Transcript of the beginning of the meeting:

Dmitry Medvedev: I would like to say a few words at the beginning of our regular meeting on Monday. As you know, I had chaired a meeting of a Government commission in Makhachkala last week, on October 2. The North Caucasus has been facing, and continues to face, a lot of problems. I would once again like to draw the attention of the Deputy Prime Ministers to the fact that all of them should, naturally, oversee issues concerning the development of the Caucasus in line with their respective spheres of activity.

I have already said that this year’s allocations have increased to 12 billion, practically to 13 billion roubles, in line with the Federal Targeted Programme, “The South of Russia.” Their volume is to total 6.6 billion roubles next year. The Government Commission on the Socio-Economic Development of the North Caucasus Federal District will be expected to receive a long-term state programme for the development of this district up to 2025. This is a very broad horizon for planning the development of Caucasus territories as part of Russia. But the document should stipulate real investment in the development of healthcare, culture, education and, of course, infrastructure, which nevertheless continues to develop, despite difficulties. A large tunnel has been opened in Dagestan.

It is, of course, no less important to create a mechanism for attracting investment, because it will be impossible to accomplish our objective at state expense alone and without investment, no matter what the leaders of North Caucasus territories might expect. Mr Khloponin (Addressing Alexander Khloponin), please draw the attention of your colleagues, the leaders of the republics and the Stavropol Territory, to the need to search for private investment. There can be no fully-fledged development without such investment.

As for the infrastructure of the North Caucasus, it is highly important that we build roads there. I know that Mr Dvorkovich (Arkady Dvorkovich) is chairing a meeting on this road issue today, and I would also like to focus attention on this. Are there any comments on the North Caucasus, the future programme until 2025 and the results of our joint trip to Makhachkala?

Alexander Khloponin: Mr Medvedev, I would like to inform you that the draft state programme for the development of the North Caucasus is now virtually in its final stage. The draft programme, which is due to be coordinated with the executive bodies concerned, will be submitted to the Government by December 1. The entire state programme will be modified, with due consideration for the meeting of the Government Commission. It will include the sub-programmes of the Federal Targeted Programme, “The South of Russia,” which will still be implemented in 2013, and the “Socio-Economic Development of the Republic of Ingushetia,” which should be implemented until 2018. A sub-programme will be drafted for every territory of the North Caucasus Federal District. As you know, they always ask the Government, including you and the President, so that … To be honest, three republics have been singled out, and other republics have not been included. This is also a very important political issue for them. Consequently, there will be sub-programmes for every republic.

Dmitry Medvedev: In the long run, we need a major and effective programme, that includes sub-programmes for all the republics. There should be no exclusives in the future.

Alexander Khloponin: I agree, Mr Medvedev. There will also be a sub-programme for the development of the Caucasus Mineral Waters region. There will be a sub-programme for the development of the tourist cluster in the North Caucasus Federal District, the Republic of Adyghea, as well as projects to improve the investment climate. After the October 2 meeting of the Government Commission, which you chaired, I believe it is necessary to continue developing the social sphere. And, frankly speaking, we propose including the sub-programme in the state programme for the development of the social sphere. This would include healthcare facilities. This concerns issues regarding the development of perinatal centres in Dagestan, Kabardino-Balkaria and the Stavropol Territory, as well as three maternity homes, a hospital for children and a tuberculosis treatment centre in Ingushetia, an infection treatment hospital in North Ossetia, an oncology centre in the Karachayevo-Circassian Republic and some other facilities. All of the concerned ministers should submit the required proposals to the working group by November 1, so that we will have time to accomplish all this in line with the sub-programme. The same is true for the development of education. We have stressed that we still have some territories where children still study in three shifts. Of course, this cannot be considered top-quality education, and I don’t even know what this can be compared with. We therefore plan to rapidly attain the average Russian parameter, at least 80% in terms of the average Russian parameter … This is a rather ambitious task… 

Dmitry Medvedev: What do you mean by 80%?

Alexander Khloponin: The average Russian level, including schools and social infrastructure facilities.

Dmitry Medvedev: Are you talking about their quantity?

Alexander Khloponin: Yes. There is one more objective that we have to accomplish. Mr Shuvalov has also asked us to hold a meeting in the near future. This concerns issues associated with the localisation of production facilities in the North Caucasus. In effect, we have a lot of natural monopolies and the financial-industrial sector. Right now, they also have their own interests while operating in the North Caucasus. We could provide incentives to some enterprises, so that they would relocate production facilities to the North Caucasus Federal District with the help of economic instruments. Incidentally, this, too, amounts to highly important leverage for attracting Russian-speaking individuals there. This concerns sufficiently skilled specialists. But this is still in its early days, and we will discuss this idea once again.

Mr Dvorkovich and I are holding a meeting today on transport infrastructure in the North Caucasus. We will also touch on the issue of energy, including energy debts. We have been working quite effectively in this area and I wanted to report, Mr Medvedev that, as you instructed, the programme will be complete and submitted to the Government by the first of the month.

Dmitry Medvedev: All right. We’ll be expecting it.

Let’s now go back to the issue that I mentioned at the Government meeting – grain interventions. The decision has been made and I announced it on October 4. We can proceed with this project. I am referring to the sale of last year’s grain from the reserves of the Intervention Fund. The summer was quite difficult and dry this year, and we harvested less grain than planned in various regions.  

However, the overall harvest is sufficient to cover all of our domestic needs, and also to export a moderate amount. But interventions are still needed. The additional supply of grain will balance out the situation in individual regions. These commodity interventions are expected to start this month, as far as I understand. Is this correct, Mr Dvorkovich?

Arkady Dvorkovich: Yes, that’s correct. The Minister of Agriculture has issued a directive on organising the interventions. The first intervention will take place on October 23. They will be held twice a week, on Tuesday and Wednesday. In the Siberian Federal District, the grain will be initially available to flour mills and fodder companies from the Siberian, Urals, and Far Eastern districts, where the post-harvest grain prices are currently the highest.

Overall, we expect that the harvest will exceed 70 million tonnes, which corresponds to our forecasts of last month. The situation has not changed for the worse, but has stabilised. We have already harvested 68 million tonnes and are approaching the forecasted 70 million tonnes, and maybe even slightly more. Exports have stopped growing. In fact, at these prices, exports are becoming unprofitable.

Based on this, we have two objectives – to stop domestic prices from further increasing and may be even to help bring them down a little, while, at the same time, avoiding stimulating exports too much, as otherwise there will be an imbalance again. This way, we will ensure decent profitability for grain producers and simultaneously avoid a sharp price increase for consumers.

The initial prices at the tender will be set at about 10% to 15% lower than the current market prices – 7,200 roubles for grade 4 wheat and 7,600 roubles for grade 3 wheat. The sales volume is expected at 110,000 tonnes per week. We believe that this will be sufficient to stabilise the situation in these regions.

Dmitry Medvedev: We have to monitor the situation and see if this is sufficient. If not, we might need to provide additional amounts in some of the regions to ensure balanced prices.

Arkady Dvorkovich: We’ll do that. And, if necessary, we’ll expand the list of companies that can participate in the tenders and will extend them to other regions. But for now, those regions that I have mentioned will be sufficient in the first two weeks of October.

Dmitry Medvedev: The new state programme on the development of agriculture also provides for support to producers of agricultural machinery and equipment. Is there any progress in that area?

Arkady Dvorkovich: Yes, there is. We have prepared draft by-laws that will help us start implementing these support measures. The first is related to subsidising Russian manufacturers of agricultural equipment who will sell modern agricultural equipment to domestic agricultural producers at pre-determined prices, in line with the declared pricing policy.

These prices will be lower than current market prices, so in essence we will be giving a discount. In this way, we will ensure sufficient demand for our agricultural equipment by supporting both the agricultural producers and manufacturers of agricultural equipment.

Following a meeting that I held, this draft law will be finalised within two weeks to prevent corruption during the distribution of subsidies. The original draft did contain these risks, but we found a way to eliminate them and ensure that distribution is completely transparent.

The second mechanism is to support the leasing of agricultural equipment through Rosagroleasing. Part of the funds will go to Rosagroleasing’s capital, which has contracts with the agricultural equipment manufacturers and generates significant underlying demand for the products made by our companies. 

Dmitry Medvedev: How much money will go to Rosagroleasing’s capital?

Arkady Dvorkovich: Eight billion roubles (we are currently finalising the exact amount with the Finance Ministry) will go to Rosagroleasing’s capital, and about two billion roubles has been allocated for subsidies so far, but there is an understanding that this figure can be increased following the distribution of subsidies at the initial stage at the expense of the redistribution of funds from other programmes.

Dmitry Medvedev: All right. Please monitor closely how the interventions are proceeding. If there is a need for adjustments, please report to me and we will react accordingly. Ensuring grain supply and balanced prices is definitely among the key public policy issues along with food security.

There is also another issue that I wanted to discuss. I have signed a rather important resolution on discounted rent for individuals and organisations renting cultural monuments (this had been discussed for a long time) owned by the federal government.

The discounted rates will be granted to those who have invested their own resources in the preservation of these monuments. Unfortunately, we have a great many monuments in poor condition, and very often the state acts like a dog in the manger by not permitting anyone to use the monument and, at the same time, not investing in it due to lack of money, time or some other reason.

I believe this will create an effective and modern mechanism. Hopefully, it will help attract additional investment to maintain the monuments and will teach our citizens, including those with the means, to care for our country's history and cultural heritage sites.

Of course, it is crucially important to ensure that restoration is carried out in accordance with existing rules. But at the same time, additional investment in culture would be very helpful. Let's see how this works. Thank you.

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