27 october 2008

Prime Minister Vladimir Putin chaired a Cabinet meeting

Vladimir Putin

Cabinet meeting

"We support a consistent removal of the barriers to foreign trade. We support honest and transparent rules of play in the world economy and finance. Russia will consistently promote integration processes. The priority here, of course, will be the formation of the customs union of Russia, Belarus and Kazakhstan, and the strengthening of EurAsEC."

Transcript of the beginning of the meeting: 

Vladimir Putin: Good afternoon, let us start with some current affairs. Mr Kudrin, how did the work on the budget go at the State Duma?

Alexei Kudrin: The State Duma, last week, and the Federation Council, this morning, voted for a package of documents that may go a long way in stabilising the financial situation. Among them is the Law On Additional Measures to Support the Banking Sector. The law would grant the Deposit Insurance Agency additional powers to support banks.

Also today, the draft law on changing the status of the Central Bank went through final readings at the Federation Council. It gives the bank broader powers to buy corporate securities.

In addition, the Law On Amending the 2008 Budget that was finally approved today includes measures to increase the capital of Vneshekonombank and the Housing Mortgage Credit Agency, and to earmark 200 billion roubles as contribution to the Deposit Insurance Agency. The Government has also been authorized to use an extra 175 billion roubles in additional revenue before the end of the year to support the financial and economic sectors. It is an important authority of the Government to make decisions if necessary to support selected sectors, and one which was supported almost unanimously. We hope that the laws will be signed and take effect this week.

Together with the Central Bank, we are preparing a whole package of regulatory documents that we will submit this week or approve within our scope of authority - and here, I mean the Finance Ministry and the Central Bank - so that these laws kick in.

Vladimir Putin: We have discussed all these problems before. We said that, if necessary, additional money could be transferred to the Deposit Insurance Agency.

Alexei Kudrin: Yes. I think that for now these measures are sufficient. But the Deposit Insurance Agency has extensive powers that enable it to provide timely assistance to banks and insure deposits. Thus, I am sure that the banking system will remain stable.

Vladimir Putin: How much money has the Central Bank put toward unsecured auctions?

Alexei Kudrin: Mr Ignatyev (Head of the Central Bank) has the latest data. He is here and he can report to you.

Vladimir Putin: Mr Ignatyev, how much money has been put up for auction?

Sergei Ignatyev: Counting today's auction, about 600 billion roubles over 3 months. There were three auctions: the first for 380 billion, the second for about 30 billion and the third, held today, for about 200 billion roubles.

Vladimir Putin: Is work proceeding at an even pace? Is the banking system absorbing the money? Are there any problems?

Sergei Ignatyev: The situation is not simple. I can't report any dramatic improvement. However, I think the situation is fairly stable.

Vladimir Putin: In any case liquidity is being injected.

Sergei Ignatyev: Yes.

Vladimir Putin: Thank you.

We spoke with Transport Minister Levitin about the situation in the air passenger carriage market several times. I am aware that Mr Ivanov has chaired a meeting on the issue. What was the outcome?

Sergei Ivanov: Yes, I chaired a meeting on Saturday to find ways to quickly normalise the situation in the air passenger carriage market. You know the situation well, and in order to rectify it, swift and effective actions by all the government agencies concerned are needed.

Hence I invited to the meeting representatives from the Finance Ministry, the Ministry of Economic Development, the Ministry of Transport, Rosaeronavigatsiya (Federal Aero-Navigation Service), and three other agencies - the Federal Antimonopoly Service, the Federal Tariff Service and the Federal Customs Service; also present were state corporations, notably Rostekhnologii, the United Aircraft Building Corporation, and the heads of all the leading Russian aviation companies and insurers. The conference resulted in several decisions, which I am now ready to announce.

First, it has been decided to draft a piece of legislation giving the Transport Ministry the power to set requirements for financial stability and status of various aviation companies, and to be provided with information on the forms of accounting and reporting for these aviation enterprises, so that the Transport Ministry may monitor the financial status of aviation companies. At present the Transport Ministry does not have such authority.

Second, the Finance Ministry and the Central Bank have been instructed to work out proposals on crediting aviation companies to enable them to buy fuel on credit and liquidate cash gaps that may appear in the current situation. We are talking about 30 billion roubles in credits before the end of the year. The Finance Ministry has confirmed that it is ready to extend such credits to aviation companies before the end of the year.

Third, within two weeks, proposals are to be made on granting Russian air companies a deferment of up to six months for paying customs duties, duties for aircraft, simulators, and foreign-made engines imported into the Russian Federation.

The Government has also been told to submit a draft resolution to grant tariff benefits, through exemption from payment of import duties on planes that carry less than 50 passengers or more than 300 passengers. This proposal is a follow-up to our meeting in Ulyanovsk, and would enable the Russian Federation to import planes that the Russian aviation industry does not yet build, without the payment of customs duties. It will enable us to renew our aircraft fleet and allow companies to run regional aviation services.

Vladimir Putin: No objections from the United Aircraft Building Company?

Sergei Ivanov: No objections, approval has been given.

Aside from this, it was decided that planes carrying between 50 and 300 passengers, along with the engines for them, will be imported duty-free by air companies if they sign a contract with the United Aircraft Building Corporation for the purchase of a similar plane once domestic production begins. Thereafter, the foreign plane is to be taken out of Russian territory. This was agreed in Ulyanovsk, and now that provision has been fixed.

Fifth, the proposals of the Transport Ministry aimed at minimising the growth of charges and tariffs for airport and air navigation services, at least before May 1, 2009, have been supported in order to prevent tariffs from rising and putting an extra burden on air companies in the current situation.

Sixth, we have of course discussed fresh supplies of aviation fuel. We accepted the proposal of the Energy Ministry whereby the producers of aviation fuel will have direct and non-discriminatory access to the services of fueling complexes, sign long-term contracts (for a term of up to a year) for the supply of aviation fuel, and in regards to the services of the fueling complexes we are planning to introduce, for the first time, tariff regulation for these services: the Federal Tariff Service will set the rates for fuel storage at the fueling complex and delivery of fuel to the plane.

The state is now planning to regulate the services of fueling complexes regardless of the form of ownership - irrespective of whether it is public or private.

In addition, we decided to consider increasing the size of compensation out of the federal budget of the cost of leasing Russian-made planes that are received by our domestic lease companies.

Finally, the eighth major measure discussed was the introduction of air passenger risk insurance if air companies fail to transport passengers. In other words, we want to introduce insurance arrangements in such cases.

As you know, at present the air companies KrasAir and Dalavia are in a difficult situation and not all flight personnel are assured of keeping their jobs. In response to this, Deputy Transport Minister Boris Korol, Deputy Director-General of the Rostekhnologii Corporation, Igor Zavyalov, and the future head of the company Russian Airlines, Vitaly Lantsev, will today fly to Krasnoyarsk and Khabarovsk, where Dalavia is located, in order to meet with the flight and ground personnel to answer their questions and clarify their future. People must know what is in store for them.

Vladimir Putin: That's right, because in spite of all the mergers, takeovers and economic problems of the companies, and restructuring of the sector as a whole, people must be the focus of our attention. They must know what will happen.

Mr Sechin, speaking of air fuel, you discussed these matters with your Chinese colleagues ahead of the visit of the Chinese Prime Minister tomorrow. What was the discussion about?

Igor Sechin: As part of the preparation for your meeting with the Prime Minister of the State Council of the PRC, Mr Wen Jiabao, scheduled for tomorrow, we had a second round of energy dialogues between Russia and China. The Chinese side was represented by the Deputy Prime Minister. A wide range of bilateral cooperation issues, which are part of the energy dialogue, were discussed, including the implementation of joint projects in nuclear energy, the gas programme, electricity, and the oil sector. Experts from both countries are continuing work on the documents, which will be signed during your negotiations tomorrow.

Vladimir Putin: All right. Will you complete them today?

Igor Sechin: By all means.

Vladimir Putin: Mr Fursenko was in Astana in the run-up to the SCO meeting.

Andrei Fursenko: A meeting of the SCO Education Ministers has been held. Among the issues discussed was the creation of an SCO University, which would pool the intellectual potentials of the leading national universities in the SCO countries.

We have signed a protocol and approved the concept of the creation and functioning of the SCO University. A plan of activities to implement it has been approved, and a working group has been created to draft the documents.

The Chinese Education Minister stressed the importance of the Russian initiative to establish the university and said that a great deal has already been accomplished. And indeed, we have made considerable progress in spite of the problems.

Another point I would like to mention is the meeting of the CIS Education Ministers, which took place in Astana on that same day. Particular attention was paid to the quality of education, notably the professional training of personnel for industry, especially at the primary and secondary vocational education level.

We have agreed that the next meeting of Education Ministers will be devoted entirely to that topic.

Vladimir Putin: All right.

Ms Nabiullina, as you are aware, I was recently in Siberia - in Krasnoyarsk and Novosibirsk - talking to people there. There were many questions raised concerning small and medium-sized enterprises. Your Ministry had formulated proposals on how the government would proceed in that sphere given present-day conditions. Have you any results to report?

Elvira Nabiullina: We have prepared proposals to strengthen government support for small and medium-sized businesses.

We have two major programmes at the federal level. The first programme is being implemented by our Ministry and it is financed out of the federal budget. It is co-financed by the regions and it is aimed at creating regional and municipal business incubators, technology and industrial parks, and regional venture funds, as well as buffer funds to help small businesses get loans when they have nothing to pledge and nothing to offer as collateral.

This year, 3.8 billion roubles have been allocated for these activities, although we have received requests for a lot more, almost 6 billion. Next year 4 billion will be allocated. We suggest that this programme be enlarged and reoriented to provide grants to start-up enterprises, that is, individual entrepreneurs, so that these grants can be made available to many people who want to start their own business.

The second programme is under the auspices of the Russian Development Bank. It cost 9 billion roubles this year, money that the Development Bank used to finance small enterprises through 64 banks. In our opinion, that programme should also be enlarged, and we should see to it that rates do not grow along the way and be affordable to small businesses.

Finally, the third measure is a law we passed this year to create target funds in the regions that would enable small businesses to rent floor-space, since access to space is very important for them. We are monitoring this situation and are considering the possibility of adding some federal property that is currently not in use to the property of the regions, in order to support small businesses.

Vladimir Putin: When will all this get off the ground?

Elvira Nabiullina: We will confirm the financial numbers with the Finance Ministry shortly, and are already discussing them so as to introduce part of these measures this year; the bulk of the measures are scheduled for 2009.

Vladimir Putin: I understand that you propose to increase support for small business in multiples, as far as the financial aspect is concerned.

Elvira Nabiullina: Yes, the increase will be by several times.

Vladimir Putin: Mr Kudrin is nodding his head in agreement. That's good. I urge you to finalise this issue as quickly as possible.

Mr Kozak, tell us about the use of housing stock to move residents out of dilapidated housing. We have agreed to allocate an extra 50 billion roubles this year.

How is that work proceeding?

Dmitry Kozak: Based on your instructions issued at the last Government meeting, we have taken up this issue together with the Ministry of Regional Development, with Igor Shuvalov and Alexander Zhukov. On Thursday we made a decision on how to incorporate, in principle, this idea into the current law. We cannot implement the idea of advance subsidies without passing a relevant law. We have been able, together with the State Duma deputies, to prepare a draft of a federal law on amendments to the Law on the Housing and Utilities Fund, which enables the Russian regions, immediately after the law is passed, to get 50 billion roubles in extra subsidies that will speed up the movement of residents out of dilapidated and dangerous residential stock.

The law somewhat streamlines the procedure of providing such housing. We have expanded the opportunities for moving people out of such housing. Under current regulations, the money allocated can only be used to move residents out of unsafe housing that has been declared unfit for residence as of January 1, 2007; we extended that period by a year and 10 months, to November 1, 2008, so that now, residents can be moved out of all the houses that have been declared unfit before that date.

The regions will be able to draw on that subsidy soon. We have simplified the procedure somewhat, notably with the number of homeowners' partnerships. Previously they were supposed to present the number of such partnerships by the beginning of 2009, now they have to submit only the obligations to meet that requirement and the terms of the law by the end of 2009.

Thus, by mid-November, if we pass this law quickly, the regions will be able to make use of it. At the same time, the Ministry of Regions is currently gathering information that will help determine the geographic housing needs for servicemen entitled to federal benefits and residents who must be moved out of dangerous housing, versus the geographic supply of readily available houses on the market. This research will solve many of the social problems that are currently persisting due to the lack of housing availability, as well as bolster the housing market.

In connection with this, I have a request to make. We must agree today so that the draft law can be finalised tomorrow. Since Duma deputies took part in drafting the law, it should be introduced in the form of amendments - a similar law is being considered at the Duma by the deputies so that it could be promptly adopted and implemented.

Vladimir Putin: Let's see. We agreed that all the proposals would be properly formalised within a week, and the week is nearly over. What have you arrived at?

Dmitry Kozak: At present everything is practically ready. Some approvals need to be obtained so as to rule out any differences in the future.

Vladimir Putin: Yes. Do not overlook the mechanisms of buying finished housing from the market. As I have said many times, we will buy at current prices and not at yesterday's prices. This is more than honest with regard to the building sector. We will buy more housing at current prices, or the prices of tomorrow or the day after tomorrow, which means we will enable more people living in dilapidated housing to move to new housing.

Dmitry Kozak: In regards to housing and utilities funds, we should also consider the draft law and the draft Government resolution concerning the purchase of housing with federal money for forced migrants and citizens to whom the federal budget has obligations.

Vladimir Putin: We have many commitments. Let us not be in a hurry. Let us see what can realistically be done and what will yield the greatest social effect. You are welcome with your proposals.

Mr Levitin, you are completing stretches of the ring road around St Petersburg and the expressway diameter.

Igor Levitin: Yes. The total length of the ring road around St Petersburg is 116 km. 80 kilometers of an eight-lane highway between Priozyorskoye and Tallinn Highways will be commissioned within days. Originally we planned four lanes, but in 2005 we updated the forecasts of the number of cars in St Petersburg, and it will now be an eight-lane highway. We will complete the remaining 40 km in 2010, that is, we will reach the village of Bronka, where the dam is; money in the federal budget has already been reserved. Thus, the entire ring around St Petersburg will be finished by 2010.

The first, southern stretch of the Western high-speed diameter was completed simultaneously. This is the first toll road that will lead directly from the ring road to the third and fourth cargo areas in the port. The vehicles that at present spread out all over the city will now directly reach the ring road, the Moscow highway and other highways. In the process, all the demands of residents in the houses along these roads were taken into account: they have been given new houses, service lines have been moved, that is, all their needs have been taken care of. That stretch of the road will be inaugurated this week.

Vladimir Putin: All right. I would also like to draw your attention to the price parameters. When was budget money allocated? It was allocated when there was a certain level of prices for metal, cement and other building materials. Today they are much lower, so you should be able to build more with the same amount of money. I would also like you to provide an analysis of what is happening in this sphere.

For instance, they have built a two-lane road in Krasnoyarsk. Luckily, they made provisions for possible widening of the road, but one should really design roads from the beginning in such a way as not to have to revisit the same issue half a dozen times.

Ms Golikova, do you have data on the changes in the main parameters of living standards in Russia recently?

Tatyana Golikova: The past nine months have seen positive changes in the main indicators that characterise living standards. The real incomes during this period increased by 7.8% from the same period last year, real wages are up 12.8% and average pensions are up 18.6%.

In terms of nominal indicators, in September 2008 the per capita income was 16,250 roubles, the average wage was 17,847 roubles and the average pension, 4,541 roubles. Wage arrears stood at 3,017 million roubles as of October 1, 2008. That is 1% of the average monthly wage in the economy, and 0.1% of the arrears are in the budget dependent sectors. The number of people who have not been paid or have not been paid in full by their employers is 200,000.

Comparing these indicators with those of the same period last year, the number of workers who are owed money by their employers has dropped by 100,000 and the size of arrears has dropped by 1,038 million roubles, or by 25% compared with last year.

We continue to monitor the overall situation in the labour market and have made it mandatory for employers to notify employment agencies when they lay off staff, both on a routine basis and in the case of massive layoffs. We are ready to provide weekly reports on the measures being taken by employment agencies and the Ministry in response to the situation in the labour market.

Vladimir Putin: How do you assess the current situation?

Tatyana Golikova: The current situation is calm. It is premature to draw conclusions because I think that even if substantial changes occur, we will become aware of them only after 2-3 months. At present, Rostrud (Federal Service for Employment and Labour Relations) and the Ministry are planning a series of meetings with major employers and industry representatives in order to work out a series of measures to respond to the labour market situation.

Vladimir Putin: If we want the situation to remain as calm as it is today, we should solve some issues connected with the allocated cash flow more quickly. I am referring above all to the industries. We deal with these issues on a day-to-day basis. I suggest that after this meeting all those concerned stay on and discuss what specifically needs to be done to be able to trace the movement of the assets.

The first item on our agenda is to draft guidelines for the foreign economic policy of the Russian Federation up to 2020. The document should provide benchmarks for our work in the global and regional markets in the coming decade.
Active foreign trade policy is a key long-term factor of economic growth.

It is an effective instrument for diversifying and stabilising the domestic economy and making it innovative. We should avail ourselves of the windows of opportunity that are opening up and protect ourselves against potential and current risks.

During the last 8 years, Russian foreign trade increased by 120% to $579 billion. Even so, its structure is unsatisfactory. Russia is still excessively dependent on the export of hydrocarbons and other raw materials, and hence on the fluctuations of world prices.
In our domestic market, foreign producers are often one jump ahead of domestic producers, and imports are thus displacing Russian goods. Russian goods and services are still poorly represented in such fast-growing regions as Latin America and the Asia-Pacific region.

Unfortunately, we are constantly faced with dishonest trade practices, artificial barriers to the export of Russian goods and the import of high technologies into our country. Restrictions that were introduced in another era for another country and for different reasons are formally still in force; by that, I mean the political anachronism called the Jackson-Vanik amendment.

However, even the COCOM lists, which officially no longer exist, are in fact still valid in many areas.

At the same time, a great deal has been done in recent years to strengthen Russia's position in the world market, to give our foreign trade a modern, civilised look. I am referring to the rapid development of foreign trade infrastructure, increased capacity of Russian seaports, the inauguration of new routes for transporting Russian hydrocarbons - the Baltic Pipeline System, the Blue Stream. A number of similar major projects are in progress, notably the pipeline towards the Pacific, the North European gas pipeline, and the Southern Stream which is being considered with an eye to the future.

Let me add that today we will discuss ratification of the agreement between Russia, Kazakhstan and Turkmenistan on the building of the Caspian pipeline. Again, all of this is connected with commodities, though it should be noted that government institutions to promote general exports are also being formed.

One must note the increased effectiveness of the tariff policy and the improved technology for handling cargoes at customs. The aim of all these measures is to tap all the competitive advantages that Russia has, including its being a key player in the global energy market, and at the same time to fill the new and promising niches in the international division of labour, to promote Russian manufactured goods in the world markets and to create new hi-tech production facilities inside the country.

Russia has already implemented hundreds of investment projects in the automobile and food industries, in the production of building materials and other spheres. Export of Russian machines has more than doubled since 2000. We should consolidate these trends and turn the system of government support of exports into a development instrument that is convenient and accessible to domestic producers, above all, in the sectors where we see significant export potential.

It is not by chance that we have been creating aviation and ship-building corporations. Russia has always been strong in the sphere of space services, in the nuclear power complex and in information technologies.

Russia can become a major exporter of agricultural produce and make a substantial contribution to global food security. We know that the grain crop this year is 100 million tons, an excellent result that increases our export potential.

We should also continue detailed adjustment of customs tariffs, so as to increase the processing of raw materials on Russian territory and stimulate the export of high added value products. On the other hand, customs tariffs must not be a hindrance to the modernisation of our industry. We are introducing corresponding regulations quite successfully. I am referring to the data that we have, objective data, including data on investments in basic assets. This is done above all due for the retooling of our industry.

In the context of the financial crisis the world is experiencing, there is a great temptation to try to find a quick fix. There is talk about closing national economies, aggressive protectionist measures, and restricting the movement of capital. Of course, we must be mindful of the current situation, and we are taking it into account in our practical policy, but strategically speaking, isolationism is not an option.

The option is further integration of Russia into the world economy. The world economy is of course changing before our eyes and will be different, but the future still lies in the pooling of efforts, not only in overcoming the crisis but also in ensuring progress.

We support a consistent removal of the barriers to foreign trade. We support honest and transparent rules of play in the world economy and finance.

Russia will consistently promote integration processes. The priority here, of course, will be the formation of the customs union of Russia, Belarus and Kazakhstan, and the strengthening of EurAsEC.

We are still interested in and will work towards joining the World Trade Organisation. We are well aware of the processes that are underway there, but still we believe that we will stay in the negotiating process, with membership as our ultimate goal. We will conduct negotiations patiently, presenting our arguments and upholding our interests.

We are ready for a dialogue with the European Union on the new strategic partnership agreement. As you know, economic interaction has always loomed large in this treaty.

In other words, we intend to develop mutually beneficial economic ties with our traditional trading partners: with the CIS countries, Europe, the People's Republic of China, India and the United States.

All these issues are addressed in the draft document we are going to discuss today.
Let us get down to business.

I give the floor to Ms Nabiullina.

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