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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,

To begin with, let us exchange current information.

On June 11, Viktor Zubkov conducted a meeting of the Government Commission on Foreign Trade Protection Measures in Customs and Tariff Policy. I have looked at some of the decisions and I would like you to comment on them. The first question that springs to mind is what are we going to do? Stimulate the development of our own industry or help to develop industry abroad by stimulating imports into the Russian Federation?

Mr Zubkov, please.

Viktor Zubkov: Mr Putin, I conducted a meeting of the Government Commission on Foreign Trade Protection Measures in Customs and Tariff Policy. We examined many proposals on changes in the import duty for a number of items that have come to the Commission from ministries, agencies and the business community.

Vladimir Putin: Which business community did these proposals come from? From the community that is engaged in real production or the one engaged in trade? What proposals have you examined?

Viktor Zubkov: Primarily from the business engaged in real production, for example, leather and shoe-making and car assembly in Russia. There were proposals to grant a 9-month reprieve from import duties on spare parts for our aviation in order to make flights safer because there are many fakes. It was also decided to lift customs duties on mobile phones.

Vladimir Putin: Lift them altogether?

Viktor Zubkov: Yes. Because the aim is to make this business transparent. But on the other hand, we should see how the situation develops over the next nine months. We have already lifted duties on spare parts and components for mobile phones. Unfortunately, that work is moving slowly. We do not yet produce our own mobile phones. We will keep the situation under review.

In addition, we discussed several other issues. I have mentioned the lifting of import duties on some types of chemical materials for the leather and shoe-making industry. The proposal contained 12 points, but we have 6 points, items that we do not indeed produce in Russia. Besides, the import duties on furniture sheets made from tropical species of timber. We do not have such timber. Though the furniture produced in Russia is not bad, it will acquire a new quality if tropical timber species are used more widely.

I must say that instructions have been given to carry out further analysis on all the decisions taken.

No decision has been made on lifting the duties on plasma and liquid crystal monitors. The proposal was to set the import duty at zero. But we have given the working group another 10 days to study these items more closely.

Our main criterion was the absence of domestic production of the goods on which zero duties were proposed in the interests of Russian consumers. We are tackling the task of creating incentives for increasing legal imports. This approach will ensure a reasonable balance between the interests of the budget and the development of domestic production through the creation of a competitive environment.

We will closely look at all the Commission's materials. A permanent working group has been created for that purpose. The ministries have pledged to provide the materials in advance, and not at the eleventh hour. In addition a panel of experts comprising representatives of research institutions will be set up. They too will analyse all the questions that may arise in making final decisions before the meetings of the Commission. But the final decisions will be taken by the Prime Minister based on the materials that we will submit.

Vladimir Putin: Here is what I would like to stress. Mr Zubkov and I have already discussed it. Clearly, the Russian economy has to a large extent become part of the world economy. So cooperation is deepening and the ties are expanding. It is a natural and absolutely normal process. At the same time any decisions on custom tariff regulation have long-term consequences for our own economy and our own industry, its various sectors. So, the decisions must be very balanced. They must be totally free of any lobbyism, especially on the part of trading and intermediary organisations. We all know that in some sectors a single wrong move may destroy our domestic production for decades ahead and deprive it of any incentives. I urge you to be very careful on these issues and study them very thoroughly.

In accordance with the President's Decree a draft law on the creation of the Housing Construction Fund was submitted to the State Duma.

Dmitry Kozak: Mr Putin, pursuant to the President's Decree of May 7, we and the Ministry of Economic Development, the Finance Ministry and a group of deputies have submitted a draft law on the development of housing construction. A Land Fund is to be created, a proposal that has been discussed earlier.

The main task of the fund will be to conduct an inventory of federal land used to support the functions of the Russian Federation, land suitable for housing construction, the development of industry and the creation of industrial facilities. The main task of the fund is to consolidate such land and distribute it among the regions and to hold land auctions for large plots of land with a view to making housing more accessible. That work is now being done. Today the State Duma deputies, members of United Russia, introduced the bill dated May 7. The Government is to submit its opinion before June 18. The end of June is the final deadline.

I would like to remind you that the idea of creating such a fund was first put forward during a meeting of the Coordinating Council for the implementation of the national projects on April 2. The Government Resolution of April 3 forbade federal government bodies and federal state enterprises to dispose of the land and engage in commercial activities involving that land. At present, pursuant to that resolution, we, together with the Ministry of Economic Development, approved the form of the application of Russian regions for the transfer of land to them. On June 7 I issued an Executive Order to create a Commission which will consider these applications. If the Duma passes the law during its spring session that will complete the formation of the fund's legal framework.

Vladimir Putin: Mr Kozak, I would like to remind you of our understanding that we should complete the work on building standards by November.

Dmitry Kozak: Yes, we are working on that. A plan of measures to reform pricing in construction was approved today. We have sent requests to the Russian regions and our representative offices there for help in creating a data bank on prices for construction services. We could use it as the ceiling for building services prices at the stage of budget planning. At this stage we frequently take another look at the fairly expensive projects approved in accordance with the old standards, the old SNiP norms. These restrictions should play the key role in cutting prices for building materials out of budget assets.

Vladimir Putin: Please do not forget it, keep it under personal review.

Ms Golikova, the State Duma passed three readings at once of our bill that will practically double the minimum wage. We have discussed this topic time and again. And still, what is your analysis of its impact on the labour market and the economy as a whole?

Tatyana Golikova: Yes, the State Duma passed the law just last week. It is a very important law. It was the subject of stormy discussions as to whether such a major increase of the minimum wage was practicable or not. We believe that the decision is well grounded.

The main thing is that we should shortly take another decision on how to square the increase of the minimum wage to 4,330 roubles as of January 1, 2009 with available budget resources, and with Government Resolution № 605 issued late last year on the adoption of new wage schemes. What I mean is that we are shortly to adopt the regulations for the switch of all the federal executive bodies and public-financed institutions to new remuneration systems. Accordingly, we should make available to the federal executive bodies the necessary financing that takes into account the transition to new remuneration systems and simultaneous incorporation into these new systems of the minimum wage that will be established from January 1, 2009. That has to be done today, without waiting for the draft budget to be introduced at the State Duma, because it will take the government bodies considerable time to develop or finalise the new remuneration systems. I think it would make sense to coordinate the schedule of the transition to make it the same for everyone and understandable so that our federal agencies would be ready to approve the new remuneration systems not later than November 1. Such work is being done at present. I think we will complete it duly within a short time and submit our proposals to you.

Vladimir Putin: We will talk about it some more today.

Mr Gordeyev, you are going to Geneva to discuss the issues of agriculture in connection with the terms of Russian accession to the WTO. What will you focus on?

Alexei Gordeyev: Mr Putin, on the Government's instructions I am to visit Geneva on Wednesday for final talks on the level of support of agriculture in Russia. I will have a meeting with the ambassadors of the so-called Kern Group, which takes the toughest stand on liberalisation of farm produce trade and cutting direct subsidies.

We have declared $9 billion. That is an agreed position. Our partners tell us to proceed from the 2005-2006 base, that is, about $3 billion.

But we argue our case by pointing out, first, that our main partners - the European Union countries, the US and Canada - enjoy a much higher permitted level of support. So we have our own plans for restoring our domestic agriculture, I mean the government programme. The level of $9 billion should ensure the fulfillment of that task. I hope we will be able to persuade our colleagues. We have worked out the arguments together with the Ministry of Economic Development and I think they must lend us an ear.

Vladimir Putin: Very well. When you are back, you will tell us about it in more detail.

Mr Ivanov, you attended the celebrations of the 225th anniversary of the city of Sevastopol.

Sergei Ivanov: Mr Putin, I visited Sevastopol on June 14, where I led a government delegation at the celebrations of the 225th anniversary of the Hero City of Sevastopol. I held a series of meetings with the representatives of the city administration and the City Council, and I attended several functions. But I would single out the meeting with the public representatives, our fellow countrymen who live in Sevastopol. We had a very in-depth and at times, let us face it, emotional conversation.

Most of the questions raised fall into two main groups: first, support for the status of the Russian language in Sevastopol and the Crimea as a whole, and second, the position of our fellow countrymen. I spoke in detail about our current approach to these problems, I mentioned the recent World Forum of the Russian-Speaking Press, the federal targeted programmes that are already being implemented to support the Russian language and our countrymen abroad. I conveyed an address from the President of the Russian Federation. I was asked about 100 questions in written form about the Russian language and fellow countrymen. We will make a point of looking at them together with the Foreign Ministry and will give corresponding answers. The topic of Sevastopol of course is very acute and very emotive. We could feel it with our skin during our stay there.

On the whole I think it was a useful trip. It enabled us to hear once again what the common people think, the people who live there and are in a difficult situation, and at the same time, to tell them what the Government of the Russian Federation and especially the Foreign Ministry are planning to do to support the Russian language and the 92% of Sevastopol's population who are Russian citizens. Sebastopol is a unique case: 92% of its citizens are citizens of Russia. That should give us pause for thought.

Vladimir Putin: Thank you. Let us move on to our agenda of the day.

As we have agreed, we will look at the implementation of the federal targeted programmes and the targeted investment programme.

We know that these are key levers of the social and economic development of Russia. The fact that they are federal programmes indicates that they are aimed at solving truly strategic priority tasks.

I have just visited the All-Russia Aviation Materials Institute. The Institute is actively involved in a number of areas. Its participation in federal targeted programmes enables it to achieve major technological results, to upgrade the research and production facilities. But, as the head of the Institute said, in 1997 practically all the main sites were "dead" and idle. As regards age, out of more than a thousand research personnel less than a score can be described as young specialists aged under 33. The average age of a scientific worker today is 50. That should give us pause. It is another proof that we were right in adopting a new programme for training scientific and scientific-pedagogical personnel. Even so, the overall trend is positive.

In 2008 the Institute is receiving 1.1 billion roubles from us for research in five areas. It is a great help. There are some problems of a general character that the Institute's head raised during the talk. I will speak about them a little later and I would like you to take note.

All in all, in 2008 we are earmarking 850 billion roubles for federal targeted programmes and investments "outside the programme" will be allocated. It's a hefty sum, but it is only 12% of the federal budget expenditure. These allocations of course should yield tangible and effective returns. I am not going to enumerate them, you know them well. Modernisation of the transport system, 251 billion roubles; the Housing programme, 64 billion roubles; the development of the nuclear power industry, 51 billion roubles; social and economic development of the Far East and the Trans-Baikal Area, 37 billion roubles, etc.

I believe that one of the government's key tasks is to pass on to modern, project-based, methods of designing Federal Targeted Programmes (FTPs). That is when every programme project has a clear economic validation, deadlines and criteria for assessing the result.

In fact, such experience already exists, including in the implementation of the priority national projects. The recently adopted programme for the development of the transport system, which I just mentioned, is based on this principle.

This practice should be phased in for all the FTPs. I urge the Ministry of Economic Development to attend to this problem and to bear it in mind.

In addition, we have to put in place the organisational mechanisms connected with the fulfillment of the targeted programmes. We still face instances when the actual start of programme implementation is delayed until practically the middle of the year. That absolutely cannot be tolerated. Every such managerial slip-up has to be looked into. And the corresponding agencies which provide funding, above all the Finance Ministry, must bear in mind that it cannot be used as a method of deferring the disbursement of funding to the end of the year. That is not the way to combat inflation.

Of course, one can bring in specialised managing companies, including private sector ones, to implement FTPs. The law allows that, at least it does not expressly forbid it. That is true.

But I would like to draw your attention to what I just heard during my visit to the Institute. We have had a change of the Government in accordance with the Constitution and the Law on the Election of the President. We have new ministries and agencies, at least they have new names. This need not be a pretext for holding back financing of the programmes already adopted. I draw the attention of the Minister of Economic Development and the Finance Minister to this. Equally, the change of status of the government institutions should not be cause for holding back funding. What matters to us is not the status of the institution or its name, what matters is the substance of the programmes. We must implement these programmes and we must not delay them under any circumstances. So I urge my colleagues to think about an effective way of closing this problem once and for all, rather than go from door to door to various agencies and spend a whole year securing the necessary approvals. That cannot be tolerated. We don't want more red tape.

The same goes for the funding of capital investments. I want you to pay attention to this. There is a problem here and the Minister of Economic Development knows it, I am sure. I ask you to confer with Mr Khristenko and take a common decision so that there be no delays connected with capital investments.

We have considerable problems with financing federal programmes out of the regional and local budgets and off-budget sources. During the first quarter a little over 9% of the planned annual amount of funds has been raised. The promise to raise additional resources often provides one of the main arguments in favour of adopting this or that FTP. But, having given these promises, we must keep them and constantly work with the regions, municipalities and business. I know how it happens. You yourselves come to me and say: part of the programme will be financed by business. But it is often hard to say which part. Meanwhile the programme has already been approved. And everything is sewn up, and there is no one to call to account. That is not the way.

I ask you to report on the preparation of new programmes which may be launched from the beginning of next year.

Work on them must be completed exactly on time before the draft federal budget is introduced at the State Duma.