Dmitry Medvedev’s speech:

Good afternoon, Mr Naryshkin (Sergei Naryshkin, State Duma Speaker). Good afternoon, State Duma deputies, colleagues.

Today for the fifth time the Government is presenting a report on the results of its performance over the past year. This tradition has become a logical step in the development of the modern political system, improving its openness and accountability to its citizens. I am happy that I was one of the originators of this tradition and that I made proposals which have been supported by our parliament. I never thought I would present the report myself, but in this life you have to answer for all your actions. This is the inevitable logic of history. So here is my report. During the report if you don’t mind I will answer some of the questions political parties have asked. And finally I would just like to ask you to be patient. The report as you all know is not short.

This year marks the 20^th anniversary of the Russian Constitution and the establishment of the Russian Federal Assembly. Representatives of political parties who clearly remember those difficult times have gathered in this hall. I thank you sincerely for your contribution to the establishment of the new Russia. Achieving this has not been easy. Our approach was one of trial and error, but the country we live in today and are developing was born in those years, and we must understand this.

The country has changed radically over the past 20 years, and most importantly, stability has been achieved. People have become used to a certain level of prosperity and today rightly expect further development of the country and, as a consequence, further improvements to their quality of life.

In late April, we will celebrate Day of Russian Parliamentarism. I’d like to say (and this has been my sincere belief ever since I started working at the Presidential Executive Office and as President) that a feeling of respect for a legislator – from the municipal level to the State Duma and the Federation Council – is part of the general respect for a state governed by the rule of law and for the law in general, and this should become part of our national mentality. That is not quite the case yet, unfortunately.

Almost a year ago, speaking in this hall, I presented my programme. We talked about the priorities, about what needs to be done and about how it can be achieved. As of now, we have approved the main areas of Government activity up until 2018. In 2012, the Government introduced 218 draft laws to the parliament, 153 of which were signed by the President. Within the first three months of 2013, the Government presented over 80 draft laws to the State Duma. I’d like to note, that our joint work, even with some obvious political disagreements, is bringing good results in general. We remember times when this was not the case.

The Government and the State Duma assume common responsibility for the country’s balanced development during this difficult period of global economic instability. I think everyone understands this. We need to create favourable conditions for people to be able to develop good careers and for the population to have a decent quality of life. And we must also consolidate society when we try to solve the most serious problems. This latter objective is probably even more difficult. I am not saying this just in order to state that we are all together on this. The first months of this year show that subsiding economic growth is a global trend. I would like to stress that this trend is persisting, and that we are facing serious risks in this sphere. The Government has spoken about this. We foresaw subsiding development rates precisely in the context of the world economic markets and, I will not conceal this fact, in the context of independent Russian economic problems. 

The Government must implement well-balanced measures so as to attain acceptable basic parameters. This is a very difficult and highly important subject. I discussed this issue with the President the other day. We discussed measures to encourage economic development, and we agreed to hold a presidential meeting with key experts and, quite possibly, State Duma deputies and to discuss the current agenda with them. In effect, we are talking about the implementation of well-known Presidential executive orders and Policy Priorities of the Government of the Russian Federation.

I would like to note that the Government has its own idea of specific measures which must be implemented in this situation. But these measures must be discussed in great detail together with experts and, of course, with members of parliament. I mean what I have said. We have common tasks and shared responsibility. Nevertheless, I will now give you a brief macro-economic outline. Of course, you know many of the statistics, but I believe it would be useful to illustrate the entire situation.

On the whole, with due account for the global economic situation, we can say that overall the 2012 macroeconomic results are quite good. The GDP grew by 3.4% in 2012. Real wages exceeded 2011 wages throughout 2012, except November and December. Wage growth rates increased from 2.8% to 8.4%. On the whole, this was made possible by raising the wages of teachers and medical personnel and by raising the pay grades of military personnel. I believe that all of us have reached consensus on this issue through much deliberation, regardless of our political convictions.

We can also talk about another positive fact, namely, unprecedentedly low unemployment levels, which totaled 5.5%, as compared to 6.5% in 2011. Last year, consumer inflation exceeded 2011 inflation by 0.5% and reached 6.6%. This was caused by a crop failure and by some other factors.

We have virtually balanced the federal budget, and we have only a small budget deficit, which makes up 0.06% of the GDP. This situation is different from that in an absolute majority or virtually all industrialised countries. I would like to remind you that the United States, Japan and the United Kingdom have 9%, 10% and 8.2% budget deficits, respectively. 

The share of oil and gas related revenue has grown by 0.2% of GDP while the share of non-oil and gas revenue remains at the last year’s level of 10.3%.

As you know the budget rule enforced by the federal law regulates the use of oil and gas revenue and limits the total amount of federal budget expenses. It also specifies the procedure for building up and using the money of the Reserve Fund and the National Welfare Fund. The argument involved was long and difficult. However, we made a decision that must be acted upon. This will increase macroeconomic stability of the Russian economy and its investment potential, and will ensure the fulfillment of all expense related obligations, social obligations, first and foremost. I would like to stress that the rule is particularly important when it is obvious that other countries are facing disadvantageous scenarios which lead to recession and could eventually come to affect us. And it is particularly important when there is a risk of a fall in hydrocarbon prices. We have been through this before and the dramatic fall in hydrocarbon prices that we experienced in 2008 should be a lesson to us, hence we have the budget rule that must be followed unfailingly.

There is one more issue of particular importance in current conditions. It is national debt. Russia’s national debt is a bit more than 10% of GDP.

Now, if we compare this with other countries, we see that the national debt of the United States makes up over 100% of the GDP. It makes up 90% of the GDP in France and 83% in Germany. And those countries are the driving force of economic growth. Our financial system is reliable enough to make effective borrowings to fund our budget priorities. In 2012, Russia floated a bond-secured loan of $7 billion from the international capital market, and a loan repayable in 30 years was the longest loan in our history.

However, I would like to repeat that the quality of growth and the structure of the economy are as essential as the growth rate. Russia will be facing fierce competition in terms of economic and technological development and human resources. To successfully respond to this challenge, we must make use of all of our resources and continue to improve the business climate and increase the efficiency of the economy and social sphere. We need to focus on developing the human potential and competitiveness of our people. It is an ambitious goal that should bring us all together in order to create comfortable conditions for living and working in our country – and we should set out a plan to achieve this goal.

Now let's move on to talk about specific sectors of our socio-economic agenda.

I will start with the most important part, which is our demographic situation. In recent years, we have been regularly taking action to increase birth rates, decrease mortality rates and extend life expectancy. The relative objectives have been described in a special presidential executive order issued last May. Let me remind you that nearly two million children were born in 2012, which is 102,500 children more than in 2011. The share of multiple births has gone up to 51.5% and the general birth rate has reached the 1991 level. I think it is a very important result.

What do these statistics indicate? We have managed to level off the demographic crisis, which is good. It is still too early to speak about getting out of the "demographic pit." The birth rates are still not high enough to ensure the replacement of the population. We must make sure that having more children does not entail a lower quality of life. The maternity capital is regularly adjusted. It should be noted that this initiative has proved to be successful and popular. The maternity capital equals 409,000 roubles this year. Over 4 million families have already received their maternity capital certificates. When this project was started we did not have a clear idea of how it was going to work out, but it did and it resulted in new births. Also, regional maternity capital is given out in 71 Russian regions.

Starting this year, federal funds are provided to the 50 regions with the most difficult demographic situation. A monthly monetary allowance for the third child and subsequent children has been introduced there. An allowance of 7,000 roubles on average will be paid until a child reaches the age of three. The 2013 federal budget will allocate some 6 billion roubles for this purpose. Fourteen regions are introducing this measure at their own expense.

There is a proposal from lawmakers to extend this practice across all regions, but this will have to be thoroughly considered. I would like to note that this is a specific measure by the Government to support regions in crisis. The situation is not the same across the country and the statistics differ, therefore we cannot apply a one-size-fits-all approach. However, the regional officials are the one to make all the decisions related to these payments.

I know that members of the United Russia parliamentary party are concerned about the situation with many young families. In fact, it's not only United Russia members, but basically everyone is concerned about this. The problem is particularly acute when a child is between 18 months and three years old. Parents do not receive child allowances any more but the young mother still cannot work full-time. Therefore, we need to make sure women can take up professional retraining and find a flexi-time job. Last year there were 840 retraining programmes and advanced professional training programmes available for young mothers in 78 regions.

There is another issue that is also very important. We have set the goal to increase the number of kindergartens and fully satisfy the demand for them by 2016. The Government will provide budgetary loans and subsidies for this purpose. As many as 270,000 children were additionally accepted last year. The number of children on the waiting list has been reduced by over 20%. We can see a positive trend here.   

Another 1 million places in kindergartens will need to be created in 2013-2015, taking into account the growing birth rate. Some of the questions you ask the Government concern this. The United Russia party has also asked this question. Indeed achieving this target will require substantial investment. I will give you the figures later, just let me add one more thing: it is absolutely clear to us that the regions cannot handle this on their own. The federal government cannot simply tell them, “it’s your job, go and create more places and build new kindergartens.” It would be unfair. A co-financing programme for planned preschools is the solution. I have issued an instruction to this end and a Government resolution is already in the works. I think this resolution will be approved. It will be a big step in the right direction.

We are all aware of the problems piling up in the national healthcare system. But let’s try to be objective: we have not been idle in the past few years. Much has been done and work is underway as part of the regional healthcare modernisation programmes. In 2011-2012, these programmes’ funding from a range of sources added up to 664 billion roubles. As a result, more than 70 inpatient and outpatient centres have been built, and nearly 2,700 facilities have been overhauled. About 290,000 units of high-tech equipment have been purchased. As many as 8,000 doctors have moved to rural areas, and a total of 8 billion roubles have been paid to them as part of their compensation packages. This is very important for the harmonious development of rural areas.

Last year, we completed a large programme to build high-tech medical centres across Russia. I remember how it was launched more than six years ago. It has proved a success since then. The number of certain operations performed there has grown sevenfold, which means these services have become more accessible and affordable. Frankly, some of the operations performed at the new centres were practically unavailable six or seven years ago, and people often had to travel abroad for surgery.

Many operations have become widely available now. There are problems such as waiting lists, but surgery is available now. And importantly, people from the regions no longer have to travel to Moscow, which used to be the only place to have any complicated surgery.

We have set up new high-tech centres across the country – I think we were right to do so – and now 12 regions have major federal healthcare centres, from Kaliningrad to Khabarovsk.

Many of the most common cardiovascular treatments have become routine. We all know that cardiovascular diseases are a leading cause of death, especially in Russia. Many interventions in traumatology, orthopaedics, endoprosthesis replacement and neurosurgery have also become easily accessible.

The number of children who have received high-tech medical services has grown 60% since 2009. Many of their problems had been considered untreatable in the past. However, the state programmes that have made this possible need to be further expanded, to help cut the waiting lists for high-tech medicine. Many people still prefer going abroad for an operation.

According to the federal statistics service, there are 310,000 state and municipal establishments in Russia working in education, healthcare, culture, sports and social services. It is the government’s job to elevate their quality to a new level. The year 2012 was a breakthrough year, at least in terms of salaries. Salaries at these establishments have grown, as confirmed by the figures I cited earlier. The average salary of medical workers grew by almost 18% from the year before; teachers, by more than 20%. We seem to be getting used to these statistics and do not consider this a big pay raise. But colleagues, just think of this: no other government has been increasing wages lately, not during the global recession. Russia is the only country doing so. Further increases will be made in accordance with the approved schedule (I can assure those present that you do not need to doubt this). The increase will depend on the specialist’s qualifications and the quality of services provided, of course. These specialists must understand that higher salaries imply better quality of work.

One of the landmark events in 2012 was the federal law On Education in the Russian Federation. The bill was widely discussed and probably caused more controversy than any other bill. I think this is only natural. What are the biggest concerns for the people, experts, and lawmakers? There are two – healthcare and education. These two issues are the most important, along with housing and utilities bills, of course. I must say that the discussion of this bill has shown how important it is to debate, to listen to experts and to study public opinion. Personally, I have discussed this with many of you, colleagues, many deputies from various parties. I think our discussions were very productive and I would like to thank you all for the work you have done.

What we need to do now is monitor the new law’s enforcement. It is wrong to treat laws like dogma. As lawmakers, you know this better than I do. If something isn’t working, it needs to be adjusted, corrected or changed. But even now it is clear that this law reflects the changes in modern education and provides additional opportunities to students who have shown outstanding progress and capabilities, as well as those who are in need of social or legal support. It also regulates experimental and innovative activity in education. The previous law did not take all this into account.

Educational services for children under seven lay the foundation for an individual’s further development. We are working on new education standards for programmes serving children under seven. It is important that the Government and the Ministry provide organisational and methodological support to regions and institutions. This answers the question from United Russia.

Last year we also achieved good results in modernising regional general education systems. Federal financing for this project amounts to 120 billion roubles in three years.

The concentration of such impressive funds and the project’s ideology make it possible to introduce the best practices in the regions and allow them to fully comply with their commitments.

Children should study in modern, decent conditions either in large cities or in small villages. This is an indispensable requirement. It is no less important to have proper educational programmes. More attention should be paid to upbringing. New standards have been introduced in elementary and secondary schools.

Despite growing competition, our fellows are successful in international Olympiads. Incidentally, I think that this is an important indicator of the competitiveness of our educational system. Estimates regarding its quality are poles apart. Some people believe that it is the best in the world and that it is rooted in the Soviet or even the tsarist system, while others think that we had a good system, but it has been destroyed over the past few years. None of these opinions is true. Our educational system has a huge potential and bears an enormous burden, shouldering the problems that have accumulated over the past few decades – and not only… We shouldn’t idealise anything, including the Soviet school.

That said, the fact that our fellows do so well in international Olympiads shows that our school system is sound and this does not just mean academic schools or classical education. It also means that we have certain school methods how to explain to schoolchildren what they have to do and how they have to do it. This applies to most modern fields of knowledge. They are brilliant with computers and this is so not because we had a good educational system before. This is a new field. It is linked with mathematics where we had outstanding achievements…But this is great regardless.  

We’ll soon host the international school Olympiads. Maybe they won’t be on the same scale as the Sochi Olympic Games, but they won’t be any less pleasant. This year, we’ll host the chemistry Olympiad. We’ll host the geography Olympiad in 2015 and the computer (informatics) science Olympiad in 2016. This shows that we are doing well.

The National Coordinating Council to Support Talented Young People has started working. We hope that the number of children who pursue further education will increase by almost 60%.

Modern, talented children should work at schools regardless of their age. Our colleagues from the Just Russia parliamentary party have spoken about supporting young teachers. Twenty regions take such measures in the form of lump-sum payments, monthly benefits in addition to salaries over the first two or three years, and housing provision. I think that this is a very sound practice and we’ll encourage it. There is also a special mortgage programme for young teachers. It is operating – better in some places and worse in others. 

We have started assessing the performance of higher educational institutions. This work is complicated and evokes a great response from society. This year public and private institutions will be checked. This aroused many emotions – particularly as far as assessment procedures and ensuing decisions are concerned. It is possible to understand this… I spent practically 20 years in a university myself. But we should do something about this issue. I always quote this figure, although our living conditions and our social structure have changed. Sometimes it is necessary to receive a higher education just to work at a computer. Now this is a qualification requirement. Yet let me remind you that Russia with its 142-million-strong population has twice as many higher educational institutions as the Soviet Union had with its nearly 300-million-strong population. This is also an indicator, and we must understand what to do about this. Apparently, some universities have problems as far as the research and employment results of their graduates are concerned. The transparency of lists and discussions is another matter. Everything must be done in an open format, so an indicator system must be improved as well. It should be understandable for everyone – students and teachers and civil society.

Furthermore, a major task is to create effective contacts between industry and employers and to train specialists that are required by the market. Now, an entirely new professional standards system is being elaborated and employers are quite active in this respect. We will have 800 standards covering all fields of activities and they will be tailored to new education standards.

Another priority is the ability of our universities to compete on a global scale. They should move up in the global ratings. I’d like you to understand my position – ratings are not an end by themselves. On the one hand, we shouldn’t say that we should climb to the top by all means necessary. But, on the other hand, we realize that these ratings or rather an aggregate of them (not any one of them since there are no universal ratings) reflects the alignment of forces in education. There are problems with the compilation of these ratings – an obvious bias in favour of the Anglo-Saxon educational model. Yet, we should still work to be perceived as an integral component of the international educational system. Only in this case will people come to study or to teach in Russia and this is important because social networking, and television and online communication cannot replace the normal lecture of a good professor. I’m also referring to foreign professors. So, we’ll allocate additional subsidies for contests and grants. We’ve already earmarked 9 billion roubles for this purpose. We’ll continue improving our system of certifying people for scientific academic and teaching positions. We’ll finish streamlining a network of thesis boards before March 2014. Procedures for defending and presenting theses will become more open, including those that are online. I hope that this will improve the research quality.

Domestic science should play a fundamental role in our national development. The state programnme for the development of the sciences and technology was adopted on December 20 last year. We should focus our efforts on the most promising areas – nano-technology, information and telecommunications systems, using nature and the energy industry -- that are still vital for us. Last year, our researchers developed 31 international-level technologies and submitted applications for over 800 patents under federal targeted programmes. We are still lagging far behind others in this sphere. We need to set straight our licensing procedures and try to provide protection for all of our intellectual developments and property. We know what happens often with them when our competitors use them without the protection of the state and patent holders.

We’ve allocated an additional 2 billion roubles to the Fund of Fundamental Research and another 500 million roubles to the Fund for Humanitarian Studies. By 2018, we should reach the designated level of financing state scientific funds equal to 25 billion roubles.

Much has been done for the formation of development institutes. They have received about 500 billion roubles. We must focus on the applied format of research and infrastructure that should provide for the continuous operation of innovation lifts. Certain results have been received here as well. Vnesheconombank is funding 47 projects aimed at developing innovations. This is a good thing because nothing develops without funding. The total figure is about 758 billion roubles.

The share of innovative projects in the portfolio already adds up to one third. Rosnano has approved some 120 investment projects with a total budget exceeding 515 billion roubles. The Russian Venture Company (RVC) and its branch funds, RVC Biopharmaceutical Investments, RVC Infrastructural Investments and the Seed Fund are doing there job. The Skolkovo innovation centre has 850 registered participants. The key investors include major companies that promote innovation worldwide and this is important. According to an authoritative study by the Dow Jones Venture Source, Russia is one of the top five European countries currently investing in high technology start-ups. This is not bad.

The state subsidises research and development at institutes and universities based on corporate orders. Over the past three years, total subsidies amounted to 19 billion roubles; and this support will continue. We have allocated 9 billion roubles for the development of the innovative infrastructure: for creating engineering centres, business incubators, and for training management personnel for small business ventures. We have founded special grants to attract renowned scientists to Russian higher educational institutions from all over the world. 

Innovative territorial centres are a promising approach. The federal budget provides funds to 13 regions to subsidise the development of these centres. Naturally, this kind of development should not proceed in only a few regions or a specific place alone, it should cover the whole country – especially traditional research centres - our colleagues from the LDPR party have asked about this. Last year, special economic zones were initiated in the Republic of Tatarstan, in the Pskov Region and the Kaluga Region. Russia has a total of 27 similar zones of four types: technology promotion zones, industrial and production zones, port zones and tourist and recreation zones. On the whole, this mechanism is good. However any mechanism has its deficiencies. We’ll consider ways to make it all more efficient.  

The creation of new efficient, high productivity jobs is also a Government priority. Answering LDPR parliamentary group questions, I want to say again: our goal is to create 25 million modern jobs by 2020. Everybody should take part in solving this – the Government and the regional authorities, but most importantly - Moscow officials can create jobs only on paper – businesses should take part, businesses should see this as a priority with state support, of course.

State demand and support is critical for increasing competitiveness in some priority sectors. Last year we allocated over 21 billion roubles to increase the charter capital of the aircraft manufacturing companies. The aircraft manufacturers got subsidies for technical rearmament, and innovative and investment projects. In addition, some 18.5 billion roubles were invested in aircraft manufacturer  capital assets under various targeted programmes. As a result, aircraft production increased by over 12% in 2012. This may not be a breakthrough, but it was a step forward rather than the further backsliding of indicators that we’d seen for years.

We extended state support to the shipbuilding industry too. For example, we allocated development funds to companies in the amount of about 10 billion roubles. In addition, we extended subsidies in order to prevent the bankruptcy of strategic enterprises – we extended subsidised loans and covered lease payments for ships. Of course, this was centred around Russian shipyards. Last year (in my presence) the Admiralteiskie Verfi handed over to our customer – the Federal Service for Hydrometeorology and Environmental Monitoring – the Akademik Tryoshnikov, a unique research ship which has taken its first Antarctic voyage. Thus we have begun to build these kinds of unique ships again. Only a few countries in the world produce such ships. 

The national radio-electronic industry showed a good rate of development. Production grew by about 14% compared with 2011. The funding for research and development increased by about 18%, and by 35% in the non-defence sectors.

Practically all state programmes envision labour growth by several times, and this is a must; we cannot do without it. It is clear that the employment structure will change. We need to stimulate programmes for retraining and re-educating.

Last year we formed and adopted the state defence order for 2013 and for the 2014-2015 planning period, with funding amounting to 6.5 trillion roubles. On January 1, the Federal Law On State Defence Order came into effect. We are developing a number of bylaws to support it. And I want to make a point: it’s necessary to stop the price wars between state customers and executors of the state defence orders. We have the funds and so the concerned parties should tone down their disputes. It’s important to conduct regular and normal work. The heads of all companies should take personal responsibility, and not just administrative or criminal responsibility – we like to discuss who should be punished… In my view, it’s much more important to penalise enterprises financially. 

In 2013, we started to employ service life contracts for armaments and equipment in mass production. In 2012, Russia remained the world leader in the number of carrier launches. Russia fulfilled its international commitments in manned spaceflights. Of course, we had to take some decisions to overcome a series of failures in 2011; we had to tighten some screws. Today, every aerospace related company is adopting a departmental quality control system, which is evident in the launch indicators. Integrated organisational structures are being formed. Management systems should be reorganised too. We need to find the best solutions.    

Now I want to come back to earth. Last year was very difficult for agriculture. Some traditional agrarian districts suffered a serious drought. As a result, the grain harvest amounted to just over 70 billion tones or 25% less than the harvest in 2011. We held a meeting yesterday to discuss this issue. Of course, the last few years have been fairly difficult, but we have nevertheless achieved good results. The weather hasn’t always been cooperative, even though you’d expect it to be, at least in some regions, given the vastness of our country. However, the carryover reserves and the new crop allowed farmers to cover the domestic needs and even keep their exports at the existing levels. The Government decided to intervene on the commodity markets. We focus particularly on sowing winter crops and on the current sowing campaign. We expect that in the event of favourable weather conditions, farmers will harvest up to 90-95 million tonnes of grain. Our WTO membership complicates matters somewhat. Indeed, we have re-adjusted the state support system to meet the requirements of this multilateral organisation, and have introduced a number of new mechanisms, such as the so-called non-related subsidies in crop production, the so-called   per-hectare subsidising. We allocated 15 billion roubles to this end. We have also introduced a new type of subsidy in the area of livestock production, whereby we reimburse a portion of the production cost of one litre of sold milk. In all, we have allocated about 41 billion roubles this year to support crop production as part of the state programme. But we do have problems. Our colleagues from United Russia party raised this question; other fractions have this question as well. More than 60 billion roubles have been allocated to support livestock production.

Please note that we have extended the zero revenue tax for agricultural producers and have renewed the VAT benefits in the import and sale of pedigree cattle, which is very important. We are doing this in order not only to maintain, but also to recreate, our own, rather than foreign, breeding stock. We are faced with major difficulties in this area, as you are all aware.

Finally, after my consultations with United Russia, I have decided to allocate an additional 42 billion roubles to support the agriculture in 2013, including 15 billion roubles to support livestock production in connection with rising feed prices. I held a conference call on this issue yesterday with the participation of all governors of the regions that are actively developing pork and poultry production. They have come up with measures, and I hope that they will be effective. By the way, several members of the State Duma and the Federation Council attended the meeting yesterday.

Our colleagues, KPRF deputies have asked us about tractor equipment. In 2020, we plan to produce about 22,000 tractors a year by way of stimulating demand, increasing exports, upgrading existing and creating new production facilities, including in partnership with the technology leaders in this area. The opening of a new plant, Voronezhselmash, was a major event for the Voronezh Region, and the agricultural machine-building industry in general. The plant will manufacture grain cleaning equipment, separators and other modern agricultural equipment.

In 2012, 4,000 units of equipment, including nearly 2,300 tractors, were transferred to farmers on preferential terms under the lease programme. In addition, our Belarusian partners traditionally have strong positions in manufacturing light- and medium-duty tractors. We are working together, because we are part of the common economic space. Our KPRF colleagues have asked us a specific question about the Traktornye Zavody (Tractor Plants) company, which is one of our leading domestic manufacturers, along with the Kirov Plant and AgroTechMash. We are discussing a possible debt restructuring scenario with advisers and lenders, including Vnesheconombank. I took the decision regarding the restructuring procedures last week as part of the VEB supervisory board, and I signed it. I want you to be aware of this.

The strategy for the Development of the Food and Food Processing Industry that was approved last year is all about strengthening food security. It provides for subsidising investment loans, including loans for construction, reconstruction and modernisation of the bakery industry.

With regard to the infrastructure, it is clear that massive investments in this sector are required, ones with long payback periods, so we need to set priorities. The development of the Russian Far East is one such priority. In the run-up to the APEC-2012 Leaders’ Meeting, we have built several major projects, including bridges, a new modern airport, Knevichi, started an airport railway service, and rebuilt many roads and port facilities. These facilities are already working for the benefit of the Far Eastern residents. The summit is over but the results remain. As part of the Olympic project, railway and road infrastructure has been built. It will, of course, be used not only by the participants and guests of the Olympics, but by the residents of the Krasnodar Territory and by many tourists.

The Moscow transport hub is another important project. I would like to note that it is being conducted jointly with the authorities of Moscow and the Moscow Region. It is actually a very complicated project, a veritable hub of problems. I have conducted several meetings on this topic. Problems have been building up for decades and they have been compounded by the staggering growth in the number of cars, so we need to solve this problem by introducing a modern and convenient system of traffic control, including public transport.

The chronic congestion on the roads is the result of the infrastructure that we have today and, as I said, the explosive growth in car ownership. I have to remind you that last year our country was the second biggest market in Europe after Germany in terms of car sales (and people there have, let’s face it, higher purchasing power than here). In all 2.74 million cars were sold, of which 2 million were domestically produced. What is important is that all the leading world producers of car parts have been building their own enterprises in our country. Under agreements signed with them, 18,000 high-performance jobs are to be created, and that, by the way, meets the target I mentioned earlier.

The system of financing road building through the creation of road funds is being reformed. During the past year about 440 billion roubles was allocated for this purpose from the federal budget alone. The volume of regional road funds stands at 590 billion roubles, which is three times more than financing in 2010 (that should also be kept in mind). To address the issue of local roads, amendments have been made to the Budget Code which envisage the creation of municipal road funds from 2014.

Passenger numbers last year increased by 6% across the board. The number of air passengers increased by 17%, partly because we are subsidising some routes. Subsidised fares were made available to 500,000 passengers. That is quite an achievement, especially considering the remoteness of our Far Eastern territories, Kaliningrad and, of course, the North. In the Volga Federal District a project was developed last year and launched this year to support regional aviation, another important topic.

Railways have traditionally been the most popular form of transport. They carried more than 1 billion passengers, a rise – 106.6% compared to 2011. The growing demand for transport is encouraging the development of transport machine-building in the country. The Tikhvinsky Rolling Stock Plant, one of the largest such plants in Europe, was put into operation. The Novocherkassk Electrical Locomotive Plant has started the production of a fifth-generation electrical locomotive (EP-20) which accelerates quickly to 200 km/h. It is a good modern piece of machinery, I visited the place and looked at it at first hand.

Further prospects of the transport sector are connected with creating conditions for attracting money from investors, including public-private partnerships. We have concession agreements and full life cycle contracts and some successful projects. They include the Western High-Speed Diameter in St Petersburg, the new access to the Moscow Ring Road from the Minskoye Motorway here in Moscow, a new motorway is being built between Moscow and St Petersburg, a bridge is to be built across the Lena River near Yakutsk, I recently signed the documents authorising the start of this work. Such projects, however, should stop being something exotic, that is our main goal. A legal framework is being formulated which will make it possible to issue infrastructure bonds guaranteed by the Russian Federation and to use pension savings for these purposes as well. That is a significant amount, 440 billion roubles in 2013.

Practically all the sectors in the fuel and energy complex, with the possible exception of gas, reported good growth last year. In January 2012 the Government approved a long-term programme to develop the coal industry. It seeks to make the sector more competitive by increasing its innovative potential.

Work is continuing to modernise oil refineries. Among the most urgent targets is increasing the depth of oil processing and making more efficient use of the associated gas. The company Transneft has launched the Baltic Pipeline System-2 and completed construction of the second strip of the Eastern Siberia-Pacific Pipeline System. The increased capacity of the Eastern Siberia-Pacific Pipeline will enable not only to increase exports to the Asia-Pacific countries but also the volume of oil we ourselves process in the Far East, which is also very important.

Gazprom has completed the first strip of the 1200-km Bovanenkovo-Ukhta gas pipeline, as a result of which gas from Yamal is being fed into the integrated gas supply system. The second strip of the Nord Stream pipeline with a capacity of 55 billion cubic metres a year has been launched. The programme to connect the regions to the mains gas supply is making progress. Gazprom allocated about 37 billion roubles for this purpose in 2012. The average level of connections to the mains gas supply today is about two-thirds of the entire country. Some of you may have forgotten this, but just eight years ago nothing was being done about mains gas connections, absolutely nothing. We made do with what we had during the Soviet period. At a certain point, when my attention was drawn to it, I realised that our partners in other CIS countries have almost total mains gas coverage (our colleagues and neighbours have 90-95% coverage) while the country that produces gas and is the main supplier had a coverage of 30-40%, there was practically no gas in rural areas. We have now brought that figure to almost 65%. I think this is a very important result and it is good that Gazprom is planning to invest in this because this, if you like, is an instance of social responsibility of the biggest gas company in the world.

The future plans of the gas industry envisage the development of gas fields in Yamal, Eastern Siberia and the Far East. An investment decision has been taken to develop the Chayandinskoye field, as you know. The company Novatek is implementing the Yamal LNG project to build a natural gas liquefaction plant. There are also plans to build a new port in the north on the basis of a public-private partnership, which would greatly increase the flow of cargo along the Northern Sea Route and reaffirm our historical leadership in the Arctic latitudes, in the development of the Arctic.

The Government is continuing work to introduce more flexible tax regulation of the oil and gas industry. Decisions will always be partly made depending on the situation, because the sector is evolving and is volatile. Legislation is being prepared to encourage the extraction of difficult reserves and develop gas fields in Eastern Siberia and the Far East and there are plans for offshore extraction. By the way, we hope that the State Duma will pass the corresponding laws during its spring session.

In the electricity industry, 2012 saw the launch of 6.5 gigawatts of new generation capacity, including four hydro units at the Boguchanskaya Hydroelectric Power Station (333 megawatt units each). Two 640-megawatt units were introduced as part of restoring the Sayano-Shushenskaya Hydroelectric Power Station. Work is underway to build new nuclear power stations: the Novovoronezhskaya Power Station-2 and the Baltic Nuclear Power Station in the Kaliningrad Region.

A new model of the electrical energy market being developed will enable the generating companies to attract long-term investments for the construction and modernisation of facilities. Technological access services are becoming more accessible, although some problems still remain. This is the purpose of the work of the Rossiiskiye Seti (Russian Grids) company; the decision to create it was passed last year. In October of last year the Government approved a complex of measures to stimulate electricity generation based on the use of renewable energy sources. The Government will shortly pass the necessary acts to implement the required set of measures.

I will now say a few words about our exports. We have to admit frankly that so far we are lagging way behind other countries in terms of state support for our exporters. We have something to learn from our neighbours. The situation must be changed drastically. The Policy Priorities of the Government set the target of providing state financial support for at least 13% of Russian exports of non-energy goods. That is a pretty high figure if we remember that in 2011 we provided state support for 0.5% of our exports. Relevant institutions were not working. Today the Russian Agency for Export Credit and Investment Insurance, EXIAR, is gathering momentum. It has provided $0.5 billion in export support. The immediate target is to implement up to 40 projects worth over $3 billion.

Administrative procedures for the export of Russian companies’ own products have been simplified. The infrastructure of information support for small and medium-sized businesses interested in breaking into foreign markets is developing. Of course, this is something that not only the Government should be engaged in, it is important that the heads of regions become involved, too.

Two weeks ago I chaired a meeting of the State Commission on the Social and Economic Development of the Far East, the Republic of Buryatia, the Trans-Baikal Territory and the Irkutsk Region. We were discussing the instruments to develop that area. The total investments already made in the events held in Vladivostok amounted to 680 billion. I have already mentioned the modernisation of the infrastructure. It is important that the housing and utilities systems have by and large been put in order. A complex of buildings of the Far Eastern Federal University has been built on Russky Island. Tax revenues of the local budgets and the number of jobs have increased.

Finally, we agreed on a state programme for the social and economic development of the Far East and the Baikal Area. I don’t mind telling you that it was a difficult discussion because everybody wants a better deal for themselves and what does a better deal mean for all those who take part in the discussion? It means as much money as possible. Money needs to be counted, therefore we chose the development of transport and energy as priorities. In 2012, about 53 billion roubles were earmarked for co-financing of innovative projects in the energy sector and 10 billion roubles for road infrastructure.

We have increased the capitalisation of the Fund for the Development of the Far East and the Baikal Region. It has to start active work (we have talked about this with governors and business representatives), in other words it needs to become a modern development institution. But naturally that money is not all, we will increase its capitalisation and further expand its range of activities.

Amendments need to be proposed to the Tax Code to offer tax benefits to long-term projects; these amendments have been prepared. A working group is being set up on improving the legal framework. There has been a suggestion, I am not sure that it is completely well-thought-out, but I would like to share it with you because at the end of the day you will have to make the final decision. I am referring to the adoption of a special law on the development of the Far East. I am generally in favour of that law (there is a measure of support for it) provided we manage to flesh it out with concrete provisions and it becomes a real driver of development of the Far Eastern regions. If that is the case then the law should be passed. The goal remains the same: the Far East must be a region where people want to live and work, a region chosen by talented and, also very important, enterprising people because I must remind you of a well-known historical fact: in former times daring and enterprising people chose to go to the Far East.

I have already said that the standard of regional managerial teams is a key ingredient of success. You know as well as I do the regions that every year report considerable growth of GRP while not having oil or gas resources. That deserves the highest praise. Anyone who wants to work looks for ways of doing it, and those who don’t want to work look for excuses for doing nothing. 

At the same time, and this was one of the questions raised by our colleagues from the Communist Party, regional debt increased 15% to 1.4 trillion roubles in 2012. The Government rescheduled part of the regions’ debt to the federal budget. As a result spending in 36 regions was reduced by about 123 billion roubles. What is the key? The key is to have a plan for state debt reduction. It enables the regions to minimise loan payments and to service their debt in the coming years. But we shouldn’t restructure all the debt: every constituent entity must prove what it is planning to do.

Another issue concerns decisions at the federal level that may entail additional spending for the regions (our colleagues from United Russia have asked this question). Of course we will allocate money for this, to balance the budgets in connection with new financial commitments, including those that have arisen from the adoption of presidential executive orders. This year 60 billion roubles has already been transferred to the regions to compensate part of the cost of raising public sector wages. A further 40 billion will be transferred to improve the quality of social institutions. The regions will not be left in the lurch, I want everybody to understand that, but the regions must be conscious of their own responsibilities.

Amendments to legislation have been made to increase regional tax revenue. I agree with my United Russia colleagues that delegating additional authority to the regions and municipalities must be matched by redistribution of financial and material resources. I would hate for you to get the impression that I and the Government as a whole have forgotten what we said some time ago, I mean 1 trillion roubles of additional revenues to be directed to the regions. The situation is not all that simple. Nevertheless we must find a way to provide that money. And I would like to address this question to everyone, including my colleagues in the Government.

Another topic is the basis for the formation of municipal budget revenues. We have said that a tax on real estate is to be introduced in 2014. This has prompted a question from the Communist Party. All the regions have determined the cadaster value of buildings, structures, premises and construction projects in progress. In Moscow and St Petersburg this was financed from the regional budgets and in all the other regions from the federal budget.

The Government has prepared draft amendments to the Tax Code and other legislative acts that would include a tax on real estate in the Russian tax system. The regions that can effectively increase their tax revenue potential will get additional incentives as in previous years. In 2012 about 10 billion roubles were allocated for these purposes from the federal budget.

Dear colleagues, I have more than once said to various audiences that entrepreneurial activities and entrepreneurial talent are among the main values and drivers of our country’s development. Our task is to create a competitive business climate and rules for doing business. This is the key to the successful fulfillment of our plans.

I should mention several key issues. First, as part of the National Entrepreneurial Initiative, procedures have been identified that cause the biggest problems for business. These have to do with simplifying permits and control procedures which are often excessive and very costly. Seven roadmaps have been approved in the main spheres of state regulation and six more are to be developed by mid-year. It is important that systematic monitoring be organised not only by the Government but also by experts: the fulfillment of decisions (and this is what I’d really like to stress) must be assessed by business itself and not by somebody else. It will be good if they have a direct say in the development of these roadmaps, if they say: “Please, correct these specific provisions because they won’t work.” And this way we’ll be able to start a much needed dialogue between Government and business.

We are making good progress in some areas, for example, tax administration, and not such good progress in other areas. The problems here have been piling up for years and they can’t be solved in only a few months. This requires a daily effort.

Sustainable development requires large-scale investment. The main resource is the development of investment activity in the regions and of course the personal motivation of the leadership, the federal executive bodies and the regional executive bodies. A new system for evaluating their performance – a more understandable and clear-cut system – has been developed. Last year the Standard for Activities of Executive Bodies was introduced in 13 regions, and this year in 22 more regions.

The Russian Direct Investment Fund attracts more than 4 roubles in foreign investment for every rouble of its own investments. Its main task is to ensure the maximum return on invested capital. Over the past five years Russia has been sixth in the world and second among the BRICS countries in terms of attracting foreign direct investment. This is a good indicator, about $265 billion, but there is still room for improvement. We hope that by 2018 we shall bring the volume of direct foreign investment to $70 billion a year.

On the Government’s initiative, a range of new legislation has been prepared and is in force, the so-called third antimonopoly package, and decisions have been taken on sectoral markets. I’m referring to exchange trading in fuel and raw materials, the drug market, air carriers, and communications and education services.

Of course free competition and pricing is the basis of a market economy, but for certain exceptionally critical goods – medicines, baby foods, goods that are brought to the Far North – we continue to regulate retail prices and the rates for the natural monopoly services. In all the other cases of course the Government can influence the market indirectly or if unregulated price growth is having a serious negative impact on consumers. Our colleagues from the LDPR have asked this question. This is stipulated by law.

Improving the state contract system is a separate issue. A newly adopted law will come into effect on January 1 next year. At this point we are preparing the support legislation.

The question of proceeds from privatisation has been asked by my comrades from the United Russia party.

Of course, these revenues should be taken into account, but they are very difficult to estimate. You can understand: the market changes, something can be sold for reasonable money and something can’t, and then we are forced to delete a property from the privatisation list. Our deal on Sberbank has been postponed twice for these reasons. In the long run, we obtained good results last year and made 160 billion roubles. The question is, when to sell.

It is another thing that the privatisation rules and the Government’s plans should be calculated in advance. Information about any meaningful deal should be available for public discussion and evaluation. We have such a programme for several years to come.

Second, government spending should be more concerned with investment. The priorities here include investment in education, healthcare and infrastructure as well as creating stable and effective demand for innovation derived products and services. Here we need to use the public-private partnership mechanism in every way.

The main resources are allocated through state programmes. There are 40 approved state programmes to develop key branches of the economy and social affairs. I would like to stress that the state programmes are not a mechanical mix of federal targeted programmes, as they may sometimes seem to be (the old federal targeted programmes are taken, put together and called state programmes). This is not the case. This is a new regulatory tool for implementing the Government’s economic policy. It offers investors (which is very important in my view) long-term prospects and guidelines to 2020. This year, for the first time, based on the state programmes, we will approve and submit for your consideration, colleagues, a mid-term programme-related budget.

Of course, and I agree here with people from a Just Russia that we need to carefully monitor all these programmes and better control budget spending. That’s self-evident. We are looking to your help and criticism needed in some or other cases.

Third, a stable and predictable tax system is of prime importance for a long-term investor. I have said time and again that we are not planning to increase the tax burden on business. May I remind you of last year’s decision to abolish the tax on corporate non-fixed assets. This is an additional incentive to renew fixed assets. As for taxing luxury items, this is a different matter. Appropriate decisions are in the making on cars priced over five million roubles, by increasing transport tax on them by several times. The Government has already submitted the relevant draft law to the State Duma.

Tax revenue continued to grow last year. The consolidated budget received 12.5 trillion roubles – an increase of 10%. But ladies and gentlemen, we should take a realistic view of things: the possibilities for increasing revenues will be greatly restricted in the near future. This is due to several reasons, including the issue the Russian Communist Party was discussing. The shortfall in taxes as a result of using low-tax jurisdictions is doing damage to our economy. We are aware of this problem and are addressing it.

In addition, we must ensure greater transparency for international cash flow not only inside our country. The G20 has already adopted the appropriate decisions. These rules are also being formulated within the OECD framework, in keeping with what are called the Basel decisions (adopted by the Basel Committee) and the International Association of Insurance Supervisors.

In our country a special federal law on transfer costs has been enforced since January 2012 (the Russian Communist Party question also refers to this) which establishes criminal responsibility for incorporating a legal entity with fictitious names and illegal documentation. These measures should generally pay off. Speaking of capital outflow, it is still very large. True, it has fallen since last year, it has also dropped by a decent margin compared with 2011, but in countries with comparable economies this kind of outflow doesn’t exist and it means something is amiss in our country. We should further improve legislation as recommended by the Financial Action Task Force and other international organisations.

Fourth. We are interested in more liquid financial markets and expanding the number of investors, including through simplified access and increasing the free circulation of shares issued by Russian companies. We’ve started to establish a single regulator around the Bank of Russia as you know. We’ll also carry on the efforts to set up an International Financial Centre. This is a far from simple job, but it is useful for the country in any case, and I hope we will succeed.

Fifth. The year 2012 – the first year of full operation of the common economic space – saw its basic agreements come into effect. Preparations for the second-tier of inter-state documents are making good progress.

The troika of Russia, Belarus and Kazakhstan is already using a common tariff, non-tariff and customs regulation system. As many as 90 functions and authority in different fields of state regulation have been delegated to the supra-national bodies. These are no simple problems, but we are trying to grapple with them in one way or another.

Last year Russia became a full member of the WTO. The accession talks, I wish to remind you, lasted 17 years. Our objective now is to make effective use of the opportunities and at the same time try to relieve problems that are inevitable when joining the WTO.

Less tariff protection and greater competition from foreign producers are, of course, creating difficulties for individual industries and some companies. These troubles were foreseen and factored in. We analysed them during negotiations and are now conducting the appropriate monitoring.

There is still work to be done in adapting separate industries and enterprises to WTO conditions. This work is running smoothly and I hope the Ministry of Economic Development and other ministries will work it all out. Talks are also continuing on Russia’s accession to the Organisation for Economic Cooperation and Development.

Now I would like to dwell on an objective whose fulfilment is essential if we are to hold out in the competitive struggle in international markets and in the international arena – it is the building of a modern state accountable to its citizens. Here the Government’s thrust is three-pronged.

First, this is, of course, increasing the effectiveness of the state machinery. We now have a system for making public the information about drafted regulatory acts and the results of their public discussion. All this is to be posted online. There is a fixed list of data that must be placed on the web starting in July of this year by state and local government bodies.

Responsibility for the fulfilment of federal targeted and state programmes will, of course, remain with heads of the ministries and government departments. The Government will only examine the progress of implementation at its meetings. 

A system of anti-corruption measures has been created within federal departments, and methods recommended for watching that the employees observe bans and restrictions.

If a broader view is taken of the anti-corruption campaign, then it is highly important that every branch of administration should take part in this work, from the President, the Government and parliament to the municipalities and, of course, the judiciary. This kind of struggle requires a serious effort and, of course, time, especially since schemes to bypass the law will always be a threat. They simply need to be exposed in a timely manner and those responsible punished.

In principle, corruption is to a considerable extent a state of mind, and not just a violation of legislation. May I remind you that we have created a regulatory base for fighting corruption from scratch – this was done over the past several years. This base must be constantly improved, and the State Duma is actively working at it. The Government has recently submitted a number of anti-corruption draft laws to the State Duma and I would like to draw your attention to them. In particular, judges must be obliged to report on all non-procedural violations in the cases they are reviewing (and there are many applications – from officials, deputies and entrepreneurs. But they are registered all over the world to avoid reproach, although this is not an easy task). We should also regulate procedures for subjecting judges to disciplinary action. Experts are drafting proposals to expand access to information on online court hearings and for tele-broadcasting them.

The federal targeted programme on the development of the judicial system provides for stage-by-stage equipment of courts with audio and video recording devices. This should be done by all means and not only in Moscow or at the Supreme Court level.

In addition, now all government draft regulatory acts are subjected to specialised expert review. Government officials are now obliged to declare their incomes and major expenses. Russia has joined several international anti-corruption conventions.

Government services are the second area of improving the state machinery. I’ve said on more than one occasion that the modern state should be open and friendly to the people and its actions should be prompt and effective. We are introducing the one-stop principle to this end. We are establishing multi-purpose centres that provide government services. There are more than 600 of them already operating in 71 regions. I’ve visited them more than once and I can tell you that it is much easier to receive a service there (at least this is my impression). It would be good to have them set up in all regions in the near future.

It is no less important to develop online services. It is now possible to receive more than 700 services of federal executive bodies through the unified portal.

One more new feature of the Government activities is open work with experts, business community and civil society. Open work is important in itself, but it is also important to back it up by specific actions.

The Open Government was formed in 2012. This is a new mechanism for implementing state policy. The Expert Council is also working. It consists of 500 highly qualified experts with the most diverse political and economic views. Now the council must present a second report on major issues at each Government meeting.

We have been working on a very complicated issue: a law on industrial safety. It has allowed more than 100,000 real economy enterprises to avoid unnecessary checkups. I think this is a good example of work with experts.     

Ladies and gentlemen, we understand that we need large-scale investment, new production lines and economic growth to reach the state’s main goal of upgrading living standards. These standards depend on many factors: education, use of the professional potential, medical services, housing conditions and environmental safety.

We live in an era of globalisation, when the issue of self-identity is becoming increasingly important for each nation. Our community and our distinctive character are based on our culture. This is directly connected with the nation’s belief in itself and a decent future, and ultimately with progress.

The state programme on culture and tourism was endorsed last year. It provides for a stage-by-stage increase in the salaries of cultural workers, the expansion of the grant programmes for young specialists in this sphere and the formation of multifunctional development centres in small and medium cities. I think this is very important because for some reason we associate culture with capitals or regional centres only, although it is a multi-dimensional notion. It is vital to ensure equal access to the country’s cultural treasures by using information technology. A unified portal – culture.ru – was created last year for access to museums and cultural heritage sites.

Development of domestic tourism, especially for children and young people, is yet another important area. Four hundred cultural and educational tourist programmes are currently being drafted.

Another indicator of the nation’s health is care for the weak and unprotected. I’d like to speak about the problem of orphans, which has been particularly urgent in the last few years.  The public custody system numbers almost 120,000. But I’d like to say right away that no government measures and no comfortable, modern orphanages for children can replace a family. All of us are clear on this.

Over the past year, 44,000 parents were deprived of their parental rights for various reasons. We should try to change this situation. This is, if you like, a national mission: a country with a rich culture and long-standing traditions of charity is capable of achieving these goals on its own. Importantly, such issues should be dealt with not only by the state, but also by social and business organisations and citizens. The National Strategy of Action for Children creates a good basis for this. It has been discussed by the Open Government and at other forums. In accordance with the decisions taken by the President and the Government, rules have been established that make it easier for Russian citizens to adopt children. This is especially important for those who have already raised or are raising adopted children. It is important to make state support more effective, and in order to do that it’s important to improve the federal laws. Here we are also counting on the support of the State Duma deputies. We have just submitted three draft laws on financial support for adoptive parents and guardians, which set out the responsibilities of guardianship and custodianship agencies to provide social, medical, psychological and educational support.

I agree with the opinion of the deputies, and our colleagues from the Communist Party have also mentioned this, that providing housing to young adults when they leave an orphanage is one of the most pressing problems. This problem is real and is being addressed very slowly. Last year, subsidies in the amount of over 6 billion roubles were allocated from the federal budget, and another 16 billion came from regional budgets. As a result, 23,000 young people received housing, which is not bad, but we need to do more to speed up the solution to this problem. When I was trying to figure out what this problem looks like in different regions ... It looks very different: some regions are planning to spend money on this, and then it becomes their priority, and orphans receive housing, Others aren't. It really is a matter of choice of our colleagues from the regions. I think that they should all be playing by the same rules.

We are also paying close attention to people with health restrictions. Let me remind you that last year Russia ratified the Convention on the Rights of Persons with Disabilities. The state programme Accessible Environment has been approved. Its goal is to provide decent conditions for disabled people on public transport, in the streets, in public places, stores, theatres, and government buildings as well. A law has been adopted designed to ensure ongoing inclusive education for disabled people. The amount of social benefits for disabled people has risen, albeit not by much, and monthly payments to parents or caregivers who take care of disabled children are up as well. We plan to create 14,000 new special jobs each year in the period 2013-2015. As you may be aware, by 2015, the level of employment among people with disabilities should be two-thirds of the average level of employment for all categories of citizens.

Social services are another issue. The state social support programme has been approved. The draft law On the Basics of Social Services has been put together and widely discussed and submitted to the State Duma. I would like the deputies to pay close attention to this document, because it lays the foundation for the future of this sector and affects the interests of more than 34 million of our citizens, primarily, the elderly, war veterans, the disabled, families with children and people who simply find themselves in difficult situations.

With regard to pensions, after a long public discussion, the Government approved the Strategy for the Long-Term Development of the Pension System until 2030, and formulated new approaches to forming and calculating the retirement pension. The issue is not only about ensuring the rights of retired people, but also about taking more account of the salary and the length of employment in such calculations.

Moreover, everyone needs to understand that a decent pension can be based only on official salaries, excluding any kind of semi-legal schemes. I believe that the pension formula should encourage people to work under legal labour arrangements.

Colleagues, we have discussed the extremely high-profile issue of the retirement age, and decided not to raise it, taking into account the current situation in our country. At the same time we need to try to make it profitable for our citizens to continue working after they reach retirement age. We want to encourage people to lead an active life after they retire. Pension readjustment mechanisms will also be preserved.

And now regarding housing. In 2012, over 65 million square metres of housing was built, which is a 5% increase on 2011, so there is some growth. Around 700,000 mortgages were issued, but this does not cover the existing need. The question is: how are we going to solve the housing problem, from the development of which markets? Surely this should be regular housing construction development, cooperative construction and the building of rental housing. Our targets should be low-income people since high-income citizens have long sorted out their housing problems, and we are also aware of that. These problems can be solved by increasing economy class housing and lowering mortgage rates. That is no easy task.

I was, if you like, at the birth of the Affordable Housing project which we launched in 2006. Unfortunately, I'd like to note that we didn't really succeed in setting up a modern mortgage market. Mortgage rates are still pretty high despite the reduction in the rate of inflation. We have to make concerted efforts to remedy this situation and bring it up to a modern level in line with Russia’s economic potential. Last year a draft law was submitted on amendments to the Housing Code and other legislation governing non-profit leasing, construction and management of rental properties.

The state offers social benefits for the acquisition and construction of housing to young families, scientists, teachers and doctors, young professionals, those who have gone to work in rural communities. Overall, 25 billion roubles have been allocated for these purposes. As we promised, the programme of providing housing for veterans of the Great Patriotic War is nearing completion. In addition, 40 billion roubles have been transferred to the savings and mortgage system for military personnel.

There is one more social programme that creates a lot of concern, including among our colleagues from the Communist Party, that is relocating people from the Far North to the mainland. The resettlement is taking place using federal and regional funds, and also those of large enterprises. It requires a lot of money but we cannot neglect the problem. We will not able to solve it within the coming year or two. I shall issue instructions to the relevant ministry to prepare additional proposals on this matter.

And now about the problem that most of our citizens (well at least half of them) consider to be the most urgent: housing maintenance and utilities. People are indignant, and rightly so, at the price levels and the increases in payments which are more often than not unrelated to any improvement in the quality of the services; at the worn-out infrastructure, hazardous dwellings, rusted pipes, entrances and stairwells in a horrific, depressing condition. Naturally these problems must be solved in a systemic way, taking into account people’s opinions.

In 2012 the Government identified a list of minimum services and work necessary to properly maintain a residential apartment block. The document, by the way, was widely discussed. It includes over 100 operations to be carried out by the managing companies. According to the document, the relevant bodies and tenants should sign a contract and it is to be strictly observed. A draft law on self-regulation prepared with the Government’s participation has also been submitted to the State Duma. I hope when adopted these rules will finally bring order to this area, or at least contribute to it.

A few words about attracting investment. The Fund for Supporting Housing Maintenance Reforms was given the right to subsidise investors’ interest rates. At the end of last year a law on the long-term regulation of tariffs was passed. This is important for investors who want to be sure that operating conditions will not change in the coming 5 or even 10 years.

The State Duma is also considering a law on concessions. A set of measures has been approved on demolishing hazardous/run-down housing.  The Fund was allocated about 160 billion roubles for this purpose. The work on dilapidated housing (there was a conversation with the President about this yesterday) will be extended until 2018 in view of a large volume of accumulated works. In general, I’d like to say, going back to that problem, that this mechanism proved to be very popular, and I must admit it appears to have been a success. May I remind you that we designed the fund to last for just a few years, but no matter where I went, no matter what the region, I met with governors, and each territory’s leader then said to me, “You know, we need to renew it for sure.” People have expectations and the mechanism is working, and therefore we will continue to act.

Our colleagues, members of the Just Russia party, are concerned about whether the regions will be able to fully co-finance the programme to overhaul housing in the short term. This is indeed a problem, and I must admit, I too have repeatedly discussed it with our regions – all of which, of course, want to change the ratio. On the other hand, we must take into account the existing provisions of regional finances themselves. But now the fund is entering into appropriate agreements with the regions, about which there is still an ongoing debate. We will look into this and identify the optimum ratio based on the resulting feedback.

A key objective is to make municipal infrastructure more energy efficient. The current state of affairs is still entirely unfavourable, but there are the beginnings of a new, modern, energy efficient municipal structure. In Biisk, Altai Territory, the first energy-efficient district has been built, and the latest technology was used there. This is a good example for colleagues in other regions to follow, because such examples help resolve problems.

This year has been declared the Year of Environmental Protection. We need to reach a new level of understanding of the issues and the necessary level of environmental education. There has been a huge, incomparable amount of environmental damage, and work to repair it cannot be postponed. About 15% of our territory is in poor condition, and considering how large the Russian Federation is, the magnitude of the task is clear. This damage has not accumulated over just three or five or seven years – it has accumulated over decades, and we need to address it without fail, because each year the situation in many areas continues to deteriorate. We are going to do this as part of the programme I mentioned.

One of the most pressing issues is road accidents. I won’t speak at length on the subject. I know about the discussions that are underway in the State Duma and about the different approaches. Nevertheless, I believe that we need to move in the direction of supporting bills that increase administrative penalties, because, unfortunately, the numbers are very bad. And everything I'm talking about shows that things are improving, but in a variety of seemingly ordinary things, we have regressed. But why are there road accidents? Of course, there are more cars, but have we really become less civil? “Probably, yes,” our colleagues say. So, if we are indeed less civil, we have to adopt resolutions on the compulsory enforcement of civility, as well as resolutions on liability. I believe that we'll talk about this some more in the course of answering questions. In any case, liability should be unavoidable and should not depend on the social, property or official status of the person who violates the rules of the road.

A few words about sport. We have momentous events ahead of us. We have appeared at other major competitions. Let me just note that in 2012, 235 new facilities for mass sports were commissioned, which, of course, is the basis for future developments. The first ever specialised training base for athletes with disabilities opened – the Oka republic-wide training base. I would also like to mention the joint project of the Ministry of Sport and the United Russia party – 124 sports and recreation complexes have  to be  furnished with equipment. This is what is left for the future.

Future sports events – the Summer Universiade and the Sochi Olympics – have, of course, had a serious impact on development. I will not list what has been done. The main thing is to act the right way, but it is even more important that this post-Olympic legacy works for the entire country.

It’s a long report. This is the first time I'm making it. I can only say that even in the report, which lasts 1 hour and 45 minutes, it is impossible to show all of what we were doing. Yes, we have different approaches to many problems, but we’re doing it together.

Colleagues, I have endeavoured to tell you about the activities of the Government for the first partial year.

We live in a dynamic, rapidly developing world. It is so global and complex that sometimes we cannot keep up with the changes. We, on the other hand, we live in a society with enormous possibilities. We have a country that is strong and comfortable for living, so we will, I hope, all see the Russia of tomorrow. But these are all generalities; the development of the state consists of daily progress, the work of each of us, and it depends on our faith in our own strength, our ability to utilise our skills, to justifiably defend our point of view, to respect the opinions of others and, of course, our responsible attitude to our country and our colleagues, and simply to our families and by extension to our homeland.

Thank you for your attention. I am at your disposal to answer questions.

 <…>

 

Dmitry Medvedev: Ladies and gentlemen, first I’d like to thank the heads of the parliamentary parties for listening so attentively to my report and for their emotional statements. I hope I didn’t bore you, because such long reports are difficult for the audience, but I still want to comment on the statements made by the party heads. I agree with some but not all of them. Anyway, I want to say that the Government will definitely benefit from such a thorough analysis, even if it may be sharply critical sometimes, because it’s during these kinds of meetings that we formulate our position. We should coordinate our stances on various issues, because we are responsible for the country. I said this at the beginning of my report, and I want to say it again.

I am pleased that Mr Zyuganov quoted what I said several years ago and also Vladimir Putin’s words, which means that even members of the opposition parties take note of what we say.

I fully agree that a development model based on raw materials has driven our economy into a dead-end, as has been said more than once, and that our goal is to abandon this commodities-based model. If you can propose a way to accomplish this within a few years, I’ll suggest nominating you for a state prize, because we don’t see a simple solution.

We only have ourselves to blame for this commodities-based model of development, as well as some of our political predecessors who have been implementing it over the past 40 years. As a result, we have become heavily dependent on hydrocarbons and it will be very difficult to get past this dependence considering that we have achieved a lot in this area. Yet we must do it, and I fully agree that we must do it as soon as possible.

Regarding the general economic indicators, which Mr Zyuganov and others mentioned, including Nikolai Levichev, this issue concerns more than just our assessments. Some say that Russia can’t be compared to the United States or Germany, whereas I believe that we must compare ourselves to them. Why can’t we compare Russia with these countries? Should we compare it to North Korea? Then things will look just great.

Like it or not, we have an open market economy and so should compare our achievements with these countries, where people live better than in some other countries, which our colleagues suggest as a role model. This is where we should look.

And now I would like to say a few words about privatisation and profitable and unprofitable sales. We are all adults here. No one sells anything for three kopecks. Anyway this has never happened, and won’t while United Russia, this President and this Government are in power. Assets are sold only when it’s profitable, and based on the right market conditions.

As for claims that all our companies are registered in foreign countries, this is of course, not so, but the problem exists. Russia and the rest of the world face this problem. Therefore when they speak about the de-offshorisation of the economy… Not only does the Russian economy face this challenge (I didn’t have time to respond), but most countries have the same objective. Everyone is now very critical of Cyprus, but I would like to ask a simple question: Why did the European Union admit this offshore economy into its economic system, so to say? Did they fail to perceive the possible consequences? Or did they consider this to be profitable for some reasons?

All I want to say is that every well developing economy will have to take the same road, and they will have to create favourable conditions for the development of their companies. Furthermore, they will have to create incentives allowing these companies to deposit money in domestic banks and to register in their respective home countries.

Unlike others here, Mr Zyuganov (Gennady Zyuganov) has criticised the pension scheme. You are quite right in criticising this scheme. But I would like to know if you’ve seen the scheme.

Gennady Zyuganov: Yes, I have.

Dmitry Medvedev: But I haven’t because it hasn’t  been finalised yet. Of course, it’s easy to criticise something you haven’t seen;it would be better to look into things properly first. There are some concepts for a possible scheme, but there is no final scheme yet. However, I sincerely invite you and my colleagues from the Communist Party of the Russian Federation to discuss this scheme with the Government because the prosperity of millions of people really depends on the essence of our scheme. But I would like everyone to bear in mind that this scheme still does not exist as of today.

Various approaches have been stipulated during the creation of this scheme. Of course, we will focus on work records, wage levels and other factors, while compiling it. The specific parameters of the scheme will depend on the results of our work.

Our Communist colleagues have submitted a number of proposals dealing with those involved in participatory construction projects. There are various lists, and we have about 70,000 … I will certainly look into the matter myself, and I have instructed the Deputy Prime Minister and the Minister on. In effect, we have two options for addressing this issue. We can find regional, municipal and probably federal money to pay compensation to those who suffered from this, where we can.

In my opinion, the second option is also quite good. Under this option, construction sites would be allotted to legal entities in decent areas free of charge. And an interest in these properties would be transferred to those involved in participatory construction projects who have lost their property. I believe that this option makes sense. I would like you to support it if possible.

I believe a Prime Minister’s report gives us an opportunity to learn what our colleagues think about the Government and about Government members. This is normal. But I would just like to point out that nobody is perfect.

You used the expression “hereditary grain-grower.” It is probably possible to use this expression, but I would like to note that you and your colleagues were not bred  to work in the State Duma. None of you are a Russian JFK who was born into a wealthy family and who received a privileged education. This means that you have effectively mastered everything yourselves. This work requires certain skills. Let’s hope that everyone sitting over there will also learn these skills. I would like to point out that some of you have been working in your positions for a relatively short time. But this does not mean you shouldn't show what you are worth. Of course, this is not so. 

And the last thing I would like to say. The Government is ready to start constructive work on all the issues you mentioned. I am referring to what Mr Zyuganov and our other colleagues said.

Mr Zhirinovsky spoke about the housing and utilities sector, prices and monitoring, but I mentioned this in my report. I agree that the situation is not easy at all. We are planning to spend a lot of money. At the same time, the difference in prices is quite significant and people aren’t happy. We need to create modern legislation and burn everything connected with corruption here with red-hot iron, because corruption in this sector has reached cosmic proportions. I do not mean that there are million-rouble or multi-million rouble bribes, but negligence in this sector gives a general picture of how things work there.

As for roads, an issue which Mr Zhirinovsky mentioned, I don’t know, but I think that some roads are operational, no matter what has been said here. And Chita-Khabarovsk seems operational. I think everyone should just take a trip and asses the quality of the roads for themselves.

Regarding the “degree of responsibility” Mr Zhirinovsky was talking about, I can’t but agree. Let us raise this degree of responsibility on all levels of political power, at least to 40 degrees, or even higher. We can raise it higher if you wish.

The Customs Union. There are some outlays involved, of course, we understand this, but it was our deliberate choice of this kind of integration in order to build a new economic space. I’d like to emphasize that for Russia, for Kazakhstan, and for Belarus the establishment of the Customs Union and a Common Economic Space has led to an increase in mutual trade volume. Growing exports from Russia and imports from our neighbours to our markets – this is the objective we wanted to achieve. And I am not talking about negligible growth – in some cases growth has reached 15%, 20%, and 30%. Is this not the advantage of integration? We will improve our cooperation, of course. There is always a lack of money.

Mr Vasilyev spoke about ambitious programmes. Regarding the Far East, some aspects we have discussed today, but just so that you understand the whole picture, we calculated the total costs involved.

The minimal level of expenditure planned until 2017 as part of the federal targeted programme, which is part of the state programme, is 100 billion roubles a year. This is the absolute minimum. And the total consolidated expenditure, when taking into account what our companies must spend, is over 10 trillion roubles.

This means that we must generate new sources of income. But this is not done by Mr Siluanov (Anton Siluanov, Minister of Finance)and Mr Belousov (Andrei Belousov, Economic Development Minister) and not your humble servant alone. We must all work on this, we must do it together. Only in this case will we be able to allocate additional funding to the Far East, to the North, to the centre of Russia, for the development of agriculture and industry. Money does not just come out of thin air. Probably it is easier for our US colleagues who turn the printing press on and print dollars. We have a more difficult task. Let us create a currency equal to the dollar (if we do this, then we will be able to turn on the printing press). We need it to be equally attractive. And for that, we must create our own financial centre and reserves so that other countries will be willing to make their savings in roubles. If this happens, it will be an indicator that our rouble has become globally competitive.        

I'm addressing everyone here once again: we will continue working with municipal councils to find additional sources of revenue. I also would ask you to support the Government. I’m referring not only to United Russia members, but to all other parties as well. I think this is very important. And the figures I spoke about, we need to find them.

There was another question which I have to comment on. The Ministry of Transport discussed the issue of international unified technical inspection certificates for vehicles. I think this a good example of constructive criticism and good cooperation, because there are always pros and cons in such discussions. We are abandoning bilateral agreements and are adopting international agreements. Some of our organisations lose some money, the cargo volume increases in some places and remains the same in others. We need to think about this and make the best decision. I’m glad that the State Duma has discussed this with members of the Government. Let’s hope that our participation in international agreements will have a long-term positive effect.

I also fully support what I discussed with my colleagues from United Russia: a pre-political discussion. These are issues the Government will pay attention to. This is very important.

Another subject, highly discussed in the State Duma, is the issue of the pro mille level. I need to say that my position remains the same – one must not drive after drinking alcohol. This is harmful and dangerous, and we need to make it clear that drinking is not compatible with driving. It was prohibited in Soviet times, but then we somehow decided to join the other half of the civilised world. The problem of the margin of error (we did not have this problem before, maybe the accuracy of the measuring tools has changed) – we can formalise that in the case of controversial situations. But then, colleagues, I have a simple idea: let’s find the minimum allowed pro mille level, maybe about 0.1. This is possible and will not shake the general approach.

Remark: Winter time?

Dmitry Medvedev: Winter time? Okay, this doesn’t sound like a proper parliamentary question, but I will respond to it.

Colleagues, you are all experienced people and politicians, and understand that everyone has his or her own opinion. All surveys show that the split is practically fifty-fifty. Some people find the existing time schedule inconvenient, some people like it. I get a huge number of messages through social networks, saying “please don’t change it again.” Most of these people live in provincial towns, in the villages. I think we shouldn’t change it over and over. The Government has outlined its position on this issue. Let’s wait and see how it goes, but I don’t mean to say that this issue is over.

Mr Levichev has said that the Government is operating in very comfortable conditions. I think this is how it is in other countries. All over the world, governments are supported by a certain political force it finds comfortable. When the political alliance breaks up or this political force leaves power, the Government loses support. There is nothing too uncomfortable about this, and this is very natural, as are ongoing discussions about the party and the Government. I think we need to achieve such a parliamentary system. For obvious reasons, a government, supported by a party, is more responsible than a government that is politically uncommitted.

We said that some figures can’t be verified. Colleagues, I think we should leave this issue to the experts. If you don’t like something, you can check it, hold seminars, ask experts. But you can’t just say, “this report has a bunch of figures which cannot be verified…” This is a weak argument, I think, and it’s better to prove that a certain figure is wrong than just saying there is something wrong with it. If we made a mistake somewhere, we will appreciate it if you point that out. But as Prime Minister, I am personally responsible for the figures in my report.

As for the forecasts, I’d like us to discuss again what the means of development are for the global economy. I’m sure that this year is going to be difficult for all counties, including Europe, the United States and China, because of certain events taking place in the global economy and the global financial system. As for Russia, we have a choice: either just watch how the world economy is developing, or somehow try to prevent some consequences of its development, or try to find an additional boost for our economy. This is a choice that the Government and the President need to make, and take corresponding decisions.

It has been said that the salaries of doctors and teachers are decreasing. Well this is not true, it’s the other way around. I understand that we all have our own political views and goals, but we can’t just make things up. This is simply not true. I want us to appreciate the political result we achieved. The quality of life and salaries are improving, otherwise I wouldn’t be standing here and other people would be sitting in this hall, some other government. That’s about it.

Colleagues, I’d like to sincerely thank you all again for your patience, for sitting through this four-hour report. Thank you for your constructive and not always constructive criticism, which is also necessary to keep you all awake. I hope for further cooperation. Thank you very much!

Sergei Naryshkin: Thank you, Mr Medvedev. On behalf of the State Duma deputies, I’d like to thank you for the detailed and comprehensive report on the activity of the Government, and for answering our questions. We heard many remarks that were both supportive and critical today. Well, this is natural, because the parliament is supposed to keep the Government on its toes. It is important to keep a decent political dialogue, though. And it is also important that both the deputies and Government members understand that the effectiveness of economic and social policy depends directly on cooperation between the legislative and executive authorities. We wish success to you and the Government you head. Thank you very much!

Dmitry Medvedev: Thank you!