Transcript of the beginning of the meeting:

Vladimir Putin: Mr Misharin, how are things?

Alexander Misharin: Mr Putin, the situation is stable and under control, although during the past year the crisis hit our region harder than the rest of Russia on average.

Vladimir Putin: Your industrial production and the processing industry went into a deeper decline than the country on average.

Alexander Misharin: Yes, industrial production in the region fell by 17%.

Vladimir Putin: By 17.9%, to be exact.

Alexander Misharin: The budget lost 11% and GDP dropped almost 16%, but today the situation is stable thanks to the government's timely anti-crisis measures.

First, the defence industry here has been working, and this has been helpful. The government has kept it busy with contracts. Second, 7.7 billion roubles, including 5.3 billion roubles from the federal budget, were channelled into the employment programme, which created an additional 123,000 jobs and paid for almost 6,000 to be retrained.

The programme to support housing and utilities was also a success. We have repaired buildings for almost 446,000 people - which translates into every tenth resident in the region - and created an additional 12,000 jobs.

All these measures helped us halt the rise in unemployment last September at the level of 93,000 jobless.

Vladimir Putin: Mr Misharin, I have different statistics, unfortunately, which show that unemployment went up in your region in December and in January.

Alexander Misharin: We had 51,000 unemployed. That number increased to 93,000-95,000, and unemployment remains within that range. The number of job openings is growing and this is very important. On February 1 we had 14,000 jobs to offer, and as of March 1 this number already grew to 21,000. So things are getting better but very slowly.

Vladimir Putin: So you think that the job market has been stabilised?

Alexander Misharin: I think you can already see the first signs of it. Wage arrears also point to this. Six enterprises owe their employees 31 million roubles. One of them poses a serious problem -- the Cars and Motors of the Urals
owes its workers 23 million roubles out of that total.

There are two more enterprises where we have changed owners de facto and will now do so de jure - the Barancha Electromechanical Plant and the Novaya Lyalya Pulp-and-Paper Mill.

Vladimir Putin: What's the situation at the large production complexes?

Alexander Misharin: Well, companies fall into two categories. Most of them have invested heavily in the past years to modernise their production facilities. Although these companies were affected by the crisis, they have been pretty stable thanks to effective cost reduction policies and government support, including guarantees and debt rescheduling.

I am referring to large metal producers, such as the Ural Mining and Metallurgical Company (UMMC), the Nizhny Tagil Iron and Steel Works (NTMK), Evraz Group, as well as RUSAL, even though it has had big problems, the pipe producer Trubnaya Metallurgicheskaya Kompaniya (TMK), and the carriage producer Uralvagonzavod, which has received substantial support.

We recently reviewed the situation at the UMMC, where production is expected to reach 2008 levels. This company will commit to transfer revenues in equal to 2008, that is before the recession. We are drafting an agreement with them to this effect.

Other companies did not invest anything in modernisation projects in the past few years and were wiped out during the downturn. These include Barancha, the Novaya Lyalya Pulp and Paper Mill and a few other companies.

Unfortunately, some of these companies are the backbone of the economy in single-industry towns.

We must exercise more control over them, and we are doing so. Only new owners and additional investment will fix the situation there.

Vladimir Putin: What's the situation at Uralvagonzavod? Last year we allotted almost six billion roubles to it, including 4.5 billion roubles to its authorised capital and another two billion roubles as government guarantees. We also pledged to allocate an additional 10 billion roubles this year. In February, I signed a government executive order to allot these funds to Uralvagonzavod.
In addition, Russian Railways and Transneft have placed quite a few orders for civil production. How is the company doing today?

Alexander Misharin: I would like to thank you, Mr Prime Minister, for the meeting you held and for the measures that were taken. Uralvagonzavod is using all its civil and military production facilities in full now. Furthermore, it has a two-year contract for carriages. It currently produces 18,000 carriages annually, but it could sell over 20,000 carriages with the proper production facilities.

This plant is currently being reconstructed. I visited it on Saturday to meet with trade unions and the company's management. The situation is stable on the whole. There is one problem they are addressing: 1,400 employees do not work full-time, and some of them have to take forced leave. Meanwhile, the company has over 1,400 vacancies, and it is doing its best to retrain its employees.

Maintenance workers, warehouse personnel and other workers remain idle, while the company needs specialists, like electrical fitters, welders and others. There is a retraining programme, which has been approved by the trade union; and this work is being done. From my viewpoint, the company is stable today.

Vladimir Putin: We are planning to launch several major innovation programmes in Nizhny Tagil, Kamensk-Uralsky and Asbest, as far as I remember. What have you done on these projects?

Alexander Misharin: Indeed, these projects are very promising. They are part of the programme to modernise single-industry towns. Thank you for including the three largest towns of the Sverdlovsk Region in it.

Nizhny Tagil will receive 124 billion roubles of investment under this programme. These funds will be used to reconstruct operating facilities. For example, an electric conversion shop with a capacity of 3.2 million tonnes of steel will be built at NTMK. Also, we will be evaluating the possibility of constructing a roll mill soon. I would also like the railway track and beam shop to be upgraded to produce 100m long tracks.

A new production facility is planned at Uralvagonzavod to manufacture tools for mobile oil rigs. They did the market research, developed plans for a new structure and are eager to offer a new innovative solution. I think they're moving in the right direction. There are other branches I would like to highlight. For example, methanol production is set to reach one million tonnes. We are creating a cluster of chemical production facilities, a logistics centre and a new production park. An industrial park will facilitate small businesses growth.

A new rolled plate shop and a new production facility at a pipe plant will be opened in the town of Kamensk-Uralsky to meet the needs of Sapsan-type projects, which will contribute to the development of Russia's heavy engineering and transport engineering industries. Also, there's the production and processing of agricultural products, a fodder mill and a few more facilities to be launched there.

There are also two interesting projects in Asbest. The first one is manufacturing thermal insulation material from gabbro. There are large deposits of gabbro there that can be processed. The other project involves magnesium production in the Urals. The project proposes a cutting-edge technical solution, an example of real Russian know-how. Up to 25% of the magnesium can be produced from local rock. More importantly, they will be able to produce more than just magnesium. They will be able to produce the whole spectrum, which makes full-cycle production possible.

The governments of these three cities understand that it is critical to develop small businesses. The level of small business development is 26% in our region on average. This must be raised to 35%. This level is under 20% in single-industry towns, 12% in Asbest, and even less in other towns. It is another of our development priorities. This year we have appropriated two billion roubles for small business support programmes, primarily in single-industry towns. There are 17 such towns in our region that hold one third of the population in the Sverdlovsk Region.

Vladimir Putin: One point I'd like to make. Debt rescheduling and production restructuring plans are certainly very relevant, especially for problematic companies. But please let's not forget about social problems. Back wages must be paid. We must consider the problems in the labour market and make sure that wages are paid on time while implementing this debt rescheduling plan. Social issues must given priority in all plans. Please keep that in mind.

Alexander Misharin: We will, Mr Prime Minister, we are dealing with this issue.