15 february 2013

Dmitry Medvedev attends plenary session of the 10th Krasnoyarsk Economic Forum, Russia: Roadmap of Change



Dmitry Medvedev: Good afternoon once again, everyone. Hello. I hope that the Muscovites are awake. I recall speaking here almost five years ago. I consider this to be a special platform. The forum started a bit earlier, and many guests from Moscow were sitting with their eyes half-closed. This time, the forum’s organisers have opted for a more humane approach. This is why I hope that we will be able to discuss our current life and plans for the future.

I did indeed make a certain policy statement here five years ago. I formulated my vision for the country’s development over the next few years, and I submitted the concept of the so-called Four I’s: institutions, infrastructure, innovation and investment. Intellect, the fifth “I,” was subsequently added to these four. I believe that, on the whole, none of these five “I’s” have lost their relevance since then. Today, we can talk about our achievements and failures. But, most importantly, we should talk about how we will move forward.

Two weeks ago, I approved the Policy Priorities of the Government of the Russian Federation  to 2018. The relevant work will be and is already being carried out in a new format, in the format of the so-called state programmes. We have mapped out specific targets and the resources needed to achieve these targets. This includes programmes for the development of industry and agriculture, modernisation of education and healthcare, environmental protection and security, as well as many other programmes. I don’t want to waste time on repeating various conclusions and factors, which currently dominate the global economy, bringing instability and uncertainty. They are obvious to the Government and to the business community, whose representatives are present here, and to experts. You know all this perfectly well.

But it is clear that it is no longer possible to revert to the so-called pre-crisis growth model in this country and probably in many other countries. We have to search for a new model. We have to be honest and admit that there is now in Russian society a sustained and justified demand for a different quality of life in the broad sense of the word, for a new quality of education, healthcare and the entire social sector. The Government cannot ignore this. And it is impossible to address these issues using ordinary budget investment alone. I mentioned this not so long ago at the Gaidar Forum in Moscow, then at the World Economic Forum in Davos and subsequently at an expanded Government meeting. I will not repeat myself, but I will only say that such a challenge could not emerge in an underdeveloped and poor state. This is very important. This challenge could not have come about in Russian society say 15 years ago because we were too weak at that time. This demand highlights more impressive standards of living and the country’s sustained movement forwards. To respond to this challenge, we must ensure sustained development, and the annual economic growth has to be at least 5%. This is an extremely difficult task. We are being criticised for this ambitious task all the time, but my colleagues and I are confident that it is feasible. Moreover, we won’t be able to accomplish everything, as agreed, unless we accomplish this task. Of course, we should make our entire economy more cost-effective, we should improve the quality of public administration, and we should take advantage of civil society, which is a substantial resource.

And now I would like to say a few words about specific objectives. Unfortunately, our primary objective is a permanent one. I am talking about vigorous efforts to improve the investment climate. It is common knowledge that the investment climate is determined by various factors. The attitude of the business community is the main criterion for assessing the national business climate. I believe that this is absolutely clear. Investors’ perceptions of the state’s consistent and predictable policy, the effectiveness of the judicial system, the effectiveness of oversight and monitoring agencies and the effectiveness of companies, on which the development of nationwide business operations, including infrastructure companies, depends – all this also influences the behaviour of the business community and the adoption of investment decisions.

It is hardly surprising that they started discussing the National Business Initiative here in Krasnoyarsk a year ago. In effect, the business community formulated the Government’s agenda. This includes road maps on connecting to power and energy grids, construction permits, customs issues, export incentives, expanded competition and property registration. All these road maps are currently being implemented. We stipulate various parameters, making it possible to assess specific achievements, while accomplishing our objectives. In effect, we have created an administrative and managerial mechanism. Yes, of course, this mechanism is not ideal, but it is based on real public demand. On the whole, this mechanism really works.

Not everything is proceeding smoothly. We need to find consensus between various forces, while approving specific road maps, because the perceptions of federal agencies and the business community often differ for obvious reasons. The relevant departments and the Government are supposed to merge these approaches. Second, there are some misgivings about the implementation of the road maps, including their deadlines and the essence of ongoing changes.

The so-called second wave of road maps is approaching. These upcoming road maps will deal with company registration procedures, the access of small and medium-sized businesses to the purchases of companies with state capital, improvements in the quality of the regulatory environment and efforts to improve tax registration. I repeat, all these road maps will soon be approved. It is very important that responsibility for the end results should not be eroded between various agencies. Enforcement practices, rather than departmental reports, should change. We have to monitor the situation all the time. We need to see what has been done and how. Specific deadlines should also be assessed. At any rate, we will ensure permanent monitoring. I would also like to stress that we will monitor the situation by polling business people because this is the main indicator of what we are doing. All promises have to be kept.

And here is another ambitious idea. Russia should join the top 20 economies with the most favourable business environment by 2018. No one has abandoned this goal. We need to advance in every sphere and to improve parameters in various aspects of business climate. And this is achievable, because, as you know, we have made substantial headway in some areas. We have moved 40-50 points up in essentially one year. So these tasks are feasible. And it’s also very important to present ourselves correctly because the foreign perception of Russia is often based on false assumptions and misperceptions of the economy and the political system as similar to the Soviet ones. This is clear. 

Second, we have to create an innovative economy in order to be able to compete globally. We should also change our approach towards education in various fields. Virtually all sectors now face a problem with human resources. Companies have to invest in retraining professionals, and many graduates are unable to find jobs in their fields. We should learn the best practices of the best companies, while not forgetting about our own traditions. Nevertheless, we should introduce new forms of education, new forms making it possible to train engineers, managers and all those who will create a competitive environment, and who will compete on Russian and foreign markets. Employers and professional communities should take part in formulating education-quality standards.

We discussed this yesterday when I chaired a joint meeting of the boards of trustees of the Siberian Federal University and the Southern Federal University. These are our first two federal universities, which were established just over five years ago. It is important that the business community remain involved in the education sphere. As I see it, virtually every business person understands this today. I believe that the leaders of our IT market devote some attention to this sphere. This is true. They cooperate with schools, they establish basic departments and faculties, not only in Moscow and St Petersburg, but also in other cities. This is particularly important. These examples should become normal practice for IT companies and for the entire business community. I expect that various interesting proposals will come out of the discussions and experience sharing at the forum. Colleagues from the Strategic Initiatives Agency will take them into consideration when creating the road map to establish a national system of competences and qualifications.

Third, we should consistently build modern infrastructure, which is of critical importance for Russia. This becomes especially clear when you’re in Siberia. But, first, I would like to say a few words about the transport sector. We need to make our territories more interconnected, to ensure more affordable and accessible transport, to develop international transport corridors, to identify and eliminate bottlenecks and to make use of our potential for increasing the capacity of motorways and railways. The transport mobility of the population is to increase by 40% by 2018, and exports of transport services are to increase by 80%. Obviously, Russia is the largest country in terms of area and the longest from east to west. Consequently, the development of regional and local aviation is of paramount importance. I recently chaired several meetings on this issue. Several decisions have been taken at the government level, and a pilot project is being implemented in the Volga Federal District. We will continue working to expand the route network and to reduce the cost of flights, including by creating conditions for low-cost airlines. This is very important, considering the unique size of our country, as I said before.

As for energy infrastructure, Siberia has huge potential in this respect, even though this may sound trite. But it's true. The Vankor oil and gas deposit in the Krasnoyarsk Territory, which is the resource base for the East Siberia – Pacific Ocean oil pipeline, is reaching its design capacity. Large gas projects are being developed at the Kovykta fields in the Irkutsk Region and the Chayanda fields in Yakutia. This should give a fresh impetus to getting more users connected to the gas supply system and the development of the refining industry. Arctic shelf projects should play a strategic role in the production of hydrocarbons. Tax incentives, which are to be approved on a long-term basis this year, are crucial for these projects. We will do it.

Although hydroelectric power generation plays a dominant role in Siberia, there is considerable potential for developing it further. The capacity of potential future hydroelectric power stations in Siberia is larger than the capacity of existing stations. The first stage of the Boguchanskaya power station, one of the largest in Russia, was launched last year. This year the station should reach its full design capacity. We must also develop interregional ties, including the cross-flow of electricity between Siberia and the Urals and, in future, between Siberia and the Russian Far East. This will enable us to improve the efficiency of the Unified National Electric Grid, to be coordinated by the Russian Grids management company, which is being established for this purpose.

Infrastructure projects need big investment, really huge investment. We all know that budgetary allocations will not be enough in this case. Hence, we must use the potential of public-private partnerships and create conditions for attracting long-term loans. In particular, this will enable us to double road building in the next 10 years.

We are completing the drafting of amendments to the legislation which will specify the implementation of infrastructure projects with private investment. Private investors’ costs will subsequently be compensated from budgetary resources accumulated through additional tax revenues from the implementation of these projects. This mechanism is called Tax Increment Financing (TIF, infrastructure financing through increased local tax revenues). We could also use the country’s Investment Fund for this purpose.

 A draft of the federal law on the fundamental principles of public-private partnerships in Russian regions and municipal entities was submitted to the Government. It will cover the legal and organisational conditions for attracting private investment into the regions’ economies.

We have taken a decision of principle to expand the potential of development institutions and also to use pension funds for investment, provided there are reliable safeguards, because we cannot allow pension funds to be squandered. One of the obligatory criteria is recovering the cost of such projects. The pay-back period for infrastructure projects can be 15 or 20 years, or even longer. However, we can now offer a regulatory scheme for an optimal distribution of risks between the state, the investor, the developer and the operator of a given infrastructure project.

Fourth. We have to create a sustainable and long-term demand for inventions and high technology on the domestic market. Just over a year ago, in December 2011, we approved the Strategy for Innovative Development in Russia until 2020. Through joints efforts of the Government and the business and education communities, by 2020, the share of businesses producing innovative technology should increase to 25%, and in some sectors – to up to 40%.

The main elements of the system to promote new developments, from conception to manufacturing, are already in place. It is based on development institutions and legislation, which has to provide a comfortable environment for innovative businesses. This involves deregulation and the elimination of bureaucratic restrictions in taxation and risk insurance. But there is still a long way to go in this direction, and I would like to stress this point specifically.

What else is important? Sixty major companies with government capital have drafted innovative development programmes. In 2011, 2012 and 2013, the Government is planning to spend about three trillion roubles to fund these programmes, which is a very significant amount for our country. These companies account for about a third of Russia's industrial production and over 20% of its GDP. These are very serious numbers. Hopefully, all these plans will be realised. Most importantly, we need to ensure that these funds are not wasted and are used as intended.

To get the best return on this investment, 32 technology platforms have been created through public-private partnerships. We need to concentrate resources on breakthrough projects in such areas as information and communication technology, space technology, nuclear and radiation technology, biotechnology, and, of course, energy, electronics and mechanical engineering.

For example, as part of the Deep Hydrocarbon Processing technology platform, we have launched industrial-scale processing of bitumen as an alternative source for oil, and preparations are under way to build the first gas conversion plant for remote deposits.

The Rosatom State Corporation is to implement large-scale modernisation of the sector and develop a technological leadership strategy for the energy and non-energy markets. The state corporation has been tasked to join the ranks of the world's twenty most innovative companies.

As I mentioned earlier, we have created a network of development institutions to help commercialise scientific research. I am above all referring to Vnesheconombank, Rusnano, the Russian Venture Company, the Fund to Promote Small Business Development in Science and Technology Areas, and a number of new institutions.

A separate area is support to university-based science and young scientists. This also includes creating small innovative companies at universities. Yesterday, I was told that there are about 40 small businesses associated with the Siberian Federal University, but this is still not a very large number and there could be many more such companies. We need to work in this direction.

Our universities and laboratories have to be more open and ready to invite scholars and instructors from all over the world. They should feel comfortable doing this, and should not be afraid of competition, as often happens with our universities, and they need to use international evaluation criteria. I believe that open research structures in the field of critically important technology that will be able to host visiting scholars have to be created at all major universities in the country.

Again, there is nothing to be ashamed of. Self-reliance is not our development strategy, we need to adopt all the best practices that exist in the world and be an open country, including in terms of cooperation between universities.

By 2018, the financing of public scientific funds should total 25 billion roubles. In fact, when a few years ago, we spoke of the need to create innovation centres in the country, including such projects as Skolkovo, many people were skeptical about the idea and thought that it would not succeed.

However, today the Skolkovo project includes about 800 participants from 44 Russian regions, and 49 venture capital funds, both Russian and foreign. The success of the project is to a large degree explained by the significant interest on the part of large companies

As of today, there are 24 corporations, including 16 international companies, willing to invest close to 30 billion roubles in creating research and development centres at the Skolkovo innovation centre. In cooperation with the Massachusetts Institute of Technology (MIT) an institute of science and technology has been established. But I would also like to emphasise that Skolkovo, though important, is still only one of many points of growth. I’d like to emphasise that it is extremely important to spread innovative activities to the regions. It should not be limited to Moscow, St Petersburg or other traditional centres. We have Tomsk, Kazan and the Krasnoyarsk Territory, where we are now, which is one of the founders of Russia’s Association of Innovative Regions (AIR).

I think that the AIR is a good thing, a good initiative. It is very important to analyse foreign experience and adopt it in regional practices. Let me repeat that we believe that only the mass introduction of innovative technology will allow us to achieve the necessary growth rates, improve the social sphere and modernise the structure of industries that require human capital.

Fifth, the state should be open (everyone seems to be aware of this) and convenient, understandable to people. I’m referring to the need to improve government administration. Without this we will not be able to move forward (I hope all those present agree). We must take a number of concrete steps in the near future. What are these steps? First, we should provide more information about the performance of all government bodies. We should implement our national plan to introduce the mechanism of open government administration. Ongoing civil oversight of state purchases and investment is a must. In this context I’m very grateful to the Expert Council for its vigorous efforts. I’m sure such expert bodies exist in all regions and we must make the most of their proposals.

It is important to analyse not only draft laws and state programmes but also law-enforcement practices. We should rely on the opinion of people from different social strata, professional communities and regions.

Needless to say, the Open Government is not a cure-all for all problems. Sometimes it is ascribed non-existent functions. Yet it is steadily gaining momentum. To ensure its further development, we must realise a simple thing – this government can only be open if it includes everyone – not just one person or one department but the entire corporation of government employees. It is not enough for the state to launch initiatives – it is necessary to stay in touch and cooperate with civil society organisations and NGOs. As was rightly noted a short while ago, having ensured the transparency of the Open Government, we must make it understandable. People should understand what decisions we are taking and why. Only in this case will our decisions be effectively carried out.

Colleagues, what I have mentioned here is far from a complete list of what we must do. The so-called youth platform started working at the forum yesterday. This is a good feature of our Krasnoyarsk forum. I’d like to hear what proposals our young leaders have made. Maybe their vision is different from ours. We are ready to make changes in our approach. I found it interesting to learn that the participants in the forum are discussing the global management challenge and the championship for strategic and business management. Models are used to creating a representation of the market with competing teams. The depth of managerial decisions is assessed by a computer and you cannot come to terms with it on anything.

I was told that last year’s national championship was attended by 20,000 people from tens of regions. This initiative enjoys the backing of VEB and ASI. The winner – a team representing a group of Samotlor companies – went to the world championship and defeated very strong teams from dozens of countries. It’s a real pleasure.

Here’s another example. There is the Imagine Cup – a prestigious international student competition on technology startups – which is supported by Microsoft. Our teams consistently show good results there. The next Imagine Cup will take place in St Petersburg in July. It is in these guys, their intellect and hence in our own future that we must invest. This is why we are establishing our innovative centres – to fight for potential future leaders.

As we know, a small company or a large corporation or even a whole country is weak not for lack of money but for lack of talented people. Voltaire spoke about this in his time. Yes, we competed and will compete with the entire world if we want to be modern and effective. We have been competing for commodity markets and capital. But primarily we must compete for human assets. We want the best specialists to live and work in this country. Thank you.

Alexei Sitnikov (Vice President on Institutional and Resource Development of the Skolkovo Institute of Science and Technology and the moderator of the plenary meeting): Mr Medvedev, ladies and gentlemen. You have already answered part of my question but as a moderator I’d still like to ask. The Government’s long-term priorities require huge financial and human resources. You have emphasised the importance of competing for human capital. That said, do you think we will mobilise the required resources for this long-term plan? The recent financial crisis has shown that we are capable of short-term mobilisation of the state, the Government and society. Pursuing these priorities requires long-term, continuous mobilisation of resources. Do you think we will get hold of them?

Dmitry Medvedev: I remember well the crisis that started in this country almost immediately after I was elected President. It was easier to work during the crisis. We all united around one clear goal – to withstand it. Everyone had a bad feeling. All those present – our business people, regional governors and experts – remember how it was. That said, we overcame the crisis with the fewest losses. This is true no matter how we might be criticised – both the leaders and their decisions. Strange as it may seem, now we are facing an even bigger challenge. All of us understand that global economic growth is very weak. Some countries are in recession and our economy is growing. But we are not growing at a fast pace, and we must bring it to at least 5%.

Where can we draw the strength required for mobilisation? I think we should use our own strengths. Either we understand that this is our national idea and we must push the country toward success and prosperity and develop modern communications or we will trudge along and try to survive as many other economies do. So the main driver is in us. We will, of course, try to find the money and make more efficient plans. But I’d like to say the following – recently I’ve made many speeches and mentioned three venues. We have programme documents that were endorsed by the President and the Government. It is time we all get to work. We must work really hard. We have every opportunity for that and our economy is doing better than in many other countries. We must avail ourselves of this opportunity and try to resolve the problems that we have accumulated for years and even decades. So we are the main source of growth.

Alexei Sitnikov: Thank you. I think the idea about working hard is very clear and may be considered a direct instruction. Participants in the Sochi forum spoke about this. I’d like to mention yesterday because the forum began yesterday. Its participants actively discussed many issues, including the National Business Initiative. I’d like to ask Artyom Avetisyan from the Strategic Initiatives Agency (ASI) to tell us about yesterday’s work.

Artyom Avetisyan (Director of New Business at ASI): Thank you. Mr Medvedev, ladies and gentlemen. To begin with, I’d like to congratulate all of you – guests, organisers and participants in the forum – on the anniversary. For ASI and the Leaders’ Club this is a dual anniversary. It is not just the 10th anniversary of the Krasnoyarsk Economic Forum but one year since we came here on Valentine’s Day and held our first round tables. Following these discussions we established working groups under the road maps of the National Business Initiative. This has become a major project now. Six road maps have been signed and are being implemented. They consist of 400 items, each of which involves changes to federal laws or entirely new federal laws. It’s an enormous amount of work. When we came here, there were many sceptics. There are sceptics still, because this is a complicated project. We now have a new framework for relations between businesses and the Government, and we are grateful to the President and the Government for being supportive of the National Business Initiative. Businesses, the Leaders’ Club and other business associations are actively involved in this work. They are not just drafting road maps, but are also engaged in monitoring, because we can assess the initial results already today. Business associations are pooling their efforts in monitoring road maps: the Leaders’ Club signed an agreement with Delovaya Rossiya to this effect.

Most importantly, we should keep this work going. It’s not easy, and there are problems. Businesses cannot always find common ground with officials from the ministries and departments, although we understand each other better already. Discussions lead to better understanding between us, and we will continue this work.

In addition, we had several teleconferences yesterday with our colleagues from Singapore and Japan. We asked them what things in Russia’s investment climate hold investors back. They mentioned infrastructure and human capital among other things. We decided to go back to discussing the Davos Forum, which preceded the Krasnoyarsk Economic Forum and which, as many of you know, considered three scenarios, all of which were pessimistic. Mr Medvedev, you mentioned a fourth scenario, and the Leaders’ Club decided to discuss the fourth scenario yesterday.

As you may recall, the main variables underlying those scenarios included the price of oil in US dollars. Why in dollars? The introduction of a floating exchange rate is a major breakthrough of the last few years. This is a hallmark of a stable financial system. We realised that many problems exist only in our heads as we discussed the fourth scenario. When a businessman sees oil prices drop on a daily basis, he starts having doubts about investing in a particular project. Bankers, too, aren’t sure anymore about issuing loans. Often when we discuss things, we are proceeding from the assumption that we are still battling the crisis. This is understandable, because crisis is a stressful experience. In fact, we are dealing with a post-traumatic stress disorder. I believe, and so do other entrepreneurs, that it’s important not to programme ourselves to expect a pessimistic scenario, although there are economists who make a name for themselves by making pessimistic predictions. We suggest that the Krasnoyarsk Economic Forum become a launching pad for changing our dependence on oil, especially in our own heads, and allowing changes to take place in our minds. Thank you.

Dmitry Medvedev: I believe it’s easier to get rid of our oil dependence in our heads than in real life. I wanted to briefly comment on what Mr Avetisyan said. It’s good that our forum traditionally begins on the Valentine’s Day, but most importantly, our economies should feel the results of our decisions and get stronger. As you are aware, a meteorite shower hit the Chelyabinsk Region, Tyumen and some other localities. I hope that the impact will not be significant, but it shows us that not only economies are vulnerable; our planet is too.


Alexei Sitnikov: I’d like to begin discussing the policy priorities of the Government and ask Professor Treisman (Daniel Treisman, Professor, Department of Political Science, University of California) a question. I have read almost all of your books. One, called Without a Map, is about Russia. Please note today’s forum is called “Russia: A Map of Changes”. In this regard, I’d like to ask you whether you believe that the Government programme is faced with major structural barriers? Or is this structure vs agency face-off more about decision-making and current activities? In other words, there are no deep-running structural problems, and this can be overcome?

Daniel Treisman (via interpreter): Thank you, Alexei. I'll try to answer your question. But first I would like to thank the organisers of the forum, you, Mr Prime Minister, and Governor Kuznetsov for inviting me here.

Russia has made groundbreaking progress in economic development over the past 13 years. However, the question is whether Russia can continue to grow and maintain annual growth of over 3% and catch up with the most developed global economies. One way to see this is to take a look at other countries, look at what’s happening in the countries that at some point in time reached the level of economic growth that we see in Russia today, and see what happened next.

When the purchasing power per capita reaches the level of $50,000, most countries experience economic slowdown, occasionally stagnation. And they fail to catch up with the leading countries. How do some countries manage to sail through this period? There are no clear and simple answers to that.

If you look at the map, you can see which countries are significantly richer and more developed than Russia. These countries can be divided into three main groups. First, the countries of Western Europe, North America and several Caribbean countries with relatively advanced levels of rule of law and democracy. Second, there are a bunch of countries with huge oil reserves, such as Qatar and Equatorial Guinea. Finally, there’s the third group that includes Singapore, Hong Kong, and in part, China.

So, does the past provide any guidelines for the future? Of course, Russia may well come up with a new path for itself. But if the past is in any way indicative of the future, there are three main paths that Russia could take. First, it should invest in a massive increase of oil and gas production. It should be massive, because the per capita income from oil and gas production in Russia over the past 10 years has been about $2,000, while in Kuwait it is $19,000. Therefore, in order to achieve a high level of income in Russia, the oil and gas output should be increased many times over. The second strategy is to follow the example of Singapore and fully integrate Russia with the global economy with high volumes of international trade and annual exports of 200%. Huge amounts of goods are flowing in and out of Singapore, while its population is less than half that of Moscow. The third way is to strengthen the rule of law and democratic institutions. Of course, in and of itself this will not promote growth. It will also require intellectual policies and investment in all the things that you, Mr Prime Minister, mentioned in your speech, such as capacity building, innovation, human capital, and so on. Few states reach Russia's current level of development without attaining an appropriate level of democracy and rule of law. Many economies grow fairly quickly without democratic institutions with high levels of corruption, such as China and Indonesia. What do they have in common? They began their growth from very low levels and were then faced with the same dilemmas that now exist in Russia.

My point is that this is not something new. Mr Prime Minister, you most eloquently advocate for modern institutions. You spoke about them today, including a professional and independent judiciary. Sadly, the legal nihilism that you spoke about five years ago in Krasnoyarsk is still alive. I definitely agree with what you said that there has never before been a time when it was more important to overcome the weakness of institutions, and I am glad to hear how much you are committed to achieving this. Thank you.

Alexei Sitnikov: Thank you, Daniel. It would be great to start a deep political discussion with you here and now, but it would probably be interesting only to you and me. However, I would like to take advantage of your speech to ask the Prime Minister a question.

You talked about institutions, and I believe everyone has heard experts, political scientists and economists talk about the importance of institutions for development. But the snag is that they are describing only static statuses of such institutions: bad today, good tomorrow. Or they compare different relationships which sometimes substitute simple correlations for a causal relationship. Here’s my question to Mr Medvedev: what are we trying to understand? Is that a process of changing institutions, a process of changing the status quo and the transition from one quality to another? If we want to implement the things that we're talking about, then we need precisely this process. And a practical question. What drivers of this process should be used in order for us to attain a new status quo and new institutions that would reflect the quality that we are striving to achieve?

Dmitry Medvedev: As for our understanding of the economic situation and the state of our institutions, there is a danger that we'll see the trees, but not the forest. We keep changing things only to realise that nothing has changed. We keep saying that our small business is dying. But it’s not dying; it’s growing. When you talk to small business owners, they say that things have even improved in some ways. We are creating the benchmark system that will attest to the quality of our institutions. As a matter of fact, this is why we have road maps and the Open Government. We just have to know how to use them properly.

I would like to expand on what Mr Treisman has just said about Russia and its possible paths of development. We in Russia have quite a popular point of view dating back to the early 1990s that Russia can grow its economy without democracy and without changing its political system. Everyone points their fingers at some of our neighbours saying: “They are doing great: they enjoy trust, good trading relations and access to loans. Their economy has grown big.” I’m not going to analyse the historical roots of economic development and their relationship with the development of political systems in other countries. I’m not an expert on this, so I’ll let other people do it. But as someone who lives in Russia and oversees growth processes in our country, I’m absolutely certain that we cannot have a prosperous economy without democracy. This is the way we are; therefore, saying that certain things should be moved to the forefront, as some political forces are trying to make us believe, is wrong. We have to not only improve the economic system, we also have to develop the political system. Otherwise we won’t be able to achieve the targets that you mentioned.


Alexei Sitnikov: I would now like to turn the floor over to Governor Lev Kuznetsov. One of our most important policy priorities is to improve the quality of life. For you as a governor, the quality of life is at the top of your list of priorities. What do you think about this? Perhaps, you have certain achievements in this area in the Krasnoyarsk Territory? Please share your thoughts with us.

Lev Kuznetsov: Thank you. I would like to take this opportunity and thank all those who stood at the origins of our forum, those who joined it later and those who are participating in it for the first time today. You probably watched a short video earlier today about things that had been discussed at the forum. It was a surprise for me that Mr Medvedev mentioned quality of life so early in his opening remarks. Not the industrialisation of Siberia, nor the development of the Krasnoyarsk Territory. Not the challenges that we are confronted with, but the quality of life. I believe that this is our main challenge: human capital and competition for it. We will only be able to win this competition if we change our attitude toward the term “quality of life.”

I don’t want to take time away from other speakers, because it is very important for me as the host that everyone has the chance to speak. Talented people will not come here, even if we have amazing higher education institutions. They will not link their life and fate to an interesting enterprise, if we do not improve the infrastructure and the quality of life in the broadest sense of the word. Not just education or health care, or utilities, no matter how important they are. This also includes safe environment, accessibility and comfortable living in our cities, communications and accessibility. Yesterday, a student proposed including the cost of IT services into the minimum consumer basket, because they are among the staple services now.

Dmitry Medvedev: Another student demanded that we do at least something.

Lev Kuznetsov: Yes. I will not expand on our practices too much. I just want to say that we need to understand that this is the most important area, including culture and sports. Occasionally, some say with scepticism that we have too many sporting events. Even here in Krasnoyarsk not everyone is supportive of the Student Games. However, we understand that such major events create what are perhaps the main drivers of investment. Many people who come here today for the first time realise what Siberia is all about and then decide whether investing in it is worth it. Therefore, I believe that quality is a very important issue.

The issue of quality has another very important angle. First, Mr Deripaska already said yesterday that businesses have finally realised that they have to participate in the efforts to shape the quality of life. We know that businesses used to avoid taking responsibility for the social sphere, such as kindergartens, education and everything else. Today, they are involved in the construction of kindergartens. People are investing in public-private partnerships to build hospitals, schools and transport infrastructure, keeping them free for prospective users. This is very good, and business is supposed to do these things.

The second issue is about quality of life. We cannot keep saying all the time that things should be getting better every day. We need to set standards. We have heard people in the healthcare industry tell stories about patients who used to wait 20 days for surgery, now they wait 10, and they want this time to be cut to overnight. We should avoid spreading these illusions and should instead provide clear and definite benchmarks – especially today, when with the presidential executive orders in place we can determine these standards and enforce compliance. It is imperative that we involve nonprofit social organisation in these services, because people who work there know better how to spend funds in the most effective way, and let the needy benefit from them in the first place. The same goes for investors. People in the Krasnoyarsk Territory are telling us that they don’t need just any kind of enterprise there. We need to grow, they say, but we need businesses that minimise the environmental impact and do not affect any other aspects of the quality of life. Businesses should also understand that they can no longer come in and say that they can build anything anywhere.

Finally, improving the quality of life may result in certain restrictions: things will get better, but certain things will get worse. The law on smoking restrictions is also about the quality of life, just like reserved lanes, because traffic congestions prevent us from keeping our schedules. Therefore, the issue of quality of life, with which Mr Medvedev began and ended his remarks, is important. I believe it’s a good sign that we are finishing our forums with these words. Without quality of life, we will lose the competition for investment in human capital and, more importantly, won’t find the people who will fulfil all the other tasks that are outlined in our policy priorities. Thank you.


Closing remarks by Prime Minister Dmitry Medvedev:

I am very pleased for this opportunity to talk about our life in such a friendly atmosphere. Even the venue here seems more engaging than in Davos. They have a classic layout there: the presidium on the one side, the participants on the other side. Here, we are sitting all together; I think there is something to it.

I faithfully jotted down some things that we need to do in order to put things right in our country. I have written down that we need to have everyone go to school and have proper medical care, have proper corruption levels and engage, as before, in deregulation, but do so without following a paternalistic model.

I’m not being sarcastic, I do share these views. I would like to support what our Finnish colleague said with regard to promoting start-ups, because they are the main driver of the innovation-based reforms in our country. I believe that the tour of the Russian regions that they initiated is a useful thing.

Of course, we all are working for the future. The future lies in our youth. Young people formulated three positions that were identified at the beginning of this meeting. Besides the fact that you need to tell the truth, which is, I believe, an obvious statement, especially for politicians, there are three positions that are critically important, as our young people believe, to make sources of public officials’ income transparent. This is indeed the case, and I believe that we have made several important steps forward in recent years. Almost all public servants and deputies, in fact, all socially important persons, should disclose their income. We have to adopt several more documents in order to establish control over income and, in some cases, spending. Secondly, our young managers believe that it’s important to make sure that theses and dissertations are written honestly by applicants, and for this they should take an oath. I believe that we can take appropriate oaths, at least to be honest to ourselves, and write and publish independently written works. Finally, and I marked it specifically, they are saying that training down is also very important. Did I understand it correctly?

I'm taking such training right now, and I feel absolutely at ease. This approach has merit, since you start seeing many processes from a different angle; therefore, I believe that we all can be trained in different areas of expertise. A map of changes is not an abstract concept. We are the ones who are creating it. Russia has been going through times of change for 20 years now. They say that life during times of change is difficult, but honestly, and I think that you will agree with me, it’s exciting. Until next time!

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