Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon, Mr Kanokov. What do you have to say?

Arsen Kanokov: I would like to report on the republic's socio-economic and political situation and development prospects. On the whole, the economy is developing rapidly. In 2008, the republic's budget swelled by 200% over the previous three years. The 19 billion rouble ($728 million) republican budget will reach 24 billion roubles ($919.5 million) next year. Moreover, tax proceeds have soared by 31% in the last three years. The share of federal subsidies received by the republic has decreased from 72% to 55% of its budget.

The republic has been involved in many federal target programmes, while implementing national projects and coordinating our projects with the federal Government. We have also drafted republican target programmes in such areas as water supply, housing and village-road construction. For the first time in 10 or 15 years, the republican budget stipulates 300 million roubles ($11.5 million) for renovating local villages, primarily their roads. The people support this policy. By combining federal and republican programmes, we can tackle current social issues.

The republic which owed 6 billion roubles ($230 million) in 2005 has either restructured or repaid its debts to date. We have repaid part of our debts to Mezhregiongaz. The republic has also paid its electricity bills. We no longer have major debt, having accomplished a lot in this area. The Government, primarily the Finance Ministry and the Regional Development Ministry, are helping us a lot.

Vladimir Putin: And what about unemployment?

Arsen Kanokov: Unemployment has plunged from 35,000 in 2006 to 26,000 today. Poverty levels are also declining. Due to the republic's favourable climate, fruit and vegetable gardens help keep unemployment down. Local wages have soared by 26% to reach 8,685 roubles ($332.7). Projected annual wage raises are estimated at 20-30%.

Vladimir Putin: A 20-30% increment.

Arsen Kanokov: Yes, that's right.

Vladimir Putin: Do you think this is feasible?

Arsen Kanokov: We managed to do this last year and are planning to accomplish this objective in 2008. In late 2007, the republic's public-sector wages were 20% lower than average nationwide wages. However, we managed financial reserves and raised wages according to your February 2008 decision. The Finance Ministry and the republic's government allocated 350 million roubles ($13.4 million) and 250 million roubles ($9.6 million), respectively.

Vladimir Putin: Are you talking about the regional budget?

Arsen Kanokov: Yes, sure.

Vldimir Putin: You told me about plans for building new tourist centres.

Arsen Kanokov: We have set a rather ambitious task of building a mountain ski resort in the foothills of Mount Elbrus. As you remember, I showed you two designs in Sochi.

Vladimir Putin: Yes, I remember that.

Arsen Kanokov: We are now developing the northern slope area within the 85-km distance between Kislovodsk and Elbrus. Under an agreement with Interros, the republic's government has allocated 205 million roubles ($7.8 million). Before leaving, I inspected the first 18-km sector. We are building a road from Kislovodsk to Narzan Valley. Large-scale infrastructure construction projects are being implemented there. We will complete the Azau resort by February 2009. We are also renovating the well-known Priyut-11 base camp for those wishing to climb Mount Elbrus.

Vladimir Putin: I have been there.

Arsen Kanokov: A Moscow investor is financing the project, due to be completed one or two years from now. Here is what I wanted to ask you. We realise that the country now has two mountain ski resorts in Krasnaya Polyana near Sochi and on Mount Elbrus. But could you please help implement our project? Five out of Russia's seven mountains with a height of over 5,000 metres are located in Kabardino-Balkaria.

We are actively involving partners in these large-scale projects. Most importantly, we want to create 12,000 jobs at resorts in the foothills of Mount Elbrus. The newly hired personnel would cater to approximately 25,000 tourists. This is why we are expanding the local infrastructure, roads and cableways.

If you have time, please come with us. We will show you our achievements in the foothills of Mount Elbrus over the last two years. Your visit would stimulate our work.

Vladimir Putin: We'll see. Now let's get down to details.