Prime Minister Vladimir Putin holds a teleconference on appraising the performance of executive bodies in the Russian regions


“Of course, we must make sure that the results of work and economic effectiveness of a particular region’s team have a direct bearing on the quality of life of the citizens living in the region, and that there is no gap between the paper reports and the actual social wellbeing of citizens.”


Vladimir Putin: Good afternoon, colleagues. Happy holidays. I suggest we all get back to work without delay.

At a meeting of the state council on extending the authority of the Russian regions at the end of last year, we spoke about assigning additional tax sources to them. We all understand very well and have repeatedly expressed the same absolutely correct idea, which is that the development of the regions is directly related to the wellbeing and development of the entire country.

There are also constitutional requirements, such as the requirement to ensure equal living standards for all citizens of the Russian Federation regardless of their location. We are redistributing resources through the federal centre exactly for this purpose, which, understandably, provokes a negative response from the regions that provide the funds to be later redistributed. But you know that lately the Finance Ministry has maintained federal support for several years for the regions that show positive results provided that there are sufficient tax revenues. Both the Ministry of Economic Development and the Strategic Initiatives Agency that we established have proposed further steps in this regard, but this requires additional consideration in cooperation with the Finance Ministry.

I would like to note that the situation in a particular region is not determined solely by the availability of mineral resources or support from the federal centre; however, it is to a large extent determined by the enthusiasm and performance efficiency of regional officials. As you know, we have worked out a system of criteria to assess the work of regional authorities, and this system is currently in place. But a comparison of paper reports to actual results proves that the system is not very effective. Moreover, you often criticise this assessment system. You keep saying it is flawed. I agree with you and this is what we will discuss today. Even with equal budget funds and comparable federal support, some regions do well and others lag behind.

I would like to mention several key points in the system that we drafted to assess governors' performance. This system takes up volumes – as I recall there are about 300 criteria and quite often, as I have said, the results look good on paper, but people have a very low opinion of their governors' work. This incongruity between the paperwork and the people's attitude towards these quasi-achievements compels us to think about these assessments' validity. Thus, judging by the current criteria, the Saratov, Arkhangelsk, Volgograd and Murmansk regions are not in the lead, but rather somewhere in the middle of the list, although their residents are very negative about their regional teams' performance. Of course, we must make sure that the results of work and economic effectiveness of a particular region’s team have a direct bearing on the quality of life of the citizens living in the region, and that there is no gap between the paper reports and the actual social wellbeing of citizens.

 As I have already said, many existing criteria do not address systemic changes in the regional economies and the social sphere. They do not reflect improvements in the investment climate or living standards. Thus, efficiency criteria in education are often made to look good and this is being done using unjustified methods…

I am referring to the closure of small village schools. I am not saying that this should not be done at all, but this is a very sensitive issue. Some schools cancel the positions of school psychologists, speech therapists and other indispensable specialists. Their reports look good, but schoolchildren, whole families and villages are in trouble.

We have already taken a number of steps to change the system for evaluating the performance of regional authorities. We have introduced new assessment criteria such as attraction of investments, consolidation of the regional tax base and provided additional financial support for regions carrying out development projects. We have several strong regions. Tatarstan, the Krasnodar Territory, Tyumen, Belgorod and some other regions are our traditional leaders. Importantly, they are being joined by new successful regions. The Penza Region and Kabardino-Balkaria show good results. I would like to ask the Ministry of Regional Development, the Ministry of Finance and the Ministry of Economic Development to step up their elaboration of the new criteria for assessing regional performance.

I would like to make a number of important points. First of all, this performance should be primarily assessed on transparent, clear-cut criteria, including public opinion, which is neglected today.

Furthermore, it is necessary to design a comprehensive appraisal system that will encourage the regions to work for balanced development. We must prevent such a situation where investment seems to be growing, the economy seems to be gaining momentum, but people, as I have just said, do not see real changes for the better. Such economic success has no bearing on their living standards, the social sphere, the condition of roads, the housing and utility complex, or other vital infrastructure. The development of the regional economic potential should take into account people’s needs above all else. Certainly, clearer and better criteria should allow us to objectively assess the work performed by the Russian regions, and to support the leaders and those seeking to be among the best regions. That is why we are saying that the interbudgetary system needs to become fairer and more rational, and that the mechanisms for providing financial assistance to the Russian regions need to be improved. I would like our colleagues who are present here, the finance minister and deputy prime minister in charge of regional development, Mr Kozak, to share their proposals with us. We all know that the Finance Ministry has always erred on the conservative side, but it was precisely its idea to maintain federal support of those regions which show good performance results. Let’s discuss this matter once again today.

Finally, one more important point. The new assessment mechanism for regional executive bodies should be developed in close cooperation with the public opinion, the business community and trade unions. I would like to emphasise once again that this country’s development and improvements in the quality of life depend on the coordinated efforts of all levels of government, and in large part on the work of regional administrative teams and heads of constituent entities that are personally responsible for the situations in their respective regions. I want to make sure that everyone understands this in the same way.

And one other point, colleagues. We need to keep close track of everything that is going on out there. I understand that you are extremely busy. We in Russia have small regions as well as vast regions that are comparable in terms of their area and population to entire countries. It would seem these regions are facing different tasks. However, the level of such tasks and the level of responsibility is the same across all regions. It may seem as though you can’t really keep track of all of them, but there are still certain things that should not escape our attention. How can it be that hot water tariffs were raised by 40% in Kirov twice, the last time on December 4? There is a town called Novovyatsk where they also raised tariffs by 40% at once. Do regional authorities ever look at these things at all? Water management is part of your responsibilities. Is this done by the billing centre? The managing company is called “The Development of the Urals Territories.” Everyone knows it. Where do these leaps in price come from, and why? We have discussed many times now that things need to be done in a timely manner. That way we can avoid causing painful shocks to the people. Do we have Kirov on the line? Let’s bring in Kirov.

Alexander Kuznetsov (deputy governor of the Kirov Region): Good afternoon, Mr Putin.

Vladimir Putin: Good afternoon.

Alexander Kuznetsov: My name is Alexander Kuznetsov, acting head of the region.

Vladimir Putin: Where is Mr Belykh? (Nikita Belykh, governor of the Kirov Region)? Where’s the governor?

Alexander Kuznetsov: He’s away on vacation.

Vladimir Putin: On vacation… So he has not returned from vacation yet. What's the date? It’s January 10, a work day. Please let him know that it’s time to wrap up his vacation and return to work. It’s time for everyone to get back to work.

Please go ahead, I’m listening.

Alexander Kuznetsov: As for the information concerning the increase in tariffs in Novovyatsk, which is a suburb of the city of Kirov, we will verify this information within the next few minutes. So far, we haven’t had any information about such a sharp increase in tariffs, including hot water.

Vladimir Putin: Excuse me, what’s your name?

Alexander Kuznetsov: Alexander Kuznetsov.

Vladimir Putin: Mr Kuznetsov, you don’t have this information, but people paying their hot water bills do have it. Please take a look at the monthly bills. Please look at me in the camera. Here they are, can you see them?

Alexander Kuznetsov: Yes, I can.

Vladimir Putin: I have these bills, the consumers have them, but you don’t. And your governor is still on vacation. I have a request for you. Could you please focus on addressing this issue?

Alexander Kuznetsov: I will.

Vladimir Putin: And inform the governor about my request.

Alexander Kuznetsov: Of course.

Vladimir Putin: Mr Basargin, please go ahead.

Viktor Basargin: Mr Putin, allow me to begin with the situation in Novovyatsk. We have notified the governors on two occasions that energy commissions were considering tariff increases. We reminded them that they are responsible for overseeing this work and for conducting hearings of tariff regulation in their respective governments. We mentioned the hot water specifically because it’s a regulated tariff, and the regional energy commission was expected to make all decisions regarding utilities tariff regulations. We were not supposed to raise tariffs on January 1; therefore, we will join them, and a commission will go there soon to see how tariffs have changed in Novovyatsk and the Kirov Region in general.

As for the effectiveness of the regional government, we have been conducting this work for four years now. It has become clear that assessing effectiveness of the regional executive bodies’ performance is an essential component of regional policy and one of the tools that can be used to promote positive changes in the Russian regions. This assessment has improved over the past four years, and helps make effective administrative decisions. I would like to remind everyone that in 2007-2008, we formed the regional rating based on the effectiveness of local authorities. There were about 10 to 20 regions that topped these rankings for two years, after which we decided to draw conclusions using effectiveness indicators. We made this change in 2009. We were heavily criticised for doing so, because it turned things upside down, and those who were at the bottom found themselves in leading positions in the ratings and vice versa.

We used this comprehensive assessment method for the first time in 2010. This is also a mechanism to improve the ratings, because we used to rate regions according to their effectiveness and by performance indicators. When summing up the results for 2011, we used the transport access ratio and settlement ratio in addition to these changes to calculate ineffective spending. This helped us account for regional features, or what is known as the population density. This has to do with streamlining our social network, including healthcare and educational facilities. In other words, we have suspended all these processes.

Mr Putin, we are monitoring the work performed by the Russian regions using the indicators that we used back in 2010. Our monitoring takes into account 329 parameters of the socio-economic development of the constituent entities of the Russian Federation. Notably, we summarise the results and determine the rating position using only 63 indicators. You have already mentioned, Mr Putin, what’s on the other side of the scale. What exactly are we assessing? Our assessment covers 93 powers carried out by the Russian regions, 105 powers delegated by the federal government and 39 powers performed by the constituent entities; in other words, we are using 63 indicators to assess work performed under 250 powers implemented by constituent and municipal entities.

A few words about the results. The effectiveness assessment system has proved its value. As compared with 2007, only 13 Russian regions reduced ineffective spending in 2008. In 2009, there were 37 of them, and in 2010, 65 regions cut ineffective spending. The total amount of ineffective spending was reduced by almost 30 billion roubles, or almost 10%, in 2010. It was down 1 billion roubles, or 1% - 1.5% each in healthcare, state administration and public utilities; and it was down 26.4 billion roubles in education. The Republic of Mari El and Kabardino-Balkaria have halved their ineffective expenses. The Primorye Territory and St Petersburg cut ineffective spending by 33.5%. Tatarstan, the Omsk, Kostroma and Tyumen regions decreased it by 30%. The best performers include – you have already mentioned some of them – the Republic of Tatarstan, the Tyumen, Belgorod, Kaluga and Omsk Regions, the Krasnodar Territory, the Republic of Chuvashia, St Petersburg, and the Kemerovo and Tomsk Regions. The worst performers include the Tver Region, the Republic of Sakha (Yakutia), the Jewish Autonomous Area, the Republic of Kalmykia, the Nenets Autonomous Area, the Volgograd Region and a number of other regions. In all, 35 regions improved their ratings in 2010, five retained their previous positions and 43 fell, of which 22 lost more than 10 points, including the Ivanovo, Lipetsk, and Tver Regions, the Nenets Autonomous Area, the Volgograd and Vologda Regions and some others.

On the whole, the results of the comprehensive assessment coincide with those of the monitoring of the regions’ socio-economic development. They were the same in 80% of all cases in 2011. At the same time we understand that there is room for improvement in this method and we have not forgotten the instructions you issued last November.

We formed a panel on this issue at the Ministry of Regional Development. We established a working group of experts who criticised many provisions of the old methods of assessing regional bodies’ performance. They are already in the process of wrapping up their work. They have concluded it would be best to retain 223 criteria.

In addition, we have drafted proposals to adjust the methods of calculating ineffective expenditures in housing and utilities. The new methods allow us to take into consideration the specific features of northern territories and other comparable territories. We will use them in the 2010 report and will continue improving them this year.

In education, we are adjusting the same methods in regard of urban and rural areas in order to streamline the educational system in the countryside.

In healthcare, we are endorsing regional standards regarding the number of doctors and other medical workers to reduce ineffective spending as well.

We are also planning to change these methods as regards government management. We will monitor not only expenses involved in maintaining workers of the public sector and local government but also all other expenditures on top managers. In particular, we will check what cars they buy and when in order to do away with all this gossip.

We are also planning to pay more attention to the sociological indicators showing whether the public is content with the performance of the authorities in the social sphere. This is what you have just mentioned, Mr Putin. We propose changing the ratio of the indicators – 50% will show the results of performance and 20% (and perhaps even 30%) will reflect the public’s attitude to the services provided. In this way we will enhance the public’s role in assessing the performance of the authorities.

We want to measure not only the socio-economic indicators of the regions but also the ability of government at all levels – municipal, regional and federal – to influence the existing situation. To achieve this we suggest increasing the role of independent expert review in our efforts. We are also working on reducing the timeframe for submitting reports. It was wrong to submit reports in October or August. This year we are planning to submit the report for 2011 in April or May. We hope to submit the report on the performance of the authorities in May at the latest, if Rosstat (Federal Statistics Service) is ready.

To sum up, I suggest including in a draft resolution a proposal to change the deadline for submitting such reports from August to April or May. We and the Finance Ministry should also submit proposals on inter-budget bonuses for regions that have raised living standards. Together with the relevant federal executive bodies we must submit to the government our proposals on improving the entire system of assessing the performance of the authorities. We also propose regular monitoring of the regions in the bottom 30 positions in the ratings.

There is a lot of work. We are planning to complete it in the first quarter of this year and hope that the regions will also present to us their own proposals on improving the methods. Thank you for your attention.

Vladimir Putin: Thank you, Mr Basargin. Let’s give the floor to our colleagues in the regions. Mr Bochkaryov, please go ahead. Mr Bochakyov is the governor of the Penza Region.

Vasily Bochkaryov: Good afternoon, Mr Putin. In its 2010 report on the performance of regional executive bodies, the Ministry of Regional Development has ranked us 29th in terms of integral indicators. We have room for improvement. Last year we drafted several programmes. The first one deals with industry, of course; the second one provides for support of medium and small private companies in agriculture. We also paid attention to education and healthcare, mindful of the public grievances in these spheres. The subsidised refinancing rate of the Central Bank for our industrialists – and we make up for two thirds of it from our regional budget – has allowed us to substantially upgrade a number of old industrial enterprises.

We have seen hundreds, thousands of units of new equipment arriving to the workshops of our plants and factories, and this has attracted younger high-tech experts, primarily graduates from our institutes. And naturally, at that time our enterprises filed complaints about the quality of vocational school training, and so we have begun to invest in the modernisation of our secondary vocational technical schools and vocational colleges, because we needed other workers. Of course, we saw points of growth: the confectionary cluster, the furniture cluster, small and medium-sized businesses. We decided to subsidize up to 100% of the Central Bank base rate in order to purchase new equipment, although the equipment is mostly Italian, German, Scandinavian, and not Russian, which is regrettable. But the main thing is that labour productivity has improved many times over, and the personnel have become younger. It has become clear to me that vocational schools are seriously training young people for the furniture and confectionary clusters.

And of course, we are investing large funds in education, especially in 2011. We have purchased thousands of new computers, and have created networks in every school (we have installed servers), we have purchased interactive boards; we have held tenders in December and we decided: every school that demonstrates potential, every special subject classroom, every classroom will be equipped with an interactive board in January or February.

We are currently developing a new project in conjunction with our Swedish partners, a so-called educational entrepreneurship, and we have begun to do it at our school, Mr Putin. This project has been very interesting both for parents and teachers. And now there are some students who are registering their businesses at schools. The same important work is currently being done at higher educational institutions: enterprises are being set up and registered, and they are receiving the benefits that we have prepared. In 2011 alone, we completed work on five additional business incubators, platforms that we created for our students and young teachers, and they are setting up and registering their businesses there. Of course, this current policy that we had failed to implement in previous years has begun to produce results.

Now, let us look at agriculture. You know, 2010 was a fairly complicated year. 2011 saw efficient plant breeding and animal farming. We can see positive results in the growing of cereals, beetroot, and milk… If you recall, we presented the Turkey Meat project. The construction of this cluster has been implemented fairly well: incubators, henneries and a meat-preserving factory are being built. In 2012,  we will launch a project  for 17,000 metric tons of turkey. In total, 60,000 tonnes of meat will be produced annually under this project.   

I’d like to draw your attention to one more point of concern for me. I do not know whether other governors would agree with me, but the indices are too numerous, Mr Putin. At the beginning of your address you said it makes the assessment more difficult overall. Let's take a look at where people are focusing their attention. First (as you are aware, you mentioned the situation in the Kirov Region), this is utilities, transport, education, healthcare, jobs… These are the main points of assessment in the constituent territories of the Russian Federation. This is too large a package. And finally I’d like to say, perhaps we should form a small working group of members of government and heads of the constituent territories of the Russian Federation and review this difficult work on preparing a mountain of papers, including their electronic versions. This is my petition, Mr Putin.

Vladimir Putin: Good.

Mr Bochkaryov, I looked at the data for the Penza Region, it is quite respectable and good. Industrial production has grown considerably, by more than 17%, and agriculture is up 54.6%. Particularly pleasing is that housing per capita is 20% higher than the national average – this is also pretty good. And the growth in real incomes in January-October – year-end data is not yet available – is 1.5%. This is not much, but it still is more than the national average. We have 0.4-0.5% growth across the country – a very slight increase, but you have 1.5%. In general, these are good results given current economic conditions. Yes, it is especially nice, I want to thank you for it, Mr Bochkaryov, if these data are correct, of course – you have higher teachers' salaries than the regional economy’s average, and your doctors earn even more than the teachers.

Vasily Bochkaryov: Mr Putin, sorry, I just want to inform you and my colleagues – salaries over the last four months, from September 1, have actually doubled compared to last year! This is real.

Vladimir Putin: Nevertheless, many people are still unhappy with the state of affairs in education, health and housing. Take a closer look – what are the reasons? The trends are obviously positive, but we need to examine the reasons for this dissatisfaction more closely. But in general, the objective picture is very good. Again, your salaries in very important areas such as education and healthcare are increasing. This is the tangible result of your work, and I want to thank you for it.

If you please, Mr Yakushev (governor of the Tyumen Region).

Vladimir Yakushev: Good afternoon, Mr Putin. Good afternoon, colleagues.

I would like to start with state administration of the economy. Mr Putin, you are right in saying that the indicators assessing investment actually reflect the investment climate and overall economic situation that is emerging in the region.

In 2010, the volume of capital investments in the region increased by 12.9% to 164.9 billion roubles. According to preliminary estimates, in 2011, we need to grow by 9% and this amount will be 194.5 billion roubles. In the region, we have been quite actively – I would say, proactively – implementing our investment policy for many years, and we have set the necessary standard for a region of the Russian Federation. Today, we are implementing about 40 investment projects under our direct control, and these are diverse – the minimum value is 350 million roubles, this is the smallest investment project, and the largest is 127 billion roubles. And given such consistent work, we have been able to maintain the level of investment.

In 2010, we commissioned 1.1 million square meters of housing, of which 401,000 square meters are individual dwellings. In 2011, according to preliminary data, we commissioned 1.2 million square meters of housing. We were able to achieve these high rates because we have worked rather closely with the Federal Fund for Housing Development, and I would like to take this opportunity to commend this institution, because we were able to rather quickly resolve issues related to federal land in our region that was being used inefficiently, and now this land is being used for construction. As a result, we have been able to... even though we generally expected a correction in 2011, since some of the effects of the 2008-2009 economic crisis impacted our region, but thank God, this did not happen, and we, on the contrary, have even grown.

Regarding the expansion of business activity, our regional programme has been in operation for three years, and as part of this regional programme, we have funded small- and medium-sized businesses to the tune of $1.4 billion, and we were able to attract extra-budgetary funds by 9 billion roubles through co-financing – these are funds from leasing companies and banks, and we have received 400 million roubles from the federal budget for our joint programmes. So this is a fairly serious step forward, and I must say that our businessmen have rated this initiative rather highly.

As for the situation in the regional labour market, the unemployment rate in 2010 according to the International Labour Organisation’s methodology was 7.2%, and in 2011 it fell to 6.4%. Incomes grew 18.7% in 2010 compared to 2009, and in 2011 we hope that they will grow another 2.5%.

Regarding education, since 2005 we have been operating under the principle of per-capita funding – we have implemented an industry wage system, so in that respect all of these mechanisms have been refined and streamlined. The Education Ministry has estimated that about 88% of our students to date are studying in modern conditions.

Regarding healthcare, we have re-organised healthcare facilities. Since 2005 we have been using a single-channel financing system. Since 2006, 238 medical and obstetric centres have been replaced with modular structures, and the material-technical base of more than 300 healthcare facilities has been brought into line with regulatory standards.

Regarding wages, Mr Putin, in 2011 we increased the salaries of public sector employees twice. The first increase was 6.5%, and then we increased this fund, which was increased by 6.5%, by another 22%; in other words, on average, by using a progressive scale, we made an increase of 30% throughout the public sector. Today our doctors' salaries already exceed the national economy average. Even if we exclude the public sector and take only the national economy average, our doctors earn more. In other words, the average is 24,400 roubles, and our doctors are now earning 26,600. We have agreed with our deputies that in the first quarter we will decide on salaries for categories of teachers and pre-school teachers, because despite the 30% increase, we have not exceeded the economy average wage in this sector. In first quarter of this year, we should also be able to exceed this level for teachers and pre-school teachers, and the average wage in the region should be equal to the national economy average.

As for the main economic indicator – the growth of the gross regional product in 2010 – it grew by 4.6% in relation to 2009 and will grow 5.3% in 2011 compared to 2010. This is an estimate and is, of course, approximate.

Another important indicator that you talked about during your meeting with Delovaya Rossiya (Business Russia), Mr Putin, is the share of investment in the gross regional product. So, in 2010 the share in the Tyumen Region was 33.1%, and in 2011 it was 34.1%. Regarding the list of indicators, Mr Putin, we are working very closely with the Regional Development Ministry and we fully support the proposals set forth by the minister of regional development – we have consistently participated in this discussion. Thank you.

Vladimir Putin: Thank you. You said that the real incomes have grown some 2.3%. This is a very good figure in today's climate. This 2.3% is January-October data, right? If I understand correctly, they will grow even more by the end of the year.

Vladimir Yakushev: Yes, there should be an increase by the end of the year, Mr Putin.

Vladimir Putin: Mr Yakushev, I have another question. Your figures are indeed all very good – better than the national average in almost every category. But I noticed something – you have 47% more new housing than the national average, but the total amount of construction work in January-October rose by only 2.2%, while it grew 4.8% nationwide. Do you anticipate a decline in construction next year?

Vladimir Yakushev: No, Mr Putin, we do not expect a decline. On the contrary, we expect that there will not be a decline in housing because the market is currently growing and demand is growing. All the programmes that we are currently implementing both at the regional level and jointly with the federal government – for young families, veterans, orphans and so on – all these programmes will still be operational next year, the entire construction industry knows this, and is now actively engaged in building. We already know approximately how much housing we will commission next year – the construction industry is building precisely the housing that people in our region and all of Russia need now. This is affordable housing, and the amounts of housing that we currently have in blocks of flats and the inherent capacity for individual housing construction suggest that there should be no decline in this sector. I say this, understanding fully...

Vladimir Putin: Look at it more closely – the amount of construction in January-November 2011 grew 2.2% in your regions, and 4.8% nationwide.

Vladimir Yakushev: All right, Mr Putin. We will be sure to pay attention to this.

Vladimir Putin: As you understand, the projects will not be implemented at the end of the year unless they are laid out on time.

Vladimir Yakushev: Yes, of course.

Vladimir Putin: On the whole, this is a very good increment, thank you very much.

Vladimir Yakushev: Thank you.

Vladimir Putin: Ilya Mikhalchuk from the Arkhangelsk Region – please, go ahead.

Ilya Mikhalchuk (Governor of the Arkhangelsk Region): Good afternoon Mr Putin, esteemed colleagues. I would like to report that our region placed 55th last year in terms of its overall efficiency. The region has improved its positions considerably as compared to 2009. In terms of its current efficiency, the region has leapt from 82nd place to 63rd place. And it has jumped from 75th place to 28th place in terms of specific parameter changes. Mr Putin, you were absolutely correct in noting that the parameters for assessing the efficiency of work do not always meet popular assessments, and this is dependent upon the effective performance of the team. I believe that we have to work actively in this sphere. First of all, this means doing explanatory work. On the other hand, efforts to cut back on ineffective spending are, of course, unpopular, and this influences public opinion in conditions of a scattered, complex and under-developed transport network. It is hard to argue with this.

The gross regional product (GRP) grew throughout 2010 to a total of 228 billion roubles. Preliminary estimates put the 2011 GRP at about 266 billion roubles. At the same time, we are lagging behind in terms of the per-capita GRP. The 2010 per-capita GRP was 192,000 roubles, which was short of the 261,000 rouble per-capita nationwide volume. The volumes of fixed capital investment have increased throughout 2011. Virtually all sectors are continuing to grow. In January-November 2011, fixed capital investment volumes soared by 120%, exceeded similar 2010 volumes and totaled about 44 billion roubles. We are working hard to create jobs. We have reduced the number of officially registered unemployed persons by 24%. On January 1, 2012, the official unemployment rate was 1.7% of the economically active population. In 2008-2010, we created 10,752 jobs, including 496 jobs alongside the Federal Service for Labour and Employment under a programme to reduce labour market tensions. At the same time, regional unemployment levels are estimated at 7.1% using International Labour Organisation (ILO) methods.

Regarding popular incomes, this is one of the major priorities of our work. We have raised the wages and salaries of public sector employees by 6.5% starting January 1, 2012. Teachers' salaries have been increased by 30% in line with a federal decision that went into effect September 1, 2011. The wages and salaries of all other employees were raised by 15% beginning November 1, 2011. Mr Putin, at a meeting in Severodvinsk, you said it was imperative that we raise the salaries of teachers to match the average wages and salaries in the economy. I would like to report that this objective has been accomplished, and that teachers’ salaries reached 23,128 roubles in November 2011. And I believe that their salaries will continue to grow in the future.

As for doctors’ salaries, they totaled 25,120 roubles as of late 2011. This also exceeds the average wages and salaries in the regional economic sector (22,640 roubles). We expect further increases through the introduction of new standards.

The Ministry of Regional Development reports that the Arkhangelsk Region has placed 21st during the implementation of the healthcare modernisation programme. In 2009, the region was in 30th place. Virtually all healthcare facilities (95.1%) have converted to a new system of remuneration. In particular, all state-owned healthcare facilities have switched over to single-channel financing. The implementation of the programme includes optimisation of the medical staff and beds at medical and preventive treatment facilities.

We have jumped from 68th place to 60th place in general education, and I believe we will continue our progress in this area. Virtually all educational facilities (99.7%) have converted to the new remuneration system. In all, 85% of facilities have converted to standard per-capita funding. Ineffective spending has been reduced by 7%. And I believe that we will continue to incorporate undermanned and understaffed schools and to reduce other personnel.

As concerns the housing/municipal utilities sector, I would like to report that the task that you set for us has been fulfilled. I have already sent you a message regarding this achievement. Gazprom has extended gas pipelines towards Severodvinsk. On December 24, Territorial Generating Company No. 2 began supplying gas to Thermal Power Station No. 2 in Severodvinsk. By converting just two power stations, the Arkhangelsk and Severodvinsk stations, to natural gas, we have reduced boiler oil deliveries by 800,000 tonnes. And I would like to say that heating rates/prices have declined by 6.3% and 3.1% in Severodvinsk and Arkhangelsk, respectively, since January 1. We managed to accomplish this for the first time in many years as the result of this work, and by converting a number of boiler rooms to biological fuel. Utility rates will not be raised on January 1. We expect heating rates to increase by just 6% in only eight districts still using old traditional fuel.

Much has been done to reduce the population’s power industry debts. Of course, the introduction of natural gas opens up new prospects. Mr Putin, I would like to thank you once again for your support in resolving the issue of building a high-voltage power transmission line towards Vologda. This will enable the Arkhangelsk Region to become part of the Joint Power Grid, which will reduce fuel and energy prices still further. You had supported this idea, and Igor Sechin is working on it. I believe this will create a powerful impulse for economic development.

Regarding housing construction, 175,900 square metres of housing have been commissioned in January-November 2011. I had reported in early 2011 that the region had commissioned an additional 12% of housing, and this had raised some doubts. I would like to tell you that by the results of 2010 an additional 22.4% of housing had been commissioned. At the same time, high construction costs in the conditions in which we operate cause a reduction in the main parameter – the housing affordability parameter, which now totals 6.8 years.

And now I would like to say a few words about state and municipal administration expenses. We conform with the required format, reduce expenses and function strictly in accordance with the specific norms set forth by the Ministry of Finance. I would like to say that we will maintain the current trends.

As for the economy, I have told you that the commissioning of new timber-processing facilities and your decision to support the ship-building sector create confidence that truly serious, good, positive trends will be posted this year. We are striving to make it into the third group in terms of effectiveness criteria, that is, from 21st to 40th place. Thank you.

Vladimir Putin: Thank you. Mr Mikhalchuk. You have mentioned average economic sector wages and salaries totaling 22,640 roubles. This is slightly less than the average wages and salaries nationwide. But if we consider also the Nenets Autonomous Area, then the average wages and salaries total 24,300 roubles. On the whole, to the best of my knowledge, you really have raised teachers’ salaries to 23,100 roubles. This is even more than the average economic sector wages and salaries if we do not take the Nenets Autonomous Area into account. And this just falls short of the average economic sector wages and salaries together with the Nenets Autonomous Area. So, I would like to draw your attention to this. As far as I know, local doctors already receive 29,500 roubles, on average. This obviously exceeds the average economic sector wages and salaries, even together with the Nenets Autonomous Area.

I would like to draw attention to the fact that real popular cash incomes have dwindled by 0.2% in the period from January to October 2011. These incomes have increased by a modest 0.4-0.5% nationwide, but they have declined in your region. This is understandable, seeing as how corporate profits have plunged by 47.4%. This is a very serious drop…

Ilya Mikhalchuk: You are absolutely right.

Vladimir Putin: Corporate profits have soared by over 26% nationwide, and your regional corporate profits have plunged by 47%. The region’s industrial output has plunged by 19.8%, while nationwide industrial output has increased by 5%. These serious issues must be considered…

Ilya Mikhalchuk: Mr Putin, I would like to say that this temporary production index decline was caused by the fact that the January-November 2011 ship-building index had totaled 45.3%. But I believe that this parameter will go up now, following your intervention.

And here is one more detail. You correctly made note of the income situation. The thing is that our people now wish to take out far more substantial mortgages under a new mortgage programme. The people have currently borrowed about 30 billion roubles’ worth of mortgage loans from banks. This is quite an impressive sum! The assistance that you provided under the mortgage budgetary programme is now proving quite effective. As we move to implement this programme, we are trying to meet standard housing construction costs totaling 30,000 roubles per sq. m. However, we can only achieve this with the help of external budget-financed engineering mains.

Vladimir Putin: Mr Mikhalchuk, it's good that the mortgage programme has been launched, although we both realise that this is a rather difficult programme for the people to navigate. But high prices would persist without the necessary construction volumes, and you would fail to accomplish specific objectives regarding the commissioning of per-capita housing. The region, including the Nenets Autonomous Area, now commissions two times less housing compared with the nationwide average. Two times less! Please note that this is two times, not just some percentage.

Ilya Mikhalchuk: Yes.

Vladimir Putin: Dmitry Dmitriyenko from the Murmansk Region, go ahead please.

Dmitry Dmitriyenko (Governor of the Murmansk Region): Mr Putin, esteemed colleagues. In 2010, a comprehensive survey placed the Murmansk Region in 60th place. The most serious problems include state administration, the investment climate and the housing/municipal utilities infrastructure.

I will proceed in this discussion in order of priority. In 2010, the Ministry of Finance moved the Murmansk Region from the third group into the second group of regions in the sphere of state administration and budgetary liquidity, after assessing the results of the efforts of the Murmansk Region’s Government to cut back on ineffective spending throughout the year. A system for charting high-priority tasks for the Murmansk Region’s state-power bodies represents a continuation of the work in this direction. We have also passed a policy budget for 2012 and the 2013-2014 planning period. In total, 99% of budgetary allocations have been disbursed under specific programmes. We have drafted and are implementing a programme to facilitate more cost-effective budgetary spending. In 2010, revenues of the Murmansk Region’s consolidated budget grew by 12.4% compared to 2009. This exceeds the average nationwide parameters by 2%. At the same time, budgetary spending grew by just 1.5%. This is the lowest parameter in the Northwestern Federal District. It is also 4.5% less than the average nationwide parameter. As a result, budgetary revenues outgrew expenses by almost 11%. In January-November 2011, revenues of the Murmansk Region’s consolidated budget grew by 14%. Notably, this objective was accomplished with the help of certain measures.

Subsidies dwindled by 170.6 million roubles in 2011, compared to 2010. The volume of federal inter-budgetary transfers of closed administrative-territorial entities, which were provided to finance additional spending associated with the special regime for the safe operation of these entities, has dwindled by 1.363 billion roubles compared to 2009. The volume of subsidies received in January-November 2011 compared to the same period in 2010 (minus newly accepted one-time projects) increased by 2.2%. The total volume of overdue payables has dwindled from 843 million roubles to 458 million roubles.

And now I would like to say a few words about ineffective spending. In 2011, the number of civil service jobs was reduced by 2.5%, and the number of municipal jobs was cut by 15.8%. In 2011, the volume of ineffective state administration spending will dwindle by half, according to estimates – that is, from 1.1 billion roubles to 600 million roubles, for a total of less than 1%.

The relevant measures have been implemented in the healthcare sector, and ineffective spending will be reduced. There is a lot of work to do in the healthcare sector. We believe that regional ineffective spending will be reduced by 100 million roubles in 2011, and that their volume will not exceed 4.9%.

The banking sector was criticised for overdue debts being owed to enterprises. Our region has 251 banking institutions, and overdue debts have plunged by more than 20%.

The volume of loans being taken out by legal entities is not increasing very quickly. This can be explained first of all by the fact that our major vertically integrated companies take out their largest loans through their offices in Moscow. And these loans are not registered in the Murmansk Region.

The second issue concerns the housing/municipal utilities sector. High utility rates in the Murmansk Region can be explained by a number of factors. First of all, it has to do with a long heating season that lasts nine or ten months. Consequently, the region is the leader in the Northwestern Federal District in such a negative parameter as the number of degree days during the heating season. Naturally, this influences the entire activity of the housing/municipal utilities sector to some extent.

Secondly, over 80% of the Murmansk region’s heat energy is generated using boiler oil. High boiler oil prices are the result of unregulated market costs and considerable transport expenses. Moreover, heat-supplying organisations take on additional loads in the form of wages and salaries and other Arctic regional expenses. This has to do with the specifics of our Arctic region. Our regional specifics either mean that we have to maintain surplus power-generating units for connecting new facilities, or that the entity has to develop. As the entity has dwindled considerably, we nonetheless maintain rated power units, and this influences the current cost of housing/municipal utilities services one way or another.

What measures have we taken in order to reduce costs? First of all, we have brought all rates to conform with federal requirements. We now have no cross subsidies in full volume. Of course, investors have already reacted positively to this. As a result, we have already begun implementing investment projects under energy-efficient contracts. This includes the connection of Kirovsk city and the Apatity thermal power station, as well as construction of coal boiler rooms in Monchegorsk. There are also plans to build boiler rooms in Zapolyarny and Nickel, as well as a coal gasification unit in Kandalaksha. The city of Severomorsk is also expected to convert to liquefied natural gas. Judging by the results of this project, we will assess our subsequent operations for Murmansk. The region has drafted an infrastructure development concept for the Murmansk Region’s heat-supplying organisations for the 2011-2015 period.

The concept has been supported by the Ministry of Energy, the Ministry of Regional Development and the Federal Tariffs Service. We are implementing a number of long-term programmes, including the Comprehensive Development of Utilities Infrastructure Systems, Raising Energy Efficiency and others. Consequently, these programmes are currently used to finance the conversion of some municipal entities (some eight entities, all told) to natural gas from 2011-2013. Notably, this project is financed out of the regional budget. We are also moving to reconstruct heat-supply systems so as to abandon our dependence on boiler oil and to facilitate more reliable energy efficiency. I would also like to note that accident rates have plunged by more than 75% in the Murmansk Region as a result of this activity. You see, for the Murmansk Region, the heat supply issue is associated with the issue of safety. We are continuing this work today.

As for housing construction, 2010 per-capita regional floor space totaled 23.2 sq. m. and exceeded the average nationwide levels. We are currently implementing support programmes, which facilitate the relocation of people who have worked in the Murmansk Region to areas with more favourable conditions. There are federal programmes, we also provide help at the regional level, and people purchase their own housing. On the whole, we have discussed this issue in the context of the results of the November 2011 visit by the Minister of Regional Development Viktor Basargin to the Murmansk Region. This was done in order to consider specific prospects regarding housing construction in the Murmansk Region and the contribution of the Murmansk Region and its residents to housing construction in other regions. This is because many people leave our region and relocate to the Novgorod and Pskov regions. Quite a few people relocate to the Leningrad Region and St Petersburg. A considerable share of the population, of Murmansk Region residents, plan to relocate to regions with better climatic conditions. In our estimate, this accounts for an additional 30,000-40,000 sq. m., at least.

Besides, we realise the difficulty in implementing current construction standards in the Murmansk Region. Moreover, we have announced tenders for multi-storey apartment building construction sites with all the required infrastructure. But no investors came, because local construction costs are much higher than those stipulated by federal standards.

We are also negotiating the resource method with the Ministry of Regional Development. I believe that we will completely agree on subsequent troubleshooting options in early 2012. On the whole, we have drafted the relevant programme, and a programme to restore and expand the Murmansk Region’s construction industry in 2012-2014 is currently being implemented in the region. Moreover, we are implementing a long-term targeted programme to support and facilitate housing construction in the Murmansk Region during the period from 2011-2015. I have no doubt that a combination of these and other measures will yield results. We will certainly rectify the situation and will start commissioning more housing in the Murmansk Region.

As for the investment climate, the Murmansk Region had passed regional legislation in 2011. This legislation stipulates state support for investment activity in the Murmansk Region, the region’s involvement in public-private partnership projects and has streamlined all the necessary proceedings. As a result of an inventory check, it will take no more than 180 days to examine, approve and draw up documents for investors. We have drafted regional-level territorial planning documents for the 2012 period, including regionally-funded projects. And we will pass municipal-level urban development forms and records. As a result of these measures, the Murmansk Region will occupy the tenth place in terms of investment growth volumes in January-November 2011. Aside from that, we have done our best to create a safety cushion, and we have established a reserve fund totaling about two billion roubles. All these measures have proved effective. The ratings agency Fitch has raised the Murmansk Region’s current rating. The agency said moderate debts, high liquidity and sustained work to swell budgetary revenues had brought about the required results. The national rating was also raised.

Naturally, we had to rely on the work of scientists. The Polish National Centre of the Academy of Sciences believes that only major projects will be able to bring about intensive regional development. We implement such projects together with traditional investors. New investors are also arriving in the region and are implementing the Oleny Ruchei (Reindeer Creek) and Fyodorova Tundra projects, as well as other projects. Today I am able to say that major preparations have been made for the implementation of large investment projects in the real sector of the economy and social projects. There are objective grounds on which to base our confidence that the region will demonstrate substantial growth in the real economic sector and the social sphere this year already. Thank you for your time. 

Vladimir Putin: Mr Dmitrienko, we are not going to discuss housing construction now. This is a separate issue. Housing commissioning per capita is down 16.6 times. I remember that we met to discuss this, and I know that there are many angles to consider, but 16.6 times is a lot. We need to take a closer look, and I’ll ask ministers and the governor to look into what’s going on there.

I’d like to commend you on actually raising school teachers’ salaries as planned. They are now even above the average in the economy. The same is true for medical workers and doctors. Your average in the economy is 30,900 roubles. If my figures are accurate, the average teachers’ salary is 35,100 and doctors receive 42,300 roubles on average. Not bad, overall. However, despite this, real income in your region is down 2.6% as compared with the same period in 2010, while there has been a small increase in real income across the country. However, 2.6% is a lot. How did this happen?

Dmitry Dmitrienko: Mr Putin, we have many employees who are paid from the budget. This increase took place from September to December and has not made it to the statistical reports yet. We can already tell from our forecasts that we will match the overall Russian figures next year. Moreover, military service personnel will see an increase in their salaries. To a large extent, this issue concerns a large share of employees who are paid from the budget.

Vladimir Putin: The salaries of service personnel will increase beginning January 1, 2012; but we are discussing the past year’s results. I know from papers that you have invested a lot in fixed assets. However, most likely, the output figures will be lower as of the year end. I believe that investments in fixed assets will pay back in 2012, but still, what happened in 2011?

Dmitry Dmitrienko: The fact is that our key taxpaying enterprises engaged in renovation, which resulted in a decline in output. Second, at least according to reports from our mining companies, the quality of ore is deteriorating, hence the volume of production increases but the extraction levels decrease and efficiency also decreases. This also applies to Norilsk Nickel and FosAgro; they are now working very seriously on these issues. We have a special working group ... I don’t think it’s a good time to delve into specific issues now, but the point is that we hope that this situation will get straightened out.

Vladimir Putin: Then I’d like to ask Mr Kozak (addressing Dmitry Kozak) to take a closer look at this along with the Ministry of Industry and the vice prime minister who is in charge of this sphere. I am referring to the timely provision of a license for new deposits. This issue has been discussed many times already. We need to see what’s really going on at these major enterprises, which are important not just for the Murmansk Region, but for the rest of the country as well. All questions need to be addressed quickly. The necessary conditions must be created for the expansion of production activities.

The Volgograd Region, please go ahead Mr Brovko. (Anatoly Brovko, head of the administration of the Volgograd Region).

Anatoly Brovko: Mr Putin, colleagues. Indeed, judging by the aggregate assessment conducted by the Ministry of Regional Development, the Volgograd Region remained at the 2009 level, or even lower, in 2010. On the other hand, according to the polls conducted by the federal centre, the level of satisfaction of Volgograd Region residents with the work of the executive authorities increased by almost 1.5 times, from 28% to 41%.  In addition, the gross regional product is up 26% as of late 2010, and the amount of investments nearly doubled, from 75 billion to 110 billion roubles. The revenue generated by profitable businesses was up 35% in 2010. In 2011, the revenue generated by profitable businesses decreased by almost 12%, but following an analysis we saw that the decline was due mostly to major taxpayers, of which we have only 10 or 12. In all, we have 4,000 enterprises, which means all enterprises increased their revenue by 20%, whereas some major taxpaying enterprises submitted an adjusted revenue statement for 2008-2010. That includes Lukoil, whose revenue fell by almost 2 billion roubles in 2011. I believe that this temporary drop will be ultimately offset.

In addition, we saw the agricultural output decline by 97.9% during the 2010 draught. However, we managed to compensate for this decline in 2011, when the agricultural output index was up 26%. 

Furthermore, our government debt is up 37%. We have released almost 6 billion roubles in order to increase the financing of culture, sports, road construction and gas supplies by many times. We have started construction, unprecedented in its size, of gas supply lines this year.

Regarding the efficiency of the authorities, in 2010, we reduced the number of government officials to the average number in Russia from 13.1 to 8.6 per 10,000 people. The total expenses involved in the maintenance of the government authorities were down 100 million roubles in 2010.  It is estimated that this amount quintupled in 2011, and the decrease will amount to 500 million roubles. We will continue this work, and we plan to merge city areas and municipal districts.

Now, regarding housing construction. Mr Putin, on July 15, 2011, you chaired a meeting of a government commission in Volgograd. Back then, Volgograd was used as a negative example of a city bogged down by administrative barriers. Allow me to tell you about the changes that have taken place since then. It previously took 10-12 months to receive a housing construction permit; this waiting time has been cut to 6-8 months. We are continuing to work on it, and this time will be further reduced. Unfortunately, the housing commissioning rates declined in 2010. According to the preliminary assessment, housing construction was up 9% in 2011.

With regard to health care and education, first of all, I’d like to thank you for giving us the opportunity to commission the seventh perinatal medical centre in the Volgograd Region in a timely manner. This has helped us reduce the infant mortality rate by 14% in 2011 alone. The maternal death rate went down 34% after the perinatal centre had been commissioned. Doctors’ average monthly salary of 20,800 roubles is higher than the average salary in the region. The average teachers’ salary was 17,162 roubles in November, which is definitely above the average salary in the region, which was 16,255 roubles in 2011.

That’s how things stand in brief, Mr Putin.

Vladimir Putin: Yes, indeed Mr Brovko, I’d like to thank you for doing this. You accomplished the task regarding teachers and doctors. Their average salaries are higher than average in the Volgograd Region, that’s true. There are a few things that I’d you to focus on. We spoke about Murmansk just now. There was a large decrease in housing commissioning in the Murmansk region, but the situation is unique there, since it’s a subarctic area and many people wish to move to areas with better climate conditions. However, even though the situation with construction permits has improved in your region, housing commissioning per capita is below the average Russian figure by 1.8 times. The situation is taking on a chronic nature for Volgograd and the Volgograd Region. What is the problem?

Anatoly Brovko: First of all, this has to do with administrative barriers and the provision of construction permits. We have conducted a significant amount of work this year, and I’m sure that the situation will turn around in 2012 or 2013. We have a fairly large number of land plots ready for development, so we will be able to improve this figure.

Vladimir Putin: Regarding the organisations' profits, it's the same as in the previous case. You really have made good fixed capital investments – investment grew by 35.8% – but the organisations' profits for this year, for 10 months at least, dropped by 8.7%. You were talking just now about Lukoil, they are not the only ones who operate in Volgograd. This is an industrialised region and if the organisations' profits fell by 8.7%, that nevertheless points to certain difficult and unfavourable processes taking place in the economy. You have to take a closer look at this.

Anatoly Brovko: Let me explain, Mr Putin. The total profits for all companies grew by 20%. There were just some companies, the major tax payers, big business, including Lukoil, who submitted an adjusted income form. That means they adjusted the figures from 2008, 2009 and 2010, decreasing the profits for those periods, and as a result there was a decline in profits for the biggest taxpayers in 2011. In general, the industrial potential for the Volgograd Region is growing, and as I already mentioned, profit has increased by 20%.

Vladimir Putin: Very well, let's look at the results of further work. I'd like to draw your attention to the following. At the beginning of this meeting I said that we have to listen to what people are saying about our work. Unfortunately, one of the worst indicators in the Volgograd Region in this respect is that only 15% of respondents positively assess the work of the head of the region. That means that people are either not being informed about what is happening or they see no positive trends in what is happening, and we have to look at why this is the case. I'd like to ask you to focus on this, Mr Brovko, as I believe this is a serious matter to which the regional leadership needs to pay close attention.

Anatoly Brovko: All right. As I said, I reported to you on the level of satisfaction of the population in 2010…

Vladimir Putin: I heard.

Anatoly Brovko: But in 2011 this percentage really did fall, and we are looking at this very closely and are trying to correct it.

Vladimir Putin: I've heard what you said. But you have to understand the real picture. You ought to know what is going on and it is my responsibility to tell you about it.

Thank you. Please, Mr Pavel Ipatov, Saratov Region.

Pavel Ipatov (Governor of the Saratov Region): Thank you. Good afternoon, Mr Putin. Let me start with 2010. According to the results, we are in 16th place. We improved on our 2009 position, when we were in 27th place, and all the 2010 figures have shown growth.

Now on to 2011. We have preliminary figures for the year, though the statistics provide the latest figures for the first 11 months. We can see a slight improvement in the 2011 results. Firstly, there is a 8% growth in the domestic regional product. In comparison, the growth in 2010 was 4%, slightly lower but in line with the national average. The growth of industrial production was at 10%-12%, and in agriculture it was more than 30%. So all the indicators record a growth of 9%-10%. The growth in residential homes construction was only 2%, and these are the preliminary results for the year.

It would seem there is no cause for alarm. Nevertheless I would like to draw your attention to both the positive and the negative aspects today. The good news is that the rate of industrial growth is 10%-12%: this is due to attracting investment naturally (there will be around a 12% growth in investment this year too). But we also attracted investment in industry (with a 30% growth) this year. It is in industry that we are carrying out a programme of technological modernisation and are attracting investment for the construction of new businesses (mainly medium-sized businesses). This year in industry there will be just over 20%, so the emphasis is on attracting investment into the real sector of the economy, for the most part into manufacturing and to a lesser extent into the construction industry. Nevertheless in construction we will have rates of growth of almost 14% a year. That is precisely the amount of investment we have coming into the region. Our local construction companies that are carrying out contract work are essentially responsible for this growth. In terms of growth rates, the growth in housing construction will be proportional, perhaps just slightly higher: I think 3%-4%, while overall it will be 14%.

We are seeing wage increases in the real sector, where we expect a level of 12%. Resources for wages are growing, although as part of the drive for modernisation, companies are laying off some workers – that is how things are. Nevertheless about 16,000 new jobs have been created this year, while last year it was 15,000. As for unemployment, internal figures put the rate at 1.2%, while according to the International Labour Organisation it is 5.6%.

Now to the social sphere. Firstly, in general we have managed to cope with the programmes that are being implemented centrally (the modernisation of the healthcare system and education). But I would only like to draw your attention to incomes. The salary of a teacher in the Saratov Region this year was higher than the average salary in the economy which grew by 12%.

As for wages in the healthcare system: the average increase was 10%-11%. This is associated with the fact that, firstly, resources for wages were increased overall in the budget sector. Straight away there is a problem: there are relatively low wages in the Saratov Region. At the end of the year the average wage stands at about 17,000 roubles. This is due primarily to the agriculture sector, where the wages have traditionally been low. Considering this background, wages are rising but are still quite low. We have an entire programme (in the real sector of the economy as I said – in manufacturing and construction) for creating new jobs. All of this gives us hope that during, say, the next five to six years we will reach the national average (which stands at 23,000 roubles today). But we are moving forward. We are closing the gap every year by 1,000 to 1,500 roubles. Progress may be slow but it is definitely there.

As regards other problems, I would like to talk about global issues that are affecting us at the regional level. We believe that our rate of budget income growth…in 2010 was about 16%. In 2011 there will be a 19%-20% increase in our revenues. This figure doesn't seem to be so bad, but before the economic downturn, before 2009 (at the cost of attracting investment these were pretty significant years) – in 2006, 2007 and 2008 we saw 35% increases in revenue annually. Within the span of three years we managed to increase our budget revenues by 120%.

Naturally a rapid and active programme of tackling social problems was carried out. And frankly it hit us very hard when in 2009, during the crisis, our revenues stopped growing. In 2009, I'm sad to say, we failed. Admittedly no more so than anyone else, but we failed nevertheless. And we took on additional budgetary commitments (we took on quite a lot in fact)…but as early as 2010 we realised that this 15% growth rate would not be enough to cover all our budgetary commitments. And we were forced to borrow. One of our problems is the increased public debt. It started to grow in 2009. This was the first year of the crisis. Then in 2010 and 2011, due to a variety of factors… I can say for 2010 that we had a severe drought, a very severe drought and we had to raise additional funds.

The Federal Fund of Mandatory Health Insurance. We have unfortunately fallen into the set of those 60 or so regions that are not fulfilling their requirements for providing the guaranteed standard of healthcare: our standards are too low. This means we are now catching up every year, every year we are pouring an additional 700 million roubles through the health insurance fund for the non-working population and are reducing the deficit in the healthcare system, so that by 2015 this deficit will be wiped out completely. These additional funds…we also took out extra budget borrowing in 2011 of 2.4 billion roubles. Most of these loans were spent on road construction. Unfortunately it was the same in 2010. We have programmes underway to upgrade the road network and to build major bridges. This is what our budgetary loans are for. In this situation, I believe we should proceed as follows. Firstly, whatever happens, our task for the next few years is to maintain the growth of budgetary revenues at no less than 25%-28%, so that we can begin to wipe out the public debt. I think this is a realistic goal. But the risks that we face today…we look at what is happening today in Europe and around the world, and we think they are big risks. Nevertheless, before the crisis the annual growth of the regional economy was 8% for three years running. Overall we are now holding steady at 8% and we can see that this will allow us to decrease the public debt.

We can say that there is one more problem, which you have already mentioned: the public assessment of the effectiveness of the regional authorities. To put it bluntly, ours is low. Not that we are not worried about that – of course we are. But what can we see today, Mr Putin? Firstly we are evaluating the reforms that are currently being carried out, say, in the healthcare system. Then there is also an evaluation of how the authorities are handling the modernisation of the healthcare system. And we see figures of 35%, 38%, and about 40%. It is the same in other sectors, which are most sensitive for the people for they provide public services and the people form their opinion of how the authorities are performing. Out of 100% we have 30% or 40%. In social services (which are mainly concerned with the elderly and those who require social support) it is generally about 80%. This work is done by specialised organisations, and when we see the assessment, the one that is published, the overall evaluation which the companies publish (such as public opinion companies and others) we have a completely different assessment. When it is clear that the regional economy is growing, everything else picks up, wages increase, funds grow, but the performance of such an administration is evaluated negatively…

In my opinion we have hit upon one of the reasons. I stress I am not idealising our work, we have a lot of problems and we are addressing them. I think that, judging by the overall figures for 2010-2011 (as you say they are not bad), we are resolving them. But we have come to the conclusion that among the media I would say there are those that are systematically misinforming the population: sometimes they publish outright lies, sometimes a distortion of isolated facts. For example, there is a myth, it really exists and some federal officials even tell me about this: "Your economy is stagnating." To which I reply, "We have an overall rate of growth of 8%. Look at all the components." "Yes but the press is writing everywhere that you are stagnating." Mr Putin, we are trying to figure this out. We can see what is going on in this situation and we will definitely figure this out. I think we are on the right track.

I would like to thank you for your support overall, for the fact that industry in the Saratov Region is growing at such a rate (we have the defence industry here). And for the fact that the state defence order in the Saratov Region is growing every year, even during the crisis (at a rate of 15%) – this is mainly thanks to the support of the federal government. Mr Putin, I would like to thank you personally.

Agriculture is the second big sector in real production. We have experienced two consecutive droughts. In 2009 60% of the crop burned, in 2010 all of it.  Nevertheless we can say that in 2010 because of this support…we spent more of our money, we received substantial funds from the federal budget, we were fire victims on more than one occasion. We do not have any ruined agricultural farms. Everything is growing in our agricultural production, including milk, and that's because of the large farms. Six to seven large farms with modern technology come into production each year: 600, 1,200, 1,800 head of cattle, elite breeds with yields of 7,000 litres and higher, for this reason we constantly feel the support of the federal government and of you personally. And I promise we will overcome our internal problems. Thank you for your attention.

Vladmir Putin: Thank you, Mr Ipatov. I am once again struck by your extensive experience. You have gone through everything, I have nothing to add. And it is true, manufacturing production from January to November 2011 grew by 11.6% (against the national rate of 5%). That is more than twice as good as the overall national rate. New housing is slightly higher than in the rest of the country. Fixed capital investment is growing, company profits have risen by 60.5%. These figures are not bad at all. In fact, they are quite good.

I would like to say special thanks for raising the income of teachers and doctors above the economic average. You have also kept an eye on the size of the growing public debt in the Saratov Region, you alluded to the fact that you took on the task of fulfilling those well-known social obligations that I mentioned. I would also like to draw your attention to the fact that we are allocating significant resources out of the federal budget, for example, for improving the situation in schools. We allocate this money to you so that resources are freed up for you to raise teachers' wages. We are also allocating money from the federal budget for reforming and modernising the health system. The only requirement is that these funds be spent in a timely and judicious manner. Of course, this is a matter for your own resources, I understand that perfectly well. Still there is the size of the public debt…and you did say you will be able to decrease it.

Vladimir Putin: This year it grew by 30.2%! Not in 2009, not in 2010, but this year, it grew by 30.2% to almost 60% (59.8%), and 60% is considered to be the critical level! You have reached it and this is an alarming signal, please take note. 

Now about the media outlets, and what they are doing. I'm not ruling out the possibility that there may be some inaccurate information. I'm not excluding the possibility that, as we know, there are opposition forces promoting their position and accordingly assessing the activity of the regional administration. And you, in your turn, bring information to the people that you consider to be unbiased. How can you just sit around doing nothing? But I’m not inclined to think that this is exclusively the work of opposition forces and malevolent media outlets, and I want to explain why. Real incomes of the population decreased by 6.8% between January and October of 2011, according to the data at my disposal. The real incomes of the population decreased by 6.8%! And this is a record indicator across the country. I repeat, we have small growth, and although it is modest, it is still a 0.4–0.5% growth, and you have a 6.8% decrease. That is why, in my view, the public opinion polls show that 62% see the work of the administration as unsatisfactory – and this is one of the worst indices in Russia. I believe that this is the reason, and you should focus on this and not on the media.

Pavel Ipatov (Saratov Region Governor): Mr Putin, may I elaborate on the last point?

Vladimir Putin: Please, try.

Pavel Ipatov: Concerning real incomes. In 2010, the real income growth rate was 108%, which figure is contained in the report. This year, the statistics cite about 95%. In November, 103%, and in December we will reach almost 100%... Perhaps even a bit more. We have looked into it: the economy is indeed growing, industrial wages funds are growing, budget salaries are growing. So why have real wages decreased? One current cause is the per capita indicator, real per capita income. We saw that following large-scale reform of higher education, our schools, vocational schools… This year we increased the wage fund by more than two billion roubles, but in calculating the total educational wage funds we saw that they had decreased at the expense of higher education. Meanwhile the region’s population did not change! So we are calculating this per capita indicator, we have not completed our calculations yet. The wage funds decreased at the expense of a reduction of servicemen, at the expense of a reduction in the police reform, but the people have not left, the population is holding steady. Here is this 2011 Saratov Region indicator, it is lower as compared with the 2010 indicator. This year there will be a miniscule growth of just over 100%, but these wage funds, primarily of the federal structures, brought down this indicator for us. That is what we saw.

Vladimir Putin: The wage funds of the federal structures are responding to changes in these structures throughout this country, but why is the Saratov Region only showing this result? 

Pavel Ipatov: We are looking into it.

Vladimir Putin: Let's take a look at the year’s results and go back to it again, agreed?

Pavel Ipatov: Yes, certainly. Thank you, Mr Putin.

Vladimir Putin: Thank you very much.

Please switch on the picture for all regions. Colleagues, just raise your hands – I’ll see you – if you wish to add or ask something, or to provide some information to me and our other colleagues who are here in the building of the Russian government. None? Thank you. Than I will ask the Finance Minister (addressing Finance Minister Anton Siluanov): Mr Siluanov, please comment on what I and my regional colleagues have said, on the Ministry of Economic Development's proposals for providing incentives to the regions with positive results.

Anton Siluanov: Thank you, Mr Putin. Colleagues, of the six constituent territories of the Russian Federation that we heard from today, I can say that we have a number of constituent territories that we can deem positive from the perspective of budgetary policy. These, primarily, are the Tyumen Region and the Murmansk Region, which have formed reserves with their additional incomes, and we see that in 2012 they will maintain fairly sustainable and successful budget implementation, so we hope. As for the other regions, such as the Saratov, Volgograd and Arkhangelsk regions, they have their share of problems, because some of the figures that we saw were simply ethereal, even in some positions in draft budgets – we looked at these draft budgets together with constituent territories of the Russian Federation. Some regions simply include financial aid that is not allocated in the budget, they also include budget loans that we have not worked out with constituent territories of the Russian Federation. What does this all mean? It means that it is necessary to take another look at the parameters of the budgets. And along with our colleagues, say from the Saratov Region, we have even included in the minutes this position concerning the need to take action on debt reduction, on increasing budget incomes and optimising expenses. In any case, there are a number of problems in the Arkhangelsk, Volgograd and Saratov regions. I think we will work on these problems together this year.   

As for the indices. Indeed, we have rather many systems of assessment for the activities of the constituent territories of the Russian Federation. The Ministry of Regional Development has 329 indices, the Finance Ministry has tax potential assessments, budget management quality assessments and regional finance management quality assessments. Practically each branch ministry and department has indices for the assessment of the constituent territories of the Russian Federation. Therefore, from a regional perspective, there is probably some confusion about priority indices, what it is necessary to implement in the first place, because it is very difficult to implement all indices. So what proposals can we have? But we are elaborating on the state programme, Mr Putin. We have prepared about 40 state programmes. Approximately half of the state programmes, about 20, are in the area of joint action. These 20 programmes, in our view, should take into account the indices of the assessment of the activity of both the federal departments and the constituent territories of the Russian Federation, because every programme will be assessed on the effectiveness of this programme, along with some result at the end of the implementation of this programme. And it should take into account the indices of the assessment of the activity of the constituent territories of the Russian Federation. It can be two or three indices. Given 20 programmes of joint action, there will be 40 or 60 indices. But perhaps the constituent territories of the Russian Federation should have some integrated assessment indices that would help us to say at our conferences: yes, the Tyumen [Region] or another constituent territory of the Russian Federation has done a good job. These indices should not be too numerous, between ten and fifteen is an appropriate number. Based on these indices, a regional [governor] could ask his deputies, the heads of various services, how this or that indicator is currently being implemented. Having too many indicators is confusing: we currently have 329, tomorrow we will have 223, and it is still too many. I think that in terms of the expected state programmes, with this tool, we should jointly assess the situation in the sector formed both by the branch ministry and by the constituent territory of the Russian Federation, of course. And this integrated assessment probably requires a reduction in the quantity of indicators.

As for the motivation of the constituent territories of the Russian Federation for growth of the taxation potential, we maintain that the operation of the fund that we created and tested this year should continue. Along with our colleagues from the constituent territories of the Russian Federation, with the Ministry of Regional Development, it's possible that we will be able to adjust the indicators. There are only three indicators, and they are quite simple: investments, tax receipts and industrial production. Everything is assessed in dynamics, in volume index – that is, here. In our view, everything is calculated quite simply, understandably, and it is possible to make very clear calculations of the consequences and results for the constituent territories of the Russian Federation because… We have looked into the Tyumen Region: it received almost two billion roubles from this fund. That's a substantial amount of money. 

As for further incentives, Mr Putin, we will continue to work in terms of our inter-budgetary transfers, we will promote a more efficient use of our budget funds through subsidy consolidation, [extend] more rights to the constituent territories of the Russian Federation to implement the powers provided to them from the federal centre through consolidation of subventions. We spoke about this, and starting from the next budget cycle we will implement all these proposals. Thank you.

Vladimir Putin: Thank you. Please, Mr Kozak (Deputy Prime Minister Dmitry Kozak).

Dmitry Kozak: Just a few words, Mr Putin, colleagues. In the near future, the government will hold a meeting on the efficiency assessment system of the work of the executive bodies of the constituent territories of the Russian Federation. This meeting will focus on addressing various differences in order to develop a uniform system of assessing the efficiency of governors' activity. A comprehensive system for the assessment of the efficiency of the work of the executive bodies of the constituent territories of the Russian Federation is extremely important to having an efficient regional policy. We should not limit ourselves to talking and public discussions of the results of this assessment; rather, we should make concrete decisions on rewarding those constituent territories of the Russian Federation that have achieved excellent results, especially in terms of dynamics. This is consistent with the government decree that was adopted in September, it has been implemented in 2011, and next year we will jointly… The Finance Ministry and the Ministry of Regional Development are tasked with increasing this fund. This year the Kaluga and Tyumen regions received considerable assistance in the amount of two billion roubles, 1.9 billion roubles, to replace lost subsidies because they are building up their own economic potential.  

I’d like to draw the attention of regional heads to the government decree regulating grants provided to the constituent territories of the Russian Federation to a total of ten billion roubles, and to the included indices – let them make additional proposals – to what can be done, what indicator… I know that you will not propose much and it is necessary to add to these three that were mentioned by Mr Siluanov, in order to achieve a comprehensive assessment, to have an unbiased assessment of the work for a corresponding year based on these criteria, and to make an adequate decision on extending a relevant grant to a constituent territory of the Russian Federation.

Three indicators are necessary to provide a comprehensive assessment of the results of your work at this level, for a full assessment by the government, the president. The growth of the budget incomes of constituent territories of the Russian Federation, excluding oil and gas incomes; the growth of industrial production excluding the oil and gas sector; and the growth of investment, non-state investment in all economic sectors. Together, this provides for a comprehensive view of the efficiency of work, and there are concrete consequences that follow from them. If these indices are positive, the results will be positive for the lives of the people. It means increased income for the population, an increase in the number of jobs, and finally, an increase in budget receipts that could be used to address social problems.   

Mr Putin, I believe that all other indices – for utilities, education, healthcare, roads, etc. – it is necessary to grant full independence to regional heads, and we must assess their results based on the satisfaction of the population with their work on the whole. Because all the regions are completely different: their positions, the histories of their economic development, the histories of their social sector development, their climates, their demographic situation, and so on. They have to determine their priorities every year: today we focus on roads and utilities, on infrastructure development… Yes, they can suspend the development of healthcare and education, but this is their choice – it means they can compensate by explaining to the public why it is necessary to tighten conditions in some sectors in order to make a breakthrough later, and so forth.  

Therefore it is necessary to lift these numerous indices, fine-tune the system of assessment based on the population, on the overall satisfaction with the work of executive bodies. It will produce an adequate effect: three economic indices that can be measured, observed, that cannot be faked, plus effective rules of measurement of the public opinion, existing and tested rules that work unfailingly – these will help most adequately assess the activity of the executive bodies of the constituent territories of the Russian Federation. And we should not just discuss them (I say it again) but we should seriously reward them financially – these options are available to us today as well. Thank you. 

Vladimir Putin: Thank you. Colleagues, I want to thank you for our joint work today. We expect your proposals to improve upon the criteria for assessing the activity of the regional heads. It is important for yourselves, it is important for this country, for the government. And the assessments of the government should also be unbiased – we are working on this too, we will propose them and introduce them into practice. The year 2012 has only just begun, and I ask you to begin your work without delay. I want to remind you that we will naturally improve upon the method of assessing the results of the work of regional heads and your managing teams. We will do our best to make these assessments as unbiased as possible, and we are expecting your proposals to this end. But the main criterion will naturally be the assessment of the people living within each territory. To this end we are working with you, and the assessment of our people is (I want to stress it again) precisely the fundamental criterion of the results of the work both of the government and of the regional administration teams on all territories of the Russian Federation. The year 2012 has begun, and I wish you success. All the best!

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