TRANSCRIPT: Dmitry Medvedev speech: Report on the Government’s performance in 2012

April 19, 2013 JRL Russia List Politics, Government, Protests, Elections

(Government.ru – April 17, 2013)

Good afternoon, Mr Naryshkin (Sergei Naryshkin, State Duma Speaker). Good afternoon, State Duma deputies, colleagues.

Today for the fifth time the Government is presenting a report on the results of its performance over the past year. This tradition has become a logical step in the development of the modern political system, improving its openness and accountability to its citizens. I am happy that I was one of the originators of this tradition and that I made proposals which have been supported by our parliament. I never thought I would present the report myself, but in this life you have to answer for all your actions. This is the inevitable logic of history. So here is my report. During the report if you don’t mind I will answer some of the questions political parties have asked. And finally I would just like to ask you to be patient. The report as you all know is not short.

This year marks the 20th anniversary of the Russian Constitution and the establishment of the Russian Federal Assembly. Representatives of political parties who clearly remember those difficult times have gathered in this hall. I thank you sincerely for your contribution to the establishment of the new Russia. Achieving this has not been easy. Our approach was one of trial and error, but the country we live in today and are developing was born in those years, and we must understand this.

The country has changed radically over the past 20 years, and most importantly, stability has been achieved. People have become used to a certain level of prosperity and today rightly expect further development of the country and, as a consequence, further improvements to their quality of life.

In late April, we will celebrate Day of Russian Parliamentarism. I’d like to say (and this has been my sincere belief ever since I started working at the Presidential Executive Office and as President) that a feeling of respect for a legislator from the municipal level to the State Duma and the Federation Council is part of the general respect for a state governed by the rule of law and for the law in general, and this should become part of our national mentality. That is not quite the case yet, unfortunately.

Almost a year ago, speaking in this hall, I presented my programme. We talked about the priorities, about what needs to be done and about how it can be achieved. As of now, we have approved the main areas of Government activity up until 2018. In 2012, the Government introduced 218 draft laws to the parliament, 153 of which were signed by the President. Within the first three months of 2013, the Government presented over 80 draft laws to the State Duma. I’d like to note, that our joint work, even with some obvious political disagreements, is bringing good results in general. We remember times when this was not the case.

The Government and the State Duma assume common responsibility for the country’s balanced development during this difficult period of global economic instability. I think everyone understands this. We need to create favourable conditions for people to be able to develop good careers and for the population to have a decent quality of life. And we must also consolidate society when we try to solve the most serious problems. This latter objective is probably even more difficult. I am not saying this just in order to state that we are all together on this. The first months of this year show that subsiding economic growth is a global trend. I would like to stress that this trend is persisting, and that we are facing serious risks in this sphere. The Government has spoken about this. We foresaw subsiding development rates precisely in the context of the world economic markets and, I will not conceal this fact, in the context of independent Russian economic problems.

The Government must implement well-balanced measures so as to attain acceptable basic parameters. This is a very difficult and highly important subject. I discussed this issue with the President the other day. We discussed measures to encourage economic development, and we agreed to hold a presidential meeting with key experts and, quite possibly, State Duma deputies and to discuss the current agenda with them. In effect, we are talking about the implementation of well-known Presidential executive orders and Policy Priorities of the Government of the Russian Federation.

I would like to note that the Government has its own idea of specific measures which must be implemented in this situation. But these measures must be discussed in great detail together with experts and, of course, with members of parliament. I mean what I have said. We have common tasks and shared responsibility. Nevertheless, I will now give you a brief macro-economic outline. Of course, you know many of the statistics, but I believe it would be useful to illustrate the entire situation.

On the whole, with due account for the global economic situation, we can say that overall the 2012 macroeconomic results are quite good. The GDP grew by 3.4% in 2012. Real wages exceeded 2011 wages throughout 2012, except November and December. Wage growth rates increased from 2.8% to 8.4%. On the whole, this was made possible by raising the wages of teachers and medical personnel and by raising the pay grades of military personnel. I believe that all of us have reached consensus on this issue through much deliberation, regardless of our political convictions.

We can also talk about another positive fact, namely, unprecedentedly low unemployment levels, which totaled 5.5%, as compared to 6.5% in 2011. Last year, consumer inflation exceeded 2011 inflation by 0.5% and reached 6.6%. This was caused by a crop failure and by some other factors.

We have virtually balanced the federal budget, and we have only a small budget deficit, which makes up 0.06% of the GDP. This situation is different from that in an absolute majority or virtually all industrialised countries. I would like to remind you that the United States, Japan and the United Kingdom have 9%, 10% and 8.2% budget deficits, respectively.

The share of oil and gas related revenue has grown by 0.2% of GDP while the share of non-oil and gas revenue remains at the last year’s level of 10.3%.

As you know the budget rule enforced by the federal law regulates the use of oil and gas revenue and limits the total amount of federal budget expenses. It also specifies the procedure for building up and using the money of the Reserve Fund and the National Welfare Fund. The argument involved was long and difficult. However, we made a decision that must be acted upon. This will increase macroeconomic stability of the Russian economy and its investment potential, and will ensure the fulfillment of all expense related obligations, social obligations, first and foremost. I would like to stress that the rule is particularly important when it is obvious that other countries are facing disadvantageous scenarios which lead to recession and could eventually come to affect us. And it is particularly important when there is a risk of a fall in hydrocarbon prices. We have been through this before and the dramatic fall in hydrocarbon prices that we experienced in 2008 should be a lesson to us, hence we have the budget rule that must be followed unfailingly.

There is one more issue of particular importance in current conditions. It is national debt. Russia’s national debt is a bit more than 10% of GDP.

Now, if we compare this with other countries, we see that the national debt of the United States makes up over 100% of the GDP. It makes up 90% of the GDP in France and 83% in Germany. And those countries are the driving force of economic growth. Our financial system is reliable enough to make effective borrowings to fund our budget priorities. In 2012, Russia floated a bond-secured loan of $7 billion from the international capital market, and a loan repayable in 30 years was the longest loan in our history.

However, I would like to repeat that the quality of growth and the structure of the economy are as essential as the growth rate. Russia will be facing fierce competition in terms of economic and technological development and human resources. To successfully respond to this challenge, we must make use of all of our resources and continue to improve the business climate and increase the efficiency of the economy and social sphere. We need to focus on developing the human potential and competitiveness of our people. It is an ambitious goal that should bring us all together in order to create comfortable conditions for living and working in our country and we should set out a plan to achieve this goal.

Now let’s move on to talk about specific sectors of our socio-economic agenda.

I will start with the most important part, which is our demographic situation. In recent years, we have been regularly taking action to increase birth rates, decrease mortality rates and extend life expectancy. The relative objectives have been described in a special presidential executive order issued last May. Let me remind you that nearly two million children were born in 2012, which is 102,500 children more than in 2011. The share of multiple births has gone up to 51.5% and the general birth rate has reached the 1991 level. I think it is a very important result.

What do these statistics indicate? We have managed to level off the demographic crisis, which is good. It is still too early to speak about getting out of the “demographic pit.” The birth rates are still not high enough to ensure the replacement of the population. We must make sure that having more children does not entail a lower quality of life. The maternity capital is regularly adjusted. It should be noted that this initiative has proved to be successful and popular. The maternity capital equals 409,000 roubles this year. Over 4 million families have already received their maternity capital certificates. When this project was started we did not have a clear idea of how it was going to work out, but it did and it resulted in new births. Also, regional maternity capital is given out in 71 Russian regions.

Starting this year, federal funds are provided to the 50 regions with the most difficult demographic situation. A monthly monetary allowance for the third child and subsequent children has been introduced there. An allowance of 7,000 roubles on average will be paid until a child reaches the age of three. The 2013 federal budget will allocate some 6 billion roubles for this purpose. Fourteen regions are introducing this measure at their own expense.

There is a proposal from lawmakers to extend this practice across all regions, but this will have to be thoroughly considered. I would like to note that this is a specific measure by the Government to support regions in crisis. The situation is not the same across the country and the statistics differ, therefore we cannot apply a one-size-fits-all approach. However, the regional officials are the one to make all the decisions related to these payments.

I know that members of the United Russia parliamentary party are concerned about the situation with many young families. In fact, it’s not only United Russia members, but basically everyone is concerned about this. The problem is particularly acute when a child is between 18 months and three years old. Parents do not receive child allowances any more but the young mother still cannot work full-time. Therefore, we need to make sure women can take up professional retraining and find a flexi-time job. Last year there were 840 retraining programmes and advanced professional training programmes available for young mothers in 78 regions.

There is another issue that is also very important. We have set the goal to increase the number of kindergartens and fully satisfy the demand for them by 2016. The Government will provide budgetary loans and subsidies for this purpose. As many as 270,000 children were additionally accepted last year. The number of children on the waiting list has been reduced by over 20%. We can see a positive trend here.

Another 1 million places in kindergartens will need to be created in 2013-2015, taking into account the growing birth rate. Some of the questions you ask the Government concern this. The United Russia party has also asked this question. Indeed achieving this target will require substantial investment. I will give you the figures later, just let me add one more thing: it is absolutely clear to us that the regions cannot handle this on their own. The federal government cannot simply tell them, “it’s your job, go and create more places and build new kindergartens.” It would be unfair. A co-financing programme for planned preschools is the solution. I have issued an instruction to this end and a Government resolution is already in the works. I think this resolution will be approved. It will be a big step in the right direction.

We are all aware of the problems piling up in the national healthcare system. But let’s try to be objective: we have not been idle in the past few years. Much has been done and work is underway as part of the regional healthcare modernisation programmes. In 2011-2012, these programmes’ funding from a range of sources added up to 664 billion roubles. As a result, more than 70 inpatient and outpatient centres have been built, and nearly 2,700 facilities have been overhauled. About 290,000 units of high-tech equipment have been purchased. As many as 8,000 doctors have moved to rural areas, and a total of 8 billion roubles have been paid to them as part of their compensation packages. This is very important for the harmonious development of rural areas.

Last year, we completed a large programme to build high-tech medical centres across Russia. I remember how it was launched more than six years ago. It has proved a success since then. The number of certain operations performed there has grown sevenfold, which means these services have become more accessible and affordable. Frankly, some of the operations performed at the new centres were practically unavailable six or seven years ago, and people often had to travel abroad for surgery.

Many operations have become widely available now. There are problems such as waiting lists, but surgery is available now. And importantly, people from the regions no longer have to travel to Moscow, which used to be the only place to have any complicated surgery.

We have set up new high-tech centres across the country I think we were right to do so and now 12 regions have major federal healthcare centres, from Kaliningrad to Khabarovsk.

Many of the most common cardiovascular treatments have become routine. We all know that cardiovascular diseases are a leading cause of death, especially in Russia. Many interventions in traumatology, orthopaedics, endoprosthesis replacement and neurosurgery have also become easily accessible.

The number of children who have received high-tech medical services has grown 60% since 2009. Many of their problems had been considered untreatable in the past. However, the state programmes that have made this possible need to be further expanded, to help cut the waiting lists for high-tech medicine. Many people still prefer going abroad for an operation.

According to the federal statistics service, there are 310,000 state and municipal establishments in Russia working in education, healthcare, culture, sports and social services. It is the government’s job to elevate their quality to a new level. The year 2012 was a breakthrough year, at least in terms of salaries. Salaries at these establishments have grown, as confirmed by the figures I cited earlier. The average salary of medical workers grew by almost 18% from the year before; teachers, by more than 20%. We seem to be getting used to these statistics and do not consider this a big pay raise. But colleagues, just think of this: no other government has been increasing wages lately, not during the global recession. Russia is the only country doing so. Further increases will be made in accordance with the approved schedule (I can assure those present that you do not need to doubt this). The increase will depend on the specialist’s qualifications and the quality of services provided, of course. These specialists must understand that higher salaries imply better quality of work.

One of the landmark events in 2012 was the federal law On Education in the Russian Federation. The bill was widely discussed and probably caused more controversy than any other bill. I think this is only natural. What are the biggest concerns for the people, experts, and lawmakers? There are two healthcare and education. These two issues are the most important, along with housing and utilities bills, of course. I must say that the discussion of this bill has shown how important it is to debate, to listen to experts and to study public opinion. Personally, I have discussed this with many of you, colleagues, many deputies from various parties. I think our discussions were very productive and I would like to thank you all for the work you have done.

What we need to do now is monitor the new law’s enforcement. It is wrong to treat laws like dogma. As lawmakers, you know this better than I do. If something isn’t working, it needs to be adjusted, corrected or changed. But even now it is clear that this law reflects the changes in modern education and provides additional opportunities to students who have shown outstanding progress and capabilities, as well as those who are in need of social or legal support. It also regulates experimental and innovative activity in education. The previous law did not take all this into account.

Educational services for children under seven lay the foundation for an individual’s further development. We are working on new education standards for programmes serving children under seven. It is important that the Government and the Ministry provide organisational and methodological support to regions and institutions. This answers the question from United Russia.

Last year we also achieved good results in modernising regional general education systems. Federal financing for this project amounts to 120 billion roubles in three years.

The concentration of such impressive funds and the project’s ideology make it possible to introduce the best practices in the regions and allow them to fully comply with their commitments.

Children should study in modern, decent conditions either in large cities or in small villages. This is an indispensable requirement. It is no less important to have proper educational programmes. More attention should be paid to upbringing. New standards have been introduced in elementary and secondary schools.

Despite growing competition, our fellows are successful in international Olympiads. Incidentally, I think that this is an important indicator of the competitiveness of our educational system. Estimates regarding its quality are poles apart. Some people believe that it is the best in the world and that it is rooted in the Soviet or even the tsarist system, while others think that we had a good system, but it has been destroyed over the past few years. None of these opinions is true. Our educational system has a huge potential and bears an enormous burden, shouldering the problems that have accumulated over the past few decades and not only… We shouldn’t idealise anything, including the Soviet school.

That said, the fact that our fellows do so well in international Olympiads shows that our school system is sound and this does not just mean academic schools or classical education. It also means that we have certain school methods how to explain to schoolchildren what they have to do and how they have to do it. This applies to most modern fields of knowledge. They are brilliant with computers and this is so not because we had a good educational system before. This is a new field. It is linked with mathematics where we had outstanding achievements…But this is great regardless.

We’ll soon host the international school Olympiads. Maybe they won’t be on the same scale as the Sochi Olympic Games, but they won’t be any less pleasant. This year, we’ll host the chemistry Olympiad. We’ll host the geography Olympiad in 2015 and the computer (informatics) science Olympiad in 2016. This shows that we are doing well.

The National Coordinating Council to Support Talented Young People has started working. We hope that the number of children who pursue further education will increase by almost 60%.

Modern, talented children should work at schools regardless of their age. Our colleagues from the Just Russia parliamentary party have spoken about supporting young teachers. Twenty regions take such measures in the form of lump-sum payments, monthly benefits in addition to salaries over the first two or three years, and housing provision. I think that this is a very sound practice and we’ll encourage it. There is also a special mortgage programme for young teachers. It is operating better in some places and worse in others.

We have started assessing the performance of higher educational institutions. This work is complicated and evokes a great response from society. This year public and private institutions will be checked. This aroused many emotions particularly as far as assessment procedures and ensuing decisions are concerned. It is possible to understand this… I spent practically 20 years in a university myself. But we should do something about this issue. I always quote this figure, although our living conditions and our social structure have changed. Sometimes it is necessary to receive a higher education just to work at a computer. Now this is a qualification requirement. Yet let me remind you that Russia with its 142-million-strong population has twice as many higher educational institutions as the Soviet Union had with its nearly 300-million-strong population. This is also an indicator, and we must understand what to do about this. Apparently, some universities have problems as far as the research and employment results of their graduates are concerned. The transparency of lists and discussions is another matter. Everything must be done in an open format, so an indicator system must be improved as well. It should be understandable for everyone students and teachers and civil society.

Furthermore, a major task is to create effective contacts between industry and employers and to train specialists that are required by the market. Now, an entirely new professional standards system is being elaborated and employers are quite active in this respect. We will have 800 standards covering all fields of activities and they will be tailored to new education standards.

Another priority is the ability of our universities to compete on a global scale. They should move up in the global ratings. I’d like you to understand my position ratings are not an end by themselves. On the one hand, we shouldn’t say that we should climb to the top by all means necessary. But, on the other hand, we realize that these ratings or rather an aggregate of them (not any one of them since there are no universal ratings) reflects the alignment of forces in education. There are problems with the compilation of these ratings an obvious bias in favour of the Anglo-Saxon educational model. Yet, we should still work to be perceived as an integral component of the international educational system. Only in this case will people come to study or to teach in Russia and this is important because social networking, and television and online communication cannot replace the normal lecture of a good professor. I’m also referring to foreign professors. So, we’ll allocate additional subsidies for contests and grants. We’ve already earmarked 9 billion roubles for this purpose. We’ll continue improving our system of certifying people for scientific academic and teaching positions. We’ll finish streamlining a network of thesis boards before March 2014. Procedures for defending and presenting theses will become more open, including those that are online. I hope that this will improve the research quality.

Domestic science should play a fundamental role in our national development. The state programnme for the development of the sciences and technology was adopted on December 20 last year. We should focus our efforts on the most promising areas nano-technology, information and telecommunications systems, using nature and the energy industry — that are still vital for us. Last year, our researchers developed 31 international-level technologies and submitted applications for over 800 patents under federal targeted programmes. We are still lagging far behind others in this sphere. We need to set straight our licensing procedures and try to provide protection for all of our intellectual developments and property. We know what happens often with them when our competitors use them without the protection of the state and patent holders.

We’ve allocated an additional 2 billion roubles to the Fund of Fundamental Research and another 500 million roubles to the Fund for Humanitarian Studies. By 2018, we should reach the designated level of financing state scientific funds equal to 25 billion roubles.

Much has been done for the formation of development institutes. They have received about 500 billion roubles. We must focus on the applied format of research and infrastructure that should provide for the continuous operation of innovation lifts. Certain results have been received here as well. Vnesheconombank is funding 47 projects aimed at developing innovations. This is a good thing because nothing develops without funding. The total figure is about 758 billion roubles.

The share of innovative projects in the portfolio already adds up to one third. Rosnano has approved some 120 investment projects with a total budget exceeding 515 billion roubles. The Russian Venture Company (RVC) and its branch funds, RVC Biopharmaceutical Investments, RVC Infrastructural Investments and the Seed Fund are doing there job. The Skolkovo innovation centre has 850 registered participants. The key investors include major companies that promote innovation worldwide and this is important. According to an authoritative study by the Dow Jones Venture Source, Russia is one of the top five European countries currently investing in high technology start-ups. This is not bad.

The state subsidises research and development at institutes and universities based on corporate orders. Over the past three years, total subsidies amounted to 19 billion roubles; and this support will continue. We have allocated 9 billion roubles for the development of the innovative infrastructure: for creating engineering centres, business incubators, and for training management personnel for small business ventures. We have founded special grants to attract renowned scientists to Russian higher educational institutions from all over the world.

Innovative territorial centres are a promising approach. The federal budget provides funds to 13 regions to subsidise the development of these centres. Naturally, this kind of development should not proceed in only a few regions or a specific place alone, it should cover the whole country especially traditional research centres – our colleagues from the LDPR party have asked about this. Last year, special economic zones were initiated in the Republic of Tatarstan, in the Pskov Region and the Kaluga Region. Russia has a total of 27 similar zones of four types: technology promotion zones, industrial and production zones, port zones and tourist and recreation zones. On the whole, this mechanism is good. However any mechanism has its deficiencies. We’ll consider ways to make it all more efficient.

The creation of new efficient, high productivity jobs is also a Government priority. Answering LDPR parliamentary group questions, I want to say again: our goal is to create 25 million modern jobs by 2020. Everybody should take part in solving this the Government and the regional authorities, but most importantly – Moscow officials can create jobs only on paper businesses should take part, businesses should see this as a priority with state support, of course.

State demand and support is critical for increasing competitiveness in some priority sectors. Last year we allocated over 21 billion roubles to increase the charter capital of the aircraft manufacturing companies. The aircraft manufacturers got subsidies for technical rearmament, and innovative and investment projects. In addition, some 18.5 billion roubles were invested in aircraft manufacturer capital assets under various targeted programmes. As a result, aircraft production increased by over 12% in 2012. This may not be a breakthrough, but it was a step forward rather than the further backsliding of indicators that we’d seen for years.

We extended state support to the shipbuilding industry too. For example, we allocated development funds to companies in the amount of about 10 billion roubles. In addition, we extended subsidies in order to prevent the bankruptcy of strategic enterprises we extended subsidised loans and covered lease payments for ships. Of course, this was centred around Russian shipyards. Last year (in my presence) the Admiralteiskie Verfi handed over to our customer the Federal Service for Hydrometeorology and Environmental Monitoring the Akademik Tryoshnikov, a unique research ship which has taken its first Antarctic voyage. Thus we have begun to build these kinds of unique ships again. Only a few countries in the world produce such ships.

The national radio-electronic industry showed a good rate of development. Production grew by about 14% compared with 2011. The funding for research and development increased by about 18%, and by 35% in the non-defence sectors.

Practically all state programmes envision labour growth by several times, and this is a must; we cannot do without it. It is clear that the employment structure will change. We need to stimulate programmes for retraining and re-educating.

Last year we formed and adopted the state defence order for 2013 and for the 2014-2015 planning period, with funding amounting to 6.5 trillion roubles. On January 1, the Federal Law On State Defence Order came into effect. We are developing a number of bylaws to support it. And I want to make a point: it’s necessary to stop the price wars between state customers and executors of the state defence orders. We have the funds and so the concerned parties should tone down their disputes. It’s important to conduct regular and normal work. The heads of all companies should take personal responsibility, and not just administrative or criminal responsibility we like to discuss who should be punished… In my view, it’s much more important to penalise enterprises financially.

In 2013, we started to employ service life contracts for armaments and equipment in mass production. In 2012, Russia remained the world leader in the number of carrier launches. Russia fulfilled its international commitments in manned spaceflights. Of course, we had to take some decisions to overcome a series of failures in 2011; we had to tighten some screws. Today, every aerospace related company is adopting a departmental quality control system, which is evident in the launch indicators. Integrated organisational structures are being formed. Management systems should be reorganised too. We need to find the best solutions.

Now I want to come back to earth. Last year was very difficult for agriculture. Some traditional agrarian districts suffered a serious drought. As a result, the grain harvest amounted to just over 70 billion tones or 25% less than the harvest in 2011. We held a meeting yesterday to discuss this issue. Of course, the last few years have been fairly difficult, but we have nevertheless achieved good results. The weather hasn’t always been cooperative, even though you’d expect it to be, at least in some regions, given the vastness of our country. However, the carryover reserves and the new crop allowed farmers to cover the domestic needs and even keep their exports at the existing levels. The Government decided to intervene on the commodity markets. We focus particularly on sowing winter crops and on the current sowing campaign. We expect that in the event of favourable weather conditions, farmers will harvest up to 90-95 million tonnes of grain. Our WTO membership complicates matters somewhat. Indeed, we have re-adjusted the state support system to meet the requirements of this multilateral organisation, and have introduced a number of new mechanisms, such as the so-called non-related subsidies in crop production, the so-called per-hectare subsidising. We allocated 15 billion roubles to this end. We have also introduced a new type of subsidy in the area of livestock production, whereby we reimburse a portion of the production cost of one litre of sold milk. In all, we have allocated about 41 billion roubles this year to support crop production as part of the state programme. But we do have problems. Our colleagues from United Russia party raised this question; other fractions have this question as well. More than 60 billion roubles have been allocated to support livestock production.

Please note that we have extended the zero revenue tax for agricultural producers and have renewed the VAT benefits in the import and sale of pedigree cattle, which is very important. We are doing this in order not only to maintain, but also to recreate, our own, rather than foreign, breeding stock. We are faced with major difficulties in this area, as you are all aware.

Finally, after my consultations with United Russia, I have decided to allocate an additional 42 billion roubles to support the agriculture in 2013, including 15 billion roubles to support livestock production in connection with rising feed prices. I held a conference call on this issue yesterday with the participation of all governors of the regions that are actively developing pork and poultry production. They have come up with measures, and I hope that they will be effective. By the way, several members of the State Duma and the Federation Council attended the meeting yesterday.

Our colleagues, KPRF deputies have asked us about tractor equipment. In 2020, we plan to produce about 22,000 tractors a year by way of stimulating demand, increasing exports, upgrading existing and creating new production facilities, including in partnership with the technology leaders in this area. The opening of a new plant, Voronezhselmash, was a major event for the Voronezh Region, and the agricultural machine-building industry in general. The plant will manufacture grain cleaning equipment, separators and other modern agricultural equipment.

In 2012, 4,000 units of equipment, including nearly 2,300 tractors, were transferred to farmers on preferential terms under the lease programme. In addition, our Belarusian partners traditionally have strong positions in manufacturing light- and medium-duty tractors. We are working together, because we are part of the common economic space. Our KPRF colleagues have asked us a specific question about the Traktornye Zavody (Tractor Plants) company, which is one of our leading domestic manufacturers, along with the Kirov Plant and AgroTechMash. We are discussing a possible debt restructuring scenario with advisers and lenders, including Vnesheconombank. I took the decision regarding the restructuring procedures last week as part of the VEB supervisory board, and I signed it. I want you to be aware of this.

The strategy for the Development of the Food and Food Processing Industry that was approved last year is all about strengthening food security. It provides for subsidising investment loans, including loans for construction, reconstruction and modernisation of the bakery industry.

With regard to the infrastructure, it is clear that massive investments in this sector are required, ones with long payback periods, so we need to set priorities. The development of the Russian Far East is one such priority. In the run-up to the APEC-2012 Leaders’ Meeting, we have built several major projects, including bridges, a new modern airport, Knevichi, started an airport railway service, and rebuilt many roads and port facilities. These facilities are already working for the benefit of the Far Eastern residents. The summit is over but the results remain. As part of the Olympic project, railway and road infrastructure has been built. It will, of course, be used not only by the participants and guests of the Olympics, but by the residents of the Krasnodar Territory and by many tourists.

The Moscow transport hub is another important project. I would like to note that it is being conducted jointly with the authorities of Moscow and the Moscow Region. It is actually a very complicated project, a veritable hub of problems. I have conducted several meetings on this topic. Problems have been building up for decades and they have been compounded by the staggering growth in the number of cars, so we need to solve this problem by introducing a modern and convenient system of traffic control, including public transport.

The chronic congestion on the roads is the result of the infrastructure that we have today and, as I said, the explosive growth in car ownership. I have to remind you that last year our country was the second biggest market in Europe after Germany in terms of car sales (and people there have, let’s face it, higher purchasing power than here). In all 2.74 million cars were sold, of which 2 million were domestically produced. What is important is that all the leading world producers of car parts have been building their own enterprises in our country. Under agreements signed with them, 18,000 high-performance jobs are to be created, and that, by the way, meets the target I mentioned earlier.

The system of financing road building through the creation of road funds is being reformed. During the past year about 440 billion roubles was allocated for this purpose from the federal budget alone. The volume of regional road funds stands at 590 billion roubles, which is three times more than financing in 2010 (that should also be kept in mind). To address the issue of local roads, amendments have been made to the Budget Code which envisage the creation of municipal road funds from 2014.

Passenger numbers last year increased by 6% across the board. The number of air passengers increased by 17%, partly because we are subsidising some routes. Subsidised fares were made available to 500,000 passengers. That is quite an achievement, especially considering the remoteness of our Far Eastern territories, Kaliningrad and, of course, the North. In the Volga Federal District a project was developed last year and launched this year to support regional aviation, another important topic.

Railways have traditionally been the most popular form of transport. They carried more than 1 billion passengers, a rise 106.6% compared to 2011. The growing demand for transport is encouraging the development of transport machine-building in the country. The Tikhvinsky Rolling Stock Plant, one of the largest such plants in Europe, was put into operation. The Novocherkassk Electrical Locomotive Plant has started the production of a fifth-generation electrical locomotive (EP-20) which accelerates quickly to 200 km/h. It is a good modern piece of machinery, I visited the place and looked at it at first hand.

Further prospects of the transport sector are connected with creating conditions for attracting money from investors, including public-private partnerships. We have concession agreements and full life cycle contracts and some successful projects. They include the Western High-Speed Diameter in St Petersburg, the new access to the Moscow Ring Road from the Minskoye Motorway here in Moscow, a new motorway is being built between Moscow and St Petersburg, a bridge is to be built across the Lena River near Yakutsk, I recently signed the documents authorising the start of this work. Such projects, however, should stop being something exotic, that is our main goal. A legal framework is being formulated which will make it possible to issue infrastructure bonds guaranteed by the Russian Federation and to use pension savings for these purposes as well. That is a significant amount, 440 billion roubles in 2013.

Practically all the sectors in the fuel and energy complex, with the possible exception of gas, reported good growth last year. In January 2012 the Government approved a long-term programme to develop the coal industry. It seeks to make the sector more competitive by increasing its innovative potential.

Work is continuing to modernise oil refineries. Among the most urgent targets is increasing the depth of oil processing and making more efficient use of the associated gas. The company Transneft has launched the Baltic Pipeline System-2 and completed construction of the second strip of the Eastern Siberia-Pacific Pipeline System. The increased capacity of the Eastern Siberia-Pacific Pipeline will enable not only to increase exports to the Asia-Pacific countries but also the volume of oil we ourselves process in the Far East, which is also very important.

Gazprom has completed the first strip of the 1200-km Bovanenkovo-Ukhta gas pipeline, as a result of which gas from Yamal is being fed into the integrated gas supply system. The second strip of the Nord Stream pipeline with a capacity of 55 billion cubic metres a year has been launched. The programme to connect the regions to the mains gas supply is making progress. Gazprom allocated about 37 billion roubles for this purpose in 2012. The average level of connections to the mains gas supply today is about two-thirds of the entire country. Some of you may have forgotten this, but just eight years ago nothing was being done about mains gas connections, absolutely nothing. We made do with what we had during the Soviet period. At a certain point, when my attention was drawn to it, I realised that our partners in other CIS countries have almost total mains gas coverage (our colleagues and neighbours have 90-95% coverage) while the country that produces gas and is the main supplier had a coverage of 30-40%, there was practically no gas in rural areas. We have now brought that figure to almost 65%. I think this is a very important result and it is good that Gazprom is planning to invest in this because this, if you like, is an instance of social responsibility of the biggest gas company in the world.

The future plans of the gas industry envisage the development of gas fields in Yamal, Eastern Siberia and the Far East. An investment decision has been taken to develop the Chayandinskoye field, as you know. The company Novatek is implementing the Yamal LNG project to build a natural gas liquefaction plant. There are also plans to build a new port in the north on the basis of a public-private partnership, which would greatly increase the flow of cargo along the Northern Sea Route and reaffirm our historical leadership in the Arctic latitudes, in the development of the Arctic.

The Government is continuing work to introduce more flexible tax regulation of the oil and gas industry. Decisions will always be partly made depending on the situation, because the sector is evolving and is volatile. Legislation is being prepared to encourage the extraction of difficult reserves and develop gas fields in Eastern Siberia and the Far East and there are plans for offshore extraction. By the way, we hope that the State Duma will pass the corresponding laws during its spring session.

In the electricity industry, 2012 saw the launch of 6.5 gigawatts of new generation capacity, including four hydro units at the Boguchanskaya Hydroelectric Power Station (333 megawatt units each). Two 640-megawatt units were introduced as part of restoring the Sayano-Shushenskaya Hydroelectric Power Station. Work is underway to build new nuclear power stations: the Novovoronezhskaya Power Station-2 and the Baltic Nuclear Power Station in the Kaliningrad Region.

A new model of the electrical energy market being developed will enable the generating companies to attract long-term investments for the construction and modernisation of facilities. Technological access services are becoming more accessible, although some problems still remain. This is the purpose of the work of the Rossiiskiye Seti (Russian Grids) company; the decision to create it was passed last year. In October of last year the Government approved a complex of measures to stimulate electricity generation based on the use of renewable energy sources. The Government will shortly pass the necessary acts to implement the required set of measures.

I will now say a few words about our exports. We have to admit frankly that so far we are lagging way behind other countries in terms of state support for our exporters. We have something to learn from our neighbours. The situation must be changed drastically. The Policy Priorities of the Government set the target of providing state financial support for at least 13% of Russian exports of non-energy goods. That is a pretty high figure if we remember that in 2011 we provided state support for 0.5% of our exports. Relevant institutions were not working. Today the Russian Agency for Export Credit and Investment Insurance, EXIAR, is gathering momentum. It has provided $0.5 billion in export support. The immediate target is to implement up to 40 projects worth over $3 billion.

Administrative procedures for the export of Russian companies’ own products have been simplified. The infrastructure of information support for small and medium-sized businesses interested in breaking into foreign markets is developing. Of course, this is something that not only the Government should be engaged in, it is important that the heads of regions become involved, too.

Two weeks ago I chaired a meeting of the State Commission on the Social and Economic Development of the Far East, the Republic of Buryatia, the Trans-Baikal Territory and the Irkutsk Region. We were discussing the instruments to develop that area. The total investments already made in the events held in Vladivostok amounted to 680 billion. I have already mentioned the modernisation of the infrastructure. It is important that the housing and utilities systems have by and large been put in order. A complex of buildings of the Far Eastern Federal University has been built on Russky Island. Tax revenues of the local budgets and the number of jobs have increased.

Finally, we agreed on a state programme for the social and economic development of the Far East and the Baikal Area. I don’t mind telling you that it was a difficult discussion because everybody wants a better deal for themselves and what does a better deal mean for all those who take part in the discussion? It means as much money as possible. Money needs to be counted, therefore we chose the development of transport and energy as priorities. In 2012, about 53 billion roubles were earmarked for co-financing of innovative projects in the energy sector and 10 billion roubles for road infrastructure.

We have increased the capitalisation of the Fund for the Development of the Far East and the Baikal Region. It has to start active work (we have talked about this with governors and business representatives), in other words it needs to become a modern development institution. But naturally that money is not all, we will increase its capitalisation and further expand its range of activities.

Amendments need to be proposed to the Tax Code to offer tax benefits to long-term projects; these amendments have been prepared. A working group is being set up on improving the legal framework. There has been a suggestion, I am not sure that it is completely well-thought-out, but I would like to share it with you because at the end of the day you will have to make the final decision. I am referring to the adoption of a special law on the development of the Far East. I am generally in favour of that law (there is a measure of support for it) provided we manage to flesh it out with concrete provisions and it becomes a real driver of development of the Far Eastern regions. If that is the case then the law should be passed. The goal remains the same: the Far East must be a region where people want to live and work, a region chosen by talented and, also very important, enterprising people because I must remind you of a well-known historical fact: in former times daring and enterprising people chose to go to the Far East.

I have already said that the standard of regional managerial teams is a key ingredient of success. You know as well as I do the regions that every year report considerable growth of GRP while not having oil or gas resources. That deserves the highest praise. Anyone who wants to work looks for ways of doing it, and those who don’t want to work look for excuses for doing nothing.

TRANSCRIPT: Dmitry Medvedev speech: Report on the Government’s performance in 2012

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TRANSCRIPT: Dmitry Medvedev speech: Report on the Government’s performance in 2012

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