Transcript of the meeting:
Vladimir Putin: Good afternoon, esteemed colleagues,
We are meeting today in Pskov, one of the oldest cities in Russia, which has a long history and unique tradition of self-government. However, today I would like to speak about the present and the future, and to discuss how we can ensure the rapid development of the regions and regional centres, provincial cities and regional capitals, as well as strengthen the potential and opportunities of local governments. As Alexander Solzhenitsyn said, people’s everyday life is 80% dependent on local issues rather than national ones, and, therefore, they depend on local government.
The cities you govern are landmarks of your regions and represent the hearts of regional economies, culture, and education. Nearly 54 million people, which is fully a third of the Russian population, live in regional capitals. Their well-being and quality of life are directly dependent on the effectiveness of your work. I would like to repeat that what we need is strong and competent local government. It is essential to Russia’s successful development and to opening the vast potential of all its territories.
I would like to start with the most crucial issue, which is, of course, funding. In the course of the reform of local government, we clearly defined areas of supervision and sources of funding and how they are to be divided between the (federal and regional) levels of government. I know that we still have many problems with this and that not everything is going as well as we would like – there are still a lot of issues to be addressed. Perhaps, many of them require approval and amendments. But, in general, we have tackled the key questions of allocation and the division of supervisory areas and funding between different levels of government.
Consequently, in the past five years, the urban districts’ revenues have almost doubled. I would like to stress that I am not only talking about the administrative centres but also about small towns. In its turn, this will help almost double practically all types of spending, including on social policy, housing and public utilities, and culture and education. However, it is well known that despite this increase in revenue, there is not enough money for current needs and for promising new projects. Even cities with more than one million residents draft their budgets with a deficit. For example, Novosibirsk has a budget deficit of 1.7 billion roubles, Nizhny Novgorod – 1.4 billion roubles, Rostov-on-Don – 1.2 billion, and Samara – 0.5 billion roubles.
At the same time, the population of major cities is growing. Since the 2002 census, it has grown by more than one million. Accordingly, the scale of issues is expanding because urbanisation requires conceptually new approaches to urban development, above all in regional capitals. Meanwhile, interbudgetary transfers account for almost half of the cities’ budget revenues. This often puts municipalities in the position of supplicants and, most importantly, does little to create incentives for their initiative.
At the federal level, we have devised a unified approach to providing financial aid to the Russian regions. This issue has been resolved, but the interaction between regional authorities and municipalities has not yet been streamlined. All regional authorities act as they deem appropriate. Meanwhile, regional authorities prefer to use targeted subsidies rather than so-called unrestricted aid to balance out their budgets. Naturally, it is easier to supervise subsidies, but this method weakens the financial autonomy of local governments. I believe that it would do no harm for municipalities to have greater freedom in using regional funding, provided that they act with correspondingly greater responsibility.
As for targeted subsidies, they should above all be set aside for co-financing investment projects rather than spent on the current needs of various agencies, let alone those of the local authorities themselves. I believe it is necessary to draft amendments to the Budget Code entailing a unified procedure for providing funding to municipalities. We need a mechanism that will help balance out budgets and catalyse urban development. Certainly, municipalities should primarily rely on fiscal revenues. I know that suggestions have been voiced to revisit the issue of tax distribution. We can look into it. Meanwhile, our laws already provide for the regional authorities’ right to pass some regional taxes and duties on to municipalities. I believe that regional authorities should use this measure more actively.
As for revamping tax distribution, there are certain risks, and you, ladies and gentlemen, are aware of them. These are risks that we cannot ignore or neglect for a number of reasons both geographical and economic in nature. The development of Russia’s regions and individual municipalities is sometimes very disproportionate.
For reference, ten Russian regions accounting for slightly more than a quarter of the country’s population generated 60% of the federal budget’s tax revenues last year. As for the municipalities, 65% of local budget revenues are generated in major cities.
At the same time, I agree that the municipalities that work actively and ambitiously should have additional incentives and resources to see their plans through. Let’s proceed from this principle.
Amendments to the Tax Code will soon be adopted. Revenues from patents will be almost completely passed on to municipalities – some 90% of them, to be exact. According to preliminary estimates, efficient use of the patent system can help local authorities attract billions of roubles, which is tens or even maybe hundreds of times more than what they currently have. So, municipalities will receive a powerful tool with which to replenish their budgets. Naturally, how it will be used depends upon municipal leadership. Isn’t it the municipalities who should work most actively to develop small and medium-sized businesses? We need to make sure that people have a secure foothold [in local economies], and then the revenues to city budgets will come.
In addition, real estate tax can soon become a significant, if not primary, source of local budget revenues. However, we first need to thoroughly consider the limits of tax rates and exemptions, so that socially vulnerable groups are not adversely affected. We cannot tolerate a situation in which pensioners and people with limited means and disabilities have to spend their entire pensions or social benefits on real estate taxes for their flats or modest garden patches.
There is something else I would like to point out. Greater financial freedom and additional sources of revenue will do nothing for municipal development without quality management and strong budget discipline. It is clear that the efficiency of urban management cannot be ensured merely through endless inspections by federal agencies. And that’s a fact. Indeed, the effect of such visits is often quite the opposite. Local authorities spend their time writing inquiries to prosecutors and inspectors rather than on addressing pressing problems. I am instructing the Ministry of Regional Development, the Ministry of Economic Development, and the Prosecutor General’s Office to make suggestions as to how such unreasonable inspections could be reduced. What happened when we restricted the control of business? All the inspection agencies lashed out at other scapegoats. Control must be exercised, but so must common sense.
One of the ways to boost the efficiency of local governments is to assign them professional managers. Nearly half of the administrative centres can do so. They enlist the help of so-called city managers. This system is working, and it is working well. Representative officials hire professional executives on behalf of the people. This situation must, of course, be kept under strict control. Their duties must be fully performed. I would like to emphasise that this issue is regulated by the law. I would like the heads of representative authorities to take note as well. I know they are among us today. This can and must be done, but the activity of these officials and city managers must be duly controlled.
Colleagues, the most fundamental thing for any person is the house where one lives and the courtyard outside where one’s children play. Therefore, the condition of these premises directly affects people’s state of mind, their social identity, their confidence in life and their futures, and their ambitions to build their lives around the places where they were born and raised. Unfortunately, most of our citizens have to live in conditions that leave much to be desired.
It is clear that new housing should be built. We have set a target at the federal level to achieve a 50% increase in construction by 2015, which is equal to 90 million square metres a year. But this goal will be hard to meet if we do not eliminate red tape that significantly slows down construction rates even as housing prices soar higher and higher. These prices per square metre often include a so-called administrative fee, or exaction, to put it briefly.
I should note that 98% of construction projects are approved by local governments. It is no secret that sometimes it is easier for local and well-known contractors to obtain approval for construction. The businesses competitors want to cut out of a project get into a vicious circle even at the start of preliminary paperwork. That is something we can’t tolerate. We have introduced a scale for assessing the work of regional governments, and I think a similar system would be appropriate for municipal authorities. One of the key criteria should be the situation in the construction industry and the business climate in general.
Contemporary construction requires state-of-the-art technology and standards, and transport, utilities and social infrastructure need to be thought out in advance. Builders should not think about rapidly putting up drab concrete buildings just to meet planned targets. Rather they should take the architectural history of towns into consideration so as to make sure that new construction doesn’t lead to the destruction of historical and architectural monuments.
Here is an extremely important thing concerning infrastructure. You surely know about it from firsthand experience: you often have to settle old issues when construction work has been already planned or even partly done, and then they come for more money because there are no roads to the site and other necessities. Such things should be planned out ahead of time. It makes the job cheaper and easier.
The current housing stock needs to be repaired and renewed. More than a billion square metres – a third of the entire national housing stock – is in need of capital repairs. This is a conservative estimate. The fund to promote the reform of housing and public utilities helped ease the problem. 130 billion roubles have been allocated to repair dilapidated and unsuitable housing in regional administrative centres alone.
We must speed up the work, and so we are considering allocating a part of the additional federal revenues to capitalise the housing fund this year. As we were just speaking about, the matter has been coordinated with the Finance Ministry, and another 20 billion roubles will be spent on such capitalisation this autumn.
We should also think together how to solve the problem of dilapidated and unsuitable housing after December 31, 2012, when the term of the fund officially expires. I am not sure what will come of it given the endless shortages of budget funds – but I think it was an effective and popular tool. I am sure that you will discuss it today.
The next issue concerns utilities infrastructure. Average wear and tear exceeds 60%, and approaches 90% in some cities. We have ten years to bring our housing stock and public utilities into order and transform it from the headache that it is now into a state-of-the-art industry. Private investment should be the main source of financing for this modernisation. Meanwhile, the share of private companies in the sector has reached 70% within these two years despite the downturn. Private businesses are interested in this industry and conduct business there.
City halls must finish their inventory of housing and utilities funds and actively commercialise them using such forms of cooperation with businesses as public-private partnerships, concessions and leases. It is high time for the Ministries of Regional Development and Economic Development to develop a set of measures to attract private investment to housing and municipal economy.
The federal targeted programme to reform and modernise housing and public utilities up to 2020 is sure to become one of the tools for modernising the sector, and I call on relevant federal agencies to finally determine the ideology and parameters of this programme.
Let me stress that the people must not bear the brunt of the modernisation of housing and utilities. We must not solve the problem with skyrocketing rents and tariffs. The average increase this year should be kept below 15%. A fair number of regions have kept it even below 12%. Later tariff growth should keep pace with inflation.
Rents and utility fees are skyrocketing not only because the prices charged by natural monopolies and municipal agencies are rising but also because of the greed of the managing companies. They must be put under close supervision and have their knuckles rapped when necessary. Please keep an eye on this.
We have discussed it, made government decisions, and passed legislative acts for the disclosure of exhaustive information on service and commodity prices so that people can make comparisons and judge quality. There is a simple way to get rid of inefficient companies – they should be ousted from the market so that the public has the chance to turn to better ones.
We certainly need a systems approach to housing management if we are to put an end to corruption, improve services, and delegate decision-making responsibility to employees and managers. Here, too, we need greater efficiency because the new arrangement grants municipal authorities a mere five days to call a meeting when citizens complain to them of managing companies’ poor performance. They have another 15 days to decide what to do about such companies. Please use this tool.
We are doing the same job at the federal level. Early this month the Government Presidium approved new rules for public utilities to establish explicit quality standards, put an end to the so-called 13th month fees, and change the pattern of calculating common utility fees. In case of inadequate services, the customer is refunded the fee while the company in question may – and should – be fined. I call on the Ministry of Regional Development to explain the new regulations in the provinces to avoid misunderstandings and consequent work stoppages.
Apartment house managers need fair competition and transparency to oust dishonest and inefficient companies from the market, as I said. If you cannot render proper public services, you should quit. Managing companies need a set of explicit rules, and they must know precisely the degree of their responsibility to the people. In this, we must be careful not to overdo the thing and to help the numerous efficient companies.
We must certainly bolster government supervision of housing management. The Ministry of Regional Development should step up the drafting of this government decree. I dare emphasise that our efforts will be of no use without public support and without your guarantee of the conscientious implementation of all the decisions and compliance with the standards.
There is another extremely entangled issue – the distinction in responsibility between housing and public utilities. Particularly, it is unclear to this day who should reimburse the financial loss from the difference between actual costs – for example, the costs of heating – and tenant rates, now set by the regions. We see these situations even now: the actual costs of heating exceed the end user rates. Who will make up the difference?
Our laws do not yet precisely delineate the responsibilities of business and municipal government in heating, water supply, disposal and so on. The best arrangement is being actively sought by legislatures, and they should step up this work.
Municipal improvement is a city’s first priority. This implies a wide range of issues. Some essentials might appear quite simple and trivial at first sight. I mean snow cleaning, landscape gardening, the construction of children’s playgrounds, etc. However simple these everyday things might be, they largely determine the quality of life. Even some regional centres occasionally cannot do this properly – in some cities, about half the streets have no lighting.
What we need here is teamwork. The federal authorities must finally regulate these legal issues – particularly, specify precise definitions of the term “municipal improvement” and of its criteria.
We know how many problems have been shelved over the years. So we offer you both direct support and funding – we have launched a special project on which regional centres received a total of 50 billion roubles for urban improvement over two years. This year 22.7 billion roubles have been allocated to repair courtyards and driveways, and more than 11 billion for road maintenance. Regional funds will add to these sums.
The regions must join hands with the municipalities to ensure that these funds are used to the greatest possible effect, which implies careful selection of subcontractors, prevention of bloated costs, quality control, and adhering to deadlines.
I have just met with Mr Andrei Turchak (Pskov Region governor). He arranged my meeting with online communities that want to join the Russian Popular Front. They emerged on the internet as public protest organisations. Now, they are doing jobs of tremendous importance: they supervise road construction, and offer timely information about it to the governor and the mayor. It is an important job! They started with protests, but now they have taken up positive, constructive work and do it conscientiously, and without any remuneration.
If any of you happen to organise Popular Front work in the regions, remember that regional centres need these people – young, energetic, and determined to work productively for the goals we all share. I would like to ask the Regional Development Ministry to monitor the projects on a permanent basis. And of course, it is the local leaders who are responsible for the final result.
In addition, I would like to add that in the recent years we have held a competition for Russia’s best developed city. The winners are awarded with both extra financial support and public recognition, which has always been important in Russia. The competition revealed that financial potential is not the only factor that determines urban development. For instance, Cheboksary, the capital of subsidized Chuvashia, has won the competition whereas Samara, another city on the Volga and the centre of the region which is a net contributor to the federal budget, , has not achieved results yet. Obviously, the key to success lies in the desire of the local authorities to change the city and the life of its people for the better.
I hope that Samara’s new mayor will be guided by the same approaches. And all of us must also pay close attention to this.
A major task for the city government is to create a positive environment for the citizesns, for their self-actualisation, the establishment of one’s own business, starting a family, and bringing up children. Talented and proactive young people should live and work in their own cities and towns, which will preserve and strengthen the human resource potential.
Our cities and towns must be comfortable as well as planned harmoniously and rationally. In this respect I would like to get back to the city’s general plans. They have been approved in most of the administrative centres. However, the quality of the documents leaves much to be desired. I know this as I have studied them.
But how can we develop our cities without proper general plans? It is the general plans that provide a balanced accounting for economic, ecological and social factors. We must consider every small detail. Actually, there are no small details. Mistakes made during the initial phase, or the planning phase, may lead to problems as far as ten years ahead as they will hardly be corrected. If a plan is approved, it is expected to be a good document as there were experts working on it. A plan is developed, approved, and then the implementation phase comes next. And if there is a mistake, it is replicated on this stage, and that means spending extra money. To prevent this, citizens, as well as public associations and organisations, must take an active part in the discussion of general plans.
Another serious problem is the state of public transport. Almost one-third of Russia’s buses are over ten years old, one-fifth of the trolleybuses are more than twenty years old, and two-thirds of the trams are over fifteen years. And it is not only a matter of comfort, but primarily a safety issue.
During the crisis, 30 billion roubles were allocated from the federal budget for municipal needs such as the purchase of road machinery and municipal vehicles and passenger transport. We are now discussing how to apply new solutions and approaches to the modernisation of the transport fleet. At present, we intend to expand leasing practices to improve the public transport fleet.
This system is now operational. According to a preferential leasing program, in 2010 the State Transport Leasing Company signed agreements for 959.3 million roubles, which provided for 377 passenger city and suburban buses. This is actually the beginning, and I call on everyone to join in. Governors must help by offering regional resources.
And new vehicles should travel on good roads: we must improve and develop road infrastructure, for which we have extra resources. Local authorities are allowed to establish municipal road funds and decide on their sources. This may become an important factor in developing the road network. We count on a substantial inflow of money.
I would like to call attention to social issues. Beginning from next year, regional authorities will assume responsibility from municipal authorities in providing medical treatment. Naturally, both municipal governors and medical workers have questions and feel a bit worried about this. We must explain the key principles of this transfer.
First, medical workers’ associations must be preserved, and municipalities must provide social guarantees to medical workers. The latter include special municipal charges and the provision of housing. And most importantly, the quality and availability of medical care must improve. This is the goal we are trying to achieve by assigning medical care to the higher level of the regional authorities.
Secondly, governors must personally control the process of delegating duties in the sphere, about which I would like to ask you, my colleagues. Federal agencies must provide manuals and monitor the process in order to prevent problems at the local level. We allocate 460 billion roubles for the modernisation of the healthcare system, but the final result will depend on you to a great extent.
Almost all the plans have been approved. Both the regions and the Ministry of Healthcare have approved them, but all facilities are located in your region. And I ask you to supervise this as responsibly as possible. We are ready to make reasonable amendments, if needed, but, of course, we will work under the approved plans.
The modernisation of Russian schools is another major social project we will need to work on together. The federal budget will allocate no less than 120 billion roubles to improve education conditions, to retrain teachers, and increase wages in the next two years. This will be possible since the regions will be able to allocate the funds released to increase the teachers’ salaries. The wage fund should grow by 30%, on average, beginning on September 1, 2011. I would like to reiterate – the wage fund – the wage fund rather than the salary of every single teacher. And you will decide on the procedure to be followed, the rise in salaries and where to increase them.
As you are all well aware, I visit the regions often – governors and municipal leaders in many regions told me that this year we will be able to raise teachers' salaries to the level of the average salary for the regions. But I think there are some regions that will not be able to achieve this. Though, some of the regions have already attained the goal: the teachers’ average salaries do correspond to the regions’ average salaries. Let me repeat myself, some of the regions will do it right from September 1. Of course, these are the primary goals we need to fulfil.
I would also like to give attention to another topic – kindergartens. I’ve just been at the community liaison office – citizens have asked me about them once again. You know how serious this issue is. We have been developing the demographic programme, solving the demographic problem, and in general we have succeeded – we have achieved positive trends. But if we don’t try to resolve the issues with kindergartens, then, as many people say now, this will be a grave infrastructural limitation. For instance, a woman has just come with her son. She can’t start working because kindergartens are overfilled – some 1.7 million children are on waiting lists.
In this respect, there is another issue to be resolved – the salaries of educators in kindergartens, and you understand this even better than I do. Their salaries are too low. I understand that there aren’t enough funds for everything, there are too many issues, but this one is one of the most important, it is vital. Consider it a part of the demographic programme. We need to create conditions to attract people to work in this sphere. I ask you to turn your attention to this. On our part, we will render financial support to the regions that are doing their best to develop pre-school institutions. As you know, we have stipulated 500 million roubles in the budget this year, but we decided to double it to one billion roubles through additional revenues.
Of course, kindergartens should reclaim the facilities that were transferred to firms and offices. We need to develop alternative forms of pre-school education – we need to establish family kindergartens as well as organisations that will only specialise in taking care of children. They can be both public and private. In order to create a favourable environment for such institutions, we will need to amend the regulatory framework (and we will do this), we will adjust sanitary and epidemiological requirements to new types of work. There are a lot of standards that have become outdated. Many things depend on your support and the citizens’ initiatives in this respect. This also deals with the provision of family kindergarten facilities, transport, and catering. Why do I emphasise this? Unfortunately, the federal resolutions for developing individual enterprises often meet serious obstacles at lower levels. And I must mention it. For instance, entrepreneurs have gained preferential rights to buy out leased premises – you are well aware of this.
And what do we have after the fact? There is a public organisation called Opora Russia, which deals with small and medium-sized enterprises. They polled its members in 25 administrative centres to discover that the authorities do not allow enterprises to use their rights. This work is being done only in a number of major municipalities, which I will name now: the Republic of Bashkortostan, the Kirov, Volgograd, Nizhny Novgorod, Rostov and Tambov Regions. As for other regions, the property is either transferred to municipal unitary enterprises, or the property’s purchase costs are substantially increased. Or the property is entered in a list of facilities which are not subject to privatisation.
I understand that it’s much easier to make stable earnings from rental payments rather than from systematically developing and supporting enterprises, creating a good environment for small and medium-sized business. And you know – but we don’t need to think of it as charity to small and medium-sized business – if we follow such an approach, then we can forget about the creation of new jobs and the substantial increase of tax revenues. Think about it.
Further. It’s necessary to substantially develop the system for providing municipal services in the interests of citizens. We thoroughly discussed the issue at the meeting in Orenburg held this January. We must finish forming administrative regulations by July 2012; these regulations will specify all the details for providing municipal services, covering everything from the filing of documents to deadlines. We must convert them into electronic format to post them on a unified portal of state services. And we definitely need to establish full service centres, where people will be able to get all the services specified by law without waiting in long queues and paying money to different intermediaries. Many cities have such centres, I’ve been there personally and examined them. I am really proud of our colleagues who organised such work. And they are proud as well, because they offer what the citizens need, and this is absolutely great. And we need to work further, because beginning from July 1, almost in a month, the government agencies will be obliged to request different agencies for documents necessary for fulfilling services. Four such centres have already been opened in Rostov-on-Don, but there are cities where the progress in this field leaves much to be desired. We will have to think about ways of accelerating the work for establishing such full service centres. In general, some 242 centres have been opened in the country.
Ladies and gentlemen, before we move on to discussion, I would like to say the following in conclusion. You are closer than anyone else to the citizens, and that’s the most complicated work: the closer you are to the people, the more difficult it is. And the level of trust and respect of our citizens towards the state in general depends on your efforts and your work. People do not distinguish between the municipal authorities from the state authorities; they do not understand the difference between them since these are theoretical notions. They assess the quality of the state according to the quality of our work, first and foremost.
While resolving the municipal issues, municipalities must consider the views and interests of residents, get them involved in resolving the issues, develop and support the citizens’ initiatives. That’s why our regional capitals are meant to become an example for all other Russian municipalities. And another thing, the municipalities must become a springboard for attracting young, committed people to politics. This practice is applied all over the world, let’s help young people fulfil their potential, demonstrate their abilities, and implement their projects and ideas. I would like to quote Alexander Solzhenitsyn: “Without well-formed local government, the notion of civil liberty loses its meaning.” This is the very truth itself.
Our common task is to make people feel comfortable in any part of Russia, to make them proud of the cities, towns and villages they live in. That’s the only way to establish a solid basis for the steady development of the country, and we have everything we need for this today. Thank you for your attention. Let’s move on to our discussion.
Pskov Mayor Ivan Tsetsersky, proceed, please.
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Vladimir Putin: Thank you. I would like to hear comments on the issues that have been raised and the decisions, addressing these problems that are currently in the making.
Viktor Basargin: Mr Putin, colleagues. Let me first speak of the single source database. Our housing and utilities sector reform programme will include (as Mr Putin mentioned here, we will make every effort to finalise the master programme this year) all aspects related to facilities’ electronic certificates and apartment buildings.
It will establish a system to register consumer utility payments. It will contain comprehensive information on management companies, including a list of these companies. In other words, the database will include all housing and utility related information in a specific municipality. This is to say that the system has been elaborated including the necessary software. We are ready to launch this system.
Second. As Mr Putin mentioned in his remarks, on May 6 the government adopted a resolution on housing and communal services in lieu of the resolution No. 307. It will be published in the near future. The document covers nearly every aspect of the relationship between the management companies, resource supply companies, and consumers.
It allows customers to conclude a direct agreement with resource supply companies and specifies the procedure for the agreement. Someone here said that the regulator establishes tariffs that are not economically justified. I think that jointly with the tariff setting organisation, we can find a way to work out a mechanism for compensating for such losses.
Vladimir Putin: On the housing and utilities fund, Mr Kozak please.
Dmitry Kozak: Regarding the fund to facilitate the housing and utilities reform, the issues raised here are current. The fund will complete its activities in 2012. Naturally, the federal budget cannot endlessly finance these activities.
Unfortunately, we have been sending mixed signals to tenants and apartment owners. However, we have managed to reconcile the differences between the federal agencies. Federal legislation will be amended soon to provide for the creation of permanent regional and municipal programmes for the major repair of residential housing.
The 20 billion roubles mentioned by Mr Putin will be allocated for major repairs and dilapidated building demolition programmes in the regions. However, these funds will only be allocated contingent on the regions having real mechanisms in place by mid-2012 to implement these programmes.
I am referring to processes for funding the building repairs from the regional budget. As everyone knows, under the current housing code, there is a large repair fee levied on consumers.
These fees exist in half of the country’s regions bringing in a total of 40 billion roubles per year. However, these funds are not used as intended. Therefore, we will introduce appropriate amendments in the law in the near future and will continue working in this direction next year.
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Vladimir Putin’s final remarks:
I always prepare for such meetings and take them very seriously because, as I said earlier, you are dealing with issues that directly affect every individual. These are the most complex and important issues, reflecting the constant shortage of resources and ever-growing needs.
But I think that such meetings are extremely important because first of all, they allow you to get first hand information on a specific issue. In addition, for me and my colleagues it is also very important to hear what you think about these issues and how you propose to tackle them. If we act jointly, we will definitely succeed. And this is precisely what I hope for. Thank you very much.