Transcript of the beginning of the meeting: 

Vladimir Putin: Good afternoon, Mr Mikhalchuk,

Today we will discuss the social and economic situation in the region. To begin with, I am pleased to note that industrial production in your region has gone up 11% in the first two months of the year, which is double the average for Russia. It's quite an accomplishment, but there are problems too, and I'd like to discuss them with you.

It is especially gratifying that growth has been significant in the leading industries, timber processing and the pulp and paper industry. It should be said that these are the industries that received support from the federal budget to reimburse interest payments on loans issued to create reserves of timber, raw materials, and fuel, among other things.

We plan to provide roughly 10 million roubles in support this year. We will also discuss this issue today.

That being said, there are problems too. Wage arrears are going up for some reason. Industrial production is on the rise, but wage arrears are going up.

What I can't understand is why they are going up in government-funded industries. There's no lack of money  here! We provide all necessary support to almost all regions, at least in the amounts agreed upon with regional leaders, yourself included.

I would like you to explain the cause for this in today's meeting.  

Turning our attention back to the economy, the Arkhangelsk Region is known for its well-developed shipbuilding industry. As you know, last year we provided significant support - four billion roubles worth - to Sevmash. At the end of March the Supervisory Board of Vnesheconombank may consider extending the loan issued to Sevmash to another five years.

Moreover, there is a targeted investment programme that calls for an additional 55 million roubles in federal funds for Sevmash to purchase additional equipment.

Ilya Mikhalchuk: Yes, to purchase marine equipment.

Vladimir Putin: Precisely, marine equipment. Also, the repair shipyards Zvyozdochka will receive 182 million roubles, the production association Arktika - 74 million, the design and technology office Onega - 16 million, and the Northern Raid Company - 15 million roubles in federal support.

I would like to hear your opinion on these aspects of the shipbuilding industry in your region. I would like to hear about progress made at large-scale projects and those that are just getting underway. Given our plans to revive and reinvigorate the Russian shipbuilding industry, the northwest of our country is of special interest to us in this respect.

Let's start with wages. What can you say on this score?

Ilya Mikhalchuk: Thank you. You correctly pointed out that industrial growth rates are on the rise. For certain types of production - cardboard and pulp -

they have reached 20%...

Vladimir Putin: I'm asking you about wages not cardboard.

Ilya Mikhalchuk: As for wages, first, we don't have any debts to public sector employees.

Vladimir Putin: Then why is it written in the report I have that you do?

Ilya Mikhalchuk: We don't. I am positive that we have no debts to public sector employees working in regional and municipal institutions.

Vladimir Putin: Look, as of March 1 of this year, debts totaled 113.6 million roubles. They have almost doubled since the start of the year. The failure to pay public sector employees on time is particularly worrisome. Wages owed to them have reached 17.5 million roubles.

 Ilya Mikhalchuk: I will get to the bottom of this, Mr Putin. My figures are slightly different. Our total debt is 53 million, but we are doing all we can for the debts...

Vladimir Putin: In other words, you cannot answer this question now, correct?

Ilya Mikhalchuk: I can check, but the figures I have...

Vladimir Putin: You can check but you can't answer.

Ilya Mikhalchuk: We have achieved such impressive growth...

Vladimir Putin: Okay. I have a big request. Literally right after our meeting today, please request all the necessary data from your fiscal agencies and report back to me early next week.

Ilya Mikhalchuk: Yes, certainly.

Vladimir Putin: Let's turn our attention back to the economy now.

Ilya Mikhalchuk: To the economy. First, I'd like to thank you for the support provided to the Northern Centre of Shipbuilding and Repairs. It is using 100% of its capacity. Today, all the vital enterprises you mentioned are working at full capacity.

That being said, we know that we could make greater use of Sevmash in marine engineering for developing the Stockman deposit.

Second, the measures being taken today require that we streamline production. Staff size at these enterprises is rather large. Sevmash alone employs 24,000 people. These five enterprises together have 44,000 workers. Of course, this requires streamlining and new management.

As for the economy, the government has indeed provided a great deal of support to the timber industry and the pulp and paper industry.

This support has allowed for record production of unbleached pulp at the Kotlas Pulp and Paper Mill - 900 tons per day.

Now we are building probably the biggest wood processing mill equipped with new technology. We are planning to commission it in October and I would like to invite you to attend this event.

Vladimir Putin: Who is the investor there?

Ilya Mikhalchuk: Sberbank is the investor. The total amount of the loan is 3.2 billion roubles. Sberbank put up half and we put up the other half.

I think that the main goal today should be to establish order in forest management. We have implemented all of the government's decisions on this issue. We are taking an active approach toward combating illegal felling.

But there is another urgent problem that...

Vladimir Putin: Excuse me, please. While we're on the topic, what do you think about our discussions with our Finnish partners on pulpwood export duties? What should be done in the near future on this issue?

Ilya Mikhalchuk: You are probably right about pulpwood. Duties should be lowered, but I also don't think we should export sawlog. This industry is undergoing technological modernization. I think we need coniferous timber for our own production, for intensive processing and comprehensive development. I think this is the right position.

Vladimir Putin: So, investments are still being made in processing?

Ilya Mikhalchuk: Absolutely. This translates into totally different allocation rates and a high operating capacity immediately. 

Of the 22 million cubic meters on which felling is planned, only about 60% are being developed. The transportation infrastructure is holding us back, but the position is right.

Other regions have not yet processed all their hardwood as building materials, but overall the trend is very good.