Vladimir Putin's opening remarks:

Good afternoon,

Today we are holding the first meeting of the Government's Regional Development Commission, which has been set up recently.

I would like to remind you that it was established to look into strategic and practical issues of regional development and to recap and share the successful experience gained by individual regions of the Russian Federation. I view the Commission as an important tool for increasing the effectiveness of cooperation between federal and regional bodies of authority. And of course, in the immediate future, its key objective will be to monitor the situation and help regions and cities solve problems created by the global financial crisis.

Speaking at the [recent] congress of the United Russia party, I mentioned the urgent measures that regional and local authorities must take to boost the economy and ensure social stability.

I repeat: our priorities must be the preservation and creation of jobs, support for entrepreneurship, and implementation of investment and infrastructure projects that promise the highest and, preferably, quick returns.

These are the issues the first meeting of the Commission will deal with today.

At present, there are 1,150,000 small and medium-sized businesses in the country. Together, they employ more than 12 million people.

There is an increasing number of small enterprises in engineering, science and technology which provide sophisticated intellectual services (information technologies, programming, etc.).

Polls show that large numbers of people, especially among young people, seek to try their hand at creating their own businesses. In the ultimate analysis, it is such energetic and purposeful people that must form the core of a large middle class in this country. And the state's task is to help them realise their potential, build a reliable future for their families, and create new jobs.

Development of entrepreneurship is a strategic priority for our policy. I want to stress that the basic decisions on support for this sector of the economy were made long before the beginning of the global crisis.

In the recent period, we have made considerable progress in developing infrastructure for small and medium-sized businesses. Fifty-nine business incubators have been opened in the country, and 33 guarantee and 23 venture funds established. Twelve regions are implementing grant programmes for beginner entrepreneurs, and 25 more have launched micro-crediting programmes. And it is good that we should have taken care of such an infrastructure in time.

But the latest events are demanding more determined and more prompt measures from us, a concentration of greater financial resources in this sector. It is small businesses above all that are able to generate new jobs and new growth points. And generally they have an effective influence on the diversification and greater effectiveness of the economy. We badly need all this now.

In 2009, the federal budget will allocate considerable resources in support of small businesses - 10.5 billion roubles. A further 30 billion roubles will be channelled through the Development Bank. I want to stress: control over the purposeful and effective use of these funds will be extremely strict.

In addition, the autumn parliamentary session must pass a law on eliminating excessive administrative barriers. The law also contains such a drastic measure as adoption of a declarative principle in opening up one's own business in such fields that are much sought by small businesses: public catering, retail trade, everyday services, and a number of others.

The Government is now working on a package of legislative acts to simplify access for small businesses to electric power grids. The idea is to fix a lower connection tariff for small facilities and introduce an instalment payment plan. We also need to organise a control system over grid companies to make sure they observe all the established connection rules. We will try to pass the necessary decisions as quickly as possible.

Measures being adopted at the federal level will not be effective unless they are backed and pursued on the ground. Especially since support for small and medium-sized businesses is the direct responsibility of the regions and cities.

Above all, it is necessary to ensure impeccable implementation of federal laws. And in the first place, to complete the lists of federally- and municipally-owned premises for rent to small and medium-sized businesses. The lease terms must be stable and not burdensome, allowing the entrepreneur to plan his or her activities for a longer period ahead.

Wherever advisable, businesses should be allowed to buy out the properties they hold on the most beneficial terms possible. For example, payments should be spread out over a period of at least three years.

Secondly, small and medium-sized businesses should gain real access to municipal and regional orders.

I am talking here about businesses that are run efficiently, not the ones that have the protection of local officials.

Third, as I have already said, federal authorities are going to simplify power grid connections for small enterprises. Similar steps should be taken on a municipal level to give access to other utilities, and above all, to water supplies.

Fourth, a week ago the President signed a law allowing the Federation's constituent entities to reduce the small-business tax rate from 15% to 5%.

I believe that regional laws implementing this right could be adopted this year and come into effect from January 1, 2009.

And, of course, we expect that constituent entities and municipalities will put together their own programmes of support for small and medium-sized businesses, since they are more familiar with real problems and requirements in each specific region or town.

And now a few words about another subject of our meeting, namely, regional industrial zones. I am talking about an investment mechanism for creating new industrial enterprises and complexes, including the provision of sites featuring all the required engineering infrastructure to potential investors. This makes it possible to organise production more quickly and easily.

The experience of some regions, including the Leningrad, Kaluga and Yaroslavl regions and the Republic of Tatarstan, shows that such sites generate synergy in the sphere of business development. In effect, the appearance of one or two major investors, such as an automotive plant, creates thousands of small production facilities, such as auto components suppliers, service providers, etc.

Regional industrial zones effectively supplement the following economic-diversification mechanism, namely, special economic zones being created under a federal law.

Today, I would like to discuss opportunities for popularising the successful experience of creating such industrial zones with you.

* * *

In conclusion, I would like to raise another issue. As you know, we have decided to reduce the tax burden still further. Last week, the President signed the relevant bill.

We estimate that the budgetary system will, at most, lose 550 billion roubles ($19.6 billion). In reality, such losses will be smaller. These resources, including 80% worth of federal budget allocations, will remain inside the economy.

Although our estimates show that consolidated regional budgets will account for 100 billion roubles ($3.6 billion), some analysts believe that their share will be 120 billion roubles ($4.3 billion).

As you know, I have just ordered the Finance Ministry to submit proposals for facilitating stable regional and local budgets.

I would like to acquaint you with several specific proposals. Regional budgets will receive an additional 0.5% of federal profit tax proceeds, or 50 billion roubles ($1.8 billion).

These allocations will also be channelled into regional budgets. Moreover, regional budgets will receive 100% of petrol, oil and lubricants excise tax proceeds.

The latter system will apply in all the Russian Federation's constituent entities and will account for another 53-54 billion roubles ($1.9 billion).

As I have already said, these measures are expected to channel another 110-120 billion roubles ($3.9-4.3 billion) into regional budgets. All these estimates are based on real macroeconomic parameters and are subject to change together with such parameters.

But our losses will also change accordingly. Consequently, there will be adequate compensation. In effect, your additional proceeds must match missed revenues.

Moreover, the Finance Ministry has proposed channelling another 18.4 billion roubles ($657.1 million) from the regional budget balancing fund.

I would like to thank the press. Thank you very much.