RUSSIALINK TRANSCRIPT: “[Medvedev at] Russian Investment Forum Sochi 2019 [Excerpts]” – GovernmentRu

Dmitri Medvedev file photo

(Government.ru – February 14, 2019 – government.ru/en/news/35726/)

Plenary session Success Factors: Ideas, Personnel, Skills.

The forum’s main theme is National Projects: From Strategy to Action.

The Russian Investment Forum exhibition includes promising investment projects from the regions and companies.

Excerpts from Dmitry Medvedev’s remarks at a plenary session of the investment forum:

This forum is completely different from any previous ones. It is the first time that we will be talking about a comprehensive transformation of Russia, and we will do so in great detail. Everything we need to do to improve the quality of life for the people and to ensure the country’s strategic growth and development in the next six years has been formulated as national projects. This is what we will discuss at this forum.

We have nine strategic goals to attain, 12 national projects to implement, plus the modernisation of the mainline infrastructure and the implementation of 76 federal projects.

We will not begin from scratch. We are very experienced when it comes to the national projects that have been implemented since 2005. We were working in separate sectors then, and in specific spheres we have been successful.

Take agriculture, for example. When we first started working on it, it was seen as almost knowingly a failure, but as a result, agriculture has become a profitable industry which not only provides enough food for the country but has been increasing its export numbers every year. And now it is a leading industry in terms of exports.

We applied the same project-based approach to fulfilling the 2012 May Executive Orders. The birth rate increased while the mortality rate decreased. Public-sector worker salaries increased. We improved conditions for businesses, which has been confirmed in several international rankings. We created a network of integrated centres all over the country that provide public services in a format that never existed before in Russia.

This is a completely new time for us. Not only are we carrying out targeted reforms but we are implementing comprehensive decisions and introducing comprehensive transformations across all areas. Simultaneously. Never in the history of modern Russia have we seen such complex, overarching and ambitious changes.

We certainly understand that the economic structure is seriously unbalanced and that the sanctions pressure will continue (yesterday a new chapter was announced) and that our infrastructure requires thorough modernisation, and our education and healthcare systems are only on their way to the desired level. Most importantly, life in the country can still be difficult and people want social justice.

Completing national projects is one of the ways to solve these problems, but it is important that the people in our country do not have to wait and just hope for better times, that they can see results every day.

What do we still need to achieve?

More than 1.5 million new flats and 300,000 new buildings per year. Forty new and renovated pediatric departments and hospitals; 420 outpatient cancer clinics. We need to increase capacity in schools by 230,000, with 245 student technoparks and 345 mobile technoparks for youth living in rural areas. We need to renovate 40,000 km of roads in the provinces and just as many in the cities and suburbs. We need to renovate almost 50 airfields and eliminate a huge number of city landfills. We need to build world-class research facilities. The list goes on.

We have almost everything we need for success including positive dynamics in the macro-economy, an unprecedented amount of available government investment for national projects, involvement and engagement in all the regions. And finally, we have a new workforce and skills.

We are still working against a great deal of negative factors, such as trade wars, growing protectionism and deteriorating conditions for international commerce, a global economic slowdown, a roller coaster ride of oil and other export product prices, and the permanent threat of new sanctions, which provoke capital outflows. However, our economy is reacting differently now. Our GDP increased by over 2% in 2018. This is the third year that our economy has grown, but we are not happy with the quality of this growth because it depends on many sporadic factors. Most importantly, people have not yet felt the effect of the improvement. Growth in investment in fixed capital is still below target. There are also many other unfavourable factors.

Our financial markets and our banking system remain stable overall. Unlike many other countries, our sovereign debt is acceptable and hence safe in the current situation. It decreased by over $60 billion last year. Our balance of payments is in surplus, and we have a considerable budget surplus, which equals some 2.7 percent of GDP. Our international reserves are growing; we have increased them by $43 billion since the beginning of last year.

The unemployment rate in the country is at an all-time low, only 4.8 percent of the economically active population.

Inflation increased to 5 percent at the beginning of the year. We hope it will drop to the target level in a year.

International experts have a positive view of these results. Several days ago, another rating agency, Moody’s, upgraded Russia’s sovereign debt rating. Now all three rating agencies have recognised Russia’s economic stability.

We continue working to create an economic environment that can stimulate enterprise and investment. Our budget, tax and tariff policies and sectoral management must be streamlined to help our businesses.

Russia has advanced to 31st place in the World Bank’s 2019 business rankings. We have launched a new mechanism for the transformation of our business climate, under which we will be working with our businesses in more areas. This programme includes about 150 measures to cut the time and cost of connecting to utility lines, to provide government and municipal urban development services online, to accelerate the introduction of digital technologies and to simplify administrative procedures in international trade.

We are also committed to further improving the means of oversight and supervision. This includes phasing out all requirements that are redundant or obsolete. This “legal guillotine” could facilitate the emergence of a new set of rules for future inspections.

Roadmaps will be drafted in the near future on all types of supervision activities. All corresponding regulations are expected to be adopted and draft law submitted to the State Duma by 1 February 2020.

These efforts must be underpinned by an adequate research and methodological foundation, which calls for creating a new cross-disciplinary field of study combining law, economics and mathematics.

We view national projects as an investment tool that enables us to channel resources from various sources to priority objectives. The financial parameters of thenational projects are quite impressive, with a promise to invest over 25.7 trillion roubles over the next six years. Never before in Russia’s recent past have we even come close to discussing allocations of this magnitude.

We hope that businesses, government agencies and development institutions actively contribute to these initiatives. We are forming a portfolio of projects based on some 1,000 initiatives worth almost 76 trillion roubles. Of this total, 250 projects are investment proposals for a total of 12 trillion roubles, covering a vast range of sectors, from construction of gas chemical complexes and waste incineration plants to developing software products with elements of AI in Russia. As many as 100 projects have already been reviewed.

In order to support investment in the most important sectors of the economy, a sectoral section was included in the official plan to accelerate fixed capital investment and increase it to 25 percent of GDP.

Geology and mineral resource use, electric power generation, transport, agriculture and construction are all specific sectors that require special regulations. Special long-term tariffs will be introduced to promote specific elements of the transport infrastructure. Those involved in the construction and operation of high-speed rail will be entitled to some tax relief and compensation.

We also intend to specify subsidy mechanisms for industrial manufacturers and agriculture in terms of how they affect investment, including in related sectors. To do so, we will rely on the investment multiplier method.

Another area of focus includes promoting existing investment incentives, including the special investment contract (SPIC) mechanism, which is used to create proper conditions for investing in high-tech sectors. In particular, the revised SPICs provide for mandatory participation of the regional and municipal authorities. The maximum period of SPICs will be extended and the investor’s duties will be defined more clearly. A list of compliance processes and procedures will be developed. There are plans to amend the Tax Code, including reduced rates during the entire term of a SPIC for the revenue tax to be paid by the organisations that have received taxpayer status.

We have been using one more mechanism since last year, which is special administrative districts. These are actually “privileged areas” where investors enjoy special taxation and currency regulation rules and other benefits. There are two such areas – one in the Kaliningrad Region and one in the Primorye Territory. We need to look at the bottom line. If we find it satisfactory, we can think about replicating this experience.

National projects should be tailored to specific needs of particular regions. And the funds should be distributed accordingly.

In order to find growth points and to improve living standards in each region, we have drafted the Spatial Development Strategy. The President issued an instruction to that effect back in 2018. I signed this document. The strategy provides for forming 12 macro-regions based on the specifics of each particular area. This will make state support more targeted and effective.

Potential economic specialisations have been determined for each region based on their competitive advantages.

We plan to develop future economic growth centres, including large metropolitan areas, small- and medium-sized urban areas, single-industry towns, historical towns and science towns, as well as rural areas and areas that specialise in the extractive industry.

We will continue to focus on our priority geostrategic territories such as Crimea, Sevastopol, Kaliningrad, Russian Far East, the North Caucasus and the Arctic zone. We will come up with customised support measures to promote what they are already doing.

We will eliminate federal infrastructure constraints, that is, we will make roads, power grids and telecommunications more accessible to the regions.

The federal budget plans to co-finance regional spending, in some instances up to 99 percent. This is also an unprecedented decision. However, I signed such a directive as part of implementing national projects proposed by the President. Thus, we will provide the regions with more money in addition to the funds allocated under national projects.

First, these are budget-to-budget transfers. This year, we will allocate almost 1.7 trillion roubles to this end and we will come up with the same amount next year. These funds will be used to level out budget support and to reimburse additional expenses associated with increasing state employees’ salaries.

We will help reduce the debt burden on the budgets. As of early 2019, the public debt of the regions had dropped by over 100 billion roubles. This represents only 5 percent, but the trend is promising.

In conjunction with increased tax and non-tax revenues, this led to a situation where the budgets of 70 regions enjoyed a surplus last year versus 38 in 2017. Only 15 regions are operating at a deficit.

We need professionals, well-educated experts with skills and experience who are responsible and who use contemporary approaches. This applies to absolutely every category, from workers to academics, especially in the rapidly changing world of comprehensive digitalisation. Textbooks cannot keep pace with technical progress, so people must be flexible and be ready to learn new skills when necessary and to retrain fast.

All national programmes, not only the education programme, include a learning component. There are about 100 of them for all economic and social spheres. People should be able to receive an education not once, but as many times as they need to, to use their talents.

We are improving the training and re-training of the staff working in the higher and secondary education systems. Centres for continuous advanced training and accreditation centres for teachers will be created in all regions. Every year, no fewer than 30 university professors, who are listed in the Top-200 rankings, will receive grants to develop advanced university programmes.

We must draw the real economy and business into the improvement of our education system. Graduate placement and career guidance are key areas for universities.

Management technology also requires innovation, new approaches, new thinking and broad-based knowledge. In order to implement national projects, we will need to quickly train and re-train about 1 million civil servants.

Since 2010, Russia has been implementing a federal programme to train a management personnel pool. At the end of 2018 we decided to extend this national programme.

We also need to use personnel promotion mechanisms. A good example is the Leaders of Russia competition that was launched last year. The winners have already begun working at federal and regional institutions and agencies.

The first skill that a contemporary manager needs is to know the project method.

The second is to be able to create a high-performance team at all levels. At the same time, approaches to training regional teams can be the same across the country.

The third skill is the ability to learn digital technologies fast. It is necessary to improve the digital literacy of employees, including in cybersecurity, along with the introduction of digital platforms in government agency activity.

[featured image is file photo from another occasion]