, plagued by numerous problems. Nevertheless, talented and hard-working people living in this region can do a lot to solve these problems. Today, we touched upon and discussed almost all aspects of life in the North Caucasus. I believe everyone has a clear understanding of the major progress we have made in recent years, and we can do much more in the years to come. We can and we must! Let’s work in a coordinated and focused manner. Thank you very much.