Prime Minister Vladimir Putin attends the conference of the Russian Union of Industrialists and Entrepreneurs


“The national business initiative signifies an entirely new approach to the formation of a business environment in which not officials but business itself, the main user of its services, sets demands for the participants in the process. We must charge officials with an obligation to fulfill these requirements efficiently rather than just on paper.”

Vladimir Putin's address:

Ladies and gentlemen, friends, colleagues,

Mr Shokhin (Alexander Shokhin, President of the Russian Union of Industrialists and Entrepreneurs) has told me how your work began. It was nice that he took note of the statements made by our ministers, saying that they are acting brilliantly, promising everything. I will not promise you everything, but will try to speak only on the issues of interest and concern to all of us.

Thank you for inviting me to your conference. I would like to begin by congratulating you on your 20th anniversary. Although the actual anniversary was late last year, I was given to understand that you decided to celebrate it this year, because of the long holidays (early this year) which left no time for your celebration. A few words about our holidays: the New Year holidays are indeed too long. We could decide to end them on the Orthodox Christmas day, January 7, moving the other holidays to May, as people have suggested. What I mean is, holidays coupled with weekends lasting as long as 10-11 days do not seem good for health. That was a minor digression, and an unplanned one at that. So, I want to congratulate you on your holiday and wish you all the best.

The companies that are represented in the RUIE really do constitute a powerful force: they account for two thirds of the country's GDP. You can be rightfully proud of this, because it means that the RUIE is the largest and most important association, one capable of discussing the problems facing the country, the economy as a whole and business. It provides a forum where these issues can be discussed and solutions found.

Today we are definitely going to talk about practical measures aimed at fundamentally changing the investment climate. As you know, the first package of such measures was made public at the Russia 2012 investment forum a week ago. I’d like to begin with the fundamental question of how business, businessmen and private property are perceived by our society. I believe that this is one of the basic principles of creating a positive business environment in Russia. This problem has cultural, mental and historical dimensions.

We should be straightforward in admitting that the existing attitude toward entrepreneurship and private property dates back not only to our Soviet past, although it does have roots in this period, but it also has to do with what was going on in Russia in the 1990s. We have spoken a great deal about this, and we know that business back then amounted to nothing more than slicing up the state-owned pie. Certainly, we need to turn this page as well. I spoke with Mr Yavlinsky about it. He is right when he says that we need to close this period, I agree. There are different ways to do this. We need to discuss them with society and with experts, but we must do so in such a way that society agrees with the resolution of problems dating back to the 1990s, including patently unfair privatisation and auctions of all kinds. The solution lies in either a one-time contribution or something else, but we need to think about it together. I believe that society and particularly the entrepreneurial class are interested in finding such a solution. We must resolve this issue.

What we absolutely have to do is ensure public legitimacy of the institute of private property and public trust in business. Otherwise we will not be able to develop a modern market economy, let alone create a healthy civil society that is not divided by deep contradictions, since they would get in the way of the evolution of our society and would interfere with economic growth and economic freedoms. We need to put an end to this.

By the way, people’s attitudes toward businessmen began to change during the crisis. I’ve already mentioned this in public, and I believe it would be quite appropriate to raise this issue again in this audience, because the absolute majority of our businessmen demonstrated social solidarity and preserved production facilities and jobs during a period that was difficult for most Russian people and for the Russian economy. I know this first-hand, because during my numerous conversations with your colleagues I became convinced that many businessmen assumed personal responsibility and put everything they had earned over many years on the line in order to preserve their enterprises and their employees’ jobs. This is important. I think we are breaking some new ground here. I’d like you to know that I appreciate it very much.

Over the past years we’ve seen instances of honest and forward-looking businessmen thinking about further development and modernisation of their enterprises and personnel training. Many Russian companies have proven their ability to compete both on the domestic and international markets. I believe that businessmen are primarily interested in having the majority of Russians understand that businessmen are not just experts in the redistribution of property, but that they are real workers, men of business in the true sense of the word, and their services to Russia are as valuable as services provided by workers, engineers, teachers or doctors.

Now, I’d like to discuss a proposal that is not directly related to business, but, conversely, is seen as an attempt to nip off something from somebody. This is not the case. I’m referring to the proposed introduction of tax on luxury items. It should become the universally accepted payment for refusing to invest in economic growth in favour of hyper-consumption and vanity. I’d like to call your attention to the following fact. Many of you sitting here have known me for years, and they know what I’m about to say. People in so-called developed economies, whose capitals pass from generation to generation and might be 100, or even 200 years old, don’t look any different from the rest of the crowd. Unfortunately, this is not always the case in Russia. For the record, I’d like to say that the number of the newly rich is declining in Russia, while the number of responsible and businesslike people is growing. We are seeing more and more renowned and established businessmen showing responsible attitudes. Therefore, I’d like to say that this tax on wealth is not fiscal in nature. No one is going to overstate its fiscal importance. The fiscal component of this measure is insignificant. This is sooner a moral standard and I’d like the business community to understand this. It's also obvious that this tax should not be levied on the middle class. We must very clearly define the principles and criteria for imposing this tax. I think we must elaborate these criteria in an open dialogue with society and, of course, with the business community. We must also utilise modern mechanisms of public communication and appraisal of government decisions in applying this measure.

I’d like to return again to VTB Bank’s popular IPO. Mr Kostin (VTB CEO) is present here. I think the bank’s managers have made a very fair and morally valid decision to preserve its business reputation in the eyes of society and investors – to buy back its shares at their initial public offering price of 13.6 kopecks per share. Importantly, the bank will buy them back next March and April at its own expense. It will complete all settlements before May 1. I must say that VTB Bank came to this decision on their own without any pressure – nobody imposed this decision on Mr Kostin and he can confirm this. We did not force the bank to do this. This is a government bank but its managers have made this decision on their own free will.

Dear colleagues,

I think a fundamental change in the public attitude toward business will help us alter a broad spectrum of economic and social issues and improve the investment climate, in particular, to implement our plans on expanding the space for business initiatives. Let me repeat once again – entrepreneurial talent is Russia’s most important resource. We must pave the way for a new generation of business by creating an optimal investment climate in Russia and the best corporate and anti-monopoly laws and by removing barriers to access to the market for new companies.

There is a massive stratum of people in the Russian business community that are ready for change and want to live in a new way. There are also enough people with this attitude in big, medium and small companies, and not just among the owners but also among management at the second and third levels.

We have offered our leading business organisations, including the Russian Union of Industrialists and Entrepreneurs (RSPP), to take it upon themselves to develop a national business initiative on forming a competitive business environment in this country. We have proposed that the Strategic Initiatives Agency (ASI) be in charge of this project. We discussed this with Mr Shokhin and our other colleagues who are present here. I would like to say straight out that we are not going to turn ASI into a new business community (we discussed this as well), because we have enough of them and do not need any more. In this case ASI could function as the headquarters, the coordinator of the project, and I’m pleased to say that last week ASI and our major business associations signed an agreement to this effect. I’d like to emphasise – the national business initiative signifies an entirely new approach to the formation of a business environment in which not officials but business itself, the main user of its services, sets demands for the participants in the process. We must charge officials with an obligation to fulfill these requirements efficiently rather than just on paper.

As I’ve said, we are going to introduce the system of Key Performance Indicators (KPI) for each ministry or department head in order to establish their personal responsibility and efficiency. In practice this would mean the following: we will charge departments with assignments within their competence (in terms of concrete time – days, hours, etc) on considerably shortening deadlines and the number of different procedures and their costs. The goal for Russia is to become one of the world’s top twenty countries in terms of having the best conditions for business. Of course, these tasks are not easy and we fully realise this, but if we do not strive to reach this goal we will not accomplish anything.

What does this new approach mean in such a sensitive area as foreign trade?

This issue is particularly relevant in view of our country’s imminent accession to the WTO. By the way, for your information, we are going to join the WTO in May or June. It will be at most six months, and we are not going to rush for the reasons of which you are aware. We will actively elaborate different measures. It goes without saying that we have thought about this before as well, but now that everything has been signed we have a break in line with the WTO rules and we don’t need to rush. We will put our heads together to consider the problems that exist (and we know that they do exist) and make governmental decisions to guarantee your interests in the best possible way during our WTO entry.

Once we make in onto the list of the world’s top twenty countries in terms of conditions for doing business, our entrepreneurs who are involved in foreign trade will take five or six days to process papers for exports or imports rather than 36 days, as they currently do. They will pay not an average of $1,800 per container as they do now, but instead almost half of this amount, and will have to fill in no more than five documents instead of the current 10. I have cited this example to show you what we should be striving for within specific spheres of activity of different government departments. We will proceed based on the fulfillment of these targets in evaluating the performance of different government bodies. Have they managed to cope with their tasks? Do they still process 10 documents as before, or seven, or probably five or four? We will judge the performance of every official and department head in terms of their specific achievements. This is how the KPI system will work.

I’d like to emphasise that we will evaluate the work of the heads of ministries and departments for the sake of qualitative rather than quantitative changes. Moreover, we will introduce a mechanism of dismissing officials for violating standards of services. This implies not just some reprimand or even removal from office but a ban on their right to occupy a certain position for a number of years. In other words, we are introducing a system of disqualification.

It goes without saying we will be persistent and even tough in these efforts, because we are lagging considerably behind other countries in many parameters and we must move along this road more quickly than our partners and rivals. I suggest that we should work out with our colleagues, including you, road maps for each sphere of activity – specific steps to improve legal standards and state institutions. I’m sure that the participation of business in this work will help us to avoid making deplorable mistakes that often make things worse instead of improving them. Regrettably, sometimes the results that we achieve are the opposite of what we expected. To prevent this we invite you to cooperate.

For my part, I’d like to submit for discussion a number of our proposals on upgrading the business environment. First, such a mechanism as the assessment of regulatory influence (ARI) has proved efficient. I have already said that during the last year the business community rejected practically every other draft normative act because it could worsen the conditions for national economic development.

I’d like to draw your attention to the following: our permanent contact with your association, Mr Shokhin, who represents your interests along with some other colleagues whom he involves in this work, are yielding practical results. We are in touch with him when elaborating decisions that influence operation of private companies and business in general. Every other draft was rejected. This shows that for the time being we are not yet… This is good, on the one hand, but on the other, it means that we have not yet learned to draft documents in a way that will suit those who use them – both people and companies. This is why we are determined to maintain a powerful public filter and expand the sphere of its use.

Currently the assessment of regulatory influence only covers normative acts of control and supervision as well as establishing requirements for produce and the processes of its production. I propose expanding ARI to customs laws and delegated legislation. I’m confident that this measure will help us substantially improve the business environment in this sensitive and, frankly, problematic area. I’d like to request that the Ministry of Economic Development and the Federal Customs Service draft relevant proposals. I think that in future this procedure should also be extended to tax legislation.

Second, at the meeting with Delovaya Rossiya we spoke about the need to streamline taxation that has to do with the development of the production sector of our economy. We already have a reserve for expanding tax revenues in a number of areas. As I have already said, these areas include the consumption of luxury goods, as well as alcohol and tobacco and collection of currently underrated rent payments. Experts are now making calculations concerning this tax maneuver. We must take a well-balanced and cautious approach here because we know that any step in this direction will influence the entire chain.

Let me repeat that we are not going to increase the tax burden on non-commodity sectors of the economy. We must determine key taxes and register them for the future. We understand perfectly well that big, medium and small private companies must have a clear understanding of the state’s fiscal policy for a definite long-term perspective. This will allow you to work in a calm atmosphere, to make your plans and investment projects, sign loan agreements and so on. We do understand this and we will strive for stability.

Third, we must not only reconstruct existing enterprises but also build new ones for the growth of our industrial potential.

By the way, people have become very politically active ahead of the upcoming elections, and it is now frequently said that nothing has been built in the country in the past 10-15 years. But I attend the launching of a new enterprise almost every week. This is, in large measure – by nearly 70% – the result of your efforts. I believe the people in this audience know it is not true that nothing is being built in the country. In fact, construction is underway across the country. New facilities are being opened – truly new facilities in terms of technology – in mechanical engineering, metals and instrument-making.

Of course, we would like to build more, and this is an issue that we will address. There are quite a few problems hindering us. For example, it often takes as much time to receive construction permits as to complete an entire construction project in other countries or even here in Russia. The construction stage lasts less than the period for getting permits. Russia sits at the bottom of the global competitiveness ranking. Unfortunately, we have not yet approved a single procedure for coordinating and implementing investment projects in construction. The issue has been discussed many times and I have issued relevant instructions in large numbers, but the procedure has not been adopted to this day.

The fact that businesses have to receive a large number of permits does not ensure a positive result. To join the world’s top 20 countries in terms of investment climate, we must cut the number of permits from 51 to 7 and the period during which businesses receive such permits from 423 to at least 35. I suggest that we use the best global practices to accelerate the coordination of design documents and to radically simplify all of the coordination procedures and the issue of construction permits. If the developer owns the land plot, his design documents have been examined properly and judged as complying with the urban development plan in the given region or city, this should be enough to start the project. If you have these documents, you can start building. I would like to ask the Ministry of Economic Development and the Ministry of Regional Development to cooperate with the Strategic Initiatives Agency, the RUIE and other business organisations to draft a plan that would offer an alternative to issuing permits, one that would also allow a developer to simply notify the authorities about a planned project. At the same time we have to make sure that this developer is operationally and financially reputable.

Responsibility is an inalienable condition because it is a highly delicate issue. Responsibility must be modern and efficient – not based on ancient laws such as the Code of Hammurabi, which established a builder’s liability for a house that collapsed. If someone died, they snatched the developer’s relative and disposed of him in a similar building. We are not willing to use such barbarous methods, but we must ensure efficiency and safety.

I also consider it expedient to consider changing the conditions for placing state orders on the construction market. The government should encourage the turnkey construction project system, not pay for abstruse construction and assembly schemes. We should pay for finished projects. Among other things, such a decision would make it unprofitable to overstate expenses and the amount of work performed.

Fourth, we will continue to make criminal legislation more humane, including by precluding, whenever possible, opportunities for arbitrariness and discretionary actions – this mostly concerns articles on economic crimes. Investigators are obliged to open cases on many of them without receiving an application from the injured party or their authorised representative, which creates conditions for bias or decisions to suit the bidder’s request. However, the proposed amendments should be examined by professionals, experts, judges and investigators. Most of them are highly professional and competent people, but we must rule out the possibility of abuse.

Colleagues, in conclusion, I would like to say the following. Economic freedom can be based only on a firm foundation of moral values, on making a contribution to the life of your country and people and on finding solutions for burning social and other problems facing your country. What Russian business people need today is not only a success story. They need a story about an honest success achieved through hard work and the ability to win in honest competition. It must be connected to your readiness to control your freedom, to assume responsibility for others so that your business, the economic sector and the whole country benefit as a result. You should work and also give jobs to other people, which is, in fact, what you live to do. Thank you for your time.

* * * 

Comments by Vladimir Putin and his answers to questions from conference participants

On the Eurasian Commission

Vladimir Putin: This is really very important because this transnational governing body will be gradually gaining speed and taking over more and more responsibilities, so it is necessary that communities of entrepreneurs have a common position in their relationships with this newly-created authority. We must prevent a situation similar to the one around the European Commission, which works in isolation while the economy and Europe often have to do without it. When I talk to business representatives, I often hear criticism of the European Commission. We should not interfere in their matters – they should sort things out for themselves – but my point is we must look after our relations with this multinational governing body from the very start.

On the commissioner for entrepreneurial rights

Vladimir Putin: We are going to grant this official certain powers, including some of an administrative nature, which might be the authority to suspend the resolutions of particular bodies. But what duties exactly to impose on them, what work exactly to assign to them, as well as what rights and powers to grant – we need to give it some thought together and come up with that sort of list.

We need this person to be someone who can also feel confident working in government, someone who can work effectively.

Alexander Shokhin: Elvira Nabiullina revealed today that she started her career in the Russian Union of Industrialists and Entrepreneurs. We could propose her as a candidate for this post.

Vladimir Putin: Let’s think about it. Currently, everything related to the work we conduct with our foreign colleagues is the responsibility of Mr Shuvalov. As far as I know, they are quite content with this because, as first deputy prime minister with extensive authorities in the government, he can influence the process, the decision-making. But if this were a person who has nothing to do with the government, that would be fine, too. I don’t mind. We should think about it together.

On accession to the WTO

Vladimir Putin: I think that the Ministry of Economic Development, some other colleagues, and especially our team, which has held negotiations for almost 17 years… I think that it is necessary to gather entrepreneurs in various sectors and hold a dialogue and a workshop in each sector. Only after doing so will we see – will we probably see – the entire picture and potential risks, so we can respond promptly and timely and make decisions where necessary. Ms Nabiullina, please, do this as quickly as you can. It is mid-February now. Nothing impedes you from doing so regardless of the internal political debate.

… On the whole, we have an understanding of the danger – in agriculture, livestock farming, machine building, agricultural machine building and so on. And in a sector such as yours, there are only pluses, because it will make it possible for you to better protect your interests on the markets of third countries and to use WTO tools for protection on the markets of third countries – so you will not suffer from discrimination. But there are sectors where you could face difficulties indeed. I want to stress that practically in every area – we have some concept of what is possibly going on there – we are preparing adequate counter measures in terms of the WTO procedures. But I am not sure that our specialists understand and have calculated every last detail. Therefore, it is necessary to hold these kinds of workshops with the professional community, in each and every sector in the coming, say, two or three weeks.

… Take metallurgists. I have visited some enterprises, you know. When you visit such enterprises, you feel proud for the people working there, and all of your doubts about Russia’s successfulness disappear in a moment. When you enter a steelworks factory, where everybody is clad in white scrub suits, you feel like you are in a hospital operating room. There are very few such technologies worldwide, and we have them. I want to especially thank the people who think about personnel, about the people who work there, about this country, about the Russian economy. But there are some areas where we have not achieved this level of competitiveness, unfortunately. And they also can have problems, and I understand their concerns. Therefore, I agree with you that it is necessary in all sectors simply… They are in contact, the Ministry of Economic Development is in contact, I know, but we must go back to it again and develop protective measures.

We must consider the entrepreneurial community’s opinions in the course of the negotiating process on developing new global trade conditions, because our task is to provide for your interests. We will certainly take into consideration your proposals while forming the agenda and our approaches to developing measures to improve global trade. Certainly, there is no doubt about it! This is our task – to help you. You know about our efforts in recent years to support all of our exporters when they needed assistance. And when we could, we fought for your interests – perhaps, not always efficiently. We instructed the Ministry of Foreign Affairs in your favour. This was not the case in the past, and in my view, now they are working efficiently enough – in any case intensively in this area. Rest assured that we will continue to do so. Meanwhile, perhaps the mechanisms should be improved. Close contact is needed so that our negotiators can understand what you expect from them. 

On hazardous waste

Vladimir Putin: Mr Rashnikov (Viktor Rashnikov, head of the MMC managing company), wait a second! Please tell us, how much hazardous waste did the MMC emit, say, seven or ten years ago? And what about now? Tonnes, dozens of tonnes!

Viktor Rashnikov: Today we emit 220,000 tonnes as compared to 900,000 tonnes previously.

Vladimir Putin: Can you believe it? It’s hard even to imagine 900,000 tonnes of hazardous waste emitted into the atmosphere. It’s down to 200,000 tonnes now. That’s what modernisation can do. I’ve been to the region on many occasions, I was skiing there. Mr Rashnikov is very good at developing the social sphere for his employees and for other people residing in this area. I’d like to thank Mr Rashnikov, his colleagues and shareholders for their approach to addressing social issues.

On taxation of luxury items

Vladimir Putin: Mr Rashnikov, what do you think about the tax on luxury items?

Viktor Rashnikov: Mr Putin, we have only just now heard about it. I need time to consider it properly. But if it’s the right time to…

Vladimir Putin: All right, good answer.

On selecting candidates to boards of directors of major companies with state participation

Vladimir Putin: Please excuse me, but we have a note from Sergei Mayevsky (director of the Omsk branch of SG-Trans) regarding the procedure governing the selection of candidates to boards of directors of major companies with state participation. Mr Mayevsky writes here that the selection system is unclear. Well, he is entitled to his own opinion.

Alexander Shokhin: What is unclear about it? The presidential administration selects its own candidates; the government selects its own. Everything seems clear to me.

Vladimir Putin: But there’s no system in place. They do select their own candidates, but there’s no system to do so. One doesn’t rule out the other. Please come up with your own proposals with respect to such a system… its formal selection attributes and so on… In fact, this is a valid concern, and I’m thinking about it, too…

I fully agree with you that there should not be any conflict of interests, that’s clear. However, there must be truly independent and highly-professional experts who will make these companies more transparent and effective. 

On investment

Vladimir Putin: …We should invest in safe, foolproof projects. Our objective, the objective of the government today and in the future is to create an environment in which there is no fear of investing money, where investors know that they will not lose their money, but rather, that they will make a profit which they will be able to reinvest. This is precisely the point of the new ideas that I spoke about today.

On women in executive positions

Vladimir Putin: Of course, we cannot do without women. Natalia Suslova writes that there are too few women in the government as compared with Soviet times…

In fact, she is right. If you look at our neighbours, such as Finland, you’ll see that women form at least half of their government.

Alexander Shokhin: It's required by their law.

Vladimir Putin: I’m not sure if we should make a law to determine the percentage of men and women in the government. It’s important to have good professionals with good qualities. Of course, we have a shortage of women in the government. We should think about it.

* * *

Remark: I represent the defence industry in Tatarstan – I am the head of a munitions plant. I would like to inform you that the adoption of a federal targeted programme to modernise and upgrade the defence industry is being delayed. I would like to ask for it to be speeded up because many projects are ready to start but the funding is being delayed.

Vladimir Putin: I agree.

Remark: There is something else. You know that the global military political situation has been very acute in the past few years, as have problems associated with Russia’s national security and defence sector. They have needed to be addressed for a long time, especially with regard to munitions production. I would appreciate it if you gave more attention to this problem. The fact is that many serious problems have built up in this area. It involves thousands of people… and it’s dangerous. Thank you.

Vladimir Putin: I agree with you. This is a difficult problem. But I can tell you, as they always say in a situation like this: I have good news and bad news. The bad news is that the programme is indeed taking too much time and it has not been put into practice the way it should have been. The good news is that we have allocated money for it. I can assure you that the 3 trillion roubles we earmarked are still there. It has not been cut or anything. This financing has been included in the 2012 budget as well as the budgets for 2013 and 2014. What we need to do is to spend it wisely. But I also agree with you that we need to speed up this work.

As to munitions production and the munitions industry, this is a very sensitive issue, mainly because the customer, the Defence Ministry, says it has so much munitions supplies it doesn't know what to do with them. I am not revealing any secrets here. Munitions are constantly being destroyed throughout the country. These explosions cause great irritation.

Remark: But they are overdue.

Vladimir Putin: And they should take greater care. I have already discussed this with the Defence Minister. This does not mean that we will never need more munitions. If we do not act now, if we do not restructure this business or support the sectors that we will need in the future, then, two or three years from now, when we need new munitions, there will simply be no…

Remark: It will be too late.

Vladimir Putin: There will be no one to make them. I am aware of this problem, and I have issued the relevant instructions. We won’t give up on it…

Alexander Lebedev (head of the Murmansk regional branch of the Russian Union of Industrialists and Entrepreneurs): Mr Putin I have a question. In my opinion, it is high time the government adopted a clear policy with regard to Russia’s northern areas. This is a very serious problem. The first bill on the Arctic zone was proposed back in 1998. It has been in and out of parliament since that time, but still there is no law. Soviet policy was much clearer: the government offered incentives to people working in the north, such as the Polar benefits and wage incentives. I am not saying all of that should be reinstated. I am just saying that the government should adopt a clear economic policy with regard to the northern regions.

Vladimir Putin: I wouldn't like to say we haven't got some kind of reasonable approach in this region. You know I greatly enjoy speaking in front of an audience like you, because here I can be sure that nearly 100% of the people share this view: if the situation is the way you described – I mean, a project is not economically feasible – there is no use supporting it artificially, but there are people who live and work there, and they are qualified professionals. So in that case, it is our shared goal – for businesses and the government – to adjust the regional economy in such a way as to make local projects economically viable.

You say that no one cares about it, but that is not true. Our actions may not be effective enough to make a real difference – but it is wrong to assume that no one cares. First, we are drafting plans, and we will definitely stabilise energy supplies to the region. There is no gas there; it will be supplied from the Shtokman field once it becomes operational, which it will. We have plans and schedules. The deadlines had to be postponed slightly due to the economic crisis, because international demand for natural gas fell, and it became unprofitable to develop the field for domestic needs only. I am sure that everyone here understands how the economy works and why at least part of what we produce needs to be exported, if we want the investment to be paid back in a reasonable enough time to make the project cost-effective. Therefore, we will gradually begin developing the Shtokman project as demand grows, and supply the fuel to the Murmansk Region. That is my first point.

Secondly, we will revive the Northern Sea Route, which is crucial for many projects. We will develop local hydrocarbon resources and improve the transport infrastructure. Therefore, even if it is impossible to reinstate the incentives that worked in the Soviet era – although maybe some of them could be revived – I will not go into detail now… but in any case, some economic incentives need to be created, also as part of the special economic zones policy, as you said. I would like Ms Nabiullina (Economics Minister) here to look at this problem again. Let’s go back to it and see what we can do: special economic zones can be fairly effective when they are in full swing.

Alexander Lebedev: Mr Putin, we are discussing government regulation and not artificial support.

Vladimir Putin: I know, I know. Didn’t I say that I agree with you, for the most part?

Viktor Plechkachevsky (State Duma deputy): Just a moment, Mr Putin. I would like to ask a question which I think concerns everyone present here, because until recently I headed the State Duma Property Committee. We have so far failed to introduce a legislative concept of a “single property unit,” which will affect everyone because the government is planning to introduce a property tax based on this concept. I am confident that 99% of properties across the globe are regarded as single units comprising land and structure. In Russia, it is the other way around, with 99% of properties separated (the plots of land and the buildings they hold are regulated and taxed separately). This leads to great confusion when it comes to evaluation and causes an enormous number of disputes. So, are we going to encourage the privatisation of land? This year will complete the grace period that Mr Gref (Sberbank chairman German Gref) and I introduced to provide incentives to privatise land. I would have thought the government is interested in faster privatisation of land, to speed up the introduction of this tax, if for nothing else.

Vladimir Putin: So are you proposing extending this grace period?

Viktor Plechkachevsky: Yes. I believe it should be extended and every possible incentive should be used. As of today, we rely on an abstract formula that former Moscow Mayor Yury Luzhkov introduced: 1 hectare of land (in Moscow) costs $100 million. But, as a property professional, I must argue that, with buildings on it, its value is less than 2% of a free plot. This formula is totally wrong.

Vladimir Putin: I think you have a point because if land is evaluated according to this formula, Moscow will be full of entertainment centres and nothing else. Therefore, we can extend the grace period. However, if we continue extending it, the incentives we offer may lose their value. So let us think together about how we could stimulate privatisation without discouraging those who are working here.

Alexander Shokhin: In fact when we received approval for the previous extension, until the middle of 2012, we promised the government it would be the last time. Those amendments to the law and those regulatory acts provide for a rapid completion of this process. But we have to be on our guard against bureaucrats at property agencies, especially regional ones, who could ruin our efforts.

Vladimir Putin: The current Moscow mayor, Sergei Sobyanin, is working on this problem, and he has in-depth knowledge of the situation. I hope he and the ministry will work together effectively. If they do not succeed, I do not rule out the possibility of another extension.

Dmitry Stupin (President of the Union of Industrialists and Entrepreneurs in Bratsk): I am Dmitry Stupin, president of the Industrialists Union in Bratsk, Irkutsk Region.

Mr Putin, you just said that engineering also requires support – not everything is running smoothly there.

Vladimir Putin: In the first place.

Dmitry Stupin: In the first place. What support programmes for engineering is the government planning?

Vladimir Putin: We must look at our engineering development programmes – our support in this area is connected with dialogue with the financial institutions… We are improving the system of government guarantees. In the first instance, these guarantees should cover areas like mechanical engineering. It is one of the main aspects of this support. I have already spoken about the tax manoeuvre. I would really like for this easing of the tax burden on second and third conversion stages in engineering to be maintained. We should not only keep the trend going, but step it up. We will not, of course, make things more difficult for the resource mining industries because they are under hard enough financial pressure as it is. 

But I want us all to understand, no one should be under the impression that the government does not understand that without our own engineering sector we have no future. We all understand that. And of course, the Ministry of Economic Development and the Ministry of Industry are constantly generating proposals – on a small, medium or big scale – for how to support engineering. I have said many times and will say it again that we will support our large holding companies until we can turn them round and make them profitable. I am referring to aviation, shipbuilding and machine tool industries, because without them it will be impossible to make progress. And then we will gradually put them on the market. Incidentally, I hope very much that our business community will play an active and conscious role in this privatisation process …

Sergei Agapitov: Mr Putin, I am Sergei Agapitov, from the national employers’ association, the Union of Public Utility Enterprises. Mine is a lethal issue – about housing and utilities.

Vladimir Putin: The issue cannot be lethal, it is the situation there that is almost lethal.

Sergei Agapitov: Yes, it concerns everyone from the cradle (water and warmth) to the grave (burial services). So the issue calls for a comprehensive approach. The housing and utilities economy, as it existed in the Soviet era, is no more. Concerning housing we have the Housing Code, the Housing and Utilities Sector Reforms Foundation, the Tsitsin Foundation. But essentially it is not a housing and utilities reforms foundation, it is a housing reforms foundation dealing with capital repairs and structurally unsafe living accommodation. But utilities have been left out on a limb. In 2009, the presidium meeting…

Vladimir Putin: Sorry to interrupt you, but things are not the way you are making them out to be: money from that foundation is given to the regions and municipalities so that they can take the necessary steps to upgrade both housing and utilities. In this sense, it is not just capital construction funds or money to replace dilapidated housing, it is a tool to improve the situation as a whole.

Undoubtedly, the state should direct their best efforts in this area. We only need to understand who is responsible for what. Formal dividing lines exist and show, as a rule, municipal responsibility. Part of this responsibility is vested with the regions, but money to maintain the entire system comes to a large degree through various channels from the federal budget. You raised the issue of monopolies. We should gradually move away from a situation where prices are dictated upwards by these monopolies – we have to demonopolise the market. We need to create conditions where private investments can flow in. We are bound to succeed if we head in that direction. But if we leave everything in government hands, then the 60 billion roubles that make up the hole in the housing and utilities budget (I think there was and still is a 60 billion rouble hole) will only keep growing, unless this sum is cut back gradually. Why? Because when we have direct budget financing for such things, with nothing else, and no conditions are created for private investment, the hole will only grow bigger. We must tackle the issue together.

Sergei Agapitov: I am sorry, Mr Putin. There is a federal targeted programme, and we do not even need the money… The programme spells out a mechanism for obtaining long-term loans for the housing and utilities sector. Give us that programme, because there is five to seven, i.e. long-term tariffs, indexation. No money is required. Give us a level playing field where we can prosper.

Vladimir Putin: You know the point is that you can't get this so-called long-term money on the market today: government backing is needed, and that is also money.

Sergei Agapitov: But that is loaned money, not budget money. Although provided from the budget, it passes through the VEB bank, it's a loan and needs to be repaid. This is a business plan, with everyone responsible. When the funds are budget handouts, we never see it again.

Vladimir Putin: All right.

Sergei Agapitov: We need long-term loans, which…

Vladimir Putin: I am grateful to you for stressing this.

Sergei Agapitov: We don't need budget money: we have money. Just lay down long-term tariff indexation rules. Thank you.

Vladimir Putin: Agreed, we will speed things up…

Sergei Potekhin (director and chief designer at the Kaluga affiliate of the Lavochkin Research and Production Association): Mr Putin, my name is Potekhin, I am from Kaluga and represent the space industry. We are all perfectly aware that the nuclear and space industries are the most science-intensive, the ones that represent the real power of the country and its intellectual capabilities. I have a big request to make: despite the latest setbacks we need to focus more on the space industry so that it can act as a driver for the electronics and metals industries, so that we can produce new materials, build new space ports and regain the power we had before. I do not think we have lost it all (that is out of the question), but our space industry, power engineering (I am worried about our space industry, first and foremost) should still be developed more impressively and with greater federal backing.

Vladimir Putin: It is symbolic that the last but one issue concerned housing and utilities, a sore and painful subject, which concerns practically every one of us, and the last one deals with the space and rocket industry, which has been and remains a source of pride for all of us. That is symbolic indeed, but I wish to tell you that you… I did not know the area you came from and what you wanted to ask me. I am glad this issue has been raised because there is something to say on this score. In 2009, when we experienced a severe nationwide decline in production… I think it was somewhere around 9% overall.

Alexander Shokhin: 8.7%.

Vladimir Putin: 8.7%. The space and rocket industry shot up by over 17%. Even with the general fall in production the rocket and space sector grew by 17.4% to 17.5%, I think. Can you imagine such growth?

As for the new space ports, you surely know that we are currently building the Vostochny space port in Russia’s Far East. What is more, this is our first civilian space centre, also capable of launching manned spacecraft towards the orbital stations. This is obviously a powerful incentive and an integrator for all high-tech development. We have ambitious plans connected with the new orbiting stations, plans for new rocket boosters which I am certain you know about. They are all fully funded and we will continue such funding in the future. That is undoubtedly a competitive edge for us, one which we inherited from previous generations. We must do our utmost to maintain our leading position. This is what we will do. By all means. Thank you very much. All the best.

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