13 october 2008

Prime Minister Vladimir Putin chaired a meeting of the Russian Government Presidium

Vladimir Putin

Meeting of Russian Government Presidium

"Liquidity is there but it often fails to reach the consumers. This is a problem for all financial systems. I would like to draw your attention to the fact that although we make decisions and allocate the required funds, they often fail to reach the end users. In this sense, Russia does not differ much from other countries. The only difference perhaps is that we have a real potential."

Vladimir Putin: Good afternoon, Mr Zubkov, let's start with your trip to Astrakhan. Could you please tell us about the progress there, the current condition of the city, and briefly about the economic conference of the Caspian nations, which was held there.

Viktor Zubkov: Thank you, Mr Putin. Per your directive, I headed the Russian delegation at the International Governmental Conference of the Caspian nations. Azerbaijan, Iran, Kazakhstan and Turkmenistan were represented by deputy prime ministers and first deputy prime ministers. We discussed cooperation in the economy, finances, transport, environmental protection, and fishery as part of the preparations for the third summit of the Caspian nations.

The results of the conference are as follows. We agreed to continue discussing the establishment of the organisation on Caspian economic cooperation. We also agreed to accelerate the preparation of an intergovernmental agreement on the preservation and rational use of the Caspian Sea's biological resources. We organised multi-lateral working groups to discuss joint projects in power generation and other areas.

To increase the pace of work on the international North-South transport corridor, we decided to establish a special non-commercial, that is, non-profit partnership. In addition, we supported the proposals of a number of countries to allocate the financial resources of the five Caspian nations to develop investment projects in the region. In this context, we discussed organising a special international financial institution. As a side note, I met with Iranian Vice President Ali Saeedlou at his request to discuss bilateral cooperation.

In general, the results of the conference were satisfactory. It was a stepping stone to the third Caspian summit in Baku. With the Minister of Economic Development, and with the active participation of the leaders and delegations of the five countries, we attended the celebrations of Astrakhan's 450th anniversary. All countries participated with enthusiasm sending their performers, Iran for the first time.

Vladimir Putin: Did the performance include singing and dancing?

Viktor Zubkov: It did. The city has changed beyond recognition. Residents can hardly recognise it. The organising committee did a very good job, as well as the city's residents, the Mayor and the Governor. The city has been cleaned and organised. City and regional authorities want to continue working in this direction, and turn Astrakhan into an efficient, beautiful city within two to three years. The time is ripe for this. Thank you.

Vladimir Putin: I would like to draw the attention of the Minister of Economic Development and the Minister of Regional Development to the following question. When we last visited Astrakhan we discussed the problems of both the region and the city, and agreed that the city's development should continue. I mean more than just completing construction of the music theatre, the high medical technologies centre, sports and other facilities. In any event, you know what I'm talking about. Funds have been set aside in the budget for this purpose. I would ask you to vigorously pursue this because, as we discussed last time, it is clear that if projects or programmes remain unfinished, public funds will be simply wasted, and we will have to return to these problems later and at a higher cost. Therefore, despite certain difficulties, we still have opportunities. All plans must be carried out.

Viktor Zubkov: The city's residents and leaders would like to present to you this certificate awarding you the title of the Honoured Citizen of the City of Astrakhan and a relevant.

Vladimir Putin: Many thanks. Thank you and thank the city's residents for their trust. However, don't forget, it is important for us to complete these programmes. This is the main objective.

Let us continue discussing the international economic problems. Finance Minister and Deputy Prime Minister Alexei Kudrin attended the G8 financial summit and the summit of the world's top 20 economies. How did it go? What did you discuss and what was agreed upon?

Alexei Kudrin: Mr Putin, at the G8 financial summit, we discussed many key issues of the world economy and financial markets. Washington also hosted the meeting of the financial G20, and the boards of the International Monetary Fund (IMF) and the World Bank.

I met with the US, British, and Brazilian finance ministers, and the Chairman of the Federal Reserve System. We discussed the stabilisation of the financial markets, and exchanged experience. A number of countries made effective decisions. It also transpired that Russia took the required measures and left some countries behind in this respect. During these two days, we discussed G8 proposals, which were then approved and even expanded upon in other summit documents.

First, the governments of all countries are urged to mobilise all possible resources and create more tools to support their banking and crediting systems of the real economic sector.

Much attention was devoted to the second point, the need to overcome the crisis of confidence in financial industries, which have impeded interbank lending, and investment in the United States and other industrialised countries. The capital is there, but it is not invested because of perceived risk in finance and the economy in general. Therefore, each country should have a respective package of measures to loosen credit lines and markets and to boost liquidity.

We have already done this while providing guarantees for interbank lending and for the stock exchange. We have also boosted liquidity by allowing unsecured credit.

The third measure is linked to bank capital. The decline in market indexes has devalued bank assets and market shares, and created a large gap between assets and liabilities. This gap can only be bridged with increased capital. In this extraordinary situation, states should increase their share in bank capital. This is the conclusion that was reached. It is unusual, but no other investor is powerful enough to resolve the problem. This week, a number of countries will announce decisions to substantially increase their capital shares in banks by injecting them with what appears to be taxpayer money. Russia accomplished this by increasing subordinated loans, which are tantamount to second tier capital.

Vladimir Putin: Are you talking about 950 billion roubles? You have decided to allocate Sberbank 500 billion roubles, haven't you?

Alexei Kudrin: To Sberbank, Vneshtorgbank, and to Rosselkhozbank. We will support private banks by co-funding them through their shareholders. We have made this decision, but I do not rule out the possibility that we may have to return to this problem.

Fourth, it is necessary to guarantee deposits. All countries are making this move. In Russia, we have decided to cover deposits of up to 700,000 roubles.

Vladimir Putin: You have increased guarantees to cover deposits of up to 700,000 roubles.

Alexei Kudrin: Yes, we have increased guarantees to cover deposits of up to 700,000 roubles.

And the fifth measure is to re-launch the exchanges, including securities, and mortgages. Mortgage banks are no longer able to attract additional lines of credit for their programmes. This market is also slowing now.

This five-point plan was discussed at all levels, and enjoyed support. In some cases, it was even expanded.

The G8 and the G20 also discussed the IMF's decisive role in supporting the countries which do not have enough gold and currency reserves for resolving their problems. This does not apply to Russia because we have enough reserves, but there are developing markets, countries of Central and Eastern Europe, and CIS states which may not have the resources to cope with the arising difficulties.

The IMF has big potential, and we discussed simplified and fast procedures for making these decisions. I also discussed other issues with the ministers, and I will report on them separately.

Vladimir Putin: Good. Mr Kudrin, you said that the liquidity is there but it often fails to reach consumers. This is a problem for all financial systems. I would like to draw your attention to the fact that although we make decisions and allocate the required funds, they often fail to reach the end users. In this sense, Russia does not differ much from other countries. The only difference perhaps is that we have real potential. We have it; it is not somewhere in the air, we do have it.

However, builders and those who work in machine-engineering and agriculture are telling me that their companies are beginning to run short of capital although they all hope that our decisions will be implemented shortly. I would like to emphasise to you and your colleagues that these decisions must be implemented without delay. It is necessary to accelerate the implementation of the adopted decisions. Last week, the State Duma passed relevant legislation without which it would be impossible to implement some decisions. This week, the State Duma will meet again to consider further amendments to the budget. I would like to ask you to cooperate with Duma deputies, but not to delay the adoption of these amendments under any pretext because without them it will be difficult to carry out our plans in full.

Now let us get to construction, leasing, machine production, and the military-industrial complex... I met with Duma deputies last week, and they expressed their apprehensions. We know that the military-industrial complex and its enterprises receive financing under special procedures, and quite often methods of attracting investment in exchanges are difficult for them. Many of them receive government orders. Decisions should be made and measures taken on time.

Let us go further. Ms Golikova, could you please tell us about the fund to support children, which is now operating?

Tatyana Golikova: Mr Putin, after the decree in March and related correlation procedures, the fund's board of trustees will hold its first session on October 16. It is expected to approve a plan, including programmes which it will support in 2009 and for a period thereafter.

After this is done, 5.2 billion roubles, which has been allocated from the budget for this purpose, will be transferred to the fund for the implementation of its programmes in late 2008 and 2009. We have not yet earmarked money for the fund in the 2009 budget. This will depend on the effectiveness of the programmes in late 2008 and 2009.

The fund will work to promote family well-being, a children's orphanage, to support families with disabled children, and to promote children's social recovery. It will also support the regional programmes engaged in these efforts.

I believe that we will be able to report on the first results of the fund's performance by the end of 2008.

Vladimir Putin: Good. Mr Ivanov, on December 3-5 Moscow will host the International Forum on Nanotechnologies. What can you tell us about the preparations for it?

Sergei Ivanov: This week we will meet with the organising committee on the preparations for and presentation of the first International Forum of Nanotechnologies. Let me repeat that it will take place in Moscow on December 3-5. It will include various plenary and panel meetings, reports, roundtables, and seminars. But we are planning to emphasise the practical application of nano-products and nanotechnologies in different industries, many businesses and simply in everyday life. Leading experts from European countries including Austria, Britain, and Finland, and also from the United States and some Asian countries, including South Korea, Japan, and China, have already confirmed their intention to participate.

We would like to make this an annual forum to be held in Moscow. The organising committee's first session will take place this week, and we will start systematic preparation for the forum.

Vladimir Putin: Good. Mr Gordeyev, we visited the agricultural exhibition on Saturday. I would like to thank you and all organisers for such a practical and attractive event. Please, say a few words on the completion of harvesting and the results.

Alexei Gordeyev: Mr Putin, today we can submit the final report on the harvest. As you said, it was a good season. I can say with confidence that we will net more than 100 million metric tons of grain. This figure is comparable with the harvests of 1992 and 1991, when we still had a planned economy and more extensive cultivated land. This year, we have received the biggest per hectare yield in Russian history. Grain is the dominant crop, and 65 million metric tons of grain has been threshed. This is also a record in Russia's entire history. We will have more than enough grain for food and for fodder. It is important to keep enough grain for consumption and replenishment of reserves, while at the same time developing exports. Mr Zubkov has already instructed us, and we report to him on a regular basis.

The main contribution was made by the Southern, Central, and the Volga federal districts. They have substantially increased their respective harvests over previous years.

We have harvested a high yield of sugar beet, sunflower seeds, vegetables, and potatoes. There is a tangible increase in the harvest of all of these. In general, the first nine months of agricultural growth was up more than 5% over last year. These are high rates for agriculture, in fact, the highest in the last seven years.

Now we have concentrated on sowing winter crops. It is very important to be well-organised here. We are already preparing for spring sowing, buying fertiliser and lubricants in advance. We have certain problems, and the Finance Minister and I have been instructed to resolve them. I will meet with Mr Kudrin tomorrow or the day after tomorrow, and will discuss this situation in detail.

Thank you for the words of gratitude. I think Russian farmers have done a good job, and deserve them.

Vladimir Putin: Yes. We should first thank our rural citizens, those who work on land. They deserve gratitude and recognition. Therefore, I would like to direct Mr Zubkov and the Finance and Economic Development Ministers to focus on agricultural machine production. It is necessary to create conditions to enable this industry to maintain its development rates, and probably, to step them up. It is important to focus on programmes that develop cattle breeding and dairy, and to find ways of maintaining grain production rates. We have every means for success. We have ambitious goals - in writing - and funding is guaranteed. It is necessary to provide this funding in a timely manner.

There is one more question which people in rural areas keep raising. I refer to compensation for fuel and lubricants. I would like the Agriculture Ministry to note that this year the Finance Ministry has allocated an additional 21 billion roubles. The Agriculture Ministry has determined its priorities, and, regrettably, this compensation is not on the list. But this is your decision. This does not mean that there will be no compensation. As you reported, we will have to analyse the scale of using these products and the prices on them this year. We will decide on compensation at the end of this year, or the beginning of the next. But it must be done.

Let us proceed to the meeting's agenda.

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