Transcript:

Dmitry Medvedev: I’d like to say a few words to start the conversation. I have endorsed the road map on state cadastral record-keeping and registration of real estate rights. I hope this will make it possible to speed up document issues and enhance the reliability of the database of the Uniform State Registry. This is consonant with the energy issue that we have just discussed at the meeting attended by Mr Dvorkovich and Mr Khloponin. We have discussed more than once what should be done to facilitate the access of private companies to electric grids and eliminate excessive administrative barriers in them. A relevant roadmap was endorsed under this entrepreneurial initiative. 

In October we expanded the range of customers that can pay by installment over three years for connection to grids. Moreover, connection costs are now uniform and are provided for all regions.

Recommended practices of the Federal Tariff Service on determining the technological connection costs will become valid tomorrow. I hope it will be possible to make this connection in a shorter time span and for a reasonable amount of money. The main point is that this money must be paid properly, not like it is done in the North Caucasus Federal District. It took us an hour and a half to establish the mess they have with payments in this district. I’d like to emphasise once again that it is necessary to get to the bottom of this problem there and deal with all debts. Mr Dvorkovich, will you work on this issue?

Arkady Dvorkovich: The new rules, which take effect tomorrow, introduce a significant reduction in the number of services that have to be paid for by new customers. In particular, they won’t have to pay for the organisation of automated accounting or the installation of meters or other devices necessary for electricity supplies. The billing process will thus become absolutely transparent, since all billed services will be easily verifiable and raise no doubts with regard to their legitimacy. In addition, the connection charges will not include the revenue tax, which from now on will be included in regular electricity usage bills rather than in an upfront fee for new customers.

Finally, standard rates will be introduced in all regions (you mentioned this earlier), thus precluding arbitrary rates for individual customers. In other words, this will be a transparent, clear and user-friendly system, which will cut grid connection charges by 20% to 30% depending on the region.

Dmitry Medvedev: That’s a significant figure.

Let’s hear an update on the Olympic construction. Mr Kozak, you’ve been in Sochi for several days. Please tell us how things are there. There’s something I’d like all of you to keep in mind, though: during major international events, including sports events, prices for real estate, tourist services, and hotel accommodation tend to soar, and in this case the International Olympic Committee requires the host country to regulate them. I have signed a government resolution that sets hotel ceiling rates in Sochi during the Olympic Games. Obviously, this is a temporary measure only during the Olympic Games. This is exactly a case of the state taking control of prices even though it’s at odds with everything that we know about market-based pricing mechanisms. Everybody understands this, though. Please see to it that the resolution is properly implemented. How are things in Sochi in general?

Dmitry Kozak: I reported to the President on the construction of the Olympic infrastructure and other issues on Friday. We are significantly behind schedule on 20 Olympic sites. However, there’s no risk of us failing to hold any scheduled event either before or during the Olympic Games. So far, we have held three international contests, including a World Cup ski jump event and a Grand Prix ISU (International Skating Union) figure skating competition at the newly built sport facilities. In late 2012-early 2013, we will open all the Olympic sport facilities, which will be used in full Olympic test mode in February and March. Each competition that is included on the Olympic and Paralympic programmes will be held in February and March at every sport facility. We are not concerned about any construction project not being finished by that time.

The Olympic preparations are in their final stages now. As I mentioned, the construction of sport facilities and infrastructure will be finished in time. Hotel construction will be finished next year. They will open for business sometime between June and October 2013. During this time, we will also conduct about 2,000 activities related to the testing of functions of the Organising Committee, federal executive agencies, regional authorities in the Krasnodar Territory and Sochi to ensure that we are on top of our organisational commitments for the Olympics.

The Government resolution on the regulation of hotel prices was signed on  December 6. This resolution stems from our application commitments: these rates were included in our bid book, and such price controls are set forth in the Law on the Olympic Games. This resolution cuts 30%-40% off high season rates. Normally, we do slash prices many times over during peak demand periods, such as economic forums and the like. I can give you...

Dmitry Medvedev: Mr Kozak, please don’t underestimate the street smarts of our people. Tour operators and hotels can still come up with many ways to add additional charges which will have nothing to do with room rates but which will be a required fee that they’ll use to compensate for their losses. Please keep this in mind.

Dmitry Kozak: The resolution takes care of all these angles. The Government-approved hotel service provision rules will be amended so as to exclude excessive charges, such as a minimum three-day stay and so on.

Dmitry Medvedev: That’s exactly my point.

Dmitry Kozak: Or 157,000 roubles per night at Rodina Hotel, for example.

Dmitry Medvedev: How much?

Dmitry Kozak: 157,000 roubles.

Dmitry Medvedev: Is that a going rate?

Dmitry Kozak: That was the amount charged during the recent forum. Rodina charged 157,000 per night, Rus 30,000, Zhemchuzhina, a three-star hotel, charged 17,300 roubles per night. We’ve taken care of this. The top rate for the best room at Rodina will now be 13,500 roubles per night without any minimum stay requirements. This price should include breakfast. There will be no mandatory additional charges for any services.

Dmitry Medvedev: Please keep an eye on it because I'm pretty sure that sooner or later they’ll start charging for some additional services. If we don’t take into account the prices at five-star hotels the prices for two- and three- star hotels look reasonable, almost in sync with what you’d expect to be charged at similar European resorts.

Dmitry Kozak: The top rate for a room at a two-star hotel is 2,900 roubles. A single room at a three-star hotel will cost 4,000 roubles or less. We will create a more competitive hotel service market as we get closer to the Olympic Games. Sochi, with its 21,000 hotel rooms, runs extremely short of hotel rooms during the high season. Besides that, the quality is questionable. We will double the number of hotel rooms in Sochi before the Olympics, and the competition will increase. I believe that with these regulations in place after the Olympics, there will be even more competition, and hotel guests will get better rooms and better services for their money. All of the Sochi hotels with their 17,000 guest rooms comply with international standards (two, three stars, etc). They are now official hotels with official star ratings.

Dmitry Medvedev: Competition is certainly a good thing, but keep tabs on prices as well. Now that the regulations are in place, they will try to find ways to get around them.

Dmitry Kozak: They will expire after the Olympics though…

Dmitry Medvedev: I know. It’s only natural.

Dmitry Kozak: Then, the market will take over, and I believe things will work out okay.

Dmitry Medvedev: That’s exactly when they will start making up for all their losses. All right, please look after it. Thank you.

<...>