Mr Putin's opening address:
Mr Primakov, colleagues,
I am happy to be able to address this large and respected audience. I would like to thank the leadership of the Chamber of Commerce and Industry, the Chamber's members and experts for their sincere cooperation with the Government and constructive proposals on the key issues of the country's social and economic development.
I am grateful for the Chamber's contribution to improving the Government's anti-crisis package. Many of your proposals and criticisms were taken into account and are now being applied in practice.
Your meeting today will discuss ways to create and support innovation growth points as a key element of anti-crisis actions by business and the authorities. I wholeheartedly support this formula, which is exactly what we need today.
Modernisation is the founding idea of the Government's anti-crisis package. I want to say it again: it is not a plan of survival during the crisis, but a plan directed at development. Our goal is not simply to minimise losses and preserve the economic, industrial and human potential, but also to renew and strengthen it, to enhance our "human capital" and to improve the quality of the structure of our production and exports.
If we do not change anything, we will only preserve an ineffective economic model that is highly vulnerable to external influence, spend huge resources and taxpayers' money without the desired effect, and continue to lag behind the world's leading countries.
Here are a few figures to prove the point. Actually, I believe you are well aware of them. Innovation products make up barely 5% of our output, and the share of enterprises using innovation technology is less than 10%. Of course, we cannot be happy with this.
Therefore, we must move forward, even in less comfortable conditions; we must convert our economy to information-based principles, using new factors for post-crisis growth and additional tools for enhancing labour productivity, effectiveness and competitiveness.
It is highly important to encourage business to invest in new projects, in modernizing production and in cutting-edge technology. As you know, a number of practical measures have recently been implemented towards this end. I am referring to the increase of bonus depreciation to 30% from 10%, the reduction of taxes on companies' investment in R&D and technical retooling, and the lifting of VAT from the imported equipment that is not produced in Russia.
We have also simplified the procedures for customs registration of high-tech exports and imports and for introducing innovation products to the market. The latter procedure is based on voluntary declaration of conformity.
We also intend to stimulate the demand for innovation through federal targeted programmes. Additionally, we will try to encourage high-tech projects implemented with state assistance.
The adjusted 2009 budget has maximally preserved spending on the development of high-tech and science-intensive sectors such as aircraft manufacturing, shipbuilding, space research, nuclear power generation, and electronics. We will allocate over 300 billion roubles for this purpose this year. I want to say that it was very difficult to preserve these allocations now that our revenue is shrinking. We had to make a difficult choice - I am referring to large social spending. We had to preserve that and also help macroeconomics avoid a difficult and even dangerous situation.
We have a considerable head start and competitive advantages in the above listed high-tech spheres and we can greatly strengthen our presence in global markets, for example, by increasing Russia's share of commercial space launches from 40% today to about half of the market. And of course we will pursue the scientific aspect of space programmes.
In spite of all the known constraints we will continue the nanotechnologies programme. A number of such production facilities will be deployed soon. They will have a multiplication effect on a whole number of sectors, such as energy, electronics and medicine.
Further. The funding of investment projects in high-tech sectors draws extensively on such serious resources as the Development Bank where the loan rates for retrofitting are subsidized. We plan to expand this practice in the future.
I would like to note again that in offering financial assistance to the companies in the real sector of the economy we set fairly harsh conditions. Every enterprise that receives state support should implement modernisation programmes, raise labour productivity and save energy.
That applies above all to natural monopolies, state-owned corporations and companies with government participation. These companies currently seek ways to cut costs, but I believe allocations for research and development are not areas on which one should look for savings.
The next task. We must complete the creation of a truly integrated innovation infrastructure. It is still fragmented and cannot effectively support the process of innovation all along the development chain, from generation of the idea to the launching of new products in the market.
We must continue forming the intellectual property rights market and create, jointly with business and science, a system of scientific and technological forecasting.
I believe that we should make wider use of various forms of public-private partnership relative to innovation, for example to identify R&D themes with emphasis on what companies are interested in and convey the technology developed at federal budget expense for subsequent commercialization, bringing in off-budget sources. I think both the state and business would be interested in this.
Over the past years we have invested about 30 billion roubles in the development of the engineering, transport, energy and social infrastructure in special economic zones, technoparks and science cities. These investments are sure to bring returns.
Small business is one of the economic sectors most receptive to innovation. The deputies have submitted a bill that will enable budget-supported research and educational institutions, and I would like to stress this: to create small innovative enterprises. They may contribute the rights to the results of their research to the authorized capital of these companies. The Government supports this idea and has already approved the bill. I very much hope that a wide network of our higher and perhaps secondary education institutions can integrate with the innovation economy.
I can also say that the money of the Russian Venture Company will be used to create the so-called "seed funds." This is about financial support for small enterprises at the high-risk initial stage in the development of innovative production.
And of course much depends on the position of business associations, such as yours, for example. In the business world it is necessary to enhance the status and prestige of the innovator, inventor and in general form a new innovation culture, make creativity fashionable, so to say.
We expect the Chamber of Commerce and Industry and similar associations to be actively involved.
To conclude I would like to stress that Dmitry Medvedev recently proposed the establishment of a Commission for the Modernisation and Technological Development of the Economy. I expect that business and its associations will contribute most actively to the work of that Commission.
Thank you.
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Vladimir Putin's concluding speech:
Before Mr Primakov announces a short break, I will very quickly respond to the remarks which were made here. I will start with the last comment, because I took notes.
You see, the reason we have gathered here today, the reason we have launched high-tech programmes and made innovations the main route of our economic development is to find a solution to this problem together.
I think that our work in this respect should be aggressive in the good sense of the word and cooperative - less of Yaroslavna's Lament and more of specific proposals.
Indeed, we have many problems on this road, and not because there is someone who does not want to resolve them but because over the past few decades a certain structure of the economy took shape in our country.
We carried out innovations in 1936, 1938, 1939, 1940, and on a smaller scale in the 1950s. Large-scale innovations practically ended with industrialisation, with the exception of the nuclear project and space exploration, which was closely linked to it. It is clear that these projects were designed to guarantee the Soviet Union's survival after World War II and the advent of the nuclear century. Having focused all of its national resources on these projects, the country developed nuclear weapons and missiles.
Today, we must do this in other conditions. We must use other instruments, which we must create together with you. It goes without saying that we all want to have national leaders and champions in the sphere of high technology. Who doesn't?
This is why we started talking about this three or four years ago. This is why we made innovations the foundation of the national development programme until 2020.
The same ideas underlie the programme of the Government's work until 2012. I have already mentioned here that despite all of the crisis-inflicted difficulties we are still trying to adjust the system in a way that will create a demand for high-tech products. We want to make it profitable to work in this sphere. And, by the way, we see some changes happening in Zelenograd, this may also be a result of the purposeful efforts in the last few years. Let us think together how to train high-tech champions.
Previous speakers hinted that not everything is purchased correctly, and that your expertise is not much in demand. What is the question? Who will decide where to channel these government resources and in what amounts? I guess that the thrust of our colleague's speech is that it is hardly possible to do anything without government support. We are ready to concentrate these resources and direct them there. Let us elaborate a mechanism together. It should be transparent, understandable, and corruption-free.
Today, the economy requires other investment. Investment means smart money. This money is invested in order to get more money. Investors are putting their money into projects which promise the biggest and fastest proceeds. The conditions should be created, but this cannot be done in one go or we may risk destroying the sources of funding innovations. We should act with care here but I am grateful to you for such an involved discussion of these issues.
Now I would like to say a few words about some issues of systemic character. We have repeatedly discussed the problem of loans. We all know that our economy has very little long-term money or almost none at all. Where does this money come from in normal advanced economies? I am referring to long-term money, long-term funds. This money comes from several sources, which have been created by the internal development of these economies, from the funds which citizens of these countries have invested into their financial systems on a large scale and for a long time.
This money comes from deposits in the financial system, and from carry-over balances, which remain in the financial system for a long time and are available. It comes from pension funds and insurance companies. This is a solid mass, which is based on long-term money. I would like to emphasise that our market economy is only several years old. Our real market economy has been developing for less than a decade, or maybe a bit more.
We do not have pension funds like America or Western Europe. There is no public money in the financial system that would stay there for a long time with nobody rushing to withdraw it at the sight of the first economic troubles. This problem cannot be resolved with government money.
Nobody is trying to resolve it with government money. Something is being done in the United States, but this is so complicated that nobody can predict the results. Deficit has already topped 13%. Americans have never had this before, and it is not clear what it will lead to. I very much hope they succeed because we are also interested in this.
We cannot even afford to do this. They printed the money, came to the Federal Reserve and filled their bags. They are looking only at macroeconomic consequences. And what should we do?
We should act very carefully, in a truly balanced manner.
Further. As for including high-tech facilities in the list of backbone companies that receive the state's special support, it is true that we have not defined such a group. However, there are some high-tech companies on the list of civil backbone enterprises. In addition, there is a special list of strategic companies in the defence industry and the military-industrial complex. Practically all facilities on this list are high-tech.
As far as the space industry, shipbuilding and aircraft manufacturing are concerned, the list of such companies has not been reduced. There are few such companies in this country. Nevertheless, I have taken note of your remarks; we will try to take them into account. Maybe we need to make some additional effort in supporting such companies.
Now I would like to go on to the access of small businesses to state orders. We need to attend to this matter. I agree with this remark. It is obvious that we haven't managed to implement everything we planned in this area, and you must be aware of it. We must pay special attention to it so that these small businesses could have access to state orders. The speaker mentioned positive expectations connected with online auctions. We also hope that this project will be effective. We'll wait and see how this system will perform.
As for exhibitions, I fully agree that not enough attention is given to high-tech facilities at exhibitions. We must pay due attention to this. I completely agree with this point.
As far as Soyuzexpertiza is concerned, I fully agree with you. If you are debarred from this work, it is wrong. We will consider this issue to figure out how to formalise our teamwork - between the Government, your body and Soyuzexpertiza. I believe that it is relevant. In fact, I am convinced of it, whatever they say in different departments. It applies to the Defence Ministry, as well as other departments. You have outlined them correctly; it is clear which agencies you referred to.
You said that sometimes R&D centres stop to be financed if private companies do not co-finance joint projects. Probably, such cases are possible. This was an attempt to promote private-public partnership. If private companies stop financing R&D projects, naturally, the state can't always ensure 100 percent financing. It was presumed that the results of this work would in fact be handed over to private companies.
On the face of it, the situation appears as follows: Private companies seek to carry out a project; the state participates in it investing taxpayers' money, and then steps down. I believe this is the right pattern. The state can quit without losses, having supported the project's development and handing over the results of this initial joint activity to private companies. But if private companies quit, the state does not always have the opportunity to support such projects single-handed.
True, in high-tech areas, it is probably necessary to look into the matter more thoroughly. Perhaps the state should stay in particular projects and finance them in the hope that the market will be restored, and the interest of private companies to this field will grow. However, it is very difficult to do it during a crisis. In certain cases the state will stay there, even if private companies quit. There are a few such cases. I know about them because I personally made the decision on them.
And finally, we often hear variations of the import replacement thesis. I would like to reiterate my opinion on this matter. I do not believe import replacement is an end in itself. Moreover, speaking about import replacement, we say that we produce goods of at least the same quality as our competitors, but this is a fallacious approach to addressing the innovative development issue. What does "of at least the same quality" mean? We must manufacture better and cheaper goods, or not manufacture them at all. Maybe, it is easier to buy them?
Naturally, when this country's defence capabilities and the areas whose development is vital for its survival are at stake, related items must be produced domestically, while always seeking an increasing quality and lower price, even if such manufacturing is typically cost-based.
But if we speak about the economy in general, there is no point in import replacement, if it is possible to purchase goods cheaply. If we put all our effort into catching up, we will always lag behind.
At the end of the day, it is necessary to create new competence centres and find new approaches to address specific problems, boosting the economy's competitiveness in general.
I would like to wish you professional successes. Thank you very much.