12 february 2010

First Deputy Prime Minister Igor Shuvalov’s speech at the 7th Krasnoyarsk Economic Forum

"The capacity of the Russian economy to attract investment has been put to serious test. However, from the results of 2009 we believe that the political and economic systems have proven stable".

First Deputy Prime Minister Igor Shuvalov's speech at the 7th Krasnoyarsk Economic Forum: 

Good afternoon, dear friends,

Yesterday I was in Tomsk with Alexander Khloponin where the President of the Russian Federation chaired a meeting of the Commission on Modernisation and Technical Renewal. After all the issues had been covered, the President discussed with us his speech at the 2008 Krasnoyarsk Forum when he was a candidate for President. The President has asked me to convey his greetings and best wishes to the participants in the Forum and to tell you that he remembers that his economic programme was unveiled here at the Krasnoyarsk Forum. It was announced after Vladimir Putin had delivered a policy speech on the country's development until 2020 at the Kremlin on February 8. I have also been asked to tell you that his speech was programmatic and pragmatic in character. This is what we are putting into practice today. The provisions of that statement form the basis of the Government's action programme until 2012. I have before me two other speeches, "Russia in 2020" by Vladimir Putin and "Modernisation of the Country" by Dmitry Medvedev. I would like to brief you on what we, the Government, are doing based on that programme. It is too soon yet to report on what we have accomplished, but the results will be known by mid-2012.

Of late there have been a lot of arguments as to whether Russia has strategic planning at all. I think that debate is not quite professional because if you look at the documents from which the Government proceeds, it becomes clear that these priorities determine the main steps in our activities until 2012.

Addressing the Forum in February 2008, Dmitry Medvedev spoke about the "four I's". Soon after, we announced the Government Programme until 2012. We proceed on the basis that the main policy document on the country's development is the concept for the long-term development of Russia until 2020, with its main stage covering the period from 2008 to 2012. The "four I's" are institutions, innovation, infrastructure and investment. A range of legislative acts has been proposed for each of these areas. Regarding institutions, new federal laws have changed the political and electoral systems. The President came forward with initiatives on changing the judicial system. We are preparing a series documents to protect business from hostile takeovers in order to change the attitude toward private property in our country. We are working to lower the administrative barriers.

Investment...The capacity of the Russian economy to attract investment has been put to serious test. However, from the results of 2009 we believe that the political and economic systems have proven stable. Even so, we are aware that Russia's investment image needs to change. We cannot be content with the Russian Federation's ratings. Such a low rating is unfair. Some work needs to be done in this area in 2010. The relevant instructions have been issued by the President and the Prime Minister, and ad hoc groups have been created. I think before long we will be able to demonstrate positive dynamics in this area to domestic and foreign investors.

Infrastructure...Before the crisis we planned massive allocations for the building of highways and the modernisation of other types of transport. We cannot fulfill all these plans because of budgetary constraints. Nevertheless, our spending in this sector has not dropped compared with the pre-crisis period. Expenditure has been growing at a very high rate. Now we should do all we can to make spending more efficient. We are often criticised for low standards in road-building technology and the high cost of construction. We should learn to spend money in a different way.

Concerning innovation, I can say the following: at the peak of the crisis a commission was set up to tackle one of the top priority tasks. We started to study the modernisation theme seriously. Overall it differs from the concept of "innovation." "Modernisation" is a broader term. Modernisation means the introduction of existing technologies. Innovation is the creation of something new. We have visited American universities that are in the forefront of innovation and introduction of new technology to the market and we understand how it should be organized in Russia. A law is being drafted to regulate this aspect of Russia's development. Pursuant to the tasks set by Dmitry Medvedev, we have yet to overcome "legal nihilism" and dramatically bring down administrative barriers. We must work on tax administration and on diminishing the tax burden, build a strong financial system, modernize the transport and energy infrastructure, lay down the foundations of a national innovation system and pursue social development programmes.

At the beginning of this Forum, I would like to say the following: We in the government see the result of the Forum as an intellectual product which enables us to make our plans and then implement them. Last year the 6th Forum put forward some ideas which we used in planning anti-crisis measures, we relied on what was developed in Krasnoyarsk. So, the fifth element that the President added later is intellect. This is what you represent and this is what you can offer for the results of the Forum.

I think the Forum is aptly called "The Challenges and Values of Modernisation." The main challenge of modernisation is our personal attitude, our subjective attitude to what an innovative entrepreneur is. In this country there is little respect for the entrepreneur as a person who can bring about welcome change. Our conservative attitude may result in a situation where we would give up hope of living in a successful country. Success today depends on our ability to create the new and proceed to modernise it tomorrow. For decades we used to believe that one could use a car until it fell to pieces. A modern innovative society should be oriented towards the consumption of innovative products. Our failure to appreciate the value of innovation is the main obstacle to "the fifth element," i.e. intellect. This will be the subject of one of the discussions at the Forum.

It is a challenging task, but if it is solved, it will improve the quality of life for the majority of our citizens and enable everyone to fulfill their potential. I hope that our work today will be productive. Thank you.

Speech during the discussion:

I have listened with interest. I agree with a lot of what has been said. But I also found many things dubious. Sometimes one gets the impression that people do not read programme documents. We probably share some of the blame, perhaps we are not doing enough to explain the actions of the President's Executive Office and the Government. Speaking about modernisation and possible losses, we shouldn't forget the subject called "The History of State and Law" which is studied at higher education institutions for two years. In the past, attempts at modernisation often ended in massive failure. Peter, Paul and Catherine tried to modernise government; during perestroika modernisation also stalled because it all hinges on social stability in the country. The kind of modernisation we need should preserve social stability while certain losses cannot be avoided. Modernisation, renewal and change should not exceed the threshold of normal losses. Otherwise we will face a high level of social instability which would spell the end of the initiatives.

In Russia, social stability should be seen as a very real priority. The experience of other countries must be used, but we should not forget that conditions in Russia have always been unique and that our cultural and historical past cannot be ignored. By preserving social equilibrium we will move forward. Staying the course is a challenge for all of us. It is all too easy to criticise the Government or the political parties, but it is very difficult to find correct answers for Russia. We need mechanisms that will enable authority and society to interact, exchange ideas and move forward. I think the division between state, business and society is untenable. Business is the best part of society. Business brings creation. Authority should indeed be separate, but even that is debatable. Division brings intellectual conflict, which stands in the way of innovation. We all see eye-to-eye on what modernisation means, and I have been clear about this, but one cannot force people to learn the meaning of modernisation. One can create any number of approaches, but the strategic direction should be one.

There are many things that we understand differently, but the exigencies of real life force us to find answers quickly and use them to make tactical political decisions. As regards programmes and their fulfillment: it would be wrong to treat every programme as an axiom. Life changes rapidly and the changes can be incorporated into the programme. The challenges may change. We sometimes have to admit that parts of our programmes have lost their relevance. Of course, we would adjust our programmes. For all the shortcomings of our life, Programme 2020 shows that the past fifteen years have dramatically changed our country. Everything was different fifteen years ago. Things are hard for everyone, not only for business, but also for the authorities. We should maintain the pace and in the coming years achieve as much change as in the previous fifteen years.