Vladimir Putin's opening address:

Ladies and gentlemen,

We will discuss an extremely important, systemic matter at today's meeting of the Commission for Regional Development.

We will discuss government efficiency, efficiency of regional government, to be precise. As I have said on many occasions, we will continue to focus on government efficiency and effectiveness at both the federal and regional levels. We should never ignore this issue.

This concerns crucial government responsibilities-in this case, regional government responsibilities- such as education, healthcare, housing, public utilities, promoting economic growth, increasing the gross regional product, and protecting and creating jobs. We will also set the principal regional targets for next year.

Regular assessments of government activities-I mean regional government in this instance-allows us to evaluate their progress in tackling the strategic tasks of improving living standards and modernising social programmes.

Such assessments also allow us to uncover when agencies are procrastinating, clinging to outdated ways of governing, and dodging responsibility for vital decisions.

A majority of the Russian regions made significant progress last year-life expectancy and birth rates grew, while death rates decreased, especially among people of working age. Demographic improvements continue this year, revealing that these changes are becoming increasingly stable.

However, last year's results were heavily influenced by the global financial crisis. This is especially true of economic indicators, such as GDP, the regional product, and levels of investment and unemployment.

A majority of regional leaders managed to deal with the unfortunate situation. Timely steps prevented snowballing unemployment, and regional employment services promptly concentrated on stabilising the labour market.

Kaluga Governor Anatoly Artamonov and I visited the new Volkswagen plant today. I wish you all had also been there with us. I strongly recommend that you visit it. I know many modern facilities are opening in your own regions, but you should visit that one to enrich your experience, now that you are already in Kaluga.

The Kaluga Region shows that it is possible to be successful even in these hard times. That is to say, it is possible to attract investments, diversify the regional economy, and increase budget revenues.

There is a steady flow of investment into the Kaluga Region, despite the fact that it has no oil or natural gas deposits. Several large-scale plants have been established over the last three years, in addition to the Volkswagen automobile plant we have seen. Just think, these companies have achieved full production capacity even though their foundations were laid a mere three years ago. They manufacture fine commodities, mainly for Russian citizens.

Volvo, Renault and Citroën also have branches in the Kaluga Region. There are South Korean and Japanese companies as well. I think the region will do well in the future. It is a good example for all of Russia. I wish you every success.

Don't forget that this is a general meeting and not a corporate opening gala. So I think it appropriate to bring into focus not only recent achievements but also the regions' managerial problems.

I want this to be a businesslike conversation without faultfinding or sweeping denunciations. There is nothing easier than laying the blame on one another, as you might know. We do not need this. What we need is an explicit and unbiased analysis of the situation. That is the best way to take stock of any problems and figure out how to tackle them.

I want to say this for starters: the introduction of the new remuneration programmes for companies and offices financed from the Government budget is inadmissibly slow-I mean the programme in which workers' earnings depend on their performance.

Only 24 regions have fully shifted to this remuneration programme in education, and mere 12 in the health care services.

As the result, schoolteachers' average monthly wage is still just over 12,000 roubles. Doctors do not earn much, either, though they make more than teachers-21,000 roubles a month, on average. That is hardly enough for decent life now.

Fourteen regions have not even begun introducing per capita financing in education. Fifty-five regions have not yet introduced single-payer system of health services through mandatory health insurance.

Government and municipal social welfare reforms are proceeding at a moderate pace. Progress in setting up independent welfare offices is especially slow.

That is why regional and local budgets are wasteful; their spending by the regions on education and health make up 147 billion roubles, which is a sizeable sum.

A major portion of this spending has been squandered on maintaining facilities instead of paying the best employees or purchasing cutting-edge equipment.

Housing is another serious issue. The Housing Reform Fund programmes have helped us to make progress, however modest it may be. What matters most is that we have started resettling people from hazardous dwellings, and basic repairs have improved more than ten million people's homes.

Still, there are no major improvements. Only 20% of residents are satisfied with their accommodations and public utilities, according to opinion polls. Heat and water losses actually increased in 2008 due to worn-out municipal infrastructure and the absence of discharge gauges.

It is true that the average time necessary to obtain a building permit has gone down recently. Still, it is too long-six months, at the shortest-and it is longer than seven months in 28 regions.

There is another problem I cannot fail to mention. This is the unnecessarily high number of regional and municipal officials. I spoke about redundant Government personnel and the resulting exorbitant costs at a recent meeting in Kislovodsk. The trend persisted even in the first half of this year, when the crisis was at its peak. We cannot allow this.

National and municipal administration costs grew by 30% in 2008, and by 4% this year. One might say that this is only a small increase, but there has still been an increase during a crisis that should make us thrifty in everything.

As you know, I never accept explanations for the unnecessary personnel based on the new government activities that allegedly make it necessary. The system certainly must be reformed.

Experts estimate that 116 billion roubles are wasted in public administration, including in local self-government. This is a third of all money spent on administrative purposes.

The regions formerly complained there were no federal regulatory system or established programmes and methods for such reforms. Such complaints were justified, but we cannot accept them any longer, now that all the appropriate programmes have been worked out and tested in pilot projects as part of the national priority projects.

The time of creating new legislation intended to reform the budget and industries is mostly over. We should realise that we largely owe our achievements of the recent years to increased expenditures on improving public welfare. We have made the right choice and pursued the right policy, because it was impossible to demand greater effectiveness while not giving sufficient support to important branches of government.

Today, we can no longer improve the situation by increasing expenditures-not only because we need to be very careful with our money but, more importantly, because it is pointless to increase allocations without comprehensive reforms. More than that, delays in modernising these government services I have mentioned may interfere with our progress so that our previous achievements will come to naught, which is inadmissible.

The decrease in the regional budgets caused by the crisis is a major challenge. The federal budget is also shrinking. Yet this is no reason to postpone our reforms.

Now is the time to be thrifty, improve the performance of agencies funded by the government, implement new ways of financing, and remove administrative obstacles. It is the time to learn to develop on the basis of domestic resources and potential, and to implement cutting-edge technologies.

You can rely on federal support for all of this-provided regions fulfil their basic social obligations toward citizens. That is why, as we were drawing up the federal budget for 2010, we decided to increase the expenditures on levelling out the regions' fiscal capacity from 374 billion roubles to 397 billion, as well as 90 billion rouble reserve to support balanced budgets. The regions can obtain another 140 billion roubles through low-interest loans for terms of three years.

We will go on funding the principal measures envisaged by national projects according to which the regions receive extra federal support for development.

On the whole, federal financial aid to the regions will exceed 1.1 trillion roubles in 2010. This is big money, and we will constantly be watching to ensure that it is spent rationally.

Let us start working.