Opening remarks by Mr Putin:

Good afternoon, colleagues.

On our agenda today are items concerning the development of railway transport, the effectiveness of administration in the regions, and some issues of international cooperation.

But first I'd like to refer to a draft law we must examine that will raise pensions. The law provides for a base pension increase starting from March 1 of next year by 8.7%, and from December 1 to 2,460 roubles a month, that is, by another 26.15%. All in all, we plan an increase of 37%.

As a result, by the end of 2009, the average social welfare pension must be not lower than a pensioner's cost of living. This objective was set forth a long time ago. And we will fulfil it within the declared timeline.

Of course, the insurance part of the state pension will also be indexed in 2009: by 15.6% from April 1.

Now about the other items on the agenda.

We have been reforming railway transport since 2001. It was then that the federal programme was approved and its main stages outlined. Today two of them have been completed. Specifically, we have set up the joint stock company Russian Railways, and independent operators have agreed to manage the freight market.

Today, in the third stage of the reform, the main objective is to lay out a competitive market for both freight and passenger rail service. The idea is to ultimately divide the functions of state administration and economic management on railway transport, to improve tariff regulation, provide equal access to infrastructure for independent carriers, create commuter passenger companies and a Federal Passenger Company that will administer long-distance service.

By the way, as many as eleven suburban commuter companies have been established in several Russian regions, with another twelve currently under development.

I would like to emphasise that these railway transport reforms were phased in from the very beginning. Decisions were made after thoroughly studying all possible alternatives and consequences. The quality and effectiveness of the reforms matters more than the pace, nevertheless, the latter should be kept in mind. We should pursue this approach in the future.

The Russian Railways' investment programme is being drafted under challenging circumstances, and we are well aware of that. The global financial crisis has led to a decrease in freight traffic volume.

Nevertheless, I believe we should keep the key parameters of our investment plan. We should take into account the natural reduction in construction costs due to a decline in materials prices, i.e., steel, cement, etc. Corresponding calculations are almost complete.

In addition to railway reform, today we will consider a report on the effectiveness of the local government activities in Russian regions.

The purpose of this work is to carry out an unbiased analysis of the state of affairs in the regions - to encourage the most efficient governments, to assist local bodies of authority in pinpointing shortcomings in their work and prompt solutions.

The assessment criteria critical to most people include income growth, the state of education, healthcare, housing and utilities, and a region's investment attractiveness.

Assessment results will be covered in detail in the Regional Development Ministry's report. I would like to list pivotal provisions only. In recent years considerable changes have taken place in the social area, particularly housing and utilities. As a rule, the more actively a local government introduces new approaches, the higher are doctors and teachers' salaries, and the quality of social services.

That means the models recommended by the federal Government are justified and received practical approval. They have been applied, as I have mentioned, as part of implementing national priority projects.

However, not all the regions have launched these reforms. Judging by the results of 2007, only seven regions have introduced insurance-based principles of payment for medical care. As few as 26 regions completed the transition to per capita based school financing. Construction permits can still take half a year to receive, and sometimes even longer. In ten regions this waiting period was actually increased.

In the Stavropol Territory the time required to process a construction permit takes seven months, in the Vladimir Region - ten months, in the Saratov Region - one year. Other results are actually no better.

I recently chaired a meeting with heads of oil companies, where I raised this question. Unfortunately, the State Duma hasn't adopted the relevant package yet. It currently takes two years to obtain a permit to launch works! Even if you already have a license! Do you believe this is the way things should run? As for construction, the situation is no different. Unless we change the process now, the consequences will be considerable and serious.

Analysis shows that some 440 billion roubles of local budgets were spent ineffectively in 2007, which accounts for almost 10% of all public expenses. If more effort was put into carrying out the reforms, these funds could have been spent on raising wages for budget-dependent employees, or on investments.

I would like to stress that we are not trying to preach at local governments about the way they should operate. According to the Constitution and the law, it is their domain. They can choose priorities and the pace of reforms independently. However, it is the federal government's prerogative to allocate financial aid to regions in accordance with a local governments' efficiency. And we will certainly take advantage of this right.

This year as many as 20 regions, that have achieved high results, will receive a bonus of two billion roubles from the federal budget. The regions are free to determine priority tasks for using these additional funds.

In addition, today we plan to discuss the ratification of several international agreements. The initiation of these agreements will launch the Customs Union of Russia, Belarus and Kazakhstan, namely the formation of a common customs territory.

I should add that Russia endorses developing CIS integration, including cultural ties. In 2006, we fostered the founding of the Interstate Fund for Humanitarian Cooperation. Today we will decide on making a voluntary donation to the fund. These funds will be spent on joint research, cultural and educational projects.

If there are no comments, let's get down to work. I would like Transport Minister Igor Levitin to take the floor and report on the first issue.