3 july 2012

Prime Minister Dmitry Medvedev holds a meeting in Yuzhno-Sakhalinsk on the socioeconomic development of the Sakhalin Region

“I consider it extremely important for members of the government of the Russian Federation to visit the Kuril Islands. We have done this in the past, and naturally, this practice will be continued by the new government. The reasons for this are obvious: this is a very important part of the Sakhalin Region and of our Russian land as a whole.”

Transcript of the meeting:

Dmitry Medvedev: Colleagues, good afternoon once again. In Vladivostok yesterday, we discussed transport infrastructure problems at a meeting of the State Commission for Socioeconomic Development of the Far East and Eastern Siberia. This is a pressing issue for the Far East as a whole and particularly for the Sakhalin Region. We have just discussed it with Mr Khoroshavin (Governor of the Sakhalin Region Alexander Khoroshavin).

This region is unique in that it is the only island-based constituent entity of the Russian Federation. Possibly the most important task for today is to organise uninterrupted year-round traffic between the mainland and the islands, as well as between the Kuril Islands and Sakhalin. This is a standing task. Let me remind you that my colleagues – the ministers and deputy prime ministers – and I are planning to visit the Kuril Islands today and inspect the facilities that are being built there under a programme that has been implemented there in recent years. We also want to hold the necessary meetings and meet with people.

Because of adverse weather conditions, the airport stopped receiving flights several days ago. But we will visit the islands anyway, albeit somewhat later. I would like to stress that I consider it extremely important for members of the government of the Russian Federation to visit the Kuril Islands. We have done this in the past, and naturally, this practice will be continued by the new government. The reasons for this are obvious: this is a very important part of the Sakhalin Region and of our Russian land as a whole.

We also must continue modernising airports (we have just discussed this with the governor) in Yuzhno-Sakhalinsk and in other places, to enable them to receive not only Russian but also international flights and all types of aircraft. This is highly important for tapping the island’s potential. We will also discuss what is to be done in this respect in the near future. There should be a focus on modernising Yuzhno-Sakhalinsk’s TTP-1 and the electric grids on Sakhalin. I would like the Ministry of Energy, the Ministry of Regional Development, the Ministry for the Development of the Far East, and the Ministry of Economic Development to prioritise this issue as they work on the new wording of the Federal Targeted Programme for the Economic and Social Development of the Far East and the Trans-Baikal Area. It is clear that this is the decisive factor influencing the region’s investment attractiveness and high-quality utilisation of its rich natural and economic potential.

Currently, the Sakhalin Region is a donor region in the Russian Federation. Its internal regional product index increased by 7.5% in 2011 as compared with 2010. It is a good result. Local housing construction growth is far ahead of the average indicator for Russia as a whole. This is a good result as well. Most importantly, this result indicates that we have perhaps failed to reverse the negative post-Soviet tendency, even though we are trying to do just that. The outflow of residents from the islands has declined considerably or even stopped altogether in some places, as is evidenced by the rates of housing construction and certain other indicators.

The successes of the Sakhalin-1 and Sakhalin-2 oil-and-gas projects, and the launching of Russia’s first ever modern gas liquefaction plant (I participated in this memorable event) have contributed significantly to improving living standards. As of April 1, 2012, the amount of accumulated foreign capital amounted to over $40 billion, and this is a good figure. The minimum pay level in the region – 11,500 roubles – is one of the highest in the Far East; the minimum salary level for schoolteachers has exceeded the average figure for the region. I have just spoken with the doctors, and they say that things are generally in a decent state, with pay levels rising, even though there are still certain gaps that have to be bridged. As I understand it, the average pay level in the region has come close to 40,000 roubles. Is that correct, Mr Khoroshavin? Good.

The important thing right now is to provide the Sakhalin Region’s education system with modern technology, including distance education technology. We must organise work with children, including gifted children, speed up the introduction of additional programmes for in-depth and specialised training and vocational guidance, and pay particular attention to schools located in hard-to-access areas of the Sakhalin Region. All of this falls within the purview of a 2012-2013 regional education modernisation project. I will also instruct the government of the Sakhalin Region and the Ministry of Healthcare to expedite the implementation of the regional healthcare modernisation programme and to coordinate the relevant effort in cooperation with the Mandatory Medical Insurance Foundation.

We should focus on this territory’s competitive advantages. A project for the production of marine biological resources is at the implementation stage, as is another project involving the establishment of a unique biological technopark. There are plans to launch a technological institute and to use alternative energy sources on a large scale. A comprehensive programme for supporting small-scale investment projects has been drawn up. But we need to shift into a higher gear and provide additional support to new investment projects, while accordingly upgrading legislation and promoting public-private partnerships.

I would like to dwell separately on the amelioration and development of the Kuril Islands. This country’s remotest region cannot and must not be its most deprived, even though this was more or less the case not so long ago. I said as much while visiting Kunashir. The social standards and living standards there should be the same as on Sakhalin and ultimately, as on the mainland.

Let me remind you that we have not reduced the amount of funding by even one kopeck, despite the difficult economic situation, for the federal targeted programme providing for the development of the Kuril Islands. At our earliest opportunity we even increased the funding from 14 billion roubles to 21.5 billion roubles. The amount of co-financing coming from the Sakhalin Region’s budget has grown almost 3.5-fold to reach practically 5 billion roubles. As of today, the total programme funding amounts to 28 billion roubles, which is an entirely decent figure. This money is spent on the construction and maintenance of kindergartens and hospitals as well as on housing and utilities. Since 2007, 18 facilities have been commissioned, including three kindergartens (we visited one of them while on Kunashir), a hospital and a health centre on Iturup, two water supply facilities on Shikotan, and several housing-and-utilities facilities.

I know that an authorisation has been drawn out for the commissioning of the Mendeleyevo airport on Kunashir. The construction of a quay installation will be completed at Yuzhnokurilsk later this year. An airport and a port in Kitovy Bay are being built on Iturup.

All of the Kuril development programmes I have mentioned should be brought to fruition. It is for this reason that the ministers ought to supervise the process both remotely and in person by visiting the islands, even though this is not always easy. Let me underscore this necessity once again. The socioeconomic development of the Kuril Islands should become a priority during the drafting of the state programme I have mentioned, the Social and Economic Development of the Far East and the Baikal Region, and other state programmes.

The signing of contracts and agreements in the context of federal targeted programmes should be sped up. The six-month period is over – let me draw the attention of all those present here to this fact, including the regional authorities and the federal structures – while no requests have come for the earmarked federal funds. Bureaucratic coordination takes more time than the actual work.

And the last point to make before we start our discussion: we intend to continue developing the region’s economy. This includes addressing the social problems that exist all over the Sakhalin Region, including the Kuril Islands. I know that businessmen from countries of the Asia Pacific Region are keen to become involved in promising joint projects in the Sakhalin area. This is a very good and proper sign. This area has an exceptional fishing industry and tourist potential. Given that this potential is so significant, we should do all we can to ensure that local residents have good jobs and enjoy a decent standard of living. These islands should have clear and attractive development prospects.

Let us begin our discussion. The Governor of the Sakhalin Region has the floor. Please, Mr Khoroshavin.

Alexander Khoroshavin: Thank you very much, Mr Medvedev, for giving so much attention to Sakhalin and its residents. You have visited Sakhalin five or six times as Deputy Prime Minister, President and Prime Minister during the more than four years I have been the Governor of Sakhalin. These meetings, your visits, have always resulted in serious practical decisions that have bolstered the development of the Sakhalin Region. We – above all, the residents of Sakhalin – appreciate this.

As for the current situation on Sakhalin, I would say that the main factors involved in our economic competitiveness are the resource potential you mentioned in your opening remarks and our proximity to large Asia-Pacific markets. We have nearly fulfilled the task that was formulated, if memory serves, at the meeting in Khabarovsk: to become integrated in the Asia-Pacific economy. Our trade with Asia-Pacific countries has reached approximately $19 billion, and our main trade partners are China, South Korea and Japan.

The key figures have been named. We have outlined several areas of growth, that is, the main drivers of economic growth for the future. They are, of course, the oil and gas industry, the coal industry and fishing.

Regarding the oil and gas industry, we have almost completed the development of the Sakhalin oil and gas production centre in the region. This is very important for interregional and international relations. Within the interregional framework, we supply natural gas to the Khabarovsk Territory, have begun deliveries to the Primorye Territory, and have launched a project to connect all users in the Sakhalin Region to the gas supply network. Internationally, we export about 13 million tonnes of oil and our liquefied natural gas accounts for about 5% of the global LNG market.

So far, the bulk of oil and gas is supplied from the Sakhalin-1 and Sakhalin-2 projects, but Russian companies are also strengthening their presence on the island. Gazprom plans to launch production at the Kirinskoye field, as part of the Sakhalin-3 project, this year. We believe that the future of the oil and gas system depends on new hydrocarbon projects. Our forecast for 2020, if the offshore project that is currently underway succeeds, is about 20 million tonnes of oil and about 67 billion cubic metres of natural gas.

Of course, growth is very important to us, along with the fulfilment of the tasks that you have set for us regarding the supply of gas to the pipeline and the provision of that vital resource to the Far Eastern market. However, we would like to diversify our economy, to increase the share of the processing sector in the Sakhalin Region, which is why we are considering building a third production line at the LNG plant, and analysing the investment feasibility study involving Gazprom and the creation of a petrochemical facility.

As I have said, the programme to connect users to the gas supply network began in 2011 at the Yuzhno-Sakhalinskaya-1 Thermal Power Plant. By this autumn, the power generating facility plans to convert three of its four steam generating units. At the same time, we are building two power units – Units 4 and 5 – with an aggregate capacity of 230 MW, which will allow us to satisfy the peak consumption demand in Sakhalin’s energy system.

This will also help us resolve one more issue on the island, which concerns the environment and people’s health. Unfortunately, the power plant is located such that winds sometimes carry hazardous emissions all the way to the city. Converting to gas will dramatically reduce pollution. Of course, this will not resolve all our problems. We will still have to consider two serious issues: electricity security -- because while new facilities are launched, one of our main electricity suppliers, the obsolete Sakahlinskaya GRES state district power station, is being gradually decommissioned -- and the isolated and obsolete Sakhalin grid system, which accounts for major electricity losses. Both these issues are being addressed within the framework of the targeted federal programme for the development of the Far East and the Trans-Baikal Territory. We hope that its implementation will help us resolve these issues in full. I will speak about them later on.

As for the fishing sector, which is the second driving force of our development, the region accounts for nearly 25% of fish and other seafood products and about one-third of natural fish preserves made in the Far Eastern Federal District. Our fish breeding farms account for 85% of salmon grown in the country: our 38 fish breeding farms, including 16 state farms and 22 farms built with private investment, produce about 80 million spawn. In the next few years, we plan to build about 20 more fish breeding farms, including 9 farms in the Kuril Islands. I believe that this will ease our dependence on seasonal fluctuations in the number of salmon. As you have said, we have considerable potential in the sphere of mariculture, and the Sakhalin Region government is working in this sphere to create a full-scale, closed cycle production cluster, from artificial reproduction of water biological resources to the deep processing of them.

Another major issue is the introduction of an international system of quality control and promotion of local products under a common regional brand. In short, we have a goal and the opportunity to double the production of biological resources and to increase and deepen their processing. We have formulated this goal and we plan to achieve it.

And lastly, the third leading regional economy is coal production. In 2011, we produced over 4.3 million tonnes of coal and exported about 40% of it, or approximately 1.8 million tonnes. In the next five to seven years, we plan to increase coal production by 100%-150% and to export 90% of our output.

As for investment activity, it is one of the key priorities of the Sakhalin Region government. Foreign investment has reached $37.7 billion, or approximately 11% of the accrued foreign capital in Russia. Of course, we know that most of this money is invested in hydrocarbon production, and we are trying to change this trend. In the past few years, investment in fixed assets (as of 2011), for example, in some industries, has been growing faster than the figure for the oil and gas sector. For example, investment in mining has grown by 118%, in fishing and fish by 200%, in agriculture by nearly 35%, in manufacturing by 11%, in construction by over 40%, and in wholesale and retail trade by about 40%.

We view the attraction of investment as a tool for creating conditions to achieve the key goal of the Far East development strategy, which is to attract people to the region and to encourage them to settle here. We are creating new production in order to ensure comfortable living and working conditions and an additional tax base for fulfilling our social commitments. We have compiled a list of 28 investment projects of priority significance for the Sakhalin Region. Their total value is about 100 billion roubles. Moreover, these projects are not connected with oil and gas production.

In order to implement these projects, we have drafted and adopted the necessary legislation and have created a system of support for investment. It is multifaceted and I will not speak about it in detail. We have established the Sakhalin Agency for Development Projects, we are creating a pool of employees with the necessary qualifications and we have developed cooperation with various development institutions, such as Vnesheconombank, the Far East Development Foundation, the European Bank for Reconstruction and Development, and so on.

The Sakhalin Project Development Agency has been established. The region trains skilled specialists, and we have established cooperation with various development institutions, including Vnesheconombank, the Far Eastern Development Agency, the European Bank for Reconstruction and Development, etc.

The implementation of federal targeted programmes is a highly important aspect of our work in the Sakhalin Region. In 2012, the total volume of federal budget allocations for various measures and projects in the Sakhalin Region is just over five billion roubles, including the non-programme section of the Federal Selective Investment Programme. Of course, this amounts to substantial investment in the region’s economy. Of all federal targeted programmes, the most important for us are, “Economic and Social Development of the Far East and the Trans-Baikal Territory” and “Socio-Economic Development of the Kuril Islands.”

The new version of the Kuril programme was approved in May 2012. Mr Medvedev, this was the direct result of fulfilling your instructions following the President’s first visit to the Kuril Islands. The pertinent decisions, which have been adopted, will provide a new powerful impetus to the development of the Kuril Islands. Of course, they will not resolve all issues. We need support on some issues, and such support does not always mean financial resources.

Speaking of the programme for the development of the Far East and the Trans-Baikal Territory, I would like to dwell on two issues, and I would like them to be included in final protocol. You and I have discussed them in advance. They are construction of the Sakhalin state district power station No 2 and reconstruction of the power transmission network. These facilities must ensure reliable power supply for our power grid. Of course, this sector would face problems in the event of spending cuts.

Another aspect was discussed yesterday at a meeting of the state commission. I am referring to the operation of the Vanino-Kholmsk ferry route, which carries most of our freight. This artery handles about three million tonnes of freight each year. Our main transport artery might collapse in the event of possible spending cuts. Construction of two new ferries has been delayed. We will have to decommission operational ferries three to five years later. Mr Ishayev (Viktor Ishayev), thank you for your support at the commission’s meeting on Monday. Of course, it appears that this engineering solution dating to the 1970s had facilitated a breakthrough. But we live in the 21st century, and we need to move on. The issue of building a bridge or a tunnel, no matter what we call it, is a major state decision that must be implemented, and we are already making certain headway in this area.

We have submitted the pertinent proposals regarding the “Far East and the Trans-Baikal Territory” programme to the Ministry of Regional Development and other state clients.

The second section of our proposals has to do with the specifics of implementing the Kuril programme. Mr Medvedev, the Iturup airport must start operating on time. We consider this to be a highly important issue, and I would like to mention it once again in the presence of Maxim Sokolov. The contractor will build this facility by 2013 under the programme. Today, we are calling on the Federal Air Transport Agency (Rosaviatsia) to start employing air traffic controllers and specialists of other federal divisions. For our part, we are ready to help resolve social and housing issues for future employees and the above-mentioned specialists.

Second, we suggest granting seaport status to the Yuzhno-Kurilsk sea terminal, which should include the Kurilsk, Severo-Kurilsk, Krabozavodskoye and Malokurilskoye sea terminals. Moreover, this port should be named the Yuzhno-Kurilsk Seaport. This decision will create additional opportunities for more active business operations on the Kuril Islands.

Third, we must complete construction of the basic Kuril road network. Above all, this concerns Kunashir Island, which accounts for over 50% of the Kuril archipelago’s entire population. In this regard, we suggest and request that the government study the possibility of expanding the volume and pace of road-surfacing work along the Yuzhno-Kurilsk – Golovnino route, the main insular road. Another aspect of the road issue is linked with assistance in building a motorway network in the direction of fish-breeding farms, which are scheduled to be built. The pertinent allocations, which are stipulated by the Kuril programme, will make it possible to build roads towards four out of nine fish-breeding farms that are scheduled to be constructed. Mr Medvedev, we have held consultations with the business community, which is ready to build these fish-breeding farms at their own expense.

I believe that infrastructure issues should be addressed by the government, and we consider it appropriate to reinvest such allocations in this area. We would like to ask you to instruct the Ministry of Regional Development, the Federal Fisheries Agency and the Federal Road Agency (Rosavtodor) to examine this issue in conjunction with the Ministry of Economic Development and the Ministry of Finance and to draft a relevant decision.

Our next proposal concerns all fishermen on the Sakhalin and Kuril islands, as well as with the entire Russian fishing sector. The federal law on aquatic culture should be passed more quickly in order to ensure the development of the fisheries sector. Although the bill’s first version was approved long ago, the document has become stuck at this stage. And we are unable to tackle our subsequent investment tasks without this law. It is important that some amendments be introduced to the law on fishing. We have formulated the relevant proposals. Right now, we are cooperating with the State Duma. We maintain close contacts with the leading parliamentary party, but we need your support, Mr Medvedev, and that of the government.

And, finally, the third package of our proposals deals with several non-financial issues. We have prepared a number of proposals in this area. We have examined the issue of the Yuzhno-Sakhalinsk airport. Thank you very much. And I would like to thank you for the relevant decision. Our next request has to do with the transfer of unused Defence Ministry land plots to the region. In your introductory remarks, you have noted that we have considerably expanded construction volumes.

In your opening remarks you said that we have substantially expanded construction. But now the questions remain of where to build and how to proceed with this work. As of today, the Defence Ministry owns 18 unused plots of land in Yuzhno-Sakhalinsk and Korsakov alone that can be developed with around 1.5 million square metres of residential properties. I know it is a shared problem but I can’t help mentioning it, Mr Medvedev.

Long ago, we discussed the establishment of special economic areas in the Sakhalin Region with the Ministry of Regional Development. Further developments in this respect were instructed through your directive, Mr Medvedev, in October 2008. However, the current Federal Law on Special Economic Zones does not allow for production and processing of mineral resources in special economic zones. The economy of Russia’s Far East is highly dependent on mineral resources. Development of production and processing of products with a high added value is the key factor of our progress.

The second limitation is usually the fact that the special economic areas are very local. At the same time, mineral production covers different but small areas. Do we have to establish several zones with their own management on one island?

Another important aspect is that, should a special economic area be organised, it will require budgetary spending for infrastructure development. Considering the budget limitations, we figure it would be easier to arrange a special area of tax and customs preferences for residents and loosen up the administrative procedures. It is more difficult within the Customs Union, but it is reasonable to continue working on this. We suggest considering a law specifying the establishment of special economic areas in certain regions of Russia’s Far East – such as the Sakhalin Region, Kamchatka and Chukotka. An alternative could be drafting amendments to the existing law on special economic areas. The amendments would allow concessional terms of business within special economic areas. The terms would be valid only for investment projects for organising production facilities and factories involved in the advanced processing of mineral resources.

This is what I wanted to say, Mr Medvedev. Thank you once again, and I hope for your support. Thank you.

Dmitry Medvedev: Thank you very much. Colleagues, from my address and that of the governor, the situation in the region becomes quite clear, including achievements and current problems, obstacles and suggestions on further development. Therefore, I suggest that we work quickly. There is a draft record of the decision that we will return to. Now I would like to hear from our colleagues present here, who will make brief reports. Three minutes each. I think that would suffice.

We can start with the partnership between the state and businesses in terms of the socio-economic development of the Sakhalin Region. Gennady Alekseyev, CEO of the Foundation for the Development of Russia’s Far East and Baikal. Please.

Gennady Alekseyev: Thank you. Mr Medvedev, colleagues. First of all, thank you for this opportunity to speak at this high-level gathering. <…> The foundation was established in late 2011. This year it has worked under the special terms of Vnesheconombank that were also agreed upon for operation in Russia’s Far East.

The foundation assists in implementing investment projects related to transport, energy, engineering and social infrastructure, development of prospective economic activities in the region and diversification of the regional economy. This is achieved through participation in the authorised capital of commercial enterprises, funding on a repayable basis, joint investments by such enterprises, including investment partnerships and investment funds, consulting, management and marketing services. Apparently, the charter specifies that the main terms on which the foundation operates are promptness, repayment and earning ability. We have drafted a memorandum on the investment policy of the foundation. We expect the memorandum to be signed at the next board meeting chaired by Vnesheconombank Chairman Vladimir Dmitriyev.

Since its establishment, we have held regional offsite meetings in every region except Chukotka, in some regions more than once. We met in the Sakhalin Region on April 16-17 to form a project portfolio of the foundation. The meeting was attended by private investors, representatives of expert organisations and researchers. Proposals were discussed on the collaborative implementation of the investment projects. As in other regions, protocols and collaboration agreements between the foundation and the Sakhalin Region were signed at the meeting. In cooperation with the management of the partnership between Vnesheconombank and the foundation we started considering the investment projects that Mr Khoroshavin mentioned in his report.

So jointly with the Public-Private Partnership Centre of Vnesheconombank and the fund, we accepted these investment projects for consideration. Mr Khoroshavin (Alexander Khoroshavin) mentioned many of these projects in his address. I’d like to highlight once again the project to create a marine biotech park. This is indeed a rather complicated and risky project for fishery management due to the climatic conditions and other parameters that are more complex here than in other countries. To promote this important type of business on Sakhalin and in other territories in the Far East, this business badly needs special preferences, especially with respect to the draft federal law on aquaculture. This involves the creation of a fishery cluster on the Island of Shikotan, the comprehensive development of the Gorny Vozdukh project, which involves the creation and comprehensive development of hotel and skiing infrastructure. There are also issues related to the comprehensive development of timber manufacturing on Sakhalin with the participation of the BM Sakhalin company, which is successfully operating in the Khabarovsk Territory; it was created by the Biznes Marketing company. And of course, the fund and Vnesheconombank can jointly participate in the construction of Yuzhno-Sakhalinsk Airport.

The issues on processing and recycling solid waste in Yuzhno-Sakhalinsk is also a very important subject – creating friendly environment for people and for economic development. Special conditions for development projects in the Far East should ensure the realisation of principles and, I daresay, the ideology of comprehensive development of the territories of the Far East.

We are handing over responsibility to private investors for infrastructure development under life-cycle contracts – which was implemented by Federal Law No. 115 in the road sector, but was not implemented in the power sector and in housing and social infrastructure. And, of course, the attraction of long-term institutional investors to invest in the development of infrastructure within the framework of the model of comprehensive territorial development and the development of life-cycle contracts. And, of course, elaborating and implementing risk insurance mechanisms for non-budget investment in long-term projects of comprehensive territorial development.

This will make it possible to create an exclusive investment climate stimulating the active use of the public-private partnership mechanisms, will ensure the efficient implementation of investment projects both in the Sakhalin Region and in the east of Russia, will provide for product competitiveness both on the domestic and foreign markets, and will create conditions for small businesses. You can see on the right of this slide the proposals for tackling these issues. Of course, issues regarding the active participation of private investors in infrastructure development are the most important task, for which the Far East and the Baikal Region Development Fund has been created.

Thank you for your attention.

Dmitry Medvedev: Thank you. Now let’s discuss fishery in the Sakhalin Region, including the amendments to the law, particularly the law on aquaculture. Mr Krainy, go ahead please. 

Andrei Krainy (Head of the Federal Agency for Fishery): Thank you. Mr Medvedev, colleagues. I’ll be brief. Mr Khoroshavin briefed us in detail on the importance of the Sakhalin fishery, which is third after Kamchatka and Primorye, third overall in the Far Eastern Federal District, third overall in Russia, and first in terms of the potential of its coastal processing enterprises. The fisheries sector is experiencing good growth. Just to compare, in 2010, it produced 530,000 tonnes of fish; and in 2011, 720,000 tonnes; that is 35% growth. Between January and April 2012, catch and production growth was 9.5%; the production of canned fish with sunflower oil grew by 77% during these four months.

By the way, the average wage in Sakhalin fishery between January and April 2011 was 56,500 roubles (it grew by 43% against the same period of 2010), which is third after the extraction sector and the financial and banking sector.

Concerning the options for growth: The draft law on aquaculture passed the first reading, the State Duma will discuss it in the second and third reading in the autumn session. We expect that the bill will become law in November. This is a very important law, because currently the property is not legal, it has not been described, which means that somebody can raise sea cucumbers and scallops but cannot collect them without property rights. It is necessary indeed.

Concerning the law on state production: The Far East (Kamchatka and Sakhalin) is the only region where business is actively building private factories for a very simple reason: this is a biological region. Unlike all other fish, red salmon returns to the place where they were spawned. Due to this homing, red salmon return to the pipe it left from as a 1.5 gram hatchling several years back. So there is a fish return rate, there is business. And we have not only developed a fishery and biological report for seven or eight factories on the Kuril Islands, we also are working on the issue of handing over state factories to private businesses under a long-term lease. Under such contracts, we will not pay for the release of hatchlings, and the private businessman will garner the whole fish return rate. Thus businesses spring up and the state can channel an approximately 250 million rouble allocation extended for reproduction on the Sakhalin – to those regions where they build sturgeon farms, to Astrakhan and the Rostov Region, and other places.  

What should be done additionally, Mr Medvedev? Mr Khoroshavin spoke on the amendments to the law on fisheries. The fact is that we are facing serious problems in coastal fishery, and this is a national problem. But it is especially acute in the Far East. Under existing law, reshipment and processing is forbidden in coastal fishery. But when the fishermen work at a distance of several days from their port, they cannot go back with their catch each time, it is economically unfeasible; they need transport to dispatch the catch to the port so that the fishermen can keep fishing. Unfortunately, the problems of reshipment and processing are very acute for eastern Sakhalin and eastern Kamchatka. This problem should be solved by amendments to the law. I’d ask you to note this down in the protocol of instructions.

And what else should be done to exploit this potential? We should replace old ships. Our fleet is obsolete, we are losing ships, last year we wrote off 15 ships, and we had no new ones. Why? The banks of leasing companies say we have insufficient collateral to get loans. It is rather easy to solve such situations, in our view (we tested this option at meetings with fishermen). The fact is that fishermen have been extended the right to fish for 10 years, a share of quotas expressed in a percentage. If this share of quotas could be accepted as collateral, a non-material asset, then the banks and leasing companies would extend loans. A quota share could work as collateral for shipbuilding.  

And the second thing that should be done – it is necessary to lift import duties on equipment that is not produced in Russia. It is no secret that some 75% of equipment on fishery ships is unfortunately of foreign make, including diesel engines and navigation equipment. <… > We have made some calculations, a small seine-boat costs 18 million roubles to build and, including import duties on equipment, 32 million roubles. That is rather expensive for a small enterprise. And concerning the potential of fishery development. It is quite possible to catch a million tonnes of fish; and, Mr Medvedev, there is no alternative to fishing on the Kuril Islands and especially on the Island of Iturup. This can create hundreds of jobs and it has created them already. Mr Verkhovsky (Alexander Verkhovsky, Federation Council deputy from the Sakhalin Region) is sitting over there, we visited him last year, we visited fish-breeding and processing factories. Workers have decent wages, a decent standard of living, they work all year round, and not only for two or three months in the fishing season. Thank you.   

Dmitry Medvedev: Thank you. A few words on the healthcare component. Ms Skvortsova (Veronika Skvortsova), go ahead, briefly too. 

Veronika Skvortsova (Minister of Healthcare): Thank you. Mr Medvedev, colleagues. I’d like to note that in recent years the Sakhalin Region authorities have done a lot to improve public health. The local programme of state guarantees of free medical assistance, which was adopted in a timely manner, for the first time complies with federal standards. The total cost of the programme is over 11 billion roubles and the share of all healthcare expenses in the consolidated budget of the Sakhalin Region exceeded 16%. So the annual regional spending per capita is over 19,000 roubles, which is one of the best indicators in Russia. As a result, 2011 health indicators considerably improved. I’d like to highlight a 25% reduction in infant mortality, which is the lowest level in the country. We have completely eliminated maternal mortality, reaching zero in the past 18 months. Deaths due to all causes decreased by 5%. Deaths (cardiovascular disease is the leading cause) decreased by over 10% since 2008, when the cardiovascular programme was launched; deaths among the working population decreased by 23%, and deaths from tuberculosis fell by over 11%.         

The quality of outpatient clinics has considerably improved, and for the first time the region has an optimal standard exceeding nine visits to outpatient clinics a year per resident. But there are still problems and huge potential for improvement in healthcare.

I’d like to highlight several problems. The first problem is unbalanced hospital treatment. The standards of hospital treatment are exceeded by 1.5 times in the Sakhalin Region and the number of bed spaces is higher than needed there, while inter-municipal healthcare centres providing emergency medical assistance have a shortage of bed space. Moreover, especially in central Sakhalin, transport accessibility is largely undermined and the patients fail to get to hospitals in time within the treatment window. This fact considerably worsens mortality indicators.

Second, hospitals lack personnel, primarily doctors. Sakhalin is 45th in terms of staff shortages in Russia, the situation is a little better regarding paramedical personnel. There is a personnel disparity between the outpatient clinics and hospitals as well as between districts. There are some districts, such as Tomarinsky and Makarovsky, where the number of doctors is about 40% of the need. The worst shortages are in oncology, anaesthesiology, emergency medicine, neonatology and paediatrics, surgery, and clinic laboratory diagnostics.  

To improve the personnel situation, more than 180 targeted places in medical institutes have been offered to the region for the 2012/2013 academic term, the number of places in residency training and internship training has been increased. We also hope that in terms of the programme of healthcare computerisation Sakhalin doctors as well as physicians in other regions will have an option of continuous distance learning, which will improve the quality of medical treatment.

Concerning the quality of medical care, the inspection conducted in the first quarter of 2012 uncovered violations in medical treatment in 26% of cases, that is, for every fourth patient. In light of these violations of the amount, time period and terms of medical assistance, Sakhalin Region medical organisations were fined 27 million roubles in three months. 

Concerning the regional modernisation programme worth 5 billion roubles for two years, I’d like to note that implementation of the programme has fallen behind. To date, major repairs have been carried out only in eight of sixteen medical organisations, or 50% of the target. Computer purchases for healthcare computerisation are being conducted slowly. To date only 1.6% of the planned purchases, or 77 of more than 4,700 planned computers, have been bought. However my colleagues have informed me that the tender for computer acquisition has concluded and all measures will be implemented shortly. 

With regard to the federal support for the construction of new facilities, it has already been mentioned today that a hospital and an outpatient clinic were commissioned in Kurilsk in 2009 (Iturup Island), and in 2010, a regional oncology centre was opened in Yuzhno-Sakhalinsk.

At present, in compliance with your instruction, Mr Medvedev, the construction of a hospital for 25 beds with an outpatient clinic with a capacity of 50 patients per shift on the island of Shikotan has been included in the federal targeted programme for the social and economic development of the Kuril Islands. 

The Healthcare Ministry and the Ministry of Regional Development have already prepared all the necessary amendments to the programme, which makes it possible to start financing the construction. This year, they have already allocated 154 million roubles for the project.

Overall, we believe that to comprehensively improve the healthcare system in the region, we need to draft jointly with the Healthcare Ministry a balanced healthcare development programme in the region through 2020. Together, we will make every effort to ensure that the region has proper facilities to conduct large-scale preventive medicine and a balanced three-tier healthcare system.     

Dmitry Medvedev: Thank you. We have ministers, deputy ministers, and several company heads attending the meeting. Does anybody want to add anything? Please go ahead, Mr Novak.  

Alexander Novak: Thank you, Mr Medvedev. I will speak on the protocol, if I may. It has been suggested here that the Ministry of Energy jointly with other federal agencies should include activities aimed at modernizing Yuzhno-Sakhalinsk, Heat Station No. 1, and the power grid on the island of Sakhalin in the new version of the Programme for the Socio-Economic Development of the Far East they are currently working on.  

I would like to request that the GRES-2 hydropower plant on Sakhalin is also included in this list, considering that Mr Khoroshavin has raised the issue. In general, Mr Medvedev, I believe that the problems that currently exist in the Sakhalin Region really need to be addressed, since the equipment at the Sakahlin hydropower plant and heat station is highly worn out.

The equipment at the Sakhalin hydropower plant will need to be decommissioned in the near future as its wear rate is 86%, and there are substantial risks related to the reliability of power supply. Therefore, GRES-2 needs to be included in the federal targeted programme.  

Currently, we have about 1.93 billion roubles available for 2013. Unfortunately, most likely we won’t be able to use these funds in 2013, as the construction documents will be ready only at the end of this year, plus the expert assessment will also take some in August. Therefore, we may need to move the project to 2014-2015 and plan for additional funds.

As for the TETs-1 heat station that Mr Khoroshavin was referring to, we will need to review this project as well, as the federal targeted programme stipulated that the project has to be co-financed from the region’s budget.

As for our part, we had the necessary funds available. The only problem is that the project cost has gone up due to the preparation of the construction documents and the expert assessment. As a result, we need an additional 1.7 billion roubles to complete the project. We’ll see with the governor what can be done, but I would also like to offer Mr Alexeyev as well as Vnesheconombank the opportunity to take part in funding this project. The project can bring good returns and therefore, it could be a good investment for Vnesheconombank.        

The third issue has to do with the renovation of the power grid, which is also substantially worn out. We have been funding on a co-financing basis with the regions and will also consider the possibility of working with Vnesheconombank.  

Dmitry Medvedev: Thank you. Go ahead please (addressing Pavel Korolev).

Pavel Korolev (Deputy Minister of Economic Development): The Ministry of Economic Development shares the concerns of the region’s leadership about the existence of administrative barriers, in particular in the area of ownership rights registration. At the same time, I would like to point out that the region has yet to establish a multi-functional centre working on a one-stop-shop basis.  

The ministry is ready to provide the necessary assistance in this matter together with the Federal Service for State Registration, Cadastre and Cartography (Rosreyestr). We are grateful to the region’s leadership for supporting the local branches of Rosreyestr that have maintained their presence on the islands. This is very important for the residents. However, it is also necessary to develop electronic services. Therefore, we are planning to dispatch specialists from the ministry and Rosreyestr to the region to provide the necessary assistance in setting up the electronic service facilities.   

I also suggest that, as part of the ministry’s inter-agency working group on legislative work, we consider issues related to the regulatory framework for special economic areas. There are issues in this regard as well, and we are ready to cooperate on any constructive changes.   

Dmitry Medvedev: Mr Korolev, I just want to clarify whether you support the idea that the regulations for special economic zones should be more differentiated, at least in terms of taking into account the specificity of the Far East and Sakhalin?  

Pavel Korolev: Yes, I do.

Dmitry Medvedev: All right, thank you.  

Pavel Korolev: And finally, regarding the transfer of unused lands, owned by the Ministry of Defence. Presently, the situation in the region, as you have pointed out, is rather difficult. Today, we have more than 500 capital construction facilities that have not been transferred due to formal reasons and mainly due to the absence of cadastral registration (since other owners are listed) and description of the facility. 

We propose to deal with this issue in line with your instructions of June 25, Mr Medvedev. These are tough and straightforward instructions and they need to be executed. We are also planning to create a joint commission with the participation of representatives from the region, the Ministry of Economic Development, and Rosreyestr. Thank you.

Dmitry Medvedev: Thank you.

Alexander Klimov (Deputy Minister of Education and Science): It should be noted that the Sakhalin Region has been making the development of education in the region possible. They have already ensured that the average salary in the education system is equal to the average salary in other sectors of the economy. From January to May 2012, the average salary was 26,323 roubles, and in 2012, the funding of education will increase to reach 12.4 billion roubles. At the same time, I would like to draw the attention of the region’s leaders to the following four issues.     

First, we believe that the development of private pre-school education institutions and family kindergartens has not been sufficiently considered. These facilities can become an efficient and effective solution to the issue of providing the residents of Sakhalin with pre-school education institutions.  

The second important issue has to do with the low scores on the Unified State Exam. In 2012, the worst performance was shown at the math exam, with 10.3 % of the students failing to get the minimum required score and 24.7% scored under 49. This means that 82% of students have poor knowledge of math. We believe that a programme needs to be immediately developed and adopted to improve math education in Sakhalin. This problem should be addressed with methodological assistance from the Education Ministry.     

The other problem is the slow internet connection. Taking into account the remoteness of the small towns, we believe that the issue of providing broadband internet access should be somehow addressed. This is especially important for elementary school students, as contemporary distance learning methods require high-speed internet access. The problem here does not only have to do with equipment, but also with high internet access rates.   

Quite possibly, it would be appropriate to assess competition issues in this market. In our opinion, the regional leaders should focus on one more issue. We have analysed the specialist training organisation at Sakhalin State University, the only local state-owned university. In 2011, 1,129 students planned to work in education; 318 students planned to work in business and management; 246 students planned to work in the humanities; 106 students wanted to work in the mining; 65 students chose the energy sector; 30 students opted for the construction industry; and agriculture and fisheries attracted 30 students. We consider this situation unacceptable, and we are calling on the region’s leaders to tackle the problem in conjunction with the Ministry of Education and Science. They should bring the specialist training organization in conformity with those specific priorities, which were mentioned at yesterday’s meeting, and which will be included in the long-term programme for the development of the Far East. Thank you.

Dmitry Medvedev: Thank you. Please.

Andrei Ivanov: My name is Andrei Ivanov, Deputy Minister of Finance. As for the results of yesterday’s commission’s meeting and today’s meeting, it is obvious that current legislation regarding investment activity in public-private partnership is a key problem which must be solved. It would then be possible to drastically change incoming investment volumes. We are very grateful to our colleagues from the Ministry of Transport, the Federal Fisheries Agency and the Ministry of Energy for their cooperative attitude with regard to the federal budget, for comprehending specific market restrictions and the emphasis on the issues of public-private partnership. But I would like to draw your attention to the fact that this is being implemented according to the 1991 legislation. The RSFSR Law On the Implementation of Investment Activity is still in effect. The only modern federal law regarding investment in the form of state capital investment was passed in 1999. Neither law provides for accomplishing two objectives. First, they make it impossible to define the investment project concept and to make it the pillar of public-private partnership. The thing is that the creation of a capital construction facility is perceived as an investment project in the form of capital investment. We are noting that it is necessary to comprehend the essence of relations between the parties to public-private partnership, so that the relevant project can yield specific results. This not only implies the targeted spending of allocations and the creation of capital construction facilities, but also the need for any specific project to yield the required financial results for those involved in it.

In our opinion, the second and most important task is to help our colleagues from industry find the sources of extra-budgetary funding. For this purpose the legislation must describe possible models, including the family of industry funds, which would make it possible to heed passive state financing, as well as private investor capabilities for implementing any specific project in line with public-private partnership.

In this connection, I believe that the proposal of Alexander Khoroshavin on specifying legislation for special economic zones is quite reasonable. But I would like to make a reservation regarding the law. This year, we would like to suggest that the government introduce the concept of tax expenses under the programme to ensure more cost-effective budgetary spending. In effect, when we say that we implement a project in line with public-private partnership, we realise that state support is provided not only in the form of subsidies, but that the provision of customs tax privileges amounts to tax expenses. And if we realise that the recipients will perceive such support in the same way as a subsidy...

For instance, it is inappropriate to subsidise Gazprom during the implementation of a project in a special economic zone. But if we realize, based on the logic of implementing any specific project at special economic zones, that this amounts to a tax expense and to support for specific companies, which require such support within the format of an innovation project, then, of course, we would support such an idea, and we would convince the Ministry of Economic Development to cooperate.

And now I would like to say a few words about the third idea regarding pledged security in the form of long-term fishing quotas, which was voiced by Andrei Krainy. Of course, this looks rather exotic to the Russian banking system. We are quite surprised that project financing contracts do not stipulate using new fishing vessels being leased to fishing companies as collateral, and why additional collateral is required. But this task could be accomplished within the framework of investment projects. In this connection, we would like to ask the Ministry of Finance and the Ministry of Economic Development to draft a federal law on the fundamentals of investment activity in conjunction with the concerned industry departments. Why do we prioritise this objective? It is because we believe that the law’s main provision is to define key principles of public-private partnership, rather than just the investment project concept, and to suggest the idea of a model for attracting extra-budgetary sources, the pooling of state financial resources and private resources for funding specific projects. This is because it is our responsibility before industry departments. In my opinion, this is the correct approach with regard to the federal budget during the budget-planning process. Thank you.

Dmitry Medvedev: Thank you.

Maxim Sokolov (Minister of Transport): Mr Medvedev, I support Andrei Ivanov on specific law-making initiatives, including expanded public-private partnership, all the more so as Russian legislation still does not define what public-private partnership is. And I hope that such issues will be resolved by the bill on public-private partnership which will be drafted by the Ministry of Economic Development. I hope that the specific ideas voiced by Mr Ivanov will also be implemented.

As for the protocol decision, I would like to specify para 4 instructing the Federal Agency for State Property Management (Rosimushchestvo) to expedite the conversion of the Yuzhno-Sakhalinsk airport facility into a shareholding company and its subsequent privatisation. Over the past six months, we have been actively discussing the idea of establishing regional government-owned companies based on the Yuzhno-Sakhalinsk airport plan and other airports at Sakhalin Island with the leaders of the Sakhalin Region and the Ministry of Economic Development. This includes local airports like Okha, Zonalnoye, Nogliki and Shakhtyorsk. These airports could operate more effectively within the format of all-out development, and they could distribute passenger traffic accordingly. If we strictly abide by this paragraph’s current wording, then this would mean that the Yuzhno-Sakhalinsk airport would be privatised through a tender. Consequently, it would be impossible to realise this concept. This is why we should stop discussing the issue, all the more so as Alexander Khoroshavin has noted that a decision had already been made with regard to the Yuzhno-Sakhalinsk airport. Thank you.

Dmitry Medvedev: You wanted to say something?

Viktor Ishayev: Thank you. We have been in session for two days discussing issues of particular interest. Sakhalin, of course, is a very special region. Dmitry Medvedev even wrote an article about the running of remote territories in the newspaper Spetsvypusk Frantsia (June 5, 2009).

All these issues call for a comprehensive approach, but first I would like to ask a few questions in regard to our colleagues’ reports so that we could consider them together. So, the Energy Ministry. It is absolutely true that the basic assets are worn out and this matter should be dealt with seriously. Units and stations – that’s all very well, but of late the trend has been towards using more gas for fuel.

I would like to understand – and nobody has been able to answer this question – when it will start to make a profit and what will be the price of gas, roughly, in 10 years or at least five years time, because as far as I understand, it will change in three or four years <…>. We in the Khabarovsk Territory have been developing certain sectors. We are buying gas from the Americans (we have a contract until 2025), but the price is $54 for gas and this is comparable to the price of coal. So, in developing our energy sector, I insist once again that we should sit down with the Energy Ministry again and take a very close and co-operative look at the programme of energy development in the Far Eastern Federal District. And, of course, fuel is one of the main issues. As long as we stay within $100 we can say that our coal is still competitive, or at least there is a kind of balance… Everything above that mark means that the energy sector will start to crumble. Sakhalin has its own excellent coal, as the governor has said, and it should rely on the development of coalfields.

As for transport, of course, as the governor has said, we have the Vanino-Kholmsk ferry crossing. Mr Medvedev, Sakhalin is heavily dependent on the weather and on several other factors. It operates at 50%, and the supply comes from the mainland. This is extremely difficult and of course one would hate to spend money on all these ferries. It is clear we are in agreement on that point. The governor finances the proposal request just as the Russian Railways is financing the proposal request for BAM-2. That will give us some idea of the cost and then we will work out the way to approach these problems. Incidentally, this was a key point in your instructions and we have discussed this issue with you.

Next question. Sakhalin of course has seen its population shrink dramatically, by more than 30%. In 1990 it stood at 718,000. Now it is 495,000. I absolutely agree that the outflow has stopped, and it has even turned around on the Kurils. In 2010 there were 19,000 people and now there are 19,600 there which is good. There is some movement towards that territory due to the creation of good conditions which immediately change the whole situation.

When they say that wages are good here and all the rest I think we should not make comparisons with the average Russian statistics, but look at purchasing power. Here are some hard figures: the average income in Russia is 20,000 roubles per capita and in the Far East it is 23,000 roubles, however in terms of purchasing power that equals 17,000. And that does not take into account all factors. One has to take into account the distance, the duration of the winter period and a number of other factors that make things difficult for us. So, when they say that incomes are so high here and everything is fine – I can only agree up to a point, if I agree at all.

Next. When we speak about the gross regional product I would like to know how it correlates with the living standards. Last year the United States reported per capita GDP of $48,100. Sakhalin reported per capita GDP of more than $52,000 in 2011. But if we drove through Yuzhno-Sakhalinsk… I wouldn’t say that they live better than in the United States, because one rouble of its GDP yields just 0.08 roubles, or 8 kopecks in income, whereas the Amur Region has 16% per rouble of the GDP.

When we say that things are going well, that the GDP is growing, you have to bear in mind that there is the concept of “company development” and the concept of “territory development”. The correlation is not always straightforward, so the output of products with greater added value should be the main strategy in all areas, be it oil or gas or fishing.

I do not want to dwell on these matters, we have written and spoken about them a great deal, but I think that we should move in that direction.

Sakhalin has better conditions, but let us take a closer look: in terms of per capita budget, Chukotka is in first place with 394,000 roubles per capita. Kamchatka is in second place with 170,900 roubles, followed by Magadan and Yakutia, 140,000 roubles each, and then Sakhalin with 110,000 roubles per capita. These are followed by the Amur Region with 61,000, Khabarovsk with 60,000, the Primorye Territory with 52,000 and the Jewish Region, with 48,000. Sakhalin is somewhere in the middle although it is the leader in terms of production. With all these problems (in that this wealth should ultimately benefit the people who live here) of course we and our colleagues, the ministers and governors, have our work cut out.

We have done the analysis, we can see the problems and we see ways to solve them. I think the instructions that are being issued today pave the way to the solution of these problems. In keeping with your instructions, Mr Medvedev, we are developing the concept of the strategy of the Far East until 2050. Some interim publications have already been printed – and we have shown them to you – and I think we will complete the job by the autumn and propose our development guidelines. But we will never be able to raise these regions up to the average Russian level without some serious measures (it is not only the question of giving us more money, but creating the right conditions for doing business). And it is our duty because our people must live better. That is all. Thank you.

Dmitry Medvedev: Thank you. Well, let us wrap it up here. I will give a brief summary of what has been said here.
We should move along the paths that the ministers here and the governor have described, as far as we are able to today. Speaking about the law on aquaculture, it is time to adopt it, we’ve discussed it enough. Indeed, I can’t understand it, the issue was already in discussion when I had my first spell working with the government and the law has still not been passed. I don’t know what is hampering it and what problems it has met with, but I think a line should be drawn under it. So let us keep this matter under constant review and the law must pass the second and third readings in autumn.

About the land owned by the Defence Ministry. This is a delicate matter, but even so, I absolutely agree with what has been said here: all the instructions must be implemented, including the tough instructions on land that have been issued. Otherwise, neither the Sakhalin Region, nor the other constituent entities of the Federation that are part of the Far Eastern Federal District, will have any development prospects. Our country has changed, the aim of the Far East is not only to oppose enemies and secure the border, although that of course is a key function – the defence function – for any state, but the aim is also to attract investment and get additional sources for development and for increasing revenue in these territories. We should move more boldly in all these areas. Naturally, I will again give a signal to the Defence Ministry and I demand from the government and the relevant ministries, from the Defence Ministry, that these instructions be carried out.

As regards the zones on the Far East territory, frankly, it came as a bit of a surprise to me that ministers have backed the idea of a certain level of work specification in the Far East. Well, if you feel that way and if the Ministry of Economic Development and the Finance Ministry feel that way, we may give up uniform criteria for the creation of such zones and take the local specifications into account. I think in the long run it would benefit the territories. I go along with the view expressed here on the possible privatisation of state-owned factories, for example on the Kurils and other factories in the area. Because where state business does not work, private business always has more opportunities, as long as we do not slap it on the wrists. We need to let it pull its act together. This is a must.

As regards legislation, I am prepared to issue instructions concerning the matters discussed here. I made a note of the quota collateral (and I think I saw others make a note of it) because it is a fantasy, really. I find it hard to imagine banks determining the price of the quotas considering that, frankly, this is not very reliable collateral, as the state may at any moment decide to abolish quotas for various reasons. What would the bank do then?

No, my point is that it is a rather strange proposition because, in my opinion, this method of securing the performance of a long-term obligation can turn to dust at any moment. But if it is a legally sound scheme for banks, I won’t object, although, in my opinion, standard collateral for new technology, a new fishing vessel is at least as good. At least it is the standard form.

Concerning exempting equipment not produced in the Russian Federation from import duties, this is worth thinking about, as we have introduced similar exemptions in a number of other areas, but of course we should be mindful of our obligations within the Customs Union.

I support what has been said here about medical assistance and education services… Of course the region itself should exert the necessary efforts to develop them, but at the same time, the wishes expressed by the region and by the ministries must be taken into account.

The only thing that I find a little confusing is the maths tests results. What I find confusing is … either maths teaching is not up to scratch here, or the tests are administered honestly. I don’t know.

I do not object to adding an instruction with regards to GRES-2 power station and to bringing in Vnesheconombank to work on this. Incidentally, item 3 contains an instruction: “the bank for foreign economic activities jointly with <…>”.

I am also in support of proposals concerning legislation on investment activities if the corresponding laws are outdated. This law is very old and frankly it has been largely ignored over the past ten years, because I remember this law when it was passed at the dawn of the new state. If such a law is necessary, let us work on it.

Viktor Ishayev raised a whole range of issues. I hope that, as he said yesterday, he will work together with the colleagues because these are common goals and this is not about passing the buck. In the Far East, things can be done only by cooperating in various areas within the competence of industrial and functional ministries. Naturally, taking into account the specifics of the Far East, which is the whole rationale behind creating the ministry with that name.

You have asked about the need to have gas prices bringing in the same revenues everywhere. We will look to do it as quickly as possible. Only then will we have a market economy.

Regarding the airport in Yuzhno-Sakhalinsk and other airports. An instruction has indeed been issued to speed up the divestiture and privatisation. After a talk with the governor and considering the position of the ministry, I issued instructions to look at the problem from a different angle. This is not to say that all the issues have been solved: either privatisation or a kazyonny (state) enterprise. But if the region wishes to assume the management of all this cluster of airports and create a corresponding kazyonny enterprise, put them on the balance books and make them regional property and finance them, I have no objections, because I am not sure that we can easily find a buyer for the Yuzhno-Sakhalinsk airport, let alone the other airports. It is important for us not only to find an investor in Yuzhno-Sakhalinsk, but for the other airports to work too. I would like you to determine the final position on this (I have issued instructions to this effect to you and to other colleagues): what should be done considering the specifics of the Far East, because both options are possible. But if you conclude that it is necessary to proceed in this way, let us do so. The task is not to derive profits from the sale of an airport, I do not think that we can get a very good price, frankly.

And the very last thing that I want to tell you. Of course, this meeting we are holding is somewhat unusual because when the prime minister, the deputy prime minister and many ministers and deputy ministers and heads of agencies get together to discuss the problems of one region, it is a somewhat odd situation, but I think that all those present understand the reason. This is a special region and there will be no change unless the government focuses specifically on it. And I would like to stress again that all those present should bear this in mind in their day-to-day activities. You should come here regularly, visit the Sakhalin Region, and naturally the Kurils, because this is an area that is very difficult to manage. But it is our territory, a very important territory that must develop according to the same laws to which the mainland of our country is developing. When I visited Kunashir, I spoke about this with our citizens living there: we need to create new investment projects, involving foreign participation as well. Some foreign firms are ready to do it and I would like the regional administration and the ministries to work on this.

So, colleagues, I will issue all the necessary instructions on the development of the Sakhalin Region, including the Kuril Islands. Thank you, and see you soon.