Transcript of the beginning of the meeting:

Vladimir Putin: What is the outlook in the republic?

Alexander Volkov: The situation remains, on the whole, controllable and sufficiently secure. This month has seen appreciable increases in stability. Applications to employment bureaus make only a half of what we had in February and March, while unemployment is below the national average. I estimate that industrial output will stop shrinking in May. Its shrinkage made 7.5% in the first quarter-tolerable compared to our federal district and Russia as a whole.

We are grateful to the federal Government for its two funding programmes, which are of great help to us. One programme relates to employment. Now, we have concluded 5,000 contracts on the programme to 65 million roubles out of the total 244 million we have received.

The other programme envisages comprehensive repair works on decrepit houses, offering construction jobs and thus stabilising the labour market.

Vladimir Putin: Have you received allocations for this particular programme?

Alexander Volkov: We have received 800 million roubles out of the total, which slightly exceeds 2 billion. We are launching a pilot project which, we believe, deserves to be extended to other constituent entities. The programme concerns housing construction for young families, and foresees a thousand new apartment blocks-three times more than last year, a year deemed sufficiently beneficial for us. Young families will receive target bank loans and pay a mere 5% of interest. The rest will be paid from the budget.

Vladimir Putin: That means the programme concerns interest subsidising. Am I right?

Alexander Volkov: Yes, that is correct. Our main goal with the programme now is to arrive at efficient levels of partnership with Sberbank. If we manage to begin cooperation, we will bring down construction costs as mortgages, from their current standing, foresee private crediting for ready accommodation, while construction companies had banking loans to build them.

We are selecting eligible families and making investments from credit resources, so loan interest is deduced from housing costs. At present, that makes a new flat 20% cheaper. We have included 300 families out of the total 1,000 in the programme. The families have approved of this arrangement. Thus, we are willing to conclude a contract with Sberbank, and I have talked the matter over with [Sberbank president] German Gref. We are finishing preparatory work for the contract, which promises improvement of social welfare and new construction jobs. We think there are its main benefits.

Industry has avoided large fluctuations for now. The automobile works is our only cause for concern. I discussed this issue with you in 2005, and you provided assistance to settle the matter. Things are getting smoother now. We expected major problems, with up to 5,000 jobs cut-but company managers of IzhAvto Auto Works have eliminated the problem with an agreement on the South Korean project.

Vladimir Putin: Have they reduced spare part prices?

Alexander Volkov: Yes, the talks finished last week. IzhAvto's partners agreed to reduce the price of a standard spare part set because it was increasing in roubles while remaining stable in dollars. The company was working at a loss. The project will now continue. Its planned output is forecast at 200,000 cars, of which roughly 120,000 are ready. And so, the company will be engaged in the project another two or three years.

Vladimir Putin: How much will the cars cost?

Alexander Volkov: The Kia Spectra, no more than 300,000 roubles and a Jeep about a million. The company is planning to put out approximately 1,500 cars a month (Kia Sorento - 1,000; Kia Spectra - 500), so that the cars will find their buyers.

Vladimir Putin: Hence they are in the price niche in which we partly subsidise the Central Bank interest?

Alexander Volkov: The Spectra model is.

This is the most serious issue. We will not manage with it entirely on our own. That is where we truly require help. The company can manufacture 220,000 cars per year even now, using state of the art technology and paint coats. The total company potential envisages 360,000 cars-a major reserve for the Russian automotive industry.

Vladimir Putin: How many families will receive new accommodations on your dilapidated house programme this year?

Alexander Volkov: Close to 500 families. We can afford it with republic-based allocations, as well as considerable federal assistance. Apart from sums estimated by the programme, we received a 150 million-rouble target allocation for the tenants of old houses at the end of last year. We are monitoring programme efforts, and we expect to meet the targets by the end of the year even despite the market freeze and the necessity to accommodate young families.

Vladimir Putin: Thank you.