Transcript:

Dmitry Medvedev: Good afternoon, everyone. It’s going to be a long and eventful day today. The whole convention is still to come. I see that the plenary session is in its second hour now, so I will try to be as brief as the Prime Minister can afford to be. Thank you for the invitation to speak at your convention. I believe that without ongoing communication and regular productive discussions and, of course, debate, it’s impossible to build on the solid and constructive relations that have historically existed between the Russian Union of Industrialists and Entrepreneurs and the Government of the Russian Federation. The success of such contacts determines not only the development of specific companies, but also the development of the national economy.

You are all experienced and highly trained professionals, and you are aware of the economic situation, but I’ll still say a few words about the current situation, just to make sure you heard it from me.

Economic growth in Russia has slowed down, which, of course, none of us likes. In January 2013, GDP grew by only 1.6%, while during the same period in 2012, the growth was about 5%, 3.4% on average. The annual growth rate of investment in fixed capital remained low, and retail sales slumped due to a decline in domestic demand.

Obviously, one of the key reasons for this slow growth is the insufficient diversification of the economy (this is a classic reason) and the relatively low share of the manufacturing sector in gross domestic product. Even a small decline in industrial output like in late 2012-early 2013 can slow down the entire economy.

You are also well aware of the fact that much of the added value in our economy is created in the oil and gas sector. The share of energy in the structure of Russian exports stood at 70% in 2012, and the share of manufacturing is below 30% of the GDP. This is our reality, which we are trying, if not to fight, than to at least change.

The level of capital outflow is still high. Perhaps it would be wrong to define what’s happening as capital flight, although this term is commonly used. The capital outflow is composed of re-investment, investment in real estate by residents, and acquisition of foreign assets. In general, all countries are interested in developing the foreign investment activities of their companies. The question, of course, is where and how it is being done and what are their consequences.

The important part of the problem is not so much the outflow of capital but the loss of human resources. There are different reasons for this. In general, living conditions in Russia have become better, but our experts want even better conditions, and that’s why they are relocating abroad. Emigration is also linked with the business environment, which leaves much to be desired. Naturally, you discuss this issue, and we consult with the business community on this issue all the time. And, of course, this also has to do with professional self-realisation. This is why, for us, creating equally comfortable living conditions for Russian specialists, for top-tier executive and for specialists from all sectors in Russia is probably just as important today as our work on the economic track.

The goals are quite ambitious. Russia must join the leading economies in terms of high living standards, and it must also join the top 20 countries with the best business environment. We must create 25 million modern, efficient jobs and boost annual foreign direct investment to $70 billion.

The Government’s objectives, which have been approved, are aimed at creating a more effective state and making systemic improvements in the business environment, as well as modernisation of the economy and the social sphere.

It is very important that delegates of the current convention of the Russian Union of Industrialists and Entrepreneurs are discussing the prospects for Union activities to 2018, as part of Russian Business Week. Mr Alexander Shokhin (President of the National Employers Association – Russian Union of Industrialists and Entrepreneurs) has noted that you would like to bring this specific model in line with Government plans. I believe this is correct. We should coordinate our actions in this sphere.

Various important objectives are being discussed, including improving the institutional environment, eliminating administrative barriers, reducing state involvement in the free-market sector of the economy, providing additional energy efficiency and innovation incentives, as well as a number of other objectives, and, of course, developing private-public partnerships and self-regulating organisations, creating those new jobs I mentioned and establishing basic vocational training centres. It is good that we have charted all these plans, and it is very important that we continue this work together. I would like all members of the Russian Union of Industrialists and Entrepreneurs and all convention delegates to continue working with the Government. We are interested in this.

And now I would like to say a few words about some practical measures. As you remember, the National Business Initiative, which was created in December 2011, is expected to systematically improve the investment climate. The so-called roadmaps, which deal with various spheres of government regulation, are its tools. The roadmaps should stipulate concrete results, such as reducing the number of procedures performed by state agencies and their cost, or reducing the amount of paperwork involved.

The national initiative has one specific feature: All measures are being drafted not with the participation of the business community, as we often say, but by businesspeople themselves. It is the businesspeople who determine how effective the roadmaps are, and whether it has become easier to do business as a result. By the way, all my contacts – and I have chaired numerous meetings on roadmap-related issues – have revealed that most of the people who deal with these issues are satisfied with the current developments. Nevertheless, strange things come to the surface, and we have to make changes to these roadmaps. I would therefore like to tell you all that the National Business Initiative roadmaps are not dogma, as they used to say in the past. They can be adjusted, especially when you get the feeling that something does not work properly, and that something has been done incorrectly.

Second, I would like to say that, of course, a lot depends on the work done in Russia’s regions. We have created a system for gauging the effectiveness of executives at different levels, including directors of federal agencies and governors. We will also assess the situation here, and it is the business community, which should take part in this work.

The regions themselves should consider attracting investors their main priority. Colleagues form our agencies and representatives of the Russian Union of Industrialists and Entrepreneurs have developed the national investment standard, which has been introduced in 13 regions. Work to introduce this standard in 22 more regions was launched this year. This standard will subsequently spread nationwide. We are monitoring the situation. I would also like to ask all of you to take part in these projects.

Third, recently, on March 12, the Government drafted the federal law On the Basic Principles of Public-Private Partnership in the Russian Federation and submitted it to the State Duma. The document stipulates an entire range of new approaches at federal and regional levels for using the mechanisms of public-private partnership. Bylaws will be drafted in the next three months.

Fourth, I would like to mention the tax regime. Although this may sound banal, this statement is rather important: The tax regime should be stable, understandable and predictable. This is a key element of implementing corporate investment plans, especially those involving capital-intensive, long-term and expensive projects, which are linked with cutting-edge technologies, infrastructure, as well as other highly expensive projects.

It is important to improve the national tax regime given the current turbulence on global capital markets, and it should create investment opportunities. First of all, this concerns projects to develop the Russian Far East and the Trans-Baikal Territory. I’ve just chaired a Government meeting whose participants examined the relevant state programme. I would like to inform you about what I’ve told my Government colleagues. Currently, we are reviewing a draft law that stipulates zero profit tax for major investors, the so-called green fields, in the first five years by decision of regional authorities. These tax rates should total 10%, rather than the standard 20%, in the next five years.

At the same time, I have instructed Government members that the relevant tax incentives for the Russian Far East and the Trans-Baikal Territory should be effective, and that these incentives should not be invented just so you can report to the President or the Prime Minister that a package of tax incentives for the development of the Russian Far East has been drafted. It is totally unclear what results this would produce. Consequently, I would like us to re-examine this draft law, possibly in cooperation with the Russian Union of Industrialists and Entrepreneurs. We should determine how effective it is and compile a list of ineffective proposals that are currently in place.

Alexander Shokhin (President of the National Employers Association – Russian Union of Industrialists and Entrepreneurs): Mr Medvedev, aren’t you afraid that we will request that Far Eastern borders and those of the Trans-Baikal Territory be expanded?

Dmitry Medvedev: I fear nothing. Government members and I have just discussed the Cyprus issue, which is currently the most popular issue, and I have said that it is time to re-examine the issue of establishing Russian offshore zones. This implies special jurisdictions, which would probably involve special tax rates. Quite possibly, money would flow back to Russia. Currently, there are some bad jurisdictions, including Cyprus. But there are also good jurisdictions, including the British Virgin Islands or the Bahamas, etc. On the whole, every respectable country has its own jurisdiction. We will talk about this.

We are drafting a proposal that includes tax benefits for extraction industries in the Russian Far East. On the whole, I would like to repeat that we don’t plan to increase the tax burden on the business community. Our objective remains the same: We must make the Russian economy more competitive, and we must create conditions for sustained economic growth.

Fifth, I would like to say a few words about reducing excessive state involvement in the economy. This is also a rather difficult issue. We have privatised over 2,500 share parcels of federal-owned shareholding companies in the past six years. Some Russian economic sectors – including metallurgy, light industry, food industry and trade – either lack state companies, or the share of these companies is negligible. Nevertheless, the number of state-owned commercial companies remains considerable. As of early 2013, the state owned about 1,800 federal state unitary enterprises, and it also had a stake in about 2,300 shareholding companies. This is still quite a lot. That’s why we will continue to work in this direction. We have completed transactions with share parcels of such major companies as SG Trans, Apatit, the Murmansk Merchant Seaport and the Vanino Merchant Port. Currently, we are privatising the share parcels of Sovkomflot, the Arkhangelsk Trawler Fleet, Siberia Airlines (S7 Airlines) and many other companies. At the same time, of course, the state is supposed to ensure cost-effective and prompt sales of these assets. But, of course, we should not sell these assets at just any price. I would also like my colleagues to understand my point here. These sales should also be justified from ideological and budget standpoints. We would like to reduce the level of state involvement.

Sixth, I would like to note that an innovative economy is linked with the creation of highly productive and so-called efficient jobs. The successful creation of an innovative economy is linked with the development of human capital. Indeed, these issues should be resolved through public-private partnerships. It is important that the business community should become actively involved in developing professional standards. Consequently, the business community should closely link personnel-training programmes with labour-market demand. We are counting on this very much. We will – in this case, I’m referring to the state – support projects that will allow us to train specialists who are in demand. This can be done in high-tech clusters, companies uniting enterprises of the given branch, and educational and research centres. It is also possible to establish chairs at production companies and other enterprises. The major point is to create the conditions for practice-oriented training. The most important idea that you always talk about is that employers should train the personnel they need. This includes expenses for private companies, but some rules allow them to receive partial reimbursement. We should think about extending these rules because such investments benefit both the state and business at the end of the day.

I’d like to say a few words about the RSPP’s work with the Government’s Expert Council. The dialogue is going well and is productive. Sometimes it produces very good results. We discussed Russia’s WTO entry and I think that we managed to achieve the right balance in the end. We are discussing how to protect domestic companies in the real sector in conditions of an open economy. We are analysing the Federal Anti-Monopoly Service's reports on competition in Russia, discussing the formation of a mega-regulator on the financial market and improving the ecological rationing system.

I think that the obvious recent achievements are amendments to the legislation on industrial safety and the draft submitted to the State Duma. This was a good job and it was done quickly. All business representatives who took part in the event acknowledged this fact. I hope that the adoption of this draft will make our industry much more competitive in world markets.

There are concrete plans for this year. We will work together to improve the Government purchases system and monitoring and control procedures. We will continue our work on the National Business Initiative's roadmaps that I mentioned earlier. It is important for us not to limit our efforts to just the federal level, and rather to use the intellectual potential and the expert base of RSPP regional affiliates.

Today is a major European day. I spoke at the Russia-EU conference and in the evening we’ll start direct talks with the European Commission which arrived together with its President Jose Manuel Borroso.

We discussed topics that have a direct bearing on our conversation. Of course, we’ll discuss all urgent problems today, including Cyprus. In any event, we should expand mutual trade, improve the business climate and launch new projects. I’m referring not only to the EU, but also to the Asia-Pacific Region. At any rate, we will continue our discussion with the EU. We will talk about visas, roadmaps and the common space on which we cooperate with the EU. I hope that we’ll achieve progress in this area this year.

That said, the situation is not simple. You know well everything yourselves. I’m referring to the situation in Europe, too. My colleagues took the floor and Mr Borroso finally made an enthusiastic speech in defence of the euro and the European economy. He urged us not to forego our presence in Europe. Apparently, he wants us to preserve our currency reserves in euros, among other things.

To sum up, we must keep abreast of all developments. We – I’m referring to the Government – will always orient ourselves towards the position of the Russian Union of Industrialists and Entrepreneurs. Thus, we will continue meeting with you and I wish you success and I hope that you will adopt the right decisions at your convention. Thank you for your attention.

Anatoly Karachinsky (president of IBS Group, chairman of the Russian Union of Industrialists and Entrepreneurs committee on vocational training and vocational qualifications): <…> A big problem for the development of entrepreneurship is the lack of qualified people, not the people themselves, but their qualifications. It is the main restriction in our current efforts, second in the medium term and third when implementing investment projects. Seven years ago, we launched a process, a long and difficult one, to create a whole new technology to establish professional standards. Now the process has reached a certain government level. With Ms Golodets’ arrival, we have been able to adopt the necessary law, to introduce the idea of “professional standards” in legislative parlance in general, and for the first time to pass the required legislation. We hope to do the same with the expert commission that will handle these matters. Our Labour Code now includes the notion “professional standards,” and we hope that a Ministry of Labour executive order to regulate the work of the expert commission on professional standards will appear in the near future.

In the union a matrix has been created to formulate professional standards which are primarily being developed by professional associations. Nearly 50 such associations are already working to create these standards, and some are already available. We are working closely with the Ministry of Education in this respect. Three or four years ago we developed a system by which the Ministry of Education could turn the professional standards created by business into educational standards. Over the past two years (we have the statistics) these educational standards have appeared at the universities. We have seen how over the past three or four years the quality of education has changed, and how the goal we set seven years ago is being reached by the universities and colleges – they are now basically teaching what is needed by business. The idea of a professional standard and an education standard is to build a mechanism whereby business can specify qualifications, competences and the knowledge of people being trained by our educational system.

Mr Medvedev, thank you very much for raising this issue – how the state can stimulate the business-education relationship. We would like to – we have drafted such proposals – to exempt from taxes all property and monetary contributions made by employers to professional education and training, including the costs of creating these professional standards, and perhaps, also confer customs privileges on equipment, education programmes and everything needed for training that are purchased abroad. We are today working in a world where very quick technological revolutions, business revolutions and so on are taking place. We are living in a world which is now more mobile and more often than not needs to upgrade the education of its staff because the market changes very rapidly and very significantly everywhere. In this sense, the process – the continuing education of personnel – is acquiring increasing importance in terms of competition. You mentioned that issue earlier, thank you for having the Government follow this trend closely. 

The second thing we and the union are now concerned with is launching an evaluation process for labour resources in this country. Generally speaking, the education system that is functioning in this country today reflects the economic geography of the Soviet Union because the system was set up when the Soviet Union existed. It is only recently, in the last four to five years, that it has become apparent that we need to reform it since the economic geography has changed so much. The changes are everywhere – in the places where business is done, in the economic notions of the Soviet Union, in the economic model itself. To overhaul our education system purposefully, we have a very important job to do first which we have not yet started doing. Education is a long-term business, and looking less than 15 to 25 years ahead makes no sense. So instead of building macroeconomic models about our future we must begin building regional economic models because only a regional economic model can demonstrate changes in the regions’ labour requirements and show which specialties are required and which not. We have started such a programme together with the Ministry of Education and now have covered almost 60% of the country. We feel that more authoritative organisations should be involved in the effort, such as the Ministry of Economic Development, not only the Ministry of Education and the Russian Union of Industrialists and Entrepreneurs. It seems to me this is a priority because in order to envision and model a certain pattern it is necessary to make some evaluations. Today this process is absolutely absent in this country. But the first model is already 60% complete (this is very approximate). In one region, for example, the number of education graduates has doubled in the past 12 years. But according to our estimates, the region needs three times more energy specialists and has eight times more teachers than it needs. Still, teachers are being trained. Such misbalances leap to the eye. 

One more thing I would like to mention is that we are facing growing demographic challenges. Let me give you some figures. Fifty percent fewer children started school in 2006 than, for example, in 1991. The number of secondary school leavers began falling in 2004 and by 2012 had declined by 54%. This demographic low will last until 2018 because birth rates were falling until 1999. We touched the bottom in 1999, with birth rates starting to edge up the following year. Fifteen years from now, the size of the working population (the labour force) will be down by 80%. It’s a massive challenge. That is why the quality of education is so important for us. We have to clearly understand what kind of demographic policy and migration policy we need to carry out. These are the things that should dominate situational modeling over the next 15 years. Sometimes it seems to me that we are oblivious to the impending workforce problems and the size of this country when we are adopting various decisions. In this sense, we welcome the Education Ministry’s initiative to sort out the establishments of higher learning. As we know, there are a huge number of universities, too many for a dwindling population. We know too that many of them are of low quality, which makes it difficult to hire people because often people graduate from university with few or no skills. What we call “monitoring of universities” is a very useful initiative. The Education Ministry has started this work, but like all new initiatives it is hard-going. This is a very sensitive area for regional governors because by its nature it is very sensitive for the population. Healthcare, education, etc. are very sensitive things socially. It is seen as sensitive by industrialists as well because we could clamp down on unique higher education establishments if we don't employ the right evaluation criteria.

As we see it, the following is of high importance. We have worked closely with the Education Ministry and arranged that firstly these criteria will be revised every year. We will sum up the results after each round of monitoring and we will be in a position to say what we don’t like. Secondly, any regional and industry-specific discussions on particular changes to universities will only be held with the participation of the RUIE’s industry-specific associations and our regional organisations. We will send our representatives to the Education Ministry’s working groups on a mandatory basis to make sure there is no trouble. And the most important thing that we’ve insisted on and managed to coordinate is the number of graduates who will take up jobs based on their degrees. How much they are paid on average is also important. This is definitely the best criterion by which to judge how efficient a university really is. If its graduates are in demand, it is efficient. If they are paid high salaries, it is indispensable. This work needs to be done. It is very difficult because the current nationwide information arrangement was designed 10 years ago and has never been revised. Today it is clear that you cannot judge a person on the basis of their university credentials. There is no information about a person’s progress, and that's a big problem. Basically, the RUIE has found a solution: most likely we will have a system up and running by next year for monitoring graduates’ progress and university efficiency. We are working on this.

Alexander Shokhin: Thank you, Mr Karachinsky. I think the Government will find our input helpful and important, especially as it has been developed in cooperation with the Education Ministry.

Dmitry Medvedev: Let me respond right away to what Mr Karachinsky said. Where vocational training and zero taxation for relevant expenditures are concerned, this needs to be analysed. I said as much in my address and I reiterate this once again. Ms Golodets, please see to this. The Ministry of Finance, too, should look into it. I think this idea should be encouraged. We’ll discuss specific criteria and approve a decision.

As for modifying the regional models in conformity with changes in this country, I accept this as well. Indeed, why should we live the way we did in the Soviet Union, which ceased to exist long ago?

Alexander Afanasyev (Co-chairman of the National Stock Exchange Association and the National Securities Market Association; Co-chairman of the RUIE Commission for Financial Markets, Member of the Board of RUIE): Colleagues, I would like to discuss the financial market at some length. Representing the stock exchange, we, as you know, don’t trade on our own. We provide the trading infrastructure for others, but we are highly dependent on the health of the financial market. This degree of dependence is so high that I would like to discuss its health right now.

As we know, this market is not quite in ideal shape. This is regrettable because this market is the most transparent source for price formation. The securities market encourages issuers to be transparent, transparent for their investors, transparent for the community – not exclusively for traders, as is often thought.

This recession is lasting a long time. The last time a recession has lasted so long was during the Great Depression in the 1930s. There is a little growth in the United States now, but not much elsewhere. The stock market has fallen around the world – most stock exchanges have lost between 20% and 40%. Fortunately, the Moscow stock exchange has not been affected, because we have a diversified business model; we don’t just participate on the stock market. Nevertheless, this is a big problem, partly related to the mood of Russian players. 

The market has changed. It has become more of a buyer’s market than a seller’s market, as it was in the seven years of plenty in the early 2000s when foreign investors were ready to explore taiga and tundra to find new fields of undetected business potential and interesting issuers. Now they are sitting comfortably in their headquarters in the major financial centres of the world and are waiting for people to come to them. Accordingly, some business goes there, including some of the trade in Russian stocks and Russian stock receipts which increased last year. This does not mean that we see it as an objective trend on the Russian financial market and nothing is being done as a result – we are doing a lot.

We have seen a great many interesting initiatives, and a considerable number of these have been implemented. First, we have significantly eased the conditions of issue – on January 1 a new law on issuance came into force. The Government adopted excellent laws on the central depositary, on clearing and so on. Therefore we do not need any more reforms to change the market. However we do need to amend a large number of by-laws and regulations, which, regrettably, are still in place today. For example, there is a rule which makes sense logically, but economically is pointless. According to this rule, pension funds are required to have breakeven results in their accounts at the end of every year. But first, breakeven results in accounts do not mean breakeven results in the economic aspect, given a certain rate of inflation; and most importantly, this practically prevents pension funds from playing on the securities market, especially on the share market, and makes them embrace extremely short-term products, which is not very logical, because they have extremely long-term money in liabilities.

I wouldn’t call changing this rule a reform and the majority are in favour of it, but for some reason not enough is being done in this area. Meanwhile, pension reforms and the collective investment in the stock market reflect the market’s success. They are the foundation of many successful markets which we are even a little envious of. Take the successful Brazilian market. The Warsaw exchange is also doing well. The collective investment of pension funds is one of the keys to success.

The second point I’d like to make is that players on the exchange market often express apprehension or even complain about the erratic and unjustified taxation of the stock market and its two main rivals in Russia – the bank deposit market where the interest rate is practically exempt from taxes, and the real estate market where many invest and can get a tax rebate from the sale of real estate in three years. None of these terms apply to the stock market.

Incidentally, these rules have had a positive impact on these markets. The bank deposit market has seen an incredible level of growth – up by another 20% last year. Moreover, people’s savings have increased by 9%-10% generally. In other words, people keep more money in the bank than they earn. Real estate prices in Moscow and St Petersburg show how this has affected the real estate market (albeit it is hard to say who has won here). So it would be good to improve the rules for the stock market.

We have spoken with the Ministry of Finance several times and they have promised to do many things to even out these terms. It is possible to do this in different ways. Long-term investors (not short-term operators) could be exempt from taxation or higher taxes could be imposed on the other markets. The first option is preferable.

Our market infrastructure is helpful in this respect. On Monday we will finally introduce new bargaining procedures which correspond with international standards. I’m referring to the so-called T+ regime. The Central Depository will be fully operational in April. About 90% of the securities it is supposed to receive have already been transferred. This is very good. Foreign custodians are in the lead. Clearing has been centralized and IPO was a success and has shown that the plans to develop the stock market…After all, we weren’t selling just some organisation, but the future of the Russian financial market and it was bought. Foreign investors and traders trust us. They are showing a high level of interest in this market. Custodians also have confidence in us and they are the most conservative players, because they keep the securities. But there is one group that does not seem to trust us. Regrettably, these are our Russian issuers.

Many business owners, and their representatives – top managers, as well as heads and directors of major business organisations are present here. I’d like to talk to you. I am not going to reproach you for lack of confidence or for looking at listings in London before the Moscow exchange. I’d like to invite you to take part in a different dialogue and hope it will be more active. We are establishing a committee of issuers at the exchange. We are even working with our players’ clients, but issuers have not been in close contact with us so far. Come to us and tell us what you don’t like, what concerns you have, what problems you see, what we must polish up and improve. I’m inviting any issuer to come to us, not only those who are dealing with blue chips and have the most popular and the biggest shares. We’d like to welcome those who have problems because the transparency of our market… What can I say? Issuers are paying for the transparency of the market. It is not very easy to make the market transparent, because this entails additional expenses and this is an extra headache. But they are receiving access to longer term funding which is less expensive. This is what we want to achieve on our market. We have played the role of a guinea pig and have shown that it is possible to achieve success with IPO and further trade in shares on the Moscow exchange alone.

We would like IPO to stop being associated with foreign markets. Thank you.

Alexander Shokhin: Thank you, Mr Afanasyev. I would like to remind everyone that you are co-chair of the Financial Markets Commission at the RUIE, a member of the RUIE board as of today, so you can come to us, and it is an invitation to the RUIE as well.

Alexander Afanasyev: Thank you, we shall take it up.

Alexander Shokhin: I would like to give the floor to Vladimir Perederiy, chairman of the Coordinating Council of the RUIE branches in the south of Russia.

Vladimir Perederiy (chairman of the Coordinating Council of the RUIE branches in the south of Russia): Thank you, Mr Shokhin.

Colleagues, today’s discussion of the business climate in Russia is a crucial factor of the nation’s social and economic progress. The vector of business activity is directly dependent on efficient dialogue between business and the authorities, both at the federal and the regional levels. While we observe certain dynamics in the former case, business involvement in the preparation and adoption of administrative decisions varies greatly from one region to another. It is also reflected in the investment appeal of the Russian regions for foreign investors.

Ultimately, not only economic development but also regional social stability depend on the well-being of business. These factors are particularly important for the south of Russia. Densely populated, according to Russian standards, multi-ethnic and multi-religious regions require their own strategy and clear-cut mechanisms for its practical implementation. Business always moves in where there is a stable legal field and a systemic policy.

A survey of Russian companies in the south of Russia shows that we can’t speak about the uniformity of the business environment in our regions. Most actively rejected is the thesis of a uniform business climate. Over 80% of respondents acknowledged its absence. Meanwhile, the participation of the regional administrations in creating favourable business conditions is viewed positively: almost 50% of those surveyed believe that regional authorities assist in developing a business environment. Thus from the point of view of business it is not the absence or presence of the dialogue with the authorities that is at issue, it is raising the efficiency of the dialogue. 

RUIE experts are invited by the authorities at all levels to work on draft legislation and strategic documents. This is true not only in terms of evaluating a regulating impact but also monitoring enforcement practices. We have to take the next step and create a clear mechanism to register business proposals and implement them in practice. The following measures are feasible for this: spreading proven and effective patterns of interaction between the Russian Union of Industrialists and Entrepreneurs with regional authorities; creating mechanisms on the basis of regional employer associations to evaluate legislation to be adopted by the constituent entities of the Russian Federation and municipalities, as well as to evaluate draft strategic documents; interaction with the businessmen’s rights ombudsmen’s system; developing with the participation of the RUIE regional bodies of the system to monitor legislation that regulates business activities, primarily with the purpose of curbing additional barriers and violations of fair competition.

A few words on innovative business. Its development is a  key to solving the tasks set forth by the President and the Government on modernising the Russian economy. The situation in the south of the country is not different from the national tendencies. The regional measures of institutional support in this sphere are no less significant than the federal ones. Transnational innovation players should be actively attracted not only by the central authorities by also directly by the regions, and tools of network cooperation should be developed.

The most small businesses are concentrated in the wholesale and retail trade, in real estate, leasing and services. The share of enterprises designing and promoting innovative products is unacceptably small. It is high time we outline long-term regional innovation programmes for over 20 years, and coordinate those programmes with the federal development programmes.

Personnel is as big a problem in this area. Innovative business is a special area of organisation and management which needs special human capital. And it is not just a matter of drawing up educational programme standards, but rather of target selection and setting up of teams potentially capable of executing a complete cycle of innovative activities. The administrative support of small and medium-sized businesses is a key element of its success.

Moreover, this is proof, and an indicator of the authorities’ real attitude towards innovative policy in the region. It applies equally to technical universities whose innovative infrastructure is the crucial battlefield for moving research and development projects to manufacturing.

As president of one of Russia’s biggest polytechnic universities I must mention training personnel for industrial development and the system of interaction between universities and businesses. 

The Southern Russian State Technical University is the first multi-profile inter-disciplinary research and education centre in the south of Russia. It comprises 10 faculties, four branches and nine research institutes. Currently enrollment at the university stands at 20,000 students.

The university strives in its activities to meet the highest requirements for higher education establishments. At present, in accordance with the Government’s resolution, the university has set up 20 small innovative enterprises and an engineering company, a key link in the university’s innovation system. They are all operating successfully.

A special place is occupied by the university’s unique designs for the Gagarin Cosmonaut Training Centre and the Russian military-industrial complex. And it's not just research and development but also mass production.

Allow me to bring up a few general remarks concerning the organisation of interaction between universities and enterprises, which we have tested in practice. As a rule, when such communication is established, the issues discussed include the conditions and circumstances of the relationships between the parties, achieving mutual satisfaction and economic profit. I think such an outlook fails to address the present-day challenges.

Modern society is witnessing radical changes, which testify to the emergence of a knowledge-based economy. As a result, education and manufacturing can no longer develop and adapt to changes independently from one another. In other words, in place of interaction, we need to integrate science, education and production. This will create a new complex of social expectations and will set different criteria for assessing the participants’ activities. This is marked by the doctrine of common good and by easing competition among internally integrated structures.

I consider the systemic “education-science-manufacturing” chains pursued by our university, along with a number of the region’s and Russia’s largest enterprises, to be the best variant of integration interaction. Cross-internships, personnel development, combined with joint research and development yield a synergetic effect for the university’s collaboration with the industrial sector, and open up an inflow of new ideas, technologies and products.

To conclude my speech, I would like to speak about another consideration regarding not the interaction of business and authorities, but the interaction of authorities. This has to do not so much with the correlation of activities between the different levels of authority, which has been covered enough, as about the coordination of the regional bodies’ activities. The institutional administrative discord between the regions very often impedes the development of extra-territorial and inter-industry business projects of strategic dimensions. We live in an enormous country with a high degree of centralisation and uneven infrastructure. These are not the best conditions for creating a positive business climate. The way to transform them into global competitive advantages is in our hands, esteemed colleagues.

And one more point. When taking any decisions all of us – from regional minions to the federal high-ups – should bear in mind a simple truth: the larger Moscow becomes, the less is left for Russia’s regions. I appreciate your time. Thank you.

Alexander Shokhin: <…>

Now I would like to give the floor to Mr Medvedev for concluding remarks and comments.

Dmitry Medvedev: I will not take too much time. Thank you again for inviting me. I hope the proposals you have come up with will reach the Government. I will see to it personally.

Alexander Shokhin: They haven't yet?

Dmitry Medvedev: Not yet. In addition to the ideas voiced during the current discussion, I have commented on some issues and kept silent on some others, but I made note of them anyway. I hope everything will be all right. While we were sitting here, Cyprus made a final refusal to impose a deposit tax.

Exclamations: Hurray!

Dmitry Medvedev: Just like that. I hope the other authorities will also behave properly. See you again. Thank you.

* * *

After the convention, Dmitry Medvedev had a meeting with the board of the Russian Union of Industrialists and Entrepreneurs National Employers Association.