ARCHIVE OF THE OFFICIAL SITE OF THE 2008-2012 PRIME MINISTER OF THE RUSSIAN FEDERATION VLADIMIR PUTIN

Vladimir Putin's opening remarks:

Good afternoon, ladies and gentlemen.

We have gathered here in Nizhny Novgorod today to discuss the development strategy for the Volga Federal District and to carry on with the discussion we began in Siberia and continued in the North Caucasus on United Russia's goal of developing the country's regions.

Let me begin with the most pressing issues, which have affected Russia's entire European part and which we have spoken about at great lengths lately. I would like to begin today with a discussion of natural disasters, including the heat wave that resulted in numerous wildfires and a severe drought that has taken a toll on Russia's agriculture. Let's begin with this.

The Volga Federal District lost over a half of its anticipated grain harvest and the country was 30 million tons short in total. Nevertheless, I would like to emphasise that we have enough grain to meet domestic demand and beyond. However, crop failure is a problem, and so federal and regional authorities must focus on the following two tasks.

First, we must prevent profiteering in the food market. Second, we have to help farmers overcome the consequences of this drought so that they can work without interruption, carry out their field work and do not have to slaughter all their livestock.

It is worth mentioning that we have set aside an additional 35 billion roubles this year to assist farms in need, with 12 billion roubles provided to the regions of the Volga Federal District. In addition, soft loans taken out by agricultural producers affected by the drought will be extended for three years.

Another serious measure is the ban on exporting grain, which will remain in place until the harvest of next year. I believe that this is understandable. Naturally, this wasn't an easy decision for the government, but we are responding to force majeure circumstances. As soon as the market recovers and next year's grain balance takes shape, we will certainly lift the ban. I hope that we will not have to resort to such measures in the future.

We do realise that the ban on exports brings with it certain repercussions, especially for grain exporters. However, we had no other option in this case, as our top priority is to protect the interests of our people - ordinary consumers in Russia.

I would also like to address those who have been investing their time, effort and money in the production of grain over the past few years. You have indeed achieved a great success - Russia has had record harvests, which has finally freed us of our humiliating dependence on imported bread. I would like to emphasise that Russia has not imported grain for domestic consumption for as long as ten years, and has even become an exporter.

We will continue supporting our grain producers and their investment projects; we will use every option at the government's disposal to help them restore their position on the global market. I also hope that our foreign partners will be understanding of our policies in light of what happened in Russia this summer. Most importantly, we will make a concerted effort to create additional stable domestic demand for grain: common sense tells us we should be in charge of our own house and have a reliable base. To do this, we will promote the expansion of livestock production and poultry farming, because these segments are major consumers of grain.

Russia has invested over 120 billion roubles in poultry farming over the past few years, and we are almost free of our dependence of poultry imports now. We do import some, but allow me to cite some statistics for you: several years ago, foreign poultry suppliers' quota was 1.4-1.5 million metric tons, while this year we allocated only 600,000 tons to US producers, and cut that even further when they failed to comply with our sanitary requirements. Russian suppliers meet 80% of domestic demand.

Dozens of interesting agricultural projects are underway here in the Volga region, from supporting small private farms to setting up large enterprises, including livestock and poultry farms and processing plants. Good examples of such projects can be found in the Penza and Ulyanovsk regions, in Udmurtia, Mordovia and Mari El. Local professionals and regional governors just presented their projects to me.

I am confident that Russian agriculture will only become truly competitive once it can meet 100% of the country's meat and milk demand. Food exports will then become stable and balanced. We will export other products beside grain, products that can be efficiently produced in Russia and exported at a profit, and import only those products that cannot be produced in this climate, such as tropical fruit.

This is a challenging task that cannot be met in a day, but it should not be put off till tomorrow either, and we are not going to. Russia's Agriculture Ministry has received instructions to present, before November 1, 2010, proposals to amend the existing agriculture support programme. The new programme should emphasise balanced growth and improvements in the sector.

We need an effective regulatory system for the food market. We must also learn to manage agricultural risks better, mainly through better forecasting, smarter government interventions on the grain market and developing insurance instruments. We have been discussing this a lot lately, but unfortunately, little has been done.

We must introduce the principles of sustainable agriculture as broadly as possible; use modern soil protection techniques; resume soil improvement policies; and employ other practices that help reduce the impact of the weather on our agriculture.

Sustainable agriculture is a highly important issue for the Volga region. To achieve this, we will help local farms buy soil improvement equipment and subsidise bank interest on the loans they take for this purpose.

I signed a government resolution yesterday allocating 1 billion roubles for this purpose in this year of 2010.

Ladies and gentlemen,

Our work on the development strategy for the Volga region has led to many sensible, interesting and promising initiatives related to industry, construction and agriculture. Many proposals are made by local businesses, municipal and regional governments; there is a lot to choose from.

Businesses can afford to implement some of these projects without government assistance. Some will require public-private partnerships. In any case, all sensible, feasible and interesting plans should receive government support.

It is important that they promote local development, create jobs and directly help to improve the standard of living in local cities and rural areas.

We must create a new industrial image for the region. We are especially interested in supporting "smart" production facilities with cutting-edge technology and high labour productivity, and we will modernise traditional industries and set up innovation clusters as well.

More than 12% of local companies regularly introduce technological innovations, which is more than in any other federal district in Russia: these companies released 400 billion roubles worth of products last year.

In the next few years, the share of innovative companies in the Volga district should reach 30%-40%, which would mark a qualitative shift in the structure of the local economy. We must complete our work to set up industrial parks, technology-oriented special economic zones and venture funds, which are key elements of an innovation-based economy.

We adopted a plan to establish industrial parks in the Nizhny Novgorod Region, Tatarstan and Mordovia in 2006. Over 100 resident companies have been already registered there and more than 3,000 jobs have been created. The new companies specialise in unique materials, medicine, biotechnology, energy conservation technology, IT, telecommunications and petrochemicals.

It is important that federal programmes are not the only driving force behind the creation of new innovation platforms. Almost every administrative division of the Volga Federal District has successfully established technology parks and industrial zones on the initiative of regional and local authorities. This is why I want to thank both the governors and mayors of Volga cities. One example is a private business incubator set up in Sarov in 2004, which continues operating to this day. The innovation cluster that is being formed in Chuvashia has good prospects. At its foundation is a plan to manufacture solar power products (we just talked about this at the exposition). RusNano is also supporting this project.

Total investment in the Chuvash solar power cluster is estimated at 20 billion roubles. This is a significant sum. RusNano will invest 13.5 billion roubles, while regions and private investors will invest the remainder.

The pharmaceutical industry is developing in Penza, by which I mean the company Biosintez, which has received 2.5 billion in investments.

The Volga Federal District's scientific and educational complex will become an integral part of the innovation system of the Volga region. The core of this complex is Volga Federal University and the eight national research universities in Nizhny Novgorod, Perm, Samara, Saratov, Saransk and Kazan.

In the next five years, we will invest over 16 billion roubles to improve these science and education centres. By the way, I have recently signed an order to invest 3 billion roubles to develop Volga Federal University in Kazan.

In addition, the programmes to support the higher education system, the best research teams and joint innovation projects between universities and private enterprises will bring additional money. There is demand at many local enterprises for such products. Seven Volga higher education institutions will take part in the competition. By now, eleven local higher educational institutions have won the competitive bidding for setting up high-tech production.

I am sure that Volga higher educational institutions will use the funds they receive efficiently, offer modern, competitive training for specialists, develop effective ways of integrating education, science and production, become platforms for creating small innovative enterprises, and, of course, attract talented young people - like they do at the Sarov Federal Nuclear Centre, for example. Its work is not limited to traditional security issues. Specialists there work on supercomputers, laser technology, and space research, and design reactors for the next generation of nuclear power plants.

Young people are attracted by a wide range of research fields, career prospects, good salaries and housing. In recent years, over 1,200 graduates of the leading Russian universities - Moscow State University, the National Research Nuclear University (MEPhI), the Moscow Institute of Physics and Technology, and other Russian higher education institutions - came to the Federal Nuclear Centre to work. As a result, specialists under the age 35 at the centre account for 40% of the staff. And the salary as well: it was 21,000 roubles in 2008 and is about 29,500 roubles now. And I believe that as a result of these consistent, comprehensive, and decisive efforts, the Volga region will continue to emerge as one of the leading research and innovation centres in Russia.

And now, ladies and gentlemen, I would like to talk about the industrial clusters, which we will continue supporting and developing in the Volga region. I'll start with the automobile industry, as it is well represented in the Volga region, and also because the automobile industry, both in Russia and in the rest of the world, has been particularly affected by the global financial and economic crisis. I will start not with the automobile industry in general, but with a specific company - AvtoVAZ.

I believe this is logical and reasonable. You know that the government has been devoting special attention to this company and its problems. And we could not have done otherwise. We are aware of everything that is being said about this, and we do hear the criticisms. But, you know, AvtoVAZ employs tens of thousands of people - tens of thousands, as well as their families.

The number goes up to one million people if you include the subcontractors (and here is another stunning number, there are 800 subcontractor companies)! How can the government ignore this? Of course, we are aware of the problems experienced by the automobile industry and AvtoVAZ. They have accumulated over decades, and not just over the last five to seven years. At production and research facilities, there have been no new projects for decades. What are we supposed to do now? Shut everything down and send everyone home? It would be utterly irresponsible, a completely irresponsible approach!

During the economic downturn, when the production of cars, both in Russia and abroad, fell significantly, the government extended unprecedented support to the domestic automobile industry. In 2009 and 2010, the government, in one way or another, provided 170 billion roubles to the industry and 75 billion roubles to AvtoVAZ alone.

It would be appropriate to ask how efficiently these substantial funds were used. This is certainly a legitimate question.

It is true that the global automotive industry has built up excess capacity. And it was bound to decline during the economic downturn, as explained by experts in the global automotive industry. At whose expense is this excess capacity reduced? It is reduced as a result of inefficient companies going bankrupt. Following this logic, only the laid-off workers should be supported, through unemployment benefits and retraining programs, for example.

And we do this, to a certain extent. But first of all, there is no excess car production in Russia. Even producing almost 1.5 million cars per year, we were and still are a major importer of automobiles. And secondly, there is absolutely no explanation as to why a problem facing the global automobile industry should be resolved at the expense of Russia. Why should our manufacturers give up their own market, where they hold a 70% market share? Why should Russian auto industry workers be the ones to end up in the street?

As I said earlier, I do not want to idealise our car industry, but the problems can be resolved. They can and should be resolved. New approaches are needed as well as new investments. But investments shouldn't be made just anywhere; they should be made in modernisation. Therefore, while providing assistance to AvtoVAZ, the government insisted that the company came up with a clear development plan to suit the interests of the Russian consumer, and the consumer in general.

AvtoVAZ has developed such a programme, which calls for the company to transition to a modern technological platform, produce entirely new models, introduce quality control systems both for the company itself and its suppliers, and, finally, establish a strategic alliance with Renault-Nissan to attract investment and new technology.

You have probably heard already that there are plans to produce six brand-new models that are competitive in Europe and around the world, which are to be based on a new technological platform.

While supporting the company, we did not forget about our obligation to help the people. These tasks complement each other. It would be impossible to solve the problems of Togliatti in any other way. Everything in this city of 700,000 people is linked with the car plant.

The city has implemented a large-scale programme to support employment. Social programmes at AvtoVAZ have been funded from the municipal budget. Togliatti was the first city to launch a pilot project for the comprehensive development of single-industry towns. This involves new infrastructure and sites for modern industrial facilities. We allocated funds for major housing repairs from the Housing and Communal Services Reform Fund.

Last month the government decided to establish a special economic zone in Togliatti, which will provide about 10 thousand new jobs for residents of the city.

Today AvtoVAZ is on the rise. It is profitable again, and production has almost returned to pre-crisis levels. The increase is about 56%. Additional weekday and Saturday shifts have been introduced. But we're well aware, of course, what lies behind the numbers. It's our car scrappage programme, first of all, and also expanded manufacturing lines for so-called classic models. That's a feature of consumer car demand in this country, you see... People with modest incomes tend to go for simple but new cars. But this doesn't mean we should remain at the same technological level, as I've said already. So we'll be working to transition to modern, high-tech production, and I'm sure we'll succeed.

The situation has improved significantly at other auto plants as well, including Kamaz and GAZ. Kamaz's output has grown 36.5% and GAZ's 49.2%.

I'd like to make it clear today that we'll carry on with our policy of providing anti-crisis support for high-tech industrial sectors, and will continue to do so until market demand is fully restored. Soft loans for the purchase of cars have proved quite popular, and so, too, has the car scrappage programme. It has been decided therefore to continue this programme into next year, with a budget of 14 billion roubles.

We're now considering various options for modernising and advancing the auto industry. We're seeking to provide customised solutions for each of the automakers and a workable business plan. And we're negotiating with potential investors. This, too, has yielded some results already.

Sollers Group, for instance, has come close to implementing a project to create the nation's second largest carmaker, with an output of up to 500,000 automobiles a year, a new set of models, an R&D department of its own, and a network of spare parts suppliers. This project is also intended as part of a strategic partnership programme with Fiat, one of the world's leading carmakers, with facilities in a special economic zone in Yelabuga. I'd like to remind you that we've invested 10 billion roubles from the federal budget to develop this zone, while private investors have put 13.5 billion into it by now. And work is progressing.

It's no coincidence that I've been speaking about car manufacturing at length. Support of this industry was a deliberate choice for us, choosing where we should head now, with the economy in crisis. Quite frankly, I often hear people say: Why struggle with domestic manufacturers if we can import everything, from aircraft and vessels to motor vehicles to weaponry? Sure we can. Oil and natural gas could buy us all we need. And we would even be able to save money initially. Indeed, in the modern global economy, we don't have to make everything on our own, down to the last screw. But I'm absolutely convinced that deindustrialisation would lead the country into a deadlock. This isn't about ambitions or rhetoric about national prestige. It's about a sensible, pragmatic choice.

If we don't take the trouble to modernise and advance domestic industries, we'll inevitably increase our reliance on commodities while also losing many of our academic sectors and the competences we have developed over the past decade. We'll lose entire scientific and industrial schools, only to end up at the bottom of the pyramid of the international division of labour. Consequently, we'll see our living standards go down. Each and everyone of us will be adversely affected, including those who are now advocating mass importation. The entire nation would stand to lose.

I'm sure time will prove that we were right to pursue a course toward creating strong, competitive industrial enterprises in the automobile industry, the aerospace industry, ship-building and other sectors. This is the right way for us to go, and we'll continue along this path.

I'd like to point out that the Volga region will play a key role in translating these plans into reality, and they stand to benefit. For our part, we'll do our best to revive aircraft plants across the Volga region.

The consolidation of the national aircraft industry is complete. We've got the United Aircraft Corporation up and running, as well as holding companies that have brought together helicopter and aircraft engine manufacturers.

We're investing heavily in the advancement of this industry - some 200 billion roubles over the period of 2009-2011. This lets us focus on efforts to raise production efficiency, primarily through fundamental technological renovation. All the plants operating as part of integrated corporations now have clear prospects for further development.

Nizhny Novgorod's Sokol has begun mass producing a new training jet, Yak-130. Ulyanovsk-based Aviastar has begun manufacturing an updated version of the medium-range airliner Tu-204. The possibility of reviving the world's biggest freight plane, Ruslan, is now being actively discussed with our Ukrainian partners.

Permskiye Motory will design and supply engines for the prospective MS-21 airliner. The Kazan-based aircraft maker KAPO will continue its efforts to upgrade long-range combat jets, Tu-160 and Tu-22, and will then have to get down to developing and making a Russian next-generation strategic bomber. Another local enterprise, Kazan's helicopter plant, will soon launch a new Mi-38 helicopter while also carrying on with the production of time-tested models such as the Mi-8, the Ansat and the Aktai.

We fully understand that here, as well as in the auto industry, a great deal of problems remain, especially in the commercial sector. And we'll continue to support our domestic aircraft industry, while taking care not to encourage a culture of dependency.

Now I'd like to say a few words about our plans regarding the Volga fuel and energy sector. Oil mining operations of Tatarstan, Bashkortostan, the Orenburg Region and other Volga regions now produce more than 100 million metric tons of crude a year. But they all have some sixty years of experience under their belts. To sustain high production levels, we'll need to transition the Volga region's petroleum industry to high-tech, innovative production, to breathe new life into it.

First of all, we'll need to ensure that highly efficient technology is widely used for sustainable mining, which would allow for the recovery of hydrocarbons from small and heavily depleted deposits - what is known as heavy crude.

Tatarstan is already actively pursuing this goal and developing new technology of that kind. Sustainable mining will make it possible for the Volga region's oil industry to operate steadily in the decades to come.

Another task we're facing is to fundamentally renovate oil refineries in the Volga region, Russia's biggest cluster in this sector. Here we have everything we need to form a well-balanced cluster of oil and petrochemistry, which would enable us to process all locally produced crude on the spot and to increase exports of the more expensive oil products and other products with high added value.

What's particularly important, I think, is that such projects will allow us to produce more environmentally-friendly petrol that meets the Euro 5 emission standard. This will provide an additional incentive to modernise the domestic automobile industry as well as a direct way to reduce pollution in our cities.

By 2015 Gazprom, Rosneft, LUKoil, Sibur and Russia's other large and medium-size companies plan to invest half a trillion roubles in oil-refining and petrochemistry in the Volga region, quite a large amount of money even for this industry.

The first part of the extremely powerful oil-refinery in Nizhnekamsk will be commissioned this year. Modernising the Novoil, Mariysky, Novokuibyshev and other oil refineries will follow. And during yesterday's meeting with the heads of Russia's largest companies we discussed petrochemistry, trends in the industry, including in the Volga region.

The Volga region must develop its power generation capacity as part of this modernisation effort. Outdated and inefficient plants that pollute the environment have to be shut down and some new units must be built in advance. Total investment in the generation and grid systems of the Volga region will exceed 370 billion roubles in 2010-2013.

How do people understand the expressions "successful city" and "successful village"? Clearly, these terms mean there are enough jobs, good roads, comfortable housing, developed social, cultural and sports infrastructure, high quality education, a good environment and good healthcare. Now we are finding new opportunities to address these challenges.

As you know, in 2005 I initiated work on the so-called priority national projects, which cover agriculture, construction and healthcare, and it was launched in 2006. In general, time has proved that we did the right thing by concentrating financial, administrative and legal resources to solve these top-priority tasks for the country's development.

And now we can take another step in healthcare: we will start implementing the programmes to modernise healthcare in Russia's regions at a total cost of 460 billion roubles (for two years, approximately), with some 300 billion roubles allocated to bring medical institutions in all constituent entities of the Russian Federation up to code in the next two years.

But I would like to stress that we do not intend to invest the money in every institution. Only those regions and cities whose governments develop a clear, understandable, transparent and, first and foremost, efficient programme for upgrading the healthcare system will receive funding.

We well continue building perinatal centres and hospitals with high-tech medical equipment, construction of which has already begun in the Volga region, including Penza, Perm, Cheboksary, Kirov, Saratov and Saransk.

Now I would like to say a few words about road construction, the most important topic for Russia. I am truly grateful to the heads of the regions who supported the government's proposal to establish road funds. Thanks to this mechanism, the Transport Ministry will build some 14,000 kilometres of new roads in the next five years and bring all the country's federal motorways up to code by 2020 - at least that is what the ministry promised.

Repairing the Volga motorway from Moscow to Nizhny Novgorod, Kazan and Ufa, the Ural federal motorway, which connects the country's centre with Penza, Samara, Saransk, Ulyanovsk and Orenburg, and building the Kazan-Perm motorway will be the main projects for the Volga Federal District. Some 12 billion roubles will be invested in the federal motorways of the Volga region.

We will participate in promising projects, such as the creation of international transport corridors, including the one from the Baltic via the Volga region to borders with Kazakhstan; creating a system for maintaining such continental routes, and attracting Russian and foreign carriers to operate on those routes. Construction of a large logistics centre near Sviyazhsk in Tatarstan is one of the start-up projects, which has been included in the federal targeted programme for Russia's transport system.

By establishing the road fund, we will be able to allocate large amounts of money to improve roads both in cities and in the countryside. I would like to ask the regions and municipalities to prepare specific plans for repairing the road system in advance.

In addition, we have made a decision to finance major repairs on roads in all the centres of Russia's republics and regions right from the federal budget, so that they can bring their roads up to code in the near future rather than in the distant future. Some 50 billion roubles will be allocated for these purposes from the federal budget in 2010-2011, and the administrative centres of the Volga region will receive 12 billion roubles.

To be more specific, in 2010, some 4 billion roubles will be allocated to Izhevsk, Perm, Kirov, Nizhny Novgorod, Orenburg and Saratov, and 7.8 billion to all of the district's administrative centres in 2011.

Today, the federal district is experiencing growing demand for housing, as is the entire country. For instance, in the first half of 2010, the region's banks have made almost twice as many mortgage loans as in the same period last year.

And if we want to meet this demand, we need to make housing truly affordable, we need to build more housing in Russia, at least, some 100 million square metres of housing a year, and these houses and flats should suit everybody's taste and budget.

I feel confident that we will manage to resolve this issue soon. Remember how the construction sector was developing in the years before the economic crisis. Some say it was an artificial bubble, but I disagree. Despite all the difficulties, there has been demand and people have made purchases. Russia's construction sector has been steadily overcoming the difficulties caused by the crisis. I can definitively state that we will build more! The government will adopt the new Housing federal programme very soon. Some 424 billion roubles will be allocated for it in the next five years.

The programme has been designed to support regional projects for integrated land-use planning and management and building affordable economy housing.

Special grants for the regions, which will spur on housing construction, will be part of the programme. And I have no doubt that the republics and the regions of the Volga Federal District will be among the first recipients of these grants.

Large housing projects, such as the new Volgar residential community in Samara and Solnechny in Saratov as well as the Zelyony Dol satellite town in Kazan have been implemented in almost every region of the Russian Federation.

We have set up the Russian Housing Development Foundation to help the industry meet new standards and to build cost-effective and comfortable housing using modern materials and technology. The Foundation has proven as a very effective way to launch new construction projects.

We expect that, starting in 2012, at least 30% of new high-tech housing commissioned in Russia will be built on land plots of the Foundation.

It is gratifying that the regions of the Volga Federal District were the first to enter into cooperation with the Foundation, developing and starting comprehensive projects to create new residential areas with kindergartens, clinics, utilities and public infrastructure.

The first blocks of flats at the sites of the Foundation are being constructed in Kirov and Cheboksary. Families will be able to move there in the first half of next year. A total of 1.3 million square metres of housing is planned to be constructed in the Volga Federal District through the ongoing projects of the Foundation.

The Volga Federal District is successfully addressing an issue of national significance -- providing housing for veterans of the Great Patriotic War and service members. For reference, in 2011 the government will allocate 88 billion roubles for the programme for permanent housing and some 60 billion roubles for service housing for service members. In addition to this, the Ministry of Defence will allot 53.9 billion roubles and over 20 billion roubles for these programmes respectively.

The government has met its commitment to provide housing to each veteran in the Volga Federal District put on the waiting list before March 1, 2005. There are 6,374 such people in total.

After we made a decision to continue this programme, 42,000 veterans signed up in the Volga District alone. Over 14,000 of them have already received flats. We are confident that the rest will be provided with housing within the next few months.

I'd like to give statistics for the entire country. A total of 128,600 veterans have been registered for housing since March 1, 2005, while we expected that there will be 28,000 of them, or 30,000 at most. A total of 38,800 veterans who registered after March 1, 2005 have received housing through the programme. But the capacity of the housing construction industry is not infinite. It has nothing to do with funding. We are providing the necessary funds, and will continue doing so.

We will meet the commitments we made to other people that are in need of housing. In particular, one of our priorities for the immediate future is support for retired officers who didn't receive housing upon retirement from the armed forces. They were treated unfairly, and we must see that justice is done. The state must meet the commitments it made to these people. In the Volga District, there are 4,136 retired service members that need housing.

One of the most acute problems facing almost every city and town in the Volga District is dilapidated housing and utilities. Many systems were constructed without regard to environmental standards and fall short of modern standards.

The Housing and Utilities Fund has allotted over a quarter of the resources, 61.7 billion roubles, to the Volga District. This allocation was used to repair nearly 30,000 blocks of flats. Four million people have benefitted from this. Over 60,000 people received new housing through the resettlement of tenants from 3,200 dilapidated blocks of flats.

Those who have addressed this issue know that there has always been a great deal of such housing in this country, and this problem never received the attention it warranted from the state. But we must address this issue and we will, hardships notwithstanding. This challenge may seem absolutely irresolvable but as you can see when we take up an issue and pursue our plan in a methodical manner, without a fuss or squabbling, we can do anything, we can take on the world. Several years ago everybody said that Russia was in a demographic hole and nothing could be done about it. They were wrong. Life expectancy is increasing, and the number of children and young people has grown sharply in the recent years. The problem is being resolved. I must admit that this has brought about another problem, the lack of kindergartens. We'll return to this issue later today.

After 2011, we'll overhaul the current scheme of funding projects for major repairs and resettling tenants in housing in emergency disrepair, taking into account the economic situation and budget resources. To implement these projects, we'll use the resources of the Housing and Utilities Fund.

Another challenge that must be met to strengthen these regions is improving the environment and introducing modern environmental standards. We must preserve the Volga and revive it as a major water route for future generations. The Volga is a unique natural treasure of this country and the world in general.

By 2020, the amount of discharge dumped in the river must be reduced by half. This objective should be taken into account while implementing each investment project in the region. This problem is actually very easy to solve. All it takes is more investment in water treatment facilities in cities, towns and at production facilities, while addressing the problem of surface discharge.

We need an effective plan to protect the source and the estuary of the Volga and everything between them. It is necessary to fortify its banks, modernise hydraulic facilities and restore local flora and fauna. The necessary funds have been budgeted, and we will provide them. But it needs massive investment of course.

Ladies and gentlemen,

We support the initiatives of Russian cities to host national and international events and forums so that more people can learn about them worldwide and new contacts can be established.

Our efforts to decentralise business, social and cultural life while tapping the potential of each Russian region are useful and justified. Major events shouldn't be held only in Moscow and St Petersburg. This is why we are promoting the APEC summit in Vladivostok, the political forum in Yaroslavl, business forums in Krasnoyarsk, Irkutsk and other cities, the Winter Olympics in Sochi and the Student Games in Kazan. Kazan and Sochi have shown how such projects can transform a city and change life for the better. We have been chosen to host major sporting events even though the competition has been fierce.

As you know, we are submitting a bid to host the 2018 FIFA World Cup. If we succeed, we'll do our best to modernise Nizhny Novgorod, Kazan, Samara and Saransk. But it doesn't mean that we won't attend to the infrastructure of these cities if we lose the bid. We do plan to build and modernise airports, motorways and hotels. But when we face such big challenges and must resolve them against all odds we do it effectively and finish on time. I repeat, we will promote sports and modernise infrastructure no matter what.

It is also necessary to promote the Volga District as one of the most promising tourist centres in Russia. In 2011, we will start a new federal targeted programme for domestic and foreign tourism in the Russian Federation. The government will allot 7 billion roubles from the federal budget over the next three years, with 2 billion roubles to be allocated in 2011.

I believe that tourist infrastructure can give the Volga Federal District a competitive edge. Over the course of centuries, this region has gained some valuable modernisation experience, capitalising on its geographic position, natural resources and human resource potential.

In the 17^th and 18^th centuries, the Volga region became the main transport and commercial artery of this country. In the 19^th century, the region saw large-scale industrialisation and railway construction, unprecedented in terms of speed and scale. Cities developed rapidly, and new schools, universities and research centres opened.

The 20^th century was remarkable for the emergence of high-tech industries, the defence, auto and aircraft industries, the development of unique hydrocarbon deposits, the discovery of nuclear energy and the emergence of the Russian petrochemical industry.

We now need a breakthrough that will allow the Volga District to consolidate its leadership position in innovative industries, production and public services.

People living here work well and with enthusiasm. They set the bar high and then clear it with ease.

I wish all of us every success. Thank you.

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Prime Minister Vladimir Putin comments on project presentations of United Russia representatives in the Volga Federal District:

Comments on Yevgeny Rodichkin's presentation on an agriculture project:

Vladimir Putin: I think that everyone in the audience and everyone watching the broadcast would agree that having such ambitious and educated young specialists working in agriculture is what matters most. This will ensure good prospects for our agriculture. There can be no doubt about this.

Remember the situation several years ago: could we expect that young and promising people would be working in agriculture? They chose the oil industry or hunted for jobs in the public services, but agriculture... This is a very good sign.

First of all, Russian agriculture has become a profitable, high-tech and effective business. There is ample room for progress, to be sure. This is clear. Mr Rodichkin has mentioned all its problems - or many of them, at least. He has them at his fingertips because he has devoted so much time to them - and there really are problems.

What I can say for now is that we will certainly continue to support Rosselkhozbank [Russian Agricultural Bank], however great its burden might be. We cannot shift the entire burden of supporting agriculture on it. That would be wrong. In fact, we established it as an agency to provide the necessary impetus. I myself made the decision to establish a specialised bank. But we should also promote other finance agencies' work in agriculture. Sberbank is active there, and so are many regional banks.

We should certainly develop the infrastructure. I agree with Mr Rodichkin that this is a duty shared by municipal, regional and federal authorities. We cannot shift the entire burden on local agencies - they cannot cope with everything. The federal government should take responsibility for its share of the burden. We will try to continue to do this.

Protection from imports is a very sensitive issue for our agricultural producers. Yevgeny is right here. What's the actual situation in Russia?

Look at farm subsidies in European Union countries, for example, and you will see that subsidies there exceed Russian subsidies several-fold. The amounts are not comparable. We do not pay out such huge subsidies. But then, we should provide equal terms of competition for our farmers. This is the key condition. We will not and must not impose prohibitive customs duties on all imports, otherwise this will create hardships for consumers. However, we will provide beneficial terms through customs tariff regulation, as before. It would be wrong, I repeat, to slam the door in importers' faces, and we will not do so. In the final analysis, a ban on imports would be detrimental to Russian agriculture. Our producers should be aware of close competition. A stoppage of imports would also hurt consumers and cause prices to rise even faster than they are now. So we will regulate it all together with you and farm producers. The Ministry of Agriculture, the government staff and all of us are in constant contact. We will certainly control the situation. This is beyond doubt.

I have talked now to colleagues who presented their projects at the exhibition. I liked one project very much. It's very good. The colleague who presented it said: "Our farm is well underway, and we don't need government loans and benefits. We have never used them, but to make further progress we need this, this and this kind of assistance." I asked him: "But how did you achieve all that you have now - all that helped you to attract investments and loans?" He answered: "How else would we have achieved it?" I mean that everything done in the recent years is clearly bearing fruit. Now is the time to plan our next steps, and we will do so. Thank you.

Comments on Naum Babayev's presentation on a development strategy for the dairy industry in the Volga Federal District:

Vladimir Putin: Mr Babayev, these years have made me an expert on agriculture, as you know. What's your present milk yield? You say you can provide enough milk for all of Russia, but I want a precise figure.

Naum Babayev: It was 7,500 litres per cow on our new farms. I mean the year's first yield. We think we will make 8,000 to 8,500 litres. The national average is roughly 4,000 litres against 6,000 in Europe and 9,000 in the United States. We have the potential to compete.

Vladimir Putin: Our best farms have 9,000 litres, too.

Naum Babayev: There are some, right. But then the figure concerns the first lactation, the next will yield more.

Vladimir Putin: We all remember our national tragedy caused by a drought in the 20^th century. The Volga basin was hit hardest perhaps. We can prevent such things now, of course. More than that, we will do all we can to help the new generation of experts and advanced managers make agriculture throughout Russia, including the Volga region, a high-tech industry, so that Volga agriculture becomes an integral and efficient part of the national economy. I wish you every success.

Naum Babayev: Thank you.

Vladimir Putin: I want to call all our colleagues' attention to the fact that, though Mr Babayev (Naum Babayev, Russian Milk Company CEO) mentioned the growth rate of milk yields, they account for a mere 5% of the national total in recent years. There hasn't been a decline, and it's not bad at all - but it's still only 5%, which is modest growth.

As for poultry production, the growth rate was 79%, and slightly below 39% for pork. Now this is something! Domestic production covers 80% of domestic consumption, as I have said in my remarks. This is really something! What we need is a breakthrough to increase cattle milk yield.

This summer's drought and its aftereffects have added major problems - first of all, supplies of forage grain and other types of feed to farms.

Mr Babayev, I want to inform you, your colleague Mr Rodichkin and all farmers of the Volga region and throughout Russia that I have signed a government decree on subsidising railways to guarantee grain transportation from areas that had a good harvest, mainly the southern regions and Siberia, to the regions experiencing the worst grain shortages. We are allocating an extra two billion roubles for the purpose. This is our first measure.

There is another measure. We have earmarked an additional several billion roubles (five or six billion, if I am not mistaken) for feed subsidies to be distributed, starting January 1, among the farms with surviving livestock.

Thank you very much.

* * *

Alexander Kondratsky: Mr Prime Minister, may I ask you a question? My name is Alexander Kondratsky. I have a small farm in Mordovia.

The drought has hit private farms and small agricultural enterprises in the Volga Federal District, as many others. Last year's grain yield was 4.3 tonnes per hectare against this year's 1.1 tonnes. The figures for potato harvest are 40 and 7 tonnes, respectively. My farm had five times more produce to sell last year. It specialises in beef. We have 220 head of stock, including 160 beef cows. There are problems - small enterprises, private farms and minor cooperatives affected by the drought don't have enough feed and need their debts rescheduled.

Vladimir Putin: As I have said in my remarks, we are rescheduling loans for three years.

Alexander Kondratsky: It concerns big ones, not small ones.

Vladimir Putin: Small loans, you mean?

Alexander Kondratsky: Small farmers.

Vladimir Putin: Small farmers' loans?

Alexander Kondratsky: Right. There is no rescheduling for private subsidiary farms and cooperatives.

Vladimir Putin: So no decision on loan rescheduling has been made for such farms?

Alexander Kondratsky: None.

Vladimir Putin: Okay, we will consider this. I wonder why we should give preference to medium-sized and large enterprises at the expense of small ones. We will think about it. The decision for larger companies has been made, as I said: we are rescheduling their loans for three years. As for feed supplies, I have mentioned two measures just now. First, we will subsidise railways. There was quite a dispute about this decision. There were two options: to subsidise farmers or railways. After long discussions in the government, experts decided to give the money to the Russian Railways corporation. As I have said, we allocated two billion roubles and, I hope, grain will be coming quite soon. At any rate, we hope to speed up its movement across Russia from areas with a decent harvest to those whose farmers are experiencing feed shortages. As for the other measure, we will give extra feed subsidies to farms that have preserved their livestock, starting January 1.

As for loan rescheduling for small and medium-sized enterprises, we will certainly think it over. Here is the minister of agriculture . Consider this an instruction to the Ministry of Agriculture to draw up relevant proposals.

Alexander Kondratsky: Thank you, Mr Putin!

On the development strategy of the automobile industry (following Sergei Kogogin's presentation):

Vladimir Putin: In case some of you did not recognise the previous speaker, it was KAMAZ CEO Sergei Kogogin.

There was an idea several years ago to transfer Mr Kogogin from KAMAZ to another major Russian automobile plant. At the time President of Tatarstan Mintimer Shaimiev objected strongly, saying that Mr Kogogin was doing an excellent job and was a highly efficient manager. I agree with him. I would like to thank you for your praise of government anti-crisis measures. Not that this is a mutual admiration society - I must acknowledge that the KAMAZ management achieved a great deal in recent years to develop the company and, lately, to recover from the crisis.

You have probably seen me inspecting the final construction stage of the Chita-Khabarovsk motorway and talking to long-distance lorry drivers. I did my best to advertise your lorries but not with a great deal of success.

Drivers know their business inside out. Many of them spend their whole lives on the road. They have concerns about the engines. I want to ask you in this connection how is your collaboration going with foreign partners, including our American colleagues? You have told me about your first steps toward building a new engine, and have shown it to me. This was the first point.

Second. They invited me inside their lorry, and I got in. I literally walked in -the cab of this jumbo lorry is high enough to stand upright. It has a wardrobe, two comfortable berths and a fridge. The drivers told me that this vehicle was made with people in mind.

It is easy to see why such lorries were designed in the United States: they have strong trade unions that monitor working conditions in the industry, and lorries account for a great part of shipments. They made their demands for decades on end, and satisfactory standards were gradually introduced.

You have shown me your cab blueprints. To what an extent will KAMAZ future-oriented endeavours meet the client's standards?

Sergei Kogogin: Mr Putin, we are designing our new brand in conformity with the standards...

Vladimir Putin: A little louder, please.

Sergei Kogogin: We design our vehicles in conformity with the existing European standards. American standards differ from all the others somewhat. We have made a new lorry, you are right. We have done it, first, because our clients don't want to buy anything else and second, because American motorways are designed for lorries longer than twenty metres. They have no length restrictions, while Russian roads do not allow proper turns...

Vladimir Putin: The standards are different.

Sergei Kogogin: We follow European standards but the cabs we are designing now conform to all UNECE standards.

One can stand upright in the cab of a new haulage lorry. Such cabs have a smooth floor and two comfortable berths. They can't really be compared to American cabs because we cannot achieve their level of comfort on an 18 sq m space. If cabs are larger, the caravan will have to be shorter and that will raise the price for every kilo of freight. But we certainly take drivers' comfort into account.

Vladimir Putin: You see, it is not a question of standards but of consumers' expectations. That's what we should proceed from. If you say that your lorries meet all the latest standards, the consumer - a lorry driver, in this case - will reply: "This standard might conform to some demands or others but I want something different," and buy a second-hand American lorry. The market is the market, and consumers seek what they want and do not care for standards that exist on paper.

Sergei Kogogin: You are absolutely right.

Vladimir Putin: We could approach this problem by introducing bans and limitations but that would not be the right kind of regulation. I promised the drivers to tell you about this, and now I am telling you in public.

Sergei Kogogin: As for the engine plant, you asked about our cooperation with our partners. The plant has been making 500 engines a month, and we intend to produce 12,000 next year, which is the estimated output for the first stage. There is nothing to stop us from doing this. We will produce 25,000 engines in 2012. The plant is operating.

Vladimir Putin: Thank you. Go ahead, please.

On promoting the Russian automobile industry (Leonid Kazayev's question):

Leonid Kazayev: Mr Prime Minister, my name is Leonid Kazayev, and I am an assembly worker at the Volga Automobile Plant and conference participant.

I have a question to ask you. We assemble cars from start to finish. Naturally, every worker takes to heart every car we make. I would like to ask you about your impression of the Lada Kalina after your trip across several regions.

And another question, about something that is a great concern for us: we all felt the effect of the downturn as production and sales slumped. Our wages were halved. But the car scrappage programme, for which we are extremely grateful to you, has restored the plant's full capacity from March. We have been working in two shifts again since the start of September, and occasionally on Saturdays. People are working hard and are really reliable. They want normal earnings. Meanwhile, we are earning only half of what we had in 2008 and 2009.

It was said here that the industry and our company would get support as part of the scrappage programme next year. But the people want to know whether the Volga Automobile Plant is entitled to further support after 2011, and whether the scrappage programme will be extended. Thank you.

Vladimir Putin: I have mentioned it in my address. We have drawn up a big programme to support the Russian automobile industry. It envisages not only car scrappage but also subsidised interest on private loans for car purchases. It also includes customs tariff regulation to protect the market from imports, in a way, after we encountered competition that was unfair to our manufacturers as surplus stock flooded our market at dumping prices.

As I have said, we will extend the salvage programme. It will amount to 14 billion roubles, including this year's carryover. This is good money, and I think it will be enough for the whole year.

What will we do next? I don't want to announce it now but clearly, our regional car manufacturers, including AvtoVAZ, will enjoy further support in some form or other.

The main thing we should do all together is launch innovative brands that will satisfy Russian consumers.

I know your problems (wage and personnel cuts). We did not allow the company to come to a standstill. We have preserved it together with its personnel. We have preserved your chance of development and agreed with our partners of the Renault-Nissan Alliance on long-term partnership. We specified the investment of both parties - Russian investors and their foreign partners. Our foreign partners will invest the latest technologies and equipment. This is what the long-term development of AvtoVAZ should rest on, rather than on increased output of time-tested brands, because these cars should be sold not only in Russia but also in the European markets - at least, in the CIS countries. I have no doubt that the company can produce such cars. You mentioned the Lada Kalina, in which I covered 2,655 kilometres (that was the figure on the odometer). It is no exaggeration to say that it exceeded my expectations. Though the car has some foreign-made parts, it was made entirely by Russian hands and not on the new Renault-Nissan platform. It is a modern car for young people, which costs around $10,000 - a really great car.

Leonid Kazayev: Thank you very much!

Vladimir Putin: You know, when I visited your region, I rode around testing grounds in a car - I don't remember the brand. It was a Priora, I think. To be honest, I didn't really like it - it was too noisy, and the engine was a bit weak. As for the Kalina, it has a quick start and drives smoothly, and it's quiet. I liked it, believe me. Some people say to me: "Don't overpraise it. What if it disappoints buyers?" Well, tastes differ. Anyway, it is a good car for this particular consumer niche. This means that an intellectual basis and a professional basis are there, and the manufacturer has a programme. A development programme matters more than anything else. Incidentally, it should be publicised. It would be good to place it on the company's website. You will implement the programme, and that will guarantee the future of AvtoVAZ.

Leonid Kazayev: Thank you.

On launching the lorry scrappage programme (Andrei Slepushkin's question):

Andrei Slepushkin: Mr Prime Minister, my name is Andrei Slepushkin and I am a chief of car production at the Gorky Automobile Plant, which I represent here.

Apart from the federal car scrappage programme, launched this year, the Nizhny Novgorod Region has implemented a programme to promote locally manufactured cars. It was a success. Our company has seen a tangible improvement. Sales have increased and the company is operating steadily. I want to ask you about the tentative schedule and prospects of a similar scrappage programme for old lorries because I don't think it involves only an increase in sales. It will also have an impact on traffic safety as it will make it possible to remove outdated and worn vehicles, replacing them with new Russian-manufactured ones. Thank you.

Vladimir Putin: I am eager to do so. But we should think it over at first. Car scrappage concerns private individuals, while lorry scrappage will involve companies using the vehicles for commercial purposes.

I don't know whether you meant to but your question touched on a sensitive issue. Let me explain.

You said that conditions should be made to get rid of old vehicles. What does this mean? To make it clear to all, it means that a decision will have to be made at the government level on the age of lorries to be removed from use. You understand how difficult such calculations will be. Vehicles of what age should be prohibited from use by municipalities and state and private companies? And how will the ban affect the performance of many sectors of the Russian economy and small and medium-sized businesses? This is a painful issue to many.

But there is no alternative. Sooner or later we will have to prohibit the use of vehicles over a certain age.

The opponents of this measure say: "Why prohibit the use of lorries over a certain age? It is enough to check their condition. How can they be banned?" So we should think twice before we do it.

It might be simpler with buses, but here, too, there are problems as urban transport uses rather old vehicles.

However, we provided substantial assistance to towns last year and the year before: we allocated 20 billion roubles plus another 10 billion a year later - 30 billion roubles in total to improve municipal transport. It concerned mainly buses and street cleaning vehicles. It was a major programme. So if we plan support, this appears the most suitable way though, if I am not mistaken, we no longer intend it for next year. A great part of the fleet has been updated. Then, we also support lorry and bus manufacturers. Support was rendered in other fields, too. Above all, it concerned extra allocations to many ministries and agencies - Defence, Emergencies and Interior ministries, etc - to update their fleet. Mr Kogogin (KAMAZ CEO Sergei Kogogin) has firsthand knowledge of this. Our manufacturers used the programme to full extent.

We will certainly think about further support but these measures must be thoroughly thought over.

Andrei Slepushkin: Mr Putin, I think that Mr Kogogin as KAMAZ manufacturer - I add this to spite him, in a way - knows the life span of those lorries quite well: their service life, the length of commercial exploitation and mileage life. We might proceed from that, too, because there are tangible physical limits beyond which it is dangerous to ride a vehicle.

Vladimir Putin: Everything is possible. You know, one should think a thousand times about possible consequences before one signs such a document. As for GAZ, it has many problems, which I know well, but it has stabilised production and is making progress, of which I am glad. We will certainly support GAZ as our other automobile manufacturers. Have no doubt about it. I am sure, and you said so yourself, that you feel this support.

I think its' no big secret that I met with Volkswagen top managers recently. They came to Moscow to discuss the opportunities for closer partnership. They have launched a plant in Kaluga and are now estimating the prospects of launching totally new production using GAZ premises and equipment. If they do, it promises lasting cooperation attaining a global level of automobile production, including... I won't tell you any details now because the contract has not been signed yet. However, we have practically agreed on a very high level of car part production in Russia and even on the construction of car plants.

Andrei Slepushkin: Thank you.

On innovative companies in the Volga Federal District (following the presentation by Vladimir Valerkin):

Vladimir Putin: Mr Valerkin, excuse me, how old are you?

Vladimir Valerkin: I am 32.

Vladimir Putin: 32 years old. This proves that there are young and talented people in public service too, not just in agriculture. Mr Valerkin is just 32 years old, and he already heads the department for industry monitoring and development at the Ministry of Industry and Energy in Chuvashia. Let's wish him success in his affairs.

Mr Valerkin, I agree with almost everything you said. Just one minor clarification regarding the depletion of hydrocarbon resources in the next 15 to 20 years. These rumors are greatly exaggerated.

Furthermore, I can tell you that more and more new opportunities are emerging in this area. As you know, we have a new competitor now with the United States having started producing gas where it had never been produced before. We are mastering new technologies of extracting gas from coal beds; new modern technology solutions for using coal, gas, and oil are becoming available, which are more efficient and environmentally friendly.

But this does not mean that we should not develop solar power, for example, or other alternative sources of energy. Of course, we should, and we intend to, as I said earlier. You have mentioned solar power, and our Russian company, RusNano, is working actively in this field. As a matter of fact, there are some other Russian companies that are actively involved in this field with some very good and ambitious plans. They certainly deserve to be supported. And I absolutely agree with this. Yes, please.

On supporting Russian industrial parks and the innovative technologies developed there (question from Vasily Klochkov):

Vasily Klochkov: Vasily Klochkov, the Federal Nuclear Centre and Sistema-Sarov Industrial Park. I would like to thank the government and the Sistema corporation for their support. My question is this. You have visited the Sayano-Shushenskaya hydro-power station and seen the tragedy that has taken place there. We are currently working to develop a system that will ensure that this never happens again. We are planning to finish work on it by the end of the year, and beginning next year will start implementing it.

As you have mentioned here, we are working together with the Belovskaya mine to create the largest scientific and energy cluster in the Kuzbass region for new technologies of coal transportation, processing and degassing. And all of this is already underway. But the question is this. I was personally involved in this, I brought this with me and began working on this in the nuclear centre. This is shelf.

Vladimir Putin: What is it?

Vasily Klochkov: Shelf. You have probably been to Sevmash. So here is my question. We have already started producing underwater mining systems and gained a thorough understanding of the technology. But despite all of this, we, along with Sevmashshelf and other companies that are still capable of producing complex innovative products, cannot access this market. I will give you a simple example without revealing any names, as negotiations are currently underway...

Vladimir Putin: Go ahead, reveal them.

Vasily Klochkov: I would rather not, if you don't mind. Imagine negotiations with Western companies to discuss the acquisition of a regular pump. We also wanted to make it at our industrial park. I am representing our side, and on their side is the head of the company and a congressman. And the following conversation is taking place; well, you are aware of the situation with Shtokman Development...

Vladimir Putin: So who are you negotiating with?

Vasily Klochkov: Roughly speaking, we were negotiating to become their subcontractors, as it is all but impossible to gain access there. So, the whole point is that this multi-billion dollar market should ultimately be ours. I am a patriot, and I do not hide it. And given that I attend various presentations and see that the whole world is working on the shelf today, then we should too. There is a section of Total, a section of Statoil, a section of someone else, but we do not have a section of our own.

It came to the point that at Sevmash in Severodvinsk - you know, it is a working-class town - they even called us "sledgehammers" once. We already have everything - we have the infrastructure, we have your support, have the money, the people. The youth innovation centre has already been mentioned here.

We have the capacity to implement projects, we know how to lobby. In other words, we are capable of doing this. But it is impossible to compete with Western companies in these markets without the government's and the party's support. Will the government and the party continue supporting us in this? And will they continue to support our industrial park? I even invite you to go there; it is worth seeing what we have done there in just 18 months. Many people find it simply amazing. Well, this is probably how I would formulate my question.

Vladimir Putin: You are referring to the industrial park in Sarov, correct?

Vasily Klochkov: Yes, under the Sarov Nuclear Centre.

Vladimir Putin: I think I have also mentioned it. This is a good example of the development on industrial parks. Much has been done in this regard in different regions of the country, including the Volga region. The Sarov industrial park is a good example of progress in this area. We have allocated six billion roubles to support industrial parks in various areas for the coming year.

With regard to the Sarov industrial park, next year we will allocate an additional 1.5 billion roubles through Rosatom, but specifically to support your industrial park. Thus, a total 7.5 billion roubles will be allocated in support of industrial parks. As for your participation in various projects, did you mean the Shtokman project when talking about the shelf?

Vasily Klochkov: Yes, I was referring to Shtokman. It is just that I have been to Sakhalin, worked there for a month, and to be honest with you, I had some really striking experiences there. I had difficulty understanding where I was. So yes, we are referring to the Shtokman, to Sakhalin, and the Ob-Taz Bay. We have the competency and we are capable of doing it, no matter who says what.

Vladimir Putin: I see your point. Of course, I do not know in detail what is happening there, but I know the requirements placed by the government on foreign companies seeking access to these large projects.

To a large extent, these requirements are determined following consultation with our major domestic producers. With regard to the Shtokman, and you are probably aware of this, and if not, let me inform you, we have not given up ownership of the subsoil resources. Gazprom remains the owner of the reserves. Instead, we have established an international company to develop the field, and produce and sell the resources.

And certainly this international company must attract modern, high-tech, and globally competitive technologies for various components of this project offered by different manufacturers.

But from the outset, we agree on the minimum share of Russian companies' involvement in the Sakhalin projects, including the Shtokman. Yes, this is probably a complex process, and I am sure there is lobbying by foreign companies. Furthermore, I am aware that on some projects they are increasing the foreign companies' share on the grounds of not being able to find Russian technologies that meet modern requirements. If this happens, we refer them back to the original agreements, even in a fairly tough fashion.

If this is one of such cases, let's further discuss this through your party organisations. But in general, this is, of course, a competitive environment and you need to compete for these contracts. The bottom line is that everything is in our hands here. With regard to Shtokman, Gazprom is the owner. Naturally, Gazprom is interested in attracting modern competitive technologies so that the project is competitive in general.

The field is located far away, about 300 km off the coast in the Barents Sea, in a very harsh climate. The production is very expensive there, and so the product should also be expensive. But it should also be in demand on global markets, and, of course, they should seek to minimise the costs associated with its development. There is, in fact, a problem. And if you see unfair competition, please let us know in a timely manner, and we will respond.

Going back to what Mr Valerkin was saying about the power industry and solar power. I would like to say that we still have many decisions to make on this. In fact, the United Russia party has an initiative that is already being incorporated in draft laws. And you have also said here that to develop these types of energy, we need to strengthen the legal framework. This is true.

Without adopting additional legislation it will be very difficult, if not impossible, to develop this area of activity. But you are probably also aware of the planned support measures effective January 1, 2011. They include benefits in the form of property tax exemption for companies that will introduce energy-saving technologies. This is already a very specific support measure. Our joint activities include other areas as well.

Since you are coordinating this work (it says so in the presentation) on behalf of United Russia, and in fact, you are a regional coordinator, please define these tasks. I am sure that United Russia deputies in the State Duma will respond accordingly. I have no doubt about this.

On extending the funding for the programme to establish high-tech industrial parks in the Russian Federation by 2014 (question from Vitaly Reskin):

Vitaly Reskin: Mr Putin!

Vladimir Putin: Yes, go ahead.

Vitaly Reskin: Vitaly Reskin, high-tech industrial park, the Republic of Mordovia.
Mr Putin, we have seen from the report that high-tech industrial parks in the Volga Federal District implement projects that are unique not only in Russia but also in the entire world.

Take the Republic of Mordovia, for example. It is home to Russia's first commercial fibre optics company, a unique fibre made of photonic crystal; electronic equipment made of the newest materials, such as gallium arsenide, boron nitride, etc., which are also in many ways unique. Foreign countries and companies are ready to purchase them, including the United States. These are IT products.

The development of all these unique, large and innovative projects is impossible without the federal government support. I mean the dynamic development. The development is possible, but we will always be lagging slightly behind. But being slightly behind means that we will always be behind in terms of innovations. Hence my question, are you planning to continue funding the programme to build high-tech industrial parks in Russia until 2014? Thank you.

Vladimir Putin: Yes. You have probably missed me just saying that. We have taken the decision to fund them and will be allocating the necessary money in the near future. It includes several areas of support for innovative projects. I will go over this again to clarify certain things.

First, we will be reducing the property tax for resource and energy-saving technologies. There will be a programme of direct state support worth seven billion roubles annually in 2011, 2012 and 2013. That is seven billion per year. From 2014 the funding will increase to 10 billion annually. In addition, 50 billion roubles per year will be provided through a state guarantees programme between 2011 and 2013, and from 2014 the funding will be increased to 20 billion per year.

Vitaly Reskin: Thank you.

Vladimir Putin: This work will be continued.

On subsidies for innovative companies to connect to the power grid (question from Vitaly Ruskin):

Vitaly Reskin: And another short question, if I may.

Vladimir Putin: Please.

Vitaly Reskin: Many small innovative companies have serious problems connecting to power grids. You know how expensive it is and how difficult, especially when the company is small and is just beginning to develop. Is it possible to adopt special legislation to provide subsidies to such companies and facilitate the connection to power grids? Innovative companies are usually very energy-intensive.

Vladimir Putin: A decision is currently in the works that will allow small innovative companies to use a simplified taxation system. This is the first point.

Second, with regard to power connection, a decision has already been made to simplify connecting to power grids. You may think that this is not enough, but many small and medium-sized companies that we have been working with within the framework of associations of small and medium-sized businesses say that overall our measures have had a positive impact on their work. But if this is still not sufficient for innovative companies, please draw up your proposals and we will consider them.

Vitaly Reskin: Thank you, Mr Putin.

On innovations in science and education (regarding a presentation by Mikhail Strikhanov, rector of the National Research Nuclear University, MEPhI):

Vladimir Putin: I will begin with the latter request. I think this is a logical request, which we should consider. Many restrictions that were imposed a long time ago are still in place. Yours is a research reactor, isn't it?

Mikhail Strikhanov: Yes, it was and still is a research reactor.

Vladimir Putin: How old is it?

Mikhail Strikhanov: It was commissioned in 1963.

Vladimir Putin: In 1963. It is clear what the situation with your reactor is, yet the restrictions have not been lifted. I have taken note of this problem; we will certainly look into it.

As for your first question, it is connected with the issues you have talked about. One of the forms of support planned for small innovative companies, especially those working at higher education institutions and universities, is providing them the opportunity to use equipment and premises for innovative production without competitive bidding and with preferential treatment. We discussed this only recently in Krasnoyarsk. We will implement this decision and make sure it comes off as planned.

As for giving universities a chance to use equipment available for the advanced training of professionals, I think you should have specific industries in mind. Sergei Kogogin (Sergei Kogogin, general director of truck manufacturer Kamaz) has said they have established a corporate technical college - I heard him say this but decided to keep silent. Maybe it would be more expedient to use the facilities, equipment and teaching staff of existing institutions for this purpose? And then, this question should be addressed with businesses, and, certainly, with our support. In general, this is an absolutely acceptable proposal, especially in view of the circumstances you have mentioned, namely the demographic decline resulting in a decrease in enrolment during a certain period of time.

And lastly, as regards intellectual property rights. Currently, ownership rights are not held by the universities where certain intellectual property was created but rather by the state. I think this process could be liberalised. We could consider transferring intellectual property rights to the educational establishments where such property was created, even if researchers used government-owned equipment. I think this would be appropriate.

We could go even father, to ensure that those who create the intellectual property are registered as its owners. This would encourage bringing research to its logical conclusion, that is, the market. Many governments do this; they are not afraid to invest in intellectual products. They deliberately allow [educational] establishments to become the owners of such products, and then the state purchases these products from the owners. There is nothing wrong with that.

This has been put into practice in many countries. We should examine this possibility carefully. This will require open debates with the professional community, with experts and State Duma deputies, first of all deputies from the United Russia party, which is currently the leading force in parliament. Boris Gryzlov (Boris Gryzlov, speaker of the State Duma) is here, and he can hear what I'm saying. Take note of this, as it is a very important question. If we find a solution, as our colleagues have proposed, it could be a revolutionary solution that would seriously influence the innovation process in the country.

On establishing innovative companies at institutions of higher education (question by Ramil Rakhmatullin):

Ramil Rakhmatullin: I'm Ramil Rakhmatullin from Orenburg State University, the creator of the artificial skin Giamatrix [bioplastic material for treating injuries and severe burns], which you praised at the second convention of innovations as the best innovative product. I have a personal question, while Mr Strikhanov (Mikhail Strikhanov, rector of the National Research Nuclear University, MEPhI) spoke about general issues.

Since we shook hands with you at the convention, the intensity of the project has grown dramatically. We now have customers in Russia and the former Soviet republics. We are considering establishing a small innovative company at the university in compliance with federal law No. FZ-217...

Vladimir Putin: So you are considering establishing a small business?

Ramil Rakhmatullin: Yes, we are already working on establishing it. We have a private investor, customers, a promotion plan, and so on. The most important thing is that we have a market, which is what we wanted in the first place. The question is that after a market assessment of the intellectual property patent, the university registers it as contribution to the new business and hence has to pay a tax on it. If a market value is big, about 100 million roubles, the tax is also considerable, which hinders the development of such businesses. My question is...

Vladimir Putin: Does the university have to pay the tax when contributing this property to the authorised capital?

Ramil Rakhmatullin: A tax is levied on intellectual property after it becomes a non-material asset. Universities are wary of this, and so I'd like to know if this problem can be resolved?

Vladimir Putin: This is a basic question connected with the philosophy of the Tax and Budget Codes. This question needs to be seriously considered, including during public debates. We need to decide which products should be taxed and which should not, and what can be done to make taxation less burdensome for enterprises. Let's ponder this question; this is one more task for all of us and the United Russia party in the State Duma. However, the general attitude to the question and the logic of the budget and budget revenues, as well as the Tax Code is that there must be as few privileges and exceptions to common taxation as possible. On the other hand, if we are resolved to promote innovative sectors, we must lift unnecessary barriers. We need to consider this issue. I think that finding a solution is possible. Next question, please.

On the construction of kindergartens in the Volga Federal District (question by Marina Golitsyna):

Marina Golitsyna: Mr Putin, good afternoon. I'm Marina Golitsyna from Novocheboksarsk, Chuvashia. Here is what I'd like to ask you. You have already spoken about kindergartens today. We don't have enough kindergartens in the city. I have two kids. There are very many children in our city, and I am bringing this request to you from all of the mothers. Could several good kindergartens with playgrounds be built in the city soon?

Vladimir Putin: Sorry, where did you say you are from?

Marina Golitsyna: Novocheboksarsk.

Vladimir Putin: You are right; this is indeed a common problem, which I have already spoken about in my address. Nobody thought about this when there was a demographic decline going on in the country. Moreover, in the early 1990s, in 1992, we had twice as many pre-schools than we have now. Nobody thought about it when there was a low birth rate, and more than a half of these pre-schools were turned into other businesses.

Marina Golitsyna: Yes, many buildings of such kindergartens now house completely different businesses...

Vladimir Putin: Exactly. There are several ways to resolve this problem. The buildings must be returned to their previous owners whenever possible. But this is not possible everywhere, because these buildings could have been sold and resold several times; this happens quite often. They could now have bona fide owners, and it would be extremely difficult to take such property away from them as they are not to blame for buying the property on the open market. However, the buildings will be returned to their initial owners whenever possible or new kindergartens will be built. And new forms of childcare will be introduced such as children's group homes. Not all problems related to such projects have been resolved, in particular legislation and removing excessive barriers to establishing such pre-school childcare centres.

Of course, we must build more [kindergartens]. The main thing is to build more; it's that simple.

Marina Golitsyna: Thank you. We now have hope for a brighter future.

Vladimir Putin: The problem of the shortage of kindergartens can be solved if more kindergartens are built. This is the task of above all municipal authorities, which should get regional support. The federal government will also try to help, but I think our contribution should take the form of assistance to the construction sector, notably the construction materials industry, and attempts to lift bureaucratic barriers to construction. These should be our priority objectives.

We could allocate funds for the construction of kindergartens from the federal budget, but then the municipal and regional authorities would no longer be responsible for this. In this way every problem is shifted over to the federal level, which is not right either. Every official in his or her place must take responsibility for the tasks facing them. We never tire of talking about this and will continue to encourage our colleagues to resolve these problems.

Here is what I'd like to tell you. All of these questions are about setting the right priorities. What are the main objectives for a city, town or region? Where are municipal or regional funds invested? You need to look at an account of their expenses.

In this regard, I'd like to ask if the members of parliament representing United Russia analyse expenses when adopting local budgets. If you think this [the construction of kindergartens] is a key priority, then you must ensure that the authorities rise to current needs. The problem could become less urgent tomorrow, but it is a serious issue today and so must be addressed. Let's deal with this problem within the framework of the United Russia party across the country. The federal authorities will directly support this project. Next question.

On implementation of innovation projects (question by Timur Yegiyev):

Timur Yegiyev: I'm Timur Yegiyev from Samara, head of the company Innovative Dealer, which is focused on promoting innovations in the Volga Federal District. I am also on the reserve list of United Russia.

I'd like to speak about innovations. Russian science and business are working together to implement innovations, but their efforts are hindered by serious problems. One of them is the use of outdated state standards when we could use new technical regulations. Customers insist that, in the absence of new technical regulations, producers and companies providing services and supplies comply with the old standards approved in the 1970s, many of which are carbon copies of the post-war standards of the 1950s.

Another stumbling block is the procedure in place for competitive bidding and auctions, which rules out competition for any products that have not been sold in a bidding process before. The reality is that documents provide the name of the product but not its specifications, which turns the bidding process into a sham. As a result, the use of innovations and their participation in competitive bidding is limited.

This brings me to my question: Could you accelerate the adoption of new technical regulations within the framework of the reform? Could you change the current bidding regulations, which do not take into account new products but only replicate the old lists every year? Thank you.

Vladimir Putin: You know, lately we have been working hard to solve the problem you have explained here. I have no objections and nothing to add to what you have said. The state standards are old, and even some technical regulations are outmoded. Many decisions have been recently made in different economic sectors to change these rules, these state standards, but this is not enough.

Some say we should adopt the standards and regulations of the European Union. This is a very complicated process, and many European standards are indeed better than ours. However, for example, the snow load is not as large in Europe as in Russia, and so we cannot mechanically apply their construction standards here. The same is true in many other areas; the snow load is just one of many examples. Therefore, we should consider each standard individually. But on the whole, what you said is absolutely right.

This also applies to competitive bidding procedures. We are constantly improving law No. 95 and will continue to do so. We'll do our best.

On developing infrastructure and transport in the Volga Federal District (following the presentation by Polina Romanova)

Vladimir Putin: Ms Romanova has raised a number of very important and serious issues. Russia has a huge area, the world's largest, and there are no matches for it. And it also has a wide range of problems that arise from this.

We have already said that construction of the Amur-Chita-Khabarovsk motorway is about to be completed. You must have heard of it, because I have spoken of it several times: we have linked all parts of the Russian Federation with motorways, for the first time in Russian history. We never ever had it before. People used to drive to the Far East in winter, when it is cold and the snow makes the road smooth, or they used to get there via the Indian Ocean by ships in summer.

In 1903-1904 a railway was built just before the Russo-Japanese War, and then the Baikal-Amur Mainline appeared due to the deteriorating relations with China. Nothing has been built there ever since. The Amur Motorway, which I have mentioned, was designed in 1966. Its construction was launched in 1978, quite a small area was built and then the project was abandoned in the early 1990s.

We got down to it seriously only in the past five to six years: we invested 70 billion roubles there, with 40 billion allocated in the last four years. And we have almost built it. I hope it will be commissioned on October 1. These are infrastructure facilities that need special efforts and special investment.

Yesterday we held a meeting on developing the petrochemical industry here. Among other things, this also concerns the materials for the road surface, so that our road maintenance companies will be able to stop patching the holes every year and our roads become durable and serve us and later our children for decades. We can also work on improving legislation, but even now progress is evident.

You have mentioned the Sapsan trains, but they are an absolutely new technology, not just a purchase. They are being adapted to our local conditions and climate. The major part of the design was done by Russian specialists. A number of businesses were created for the servicing and producing separate components. We will proceed along this path, including in the development of the rail transport.

We have ambitious plans to develop the railway system in East Siberia, the Far East and the European part of the Russian Federation.

As for the road funds, they used to exist in the past along with a road tax. Heads of the regions were happy about it, and it's true, we built a huge number of roads with the money from this road fund. But it was a turnover tax. I want everybody to understand what it is. Yes, it was a source of revenue to finance road construction, but it is not really a tax, it is a quitrent. For instance, if someone produced grain in the farm, he would have to pay a turnover tax, then as he brought it for processing, he would have to pay the tax once again and so forth. When the grain was sold, he would have to pay the tax again.

The situation is worse in such high-technology sectors as engineering, auto industry, aviation and shipbuilding. Each stage in the process is taxed, and in general that stunts economic growth. We need to either give up the VAT or switch to turnover taxes because they cannot exist together. That is why returning to the previous scheme is so difficult. But what did we agree on? We agreed to increase petrol excises, which stand at two roubles today, by one rouble; we will also reduce transport tax a little, and that is what the governors insist on, because the money goes to the regions' budgets. We will set up road funds by increasing the excise. I am afraid to get the figures wrong, but these are substantial funds that will go to road construction.

I have already said that we will allocate 16 billion roubles to the regions this year. Next year we plan to allocate 34 billion roubles for these purposes, road construction, in particular. But what I would really like is for the governors to start establishing these road funds you mentioned, although we have not made a final decision yet and I do not want to alarm anybody. Let me explain. It's very simple. The regions are already receiving those 2% of excises but they are not allocating the funds entirely for road construction, they are using them for other purposes that are important as well. They are important in their own right, but the funds are not allocated for roads, thus making the roads fall into disrepair. They require daily attention. Roads are a living organism.

So here is my proposal. We will give the money we will get by increasing the excises to the federal budget only to those regions that will establish regional road funds.

The regions will have to pay into the fund their own two roubles of petrol excises and the money from the federal budget that we will get by increasing the excise by one rouble. In this case we will set up a strong and stable base to support road construction in the entire country.

On the New Roads of United Russia Cities project and possible inclusion of Samara in the list of participants (Dmitry Azarov's question)

Dmitry Azarov: Good evening, Mr Putin, my name is Dmitry Azarov and I am from Samara.

The New Roads of United Russia Cities project is being implemented for a number of years. I am aware that some 32 cities received large funds from the federal budget for modernisation, development and major road repair. During your speech you have mentioned cities in the Volga Federal District.

Mr Putin, I would like to ask you two questions in this respect: will we go on with the project and what time frame does it have? And what chances, do you think, Samara, my native town, has of being included in the list of participants?

Vladimir Putin: Samara has not been included in the list, but I have already said and will say it once again that we have envisaged allocating 34 billion roubles for the regions next year, and Samara will get funds for road construction under this programme if it establishes a regional fund with an approximate volume of 800 million roubles.

Dmitry Azarov: Thank you.

On regional programmes for housing construction and efficient land use (in response to the presentation by M. Usolyev):

Vladimir Putin: Good. Thank you very much. Actually, there is nothing to respond to. This development programme proposed for the construction industry is quite professional. Indeed, construction has a multiplying effect for the entire economy. It's true.

Regarding the fact that people do not invest their savings, we need to find a way to encourage them. This is the reason why we are developing mortgage systems, a housing construction fund, housing and utilities systems and more. All these programmes are intended to encourage people to invest their money - if they have any, of course - in housing construction. We can see that this sector survived, and is now developing and starting to grow rapidly. This is clear from the amounts of mortgage loans taken out. I've mentioned this already.

As far as the long-term money is concerned, my colleague said that small enterprises find it hard to resolve infrastructure issues: connecting to power grids, sewage, water supply lines and so forth. Long-term money is required for this.

For those of you who aren't familiar with this problem, I assure you my colleague knows what he is talking about. He is a professional. This is immediately clear. He makes clear and concise arguments. He knows these issues backwards and forwards. Long-term money is needed. Where will this money come from? That's the question. What is long-term money? This is not money from Vnesheconombank or the government of the Russian Federation. In a normal market economy, long-term money comes from several sources. They are stable sums belonging to citizens that are kept for a long time in domestic banks. It is money in pension funds and insurance companies. These are the main sources of long-term money. The money generated by the economy, but not budget resources. And Vnesheconombank uses budget resources. We fund Vnesheconombank from a variety of sources, but actually, this is budget money.

We need to create such development tools. And one of the main sources is people's savings held in the country's banking system for a long time. And you must know what this depends on - on economic stability and the reliability of the national financial and banking system. That's what it depends on. This work may go unnoticed by most, but it is extremely important for the country's economy. This is the direction we are moving in. Why were we so careful with the banking sector during the crisis? In order to protect the country's financial system, to assure people that it was reliable, stable and they should not be afraid to keep their money in it, and ultimately to make it a stable source of so-called long-term money, which is essential for the economy in general and the construction industry in particular.

The Republic of Tatarstan is having very good development indicators, both in the economy as a whole and in housing construction. A lot of good finds. The main thing is that the construction industry is developing rapidly - much better in many respects than in the other regions. And on this I'd like to congratulate you.

Concluding remarks:

I hope very much that the people in this hall - who are active supporters of United Russia, deputies at different levels, heads of regions and municipalities, representatives of ministries, departments and various non-governmental organisations working efficiently and taking a proactive approach to life - that all of us will have a direct influence on the implementation of the plans that we formulated today in the course of my speech and the discussion. You know, I often hear the same question, "How does United Russia influence the country's development?" I understand very well all the minuses attributed to what is called "the leading political force". As I've said repeatedly, of course, generally speaking, everybody tries to come to the force's side, especially a leading force. This is typical of not only Russia, but of all the countries, no matter where. Of course, negative aspects also exist. I will not dwell on this idea; I think you understand my point.

However, it is perfectly clear that social and government efforts, social and government forces must be consolidated in order to move forward along this difficult but absolutely necessary path toward development. We need a fusion of will, political power and financing, which follows the fusion of will and political power. And in this respect United Russia has been playing a very important consolidating and positive role for several years now. I hope very much that the party's organisations will try and closely monitor what is happening in their ranks, get rid of people who don't belong there and look at the people's needs. Not simply look, but react to them. Not only in community liaison offices, but in the course of ordinary, everyday life. In fact, you live among people, you are part of this society. Let's make it so that in the Volga Federal District and other regions of the Russian Federation United Russia is always on top of people's hopes and needs, on strategic paths to solving problems, which our country and the people of the Russian Federation need so vitally. I am counting on your support. Thank you.

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