Government report on its performance in 2015

(Government.ru – April 19, 2016)

“The Government of the Russian Federation <…> shall submit to the State Duma annual reports on the Government’s performance, including on issues formulated by the State Duma.” (Constitution of the Russian Federation, Article 114, Claus.e 1, Subclause “a”).

Dmitry Medvedev: Mr Naryshkin, Ms Matviyenko, members of the State Duma, colleagues,

The Government performance report I will deliver today is special in that there are State Duma elections ahead, and we have worked together for nearly five years.

The Government and the Parliament have reached a commendable level of interaction (and this is not an exaggeration), which is why we have resolved many problems in the economy and the social sphere. Of course, our positions have not always coincided. Moreover, we sometimes held diametrically opposite views, which resulted in debates, but this is fine. These debates helped us find the best approach and the most preferable solutions, and to assume responsibility for our country.

Retrospective

Government report on its performance in 2014, 21 April 2015 http://government.ru/en/news/17768/
Government report on its performance in 2013, 22 April 2014 http://government.ru/en/news/11875/
Government report on its performance in 2012, 17 April 2013 http://government.ru/en/news/1411/

I’d like to express my gratitude for your cooperation with the Government these past years, for your support to us and our initiatives, for your understanding and your ability to listen to others, which is a must for effective cooperation between the Government and the State Duma.

This cooperation is especially important today, at this difficult time. As you know, our economy has been under pressure caused by several negative factors. They have been mentioned here, of course, yet I’d still like to talk about them so that we have a complete picture of what went on last year and what is happening this year.

The first factor is the low prices of oil and other commodities. What matters is not only the depth of the plunge, which we saw several times before over the past decades, but the speed of the fall.

But last year the prices of oil fell by nearly 50 percent over six months, which is an unprecedented speed of the fall. No economy can quickly adjust to such a dramatic decline. It was a major shock for our economy.

The second factor is sanctions against Russia. Russia is still cut off from a large share of international credit resources and the market of modern technologies.

The third factor is instability and unpredictability of global markets, which have been increasingly affected by political considerations, as you surely feel, rather than economic laws.

And lastly, the main factor – I stress this, because I consider this to be the most important factor – is the structural problems of our own economy, which have become more acute amid the current crisis. We have discussed this more than once, including in this hall.

This combination of factors could have been lethal to us, to our country, had it happened, say, in the 1990s. Given this kind of pressure, it’s unclear whether the country could have survived within its current borders had this happened in the 1990s. But today we have not only survived, but we have the ability to develop and move forward. Of course, we understand that the government’s ability to allocate large funds to the economy and the social sphere and to support the banking sector seriously depends on the export of commodities and on access to foreign loans. But we cannot, and more importantly, we must not fully depend on these sources.

I mean, if we want to remain a country possessing the right to uphold its own position and its national interests, one that reliably provides decent living conditions for the elderly and ensures its children’s future. This is what our work is focused on. I can assure you that our economy is adapting to modern conditions. Two years ago things were entirely different, both in terms of its structure and costs. There is diversification in our economy, something we kept insisting that we vitally needed all along.

Our role in the global economic system is changing. In fact, we have started to build a prototype of the next decade’s economy and we are working on it together, along with other colleagues. Together we have gauged every step and made difficult decisions which sometimes were the only possible solution under those conditions. We tried to find balance between urgent anti-crisis measures and structural reforms. But first of all we tried to do our best so that our people were affected by the crisis as little as possible.

Of course, we have fielded our portion of criticism and suggestions about seemingly simple issues, but it is the Government’s job to thoroughly analyse all the implications and consequences of the moves we make, even the smallest ones that are not visible immediately. The Government, if you will, has to take an even more conservative position on such issues than other branches of authority.

True, the country needs profound structural reforms; the Government is well aware of that, but we also understand how this will immediately reflect on the social sphere. Any forced reformation will exacerbate and extend the crisis for a few more years.

This is why I want to say, and I want you to hear me clearly, that we will not implement reforms at the expense of the people.

It’s true that the economy is short of funds, but we will not print more money to make up for the shortfall of budget revenues. Everyone understands that this would be like printing paper, which will only spur inflation and devaluate people’s incomes, salaries and pensions.

We had enough of this in the 1990s. There is the temptation in the current situation to introduce tough economic regulation, economic planning like we had in the past. But this would only unbalance the economy in a different way, shattering business and the economy as a whole. Other ideas vary from introducing a more mobilised economy and nationalising large companies to selling out all state-owned assets. But spectacular solutions are not always effective. All of these proposals are only good for propaganda and can easily be condensed into eye-catching political slogans, while having nothing in common with real work, because politically attractive solutions are often very dangerous and sometimes even lethal for economic growth.

More proposals of this kind will be made during the election campaign. But there are certain laws, the laws of propaganda. There is nothing out of the ordinary in these unwritten laws of election campaigns. But I suggest that we change them. There must be only one law for elections: honesty. When I say honesty, I mean not only the calculation of votes, which goes without saying, but above all the honesty of election slogans and the promises made by politicians. We must not promise what we are unable to deliver. There is political responsibility and the responsibility of politicians during election campaigns. The latter kind of responsibility is much bigger. Unfulfilled promises translate into public disappointment, loss of public trust and, ultimately, the discrediting of the state, which includes all of us, both the executive and the legislative branches. I believe that no matter how different our views can be, the future of the country is incomparably more important than any immediate political considerations and election ambitions. There is no room for mistakes or for any harsh or overemotional actions, because our mistakes will simply cost us through the nose. The people and the economy can only survive reforms of a certain speed and depth, which is why the Government will continue to operate under the old principle: exclusively balanced solutions. We knew this when we developed and implemented our anti-crisis plan last year. It not only cushioned the negative consequences of the crisis, but also created the basis for further development and even a number of structural reforms.

This plan was incorporated in the Government’s action plan for 2016. The best and only possible answer to the challenges facing us is the modernisation of our economic structure. A more modern economy should be adjusted to people’s needs and aimed at creating better goods and services for the global market. Although it was the LDPR group that asked about ways to resume economic growth, I believe this question is of concern to everyone in this room. It implies work that will last more than a year, but if we want to achieve our goal we must start acting now, after clearly determining the areas in which we will operate and the practical steps we will take.

We identified five areas, without which forward-looking development is impossible. These are: budget policy optimisation, support for non-oil and gas exports and import substitution, improving the business environment, enhancing state governance and, perhaps most importantly, the development of the social sphere. I will address each of these areas in detail.

First. Budget policy.

Needless to say, without an effective budget policy it would be impossible to adapt the economy to the changing environment. Previously, the approach towards budget planning was temporarily reviewed. Instead of a three-year plan, we confined ourselves to a one-year budget. This allowed us to respond to the current situation more promptly. However, today, even with the risks and problems still in place, this is no longer necessary. We should return to three-year planning. This will give us a better vision of the future.

The Government’s principal objective was to find a balance between the need to cut spending amid the current crisis and the provision of budgetary incentives to resume growth. This is a dilemma that exists for every government during an economic crisis.

Overall, we have probably learned to cut spending. From day one, we abandoned a formal approach towards balancing revenues and expenditures (which, incidentally, was discussed here and which the State Duma urged us to do), and, despite an austerity programme, the expenditure has even increased by 788 billion roubles.

We did not carry out a proportional reduction of all spending items although naturally such proposals were put forward. Spending optimisation was careful. Reductions were made primarily in areas that were characterised by low efficiency. This work has not been completed yet. Every spending item has reserves for enhancing the payoff and achieving our objectives in a more economical way.

We have managed to avoid amending the 2016 budget even though this seemed inevitable at the beginning of the year. We have no plans to amend the budget during the spring session. We addressed these tasks along with the need to keep the budget deficit within reasonable limits, stabilise the situation on the financial market and control inflation. It may be recalled that the 2015 deficit was within acceptable limits, at 2.4 percent, even a little less than planned. This is 2.5 times lower than during the 2009 crisis. Nevertheless, economic security should be maintained and so we will work to retain such budget positions, such close positions in terms of deficit in the future.

Through additional capitalisation, we have stabilised the banks. The outflow of deposit accounts gave way to an inflow. Despite all the costs and the deficit of foreign liquidity, banks are increasing credit programmes for the economy, though not in the amount we would like to see. During this year, inflation (year on year) fell below 8 percent. This level is comparable to the post-crisis year 2010, when the Russian economy resumed growth after a significant decline. We managed to preserve quite a low level of sovereign debt. As a matter of fact, it is not even quite low, but very low, compared to other countries. I could even describe it as extremely low compared with other countries, and this, by the way, is our competitive advantage, as all financial analysts and international financial institutions point out. It was only about 13.6 percent of the gross domestic product, which gives us the opportunity for a budgetary maneuver in the future. Just think of the debts other countries have.

Another point that I would like to emphasise is that we have changed the structure of state revenues. The share of revenue not related to oil and gas has increased to nearly 60 percent. In many ways, of course, this is due to the falling energy prices, but the measures that we took have worked, too. This is a different model. The economy can be stable even without the oil and gas windfall, something we have now proved. Of course, we still have a lot to do to make the improvements permanent. The question about economic restructuring also came from several parties – including United Russia. I will say a few words about it later.

Second, we will continue to work actively on import substitution and to support non-oil exports. Our industry, like the rest of the economy, has suffered a serious shock: a slump seemed inevitable in those circumstances. Last year we made a lot of efforts to minimise losses. In early 2015 we strained to prevent a landslide shutdown of businesses, people being thrown out. Those were the targets of our 2015 plan, which helped us not only to stabilise the most problematic areas, but also to continue to seriously pursue import substitution. This structural reform will remain essential for us in the coming years, regardless of what happens with all those sanctions and so on. We need good, competitive Russian products. We need a competitive industry as a whole. To this end, we have taken a number of steps.

Let me remind you of some of them: the law on industrial policy came into force last year, also with some new support tools we didn’t have before, such as a special investment contract mode, which guarantees predictable conditions for a period of 10 years. The Industry Development Fund is functioning – last year its advisory council approved 74 projects, which created over 10,500 new high-tech jobs. This year, the Government decided to recapitalise the fund with another 20 billion roubles. We applied other financial measures to support enterprises, including subsidies, state guarantees, co-financing of research and development, and measures to stimulate demand, including public procurement. As a result, many industrial companies continued to implement their investment projects, with state support or without it.

Of course, one year is not enough for us to draw any conclusions, but we already have industries that have not only shown good performance, but also claim to provide a basis for a new model of economic growth in our country − an innovation-based industrial breakthrough, if you will. This includes the chemical industry, certain sub-sectors of machine engineering, the pharmaceutical industry, agriculture, and the food industry. As you may be aware, the output of the mechanical engineering and the food industry products has increased by almost 10 percent. Chemical production is up by almost 6.5 percent. The production of medicines is up by 26 percent. This has never happened before. Food production increased by 2 percent, and agriculture, as you may be aware, grew by almost 3 percent.

Here are some more results by the industry. Agriculture, as I mentioned, has shown steady growth across all positions. As a result, it grew by 3 percent, as I just mentioned.

We have for the first time achieved five out of eight Food Security Doctrine benchmarks. We are now supplying enough domestic meat and meat products to the market (not all items, but in general) and are boosting our exports. We are now in a situation where we are able to not only cover our own need for food, but also export foods, which we haven’t seen in a very long time.

It happened also due to an unprecedented decision − by the way, you and I are behind it – to provide state support to agriculture. As many as 222 billion roubles have been allocated to rural development, which is a decent amount. We will provide additional support to our farmers in comparable amounts this year as well.

I have another point to make: in view of the importance of agriculture and steady high agricultural growth rates, I decided to create an extensive Government Commission on Agriculture, which I will head.

With regard to the fuel and energy industry, it was affected by the overall situation on the market, but also performed decently.

Despite an unfavourable global market situation, and sanctions levied against our companies, Russia produced over 0.5 billion tonnes of oil. This is an all-time high in our country’s recent history. The industry revenue grew not only because of the positive effect of devaluation on corporate costs, but also due to a major tax move, which, by the way, you and I developed. We were actively engaged in the construction of a gas transportation infrastructure, including the Power of Siberia main gas pipeline. In 2015, we built 42 km of it. This pipeline will allow us to form additional markets for Russian gas in the Asia-Pacific region. Most importantly, perhaps, for ordinary people, we will build household gas supply lines along the entire length of the pipeline. People in the Far East are looking forward to this.

Green energy is another important part of our work. We have launched several solar power plants. We will continue to develop environmentally friendly power plants.

We have built and repaired over 3,000 km of federal and local roads. Of course, much more needs to be done. During the direct line with the President, he asked us to look carefully into how the road construction is funded. Last Friday, I was in Saratov, where we discussed this issue and reviewed proposals on ways to support our road network. We will adopt the appropriate decisions within our current budget.

We have upgraded airport hubs and sea harbours. The production capacity of Russian ports grew by over 23 million tonnes in 2015. In addition, we upgraded the ports in Crimea and the Caucasus, which are the key elements of the Kerch ferry. The first pillar of a motor bridge across the Kerch Strait has been built. The bridge will open to traffic in late 2018.

Eight airports have been modernised partly or in full and work is in progress on another six. This is to address growing domestic passenger traffic rates. Last year it exceeded international passenger numbers – for understandable reasons. The Government will continue to take steps to maintain accessible fare prices. In 2015, we offered five federal subsidy programmes for this purpose. In addition, a 10 percent VAT rate has been imposed for domestic service. A similar VAT rate has been introduced for long-distance railway service. And don’t forget, there is zero VAT for commuter rail service. So, we’ve mitigated dramatic fare increases. All of this has promoted the development of domestic tourism. From this point of view, last year proved quite successful. Domestic tourist numbers increased by over 20 percent. We’ll continue to work on improving the tourist infrastructure, which includes the federal targeted programme. Last year, nearly 4 billion roubles was allocated. Currently, the programme involves 26 regions.

Russia’s defence industry is increasingly independent of foreign suppliers. In 2015, output increased by 13 percent and the manufacture of military equipment – by almost 20 percent. Compared with 2014, production volumes increased (let me give you these figures, they are indicative): by 32 percent in the radio and electronics industry, 22.5 percent in the ammunition and specialised chemical industry, more than 16 percent in the shipbuilding industry, 7.5 percent in aerospace, and nearly 6 percent in the aircraft industry.

Let me emphasise that the import substitution effort in this strategically important area will, of course, be continued. This is simply necessary for our survival and a guarantee of our sovereignty. Russian arms manufacturers produce competitive products whose quality and reliability, far from being inferior, are, in a number of respects, superior to their foreign analogues.

We have been building up our exports, too. Last year, export revenue, let me remind you, exceeded $14 billion. Contracts worth $26 billion were signed, while the overall order portfolio in late 2015 amounted to $56 billion, which is an absolute record. Achievements by designers, engineers and workers in the defence industry have made it possible to effectively rearm the army and the navy. As a result of the successful fulfilment of state defence orders in 2015, the share of modern equipment and weapons in the armed forces has exceeded the plan indicators by 50 percent and now averages 47 percent.

Colleagues, a week ago we celebrated Cosmonautics Day. This year was special, since we marked a number of important anniversaries. In fact, Luna-10, the first artificial satellite, was launched 50 years ago, and 55 years ago Yuri Gagarin carried out the first manned space flight in history of humankind. It is important to note that our country has been able to ensure continuity as a great space nation and did not give up on our ambitions in space exploration. Last March, the ExoMars-2016 research spacecraft took off from Baikonur Cosmodrome. This is a joint Russian-European Mars exploration project. Russia’s contribution to this project is a set of unique scientific experiments that will create the necessary groundwork for further exploration of the Solar System and even the deep space.

Russia’s largest construction project is Vostochny Space Launch Centre, our first national civilian cosmodrome which will provide us independent access to space. All its facilities are expected to be completed in 2016. The first Soyuz-2 launcher will carry spacecraft into space from Vostochny Launch Centre in the near future. I think that events of this magnitude should make us all confident that on top of having a track record of glorious achievements in the space industry, Russia is also poised for glorious achievements in the future. By the way, only recently, in late March, I approved a ten-year programme for space exploration. The Government does not intend to curtail it.

Colleagues, residential construction is among the areas that have succeeded to adapt to the new economic reality. Not least of all, this is attributable to government support. In 2015, nearly 84 million square metres were built, which is 10 percent more than the initial projection of 76 million square metres under the relevant programme. Seeking to create incentives for real estate developers, the Government has reduced the number of administrative procedures required. Their total number dropped by an average 22 percent in 2015. All the formalities can now be completed one month faster. All in all, we now have up-to-date legislation regarding residential construction.

In 2015 only, dozens of new plants were launched in Russia. It wasn’t so long ago that we didn’t even have statistics showing what these production units were. We used to have plenty of data on new cooperative societies and all kinds of small companies, while not knowing anything about new production units. No statistics existed on this issue, so there was nothing to count. Today, these plants make cutting-edge products for the Russian market. I’m talking about car engines and parts, various kinds of chemical and biotech products, construction materials, food, power tools, industrial and power equipment and defence industry plants.. By the way, I intend to meet with companies and entrepreneurs who have launched new production facilities. We have things to discuss.

In fact, we are about to restore the domestic market that for a long time used to be dominated by imports. However, it goes without saying that focusing exclusively on the domestic market would not suffice. A truly strong economy is an economy that targets foreign markets. We have results to report in this area as well. For instance, exports of reaction engines almost doubled, while exports of computer parts surged by more than 70 percent.

We continued to develop a system for promoting industrial exports by establishing the Russian Export Centre with a view of coordinating various kinds of support, including searching for partners, promoting products, and providing loans to buyers. This centre currently supports more than 300 projects.

A programme to subsidise loans granted by Vnesheconombank has been in place for two years. These loans are intended for buyers of Russian high-technology products. A similar programme was launched with Eximbank last year. Export support provided to companies using these tools totalled 152 billion roubles.

We are also promoting Russian products within the Eurasian Economic Union by removing mutual trade barriers.

Last year we signed a free trade agreement with Vietnam, thereby accessing promising Asian markets. We are conducting talks on the same issue with Iran, Israel, India and some ASEAN member states.

However, it goes without saying that we should not just live for today. Technological changes are taking place faster, and they are sweeping. Industrial robots, drones, unprecedented IT-penetration and the tremendous scale of the digital economy (incidentally, it has already reached 2.2 percent of the GDP, at almost one trillion roubles) have become reality. What will happen in 10 or 20 years? Of course, victory will go to those who stake their development on innovation and build a system that can generate commercially successful decisions based on this new knowledge. In this respect we not only need to catch up with the leaders but surpass them. This is exactly the goal of the National Technology Initiative (NTI), a comprehensive programme that brings together public and private efforts. I have signed a resolution that improves the foundation of the NTI. The Russian Venture Company has been defined as a project office for the NTI; and the rules for drafting roadmaps, selecting projects and granting subsidies for the implementation of these projects have been endorsed.

Esteemed members of the State Duma, as a result of the adopted measures, the condition of the economy allows us this year to provide targeted support for the priority industries that largely influence the economy’s technological competence, employment and related industries. I’d like to make a special mention of this – under the economic plan for 2016 we are allocating funds to support the following five industries: auto manufacturing, transport and agricultural equipment manufacturing, light industry, and housing construction. Special support programmes have already been endorsed for these priorities. However, assistance for the real economy will not produce the desired effect if we don’t have genuinely free entrepreneurship in our country. Let people work freely and they will make money not only for themselves but also for the whole country. At one time outstanding Russian physicist Sergei Kapitsa said that supervising means not interfering with the work of good people. This is correct. I recently discussed this issue at a meeting with the President. We talked about the draft laws that need to be adopted. The desire of entrepreneurs to establish and upgrade their enterprises and invest in their homeland and its development will determine what our economy will be like in five to 10 years, and, of course, will influence the living standards of all people regardless of whether they work in the public or private sector or receive a pension.

Therefore, improving the business climate is the third area of Government focus. All parliamentary parties were interested in this. What does business expect from the state? First, it wants the state to be predictable, especially with regard to taxation. Now that oil prices have dropped, there is the temptation to increase budget revenue by imposing higher taxes. But, as you know, our position is different than that in principle and remains unchanged. We do not plan to increase taxes until 2018.

It is good that you support our decision. No one needs the return of unreported wages and increased capital flight.

Second, what business needs is for the state not to interfere with its operation, for example by means of numerous inspections, as I have said. We had to clear the system of state regulation of the barriers that were created back in the past, including in the Soviet era. We did this through the roadmaps of the National Business Initiative. We have simplified procedures in construction, in the registration of property rights, connection to the electricity system, and in tax and customs management. As a result, Russia has demonstrated sustainable progress in doing business rankings. Of course, the importance of these rankings must not be overestimated, yet they demonstrate the trends and dynamics. Our country has risen from 120th to 51st place in the World Bank’s Doing Business ranking in the last few years. This means that we are moving in the right direction, even though our achievements have not been uniform.

Of course, our businesspeople need government protection. They want the state to protect their property and to protect their businesses from pressure. Our businesspeople must feel confident that no one will steal their businesses or initiate criminal proceedings against them without good reason. I am referring specifically to unsubstantiated criminal proceedings. If a crime was committed, punishment for it must be unavoidable, but it also must be fair and adequate to the gravity of the crime, rather than used as an instrument for pressuring businesses in unfair competition.

Fourth, businesses need support where they cannot fare alone. This implies creating a fair competitive environment. Investors must have equal access to funds, infrastructure and markets. The situation with competition is not ideal in Russia. Access to the market is often given to cronies, and tenders and competitions are held on a pro forma basis. We are working to change this. Last year, we adopted the fourth antimonopoly package after four years of discussions, including at the State Duma. We will continue to improve the system of state and municipal procurement, as well as procurement by state-owned companies. The creation of the main agencies of the federal contractual system [of procurement] is nearly complete. Thanks to this, we saved over 300 billion roubles last year. The involvement of small companies in the system of state and municipal procurement is gradually increasing. Small business revenues increased by almost 41 percent last year and reached almost 500 billion roubles. On 1 January of this year, we introduced a system of strict regulation of state procurement in order to preclude excessive spending and the purchase of luxury items. Last year, we adopted a federal law on public-private and municipal-private partnership. This law has formalised two new elements: private ownership of elements of public infrastructure, and state guarantees of stability of the basic parameters for investment decisions.

One of the business climate indicators is the condition of small and medium-sized businesses. This year, we continued with the state support programme for small and medium-sized businesses. Significant funds have been allocated from the budget. A single development institution – Federal Corporation for the Development of Small and Medium Businesses – was established to coordinate the state support measures. The corporation has already provided 4,027 payment guarantees for over 22 billion roubles. This made it possible to attract almost 50 billion roubles in loans. These are quite good figures. Additionally, the corporation and the Central Bank of Russia started a concessional lending programme. Some 20 billion roubles will be secured under this programme this year.

Further, tax concessions for small and medium-sized businesses may be introduced by resolution of regional authorities. We made an agreement with the regions, and the final decision is theirs. They have a better understanding of the local needs. We know that in the current circumstances the regions are experiencing serious financial difficulties (we already discussed this issue with the State Duma deputies). While providing tax concessions to businesses, they have to worry about compensating for shortfall in revenue. We helped the regions before, and we will continue to do so. In the last year, the federal budget allocated over 1.6 trillion roubles in transfers to the regions. Also, less costly budget loans were issued to replace expensive commercial loans.

We are conducting an inventory check and assessment of expenditure powers, for the first time since 2005. It is necessary to complete the work as soon as possible and take decisions on financial provisions against the liabilities of regions and municipalities. Then our decisions will not be just empty declarations.

Aside from the funding, we must develop measures that will help regional businesses to grow and attract investors, including from abroad. We established the priority development areas (PDA), and continue creating special economic zones, industrial and technology parks, and free ports. There are currently 12 PDAs operating in the Russian Far East, with an estimated investment potential of almost one trillion roubles. Starting 1 January 2016, PDAs can also be established in restricted territorial entities. Similar action is being taken as regards single-industry cities that are not in great shape, to be honest. So far, there are three such areas: in Tatarstan (Naberezhnye Chelny), the Rostov Region (Gukovo) and the Irkutsk Region (Usolye-Sibirskoye). This work will continue.

We also started working on Russia’s spatial development strategy, which is aimed at using more effectively the economic specialisation of the regions. This question was asked by the Communist Party and United Russia.

In addition, we are creating a new model for macro-regional development. Back to the Far East, in addition to the priority development areas I already mentioned, we have established a state infrastructure support mechanism and selected nine of the most promising projects, which in total amount to almost 220 billion roubles. Six more projects will receive state funding in the amount of 9.5 billion roubles through the Far East Development Fund. We have also established special development institutions there, and prepared a land bill. You must know about it because you have taken part in the discussion. Construction of new houses, roads, and hospitals is underway there.

I would like to inform you that just yesterday I signed a government directive approving a long-term plan for Komsomolsk-on-Amur’s socioeconomic development. The reason behind this decision is that almost 8 percent of its residents left the city in five years, despite the fact that it is there that many kinds of state-of-the-art equipment, aircraft and oil products are made. This is attributable to a deficient social infrastructure. According to the plan, 50 billion roubles will go towards addressing these issues. It goes without saying that this plan should be well implemented.

Now, let’s turn to the fourth area. Of course, we can produce oil and gas, and devise all kinds of measures to develop the industry. However, nothing will work if the state is unable to operate efficiently. This goes for all areas, from state governance and fighting corruption to tax administration and oversight. This is absolutely clear to everyone and it is a huge burden on the budget.

It was decided to reduce the number of civil servants by 10 percent, effective 1 January 2016, and this also applies to those employed by central and regional offices of all agencies that report to the Government or federal ministries. As you know, similar decisions have been taken regarding agencies within the Presidential Administration.

The Government also came up with an initiative to create a single mechanism for administering tax, customs and other fiscal payments. We have already partially launched this mechanism by transferring the Federal Service for Alcohol Market Regulation and the Federal Customs Service under the control of the Ministry of Finance.

Paying taxes has become a simple procedure. Of course, everything is relative. In last year’s Doing Business ranking, which we refer to so often, Russia was rated ahead of the United States, OECD and BRICS countries. After all, it is much easier to pay taxes with the one-stop-shop principle, rather than to several agencies.

We will also strive to make business inspections simpler and more intelligible. We still have too many inspections, about 2 million per year, which creates a lot of opportunities for abuse. Let me remind you that we have enacted a radical solution for small businesses by introducing a three-year moratorium last year. A single registry was created so that anyone can control the situation. However, we have yet to revise the whole system of state supervision, as the President said in his Address to the Federal Assembly, so that the system can effectively identify risks. We have to make sure that inspections are carried out as and when needed, and not everywhere and across the board.

State-owned companies are a separate issue. They cause a lot of discussion and controversy. The state should know what are they spending their money on: business development or corporate parties; how top managers’ salary is calculated − whether it is based on the company’s performance or not − and react accordingly. This will be easier to do following the introduction of the technical and price audit. I signed a government resolution, which outlines the amount of dividends that state-owned companies will pay at the end of 2016. This amount cannot be less than 50 percent of their net profit. That way, the budget revenue will receive an additional almost 100 billion roubles. One more consideration: an efficient state should efficiently manage its property. If we see that a privately-owned company can make more money and pay more taxes, it is in the interest of the state to let such a company go private. However, every such transaction must be based on thorough analysis and number crunching.

Everything that I said and everything that we do, we do it with one and only one purpose − to make our people’s life convenient and comfortable. Our people should be proud of Russia not just because we have nuclear weapons or the world’s best ballet. People should be proud of their country because the government always stands for them and protects them both from external threats and from the fallout of economic shocks.

I will list the most important things that we managed to accomplish under these difficult circumstances. I will start with demographics. Let’s face it: our country was simply dying out at some point. In the past three years − for the first time since 1991 − there’s more of us in Russia. Natural population growth amounted to 30,000 annually. Increasingly, families are having a second, a third and even a fourth child, even despite unfavourable changes in our society’s age structure that can be traced to the 1990s. The number of elderly people is up, which in itself is a good sign, but they are a natural load on the working population. Nevertheless, I would like to emphasise, so that we have a clear understanding that this is the result of our joint work in recent years. We have achieved an all-time high life expectancy of over 71 year in Russia. A few short years back, most Russian men died before they reached 60. This increase in life expectancy is the result of our social policy, which focuses on helping those in need, in a difficult situation, and also those who are unable to deal with their problems on their own, be it a retired person, a child, or a person with a disability. And, of course, we focus on providing employment to those who are able and willing to work.

The Government is now focusing on populations that have it hard, such as families with many children. Children grow quickly, incomes remain unchanged, and expenses are rising. Such families need support in many forms, not just money. They should have better opportunities to place their children with kindergartens, or obtain summer vacation packages for them. Large families need to have access to special home buying arrangements.

We have expanded the uses of maternity capital. The programme itself has been extended by two years. Now people can make housing down payment, including a mortgage initial installment, with maternal capital money, while those who bring up children with disabilities can spend part of the money to buy adaptation devices. Since last year, parents can receive 20,000 roubles as a one-time payment from their maternity capital. As of today, 2 million people are planning to use this right.

We discussed this subject with the President in the evening yesterday, when I came to review the key points of the report I am making now. Indeed, this is a difficult period. We have to cut programmes – programmes that are important for this country. And yet, we must remember those who are in a particularly difficult situation. I mean families with children. This is why we have arranged to approve a decision on extending the programme for one-time payments from maternal capital to 2016. We will pay 25,000 roubles per applicant. For this, we will need 50 billion roubles, but we will find the money.

We will continue monthly payments for the third child and subsequent children, and the funds for this have been allocated in the budget. We, at United Russia, by the way, held a forum on social policies not long ago and I issued a number of instructions as regards support for families with children. This year, the federal centre will undertake to co-finance summer vacation opportunities for children in difficult circumstances. The vacations are around the corner and the children should be helped not only with the vouchers to summer camps but also with roundtrip tickets. As we have agreed, all relevant resolutions have been approved.

We have also passed legislation designed to help people whose utilities bill exceeds a certain aggregate income amount. The state will subsidise these families.

The authorities in the regions should wind up within three years the waiting lists for plots of land intended for families with many children. If there are no opportunities of this kind, they should instead provide people with housing or other types of support. And this is not the only option. To enable as many people as possible to buy a flat, we are moving in several directions at once. In 2015, we launched the Housing for the Russian Family programme, which provides for the construction of economy-class houses, with 50,000 families volunteering to join the programme. Second, there is the Housing federal targeted programme, under which over 40,000 families moved to new housing last year. Third, the Mortgage with State Support programme came under way in March 2015, for which almost 19 billion roubles have been allocated to date. The programme enables people to buy housing on the primary market at an interest rate no higher than 12 percent. Given that the programme is quite efficient and in high demand, we decided to extend it until 1 January 2017. As is only natural, we will try to do our best to make social support fairer and more targeted, so that it can reach those who really need it.

This is a difficult time for our senior citizens. We must do our best so that they don’t fear old age, have access to medical services and are able to buy medicines, and so live active lives. The system of assistance for the elderly must be overhauled in the next decades. We have outlined the basic steps in our action plan to support the elderly through 2025. We are open to any proposals that can help deal with these issues. By the way, after a conference of social workers in Yaroslavl, I instructed governors to check the situation at social care centres. In other words, I told them to go and see for themselves.

We have adopted several practical measures in this respect in the past few months. This year we approved benefits for people over 70 in the payment of contributions to finance major repairs. These benefits also apply to people with disabilities. Last year, we extended the Accessible Environment programme to 2020. Over 40 percent of vital facilities have been included in this programme with assistance from people with special needs. About 30 billion roubles have been allocated from the budget to buy technical rehabilitation equipment for the disabled. The same amount of allocations (even though the sum is huge) has been approved for this year.

Assistance will also be provided to families that have children with disabilities. Starting this year, the personal income tax relief has been increased for these children’s birth and foster parents.

We have taken measures to support the employment market. As a result, we have kept back the growth of unemployment, which is a major achievement. Unemployment was about 6 percent in March 2015, but it went down to 5.6 percent by the end of the year. This is considerably better than in 2008 or 2009, when the unemployment rate was over 9 percent according to the ILO standards.

Eighteen regions have been issued nearly 4 billion roubles, which they used to organise the retraining of jobless and to find temporary employment for them. We also approved first allocations towards increasing labour mobility.

We will continue to support the employment market this year. The approved budgetary allocations amount to 3 billion roubles, but our actions will depend on the situation.

Of course, we know that people must receive a fair and sufficient pay for their contribution, which is why we need to consistently increase the minimum wage. This year, the minimum wage has been increased by 4 percent. Acting under a United Russia initiative, the Government will increase the minimum wage to 7,500 roubles or by 20 percent on 1 July, aiming to ultimately increase it to the minimum subsistence wage. Frankly, this is a challenge, but we will deal with it one way or another.

Healthcare. The Health National Project was launched 10 years ago. The ten years that have passed since then were not in vain. The results in this area are always clearly visible and easy to understand, since the main indicator is life expectancy. Of course, other indicators can also be used, such as the number of high-tech surgeries, the number of doctors who leave to work in rural areas, the availability of inexpensive quality medicines and queues at outpatient clinics. Let me share some numbers with you. These are very important figures. From 2000 to 2015, maternal mortality dropped almost four times, and the child mortality rate more than halved. During that time, 128 regional vascular centres were built, and many perinatal centres were created. As you may remember, when we started out on this journey, high-tech medical services were virtually non-existent in Russia. They are now available at 133 federal and 800 regional healthcare institutions. We were instructed to increase the provision of high-technical medical services by a factor of 1.5 within three years. Not only did we deliver on this objective, but we exceeded it. Last year, more than 820,000 people received the high-tech medical services they needed. As you know, I oversaw this initiative personally. The number of high-tech surgeries performed in Russia when the national project was launched was in the tens of thousands, but now we have reached 820,000. Before, in order to get things done, people had to travel abroad, and pay huge sums of money. But now we are able to do many things without leaving the country. This is an outstanding achievement.

There are also achievements to report in the pharmaceutical industry. I have already shared with you the figures on pharmaceutical production. Russia has finally started to produce pharmaceuticals. As much as six new pharmaceutical production units were launched, and new medicines are now being made, including those from the list of essential drugs. Next-generation medicines are in the pipeline. It should be acknowledged that Russian pharmacologists have already laid the groundwork for future achievements. They are able to resolve the most complicated tasks. A unique vaccine for preventing the Ebola fever was registered. We understand that this is an important achievement, not merely because it can deal with an exotic African illness, but because, first, it is a deadly disease, and second, those who make such kinds of medication are at the very top of the pharmaceutical industry. It is very important to reinforce these accomplishments.

People need accessible medicines, so that when they go to any pharmacy they can buy all they need without having to pay sky-high prices. This situation has to be brought under control. In 2015, an additional 16 billion roubles were allocated to the regions for improving the availability of medicines. A mechanism for state regulation of prices of essential medicines is in place. The market may be important, but we are intentionally seeking to introduce restrictions. Those who sell medicines at excessive prices are held accountable. However, we need even more inexpensive products on the list of essential medicines. Moreover, they should be made in Russia. In 2015, in an effort to support pharmaceutical companies, the Government granted subsidies for setting up production of substances. A number of projects were financed through the Industrial Development Fund.

A few words about education. It seems that the most successful initiative was the programme to build kindergartens, in accordance with the 2012 presidential executive orders.

This work involved us all – almost everyone in this room did their part. I met with regional leaders during my frequent visits, and together we went to construction sites – we saw it all happen. You just need to see people’s faces, because that is the most important reward.

Today, nearly all children from three to seven have an opportunity to enrol in preschools, and all of those are modern institutions offering child development services and interesting preparatory programmes for school. We all know how important this task is for our future, what a huge and responsible job it is.

Some colleagues have asked me, so I would like to inform you that I signed an executive order to establish a professional holiday for those to whom we entrust our children: kindergarten teachers and those working in preschools will mark their professional day on 27 September.

I hope that another ambitious programme will also yield good results, just as with kindergartens – I mean, of course, schools. Ten years from now, the total number of pupils will increase by 3.5 million, and they all deserve to go to modern schools. The amount of support for this programme to be provided by the federal government alone (estimated at current prices, of course, but the prices may change) is about 2 trillion roubles. We will need to provide this much over the next decade. This year, we allocated 25 billion roubles at the Government meeting, based on the decisions we have made, and the money went to the regions for the construction of schools.

We have achieved good results in promoting our universities to the group of top-notch universities, the Top 100. What is most important though is that many universities have moved up in national rankings, and more universities are included in all the rankings now. This is very important because it means they now provide a higher quality of education. We will definitely continue this programme because there is no other way. Some of these universities receive state support to increase their competitiveness.

The higher competitiveness of universities is directly linked to the scientific research they do. More and more universities are involved in joint research projects with academic institutions of the Russian Academy of Sciences. This gives their students an opportunity to have a career in research. There is no spending too much on science, of course, but for the past 10 years we made sure there was a steady growth in financing – almost by 350 percent. In 2015, we adopted a number of decisions to improve our funding mechanisms for basic research. We eventually came up with this principle: we cannot cut the share of GDP spent on basic research. In addition, a significant portion of the basic research budget is allocated on a competitive basis now. To do this, we topped up the capital of our research funds. That additional capitalisation amounted to 28 billion roubles in 2015.

This work involved us all – almost everyone in this room did their part. I met with regional leaders during my frequent visits, and together we went to construction sites – we saw it all happen. You just need to see people’s faces, because that is the most important reward.

Today, nearly all children from three to seven have an opportunity to enrol in preschools, and all of those are modern institutions offering child development services and interesting preparatory programmes for school. We all know how important this task is for our future, what a huge and responsible job it is.

Some colleagues have asked me, so I would like to inform you that I signed an executive order to establish a professional holiday for those to whom we entrust our children: kindergarten teachers and those working in preschools will mark their professional day on 27 September.

I hope that another ambitious programme will also yield good results, just as with kindergartens – I mean, of course, schools. Ten years from now, the total number of pupils will increase by 3.5 million, and they all deserve to go to modern schools. The amount of support for this programme to be provided by the federal government alone (estimated at current prices, of course, but the prices may change) is about 2 trillion roubles. We will need to provide this much over the next decade. This year, we allocated 25 billion roubles at the Government meeting, based on the decisions we have made, and the money went to the regions for the construction of schools.

We have achieved good results in promoting our universities to the group of top-notch universities, the Top 100. What is most important though is that many universities have moved up in national rankings, and more universities are included in all the rankings now. This is very important because it means they now provide a higher quality of education. We will definitely continue this programme because there is no other way. Some of these universities receive state support to increase their competitiveness.

The higher competitiveness of universities is directly linked to the scientific research they do. More and more universities are involved in joint research projects with academic institutions of the Russian Academy of Sciences. This gives their students an opportunity to have a career in research. There is no spending too much on science, of course, but for the past 10 years we made sure there was a steady growth in financing – almost by 350 percent. In 2015, we adopted a number of decisions to improve our funding mechanisms for basic research. We eventually came up with this principle: we cannot cut the share of GDP spent on basic research. In addition, a significant portion of the basic research budget is allocated on a competitive basis now. To do this, we topped up the capital of our research funds. That additional capitalisation amounted to 28 billion roubles in 2015.

A few words about culture. This year is Year of Russian Cinema, which took over from Year of Literature and Year of Culture. Perhaps, next year will be Year of Theatre – we are currently working on it. Such years are a way to liven up people’s interest in good books, good plays, good films and good exhibitions. Since 2015, museum admission has been free for children and young adults 16 and under. Perhaps, this is the most important recent decision in the sphere of culture. I am confident that it will have a lasting effect.

Another major project has to do with building cinemas in small Russian towns. As many as 143 modern high-tech multiplexes will be built in the Russian regions before the year runs out.

Colleagues, last year we had to deal both with important and routine issues that are part of the Government’s and the State Duma’s competence. However, some of those challenges were not so trivial, such as the tragic events, the war that the terrorists had declared on the entire civilised world, including Russia. Following the terrorist attack in the skies above Sinai, which killed our citizens, we engaged in urgent retrieval of all Russian tourists from Egypt. It was not an easy operation, to tell the truth.

The situation in Crimea also required emergency measures on our part. That situation can be rightfully called energy terrorism. The criminals who blew up power lines right before the onset of winter created a life- and health-threatening situation for many people. Many hospitals, schools and kindergartens were left without electricity or heating. Portable generators were dispatched to Crimea, fuel reserves were formed, and socially important facilities were switched over to backup power sources. To protect people from such a disaster in the future, we are building an energy bridge across the Kerch Strait. The first phase was completed in December, and the second will be ready soon. We will continue to build roads, kindergartens, schools and hospitals in Crimea. I am saying this because, for two consecutive years, much of what I said in response to your questions and in my remarks when I spoke in the Duma concerned Crimea. This time, I chose not to do so, because Crimea has become a regular Russian region, which is perhaps the main result of our joint work. This is our land and our concern no matter who says what, and we will continue our efforts there.

Colleagues, looking back at the years that we have worked together, it is clear that those were the years of hard work, although it may sound like a figure of speech. However, objectively, we can compare what we have now to what was there 10 to 15 years ago. Those years were not exactly a walk in the park. However, I also realise that we did our best to not only take our country through difficult times, but also give it a foundation for another period of further growth. We did our best to make sure that overcoming the crisis is not the sole purpose of the Government and the State Duma. We did our best to make sure that today’s challenges do not obscure our future. We consider all our steps as a kind of springboard that will allow Russia to not only neutralise the aftermath of economic shocks, but, above all, to improve people’s lives and, of course, have Russia take a place of its own in the global economy.

The world is moving to a new economic and technical order. Many markets are still taking shape, and the underlying production chains are just being formed. Our common goal is to make sure that Russia does not remain an onlooker as the world moves towards its economic future. This is the raison d’etre of any Russian politician of all times, regardless of the election cycles. Let me quote the words of Pyotr Stolypin, “As we try to protect Russia, we must unite and harmonise all our efforts, responsibilities and rights to uphold our country’s higher historical right, which is the right to be strong.” We have all it takes to do so and, most importantly, we have faith in our country. Thank you.

[featured image is file photo]