1 april 2009

Prime Minister Vladimir Putin talks with United Russia leaders

Vladimir Putin

Meeting with United Russia leaders

“I would like to thank United Russia for ensuring that the Government’s anti-crisis measures have been carefully considered at all levels, including at the regional and top party levels, as well as in party clubs. They were not simply brought under consideration; I know that the proposals have been formulated and criticism offered. Today we will speak about this in detail.”

Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon. We met in this hall only recently, to discuss our efforts to solve the problems created by the global financial crisis. Today we will discuss these issues in greater detail.

However, I would firstly like to speak on a different topic. On April 1, we will mark 200 years since the birth of Nikolai Gogol, an outstanding Russian writer whose works formed an unbreakable bond between two fraternal people, Russians and Ukrainians. This is a memorable occasion for Russia's cultural and social life.

I would like to express gratitude to all those present here for drawing my attention to this event, in some form or another. I know that the parliament as a whole, including United Russia, is making efforts in highlighting this event. I want to congratulate all of you on this major event in our culture.

Now, let us address the issue that we have gathered here to discuss. Indeed, at our previous meeting we talked about the anti-crisis measures which we are taking to overcome the crisis with minimal losses and to return to the path of development.

We also said that we not only need to analyse what we are doing and how we are doing it. We said that we should consolidate all these measures in one package and clearly determine which anti-crisis measures would be most effective - and implement them. This issue has become a priority, as the State Duma will discuss a reviewed 2009 budget shortly.

I would like to thank United Russia for ensuring that the Government's anti-crisis measures have been carefully considered at all levels, including at the regional and top party levels, as well as in party clubs. They were not simply brought under consideration; I know that the proposals have been formulated and criticism offered. Today we will speak about this in detail. However, I want to say a few things first, for our meeting to be substantive.

I want to draw your attention to the fact that the budget and all elements incorporated in it are essentially aimed at overcoming the crisis. However, it can be said, although in a tentative mode, that a huge sum, approximately 1.4 trillion roubles, will be allocated directly for crisis relief efforts. I said at the previous meeting - I always say it at my meetings with public organisations and workers - that our main priority remains the unconditional implementation of social obligations to Russian citizens. I am referring to wages, pensions and allowances, their timely and full indexation, as stipulated in legislation, in the light of the crisis and inflation. This is the first thing I wanted to say.

The second, and no less important, issue is the support for the real economy sector. In this regard, we are highlighting innovation-based development, aspects of our economy that have constituted national pride - power generation, including nuclear, space exploration, shipbuilding, aircraft manufacturing, and several other spheres such as nanotechnology.

In doing this, we never forget the things that are directly connected with people's lives. Here I refer to the supporting of the construction sector. We have not discontinued the main construction projects of nationwide importance. At the same time, we are supporting and will implement our plans related to the development of the housing and utilities sector. We have preserved the sector's physical plant and other instruments of assistance to the sector. We will scrutinise these issues today and also in the State Duma on April 6 and during subsequent discussions of the budget in parliamentary committees.

It is no less important to explain the efforts of the Government and the joint anti-crisis plans of the parliament and the Government, because these efforts will be effective only if the overwhelming majority of the people agree that the measures we are taking is the best possible option for overcoming the crisis, and for ensuring that the allocations will be used to the benefit of the people. To do so, we should use all instruments at the party's disposal in the regions, in the centre, here in Moscow, in large cities and small towns, settlements and villages, everywhere where United Russia has its divisions.

This is all I wanted to say by way of introduction. Let's not waste time; let's start discussing the issues we have gathered here to discuss. I know - I have said so before - that you have scrutinised the proposed anti-crisis plan. Let us discuss it now. [Addressing Boris Gryzlov] Mr Speaker, you have the floor.

Boris Gryzlov: Thank you.

The Government Programme of Anti-Crisis Measures for 2009 was published on March 19. As early as Monday, March 23, our Executive Committee had a conference call when directions were given to all 83 regional organizations to consider the Anti-Crisis Programme. Through the regional organizations, we conveyed that assignment to 2600 local branches of our party across the country.

We are receiving proposals in the shape of additions, warnings, and suggestions that we believe should be considered before a decision is made. We have received about a thousand such proposals. Some of them overlap, but overall there are about a thousand proposals, a figure that has enhanced the public relevance of the discussion. Nonetheless, the drivers behind that process on behalf of the Party are of course the State Duma deputies - I am referring to our political clubs, our supporters, and your public reception offices. They too are receiving proposals and assessments of various items of the Programme. We can safely say that the task of organizing a public discussion of the Programme is being implemented.

The deadline of course is April 6, the day you will report to Parliament and actually speak about this Programme. We are preparing a draft resolution in the State Duma. I think we will be fully prepared by April 6 to give formulated and agreed upon - probably today - proposals regarding the Programme of Anti-Crisis Measures.

Vladimir Putin: I would like to say for starters that we practically discussed it at our previous meeting. Furthermore, in still earlier preliminary discussions many colleagues from United Russia and other parliamentary parties said it was necessary to sum up all the anti-crisis measures and put them in a single anti-crisis plan. What we in the Government have done was essentially a response to the proposals of the deputies so that the country would have a single set of rules for behaviour and actions in times of crisis.

Boris Gryzlov: On March 26 we had a joint meeting of the Supreme and General Councils at which we discussed the Anti-Crisis Programme in detail. I would like to say that we unanimously support this important document, but we have some proposals.

The seven priorities that form the basis of the Anti-Crisis Programme of course have our support. In connection with these priorities I would like to make some concrete proposals. The first priority is strict adherence to the public social commitments and addressing the employment issues. Today we can say that we do not just proclaim these priorities. As of today, the insurance part of the pension has been raised by 17.5%, higher than the target of 15%. This increase represents the fulfillment of the anti-crisis measures contained in the Programme.

I would like to touch upon the problem of employment. The Programme earmarks 43 billion roubles for retraining and possible movement of people between different regions of the Russian Federation. However, that section is not detailed enough. It is not very clear what occupations we need, where the bank of vacancies is, and in what specialities the people who have been dismissed from large enterprises are to be trained.

Vladimir Putin: Excuse me for interrupting you, I promise not to do it again, but you have raised a very important issue there. If it is not treated in a detailed manner, it should be, but on the whole we are proceeding in the following way: we have 43 billion roubles, we have agreed with the heads of regions - I think the same is happening in Moscow - that every region will set up an anti-crisis headquarters that should devote a large share of attention to the labour market. I have asked the regional heads to personally take charge of these headquarters.

I was rather surprised to hear at a conference that even the heads of regions sometimes do not know what is happening and indeed what the law and the Government propose to do to combat the crisis. What does that prove? It proves that the regional leaders do not always personally head up the headquarters. If they headed it up personally, they would know that only a person who has just lost his job and not one who has been out of work for several years would come to collect an unemployment benefit in the amount of 4900 roubles. Such details are known only to those people who have hands-on experience dealing with these problems.

Hence, these plans should be prepared in the regions. The regional governor who is involved in this problem knows the demand for labour in the region. He works with the commission he has set up and the commission includes businessmen. Businessmen tell him what professions are be in demand in the crisis conditions and will be after the crisis. For instance, they may shut down the painting shop at one enterprise but start a different production, or vice versa. Businesspeople propose their own set of professions for which they think there will be a demand. A regional plan is made and then the regional head or his representative comes to the Government and the relevant Government commissions discuss the draft.

On the whole, the mechanism is in place and is functioning, but it has some drawbacks; let us examine them.

Boris Gryzlov: Instead, we have a proposal.
There is one area that is sensitive for all Russian citizens. We are all residents of blocks of flats. Today the customers, that is, all of us, deal directly with the contractor, that is, the housing and utilities system, without a mediator, i.e. the customer's representative. In the past, this person was the house superintendent, but today the people put in charge of the partnership by the building's owners are not professionals. We have 3.3 million residential blocks in Russia, more than 50 flats to a building. I think we could create up to a million jobs, and not at the expense of the federal budget.

The point is that an experienced manager, an experienced house superintendent, can minimize the residents' expenditure by as much as 20-25 percent. The practice has already been introduced in some places. We have a party project headed by Sergei Petrov, a State Duma deputy. The project has been discussed at the Regional Development Ministry. Economy is achieved through optimization of the residents' expenses, through the introduction of electricity and cold and hot water meters. However, another revolutionary option exists. When a monopoly sees that its revenues are falling, it begins to think about optimizing the cost of the services rendered, its own costs. In the communities where that system has been introduced, we have seen savings of up to two times, that is, the cost of the service delivered by the housing and utilities sector.

Thus, we could create such a category of workers in Russia. Perhaps we could start the training process and then these people would be hired by the residents, thereby creating jobs and at long last launching a real reform of the housing and utilities sector.

I would like also to mention the issues connected with consumer prices and exorbitant network charges. We see that the markups for the products in the marketing system are often as high as 80%, and we think that the price structure is unfair. Of course, the producer should get more than the seller - that is another challenge that should be met in a comprehensive manner under the anti-crisis programme - but we are talking about social commitments, i.e. holding back consumer prices.

Now, as for maintaining the industrial potential, another Programme priority: we have many investment projects funded out of the federal budget, together with the regions, at the public-private partnership level. I think it would be important ideologically to name the investment projects that the Government supports. There could be 10-15 major projects. Today not only the people interested in knowing what the major construction projects are but indeed the general public do not know what we are building. Many of those present belong to the generation that developed the Virgin Lands and built the Baikal-Amur Railway and other major projects, and they think that such projects must be made known. If they are made known, many of our citizens could contribute to financing these projects. I am referring not only to all sorts of investment bonds or even bonds issued by the Government, that is, by the Finance Ministry. Obviously these bonds should not be inscribed; they should be floated freely, allowing broader segments of the population to take part in the process.

I think energy efficiency and energy saving are important for supporting industrial potential. It should be one of the main criteria of eligibility for government support in the real sector. The idea has been discussed in the regions: enterprises consuming too much energy to produce a unit of output should pay higher energy rates. As it is now, an enterprise that consumes 3 units of something pays the same price as an enterprise that consumes 5 units. I suggest that we discuss this issue, as well. The energy-saving potential is huge: up to 50% in the housing and utilities sector, up to 30% in the fuel and energy sector, and at least 30% in industry, according to experts. We can compare energy consumption for producing similar amounts of goods and services in Russia and in Germany. We consume twice as much energy per unit of output. This is another topic that should be among the priorities in the Anti-Crisis Programme.

Now for what I believe to be one of the most important issues, stimulating domestic demand.

Boris Gryzlov: Now, for one of the pivotal questions-enhancing domestic consumer demand. The programme refers to it as an essential matter. This is what we should attend to, yet there are no practical efforts or initiatives in this field. Nothing is being done except increasing the amount of currency in circulation. That is normal, and we will continue to support this amount, but there are practical measures deserving of inclusion in the programme.

Take agriculture. We imported $35 billion worth of finished and raw farm produce last year-a huge sum! Agricultural imports make up 3.2% of the gross domestic product planned for this year.

Agricultural statistics are shocking. Russia is importing 70% of the red meat it consumes. Grain products are the only kind of farm-produced commodities we do not import. The import substitution programme we have today is extremely unassuming, envisaging 1-2%-clearly not enough.

Then there is tourism. 11 million Russian tourists went abroad last year to spend their money, which experts estimate at $20 billion, or 1.8% of this year's GDP.

We can only regret that the development of tourist services is not on the list of national priorities now. We have passed a law on tourist and recreation zones and granted them preferences for the development of the tourist industry-but to no avail.

Russia should advertise domestic tourism, build hotels, and offer interesting routes, thereby attracting not only its own citizens but also foreigners. I think it is a huge reserve.

Now, let us continue with our economic structure. We are lagging behind in many economic fields. Strategy 2020 calls for a shift to an innovation economy. However, none of our budgetary processes take pioneer technologies and agricultural research into sufficient account. The same can be said of our anti-crisis programme.

We must necessarily make legislative amendments to change the intangible asset turnover. All too often, our scientists protect their interests with foreign patents and yet their inventions go abroad, which means we do not have an adequate system of patent agents, though a relevant law is being drafted. The job should gain pace. We also need conditions for Russian scientists who have been working abroad since the 1990s to return home. They left because they could not have necessary material support in their own country. I think we can afford normal allocations to top scientists so as to attract them back to Russia.

There is another economic matter that should not be glossed over; the anti-crisis programme mentions it. I am referring to lumber. The programme says explicitly that companies and organisations involved in major investment projects can be exempt from lumber export duties. This is inadmissible, in my opinion. It opens a loophole to rob this country.

Another problem concerns administrative obstacles, which the programme calls to reduce. The idea has our wholehearted support. There are many practical proposals that deserve to be documented. They concern the so-called Electronic Government, a term already in everyday use. It means an opportunity to ask questions, get answers, and approve documents in the computerised form. The arrangement reduces corruption and improves the population's relations with the executive branch.

As for small enterprise, the State Duma released a statement recommending a raise in the threshold income qualification for the admittance of small companies to simplified taxation. At present, it is 20 million roubles and the Duma statement calls for an increase to 60 million. We think the change is worthwhile, especially as the qualification has not been revised for several years. The threshold sum should rise by 50% automatically with rouble devaluation, and continue rising at the inflation pace.

Vladimir Putin: This concerns simplified taxation.

Boris Gryzlov: Yes, it implies shifting to simplified taxation. A company whose annual revenues do not exceed 30 million roubles may pay nothing but one 6% tax. The arrangement allows such companies to operate without an accountant and merely pay 6% of their yearly income.

Enhancing the stability of the financial system is another essential matter. We have given sizeable aid to banks on Government decisions approved by the State Duma majority. Bankers received all the money they needed, but I see an imbalance in this support because banks do not always cope with their main duty-keeping industry afloat. The banking system and the entire financial network are turning into a "thing unto itself", profiting on the available resources. This is good because banks allow clients to increase their deposits, but at the same time, services and support for clients are the main functions of banks-and industry is one such client.

Thus, there are legislative and other initiatives for banks to channel a part of their received allocations to industry.

The Supreme and General councils of the United Russia party, along with some other bodies, have discussed this draft amendment to the law. It should specify percentages of allocations to transfer to industry, and deadlines for such transfers.

Today, I think, we have every reason to say that we should take our stock market with a grain of salt-the same goes for the aggregate estimate of the Russian economic volume by transnational rating agencies and auditor companies. In fact, we might merely shrug off these estimates. If that is so, we should set up a network of Russian rating agencies, certainly under the relevant control of executive bodies, which would enable us to properly evaluate the development and prospects of our stock market and choose companies qualifying for loans. Meanwhile, it is common practice today for the stock market to estimate the cost of a company even below its balance. This is absurd! Companies are auctioned off as a result, and the purchaser makes a fat sum on their balance-inadmissible!

Mr Putin, today's agenda includes addresses by the presidents of our clubs-the Centre for Conservative Social Policy, the Liberal Conservative Club, and the State Patriotic Club. I want them to speak up. You might allow the audience to ask questions later.

Vladimir Putin: Certainly. If you allow me, I would like first to comment on several issues you have mentioned, even if only generally, because I think some of them are essential.

Let us start with price formation-one of the most serious economic and social issues. Today, we have no experts to speak of who can offer an explicit and well-grounded system of price formation control. As we know, the prices of staple goods-let's say, bread-depend not only on grain prices, but also on loan expenditures, labour remuneration at every production stage, and energy, heating, transport and fuel costs, and much else.

The ultimate price must not become inflated. On the other hand, prices should not drop below the cost of production at any. It is hard to find the golden equilibrium, but I do believe that regions can cope with it the easiest. At the same time, we surely need to delve into the principles and methods of solving the problem. It demands the utmost precision; I agree with you on this.

Next, there is import substitution. I don't think it is a cure-all, since we should buy and produce the most lucrative and low-cost goods. This point concerns all groups of commodities - but this is merely a general remark.

If we look at the global economic structure and the economic structure of our basic partners' particular industries, we will see that they make sizeable subsidies to, let's say, agriculture - something we have not afforded for many years.

It is thus our duty to protect Russian manufacturers. We are doing it ever more actively, and we also protect Russian consumers, considering the high import prices. In this, the principles we proceed from should be simple enough for everyone to understand. We should merely support domestic agricultural development. We cannot cut off the domestic market from imports-or the prices of staple foodstuffs will skyrocket.

You are familiar with the relevant statistics, I am sure. We allocated 116 billion roubles to agriculture along many channels last year. We have earmarked 182 billion roubles for this year. Not a single major agricultural project has been abandoned-not a single one!

We have cut poultry meat and pork imports drastically-especially poultry-as we expect Russian farmers to substitute the remaining amount.

As for cattle, this is a different situation, given the longer reproduction cycle. What we need are large farms and meat-packing factories. We must purchase pedigree animals. Our beef stock farming is in a deplorable state. The beef we see in shops comes from substandard or old milk cows.

We have no specialised beef stock farming to speak of; it has to start from scratch. One of my deputies has recently brought me proposals for its improvement, and we are drafting a package for financial support of beef stock farmers. We agree with you on that point.

As for the status of federal construction and other projects, I think they demonstrate national priorities and thus mobilise the public. We know our priorities but it would do no harm to discuss them again.

We have often discussed "brain drain". It depends today not so much on salaries as on laboratory equipment, the technical base of research, and housing accommodations. These are all issues to ponder.

We are improving the technical equipment of our universities and research institutes. We have made tangible progress in this field. We are establishing commonly accessible centres on the basis of the Academy of Sciences, its institutes and major universities. As for housing, especially for young researchers, that is a separate problem.

Administrative obstacles and energy saving are also among our top priorities.

As for small companies and their annual turnover threshold, it is 20 million roubles now, as we have said. This is a sensitive issue. The threshold might be raised, really-but it demands the utmost caution lest we trigger company segmentation, especially with regards to trade. It is hard to divide a major industrial plant into 10-15 small plants with an annual turnover of 20, 25, 30, 40 or 60 million roubles, but a commercial chain is quite different. It is relatively easy to divide a mega-market into small shops, each qualifying as a small or medium-size company. That is something to think over as we raise the threshold on pace with the inflation. Please be as circumspect as possible with it-any error will do great economic damage.

As for imbalanced support of banks, I was writing down what you said before I realised that you did not mean the imbalance as such, but rather the necessity of effective monitoring of expenditures on industrial development.

I don't think we have really been too generous to bankers, as you put it. We have given them what they needed to keep the national financial system afloat and protect private deposits so that every Russian citizen could feel that the system is steady and reliable. That is essential.

It is of no smaller importance to pay attention to what Mr Gryzlov has said: when they receive allocations, banks should channel them into the intended spheres of support.

In that, it is necessary to distinguish between monies. Central Bank repos for a term of several days or two weeks are one thing; subordinated credits are quite different. They are not accounted as capital but really become part of capital, as they are given for a long term with high interest. Here we should closely monitor how they are spent.

We need flexible tools for such monitoring so as not to upset the performance of banks as multi-purpose instruments of national finance and agencies of full legal personality. We should not use administrative power to make banker support ineffective, lest the beneficiary go into desperate debt to banks, necessitating that the debt be paid out of the government purse.

Banking experts should be given the opportunity to ponder offers and projects thoroughly. At the same time, we should see to it that the money goes toward lucrative targets, not currency deals or profiteering. I agree with you on this point. Let us analyse the problem and figure out how to solve it.