22 december 2009

The following issues are scheduled for discussion at the December 22, 2009 Meeting of the Government Presidium

1. Approving the Federal Targeted Programme for the Social and Economic Development of the Republic of Ingushetia in 2010-2016

The main objective of the Programme is to stabilise the social and economic situation in the Republic of Ingushetia, which would provide the basis for sustained economic growth in the republic in the longer term.

To achieve the goals set by the Programme, the following key issues must be addressed: the development of housing and utilities sector, the engineering infrastructure, the providing housing for internally displaced persons; construction of cultural amenities and facilities; the development of education, physical education, sports and youth policy; the development of the healthcare system and social protection; overcoming technological backwardness and providing support for the development of industry and agribusiness; as well as construction of transport and communications facilities and the development of the power supply system.

To address the above issues, a number of measures have been proposed that would affect various sectors, cover the entire range of the social and economic development problems in the Republic of Ingushetia and help rebuild infrastructure enterprises and facilities, which would include the renovation of fixed assets and the construction of new facilities.

By 2017 the programme will create the conditions for the development of manufacturing and social programmes, thus leading to employment and rising real incomes. In addition, the construction of the social and engineering infrastructure and support for industry and agriculture will create favourable conditions for small businesses growth.

The programme will cost a total 32.2426 billion roubles, 29 billion roubles of which will be provided out of the Federal Budget and 3.2426 billion out of budget of the Republic of Ingushetia.

Capital investments will amount to 27.3854 billion roubles, 24.779 billion roubles of which will be provided out of the Federal Budget and 2.6064 billion roubles out of the budget of the Republic of Ingushetia.

The Federal Government will co-finance between 90% and 95% of the total expenditure commitments of the Republic of Ingushetia.

Under the Federal Law On the Federal Budget for 2010 and the Planning Period of 2011 and 2012, 1.5 billion roubles will be allocated for implementing the programme in 2010.

While implementing the programme measures the following targets are to be achieved:

 

  •  reducing unemployment by 22%;
  •  creating up to 18,000 jobs in sectors such as healthcare, education, light industry, food processing, agriculture, etc;
  •  increasing housing space for the population to 18 square metres per person;
  •  reducing wear and tear on utilities infrastructure from 70% to 15%;
  •  increasing availability of hospital beds by 13% (to 45.5 beds per 10,000 persons);
  •  increasing the proportion of first-shift students in primary and secondary education to 90%;
  •  increasing the grain harvest by 22% (to 74,000 tons per person);
  •  increasing gross vegetable production to 6,300 tons per thousand persons;
  •  increasing livestock and poultry production by 25% (to 7,000 tons per 1,000 persons);
  •  increasing the number of fixed telephones by 100% (to 5.8 phones per 100 persons).

Under the Programme, tax revenues for all levels of budgets are to increase by four billion roubles (by a factor of 4.4), which includes an increase in federal tax revenues by 2.6 billion roubles and an increase in tax revenues for the Republic by 1.4 billion roubles (2.3 times current revenues). As a result, the Republic of Ingushetia's financial sufficiency will increase from 12.1% in 2008 to 28% in 2016.

By 2017, the gross regional product of the Republic of Ingushetia will have increased by a factor of more than 2.8 compared with 2007 (in comparable prices).

2. Draft Strategy for the Federal Targeted Programme Comprehensive Programme for Housing and Utilities Sector Modernisation and Reform in 2010-2020

A draft executive order on the issue has been prepared by the Ministry of Economic Development of the Russian Federation.

The housing and utilities sector currently faces the following key challenges:

 

  •  uneven distribution of utilities and, as a consequence, ineffective use of utilities;
  •  outdated and deteriorated utilities networks, facilities and equipment, resulting in huge energy losses; and
  •  ineffective management of the housing and utilities coupled with high risks for businesses entering these industries.

By 2020, a comprehensive approach to the abovementioned issues in accordance with the Strategy will cut energy consumption per square metre of housing from 77 to 55 kilograms of conventional fuel units a year (an overall economy of 56.8 million tons of conventional fuel units), cut water consumption from 304 to 182 litres per person per 24 hours and save the budget 400 billion roubles a year by the end of the period (2020).

The executive order calls for developing a draft programme under which the Federal Budget would lend 696.56 billion roubles to housing and utilities enterprises in the period from 2010 to 2020. Most of the spending on the proposed measures of the Strategy would be financed through off-budget means and investments in the housing and utilities sector.

The principle policies of the Strategy stipulate repayment of funds lent to the housing and utilities enterprises, reform of the sector through investments and full use of public-private partnership mechanisms.

The expected result from the implementation of the Programme for regional and local budgets is as follows:

 

  •  the elimination of tax arrears accumulated by utilities enterprises;
  •  transparent mechanisms for budget financing;
  •  a decrease in energy consumption in the sector;
  •  the completion of scheduled repairs and demolition of dilapidated housing deemed unsafe;
  •  a decrease in the rate of emergencies and breakdowns in the housing and utilities sector;
  •  involvement of small and medium-sized enterprises in the utilities sector and, as a consequence, an increase in the taxable base;
  •  increased participation by domestic enterprises in the production of materials, instruments and mechanisms required for the sector's development.


3. Prospects for the development of federal highways and their subsequent operation as toll highways

In order to further develop the network of federal highways and build toll highways, and pursuant to the Federal Law On the State-Owned Company Russian Highways and On Introducing Amendments to Certain Legislative Acts of the Russian Federation, the state-owned company Russian Highways will be established.

In accordance with Article 16 of the Federal Law, the Ministry of Transport has submitted a draft executive order of the government of the Russian Federation entitled On Approving the Long Term Programme for the Russian Highways State-Owned Company (2010-2015).

The draft executive order will approve the Programme for the Russian Highways state-owned company for the long term (2010-2015) and charge the Ministry of Transport, jointly with the Ministry of Economic Development and the Ministry of Finance, with:

 

  •  submitting to the Government of the Russian Federation a draft resolution for introducing amendments to the Modernisation of the Transport System in Russia (2002-2010) Federal Targeted Programme within two months;
  •  revising the Programme to take into account the measures stipulated by the Modernisation of the Transport System in Russia (2002-2010) Federal Targeted Programme in the first quarter of 2010.

In addition, under the draft executive order the Russian Highways State-Owned Company will be financed as a part of the budget allocations for 2010 under the Federal Law On the Federal Budget for 2010 and for the Planning Period of 2011 and 2012, under the Road Management subsection of the National Economy section.

The Programme identifies the main areas, the financial and economic indicators and the expected long-term results of the state-owned company.

The Programme takes into account the Highways sub-programme of the Development of the Transport System in Russia (2010-2015) Federal Targeted Programme. The programme also takes into account the instructions of the President of the Russian Federation and the Government of the Russian Federation, as well as proposals from the Russian regions. Financing for the Programme will be based on the parameters for the Federal Budget in 2010 and the Planning Period of 2011 and 2012, an assessment of the size of the investment market (including the potential capacity of the infrastructure bond market) and the projected revenue base of the state-owned company in the period from 2010 to 2015.

The Programme will mark the first stage in the implementation of the long-term strategy of creating a national network of express highways, bringing the network's total length to 9,000 km by 2030.

The adoption of the Programme will enable the State-Owned Company to launch full-scale operations, which in turn would make it possible:

 

  •  to transfer the revenues from the use of highways and the road infrastructure to their users for development and for the current needs of the road network;
  •  to borrow and manage funds, which would speed up the construction of road facilities that cannot currently be included in the programme of road construction due to budgetary constraints.

The implementation of the proposed Programme of Activities would improve the quality of construction and operation of highways and raise additional revenues for the development of the network of highways.

4. Approving technical regulations on the safety of pyrotechnic compounds and products containing them

The draft resolution on the issue has been submitted by the Ministry of Industry and Trade.

The regulations seek to protect the life and health of humans, animals and plants, the property of natural and legal persons, state and municipal property and the environment, as well as prevent the deception of consumers regarding the handling of pyrotechnic products. These regulations are intended to bring the Russian system of technical regulation more in line with internationally recognised technical regulatory principles, harmonising the system with international requirements while taking into account the actual state of the national economy.

The requirements for pyrotechnic compounds, products containing pyrotechnic compounds or products that are developed, produced, transported, stored, sold, used or disposed of in the same way as pyrotechnic compounds, as well as the guidelines and methods for evaluating compliance and government regulation (supervision), are based on the following principles:

 

  •  pyrotechnic compounds and products containing them are prone to combustion and explosion. Therefore, failure to adhere to established legislation or other regulations at any stage of the life cycle of these products may lead to situations with serious consequences, including death and damage to property and the environment;
  •  the majority of pyrotechnic products affected by the regulations are intended for use by the public, and the introduction of regulations would therefore help protect people, property and the environment;
  •  pyrotechnic products do not require technical maintenance during storage or energy consumption during their use.

The regulations are designed to ensure the necessary level of safety at all the stages in the life cycle of pyrotechnic products while at the same time not being so strict as to become excessive barriers to economic activity.

5. Approving technical regulations for personal protective equipment safety

A draft resolution on the issue has been submitted by the Ministry of Healthcare and Social Development.

The draft would approve technical regulations affecting the safety of personal protective equipment. These regulations would set the minimum requirements to ensure mechanical, thermal, biological, chemical, electrical and radiation safety when using personal protective equipment and be determined by the type of personal protective equipment. The technical regulations also establish guidelines for identifying personal protective equipment and the procedure for confirming the equipment's compliance with established requirements.

The technical regulations are being adopted to protect the life and health of people, prevent the deception of users of personal protective equipment and protect the environment.

According to the draft, after securing approval from the federal executive bodies concerned, the Ministry of Healthcare and Social Development are charged with submitting the following documents to the government of the Russian Federation within six months:

 

  •  a draft official list of national standards outlining guidelines and methods of investigation (testing) and measurement, including guidelines for determining which particular models of personal protective equipment are required for the use of and compliance with these technical regulations, as well as for assessing the compliance of personal protective equipment with established requirements;
  •  a draft official list of personal protective equipment subject to confirmation of compliance with technical regulations regarding the safety of personal protective equipment available in the customs territory of the Russian Federation.

These technical regulations were developed with due account for GOST standards, the directive of the European Union on Personal Protective Equipment and the federal law On Technical Regulation.

These technical regulations do not pertain to the following types of personal protective equipment, which are regulated by separate, corresponding legislative, other regulatory acts of the Russian Federation and other technical regulations:

 

  •  military personal protective equipment developed and manufactured for state defence purposes;
  •  personal protective equipment developed specially for fire units and units that respond to natural and human-induced emergencies;
  •  personal protective equipment specially developed for use in aircraft, spacecraft and underwater operations;
  • personal protective equipment developed for medical purposes and for use in microbiology.

The adoption of the draft would create safe working conditions for consumers in dangerous and harmful environments; ensure a balance between the necessary level of safety and the technical and economic state of producers and consumers of personal protective equipment; streamline the regulatory framework that determines the regulations for personal protective equipment safety and consolidate into a single document the standards that are currently found in a large number of regulatory documents of various legal statuses.

6. Introducing amendments to certain regulatory acts of the Government of the Russian Federation

7. Draft Federal Law On Introducing Amendments to the Federal Law On the Procedure for the Formation and Use of the Targeted Capital of Non-Profit Organizations and to Part 2 of the Tax Code of the Russian Federation

The Draft Federal Law has been submitted by the Ministry of Economic Development of the Russian Federation.

Under the current version of the Federal Law On the Procedure for the Formation and Use of the Targeted Capital of Non-Profit Organizations, the target capital can be replenished only through cash assets.

The amendments proposed by the draft are aimed at increasing opportunities for non-profit organisations to replenish their target capital not only with cash assets, but with other assets (securities and real estate) that they own.


These amendments require the introduction of other amendments to Chapter 21 of Part 2 of the Tax Code of the Russian Federation, which pertains to the Value-Added Tax, Chapter 23, which pertains to the Tax on the Incomes of Natural Persons, and Chapter 25, which pertains to the Tax On the Profits of Organisations. These changes would allow securities and real estate transferred to replenish the targeted capital of non-profit organisations as well as the revenue raised as a result of the division of the targeted capital and cancellation of a donation to be included among the sources of revenue that are exempt from taxation.

8. Draft Federal Law On Introducing Amendments to Chapter 25, Part 2 of the Tax Code of the Russian Federation in the section on the procedure for determining costs paid by investors for the construction and/or reconstruction of transport, engineering, social and utilities infrastructure

The draft federal law on the issue has been submitted by the Ministry of Finance of Russia.

In recent years it has become widespread practice, as part of the implementation of investment projects, for government bodies and local self-government bodies to impose additional burdens on investors and developers who have been given state-owned or municipal land for development. These burdens consist of commitments to build (modernise) transport, utilities and social infrastructure as well as utilities networks, which would subsequently be transferred to the state (municipality) ownership without compensation. This situation is a strong deterrent for attracting investment in the real sector of the economy, i.e. the construction of residential and industrial projects.

In this regard, Chapter 25 of Part 2 of the Tax Code of the Russian Federation, entitled Tax On the Profits of Organisations, has been supplemented by Article 2642, entitled The Cost of Construction and/or Reconstruction of Transport, Engineering, Social and Utilities Infrastructure Facilities, which establishes special regulations for determining the taxation base for corresponding taxable profits.
In accordance with the procedure stipulated by the draft law, these expenditures will be recorded as expenditures when determining the taxable profits evenly throughout a period to be determined independently by the tax payer, but which may not be less than five years.

Under the draft law, the amendments will not apply to agreements under contract, the cost of which is taken into account in taxing profits in accordance with the current provisions of Chapter 25 of the Tax Code of the Russian Federation.

The adoption of the draft federal law On Introducing Amendments to Chapter 25, Part 2 of the Tax Code of the Russian Federation in the section on the procedure for determining costs paid by investors for the construction and/(or) reconstruction of transport, engineering, social and utilities infrastructure would relieve the tax burden on investors and put an end to the practice of government executive bodies and local self-government bodies presenting investors with unreasonable requirements for projects connected with the construction (reconstruction) of utilities networks and transport, utilities and social infrastructure.

9. The issue of government securities in 2010

In accordance with the Budget Code of the Russian Federation, the Finance Ministry of Russia has submitted a draft executive order on the issue.

Pursuant to the Federal Law On the Federal Budget for 2010 and for the Planning Period of 2011 and 2012, the draft executive order of the government calls for the issue of securities worth 869.3 billion roubles in 2010. The nominal value of these securities will be in the currency of Russia and serve to:

 

  •  balance the Federal Budget (up to 343.6 billion roubles);
  •  carry out an exchange of federal loan bonds for privileged shares of bank lending institutions under the procedure and on the terms established by Federal Law No.181-FZ of July 18, 2009 On the Use of Government Securities of the Russian Federation to increase bank capitalisation (up to 250 billion roubles);
  •  redeem government debts (275.7 billion roubles).

Considering the state of the government securities market in 2009, the Ministry of Finance of the Russian Federation proposes issuing government bonds in 2010 based on an average price of 98% of the nominal value, including:

 

  •  federal loan bonds (up to 695.3 billion roubles);
  •  government saving bonds (up to 174 billion roubles).

To maintain an optimal schedule for the government debt, the Finance Ministry expects that borrowing in the internal market in 2010 will be of mainly medium- and long-term nature (up to 90% of the projected amount of domestic borrowing).

To maintain the liquidity of the government securities market, government bonds with standard terms (3 and 5 years) will continue to be issued in 2010.

In 2010, the amount of 3- and 5-year federal loan bonds in circulation will be increased to 50 to 55 billion roubles for each issue.
In addition, if the macroeconomic situation continues to improve, new federal loan bonds will be issued in 2010 for a term of up to 10 years in order to optimise the schedule for servicing and redeeming government domestic debt.

The amount of 10-year issues in circulation is to be increased to 90 to 100 billion roubles each.

To avoid the negative impact on the liquidity of the government securities market caused by the investment of large amounts of pension savings in government securities circulating in the GKO-OFZ market, the issue of government savings bonds is to continue into 2010.

The adoption of the draft executive order will make it possible in 2010 to issue government securities to ensure a balanced federal budget, repay government debts and exchange federal loan bonds for preferred shares of in bank lending institutions, thus increasing bank capitalisation.

10. Distribution of support for the reform of regional and municipal finances in 2009

The draft executive order on the issue has been submitted by the Ministry of Finance.

Subsidies for the reform of regional and municipal finances are intended to restore the financial health of the Russian regions (municipal entities), promote the reform of the budget system and the budget process and stimulate economic reform.

In 2009 1.7806 billion roubles were allocated from the federal budget for such subsidies, including 1.5064 billion roubles for the reform of regional finances and 274.3 million roubles for the reform of municipal finances.

The grounds, procedures and terms for providing subsidies for the reform of regional and municipal finances are determined by a statute approved by a resolution of the Government of the Russian Federation and supported by Russian Finance Ministry regulatory acts regarding the distribution of the abovementioned resources.

Subsidies are granted to the constituent entities of the Russian Federation and municipal governments (the capitals of Russian regions or cities that at the end of the last report year had a permanent population of more than 100,000) that have been used in the past two years to realise regional (municipal) financial reform programmes or the first stages of such reform programmes have achieved the best quality of financial management.

The percentage of granted subsidies for the reform of regional and municipal finances that will receive co-financing (compensation) varies depending on the specific objectives of the programme being fulfilled by the region (municipality), ranging from 20% to 80%. The remainder is to be provided by regional and local budgets. If the regions (municipal entities) of the Russian Federation have allocated more than their fixed share of financial resources to fulfil such programmes, these outlays will be compensated for through Subsidies.

In allocating subsidies, the results of implementing the programmes achieved by the Russian regions (municipalities) were taken into account: lack of disqualifying criteria (compliance with the budgetary laws of the Russian Federation, absence of outstanding debts and wage arrears); phased fulfilment of at least 80% of reform programmes, compliance with established distribution of financial expenditure out of the regional and local budgets, compliance of actual disbursements with the amount of subsidies stipulated in the plan for the use thereof.

Subsidies have been distributed among the constituent entities of the Russian Federation based on a constituent entity's fulfilment of outcome indicators, taking into account the budget sufficiency target of the constituent entities of the Russian Federation. Subsidies have been distributed among municipal entities based on budget expenditures by the municipal entity for 2008 and the final outcome indicators of the programmes implemented.

Thus, a total 1.7806 billion roubles worth of subsidies are to be distributed among 17 regions and 7 major municipalities in the Russian Federation. This funding will thus compensate the 317 million roubles in costs incurred by regional and local government bodies over and above the share established for financing the programmes.

As part of implementing the programmes for reforming regional and municipal finances, the regions (municipalities) referred to above have developed a regulatory framework that complies with the principles of responsible and effective financial management at the sub-national level. The main results of the programmes carried out by the regions and municipalities are approval of the standards of the quality of government services rendered to legal and natural persons (in the field of education, healthcare, culture and social policy), the procedure for annual evaluation of the financial consequences of the tax benefits offered, changes in the legal status of existing institutions, the introduction of instruments for targeted programme planning, the development of objective and transparent mechanisms for the distribution of financial assistance and the introduction of a formalised procedure for managing Russian regional and municipal debt.

11. Government Commission on Economic Development and Integration

Moscow,

December 21, 2009

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