Good afternoon,

It is my great pleasure to welcome you to the Sochi forum.

For several years, the forum has brought together proactive people, who are interested in a dialogue and are eager to search for new bold solutions and ideas. Many projects that were presented here in Sochi a few years ago, at that time they were simply models, are being put into practice today.

The forum's success is more than a symbol of southern Russia's economic revival. It is a token of a growing interest in the Russian market, in the opportunities and prospects it offers businesses. No doubt, such a venue as the Sochi forum is primarily meant for discussions on strategic long-term issues. But in the present circumstances I cannot help turning to recent developments.

We have been receiving negative signals from the world financial markets for a long time, for a few months already. We all are aware of the mortgage problems in the United States. Large financial institutions in the West have started to experience difficulties.

I would not like to mix it all together - economy and politics - however, I think that many of you will agree with me that it is another step towards a multi-polar world, be it through a crisis, problems, whatever. It is obvious.

As to Russia, unlike the past, we now have a very different level of economic and financial development. Both the state and Russia's business have a much higher factor of safety.

All fundamental indexes of the Russian economy remain normal, including the foreign trade balance and budget surplus. Our currency reserves are known to exceed $550 billion. Also, the Reserve Fund totals some $140 billion, and the National Welfare Fund - $32 billion.

We boosted the performance of our financial institutions considerably, created a system of deposit insurance, and almost cleared the market from problematic credit organisations. Financial authorities have gained the necessary experience to effectively respond to the changing situation.

We use market methods to respond to emerging problems. The Government and the Bank of Russia have sufficient reserves to protect the Russian currency and the financial system. We have adopted a set of measures, as you know. These are both the Government and the Central Bank's measures, which provide extra liquidity to the market. The limit of budget funds deposited in banks has been raised from 625 billion roubles to 1.514 trillion roubles. We will take other measures too. There is no need to list them all now. We have touched upon them already. I don't think there is any point in bringing up the question once again.

What I would like to stress is that Russian companies are, in my opinion, undervalued in terms of such a fundamental indicator as the ratio of the value of the market to the listed companies' revenues (and it need be said that you actually have different tools to assess their capitalisation).

There is a substantial basis for investments already. Russia is the world's seventh economy measured in purchasing power parity. The country's GDP has increased some 7% each year in this decade. Last year GDP amounted to 8.1%, reaching 8% in the first six months of this year. Real incomes grow over 10% annually on average.

In many indexes, our market has become Europe's largest. There are not so many countries in the world that are ready to offer business such a wide spectrum of projects - from investments in agriculture and municipal economies to the Olympics and nanotechnologies.

We are going to coordinate the Programme of Long-term Social and Economic Development up to 2020 and the basic areas of the Government's work for the next four years.

This means setting a cluster of major tasks with the same goal - to secure Russia's leadership in economic development and the quality of life for our people.

At the same time our policy and our basic ideological approaches remain unchanged. We stake on private initiative, business freedom, openness and rational integration into the world economy.

We regard any attempts to throw us back to the Cold War times as nothing else but a direct threat to our modernisation project, and, in fact, a desire to jeopardise it.

Confrontation is not our choice. Russia will not be forced to close its markets due to some vague "political motives" or break off economic ties. We have very different things in mind. Primarily launching new factors of economic growth.

What do I mean? I mean a breakthrough in developing human capital, including the modernisation of education and medical care. I mean liberalisation of economic institutions and supporting business competition. I mean an increase in labour productivity and a decrease in costs.

And one more thing, we must seek a balanced regional development and create new centres of growth. And, of course, we need to improve the state administration system.

I'll elaborate on several points we consider our prime tasks.

Eliminating institutional obstacles to investment is an unqualified priority. We intend to get rid of the obsolete permit and control procedures involved in starting and developing a business. They must be replaced with mechanisms of self-regulation and responsibility.

We are preparing a programme to encourage competitiveness. The programme's aim is reducing the possibilities for monopolies to abuse market power. I should say you have nothing to fear. We are not going to invent anything special, exclusively Russian in this sphere. We are well aware of legislative measures against corporate collusion. Unfortunately, they don't work properly here in Russia.

A proactive anti-monopoly policy, among other things, will, hopefully, contribute to getting rid of price distortions and lowering inflation.

Second. Taxation should play a more stimulating role, rather than merely serve as an instrument of securing the state's fiscal interests. Starting from 2009 corporate expenditure on education, health care and the housing problems of employees will be exempt from taxes. We have also extended the list of tax cuts for companies investing in research and development.

We discuss other steps to further reduce taxes. Naturally, we will take into account the latest global economic trends, the budget's capabilities and the scenarios of reforming the pension system. We will also consider a reform of health care and education.

Third. The recent developments once again showed that Russia needs to build a strong independent financial system. In this, we plan to make Russia an international financial centre, which envisages developing the banking system, the stock and commodity exchanges, streamlining the tax legislation concerning investments in the securities market. I have already stated that we decided to zero out the income tax for those who trade on the stock exchange.

By the way, our businesses, I hope, will switch to settling accounts in the national currency. In any case, oil and gas companies could do it when carrying out some of their deals. Indeed, selling gas to Belarus for dollars sounds strange. But why should it be like that? Gazprom has proposed to several of its counter-agents, its partners, to switch to settling in roubles.

Fourth, we are interested in attracting foreign investments. I would like to say it openly and clearly. Of course we hope for reciprocity, for the western partners' equal interest in welcoming investors from Russia. We are perplexed to encounter purely political impediments that have no sound economic ground.

We become more dependent on each other through mutual investments. But is there anything wrong with that? Apparently, it insures us against abrupt changes in the economic situation bringing together the business community in the whole world.

We have recently passed a law on foreign investments in strategic economic sectors. I should underscore that they will not become closed to foreign investors. We are simply introducing clear-cut and transparent practices of granting them access to the most sensitive spheres. We haven't made up anything new, which would distinguish Russia from developed economies. As for other industries, no extra coordination or permissions are required. Especially when it comes to foreign companies' participation in realising unprecedented programmes of modernising Russia's infrastructure, including transport and energy.

Take a look at our power generating facilities. Controlling interest in the largest Russian energy companies belongs to foreign investors. Unfortunately, Russian investors are not allowed to take similar positions in Western Europe and US markets.

Fifth. We will prepare a set of measures to boost the economy's energy effectiveness. What I mean is introducing technical regulation measures and developing the service market in the energy conservation area. The project will involve large foreign investments as well.

Ladies and gentlemen, the present Sochi forum is entitled "Russia. Where to invest?" The topic remains relevant.

Indeed, the question is not whether to invest in Russia or not. Both Russian businessmen and our foreign partners - the thousands from overseas, who invested hundreds of billions of dollars in the form of long-term and direct investments in this country - have given a positive answer to that question.

A serious businessman now addresses another issue - in what sectors his investments will prove the most effective. To make the right decision, you should abandon old stereotypes; feel the new groundbreaking trends in the development of the Russian state and economy. This is the only way to take strong leading positions in the spheres that are likely to determine tomorrow's agenda.

I would like to wish you success at this forum. Thank you for your attention.

Vladimir Putin's closing remarks at the plenary session of the 7th International Investment Forum Sochi-2008:

We have been discussing the social sphere a great deal recently. Unfortunately, social issues in this and in many other countries have always been given least priority, which is due to certain highly important trends in the country's development.

Today we have made the economy's innovation development our key task. Not only because the state and any government is obliged to improve the quality of life for its citizens - there is an underlying economic objective that prompts us to address these problems constantly and systematically. Since, as you have already stated, it is impossible to address innovation development problems without an educated specialist, a healthy person living in good conditions. It is our strategic goal. It is an essential, so to say, infrastructure requirement to develop innovations. This is the first point I would like to make.

Second. These spheres have never been lucrative almost in the entire world. Nonetheless, when properly structured by the state, these areas may become attractive for investment, including private investment.

Of course, you can't do without the state's support, without it creating certain preconditions. For example, let's take health care, healthy lifestyle, sports and leisure services. It was only yesterday that we remembered that three or four years ago it was hard to draw a serious investor here - to the area with the favourable climate of the Black Sea coast (and I should say that few places in Russia have such a good climate). It was difficult to lure investors to the seemingly profitable projects of building hotels, sports facilities and ski-runs. You could not find anyone, however hard you tried. Now, after the state took certain decisions to develop Sochi as a future Olympic site, we have no end of offers - there is a fight for every square metre of the ground. This was achieved through the Government's targeted work - of course, with the help of our friends and partners. Certainly, the International Olympic Committee's decision played a huge role. But it is mainly due to the state's systematic work in this direction.

The same is true of education. My colleague has already mentioned training staff for the company. Our business partners and we know it. We have attracted and are going to attract specialists, making favourable conditions to allow businessmen to train specialists for them. Of course, it is the state that should create all the necessary conditions. I just would like to stress that we will do it.

As Mr Ackerman delivered his address here, he spoke about bureaucracy's negative impact on developing business, saying that he didn't know about the state of affairs in Russia very well, he only knew for sure that in Germany bureaucracy does not suppress business much. I am very grateful to him for touching upon the problem so tactfully although he knows pretty well that it does happen in Russia: the Deutsche Bank is very widely represented in Russia.

It is one of the principal directions of the Government's efforts. I have already mentioned it here, on this podium, in my opening address. Of course streamlining the administrative system is another essential condition to develop the country the right way.

I am very grateful to the organisers for finding it relevant to discuss concrete projects connected with highly profitable business areas as well as the issues which appear less important to business. In fact, to our country and to our economy, these problems are coming to the fore.

I would like to wish you all success. Thank you.