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TRANSCRIPT: Presidential Address to the Federal Assembly (transcript concluded)

File Photo of Vladimir Putin at Podium Gesturing

(Kremlin.ru – December 12, 2013) Finally, we need to speed up the adoption of laws that would enable Russian universities to actively develop distance learning, which would also be aimed above all at our compatriots abroad and at the CIS countries.

As we improve professional education, we must remember that the labour market is becoming more flexible and people need to have possibilities for re-training and getting a new professional start in life. We must provide the right conditions for people who are willing to change jobs or move to a different town or region. Of course, this needs to be coordinated with our regional and local development plans, and working together with business.

We must give people information support, including by setting up a national job database, so that people everywhere can see in which region they might find a good job. This requires a whole series of decisions. I ask you to draft these measures, including those on rental housing and so forth. You know what sorts of issues I am talking about. The list is long. This work can and must be carried out as soon as possible.

The second task is to make the countryside a more attractive place for life and work. We have already invested considerable money in developing the agriculture sector. The sector is showing a positive dynamic now. In many areas we can now fully cover domestic demand with Russian-produced goods. I want to thank our rural population for their work and the results they have achieved.

The big task now is to encourage people to stay in the countryside and build a modern and comfortable infrastructure in rural areas. I ask you to pay particular attention to this issue when making changes to the state agriculture development programme.

I would like to say a few words about the situation in single-industry towns. They are part of the complicated legacy we inherited from the Soviet economy. These towns are home to more than 15 million people. Many of them are in a difficult situation, but these towns do have an excellent base: social infrastructure, housing and a skilled labour force. We need to identify what is stopping business from coming here, what incentives and conditions we can offer so that investors will come to these towns not under pressure, but because they see real opportunities for themselves there. Believe me, it is better to resolve things this way than to end up pumping tens of billions from the budget later into job creation there, which is what we will end up having to do if we do not properly address the situation now.

I therefore ask you to draft proposals on comprehensive development in the single-industry towns, investment projects that can be carried out there, and proposed financing sources, as well as proposals on reducing labour market tension and targeted support for small and medium business.

In this respect, I want to say to all of the regional heads that we are aware of the constraints that regional budgets face, but we do need to look beyond our immediate problems too.

The proposal has already been made ­ and I support it ­ that all regions could offer two-year tax holidays to new small businesses working in the manufacturing, social or scientific sectors (applause). Probably not all of the governors are applauding, but I want to say that carrying out this kind of idea today would bring dividends tomorrow in the form of additional revenue for the regions and municipalities. These would be new businesses. They do not even exist at present, and so we are not talking about any loss in budget revenue here. On the contrary, if we create the conditions for these new businesses, we will create revenue too.

We also need to make it possible for small businesses and individual entrepreneurs to pay their taxes and insurance payments using the ‘one window’ system. These are different payments, but we need to make it possible for them to be paid at a single place and time.

Another complicated problem related to the labour market is foreign labour migration. The lack of proper order in this sector creates labour market distortions, causes imbalances in the social sector, provokes ethnic conflicts, and leads to higher crime rates.

We need to put order in the procedures for employing foreign nationals who have visa-free entry to Russia, and increase employers’ responsibility for employing foreign workers. Of course, if these people are living and working in Russia and using our country’s education and healthcare services, they must also take on their share of obligations and pay their taxes and other payments.

The task is not an easy one. We must preserve our special ties with the former Soviet republics, but at the same time we also need to put the situation in order. I think that in this context we should change the current license system. Foreign workers currently need to acquire a license if they are employed by a private individual. I propose that legal entities and individual entrepreneurs should also have the possibility of hiring foreign workers on a license basis. The license’s cost would be set by the particular region depending on the situation on the region’s labour market and the average income there. The license system should be differentiated and encourage above all professionals, educated specialists, who speak Russian and have an affinity for our culture to come to work in Russia. I stress too that licenses would be valid only in the region where they were issued.

I hope that if we organise this work competently, it will be an economic instrument that can help us regulate the migration flow. I call it an economic instrument because of the differing cost the licenses would have from one region to another in Russia.

Finally, we need to establish tighter scrutiny of the purpose foreign nationals declare when entering Russia. All civilised countries do this. Russia must be able to know why people are coming, and how long they plan to stay. We also need to settle the issue of foreigners who enter Russia under visa-free travel arrangements and without any specific purpose. At least they supposedly have no specific purpose, though in actual fact they probably do have a purpose, but the authorities know nothing about it. Their time in the country should be limited, and entry into Russia should be prohibited for people who have broken the immigration rules. Depending on the seriousness of the violation, entry should be prohibited to enter the country for 3-10 years.

These measures would set an additional barrier for foreign citizens who are working in the shadow economy or are even engaged in criminal activity, or who are working illegally, often in inhuman conditions, and who, sadly, themselves become the victims of criminals.

Colleagues,

Two years ago, together with the business community, we began systematic work to improve Russia’s investment climate. I can say that we have already achieved some good results. Perhaps not many people believed that we would actually achieve these results, but they are there. Now we must go further. By 2015, we must have completed the main work to put in place the laws and regulatory base that will make it attractive and easy to do business in Russia.

For this reason, starting next year, we will publish a national rating of the investment climate situation in the different regions. This will essentially be an instrument for evaluating the national business initiative’s implementation in each of the country’s regions.

At the same time, we need to create incentives for regions that are developing their economic base and that have made it their mission to support business initiative and create new production facilities and jobs.

Let me announce a piece of good news for the regional governors. Regions that invest in developing industrial and technology parks and business incubators will have the federal taxes paid by their resident companies returned for three years to the regional budgets in the form of inter-budgetary transfers. Let me stress that this will be within the limits of the region’s expenses for building the infrastructure for these sites.

There is nothing to laugh about here! This is a good proposal. It was the result of long and exhausting discussions with the Finance Ministry. I ask the Finance Minister not to water down these agreements, but to give them your full attention and carry them out.

One issue that is still a sensitive matter for businesspeople is excess attention from various inspectors. Inspections and checks are necessary, but the work to change the principles on which the oversight and inspection agencies carry out their work must continue.

This work is still ongoing and it must continue. To make this area more transparent, I propose that we set up a unified federal portal, where every check and inspection will be given an individual number and it will be clear immediately who initiated each investigation, who was inspected, on what grounds the inspectors carried out their investigations, and, most important, what results the investigations produced.

Let me note another problem too, namely, that our mechanisms for settling economic disputes are still a long way behind the best global practices. In this context, we also need to make a serious effort to raise the arbitration courts’ authority.

I ask the Government, together with the Russian Union of Industrialists and Entrepreneurs and the Chamber of Commerce and Industry, to draw up a draft law on fundamental improvements to the arbitration system and submit it to the State Duma as soon as possible.

In last year’s Address, I spoke about the challenges in relieving the economy of offshore activity. This is another topic to which I want to draw your attention and which we must return to today.

Why is that? I will tell you frankly that so far, the results are barely perceptible. Let me remind you about a major transaction that took place this year, worth over $50 billion. The sale of TNK-BP shares occurred outside of Russia’s jurisdiction, although we all know that the sellers were Russian nationals, and the buyer was one of Russia’s largest companies.

Last year, according to expert assessments, $11 billion worth of Russian goods passed through offshores and partial offshores ­ that’s 20% of our exports. Half of the $50 billion of Russian investments abroad also went to offshores. These figures represent the withdrawal of capital that should be working in Russia and direct losses to the nation’s budget.

Since nothing significant has been achieved in this area this year, I want to make the following suggestions.

The incomes of companies that are registered in offshore jurisdictions and belong to Russian owners or whose ultimate beneficiaries are Russian nationals must follow Russian tax laws, and tax payments must be made to the Russian budget. We must think through a system for how to collect that money.

Such methods exist and there is nothing unusual here. Some countries have already implemented such a system: if you want to use offshores, go ahead, but the money has to come here. It is being implemented in countries with developed market economies, and this approach is working.

Moreover, companies that are registered in a foreign jurisdiction will not be allowed to make use of government support measures, including Vnesheconombank credits and state guarantees. These companies should also lose the right to fulfil government contracts and contracts for agencies with government participation.

In other words, if you want to take advantage of the benefits and support provided by the state and make a profit working in Russia, you must register in the Russian Federation’s jurisdiction.

We must increase the transparency of our economy. It is imperative to introduce criminal liability for executives who knowingly provide false or incomplete information about the true state of banks, insurance companies, pension funds and other financial institutions.

We need to maintain our fundamental, firm position on ridding our credit and financial system of various types of money laundering operations. Meanwhile, the interests of honest clients and depositors in problematic banks should be securely protected.

Today, the fight against the erosion of the tax base and the use of various offshore schemes is a global trend. These issues are widely discussed at the G8 and G20 summits, and Russia will conduct this policy at both an international and national level.

The need for liability fully applies not only to private businesses, but executives at state-controlled companies and development institutions as well. I propose that the Government should radically change the principles of its work; there should not be any executive comfort zones here. They are paid very good money. We will not achieve much economic progress if we undermine them; we will not be able to employ the professionals we need. But we must establish supervision over their work, and we must do it the right way.

All such organisations must develop their own long-term strategies, which should state clear goals and personal responsibility indicators for their leadership. Executives’ employment agreements must stipulate liability for failure to fulfil the set objectives, including financial liability.

Company programmes for corporations included in the strategic enterprise list must be approved by the Government of the Russian Federation, and their implementation should undergo an external audit. I looked at the list yesterday: there are several dozen such companies. We have several lists, but the list of strategic enterprises includes only several dozen. Of course, this means an additional workload, but I am confident that the Government will rise up to this challenge.

I will stress again that government and private sector resources should go toward development and achieving strategic objectives. For example, let’s look at such objectives as developing Siberia and the Far East. This is our national priority for the entire 21st century. The challenges we will need to tackle are unprecedented in their scale, which means we must take unconventional approaches.

We have already made a decision on a reduced income tax rate and a number of other taxes for new investment projects in the Far East. I feel it would be expedient to expand this regime to all of Eastern Siberia, including Krasnoyarsk Territory and the Republic of Khakassia.

Moreover, I suggest creating a network of special advanced economic development zones in the Far East and Eastern Siberia with special conditions for organising non-extractive production, including that intended for export. New companies located in such zones, in such territories, should be provided with five-year exemptions for income tax, mineral extraction tax (with the exception of oil and gas, which is a profitable sector), land and property taxes, as well as preferential insurance rates, which are very important for high-tech manufacturing.

What’s also important is to create conditions here that will be competitive with key business centres of the Asia-Pacific region. Such conditions should apply to authorisation procedures for construction, connecting to electricity networks, and passing through customs. We will make active use of the Far East Development Fund in order to resolve infrastructure issues in these territories.

We will need to decide on the exact location of these territories by July 1, 2014, and adopt all the legal regulatory acts necessary for them to operate. Given the importance and scale of this endeavour, I am asking the Prime Minister to personally supervise this work. In the future, we will make decisions about their future development based on the experience and practice of working in such zones and the resulting effect.

We will also continue the projects already being implemented at this time. As you know, a new university has been established on Russky Island. It will conduct a sound scientific evaluation with regard to Far East development programmes, and provide for the region’s employment needs, first and foremost in areas such as space, biotechnology, robotic technologies, design, engineering, oceanography and the use of marine resources.

I am confident that Russia’s reorientation toward the Pacific Ocean and the dynamic development in all our eastern territories will not only open up new economic opportunities and new horizons, but also provide additional instruments for an active foreign policy.

Colleagues, global development is becoming increasingly contradictory and dynamic. Russia’s historical responsibility is growing in these conditions, not only because it is one of the key guarantors of global and regional stability, but also a nation that consistently asserts its value-based approaches, including in international relations.

The intensity of military, political, economic, and informational competition throughout the world is not decreasing, but only getting stronger. Other power centres are closely monitoring Russia’s progress as it grows stronger.

We have always been proud of our nation. But we do not claim to be any sort of superpower with a claim to global or regional hegemony; we do not encroach on anyone’s interests, impose our patronage onto anyone, or try to teach others how to live their lives. But we will strive to be leaders, defending international law, striving for respect and national sovereignty and peoples’ independence and identity. This is absolutely objective and understandable for a state like Russia, with its great history and culture, with many centuries of experience, not of not so-called tolerance, neutered and barren, but the actual modern, natural life of different peoples within the framework of a single state.

Today, many nations are revising their moral values and ethical norms, eroding ethnic traditions and differences between peoples and cultures. Society is now required not only to recognise everyone’s right to the freedom of consciousness, political views and privacy, but also to accept without question the equality of good and evil, strange as it seems, concepts that are opposite in meaning. This destruction of traditional values from above not only leads to negative consequences for society, but is also essentially anti-democratic, since it is carried out on the basis of abstract, speculative ideas, contrary to the will of the majority, which does not accept the changes occurring or the proposed revision of values.

We know that there are more and more people in the world who support our position on defending traditional values that have made up the spiritual and moral foundation of civilisation in every nation for thousands of years: the values of traditional families, real human life, including religious life, not just material existence but also spirituality, the values of humanism and global diversity.

Of course, this is a conservative position. But speaking in the words of Nikolai Berdyaev, the point of conservatism is not that it prevents movement forward and upward, but that it prevents movement backward and downward, into chaotic darkness and a return to a primitive state.

In recent years, we have seen how attempts to push supposedly more progressive development models onto other nations actually resulted in regression, barbarity and extensive bloodshed. This happened in many Middle Eastern and North African countries. This dramatic situation unfolded in Syria.

As far as Syria is concerned, the international community had to jointly make a momentous choice: to either descend into further erosion of the world order’s foundations, or collectively make responsible decisions.

I feel it was our common success when the choice was made on the basis of the fundamental principles of international law, common sense and the logic of peace. So far, at least, we have been able to avoid external military intervention in Syria’s affairs and the spread of the conflict far beyond the region.

Russia made significant contributions to this process. We acted firmly, thoughtfully and carefully. We never jeopardised our own interests and security, nor global stability. In my view, that is how a mature and responsible nation must act.

As a result, together with our partners, we managed to steer the course of events away from war and toward establishing a nationwide political process and civil consensus in Syria. Syria’s chemical weapons arsenal is now under international control. Its liquidation is an important step in strengthening non-proliferation regimes for weapons of mass destruction. The Syrian precedent confirmed the UN’s central role in global politics.

The Syrian crisis, and now the situation in Iran as well, clearly demonstrate that any international problem can and should be resolved exclusively through political means, without resorting to forceful actions with little potential that are rejected by most nations in the world.

This year, we saw a breakthrough with the Iranian nuclear programme, but it was only the first step. It is imperative to continue patiently searching for a broader solution that will guarantee Iran’s inalienable right to develop peaceful nuclear energy and ­ I want to stress this ­ security for all countries in the region, including Israel.

Incidentally, it was Iran’s nuclear programme that once served as the main argument in favour of deploying a missile defence system. So what is happening now? The Iranian nuclear issue is being resolved, but the missile defence system remains. And it doesn’t just remain, it is being developed further. But I will talk about that a little later.

I want to stress again: Russia is prepared for joint efforts with all partners in the interest of ensuring common, equal, indivisible security.

Russia’s G8 presidency in 2014 will focus on acute global problems: strengthening non-proliferation regimes, combating international terrorism and drug trafficking. We will also act in accordance with these principles when preparing to host the BRICS and Shanghai Cooperation Organisation (SCO) summits in 2015.

We are now entering a crucial stage in preparing the Eurasian Economic Union Treaty. We expect to have agreed on the Treaty’s text by May 1, 2014 and to have submitted it to the Russian, Belarusian and Kazakhstani parliaments by that time. Colleagues, I would ask you to prioritise this document and give it your consideration and support.

Let me add that working groups are currently preparing roadmaps governing the accession of Kyrgyzstan and Armenia to the Customs Union. I am sure that the real achievements of Eurasian integration will only enhance our other neighbours’ interest in it, including that of our Ukrainian partners.

Even before all these protests that we are now witnessing in Kiev ­ and I very much hope that the country’s political forces will be able to negotiate and resolve Ukraine’s accumulated problems in the interests of its citizens ­ before all these problems began, starting in May Ukraine has expressed its desire to be present at all meetings between Russia, Belarus and Kazakhstan as an observer. Ukraine participates in discussions and has repeatedly declared its interest in joining some of the Customs Union’s agreements.

We are not imposing anything on anybody. But if our friends want to work together, then we are ready to continue this work at the expert level.

Our integration project is based on equal rights and on real economic interests. We will consistently promote the Eurasian process, without setting it against other integration projects including the more mature European one. We proceed from our complementarity and naturally we will continue to work with our European friends on a new basic agreement.

Colleagues,

A few words about our actions to further strengthen our Armed Forces.

I just mentioned the issue of missile defence, and here’s what I would like to say in this regard. We are all perfectly aware that the missile defence system is defensive in name only. In fact, it is a crucial component of strategic offensive capabilities. The development of new weapons systems, such as low-yield nuclear weapons, strategic non-nuclear missiles and hypersonic high-precision non-nuclear systems for prompt, long-range strikes are also causes for concern.

We are closely following the development of the so-called Prompt Global Strike system, which is being actively developed by some countries. Implementing all of these plans could have extremely negative consequences for regional and global stability.

The ramping up of high-precision strategic non-nuclear systems by other countries, in combination with the build-up of missile defence capabilities, could negate all previous agreements on the limitation and reduction of strategic nuclear weapons, and disrupt the strategic balance of power.

We understand this very well, and in this context we know exactly what we need to do. No one should entertain any illusions about achieving military superiority over Russia; we will never allow it. Russia will respond to all these challenges, both political and technological. We have all we need in order to do so.

Our military doctrine and advanced weapons, weapons that are being and will be deployed, will unconditionally allow us to ensure the security of the Russian state.

We still have a lot to do to develop modern high-precision weapons systems. At the same time, judged by qualitative parameters for modern strategic nuclear deterrent forces, today we are successfully reaching new milestones on schedule, and some of our partners will have to catch up.

We are developing new strategic missile systems for land, sea and air to further strengthen our nuclear forces. We will continue to strengthen our strategic missile forces and continue building a fleet of nuclear submarines. We are also starting work on a promising long-range aviation system.

The establishment of a global intelligence network is the next step on our agenda. The formation of an integrated, real-time global network for reconnaissance and targeting, which will operate in a single informational space in the interests of the Armed Forces of the Russian Federation, is extremely important. This is connected with additions to our satellite group.

We will continue to develop our general purpose forces: aviation, the navy and the land forces. This year in keeping with our plans, the number of privates and sergeants under contract increased to 220,000. At the same time we have to think how to create highly trained reserve forces.

There is another suggestion in this regard: keeping deferrals for students and changing the very system of military training offered by institutions of higher education. This will enable all students to study, receive military training for their next military assignment and a particular area of military specialisation.

This mechanism will allow us to train the right amount of reservists for the most needed, primarily technical military specialisations, while not drafting them into the Armed Forces. I would ask the Government and the Security Council to submit concrete proposals for how such a system could be organised.

Next. As you know, the funds we are allocating for rearming the Army and the Navy, for modernising the defence industry are unprecedented. They total 23 trillion rubles [more than $700 billion].

In the next decade, our defence companies will be fully loaded with orders. They will be able to upgrade their manufacturing base and create high-quality jobs. Let me recall that in Russia about two million people work in the defence industry. Together with their families, the number comes to almost seven million people. And specialists in this sector will have stable, well-paid jobs, and their families will be provided for.

Now we have to think about what the defence industry’s companies will do after having fulfilled the state defence procurement order, after 2020. We cannot allow them to become obsolete.

We need to strengthen our position in global markets. I would ask the Military-Industrial Commission to submit proposals in this regard, to ensure that our businesses can promptly switch to releasing in-demand civilian products onto both our domestic market and foreign ones.

There’s another point I would like to emphasise. We said that all Defence Ministry servicemen who began their service before January 1, 2012 would receive permanent housing by the end of this year. This task should be fully completed in the near future, and it will be. I would draw the Defence Ministry’s attention to this and ask you to deal with the issue on a case-by-case basis, helping people choose the best option for them.

Colleagues,

For the first time in our country’s history, we are turning the page on the issue of permanent housing for servicemen in Russia’s Army and Navy. Now we can concentrate on completing the construction of modern service housing and comfortable military bases.

Colleagues,

A sense of responsibility for the country is the main theme, lifeblood, and core value of the Russian Constitution, and it is also a call to each of us.

The nation’s strategic development agenda is well-known; this Address has outlined main areas of work and ways to achieve specific goals.

Everything that has been stated here must be executed without any reservations, new suggestions or bureaucratic interpretations. This is what the authorities’ most important and most notable task consists in.

It is our duty to increase people’s trust. Only in this way will we be able to increase the activity of our citizens, and people will want to contribute to our country’s development.

Let me repeat that if a decision has been made, then it must be implemented. I consider this approach to be a concise expression of shared responsibility, and would suggest making this the motto of the coming year, a motto for everyone: for the government, for society, for citizens.

I am absolutely convinced that by drawing on the best traditions of our people, by using the latest ideas and most effective development paths, we will meet all the challenges we face and guarantee our success.

Thank you for your attention.

[featured image is file photo]

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