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Prime Minister Vladimir Putin held a meeting of the Government Presidium

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Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon,

Let us begin with current issues. Ms Nabiullina, how did the Economic Forum go, what are the results?

Elvira Nabiullina: The 12th St Petersburg International Economic Forum ended yesterday. It had a highly representative audience. Taking part in the work of the Forum were about 2,500 participants. Among them were the leaders of major Russian, international and foreign companies, the heads of state and government, government ministers and top experts. Many meetings, conferences and roundtables were held. There was a lively discussion both of global and world development and the development of Russia. Many proposals have been made.

Investment exhibitions were organised on the margin of the Forum. They included a large exhibition of Russian developments in the field of nanotechnology. It also attracted interest. Timed for the Forum was the signing of investment agreements to the total sum of more than $14 billion. Presentations were held; one of the highlight presentations was that of the St Petersburg Mercantile and Commodity Exchange.

Victor Zubkov: Mr Putin, your instructions have been fulfilled.

Elvira Nabiullina: The winner of the first concession tender for the building of the Western High-Speed Diameter has been named. On Friday the Duma passed amendments to the third reading of the Law on Concession Agreements which improves the whole mechanism, so we hope that concession agreements will multiply.

As part of the Forum we also held a meeting of the Board of Directors of the Russian Venture Company and named the winners of the second contest of company managers. We selected five winners out of 18 candidates. New managing companies which will finance venture projects are to be formed shortly. On the whole, the Forum passed normally.

Vladimir Putin: Very well. I would like to thank all the colleagues in the Government who prepared the event and attended it. Especially at the final stage when such significant results were achieved. Thank you very much.

Mr Ivanov, I know that you are going to the Crimea. Tell us about it. What activities are being planned?

Sergei Ivanov: On Saturday, June 14, on behalf of the Government, I am going to visit Sebastopol to attend the celebrations of the 225th anniversary of the city. We have already marked the anniversary of the Black Sea Fleet. Now it will be the Day of the City. During my stay in Sebastopol I plan to meet with the representatives of the City Council, with the City Administration and with veterans and members of the public. Of course, Sebastopol is closely tied to our history. I think the presence of members of the Russian Government is important.

And I would like to add, Mr Putin, tomorrow will see the inauguration of express train service between the Savyolovsky Train Station and Sheremetyevo Airport. A brand-new 8-km stretch of bi-level electrified railway has been built and, even more important, there is a new rail terminal in Sheremetyevo.

That branch will have 21 pairs of trains every 24 hours, running at roughly 30-minute intervals. The journey from the center of Moscow to Sheremetyevo-2 will take 35 minutes. I think that is a great improvement considering the traffic jams on the Leningrad highway we are familiar with. It will be much more convenient for passengers, and the journey to the air terminal will be more comfortable.

The trains will offer wireless Internet access and other modern facilities. Economy-class tickets will cost 200 roubles. I think that is a very competitive price compared with what it costs for passengers to reach Sheremetyevo today. Now, all the three major Moscow airports will have express train service to the center of Moscow, because express trains are already running to Domodedovo and Vnukovo.

The Transportation Ministry, RZhD, the governments of Moscow and the Moscow Region took an active part in the project, for the first time they all worked together to build this transport hub. The next important stage will be the opening of the high-speed train service between the Belarusian Train Station and Sheremetyevo, and then we will start the project of express train service on the Moscow Ring Railway thus linking all the three Moscow airports - Domodedovo, Vnukovo and Sheremetyevo - by high speed train service. Passengers will be able to travel by rail between airports without changing transport mode. This is the ultimate goal of the modernisation of the transportation infrastructure of the Moscow hub.

Vladimir Putin: Mr Levitin, is this idea written into the general scheme of the development of the Moscow Transport Hub?

Igor Levitin: What we reported to you at the meeting in Sochi - pursuant to your instructions - we prepared a proposal for the Government to call a meeting to discuss the development of the Moscow Transport Hub. The airports are one of the elements in the development of the Moscow Transport Hub.

Vladimir Putin: Thank you. Mr Zubkov, the Mercantile and Commodity Exchange was opened recently. What are its prospects?

Victor Zubkov: Mr Putin, pursuant to the instructions of the President of the Russian Federation, we in the Government have done a lot of work to organise the presentation of the St Petersburg International Mercantile and Commodity Exchange in St Petersburg. Ms Nabiullina was speaking about it.

We managed to raise the exchange capital and obtain a license for exchange activities. We are planning to hold pilot trading in July-August. The very fact that a Mercantile and Commodity Exchange has been set up in St Petersburg is very important because it may be an element in creating a world financial center in Russia. Trading will be in roubles. We believe that initially, in July and August, oil and petroleum products will be traded there and subsequently construction materials, grain and mineral fertilizer. The range of commodities traded will constantly expand.

Before the end of the year the volume of trading at the Mercantile and Commodity Exchange will reach about 1.5 trillion roubles. This should diminish the non-economic factors of price formation and rule out markups by middlemen. When we were preparing the Mercantile and Commodity Exchange we found that there are six middlemen in petroleum product trade. Of course, all this has a negative impact on petroleum product prices, and food prices grow as a result.

I think that the Mercantile and Commodity Exchange will soon be up and running. The Ministry of Economic Development has made a major contribution. St Petersburg has done a good job of providing practical, modern space. Work is now getting started.

There is another question on which I would like to report to you. I chaired a meeting on livestock development in Chuvashia. I must say that now, especially with the adoption of the law On Technical Regulations Regarding Milk and Dairy Products, demand for whole milk in the country may grow, therefore all aspects connected with the development of the dairy industry have been carefully examined. Chuvashia, Mordovia, Tatarstan and Bashkortostan are doing well in this respect. Their experience should be shared with other regions. We considered not only ways to increase the production of milk and dairy products, but matters of cooperation and trade in agricultural markets. We will, I think, discuss these issues with the governors in a video conference soon.

The meeting also discussed the imbalance of milk and dairy prices because many monopolies that process milk have imported large quantities of powdered milk, especially from Belarus and Ukraine, the countries with which we have no border and no customs. This has had an adverse impact on the producers of whole milk because while initially the procurement price was about 12 roubles per liter, in some regions it dropped by half (to 6 roubles). And yet retail prices are not dropping.

Vladimir Putin: Are prices for dairy products rising?

Victor Zubkov: Yes, they are. I think the Federal Anti-Monopoly Service has its job cut out. I believe that we should revisit the issue together with the Ministry of Economic Development. I have given instructions on pricing and on issues connected with the customs and tariff policy.

Instructions have been given to submit to the Government proposals on increasing the profitability of the sector and the competitiveness of domestic dairy production by July 1. I think we should be controlling these issues more strictly.

Vladimir Putin: Mr Gordeyev, why are retail prices for dairy products rising? If we have imported such large amounts of powdered milk, which is cheaper, what problems do the producers face if the price is still going up?

Alexei Gordeyev: Mr Putin, from a formal point of view, the Ministry of Agriculture is not responsible for retail pricing, but analytically speaking, because the retail price is a function of demand and supply and not profitability and, accordingly, costs, today the burden has been shifted entirely to agricultural producers. Their profitability has plummeted, as Mr Zubkov has said, while some middlemen in the supply chain have increased their profits, so the Federal Anti-Monopoly Service must look into it.

Vladimir Putin: I would like to focus attention on this. You know that large quantities of powdered milk have been imported, and it creates a problem for our producers. And what is happening to dairy products in retail? Why is it happening?
Alexei Gordeyev: We will look into it promptly.

Vladimir Putin: You had better hurry. Traveling to attend various events is important... but you should also look at how people live.

To Ms Golikova: June 14 is World Blood Donor Day, yes?

Tatyana Golikova: Yes, Mr Putin, June 14 is World Blood Donor Day. It is the day when all Russian regions traditionally conduct activities. It is important for us because this year, as you remember, we launched a comprehensive programme to develop donor's blood and its components. I must say that even the insignificant steps that we have taken so far have been yielding results for several months now. In some Russian regions the number of unpaid donors has increased by 8-10%, the storage of blood and its components increased by 30-33% per 1,000 people, compared with 2007 when we had 12,500 donors. Now we have 13,000-14,500 donors. We stored 1,800,000 litres of whole blood in 2007. As of June 1, 2008 the amount of whole blood stored is 1,125,000 litres. It is a good result. If we sustain such a pace it would be a great improvement on previous years.

The Ministry, by agreement with the federal agencies concerned, has submitted to the Government a draft resolution on the development of these activities in 2008-2010. I hope the resolution will come out soon and then additional specific measures will be taken in several Russian regions to modernise blood services and put them on a modern footing.

June 15 will be Medical Workers' Day. Traditionally it is widely celebrated by the medical community. We will use this week to present the "Vocation" prize to our foremost doctors. These are festive events, which are always pleasant.

Vladimir Putin: We have two major events coming up. The Russia-EU summit in Khanty-Mansiisk and then the G8 summit. Mr Kozak had a meeting with his counterpart on border cooperation. How is work proceeding? And then Mr Kudrin will tell us what we will take to Japan for the meeting with the G8 Finance Ministers. Mr Kozak, you have the floor.

Dmitry Kozak: The European Commissioner for Regional Policy and I have discussed all the problems connected with border cooperation. Afterward instructions were issued. A group of experts arrived with the Commissioner and we finalised the financial agreements and cooperation programmes - seven border cooperation programmes - we set the deadlines for presenting them, they should be presented to the European Commission before the end of June.

All the decisions worked out at these meetings comply with domestic legislation. We have agreed on how to enforce European legislation. We will enforce only those procedures that are connected with the allocation of money for border cooperation by the European Commission. I think these will be the seven programmes that will for the first time be financed by the Russian Federation and the European Union, by the European border regions and our regions on the basis of parity. A total of 600 million euros will be spent on the programmes.

Vladimir Putin: 600 million euros by both sides?

Dmitry Kozak: By both sides. Half of our 119 million euros will come from the federal budget and 119 million euros will come from the European Union's budget. The rest will be financed by the border regions. They have all sorts of important environmental, social and business projects which will help the border regions and their economic development a great deal.

Besides, the European Union attaches great importance to exchanging experience in regional policy. They find our experience and proposals insightful, and they believe they can be spread to the European Union.

Vladimir Putin: Thank you. Mr Kudrin, you have the floor.

Alexei Kudrin: Mr Putin, a meeting of the G8 Finance Ministers will take place in Osaka, Japan, on Friday and Saturday. In general, a meeting will be devoted to preparing all the documents for the summit. Among the key issues, we will discuss the world economy and the consequences of the financial crisis and the measures countries should take, individually or jointly, to prevent the crisis.

One more pressing issue is the consequences of the food price increase, mostly for the poorest countries. Two initiatives on immediate support of poor countries will be discussed because in many countries access to food has substantially diminished causing a sharp increase in poverty and even malnutrition and famine. One initiative will be the creation of a buffer fund to support such needy countries. The other initiative is to develop mechanisms to ease this crisis for the poor countries.

Another topic that will be discussed is climate change and its impact on all the aspects of life, including agriculture and the fight against poverty. The agenda will also include the initiatives, which have been promoted and are supported above all by Japan, of creating a Clean Technology Fund to replace hydrocarbon energy sources.

By the way, in this connection the prospects of bio-fuel will be considered very seriously in the light of the events that happened. The prospects should be reappraised, because all the states have bio-fuel written into their strategies.

There will be a number of other initiatives, including financial measures that countries are contemplating in connection with energy and climate issues.

Some initiatives in medicine include access for countries to modern drugs because countries with mass epidemics typically cannot afford modern technology and medicines. Such an initiative is being developed under Italian supervision. Most probably we will make the final decision on the parameters of this initiative for the coming years and it will ensure the development and broad access to drugs for these countries.

Vladimir Putin: Let us move on to the items on our agenda. The key item is the report on the implementation of the federal budget and the budgets of the state off-budget funds for 2007. This is the last yearly budget. Beginning this year, we are switching to three-year budgets.

In 2007 the GDP grew by more than 8%. Real incomes - and I stress, the real incomes of citizens - increased by more than 10%. We have managed to sustain that figure over the past several years. Tax and customs revenues have grown significantly. All this creates a favourable background for our budget policy, a policy aimed at long-term development of the Russian economy, modernisation of the social sphere, enhancing the quality of life and the living standards of our citizens.

Federal budget spending amounted to nearly 6 trillion roubles. As late as 2004 we could afford to spend just 2.4 trillion roubles, an almost two-fold increase in real terms. Spending in such an important area as health more than tripled in the last three years.

Along with the planned allocations for the social sphere, science, culture, the strengthening of the Armed Forces and support of the regions, key development institutions were capitalized in 2007. They are the Development Bank, the Investment Fund, the Russian Nano-Technologies Corporation as well as the Housing and Utilities Reform Fund. We are talking about an overall sum of about 640 billion roubles. The Housing and Utilities Reform Fund intended for capital repair and the re-housing of citizens from dilapidated and accident-prone housing will be financed to the tune of 240 billion roubles.

The Government and its agencies must keep specific projects that use this allocation under constant review. By the way, today we intend to hold a meeting of the Supervisory Board of the Development Bank (VEB) and we will consider a number of investment programmes.

Once again, I draw your attention to the need to strictly monitor the fulfillment of the decisions taken. For many years the solution of pressing problems has been held back by a shortage of resources and under-financing. Today our potential has increased greatly. But at the same time we have learned that using these funds competently and rationally is not an easy task. For example, allocations for federal targeted programmes in 2007 were used by the end clients only to the extent of 85%.

Rational use of budget money is one of the key tasks facing every government body. Let me remind you that irrational use results in an excess of liquidity in the economy and spurs inflation. Agencies keep asking us to increase funding, and then they fail to use the allocated resources in a timely manner. Monitoring that process must be one criterion for assessing the effectiveness of government agencies. I also believe that the question of implementation of the federal targeted programmes must be looked at in detail at one of the Presidium meetings soon. Let us get down to work.

I give the floor to Mr Kudrin who will present his report.