Working Day

8 may, 2008 15:00

The State Duma approved Vladimir Putin as Russian Prime Minister

The State Duma approved Vladimir Putin as Russian Prime Minister
«There is no doubt in my mind that the Government can only be genuinely strong and effective if it can fully rely on the legislative branch».
Vladimir Putin
State Duma session on May 8, 2008

In a speech to the deputies Vladimir Putin reviewed the country's development and laid down guidelines for the activities of the future Cabinet. Vladimir Putin also answered questions from representatives of parliamentary parties.

Vladimir Putin's speech at the meeting of the State Duma of the Russian Federation on May 8, 2008:

Good afternoon,

First of all, I would like to thank Dmitry Medvedev for the kind words he said about me and for submitting, as President of the Russian Federation, my candidacy for the post of the Prime Minister of the Russian Federation.

Indeed, much has been accomplished in the previous years. But we face big, huge, grandiose tasks. It is not only about the legal procedures envisaged by the Constitution and our laws. Everyone sitting in this hall and here at the head table, each of us - should not only proceed from what has been done in the past; we should all look to the future. So I deem it my duty to speak in detail about how I see the work of the Government in the near future.

I already spoke from this podium in August 1999 as candidate for the post of Prime Minister of the Russian Government.

The situation in the country at the time was extremely complicated. For the sake of the country's interests, its integrity and the well-being of its people it was necessary to set aside inter-party squabbles and empty talk, to act resolutely with an awareness of the crucial moment and full responsibility for the events that were then taking place.

This was my position then and I presented it to the deputies. I counted on people rallying around common goals. I was not disappointed.

Since then Russia has not just changed. It has without exaggeration become a different country. But today, as before, I am convinced that we need consolidation of political forces and social solidarity. We need coordinated work between all the branches of government. We need their close partnership in the interests of all the country's citizens and successful national development.

There is no doubt in my mind that the Government can only be genuinely strong and effective if it can fully rely on the legislative branch.

I intend to build my interaction with the State Duma proceeding from these principles. I expect a similar attitude and a similar approach on your part.

Let me add that on the eve of this meeting consultations were held with the heads of parliamentary parties, as you well know. It was a very interesting, constructive and useful conversation. Most importantly, one felt the common mood for cooperation and readiness to work together for the sake of Russia, for the sake of its interests.

Right off, I would like to apologise to you because we did not have consultations inside the parliamentary parties. We will do so by all means. The fact is that tomorrow will be a big holiday, so the President thought all the formal procedures should be completed today so that all the state officials could take part in the celebrations of Victory Day.

But I repeat, I told the heads of the parliamentary parties yesterday that we would cooperate closely with the whole State Duma and with its parties, with individual deputies and groups of deputies.

At the February session of the State Council I set forth my vision of the main priorities of Russia's development. Now they are being translated into concrete plans for our work. Undoubtedly they will form the basis of the Cabinet's work.

I am sure that we have every opportunity to make our economy more competitive and to change its structure by developing the most modern production.

Besides, in the next 10-15 years we can and must join the countries that lead the world on all the key indicators of quality of life, such as the level of income and social security, the quality of education and healthcare, life expectancy, environmental safety and the provision of housing.

Modern Russia has become used to a high rate of growth of the economy and real incomes. Our GDP according to purchasing power parity exceeds $2 trillion. That makes Russia seventh in the world. According to international experts, it could move up another rung this year and surpass the GDP of Britain, a member of the G8.

But we should also admit that the Russian economy, being an inseparable part of the world economy, is developing in an increasingly and fiercely competitive environment. On many parameters we still lag far behind the key economic players, who, by the way, are anything but standing still. They are also developing.

A complicated situation is taking shape in global finance, in the world food market, where Russia is simultaneously a major importer and exporter, for example, of grain. I am sure you will have questions on that topic. Let me say from the start that we have always imported grain, even in Soviet times, as you know. We bought grain from Canada and the US. Now we have moved into the second or third place as grain exporters. We practically share that position with Canada. We will have a separate conversation on that topic.

Let me add that the prices for traditional Russian exports are subject to substantial fluctuations. Besides, our presence in the dynamic markets of science-intensive high technology products is still insignificant. Let me note that this is true not only of the external but also of the domestic market.

Unless we break into the market for goods and services with a high added value, Russia will see its role in the development of the world economy diminishing. That is fraught with serious risks for the existence of our state, for ensuring the security and defence capability of our state.

Therefore, as I have said many times before, a vital task is to significantly improve the efficiency and stability of the national economy. As you know, we have big problems with labour productivity. We should develop through universal introduction of innovative technologies. Through improved infrastructure, modernisation of the social sphere and the creating of the most favourable environment for business.

I would like to dwell in more detail on what needs to be done now, in the coming years.

Above all we need macroeconomic stability. Therefore we will continue to pay close attention to all the aspects of financial policy, above all measures aimed at bringing down inflation.

Each of us has found to his cost how it "hits our pockets". The first to suffer are the most vulnerable social groups. Thus, while average inflation last year was 11.9%, for the poor it has been 14.5%. I mean the kind of goods that they buy. It is necessary to bring inflation down to one digit within a year, within the next few years.

Let me add that Russia's dramatically increasing economic potential and significant financial reserves provide a solid basis which allows us to weather the current period of instability in the world economy.

Moreover, we can take advantage of a number of opportunities that are opening up today, including the expansion of our national capital abroad (external expansion in the good sense of that word). And also to increase returns on government investments and increase the role of the rouble in international settlements.

I am convinced that Russia can and must become a major regional financial centre in the world. This is necessary if we are to expand the sources of finance for our private and public sectors.

Besides, it is in our own interests to have such a centre contribute to the stability of the global economy and global finances. To this end the following measures must be taken to develop the national financial market and the banking system.

First, to optimise the existing infrastructure and put in order the system of government regulation of the financial market.

At present the same transactions of various participants in the financial market are regulated differently, which creates unequal conditions for competition. We should also support the consolidation of financial institutions and the introduction of modern payment systems.

The second area involves the improvement of financial legislation. That includes the development of legal norms regulating transactions with derivative financial instruments.

You know what futures, options, forwards and credit notes are. Oddly enough, to this day market participants have to use foreign and international legal norms, including English law.

Third, we should create a truly massive class of investors. Even people who have modest savings must have a chance to multiply them by investing in various sectors of the national economy. One way this can be done is to stimulate the emergence of major public companies and the successful issue of shares in the domestic market.

Finally and fourthly, it is necessary to form a comfortable tax regime in the securities market.

Let me note that priority legislation must be adopted and a clear action plan must be prepared in all these areas before the end of the year.

I think we are within reach of having one of the best tax systems in the world. True, the Finance Ministry believes that it is already pretty much the best, but so far I doubt it. We have work to do. We must build a system that works to modernise the economy, stimulate investments in infrastructure and new technologies, education, healthcare and improvement of our citizens' housing conditions.

Let me elaborate on how it must be done.

First, we must minimise taxes on the expenditure citizens and organisations incur to pay for education, healthcare, pensions, and interest on mortgage loans.

Second, all the organisations that provide socially significant services (government, municipal and private) must as a result of the new financing mechanisms, find themselves in equal tax conditions. That would mark an important step towards developing a competitive environment and attracting private investments. Above all, as I have indicated, these are healthcare, education and culture.

Third, in order to modernise production we need to liberalise the depreciation policy. So, beginning from next year additional mechanisms for faster amortisation of certain categories of production assets - above all technological equipment - must be introduced.

We should also broaden the range of tax incentives for research and design work, first and foremost in the areas that are government priorities.

We all know that the price of energy in world markets is high.

Oilmen earn considerable revenues. But we take a significant part of these profits into the budget. We had a discussion with the heads of parliamentary parties yesterday and they were surprised and asked me to give a precise figure. I can tell you that we take some 75-80% of the profits of oil companies through the mineral extraction tax and export duties. This is one of the reasons why the number of abandoned low-yield oil wells is growing. Exploration and development of new fields proceeds slowly.

In this connection, to stimulate the growth of oil extraction and refining, the time has come to reduce the tax burden on that sector of the economy. We should also ensure effective administration of the earlier decisions on the tax regime for depleted fields. A serious discussion is underway on cutting the value added tax, as I have already told an enlarged meeting of the State Council. I believe that we should make up our minds regarding the strategy and tactics of reducing the tax burden not later than August this year: when and how much to cut taxes to create additional incentives for the country's economic development.

Finally, it is necessary to relieve citizens and organisations of the time consuming filling out of various papers containing information that nobody needs. Compliance with the government's demand for paying legally established taxes must be accompanied by the lifting of bureaucratic barriers in this sphere.

The Government will introduce all the necessary new legislation in the tax sphere during the current and the autumn session of the State Duma.

Such steps would mean that our economy, the national business and the social sphere would get massive additional resources for development.

According to experts, we are talking about hundreds of billions of roubles a year. Besides, the easing of the tax burden will greatly stimulate the creation of a favourable business climate in the country. We expect business to reciprocate by moving out of the "shadow sector".

And let me repeat that in general we need broader entrepreneurial freedom. In this connection the Government will initiate large-scale work to remove administrative barriers in the economy. We are talking about reducing the inspection powers of supervisory bodies, replacing permits with notification in the setting up and conduct of business. We should dramatically cut the number of activities subject to licensing as well goods and services that require mandatory certification.

Simultaneously we should expand the sphere of mandatory liability insurance, however unpleasant it may be for businessmen. We will have to do it if we want to pass on to normal civilised procedures and ensure the interests of all the participants in the process.

Let me add that the new law On Protecting Competition was passed in 2006. It is necessary to speed up its implementation and conduct an effective antimonopoly policy. We should resolutely prevent attempts by monopolies "to reach into others' pockets".

We have already done much to improve the culture of corporate governance and develop corresponding legal norms. The market capitalisation of Russian companies speaks for itself, you know it well. Even so, there are still legal "loopholes" that make it possible to unlawfully grab others' property.

I would urge you to support the package of anti-raider laws prepared by the Government, so as to put an end to that relic of the 1990s.

In addition to common, universal measures aimed at boosting the economy and forming a favourable business environment we need special instruments to support individual sectors. Above all those that play a key role in the country's development and therefore merit close attention on the part of Parliament and the Government.

Today I will mention several such areas. They are above all infrastructure, agriculture, and high technology sectors, including shipbuilding and aircraft building.

Our key task is to minimise restrictions on economic growth caused by a delay in the development of infrastructure.

The Government has prepared a strategy of transport development to 2030. It is an ambitious document. Concrete projects will be identified in the new federal targeted programme for the development of the transport system in the period to 2015. Considering all sources of funding, that programme will be financed to the tune of more than 13 trillion roubles, of which 4.7 trillion roubles will come from the federal budget. This means that in 2010 financing from all the sources will double compared with 2008.

I would like to stress that in the development of infrastructure we should increasingly look to the private investor. That is impossible without ensuring competitive conditions for business in infrastructure projects in the long run, including by the introduction of a new tariff policy.

I believe that tariff regulation of infrastructure must be based on the following principles. First, long-term tariffs must guarantee returns and market profitability of investments. Second, it is necessary to link the level of tariffs with the quality of services rendered and provide economic incentives for reducing costs.

From July this year this new method will be used to implement pilot projects in power distribution grids. By 2011 long-term tariff regulation will be introduced in the power grids in all the country's regions. In future the practice of long-term tariffs will be spread to the entire infrastructure. We must understand that unless there is stability there will be no development in this sector of the economy.

What we need of course is not simply higher tariffs in the power industry, the gas sphere and transport, but a dramatic growth of energy efficiency in the economy as a whole.

No other country is so wasteful with its resources. The state must stimulate economic agents to introduce more effective technologies. Simultaneously it must increase targeted support of its citizens. This must be done in sufficient volumes and according to rules that are not burdensome or humiliating for people. We have already launched the restructuring of the domestic shipbuilding and aircraft building industries. Support for the development of these sectors will be one of the government priorities. A United Shipbuilding Corporation has been created. By 2009 the Government will fully divest itself of the state unitary enterprises that are part of the corporation.

An ambitious target has been set for the United Aircraft Building Corporation: by 2025 it must become one of the leading aircraft building corporations in the world.

Finally, we must step up our work to develop the agro-industrial complex in the country.

Soaring food prices in the world market since the middle of last year have had a real impact on our domestic market and have affected the well being of Russian citizens. We must say that honestly; we must admit it. So, a key economic, social and political task is to ensure a stable domestic food market by protecting it against dramatic price fluctuations in the world. These are the priorities the Government will address.

The building of an innovation-driven economy, as we have said many times, is impossible without constant development of the human factor, human capital, the conditions in which individuals can fulfil their potential, without major investments in people's health and education and without ensuring safe and comfortable living conditions.

In this work the Government will seek a close partnership with government bodies and local administrations, with the institutions of civil society and the business community.

As part of priority national projects we must continue to implement profound systemic change in the corresponding spheres. Let me add that these projects will have considerable resources to draw on.

In 2010 consolidated budget expenditure on education will reach almost 2 trillion roubles, and another 2 trillion roubles on public health. That is several times more than only a few years ago. The spending on education will quadruple and in healthcare it will grow four and a half times compared with 2004.

The main educational standards for the younger generation will be adopted shortly and the formation of a national system for assessing the quality of education will begin.

Regional and municipal authorities must turn serious attention to the problems of primary and secondary vocational training within their sphere of responsibility. Many of our primary trade schools and secondary vocational training schools seem to be stuck in a bygone era. They should open up to the needs of modern production and the economy and to the labour market. The content of education in such schools must be seriously revised jointly with the employers.

The experience of creating the Southern and Siberian Federal Universities has helped us perfect new legal schemes for the development of higher education institutions as well as modern mechanisms of financing and integrating education, science and production.

At the federal level programmes for creating a network of modern scientific-educational centres will be implemented. We may be talking about organising 16-20 such federal centres, some of which may be newly created or based on existing universities.

Their structure (in addition to universities proper) would include academic and sector-specific research institutes. Due to such integration the new scientific and educational centres will be able to attain the status of world leaders more quickly, and effectively become major national and international research centres. We are determined to create one such centre in the Far East. It should play a key role in the development of the whole region.

You know that we are preparing to host an APEC meeting in the Far East. Questions have frequently been asked about what to do with all the buildings and structures and resources that we will pour into the preparation of that major event. Dmitry Medvedev has suggested that all this, this whole complex should be geared to the needs of education and science. I think it is an excellent idea.

The federal targeted programme Scientific and Scientific-Pedagogical Personnel in the Innovative Russia in 2009-2013 will be adopted shortly. It addresses the key tasks of renewing our research and pedagogical personnel.

Now, about the development of healthcare. We cannot be satisfied with the current level of accessibility and quality of medical assistance as well as the continuing lack of patient rights. We need to put in place a workable model of medical insurance and introduce modern financing mechanisms. We must complete the development of standards of medical assistance.

I repeat that medical institutions should be financed in proportion to the concrete medical services they render. The citizen must be given the right to choose his doctor, the medical institution and the medical insurance company. We should enhance the mechanisms that make a citizen responsible for his or her health and reasonable use of the social benefits of the health system. But we should not forget the responsibility of medical professionals to their patients.

To this end it will be necessary to adopt all the relevant legal acts in 2008-2009. The federal law On the Budget for 2010-2011 must envisage the allocation of funds for improving the entire public health system. Let me stress that the organisational and preparatory work must begin in 2009.

I cannot help mentioning another topic that is directly linked to the health and survival of the nation. Smoking and alcohol abuse  have become a real scourge for our country. Russia consumes twice as much alcohol and smokes twice as much as most developed countries. We must fight this evil, but not by imposing bans or raising prices.

I think that we should not spare money for sports and the creation of good leisure facilities, and also for effective media campaigns to promote a healthy way of life. What we need is for the state to commission such work. The problem cannot be solved by mere exhortation.

Another priority is housing, increasing the volume of construction and making it more affordable to families with different levels of income.

Over the past seven years housing construction has doubled. But even that rate of growth is not sufficient to meet the current and growing needs of Russian citizens, which is absolutely natural.

Please make a note that in increasing the volume of construction we should build modern housing using energy-saving technologies and environmentally friendly materials. And we should launch as early as possible the industry of prefabricated individual housing elements. This year we should start major projects to build new low-rise residential districts in every region of the Russian Federation. It is necessary to speed up the allocation of new land and the building of engineering infrastructure there. In accordance with the Presidential Decree, a federal fund for the promotion of housing construction must be formed. It will take over designated federal land that is still not used.

Finally, it is necessary to continue work to improve the terms of lending in the housing market and to develop mortgages. We should not of course forget about building government housing. I was reminded of this by the leaders of the parliamentary factions with whom I met. I absolutely agree with this.

Tomorrow we will mark our main national holiday, Victory Day. We will honour the soldiers of the Great Patriotic War. Caring for the veterans of that war is our sacred moral duty.

The decision has already been passed to fully solve the problem of housing for veterans by May 9, 2010. To close that problem. Besides, all war invalids should be provided with special motor vehicles or, if they choose, corresponding monetary compensation this year. We will solve all the transport problems of veterans this year and all their housing problems by May 9, 2010.

We should always remember the lessons of that war. Only combat-able and well-manned armed forces with high morale can defend the country's sovereignty and integrity.

Since 2001 more than 300 new types of military equipment have been procured for the army. That is not enough. Three hundred models is not a negligible figure, but it is still not enough. The most important thing is that they are not yet mass produced. The Armed Forces do not procure them in necessary quantities. All that must be ensured.

Support of the army and the navy will remain an unquestionable priority for us in the future.

The budget will earmark enough money to provide servicemen and those who retire from military service with housing by 2010. And the housing fund for servicemen will be finally formed by the end of 2012.

We have to admit that the existing system of pay, in spite of regular pay rises, does not amount to worthy payment for the service of those who ensure the country's security in the most difficult occupations. Those who are on duty in submarines and strategic bombers, in the air defence and strategic missile forces. Those who serve in the units that play the key role in ensuring Russia's defence capability.

So I propose to introduce a special material incentive system for such servicemen and allocate at least 25 billion roubles for that purpose as early as 2009. That sum will constantly increase in the following years to a level that makes possible a dramatic improvement of the financial well being of that category of servicemen.

And of course we will continue work to increase the overall level of incomes in the country, to improve the system of pensions.

I believe that in the very near future we should make a decision that is key for the development of the economy and the social sphere. It has been the subject of heated debate for years. It is impossible and unnecessary to further delay the decision. Let me explain.

We know that the United Russia Party has agreed with the Trade Union Federation that the minimum wage should not be lower than the minimum costs of living.

I share this view. At the same time we should understand that there is a huge differentiation - we talked about it with your colleagues yesterday - a huge differentiation in the cost of living between regions and of pay levels between sectors. We should bear that in mind. In order to effectively combat poverty - and bringing the minimum wage up to the minimum cost of living is a measure to fight poverty - other measures are necessary too. In the opinion of experts and from the experience of other countries, such measures can be better targeted and more effective.

Even so, I believe it is necessary to meet our obligations during the spring session and pass the law that would raise the minimum wage in our country to 4,330 roubles by January 1, 2009. I'll explain the figure: in fact it is the minimum cost of living in our country as of the fourth quarter of 2007, and it was calculated and approved at the time the law was passed. We cannot take such decisions proceeding from a forecast. We make the computations on the basis of the past years, and the last figure checked out and approved by the Government refers to the forth quarter of 2007. I suggest that we use it in establishing the minimum wage.

I would like to say something about inflation.

The plans for the coming years must envisage an indexation of the minimum wage that outstrips inflation.

To ensure the functioning of the budget in the new conditions, new systems of remuneration must be introduced everywhere. All the required expenditure must be included in the budget. We are talking about a considerable amount of money, I won't give the exact figure, but money must be allocated if we want to painlessly switch to a new system of remuneration that will benefit the development of the economy and the social sphere. We will seek your cooperation on this.

The Government, jointly with regional authorities and the trade unions, will finalise a concrete plan to combat poverty before the end of the year. Parliament will of course be brought into this. We will be mindful of the potential of different regions and the interests of individual sectors of the economy (as written down in the tripartite agreement of which I have already spoken).

It is necessary to create a stable mechanism of pensions for the long term. The real size of the working pension must be substantially increased, especially the incomes of the older pensioners. I am referring to those who have no chance to work, but who need money and must incur large expenses to sustain their health.

In establishing the minimum pension we can no longer proceed from some kind of "average level". We should make sure that a pensioner's income (pension and other social benefits) should not be less than the minimum cost of living in the region where he or she lives. The most important role must be played by targeted benefits and other measures of social support established at the regional level with, of course, the support of the federal budget. We will do it by all means.

For those who work we should introduce a programme of voluntary co-financing of pension savings. Already a federal law has been passed On Additional Insurance Contributions to the Accumulated Part of the Working Pension and State Support of Pension Savings. I would like to thank you for this. All the expenditure to finance this law must be included in the federal budget beginning from 2010. We cannot give you the final figure as we don't know how many people will choose to join the system. But we have a forecast, and it is massive and will require a large amount of resources to carry out the pension reform.

In general over the past six months - and I don't mind disclosing it to you - we have discussed these problems every week. We believe that we have enough resources.

I think that practical implementation of all these measures must provide worthy pensions for those who are already retired and who will retire in the future.

In determining the expenditure on pensions and public sector employees inflation will be fully taken into account. Child allowances and "mother's capital" will be regularly revised upward for inflation. Considering the positive birth rate dynamics the need for such resources will grow. But that is just one proof that our measures in the demographic sphere are working, and that we were right in adopting them. Let me remind you that in the first three months of this year 34,000 more children were born than in the same period of last year, a growth of 9%.

To achieve these goals the entire system of government administration must be improved dramatically. That applies to all the levels of executive government and to local government and to issues that require a good deal of law-making.

I think we still have the potential to delegate some federal powers to the regions. Provided of course we introduce a system for objective assessment of the performance of regional governments.

Moreover, some of the functions currently performed by government bodies would best be transferred to the private sector by using, in the future, the mechanism of the state and the potential of self-regulating organisations.

On the whole, we should make up our minds about the scale, structure and the goals of the government sector. Dozens of enterprises fully owned by the state are not being modernised, rely entirely on the government budget and often, unfortunately, operate at a loss. They have no incentives to optimise their spending, earn a profit or fulfil orders well.

The time is long overdue to introduce modern methods of government investment and budgetary spending. The money should not "sink into the sand", it must give angible returns.

What is happening in the field of government spending does not stand up to any criticism. Construction projects often cost many times more than similar projects abroad. We are taking another look at the plans of major projects that you all know about. It is surprisingly simple: in fact the same projects here cost many times more than in Western Europe. Energy is cheaper, labour is cheaper, everything here is cheaper, but the project is more expensive. And everything seems to be correctly calculated by serious experts and independent experts. It is not only because of stealing, although there is no denying that, and we need to combat it with the help of our Prosecutor's Office and law enforcers. We also have obsolete systems of criteria as to what needs to be done, we use building regulations and standards dating back to the 1960s, which constantly jack up the costs, so that on the face of it everything is correct.

Current expenditure is similarly intolerable. Its volume grows year in and year out and simultaneously the payrolls of institutions and executive bodies are "inflated". The net result is dubious to say the least.

Let me repeat that government and municipal institutions have no incentive to improve the quality of their services. The budget pays the institution simply because that institution exists and not because it renders proper services. But when a client comes with "live money" everything changes: they begin to woo him and coddle him. The conclusion is simple: budget money must become "live money".

Wherever possible we should introduce financing of government services under a concrete government order. Government bodies and organisations should be paid out of the budget for services of a proper quality and in the right amount. Basically, such pilot schemes have been tried out and the results are positive.

In concluding my remarks I would like to single out the priorities for the future Government. The priorities that life itself sets before us and that ensure a historical perspective and prosperity for Russia and our people.

First of all, the creation of conditions for the full development of the individual by improving education, healthcare, science, culture and by an effective social policy.

Second, transition to an innovation-driven economy.

Third, the development of infrastructure: transport, housing, utilities, energy, social, financial and information infrastructure.

And finally, improvement of the work of governmental and non-governmental structures. I am referring to the Government, the ministries and agencies, the regional authorities, local governments and non-profit organisations.

Obviously, all these priorities are closely interconnected. They cannot be pursued separately from one another. To ensure a coordinated and simultaneous movement towards the goals, Government must be highly professional and responsible.

This is what I will work to achieve.

In conclusion I would like to once again thank this State Duma for constructive interaction and support of all the initiatives launched in recent months.

I expect that the legislature will continue to act in the mode of cooperation and mutual support with the federal Government.

Russia has grown much stronger in recent years. We have enough resources to tackle still more ambitious tasks and goals. The important thing is to make competent, effective and proper use of the accumulated potential.

For my part I am ready to exert every effort to achieve the goals set, to deliver new and significant results for the prosperity of our country and for the sake of a worthy life for Russian citizens.

Thank you.

Vladimir Putin's answers to questions from representatives of the parliamentary parties:

O. Smolin (Communist Party): You have admitted that the previous Government has failed to curb inflation. Officially it ran at 12% last year, and for staple goods at twice that level. In the first quarter of this year the official inflation figure is 5% and for food, more than 10%. Ordinary citizens and independent experts say that these figures are understated and that the real figures are much higher.

Pensions, benefits and wages in the public sector and in agriculture cannot keep up with prices. According to VTSIOM polls, three quarters of citizens are unhappy with their financial situation. Obviously, price growth is caused by systemic factors, by monopolies and underdevelopment of domestic production.

My question is, what will be the impact on prices of the last decision of the previous Government to raise tariffs, especially for gas and electricity? And secondly, what measures of a systemic character will the new Government take to curb inflation and protect people with low and medium incomes so that at least three quarters of the people would be satisfied with their material position? Thank you.

Vladimir Putin: First, about inflation. It is indeed a problem for this country, and not only for this country, but also for many other economies, even developed ones. Please note that our neighbours with whom we interact and from whom we import a significant proportion of our food face the same problems. In some of these countries inflation is even higher than here. But this does not mean that we are doing everything right in order to keep inflation down.

You have said that the figures have been seriously understated. You have mentioned 5%. I agree that the figures are understated, but not much. I think it is about 6%.

So, in the first four months of the year inflation has been 6.3%.

Unfortunately, the share of food prices is growing and substantial. It is still much less than half, but it is approaching that mark. It is an alarm signal. As I have said, it hits the low-income strata hardest.

And about the rise of tariffs you have mentioned. It is not only a question of rising tariffs. Economic decisions must be balanced. We cannot boost one sector of the economy while neglecting another. That would be following the well-known proverb: "Pull the nose out of the mud and your tail goes in, pull your tail out and your nose is in the mud". We need balanced decisions. We need to support our energy people in order to improve our whole economy. But we should give thought to the real sector of the economy and to agriculture.

Up to 70% of food in our big cities is imported. That is way too much. To avoid price growth we need to develop agriculture. We should look at agriculture first and foremost.

To make significant progress in this area the Government has developed a whole programme of action. You will of course know that in the past two years a lot of cheap loans have been made available to agriculture, especially to support livestock breeding and cereal production. I doubt that agriculture has ever received such massive loans. It is yielding results. But we believe that is not enough.

An additional decision has been taken on mineral fertiliser. You know that we have seriously raised the export duties. The budget earns about 12 billion roubles from this. All that money will be spent on agriculture.

We propose to allocate a further 5 billion roubles to support the programme of for poultry feed, another 5 billion roubles for poultry breeding, and 30 billion roubles into the authorised capital of the Agricultural Bank to support the grain programme and to enable the state to regulate grain prices if they continue to grow on the world markets.

The Government has worked out a programme to develop agriculture. We will move in that direction.

I. Afanasyeva (LDPR): One can see with the naked eye that Russian capital is facing big problems when it tries to break into world markets. We face discrimination when European countries prevent Russian companies from buying their assets. We have started selling oil and gas to Europe at world prices, and now they forget their professed love for free competition and restrict us. How do you propose to combat the use of double standards?

Vladimir Putin: In fact, this is not a question, but a political statement, which I fully share. I subscribe to what you have said.

It is true that our counterparts from countries with developed economies have been harping on the importance and practicability of opening up our economies, of a liberal approach to foreign investment. We have done so. But when our own potential increased, that market was indeed often closed for our companies. In fact, according to independent international experts, our companies missed an opportunity to invest about $50 billion in developed countries because of politically motivated decisions.

Proceeding under applicable legislation, we have encouraged and will encourage the investment activities of our companies abroad. Why? Because we believe it is a step along the way towards Russia's integration into the world economy. It means access to new technologies, new management standards and so on. This is our motive in encouraging overseas investments.

It is true that foreign investments in Russia are 10 times greater than our investments abroad. I am not sure this is the exact figure but I am not far wrong. That is why the screams of "the Russians are coming!" are groundless. We will argue with our partners that Russian investments are no worse than investments from any other countries and I am sure that eventually our partners will understand it. It takes time. Representatives of our major companies have told me how they broke into some markets. People there all but carried posters: "Help, the Russians are here!" And later it turned out that jobs were preserved, production developed and they formed excellent relations with parliaments of the countries in which they invested. And everybody begins to understand that this is a mutually beneficial process.

But of course when we see what is happening in some countries - which pass laws limiting foreign investments, obviously - we have to respond adequately. I am grateful to the deputies for passing the law I recently signed as President On the Regulation of Foreign Investments, especially in sensitive areas of the economy and with regard to mineral fields that we put on the roster of national fields. We will do everything on the basis of parity.

A. Babakov (Just Russia): You have become the head of the biggest party, United Russia, the party which has the majority in parliament. This is understandable because the Prime Minister must rely on an effective parliament.

But to solve the grandiose tasks that you have referred to a concerted effort is needed from the whole of society, as you have said. Therefore we believe that the opinions of the other parties in Parliament must also be taken into account. Could you explain how you intend to make constructive meetings and consultations with the parliamentary parties a regular practice?

Vladimir Putin: A representative of your party yesterday proposed to create a permanent council including State Duma deputies and members of the Cabinet that would conduct permanent consultations with the Government on the key economic and social issues. I think that is a good idea. I would be ready to implement it. But in addition, I and the Cabinet will be in constant touch not only with the leaders of parliamentary parties but with groups of deputies and members of parliamentary parties. You can be sure of that. It is my deep conviction that the Government cannot be successful without a constructive interaction with Parliament.

A. Loktev (Communist Party): As you have rightly said, here in Parliament we have not only United Russia, but other parties. On behalf of the CPRF deputies I must express regret that we have had no meeting with you. Many deputies wanted to talk with you and ask questions. I think it would provide the basis for the very consolidation you have spoken about.

You know very well that you can only lean from what offers resistance. My question is about corruption. By all accounts, it has recently become a scourge of our society. Unfortunately, we see it not only in industry and agriculture, but also in the social sphere. Wherever it appears it blights the structures of power, as witnessed by criminal cases and scandals.

What, in your opinion, are the causes and nature of this phenomenon and what methods can be effective against it?

Vladimir Putin: First about criminal cases and scandals. We don't need scandals perhaps, but the fact that criminal cases are brought against any individuals at whatever level they work is a good sign. I keep my fingers crossed that things will continue in the same way so that the law enforcement system can effectively react to what is happening in this field. You have of course raised one of the most acute issues there and you know how I feel about it.

I have spoken about it publicly and I have said what can and must be done. First (by the way, I spoke about it in my speech) it is necessary to get rid of excessive powers of control, licensing, certification, etc. We should remove the objective basis for corruption. But of course we should be on the side of common sense; we cannot afford to dispense with monitoring and licensing altogether. We should approach the matter carefully. But still we should remove that basis for corruption.

Secondly, government officials should be well provided for and their incomes should be big enough for them to fear losing them.

And thirdly, the legal framework must be improved. You know that we have assumed international legal obligations. I am aware that the Duma has prepared corresponding legal initiatives and draft laws. The Government will be ready to support your initiatives or submit your own draft anti-corruption laws. We are ready to work jointly in this sphere.

T. Volozhinskaya (LDPR): Everybody is talking about innovation, and you spoke about it in your report. Innovation means above all youth.

Most young people do not consider science a priority because young scientists are ill-paid. And yet we have many talented people. Many of them go into other spheres, but at the same time, we have to buy imported technologies for the medical, food and light industries. In our opinion the time has come to provide greater incentives for young scientists. What do you think about it?

Vladimir Putin: To begin with, I fully agree with what you said. It is not by chance that I spoke about it at the enlarged meeting of the State Council and I spoke about it earlier and mentioned it in my report today.

An innovation-driven economy is the number one priority. Diversification into innovative sectors is our key economic priority. Obviously we need to attract human resources into this area.

Perhaps not enough has been done recently, but we can report some progress.

Let me explain. We have adopted a programme for the development of fundamental science for the first time in many years. A hefty 25 billion roubles has been allocated for the purpose. In addition, amounts earmarked for priority areas of research equal the entire funding of science in former years.

And finally, the Government, when Viktor Zubkov was Prime Minister, practically completed work on a new federal targeted programme for 2009-2010 to develop human resources and train new specialists. I also mentioned it in my speech. We will move forward in all these directions.

During the meeting with the leaders of parliamentary parties they suggested that we should see what can be done to bring back those of our specialists who currently work abroad. It is a sound idea, we should do it together, but not in a way that would infringe upon those who already work here and who have never left the country. On the whole, however, this is a very sound idea. We will work in all these areas.

O. Shein (Just Russia): Shortage of housing is a problem that worries tens of millions of our citizens. Some important steps have been taken in recent years. At the same time it is obvious that the results still fall far short of the targets.

Clearly, the legislative framework must be strengthened if we are to solve this problem. You have already touched upon this problem in your speech. Could you elaborate on it?

Vladimir Putin: I have spoken about it many times. However, it is an extremely important theme, perhaps the most important for Russia. We are building twice as much housing today compared with 2001. However, we reached the 1990 level only last year. That is 62-odd million square metres of housing. We will exceed that volume this year. We are sure to build more than 72 million square metres.

But I think, and I have already said it: in order to fully provide our citizens with housing we should introduce 1 square meter of housing floor space per person every year. Can we meet that target? I believe that for the first time in the history of Russia we can set such a target. The building sector is developing at an unprecedented rate: by 19-20% and in some regions by 30% and more.

There are certain legal and economic restrictions. The building materials industry cannot keep pace with the growth of housing construction. Prices are rising, land is in short supply and the legal framework is wanting. All these old building standards I have referred to are obsolete and are a brake on the development of the sector.

The corresponding government divisions are committed to review all these standards by the end of this year. I have mentioned one of the first decrees issued by the President of the Russian Federation, a decree on housing construction, which envisages the creation of a housing construction fund which will take over all the vacant federal land.

All this combined, all the areas I mentioned give me grounds for guarded optimism. With your support we will make substantial progress in tackling this task in the next 2-3 years. I have no doubt about it.