5 june 2008

Background material for the June 5, 2008 meeting

The following issues are scheduled for discussion at the Government Presidium meeting on June 5, 2008:

1. Results of federal budget implementation in the 1st quarter of 2008

In accordance with the Budget Code of the Russian Federation and the Resolution of the Government of the Russian Federation, entitled Provision to the Government of Quarterly and Annual Budget Implementation Reports, the Ministry of Finance has submitted a report on the budget implementation in the 1st quarter of 2008.

The federal budget revenue (including the Unified Social Tax) in the reporting period totalled at 1,932.7 billion roubles (22% of the preliminary GDP revenue estimate for the 1st quarter of 2008 - 8,796.0 billion roubles). The federal budget revenue without the Unified Social Tax totalled at 1,826.1 billion roubles (20.7% of GDP)

The federal budget expenditures for the reporting period amounted to 1,332.7 billion roubles (15.2% of GDP) or 18.3% of the adjusted budget spending targets.

The federal budget surplus in the 1st quarter of 2008 amounted to 600 billion roubles (6.8% of GDP).

The surplus in excess of the amount estimated in the forecast for the 1st quarter of 2008 made up 6.4% (or 115.4 billion roubles).

The main sources of federal budget revenue for the reporting period were the following: export duty (33.5%), value added tax (VAT) (16.4%), mineral extraction tax (19.1%), and corporate profit tax (8.7%).

The share of tax-derived revenue in the total federal budget revenue in the reporting period was 52.3%, the share of non-tax-derived revenue - 47.7%.

The tax-derived revenue of the federal budget in the 1st quarter of 2008 totalled at 1,010.9 billion roubles (11.5% of GDP), which is by 34.5 billion roubles or 3.5% more than estimated in the forecast for the 1st quarter of 2008. Most of the tax-derived revenue of the federal budget was received from the VAT proceeds (31.1% of the total tax-derived revenue), mineral extraction tax proceeds (36.5%) and corporate profit tax proceeds (16.7%).

The non-tax derived revenue of the federal budget totalled at 921.8 billion roubles (10.5% of GDP), which is 9.6% more than the revenue estimated for the 1st quarter of 2008. The non-tax derived revenue was mainly received from foreign trade proceeds. About 83.4% of the non-tax derived revenue was received from export duty payments.

Interest-free cash expenditures of the federal budget in the 1st quarter of 2008 amounted to 1,279.5 billion roubles or 18% of the adjusted budget spending targets.

Interest-based cash expenditures of the federal budget in the reporting period amounted to 53.2 billion roubles or 28.3% of the adjusted budget spending targets in 2008. At the same time, the foreign national debt service expenditures amounted to 27.3 billion roubles.

The total cash expenditures of the federal budget in the reporting period amounted to 1,332.7 billion roubles (18.3% of the adjusted budget spending targets in 2008).

The total budgetary appropriations in 2008 for implementing the National Priority Projects of the Russian Federation, in consideration of the budget funds balance as of January 1, 2008 (37.4 billion roubles), will amount to 238.4 billion roubles. They are broken down as follows: Agribusiness Development Programme - 2.6 billion roubles; Health - 109.9 billion roubles; Affordable and Comfortable Housing for Russian Citizens - 80.4 billion roubles, Education - 45.5 billion roubles. Cash expenditures for the National Priority Projects' realisation in the reporting period totalled at 23.1 billion roubles (9.7% of the adjusted budget spending targets), and accounted for the following: Health - 11.9 billion roubles; Affordable and Comfortable Housing for Russian Citizens - 3.1 billion roubles; Education - 8.1 billion roubles.

Cash expenditure enforcement for the federal targeted programs in the 1st quarter of 2008 totalled at 44.3 billion roubles or 6.3% of the adjusted budget spending targets.

Cash expenditure enforcement for governmental capital investments in the framework of the non-scheme-based portion of the Federal Targeted Investment Programme in 2008 totalled at 6.5 billion roubles in the reporting period or 2.9% of the adjusted annual budget spending targets.

Based on the results of the 1st quarter of 2008, the consolidated budget revenue of the Russian Federation and the budgets of the state extra-budgetary funds totalled at 3,334.2 billion roubles (37.9% of GDP); expenditures totalled at 2,335.9 billion roubles (26.6% of GDP), including interest-free expenditures - 2,276.4 billion roubles, and interest-based expenditures - 59.5 billion roubles. The consolidated budget surplus totalled at 998.4 roubles.

In the revenue structure of the consolidated budget and the budgets of state extra-budgetary funds, the largest share is accrued from income tax (26.8%), tax on foreign trade income (23.7%), taxes and claims on social spending (13.5%), mineral extraction taxes, debts, and fees (12%).

In the reporting period, the national debt amount totalled at 2,392.0 billion roubles, and has decreased by 10.8 billion roubles since January 1, 2008.

With the overall decrease in national debt for the reporting period, the internal debt was on the increase, while external debt was decreasing. As of April this year, the share of foreign debt in the total debt structure was 43.4% and the share of internal debt - 56.6%.

In the 1st quarter of 2008, the share of tradable debt (government securities, denominated in foreign currency) in the total external debt increased from 73.7% to 74.0%.

As of January 31, 2008, the total volume of the National Reserve Fund was 3,069.0 billion roubles; the total volume of the National Welfare Fund - 782.8 billion roubles.

In February of this year, 28.6 billion of the Stabilisation Fund profits for 2008 were transferred into the Reserve Fund.

In March 2008, no Reserve Fund or National Welfare Fund transactions were conducted.

As of April 2008, the total volume (in rouble equivalent) of the Reserve Fund was 3,068.4 billion roubles, and the total volume of the National Welfare Fund - 773.6 billion roubles.

2. The Programme for the construction of Olympic venues and the development of Sochi as a mountain resort

The draft resolution was developed in fulfilment of the meeting protocol of the Presidential Council for the Development of Physical Fitness and Sport, Sporting Excellence, and the Preparation and Holding of the 2014 22nd Olympic Winter Games and 11th Paralympic Winter Games in Sochi.

The draft resolution clarified the structure of the Programme for the Construction of Olympic Venues and the Development of Sochi as a Mountain Resort (Construction Programme). The first sub-programme lays out a plan for the construction of Olympic sports venues and their support facilities. It is comprised of 35 venues. The second sub-programme describes the plans for constructing and renovating venues and support facilities for the development of Sochi as a mountain resort. It includes 183 different venues and events.

The draft resolution also clarifies the names of some Olympic venues and activities related to their construction in accordance with the Candidature File.

In accordance with the Candidature File, Point 17 "Construction of a Block of Buildings for IOC Partners in the Olympic Park, including the Olympic village, exhibition areas, an entrance, a parking lot, seating areas, an IOC marketing club (including design and exploratory work)" has been added.

Investors have been established for 60 venues and events that are included in the Construction Programme.

The adoption of the draft resolution will grant a more effective preparation for the 2014 22nd Olympic Winter Games and 11th Paralympic Winter Games in Sochi.

The proposed amendments will be implemented within the budgetary allocations stipulated in the Federal Law On The Federal Budget for 2008 and the Planning Period of 2009 and 2010 with due consideration of the amendments to the Law made by the Government.

3. Draft Government Resolution on The Celebration of the 100-year Anniversary of the Founding of the Pushkin State Museum of Fine Arts

The programme for the development and reconstruction of the Pushkin State Museum of Fine Arts includes celebratory events of the museum's 100-year anniversary, as well as the renovation and construction of the museum buildings, to be implemented in two phases.

The first phase of the Programme for the Museum Development and Reconstruction (2009-2012) consists of the construction of a Depositary and Restoration Centre for exhibitions of art, graphics, numismatics, applied arts, and authentic sculptures. It will also comprise restoration workshops and the museum's library and archive. During this phase, an Art Gallery Complex (19th-21st centuries) will be opened; reconstruction, restoration, and redesigning works will be completed at the Personal Collections Building and Graphics Building; engineering networks and facilities will be constructed.

In addition, during this phase, repairs and maintenance work will be initiated to reduce the negative effects of vibrations and noise emanating from the shallow-running tunnel of the Sokolnicheskaya Line of the Moscow Metro, built underneath the museum.

The second phase of the Programme for the Museum Development and Reconstruction includes a complete reconstruction and restoration of the museum's main building and other venues where expansion has been planned. Prior to reconstruction, all art exhibits will be relocated.

4. The Draft Federal Law On Ratification of the Protocol between the Government of the Russian Federation and the Government of the Republic of Kazakhstan On Making Amendments and Additions to the Agreement between the Government of the Russian Federation and the Government of the Republic of Kazakhstan On Law Enforcement Cooperation between the Law Enforcement Agencies in the Territory of the Baikonur Space Centre of October 4, 1997.

The amended Protocol on Law Enforcement Cooperation, signed on October 3, 2006, is aimed at clarifying (with due account of the complexity surrounding Baikonur) the jurisdiction distribution between the Russian Federation and the Republic of Kazakhstan with regard to criminal and administrative offenses of the citizens of the Republic of Kazakhstan; as well as improved law enforcement cooperation between the respective law enforcement agencies of Russia and Kazakhstan in the territory of the Facility.

The Protocol contains rules which are not stipulated in Russian law, and therefore, is subject to ratification based on the Federal Law On the International Agreements of the Russian Federation.

5. The Draft Federal Law On Amendments to Article 34 of the Air Code of the Russian Federation

The draft law will amend Article 34 of the Air Code with regard to affixing identification marks on state and experimental aircraft, and revised procedures for affixing marks to state aircraft.

The draft law extends the list of the required identification marks affixed to an aircraft, as well as the list of the identification marks that may be affixed to state and experimental aircraft.

The draft law is aimed at the realisation of Article 9 of the Federal Constitutional Law On the State Flag of the Russian Federation.

The main objective of the draft law is to ensure the possibility of affixing state and experimental aircraft with the imprint of the State Flag of the Russian Federation, a white-blue-red pentactinal star, the registration and other identification marks, side numbers, names and emblems, awarded in accordance with the established procedure.

The registered identification marks - which contain the international radio call KP to identify Russian aircraft and the registration number - must be affixed to state and experimental aircraft.

In addition, the nationality signs must be affixed to the aircraft:

• the military transport aircraft, conducting flies across the borders of the Russian Federation, must have an imprint of the State Flag;
• the aircraft, used for military, border patrol, and defence purposes, must have the imprint of a white-blue-red pentactinal star.

Supplementary identification marks, side numbers, names, and emblems are allowed, but not required for affixing.

Supplementary marks identify the aircraft's affiliation with the federal executive bodies.

A white and red stripe is the mark identifying the aircraft's affiliation with the Ministry of the Interior.

The following supplementary marks identify that the aircraft belongs to the Ministry of Civil Defence, Emergencies, and Disaster Relief:

• the Star of Hope mark in the form of a multi-colour circle inside of which is a star with alternating long and short points, inside of which is a circle and a triangle;
• a mark in the shape of stripes along the fuselage (two orange stripes and one blue stripe in between);
• the MCHS Rossii inscription in blue.

The adoption of the draft law will promote state symbols, foster patriotic sentiment amongst citizens, and will ensure legislative regulation for the use of signs to identify state affiliation.

6. The Protocol on Introducing Amendments into the Agreement between the Government of the Russian Federation and the Executive Committee of the Commonwealth of Independent States on the Presence of the Office of the Executive Committee of the Commonwealth of Independent States in the territory of the Russian Federation

The draft Protocol was jointly prepared with the CIS Executive Committee to bring the Agreement of July 4, 2001 into compliance with the Agreement on the Legal Status of the Officials and Employees of CIS Agencies of April 25, 2003, which is the primary CIS agreement regarding the employees' legal status and social guarantees.

The draft Protocol is amending the articles of the Agreement, containing rules, not stipulated in Russian law. In particular, in accordance with Article 8 of the Agreement, the Executive Committee Office and officials are exempt from paying taxes, dues, and fees. Therefore, following its proposed signing, the Protocol will be subject to ratification based on the Federal Law On the International Agreements of the Russian Federation.

7. Signing of the Agreement on Readmission between the Government of the Russian Federation and the Government of the Republic of Iceland

The Agreement is intended to establish conditions and grounds for the return to the countries of citizenship or permanent residence of the individuals staying in the territory of the party states in violation of the active laws on arrival, departure, and stay of foreigners.

The Agreement determines the terms for submitting and considering a readmission request; transit and paperwork procedures for over the transfer of individuals who are being subjected to the readmission procedure.

In accordance with the Federal Law On the International Agreements of the Russian Federation, the present Agreement is subject to ratification as it contains rules and regulations, not stipulated by Russian law, and the subject matter of the Agreement are the fundamental rights and freedoms belonging to the individual and citizen.

Following its first three years, the implementation of the Agreement will not require additional expenditures from the federal budget, as it will not be applicable to third-country citizens and individuals without citizenship (except for the citizens of nations that will have agreements signed with the Russian Federation at that time).

8. Clarification of the functions of the Ministry of Agriculture, the Federal Service for Veterinary and Phytosanitary Surveillance, the Federal Agency for Forestry, and the Federal Agency for Fishery in accordance with Decrees of the President of the Russian Federation No. 724 of May 12, 2008 and No. 863 of May 30, 2008.

The Government Staff has prepared draft resolutions of the Government, clarifying, in accordance with the Decree of the President On System and Structure of the Federal Executive Bodies (Decree No. 724), the responsibilities of the federal executive bodies in the field of agriculture and forestry, and the authority of the Federal Service for Veterinary and PhytoSanitary Surveillance, as well as the draft act approving the provisions on the Federal Agency for Fishery, in accordance with Decree of the President No. 863 of May 30, 2008.

In accordance with Decree No. 724, the Ministry of Agriculture was given the powers of the remodelled Ministry of Economic Development and Trade to develop and implement government policy, provide legal regulation of land relations (as related to the agricultural lands), ensure government monitoring of the lands, and prepare draft Governmental resolutions on tariff and non-tariff regulation of agricultural and fish products.

Moreover, the Ministry of Agriculture has been granted authority over the Federal Service for Veterinary and PhytoSanitary Surveillance (Rosselkhoznadzor) and the Federal Agency for Forestry.

In accordance with the Decree No. 724, the draft provisions on the Ministry empower the Ministry of Agriculture as the federal executive body, in charge of developing state policy and providing legal regulation of forestry relations and land relations (as related to agricultural lands), government monitoring of such lands, and preparing draft Government resolutions on tariff and non-tariff regulation of agricultural products.

The area or responsibility for Rosselkhoznadzor has also been clarified. The respective amendments have been made to the Provisions on the Federal Service for Veterinary and Phytosanitary Surveillance, approved by the Government.

The Provisions establish the Federal Service for Veterinary and Phytosanitary Surveillance as the federal executive agency responsible for the control and oversight in the sphere of veterinary, quarantine and plant protection, safe handling of pesticides and agrochemicals, soil fertility, quality and safety of grain, grits, and feed compounds, grain processing products; oversight of land relations (as related to agricultural lands); forestry relations (except for the forests located in the nature reserves); protection, reproduction, and use of hunting animals and their habitat; protection against diseases common to humans and animals.

The Provisions on the Federal Service for Veterinary and Phytosanitary Surveillance will be amended to included points pertaining to the performance by the Agency of the functions in the sphere of land and forestry relations.

In accordance with Point 9 of Decree No. 724, the State Committee of Fishery has been transformed into the Federal Agency for Fishery.

In accordance with Decree of the President No. 863 of May 30, 2008 On The Federal Agency for Fishery, the following functions have been given to the Agency:

• development of state policy and legal regulation in the field of fishery, fishing fleet, rational use, exploration, preservation, and reproduction of aquatic biological resources and their habitat;
• control and supervision of aquatic biological resources in the territorial waters of the Russian Federation;
• provision of state services and management of state property in the sphere of fishing economy, protection, rational use, exploration, preservation, and reproduction of aquatic biological resources and their habitat industry; as well as fishing (except for industrial fishing), fish processing, navigation safety and rescue services, servicing the fishing vessels and ports.

In addition, the Decree has established that the Federal Agency for Fisheries is a federal agency managed by the Government.

The Federal Agency for Fisheries will also have the function of preparing draft Government resolutions on tariff and non-tariff regulation of fish products.

The approval of this issue will allow the federal executive bodies to proceed in the shortest possible time with the performance of their functions and powers to the fullest extent, in accordance with the Decree of the President.

June 4, 2008
Moscow

* Press releases by the Department of Press Service and Information contain the materials submitted by the executive federal bodies for discussion by the Government of the Russian Federation.