TRANSCRIPT: In Conversation with Dmitry Medvedev: Interview with five media outlets

(Government.ru – December 6, 2013)

[Complete transcript in Russian here: http://government.ru/news/8790]

The traditional annual live interview with Prime Minister Dmitry Medvedev on the round-up of the Government’s work over the year. Asking the questions were Irada Zeinalova (Channel One), Sergei Brilyov (VGTRK), Marianna Maksimovskaya (Ren TV), Vadim Takmenyov (NTV) and Mikhail Zygar (TV Rain).

Transcript:

Sergei Brilyov: Good afternoon. TV channels Rossiya 1, Rossiya 24 and TV Rain and Vesti FM radio station are broadcasting the traditional annual live interview with Dmitry Medvedev. Good afternoon, Mr Medvedev.

Dmitry Medvedev: Good afternoon.

Sergei Brilyov: Mr Medvedev, you know all my colleagues very well, but, since I represent the majority of media outlets here, I will take the initiative and will ask the first question. Is the glass ­ meaning the economy ­ half full or half empty? I am asking you as the head of Government.

Dmitry Medvedev: My glass is more than half full.

Sergei Brilyov: Indeed, the statistics are quite contradictory this autumn. On the one hand, there are record-high agricultural indicators, and this is a fact. But on the other hand, everyone is saying that the rich years of the 2000s are over, and that officials’ salaries will be cut starting next year. The public supports this idea. At the same time, oil prices have not decreased, while the economy is stagnating. Who is to blame, and what is to be done? These are the traditional Russian questions. How do you assess the general situation in the Russian economy?

Dmitry Medvedev: Personally, I believe that the situation in our economy is the same as in the majority of developed and rapidly developing markets ­ that is, it is quite complex. I recently described it as “sour”. In general, I’d say that the situation in our economy is slightly better than in Europe on the whole and in a number of other countries, because it has grown, even if only a little. We hoped to report 3%-3.5% growth this year, but the yearend figure will likely stand at only 1.5%. On the other hand, the European economy has not grown at all. In fact, there has been a slump in production. The situation in Russia is quite complex, for two reasons. The first is that we have become an integral part of the global economy, and this is a fact. So, our economy is experiencing the same kind of pressure as the global economy.

But we also have our own problems and limitations on growth, including the structure of our economy, labour productivity, a shortage of investment and a poor business climate. If we address all of these issues step by step, we will be able to improve the situation. But allow me to say this frankly: we will not be able to make dramatic changes to the situation if the global economy continues shrinking ­ this much is obvious. The 2008 crisis showed just that, hitting every country ­ every country ended up in straits. We do have reserves which help us grow and give us reason to say that things are under control. What do I mean here? Russia’s economy is growing, not falling, and moreover, shows good unemployment statistics ­ about 5.5% according to the ILO methodology, which is half, or even one-third of that of developed markets. Our debt to GDP ratio is not large either, about 10.5%, which is a good figure as well. We have substantial international reserves and other reserves that add up to around $700 billion, giving us a safety cushion of sorts. Economic regulation is also adequate ­ something we have developed over the last few years. But this does not mean we can just relax, as this year has shown, as we had expected faster growth than what actually resulted.

Irada Zeinalova (Channel One): Mr Medvedev, eighteen months is a long enough period to be able to say how effective the Government was as a team, how wise the focus on appointing younger managers was, and how well each of them is coping with the job. So, how effective is it? Are we to expect replacements and reshuffles?

Dmitry Medvedev: You know, the Government is not a football team where people are chosen by their age and physical fitness. The Government is always a complex blend of various people. In my opinion, the current Government is a functioning team that was created at a certain point and is now an accomplished body, although certain ministries and ministers naturally face some challenges and problems. The Government members are well prepared to head their ministries. However, being a minister is very difficult and has nothing to do with, say, holding a public office or working for other government bodies. To be honest, not all the people that I have invited to join the Government were prepared to manage such a major operating processes from the very start. All ministers are public figures who manage major operating processes. Some even failed, and even if it wasn’t their fault, these people had to take the decision to move to another assignment. That’s just the way it should be. All in all, the Government is an accomplished and functioning team that brings together people of various ages. Such an approach has its merits: there are 30-year-olds in the Government, which is unprecedented, at least since the beginning of the 20th century, and there are middle-aged accomplished people who have long careers behind them.

Irada Zeinalova: Do you mean that this government line-up is final? Those who weren’t able to keep up….

Dmitry Medvedev: There is no such thing as a final line-up, since the Government is like a living organism. All in all, I don’t think rash moves are necessary at this point. The Government team has been formed and is working. There is no such thing as a final line-up, since the Government is like a living organism. All in all, I don’t think rash moves are necessary at this point. Everyone has been appointed, and everyone is doing the job. As I said, new areas have been identified, and we’ve reinforced the sector relative to the Russian Far East. A new Deputy Prime Minister has been appointed and the minister has been replaced. We have reinforced the construction and the economic areas, which is linked with the housing and utilities sector. A new ministry has been established, and a new minister appointed.

Marianna Maksimovskaya (Ren TV): Mr Medvedev, let’s talk about the work of… You just mentioned the new minister of housing and utilities. I will probably not be mistaken if I say that the people of Russia are mostly concerned about housing and utility issues. Prices have been skyrocketing, and the officials are lying shamelessly by saying that prices have increased by 6% this year, rather than 12%, as is actually the case. And you recently suggested that people might be required to pay for housing and utility services in advance, and that this measure would allow  to deal with billing defaults. But most payment defaults are caused by management companies, rather than residents. Maybe, instead of shifting the burden onto people’s shoulders again, it would be better to sort things out with the management companies in the housing and utilities sector?

Dmitry Medvedev: Marianna, why do you say that they are lying? No one is lying, this is mere talk. What did the Government decision mention? It was noted that a 6% increase would be registered at the end of the year, and that a 12% increase would be posted during the second six-month period, that is, when we raised prices. In some regions, prices will increase by 15%. I want to stress that a 12% increase will be posted at the end of the six-month period, rather than the entire year, and that prices will increase by 15% in some regions.

What’s the current situation? We’ll post not more than 5.5% at the end of the year (I repeat, year) and about 11.5% at the end of the six-month period. This does not mean that there have not been some setbacks in various regions, and we are addressing this issue.

Dmitry Medvedev: But on the whole, the situation is as I have described it, and those were the correct figures. I stand by these numbers.

Marianna Maksimovskaya: But there have been many failures, as you said.

Dmitry Medvedev: You know, there have not been many, but it is always annoying when something goes wrong. I can understand people. They were assured that the charges would increase by 6% and, based on the results of the second quarter, by 12%. But when they receive their bills, they see that they are up not by 12% but, for example, by 18%. And so they feel cheated, although there have not been many cases like this. I held a meeting on this issue, and my colleagues… You can count these cases on one hand, but they were glaring cases, and this is understandable.

The housing and utilities sector is in poor condition. It has been neglected and nobody wanted to invest in it for quite a while. I have recently met with our business leaders, who told me they’d like to have a closer look at the housing and utilities sector. In the past, it was believed that no one in their right mind would take up that sector. The oil sector, export-import and even innovative technology were the way to go, but never the housing and utilities sector. But the time has come to invest both public and private funds in this sector. This is why we are creating a system of public-private partnerships to address this issue.

Now, a few words about the initiative you mentioned.

Marianna Maksimovskaya: Prepayments?

Dmitry Medvedev: Yes, advance payments. Here is another misunderstanding. First, we are only discussing this idea, and second, no one has said that everyone would have to pay the bills in advance. This wouldn’t be right. As many as 94% of people make their housing and utilities payments on time. There’s absolutely nothing to punish them for. This issue only concerns the 6% who have not paid their bills for over six months. Indeed, this is not fair on those who pay their bills on time. They may need targeted assistance, but that’s another matter. Then they should request it. As a matter of fact, everyone must pay their utility bills. So, the proposed idea concerns only 6% of people with payments overdue for six or more months. I’d like to say again that we are only discussing the idea, and nothing has been decided yet.

Marianna Maksimovskaya: Is your tap water rusty coloured, like the President’s?

Dmitry Medvedev: If the President said that his tap water is rusty coloured, then mine is too, because we live nearby.

Marianna Maksimovskaya: So, you’re in full tandem, then?

Dmitry Medvedev: We’re basically neighbours. But anyone can have rusty tap water, including those who live far away from Moscow, as well as the President and the Prime Minister, simply because our pipes are old. But we will definitely look into this problem with redoubled zeal, because this issue concerns the absolute majority of our people.

Irada Zeinalova: Mr Medvedev, I also have a question about money in our pockets and the initiative to freeze the funded part of pensions. Those who are working now to ensure decent pensions for themselves feel very negatively about this. Can you explain if the initiative provides for any compensation mechanisms? Because people are counting on this money.

Dmitry Medvedev: Let’s talk about pensions, because this issue is no less important than utilities bills, and it concerns everyone, although not everyone may be thinking about it. I don’t know about those present, if you think about your pensions, but personally, I believe that everyone should start thinking about their pensions at the beginning of their career, when they leave school and go on to further their education. Russia’s pension system has its shortcomings, just as in any other country. For the last, say, 15 to 20 years it has been going through cycle of modernisation. We respect the progress that was made, but we also understand that the pension system is not a dogma and should be fine-tuned. Refraining from action could lead to various problems in the future. It is for this reason that we have decided to introduce certain amendments.

The first one is about the way pensions are calculated, which is actually a whole new approach. All in all, this should make things easier than they are today, whatever people may be saying about it (as it often happens, there is much talk about an issue, but no one has actually looked into the heart of the matter). The pensions that people receive should depend on two factors: the size of their salaries, which is fair enough, and the length of their employment. These are the two key factors. The bigger the salary and the longer the duration of employment, the bigger the pension. A point system will be introduced to this effect and is expected to come into force by 1 January 2015.

We are currently preparing all these initiatives. Draft laws are submitted to the State Duma, various issues are raised in this respect, the proposals are improved. This is business as usual. I would like to reiterate that the pension system needs continual adjustment. This pension system is expected to make it clear for every individual how his or her retirement pension is calculated, that it is not a gift from above calculated by some unknown people and you just have to take it but now  everyone understands where it comes from.

This was how the idea was born of a pension calculator, an electronic tool on the Pension Fund’s website or other websites for calculating pensions. It should be noted that 2.15 million people have already used the beta-version of this online pension calculator.

Irada Zeinalova: Some say that the calculator shows overestimated results.

Dmitry Medvedev: No, it doesn’t.

Irada Zeinalova: Have you calculated your pension?

Dmitry Medvedev: I did and in public view as well. However, I earn a high salary, so my pension is decent too, even taking into account that…

Vadim Takmenyov (NTV): There is a certain threshold for salaries; I think it is 47,000 roubles.

Dmitry Medvedev: Yes, right. I calculated my salary taking into account the fact that I do not plan to retire early. There’s a new feature here as well: we (just like in other countries) are seeking to incentivise people to work beyond the retirement age, which means after they reach 55 or 60 years. I would like to draw your attention to the fact that unlike many other countries we do not intend to raise the retirement age. If people want to retire at 55 or 60 years, they are free to do so.

Marianna Maksimovskaya: So it is actually a masked raising.

Dmitry Medvedev: No, it’s not. Everyone is the architect of his or her own fortune. If someone wants to spend their time gardening or looking after their grandchildren, they can retire at 55 or 60, and their pension will still be higher than it was 10 or 15 years ago, as we all understand. However, if someone wants to continue working, he or she will contribute more to their pension, thereby expanding, as experts call it, their pension entitlement. So my calculation was based on a retirement age of 70, the maximum age. And on the salary of the prime minister which is naturally higher than what most people earn.

Irada Zeinalova: So your calculation is based on the assumption that you will remain prime minister until the age of 70?

Dmitry Medvedev: I had to enter my current salary, since I didn’t have the option to do otherwise. So my estimated pension will be substantial. However, people with lower salaries also used this calculator, and received estimates that are much better than under the current system.

With respect to future developments, we will continue approving pension-related laws. You mentioned the funded component of retirement pensions. Here’s what I have to say about it. The Government does not intend to cancel this funded component. I don’t know why, but word is spreading that “everything is cancelled.” This is not true! We are just making this system fairer, because everyone should understand how best to organise their savings. The country and the Pension Fund factor your savings into the tariff system.

Our retirement pension should have two components: the funded component comes first, followed by insurance contributions. Under the proposed model, people will have the opportunity to decide how to use their savings (for people born after 1967). People will have the option to reallocate the funded component as insurance contributions, in which case the individual insurance rate will be equal to 16%, while the funded component will no longer exist and the government will take care of the savings.

But you can preserve the funded component of your pension, which is also absolutely normal, and decide to channel your 6% to this funded share. In that case, you would preserve your 6% funded component and a 10% insurance  contribution. I believe that this is absolutely fair. You should personally decide which plan is more profitable and appropriate.

But our current task is to make sure these specific managing companies and private pension funds addressing this issue should be transparent and understandable, so they won’t suddenly go broke. This is precisely why we are passing separate legislation on funded pensions, and this is why we’re talking about banks and insurance companies all the time. But this is also no less important. As you know, they have accumulated huge financial assets. Therefore it is very important that these assets be monitored and included in the system. We’ll be able to make all these decisions, after we achieve this goal. Therefore, as I see it, we are making reasonable decisions with regard to the long-term development of the national pension system and talks that it is becoming more complicated and less transparent are absolutely incorrect. On the contrary, this system has become clearer and more understandable than the current system.

Marianna Maksimovskaya (Ren TV): Mr Medvedev, but reforms you are trying to implement now – these pension and housing and utilities reforms ­ are unpopular anyhow. Aren’t you afraid that you will go down in history as the prime minister responsible for this?

Dmitry Medvedev: Marianna, do you really think that I am afraid of this? To be honest, any normal person who is placed in charge of various processes, all the more so public servants and high-ranking state officials, should not be afraid of this.  Otherwise you will never make any decision, even as President or Prime Minister. You will never accomplish anything, if you think all the time, how a decision will affect your ratings, popularity and other indicators. One should not behave like a bull in a china shop, and one should not act imprudently and foolishly. But one should summon his courage and adopt decisions, including those on complicated issues, such as the housing/utilities sector and the pension system. The Government will address these issues, which are our responsibility.

Mikhail Zygar (TV Rain): Mr Medvedev, I would like to change the subject and go from national budget and economic problems to those of neighbouring Ukraine. Can you tell us, with due consideration for current national budget and economic problems, what price are you ready to pay to prevent Ukraine’s European integration? Why does this issue have such principled significance, and do you really think that these efforts are justified? Don’t you think that, just like in 2004, Russia is antagonising the majority of Ukrainians?

Dmitry Medvedev: I have repeatedly discussed this, and I am absolutely confident that Ukraine itself, the people of Ukraine and, consequently, Ukraine’s leaders and government will decide where Ukraine should go, and what it should do. Therefore this is their authority and their prerogative, so let them address these issues.

On the other hand, we do care about Ukrainian developments. This country and its people are very near and dear to us. Moreover, Ukraine is a highly important trade and economic partner, and vice versa. Maybe, Russia is an even more important partner for Ukraine. Therefore, of course, we have to see how Ukraine will develop its economy. We have no objections to Ukraine’s integration with anyone in any way. This is their business, but they should assess the consequences of this kind of move, including the consequences of Ukraine’s association with the European Union and the consequences of its decision to join the Customs Union. Basically, this should be a well thought-out decision. To the best of our knowledge, Ukraine’s leaders are now concerned with precisely this issue. It took them a long time to think on establishing the free trade zone and signing a separate European Union association agreement. We have told them they were free to decide, but, in that case, they would face problems with national regulation, and that they would have to spend a lot of money on introducing these regulations. In addition, Russia, Belarus and Kazakhstan cannot remain indifferent to the fact that Ukraine would open up its market to European goods. We maintain friendly relations with Europe, and we trade with European countries. Russia and the EU are posting a $400 billion trade turnover. But this does not mean that we should disarm ourselves, open up all borders and tell them that they are free to deliver any items or goods which are not being sold on their markets. We should, nonetheless, understand how these goods will be delivered. Therefore we have told our partners that they should assess this future process. They have assessed the situation, and they have realised that they are not yet ready for this. This is probably the reason why, in any event, they have decided to delay the signing of the agreement. This is their internal affair. We simply drew their attention to various implications, and we told them that some problems could emerge. They have made their decision. As I see it, they have made an appropriate decision in accordance with the constitution, and they did not violate anything. The Government and the President have the right to decide on specific alliances and the documents which should be signed.

Both the Government and the President have the right to decide which alliances to join and which documents to sign. But the current situation there is really very complicated. It reflects the emotional side of decisions, and so we are closely monitoring developments in Ukraine. But then again, I’d like to say that these issues should be tackled by the Ukrainian leadership and people, and not foreigners or Russia. But other countries should behave civilly in this situation. Look at what is happening: foreign ministers from our partner countries go to Ukraine, and they don’t talk with the Ukrainian leadership or opposition, which would have been acceptable, but mingle politically, addressing people at events held contrary to existing rules on demonstrations. In fact, they take part in these events. How would our German partners feel if a Russian foreign minister attended an event in Germany held contrary to national rules? I don’t think they would consider this a friendly or justifiable move. There can be official meetings, but attending such events amounts to interfering in other countries’ internal affairs.

Vadim Takmenyov: Mikhail Zygar asked about Ukraine, but I’d like us to return to Russia.

Dmitry Medvedev: Please do.

Vadim Takmenyov: You’ve probably noticed that there’s a kind of hazing in the TV world: my older colleagues have asked two questions each, but I am a rookie, and so I was waiting my turn to ask my questions.

Irada Zeinalova: And some people are snitches.

Dmitry Medvedev: Vadim, instead you made a documentary film with the Government.

Vadim Takmenyov: Yes, that’s true. Mr Medvedev, this is what I’d like to ask you about. In the 1970s, when the situation in the oil market seemed to be quite good, the national leadership used the money to build more tanks and missiles. Years later, the economists, with the benefit of hindsight, said that the Soviet economy was ruined by the arms race.

Judging by the defence budget, the race continues, one way or another. We have also held the most expensive APEC Leaders’ Week and are preparing for the most expensive Olympics. What else? Oh, the FIFA World Cup, for which we need to build stadiums, and so on. I would describe this as a construction race. Have you ever considered that the Government and you personally might be accused of launching this construction race that… Well, I can’t say that you will ruin the economy, but have you considered that this construction race might have an adverse effect on the Russian economy, as Minister Ulyukayev has said more than once?

Dmitry Medvedev: First, construction is a good thing. As we in Russia say, it is easier to destroy than to build. So, we must build. This is first.

Second, about what happened in the Soviet Union, and what is taking place in Russia. There is often a lot of inaccurate information when it comes to the size of budgetary allocations.

Let’s begin with armaments. We invest in education, healthcare and defence, but it is generally believed that we have a defence-heavy budget, that we spend too much on defence. Some people say we are doing the right thing, while others disagree. I had a difference of opinions with my colleagues on this issue, which explains changes in allocations. It would have been better to spend less on armaments and defence, but this is the world we live in.

Second, let’s compare figures. Our consolidated spending on education this year reached ­ just imagine ­ 2.9 trillion roubles. This includes allocations from the federal, regional and municipal budgets. And all of this is invested in education. But people don’t care where the money comes from, from Moscow or from other budgets. Spending on healthcare ­ 2.5 trillion roubles, including from the federal and regional budgets and medical insurance funds. Spending on defence ­ 2.1 trillion roubles.

Now you can compare these figures. At the very least, these are comparable allocations, and the aggregate spending on healthcare and education is more than two times larger than defence allocations. We will carry on this policy, and we will try to increase spending on social projects, because the Government’s policy is to focus on the social sphere.

As for construction, there can be no development without construction. Let’s consider what you’ve said. You mentioned the APEC Leaders’ Week, Sochi,  the upcoming Olympics and FIFA World Cup. Vladivostok is a very beautiful city, but it didn’t have a sewage system! And this is the city that is supposed to be our showcase on the Pacific Coast. Yes, we try to use every opportunity, such as the one presented by the APEC meeting, not to show off Russia’s beauty to our guests (which is good in itself), but to invest in improvements.

You know, something struck me a while back. I first thought about it in 2000, when I attended a G8 summit meeting in Okinawa, Japan. They spent $1 billion on that summit, which was big money at the time. I asked them why they were doing it, since it is a relatively small island. Here is what they told me: We decided that it is one of the least developed territories by Japanese standards, and so we used the opportunity to direct investment there. And I saw that they were right. We are doing the same now. After the APEC meeting, Vladivostok not only has a sewage system but also many new roads, the biggest theatre in the Far East, a wonderful university and numerous other facilities. And lastly, housing construction received a powerful boost. Isn’t this good? I think it’s good.

Now, take Sochi. Our Olympic project is very complex, because we are building in a place that was not suited for the Olympics. Do you know what Sochi is like? I think everyone has been to Sochi. I first visited Sochi as a young man. It is our main resort town. But to tell the truth, it was a rather modest resort town until recently.

Remark: It didn’t even have a stadium.

Dmitry Medvedev: Exactly. As I said, it was a modest resort town. Because there were many other resorts in the Soviet Union, and besides, not much was done to develop that sphere. So it was embarrassing when Sochi was described as our main resort town. Sochi has changed radically. It now has a network of hotels and enough sport facilities for competitions and recreation. It will have normal tourist amenities, including restaurants and shops, without which you cannot enjoy your holidays, normal communications, and a railway in the mountains, which we would have never built if not for the Olympics. Our people like to spend holidays in the mountains, and now they can do so properly, but we still need to build more hotels and to ensure that their prices are competitive, because the greater the demand the lower the prices. In short, I believe that our investment in Sochi is fully justified.

As for the FIFA World Cup, what is it exactly? I don’t know about everyone here, but I’d imagine most of us are football fans, and so we need stadiums, and not only stadiums. Why did our regions fight so fiercely for the right to host the World Cup? Because it is a major development opportunity. You can build roads, housing and airports, which we will do in time for the championship, because it is a good development opportunity for the country. I believe that this is very important, especially because our country is so big and so complex.

Vadim Takmenyov: I hope so. The main thing is to prevent it from becoming an excuse to steal funds…

Marianna Maksimovskaya: …from the budget.

Vadim Takmenyov: …when such huge sums are spread among the regions.

More to be posted soon …

[featured image is file photo from previous event]