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

Transcript of the meeting:

Vladimir Putin: Good afternoon,

I'd like to discuss our national development plans with you today. We have the fundamental basic documents, such as Strategy 2020 – a plan for national development until 2020 – and development plans for specific industries. We have discussed them in various formats over the years and have adopted some of them.

Here is what I like to draw your attention to today. As you know, during the recent presidential campaign I specified certain issues in newspaper articles, taking into account the real state of affairs. But everything I wrote is based on the same development programme until 2020. I specified the subjects based on people's requirements and I think this is the reason that they received broad support in our society.

Today we must start implementing these goals that I stated in my election articles, and today I'd like to talk to you about the so-called road maps that we must adopt for the sake of conducting practical work to this end. We have all discussed specific areas of development. Today, I'd like the heads of ministries and departments to express their opinion on the most effective ways of reaching these goals. We must also talk about sources of funding in this respect. This is all the more relevant now that we have started drafting a new three year budget. It goes without saying that we must have enough financial resources for all our proposals and programmes in the economy, the social sphere, infrastructure, and defence and security. In this context I'd like to emphasise that although we will need substantial funds for implementing all these goals, we must still proceed based on the absolute priority of maintaining macro-economic indicators.

The question emerges, then, how are we going to achieve our goals and from where will we take financial resources which, as I've mentioned, are not small? We will do this by streamlining our priorities, by enhancing the effectiveness of budgetary expenses and by reducing costs through postponing or fully eliminating low-priority projects. We need to use state resources more sparingly, and this we can do. Even at first glance it’s obvious that state resources are being used ineffectively by many industries. I believe that we have great reserves here. We should be using private investment wherever possible and we should facilitate attracting it to the economy. Please note that we need to go beyond simply disbursing the colossal amounts of funding that we have allocated towards achieving our purported goals. What we need to do is achieve new levels of quality in education, healthcare, defence and other crucial areas of the national economy. The money should be used for reform and to improve effectiveness.

This is all I wanted to say to start off. Now, I would like to give the floor over to Minister of Economic Development Elvira Nabiullina. Everyone who is here representing different industries will also have the opportunity to speak, so please focus on the areas that I identified earlier. Ms Nabiullina, please go ahead.

Elvira Nabiullina: Thank you.

I will begin with the implementation of the objectives that are set forth in your article on economic goals. In order to be successful in achieving them, we will need to establish a series of solutions this year and create new approaches designed to modernise the economy and secure steady economic growth in accordance with our strategic documents.

According to our estimates, these proposals, and additional measures to promote growth, may increase the GDP by 0.4%-0.9% within the next three years and even more after this initial period. These figures, 0.4 – 0.9 of a percentage point, may not seem impressive, but that amounts to an additional 660-700 billion roubles to the GDP in 2013. One-third of this amount will go to the budget, and we will receive at least 200 billion roubles in additional taxes as a result of economic growth. This will help us address many budget-related tasks, and some of this money will be kept by our taxpayers. It is important for us now to introduce all these measures, including the creation of 25 million new jobs by 2020, modernisation of existing work places and raising the competitiveness of the innovative economy, into our basic documents, scenarios, forecasts and the budget.

We have always developed different scenarios and forecasts prior to drafting the budget. So, we will need to consider all the basic documents, including these measures, in late April, since the forecast is not simply set of numbers, but rather, represents the essence of our future policy. This is especially true, as this is a crucial year for us, when we are about to switch to state programmes. Many of them are ready, and we need to include all these economic measures into the state programmes.

In addition to the budget and taxes, we will need to make drastic changes in the economy as well during the next few years, which will help us engage innovative factors of growth. This is exactly where we are going to need the road map for innovation support mechanisms and the investment climate, which you mentioned in your article. We met with business community representatives after the article had been published and discussed specific proposals designed to improve the investment climate. Therefore, we need to prepare regulations, and we have plans to do so. We have also discussed mechanisms to carry out the proposals mentioned in your article with the business community, including the ombudsman for businessmen.

Promoting competition, privatisation and improving the effectiveness of the state sector form another important area. I would like to elaborate on some of the important issues that you have outlined. First, I’d like to speak about technical and pricing audits for major investment projects. You mentioned today as well that we need to drastically improve the efficiency of our expenses, including prioritisation and effectiveness of government expenses. The current cost of many investment projects, including in construction, is greater than it could be. This is not only because of imperfect regulations, whereby certain industries are still based on outdated construction rules that preclude the use of innovative technology, but also because of the monopoly status of project designing in Russia and the low quality of cost estimate and project documentation, which leads to the revision of the cost parameters of many investment projects. The current mandatory state expert analysis focuses on safety rather than the use of pioneering construction techniques that reduce the operation and maintenance of these buildings in the long run.

Therefore, a comprehensive effort is necessary in order to upgrade these regulations. We believe that our regulations should allow for major international auditors to conduct technical inspections at large construction facilities that are being pursued using government money. We need to encourage the creation of our own competitive project agencies, of which there are not enough. We also need to conduct expert analysis of the cost effectiveness of such investment projects. We have gained some expertise in this area, but it is not enough. For example, we have engaged Sberbank to conduct an expert analysis in road construction, and their financial and technical audits proved to be quite effective. We believe that such work should be conducted on a larger scale. We will need to amend regulations and introduce organisational mechanisms. We will prepare such comprehensive solutions with the departments concerned by July 1.

The article also sets forth the goal of introducing more effective public control of major government purchases that total over 1 billion roubles. As soon as this instruction was set out, we placed on February 3 a pilot system on our gov.ru website for state municipal purchasing. We posted information about all contracts worth over 1 billion roubles on the home page. In early March, we launched public discussions for all interested parties. The website offers information about 41 orders worth over 100 billion roubles, including major construction sites and social facilities, orders for R&D work, as well as purchases of sophisticated technical equipment. We received many responses from experts and expert organisations. The National Association of Purchasing Institutions has made a special report, and there are questions on seven such orders. We will now have to develop appropriate mechanisms for dealing with such concerns as excessive prices or low levels of competition. We will work out such a response system soon in conjunction with the Federal Antimonopoly Service, which has a major role to play here.

The next issue that I would like to raise has to do with the disposition of non-core assets in companies with state participation, which is also among the goals that you set. This task is already being addressed, but things are proceeding slowly. So far, only 41 major strategic companies have adopted such programmes; 208 joint-stock companies that are not listed among strategic companies, have considered these programmes and only 76 have approved them. We will need to step up this work and perhaps make more serious decisions in order to encourage companies not only to consider these documents, but also to implement this programme concerning non-core assets.

There’s another very important goal regarding taxes, which is a cause of concern for the business community. We have already shared our preliminary proposals with you. Most importantly, we should make a decision prior to the beginning of the budgetary cycle. We are continuing our discussion with the Finance Ministry and I believe that we will be able to come up with such general decisions before forming the draft budget. We will mostly focus on reducing the relative burden on operations, production and investment and on increasing the burden on ineffective consumption and lease payments.

Another area where we need a good road map is in establishing the source of long-term money, including the investment of funds by individuals so that they can partake in economic growth through such investment mechanisms. Of course, this is a very complicated task. We do have equity investment funds and mutual investment funds, but individual investors are not over- eager to get involved in them. This is quite understandable, because investing means tying up a portion of one's funds that cannot then be used for current consumption. People are not very financially literate and are wary of financial institutions, especially in the case of long-term investment. We don’t have proper tax or financial incentives in place that would encourage people to invest. We don’t have an effective system for resolving disputes between individuals and providers of financial services either. As you may recall, there was even talk of a financial ombudsman during a meeting with businessmen, who would protect the individual’s rights on the financial market. We need to develop a long-term programme and adjust the regulatory base in order to be able to address such disputes effectively. I think that we will need more time to do this, perhaps until November 1, but the Finance Ministry should lead the way, and we are ready to participate in this work.

The last issue for today has to do with regulatory impact assessment. You mentioned in your article that finally having such a filter for the adoption of regulatory acts was a good thing, since it takes into account the interests and concerns of businesspeople. We have worked on this with business associations, and they came up with a number of proposals regarding the wider use of this instrument. They spoke about the tax and customs administration, about spreading this instrument to Russian regions, draft laws in the second reading that are being prepared by the Duma and decisions by the Eurasian Economic Commission, since we transferred some of our authority to them. We will expand this list carefully, ensuring that the instrument remains effective. We will prepare such proposals regarding the broader use of this instrument in the near future in conjunction with the business community. We believe that this will significantly improve the investment climate.

Speaking about the investment climate, you have set goals with regard to construction, meaning we should have a good road map for obtaining construction permits. Work is underway on all these tasks.

Vladimir Putin: Good, thank you.

Please go ahead, Mr Manturov.

Denis Manturov: Mr Putin, you identified several priorities in your article on which we need to focus our efforts and resources in order to speed up our technical development. The aviation industry is definitely one such priority. We are now actively adopting new approaches concerning innovative techniques for forming the federal budget and implementing state policies. Acting in conjunction with the Ministry of Economic Development and the Finance Ministry, we are developing a state programme for promoting the aviation industry.The version that has been agreed upon is to be submitted to the government shortly.

One of the key tasks of the programme is batch manufacturing of civil aircraft, which can be achieved primarily by boosting the development of national engine technology. We have managed to preserve the following in this area: this year we are finalising the major corporate procedures on setting up an engine technology branch, and we plan to focus efforts and resources on serial manufacturing of modern engines. In order to manage this, a number of financial and technological problems have to be resolved which are taken into account, and this should be accomplished when the state programme is being prepared. This will result first of all in the manufacture of civil aircraft even in the next year. While addressing those issues we will increase the output up to 50 civil aircraft, something we have never had before. As for long-term numbers, by 2020 we are going to increase labour productivity in the aviation branch almost tenfold – 8.9 times.

Furthermore, in your article you mention setting up technological development centres. We have already achieved certain results in that area. A helicopter engineering centre was opened in the Moscow Region consisting of two design bureaus (Mil and Kamov), a pilot production, pre-prototype and research flight testing centre employing around four thousand engineers and technicians. Currently an aircraft engineering project is being developed on the basis of TsAGI, an association of aviation science. This direction, in our view, should be pursued by uniting with specialised chairs of corresponding universities on the basis of those technological development centres. We have already started work on this with the Ministry of Education and Science. Perhaps we should not limit this to chairs, but we could also set up branches of such faculties.

In your article you provided a list of other industries, but I would like to focus on high-tech chemistry, namely, composite materials, which are essentially used in space and aviation -- but these sectors are only certain facets of this direction. We think that future is in composite materials. We have to develop this area in other industries, above all in the fuel and energy complex, construction and ship-building. A number of federal targeted programmes in several areas of research and development are being implemented. But to ensure the broader use of those materials, I believe that legislation should be upgraded, and materials should be introduced through standards and technical regulation. That would offer an opportunity for developing that branch. Thank you very much.

Vladmir Putin: Thank you. (Addressing Viktor Basardin) – Mr Basargin, go ahead.

Viktor Basargin: Mr Putin, colleagues, concerning the article “Russia: The Ethnicity Issue” we believe that these are all very complicated issues that need to be resolved, but the ethnic issue is the most serious.

On March 20 we had a meeting chaired by Dmitry Kozak of the inter-departmental working group on inter-ethnic issues, where we discussed some of the topics outlined in your article.

The first problem – and I should mention that it may not be the most important for the sake of resolving the issue but it is most widely discussed – is the establishment of special structures to deal with ethnic policies. We have crafted our proposals, they were largely approved by the working group and the representatives of all ethnic cultural autonomies, regions and other public organisations who deal with ethnic policies, including the media.

We suggested that ethnic policy issues should be dealt with by a collective organ – a council under the President of the Russian Federation.

In addition, we propose introducing to the presidential executive office an ombudsman with a staff on the normalisation of interethnic relations, as a sort of a collective organ, a legislative one. Moreover, within the executive power we suggest setting up a presidium of that council headed by the Prime Minister of the Russian Federation -- naturally, a federal organ responsible for ethnic policies.

Vladmir Putin: Which one?

Viktor Basargin: Mr Putin, there have been a number of suggestions. Apparently, you will have to make the final decision. Many participants insisted on having a separate organ, not one that currently exists in the Ministry of Regional Development. We do not have any objections to this. Moreover, to some extent we share the opinion of some representatives of the Federation Council and the State Duma that there should be such an organ. However, Mr Putin, I would like to draw your attention to one of our proposals that I mentioned at the meeting of the working group: if the Ministry of Regional Development is going to be transformed … You just said in your article that an ethnic policy is not just an inter-ethnic or inter-cultural solution, but it is an issue related to the economic provision that has to do with aligning our regional policy and finding a solution to our social problems. That is why we believe that ethnic policies can not be separated from the regional policy, that is, everything that is connected with the comprehensive development of our territories. So if a watershed, so to speak, appears, some branch problems can be separated, but the Ministry of Regional Development should be preserved, as it will deal with strategies for regional development including ethnic issues – in other words, it will be an optimal structure.

Vladmir Putin: Well, so you think the structure of the Ministry should not be altered? And that no separate organ is needed?

Viktor Basargin: We think it would be best to maintain it, especially as there have been a great number of positive responses to that department (it is the only one, of course) which currently deals with those issues.

Dmitry Kozak: The following was discussed: the ministry is overloaded with construction, housing maintenance issues, etc, and inter-ethnic relations are on the periphery of the ministry’s focus. If we set up a ministry to deal exclusively with inter-ethnic relations… All responsibility in this area belongs to the Ministry of Education, the Ministry of Culture, the Migration Service etс.

Viktor Basargin: Eighteen agencies.

Dmitry Kozak: And they cannot be separated, so those ministries should be relieved of their responsibilities in order to pass them off on a ministry of ethnicity and the corresponding powers on regional policies, on regional development. Because objectively, the prime source, so to speak, of all inter-ethnic conflicts is above all an inequality in the level of the economic development in the regions and a corresponding lack of control in migration, leading to an excessive concentration of migrants in centres of economic attraction, namely Moscow and St Petersburg, and parts of the Krasnodar Territory. That is why everyone agreed, even those who wanted a separate ministry on ethnic relations and nothing else, that it should be coupled with regional policy. That is why they came up with, roughly speaking, the ministry of regional development and inter-ethnic relations.

Vladmir Putin: All right.

Viktor Basargin: May I continue? Mr Putin, you said we should …

Vladmir Putin: But it should be supplemented with a corresponding presidential council and a presidium within the framework of the cabinet of ministers.

Dmitry Kozak: Because at the government level… Since it is a cross-ministerial task, there should be a working organ at the level of the cabinet of ministers that would coordinate, that could monitor the way it is being done now.

Viktor Basargin: That follows the same principle as with the former Council of Nationalities. It is approximately the same principle, i.e. there is a legislative organ, an executive committee, an administrative system and a system of executive power.

Vladmir Putin: All right.

Viktor Basargin: Mr Putin, in your article you said we need an enthnicity strategy. Within two to three months we will be ready to submit to that council, perhaps, if it is set up and if this proposal is supported, either a strategy (we have practically finished compiling it) or a concept of improving ethnic policies. Such a document is currently in effect, from 1996. We are prepared to submit a document for discussion at the council to be subsequently adopted.

Besides, we believe that the work should be completed…The political decision on designing a federal targeted programme on consolidating the unity of the Russian nation has not yet been made. We have conducted this work, and we have such a document today. We are ready to discuss it.

As you say, all these strategic documents are a road map and part of a certain development cycle. They also have to be discussed. All these documents are currently available. The Ministry of Regional Development is ready to tackle all these issues.

In addition, participants in a meeting of the inter-departmental commission have discussed issues as to how to involve the media in this work. We have drafted an action plan regarding such work, and we have invited all our esteemed state media, including the central and regional media. We cooperate rather actively with our interethnic journalist guild. We hold several competitions, including Mirotvorets (Peacekeeper), using their facilities. And we maintain the Natsionalny Aktsent (National Accent) portal. This is probably the only federal publication dealing with ethnic issues. In addition, we develop an entire social advertising block. Media representatives and we have discussed our proposals. And we have established a working group, which will finalise a road map or some social order for our media, which should work on feature films, animated films and documentaries reflecting interethnic relations in the regions. They should also publish social advertisements. In effect, this road map will reflect all these issues. We will be ready to submit this amended document a month later.

I would like to mention some statistics regarding the issue of ethnic Russians. In 2011, many supported a viewpoint that Russians were the largest ethnic entity and should have more rights. In 2011, the share of respondents supporting this viewpoint had totalled 39%, as compared to 26% for 2009. At the same time, the share of those agreeing that Russia is a common home for many ethnic entities has decreased from 61% to 46%. These are alarming signals. You have noted everything absolutely correctly. Today, we can see that the North Caucasus Federal District should become a certain pilot project regarding this pivotal Russian community and the return of the Russian-speaking population. Our two esteemed republics, Ingushetia and Chechnya, suggest drafting special programmes, which will facilitate the settlement of the Russian-speaking population. We support such programmes. I think that we will be able to submit such proposals regarding specific aspects in the near future, perhaps in the next three or four months.

And now I would like to say a few words about migration policy. I realise that there is a cultural aspect to this. We and the Ministry of Culture are now selecting the 100 best books. We will also compile the list together with the Ministry of Education and Science in the near future. But we believe that a public discussion is needed in this regard.

Vladimir Putin: This is essential.

Viktor Basargin: We need to do some discussing …

Vladimir Putin: Not some discussing, but a full-fledged discussion.

Viktor Basargin: Yes.

Vladimir Putin: This issue should be discussed with the public.

Viktor Basargin: Yes, because the list is one thing, and we really need to make a compilation… We are also ready for this. We are cooperating very actively with the Ministry of Culture on this issue.

As you know, we had implemented a state programme to facilitate the voluntary relocation of compatriots in line with our migration policy. Five years have passed since the programme’s inception and its completion. The programme is to be completed this year.

More than 60,000 compatriots have been relocated. Quite possibly, this is not what we had expected. But I can say that the trend is quite positive. More than 50% of these 60,000 people relocated in 2011. In effect, such developments are rather positive. We have also drafted a new programme here, and we have currently updated it. We submitted it to the government about a week ago. In effect, we are ready to adopt it. The programme includes many new ideas. We are slightly expanding a list of territories for the relocation of compatriots. We facilitate their settlement, we chart high-priority territories and, of course, we stipulate additional preferences for those people who relocate there… And, of course, we determine such territories…

In 2009, we started relocating compatriots to the Far East. About 1% of those relocating to Russia were sent to the Far East. Their share reached 10% already in 2011. Consequently, we have drafted such a programme and submitted it already. Our objective is approximately… We are saying without any exaggeration that about 50,000 compatriots should annually relocate to Russia. We estimate that this will annually cost about a billion roubles, including relocation allowances. And we have calculated that more substantial relocation targets, up to 300,000 people, amount to very high threshold levels. Russia will not receive so many compatriots. Second, we will be unable to finance the relocation of so many people. We believe that 50,000 people is an optimal scenario, and we are ready to work in this respect. Consequently, we are ready to create an algorithm of actions based on all proposals, which have been voiced by us, in the near future.

I would also like to say just a few words about democracy and the quality of the state. Most importantly, we need to complete the division of specific powers today. We have already assessed all our legislation regulating the powers of local governments, regions and the Russian Federation. In all, there are 300 legislative acts. We should add departmental documents, and that’s about it. More than 300 prerogatives are stipulated. And we have decided that we should calculate the cost of such prerogatives in order to see where, at what level, such prerogatives are being implemented, and how they are being implemented. The Ministry of Finance and we are working rather actively in this area. We have decided to list the public powers of every government level, including joint prerogatives.

Mr Putin, we are ready to complete this process in 2012, and we propose a moratorium on the delegation of such powers from the bottom to the top and vice versa… We will continue to tackle these issues throughout 2012. After that, we will have to work in a more stable situation in order to prevent this delegation of powers.

Right now, I would like to talk about the regional level. We have drafted a proposal and submitted it to the government. Under the proposal, regional governors should play a more active role. In addition, we need to coordinate activity as regards the establishment of all public powers in any region, except law enforcement agencies. To be honest, our regions had suggested this long ago. We have discussed all this with regional leaders and Dmitry Kozak. Such a document has been drafted by us. The current task for the regions is to draft a set of regulations stipulating cooperation between the regions and our federal territorial agencies, including municipal agencies. You see, there are no regulations for governing cooperation, and everyone works as he sees fit in this direction.

Moreover, we are currently drafting all our basic legal documents, under which regions and municipalities will inform the population about their respective management decisions. This, too, was reflected in the article. In other words, institutions of state authority need to make public decisions today.

In the next two months, we will submit proposals as regards specific options for channelling proceeds into local budgets. This is what you had suggested in the context of strengthening the financial basis of local government’s work. The Ministry of Finance and we are discussing these issues. We see several options, including profit tax deductions and the abolition of land tax privileges. A real political decision needs to be made on some of these issues… The abolition of land tax privileges would enable local governments to receive about 18 billion roubles. And we realise that this funding should come from the federal budget because this is mostly linked with land plots of our natural monopolies. Such problems do exist.

We are drafting a package of documents making it possible to specify the relevant criteria for determining the territorial foundations of local governments. We can see today that we need to introduce a single-level local government system, although we say that the 131^st law is some kind of a sacred cow. In effect, we have a two-level system, and we really talk about accessibility. But there are territories with a somewhat lower population density. Such territories are very large. Of course, their enlargement is possible. You are noting correctly that ill-conceived decisions should not be made in this area. Such decisions should be made with due consideration for financial capabilities, so that every individual’s interests could be taken into account. In addition, we can see that we need to formalise key concepts, including cities, rural areas, small territories, etc., and this might be linked with the upcoming Government Presidium meeting. We are also drafting such proposals today.

Some other issues as regards assessing the work of local government need to be resolved. We will complete all this work in 2012.

Vladimir Putin: Can you add anything. Mr Kozak? You now have the floor.

Dmitry Kozak: We have to discuss all this. As far as the decentralisation of state power is concerned, this task was set about 12 months ago. I believe that we should not declare a moratorium on uncompleted work because this would be like a premature baby. We need to complete all work, which was launched in the 2000s, to bring such work to a logical end and to stop completely after that. We should not stop today when specific proposals on delegating powers have been drafted and, technically speaking, coordinated by all executive agencies. This work is not difficult, and it does not require additional assessment. Nor should we analyse 300 laws. We keep a list of specific obligations regarding mandatory expenses at every level, including federal, regional and municipal levels, in line with the Budget Code. Such obligations have been made public since 2004. Consequently, I believe that we should not approve such a proposal today. We need to hold additional discussions and decide on specific powers, which we could…

Vladimir Putin: A final decision.

Dmitry Kozak: Yes, a final decision.

Viktor Basargin: This is what I have suggested. We should complete the division process and subsequently introduce…

Vladimir Putin: Yes, yes, that’s how I understand you. Thank you.

Tatiana Golikova has the floor. Please.

Tatiana Golikova: Mr Putin, this is quite possibly the largest item in terms of funding and priorities. In this regard, I would like to note that all measures and priorities being stipulated by it amount to those problem areas, which we have been tackling in the past few years, and on which we have made the relevant decisions. Those decisions were not simply time-serving, and they dealt with the law-making strategy of the years to come. Such decisions have already been pinpointed. I would like to specify our short-term objectives. These are both tactical and strategic objectives.

First of all, I would like to discuss the demographic policy. It should be noted here that specific demographic policy measures being implemented by us since 2006 have yielded substantial results in the past few years.

First, I would like to draw your attention to the number of first, second and third births facilitated by such measures in 2006-2010. Although such statistics may seem somewhat surprising, I would like to mention them, nonetheless. The number of first births has increased by 2.7% over this period. The number of second and third births has soared by 45% and 62%, respectively. Understandably, the number of second and third births was rather small. Consequently, any increase is quite substantial. In this context, numerous demographic experts who had cooperated with us in the area of demography noted that two aspects, namely, providing incentives for the third and subsequent births and paying benefits for children aged under three, were the most important.

In this sense, this is set forth as the main demographic priority in your article. This enables us to accomplish this objective together with the regions because these are their prerogatives and because this is the next aspect as outlined by the road map. Right now, we still lack Rosstat’s regional data for 2011, and we use 2010 statistics. But I think that we will receive such statistics pending the budget’s formulation. Nevertheless, I would like to note that, in Rosstat’s estimate, the total fertility rate, or the number of children per woman, in 53 territories falls short of average nationwide levels. Of these 53 territories, eight regions are either net budget contributors or are regions having a budget coefficient in excess of one point. Consequently, they can afford to channel much greater investment in these sectors as compared to net budget recipients.

In this regard, we believe that the following top-priority objective should be stipulated for 2012. Naturally, we need to examine the national subsistence minimum bill during the State Duma’s spring session. This bill should also be examined by the government. This is essential because the previous subsistence minimum document is to expire on January 1, 2013. The subsistence minimum per child serves as a criterion for paying benefits for a third child in the Russian Federation’s territories.

For their part, the regions should adopt decisions regarding the size of the projected subsistence minimum in their respective territories in 2013. They should also adopt decisions on the projected per-capita regional incomes because this parameter is used as a reference point for selecting persons who require benefits for a third child. The regions should make such decisions well in advance, not later than October, or, at worst, by November 2012, so that this could be included in their respective budgetary parameters.

What is this like in terms of financial resources? Naturally, we are still completing the calculation of these positions. Right now, the subsistence minimum per child in these 53 regions varies from 5,500 roubles to 10,000 roubles. Consequently, as I have already said, eight out of 53 regions have a budget coefficient in excess of one point. Consequently, the relevant co-funding levels mentioned in your article could total 50%, rather than 90%, and reduced till 2018. What will this mean in qualitative terms? If we make this decision, then, as demographic experts estimate, this will create a 17-20% absolute increment in the number of third and subsequent births by 2018 on 2012. This will make up for 970,200 newborns.

Demographers are divided into two groups. There is a more or less conservative forecast, and there is a more optimistic forecast stipulating a 25% increment. But we still react in a restrained manner to such forecasts. And we prefer to side with the conservatives. Understandably, it is still impossible to make accurate forecasts, all the more as the subsistence minimum situation remains vague. Nonetheless, we realise that Russian territories should pay benefits for third and subsequent children, and that such benefits should meet subsistence minimum levels. In 2013, estimated budgetary expenses, with due consideration for what I have just said, might total a rather small sum, 4.3 billion roubles. At the same time, such expenses will increase each year because we will add up the second year, the third year and so forth. And, finally, they will stabilise in 2016. Their level will be approximately the same because this escalation will already have taken place.

This is all for demography. Another issue mentioned by you deals with employment opportunities for disabled persons. We have recently tried to actively involve this category in the labour process under the Accessible Environment programme and under a programme to reduce tensions in the labour market. We did our best to create the required conditions by paying employers for the creation of jobs for disabled persons.

We have had some achievements to date. Employment has been found for 18,400 people with disabilities. In 2012, 7,600 more will receive jobs under this programme. The federal government has allocated 540.6 million roubles for this purpose. However, no federal spending on this is planned for 2013, after we transfer this responsibility over to the regions this year. At the same time, we agreed that it is sensible to continue subsidising this initiative. So I believe this should be taken into consideration while working on the 2013 federal budget. We must bear in mind that the number of people with disabilities who find jobs over a given period is half that of other unemployed who are registered with state employment agencies. Given all the challenges, we believe it would be strategically appropriate to settle on finding employment for 14,200 people with disabilities each year.

This is how we plan to do this.

Vladimir Putin: Do you mean 14,000 added to the base each year?

Tatyana Golikova: Of course, that is the number that will be accumulated, each year. As many as 7,100 jobs will be provided for people in the third category of disabilities; 5,000 jobs for people in the second category and 2,100 for those in the first category. The cost of creating one job for a person with limited capabilities ranges from 30,000 roubles (for example, to buy a computer) to 430,000 (people with impaired vision require special equipment at their workplace). The current average allocation is 50,000, but I should think we could raise that to at least 66,600, considering the range I just cited, which stems from the real needs of people with various disabilities who would use the specific workplace.

Vladimir Putin: Are you asking for a higher subsidy for their employers?

Tatyana Golikova: I am talking about the costs per job. If we raise that, regional governments will have to increase their spending, albeit not significantly. But I think that we should continue subsidising them in 2013 so that employers will continue to be supported – the very responsibility that was handed over to them, because this is truly important for the country and for the community of people with disabilities, and it fits largely with the general policy we have been pursuing with regard to them in the past few years.

What about employment for new mothers who want to resume work after their maternity leave? This is also an important component of our demographic policy, which we have been pursuing as part of our programmes to ease tensions on the labour market. In 2011, 26,200 new mothers completed training courses and 15,700 went back to work, either returning to their old jobs or finding new ones.

There is an alarming trend though. As I said, we have transferred part of these responsibilities to regional governments as of January 1. On the whole, 73 regions allocated funds for this purpose, although they cut financing by 61.5 percent. To maintain the trend that we began in 2011, we need to retrain some 30,000 women annually. I think it would be appropriate to instruct the regions to focus on this problem, which strongly affects new mothers’ opportunities to resume their careers.

There is another issue which is closely linked to wages and salaries, something you discussed in this article: professional standards. I will mention this briefly, focusing just on the following: the structure of employment in Russia in the early 1990s was dominated by industry, which dictated the demand for certain qualifications. This structure has changed; many professions have emerged which were not even on any qualifications records in the past. Relying on the new international classification of occupations, we must now work out about 800 new professional standards. You said this work is progressing very slowly, with only 69 standards ready at this stage. So we believed that …

Vladimir Putin: Employer unions will join this effort.

Tatyana Golikova: Yes, employer unions will play an active role here, but right now, unfortunately, we do not see much activity there. Despite multiple meetings and calls to get involved in this work, they are moving along very slowly. Therefore, we estimated our own possibilities and drafted a plan to develop professional standards in 2012. We believe that, if this work is organized properly, and if employers eventually join in, we could prepare around 435 standards this year. We also need this to organise education appropriately and also to structure the labour market correspondingly.

Now I would like to say a few words about wages – within my own competency – and cite several problems that might arise when we will be making a decision to raise wages until 2018. My first point is this. We often link our wage strategies to regional labour markets and compare specific salaries with the average wage across the industries in a specific region.

Still, I would say that, when making this decision, we will need to bear in mind the existing differences between the wage levels in various regions, for example between Moscow, the Moscow Region and the Tver Region. Otherwise, we risk triggering a flow of migrants moving to regions with higher salaries – as has been the case in Moscow in the past few years.

Besides, when we take decisions for separate industries and their sectors, for example healthcare (doctors, nurses and medical technicians), we should maintain fair proportions in these industries when raising basic pay and incentive payments.

As for healthcare, I would like to speak about the decisions that have been taken according to current legislation and are now being implemented. We have outlined our strategy up to 2015, and the ideology of the wage increases fits into the overall framework. Do you want to know how? For example, starting in 2013, 2% of the employers’ contribution rate will be transferred from modernisation programmes to covering the contribution rate. Considering that today only 3.1% of these payments are used to cover the contribution rate, the additional 2% amounts to a nearly 40% increase to the overall contribution rate, including the salaries of doctors, nursing staff and medical technicians.

However, it should be remembered that when implementing the healthcare modernisation programmes we urged the Russian regions, which face the majority of the problems, to evaluate their healthcare systems. The latest data, even though it has not been consolidated yet, gives us grounds for concern. What does this mean? W still have a shortage of doctors in the outpatient sector, and not only GPs and paediatricians. We have adopted a decision regarding them and their number has increased, though not sufficiently to ensure reliable primary medical care considering the country’s vast distances. There is a shortage of pulmonologists, rheumatologists, nephrologists, surgeons and other groups of specialists in the outpatient sector. At the same time, we have an abundance of such specialists and corresponding bed numbers in hospitals, where services are more expensive. Of course, it all depends on geography, yet the regional authorities should make use of the legislation we have recently adopted. As part of the modernisation programmes, they should also adjust their inpatient systems to suit the requirements set out in these programmes and in the procedure for providing medical assistance, which we are adopting so that we can implement our modernisation programmes.

And lastly, there are two issues which I would like to draw your attention to. One concerns the improvement of the pension system: we need to adopt a long-term strategy for its development. We are working towards this end. This is a complicated issue with many challenges, and it is obvious that we will need to hold a public discussion to address all the issues that affect the rights of nearly all 143 million Russian citizens. We have met with the State Duma Committee on Social Policy to discuss holding a round table as soon as possible, most probably in April, on all the issues related to the future development strategy of the pension system, and have invited all the experts in this field to attend.

The last issue concerns the provision of medicines. You have mentioned the long term 120-billion-rouble programme for the development of our pharmaceutical industry. We have adopted this programme after the government, acting upon the recommendations of the Modernisation Commission, approved the lists of medicines that must be produced in Russia. The Ministry of Industry and Trade is holding tenders and auctions to select projects that will be financed by the federal budget. I believe that when selecting projects, the Ministry of Industry and Trade should also assess their cost effectiveness and estimate the demand for these medicines, even though it is clear that those who are granted state funding will adjust their production to the strategic lists of medicines we have adopted. However, it is not only the demand that is important, but also the quality of medicines and their prices, because they will be generics as compared to the foreign-made brand name medicines sold on the Russian market. Of course, we should remember that we have the potential to create novel medicines – there is a separate section in the programme for this – but we would like to coordinate these issues within the framework of the roadmap outlined in your article. Thank you.

Vladimir Putin: Thank you.

Mr Fursenko, regarding education. I asked you today to consider and formulate proposals on raising the incomes, the salaries of teachers at vocational technical schools, professional higher education institutions and lyceums. We will discuss that in the second part of our meeting. But now could you comment on the proposals formulated in the article, some of which, as you will remember, we prepared together?

Andrei Fursenko: Mr Putin, colleagues. First of all, when we were discussing the implementation of these proposals with the Finance Ministry and the Ministry of Economic Development we agreed on some basic ideas and principles, on how we would move forward. And we are proposing, just as with the teachers’ project, when discussing the average wage in the economy, education and so on, to take as the baseline last year’s indicator because these are established figures. In our opinion, the main thing is that commitments should be strictly complied with, so that we have clear figures that everyone has agreed upon. In addition, we have proposed, pursuant to your instructions, to raise salaries not by just providing money, but through professional standards. We in education are working under Federal Law 83, that is, the rates of financing various jobs in the field of education are being determined. We propose having reasonable rates, taking the true nature of the situation into account, such as regional realities where there are schools with small numbers of pupils, and in small towns where there are few children in kindergartens. In other words, the rates should vary from region to region and from one location to another. When we talk about high salaries, about raising salaries…

Vladimir Putin: Salaries where? At what level?

Andrei Furseko: The salaries, for example, in higher professional education and in general in vocational education -- we should take into account the earnings not only from teaching as such, but from other activities, such as scientific activities in higher professional education, and economic activities in primary and secondary vocational education. During the meeting that you chaired in St Petersburg it was said that a vocational technical school takes part…

Vladimir Putin: It is not about vocational technical schools. This is about higher education, secondary schools and students. We will discuss vocational technical schools in the second part of our meeting, as I said.

Andrei Fursenko: As for higher education, we should take into account the pay that professors receive not only for actual teaching, but also for their scientific activities. That is the general idea. Now let me go over your instructions.

First, preschool education institutions. The average salary of teachers at preschool education centres is about 11,000 roubles. We estimated what the increase would be in 2012, including under our project of raising teachers’ salaries. Some regions have raised the salaries of all the categories, and it will increase to 14,500. But that is still not enough. We propose setting the benchmark for raising the salaries of teachers at kindergartens to the average in education. That would be about 70% of the average in the economy. In 2012 we estimate that this would amount to 18,500 roubles. In order to achieve that result…

Vladimir Putin: Is that the average? I understand that that's not what it will be in every region.

Andrei Fursenko: It is the average in the education system, not in every region. We have a breakdown by region, and I am referring to the approximate amount that will be required, just like we were figuring for the teachers’ project. We calculated the entire amount and then distributed it among the regions. After we have raised salaries to that level we will update them in line with growth, the increase of wages throughout the economy. To achieve that level in 2013 we will need around 35 billion, and in that case this will be the wage level throughout the system. We propose to proceed in exactly the same way as we did in raising the salaries of school teachers -- in other words, we provide money for salary increases not directly to the regions, but rather, we co-finance the modernisation of the preschool education system so that the regions can redirect some of their own money released in order to increase the salaries of kindergarten teachers. We estimate that it would require, as I said, 35 billion roubles in 2013. We have compared our figures and by and large they correspond with those of the Finance Ministry. We believe that half of that money could be provided by the federal centre in the form of subsidies (I repeat, on the condition that the system is modernised) while the regions would provide the remainder.

Next. The general education project is underway, we had a conference call just today. The task you set is being fulfilled: we will achieve a level that is on par with the average wage in the economy. The regions are raising funds, in other words, we are gradually issuing that mandate to the regions, so I don’t think we should be adding anything, we should simply keep track of how these targets are met. And I would like to stress that it took about two years to achieve that level. We began last year and by the end of this year I think practically all the regions will raise teachers’ salaries to the average level in the economy and we will probably need time until the beginning of next year to consolidate that result. So, when we speak, for example, about kindergartens, I think we should also take as our basis a period of about eighteen months or two years, not less.

Next. We have reviewed the average wage by region in the higher professional education system. We calculated the amount we would need in the following manner. We counted the number of students and we proceeded on the basis that there should be one teacher per 10 students. This ratio is not observed in some places. You spoke about it at a meeting with university rectors and some of these decisions are based on some kind of government resolutions, some of which were issued by the government of the USSR. But they are being complied with, so in introducing normative financing we should review all these decisions and arrive at some common procedures. But we should bear in mind that for some professions, for example, training at creative higher education institutions, the ratio should be different. For example, we train musicians, and in that case one teacher per ten students is not enough. A higher ratio is also needed for some complex engineering professions. Even so, we proceeded from the basis of the average ratio (one to ten) and we looked at how many regions today have higher education salaries that are still below the average wage in the economy. There aren’t very many such regions. Naturally there is Moscow because the average… the oil producing regions -- the Yamalo-Nenets Area, the Tyumen Region and so on.

Nevertheless, given that part of the salary is generated by scientific activities we believe that the average monthly level in the economy could be achieved this year, that is, a little over 26,000 roubles per month nationwide. In order to simultaneously meet the requirement that the remuneration be properly distributed among regions, we estimate that we would need additional federal budget allocations of just under 6 billion roubles this year. The following year the amount will be larger, first, because we must preserve that ratio and second, and very importantly (you have set this task) in order to have an effective contract: that means that by 2020 or, I think, by 2018 we should achieve a coefficient of 2, that is, 200% of the average in the region’s economy. We think this coefficient must result in a substantial improvement in the quality of teaching and the performance of teachers and professors at higher education institutions.

Vladimir Putin: And there is also the structure of the sector.

Andrei Fursenko: Restructuring, yes. In our calculations we proceeded on the basis that at least a third of the funding required to implement that decision must be generated within the system. What are the possibilities there? First, we are experiencing a demographic contraction and we should alter the enrollment figures. But we have certain legislative constraints: we must finance out of the budget the training of at least 170 students per population of 10,000. Considering the aging of the population we will probably have to… We propose changing the ratio and looking at the training of degree specialists, proceeding not from the overall size of the population but from the size of the so-called cohort, from the body of people who account for the majority of students. These are people, say, between the ages of 17 and 35. How many of that number could be guaranteed budget support? So that on the whole the number of young people who want to acquire an education does not diminish, but at the same time the number of budget-financed students should not be artificially inflated. Today practically one in two secondary school graduates has a chance to get a place at university financed by the government. This was neither the case in the Soviet Union nor in the early post-Soviet years. Today this is simply a matter of demography. Nevertheless this is the first factor that is conducive to a certain modernisation and optimisation.

Second, as I have said, is the method of calculating the incomes of teachers… In principle the proper way would be to calculate the incomes of teachers the way it is done everywhere in the world: the teacher’s annual earnings from his core activity. We should take into account his/her research activities conducted at his/her own educational institution or other fields of the economy, such as consulting and work under contract with industry. As of today, that share is considerable in the leading higher education institutions. It amounts if not to half, but, at least at Bauman University, to a third of the total budget, which means financing out of the proceeds from scientific research. Denis Manturov spoke about technological centres today: if such technological centres are created, those who will teach there, I think, should derive at least half of their income from their research activities. Therefore we think that financing of course will increase, but it will be within the figures that you have mentioned. This will account for the main federal budget expenses, not only for education, but also for science.

If corresponding instructions are issued, in order to fulfill them we must, as I said, introduce some changes in the admissions regulations. We must introduce amendments to the government’s regulatory acts that establish the corresponding quotas. We must come up with more rigorous criteria, not only for the higher educational institutions that report to the Ministry, but we must also have an agreed upon position on the whole system of higher education, if the contract is to be truly effective. That means that higher salaries should be matched by an improved quality of education which is inseparably bound to scientific and economic activities.

Vladimir Putin: Grants?

Andrei Fursenko: We have made the relevant calculations. We proceed on the basis that about half of budget-supported students study normally and are paid a stipend. More precisely, the figure is 48%. About 15-17% at higher education institutions that report to our Ministry receive social support. We discussed this with Tatyana Golikova and their ministry provides social support to about 25% of students. There again, according to our estimate, to ensure a social stipend at least in the first two years of not less than 5,000 (in addition to the academic stipend which today is 1,200 roubles and more), the amount of financing, I repeat, should range from 9 to13 billion, depending on how the calculations are made. Today we had a meeting chaired by Vladislav Surkov and we compared our figures. The total volume of funding is estimated at no more than 14 billion roubles a year.

Vladimir Putin: Very well. Thank you. And one more thing I would like to bring to your attention. It has to do with setting up courses to prepare those who have served as conscripts in the armed forces for entering higher education institutions.

Andrei Fursenko: Yes, we had this experience as part of the national project. Unfortunately there wasn’t much demand for it. Anyway, this is not such a large amount in terms of financing. I remember when we launched it together with our colleagues from the Defence Ministry it cost, if I am not mistaken, 230 million roubles a year. I think that gives you an idea of the amount that is needed to address that task.

Vladimir Putin: In any case, calculate everything and prepare the organisation decisions.

Andrei Fursenko: Yes.

Vladimir Putin: Anatoly Serdyukov, please.

Anatoly Serdyukov: Mr Putin, we have thoroughly studied your article and prepared a plan for implementing the tasks set there for the Defence Ministry. There are 28 such tasks.

First, the creation of a modern Armed Forces of the Russian Federation by 2015. We will shortly approve a plan for the building and development of the Armed Forces, and by January 2016 we will prepare a plan for the next five years.

The second task is putting in place a system to provide reliable long-term forecasts of security threats to the Russian Federation for 30-50 years. We plan the development and implementation of a comprehensive research programme, the system will be designed by January 2013.

The creation of a qualitatively new system of military analysis and strategic planning for preparing recipes and their prompt introduction in the military and security agencies. We will try to formulate and prepare the implementation of that task as part of the same programme.

The implementation of the state armament programme for 2011-2020. These tasks have been set and by December 2012 we will be able to prepare the tasks for the following armaments programmes if you approve these figures.

The development of the military potential as part of the deterrence strategy at the level of defence sufficiency.

The development and approval of the defence plan of the Russian Federation are to be completed by December 1, 2012, we will try to meet all these deadlines.

The same programme includes training of the Armed Forces, special services and other military structures for rapid reaction to the new challenges, we will fulfil that by December 1, 2012.

Strengthening the potential of the Collective Security Treaty Organization means providing the Collective Rapid Reaction Force of the CSTO with modern weapons. Part of the work has been done under earlier decisions, and we will prepare a detailed plan for the next five years.

Ensuring dynamic development of military education, fundamental military science and applied research programmes. We have plans starting from 2012 until 2015, we will check them up and prepare for approval. Restoration of the former competences of military institutions and their integration with the evolving system of military education. We will prepare a plan for improving the system of scientific research in Armed Forces and Defence Ministry research organisations until 2015, and I believe that in the next few months we will be able to prepare these proposals because we are already in the process of preparing that programme conceptually.

Effective development of requests for proposals to develop, produce and plan the characteristics of weapons and military equipment. In late 2010 such requests for proposals were issued on your instruction. After the contracts are signed we will prepare updated State Defence Orders for this year and will be ready to submit them to you.

The integration of military research and civilian science. We are planning to prepare the programme within this year, and as of January 1, 2016 similar decisions are to be taken for the next period.

Massive and comprehensive modernisation of the Armed Forces. The state programme of modernisation until 2020 contains the relevant plans and by January 2021 we will prepare plans for the following state modernisation programmes.

Upgrading the quality and intensity of the training of the Armed Forces. We have just held an annual general meeting and are preparing a plan for combat training for this year. It is approved every year. We will submit it for approval. Determining the future ideology of the development of the Armed Forces, various armed services. By January 2013 and accordingly for the next period of 2020 and until 2030, the main guidelines of the building and development of the Armed Forces should be ready by January 2018. And, as I said, the development of the concept will continue beyond 2020-2030. So, we will prepare plans by January 1, 2013 and again by January 1, 2018.

The strengthening of the integrated aerospace defence system of the Russian Federation. The plan of building the Armed Forces until 2015 has already been approved. By January 2016 we will prepare a similar plan for the development of the aerospace defence for the following five years.

Revival of the oceanic Navy, especially in the North and the Far East. We will prepare the plan during this year for the period starting in 2016, and the plan until 2015 has already been approved.

Vladimir Putin: We should think about jobs for family members there: there are some problems with the labour market in that region. We should have a look at it.

Anatoly Serdyukov: Very well. We will form a full package of social guarantees for servicemen that matches their huge responsibility: holidays, medical treatment, insurance, pensions and so on and jobs, as you have said.

As I reported to you at the end of 2010, we prepared and approved a Strategy of the Social Development of the Armed Forces until 2012, that’s our Ministry’s programme. During this year we will be able to update that programme keeping in mind the tasks you have set concerning the deployment of the fleet in the North and the Far East.

By the end of 2013 we are planning to provide all the servicemen with permanent housing. The deadline for creating a modern stock of housing for those who serve is January 2015. The inventory of the Armed Forces’ property subject to be handed over to civilian organisations will be completed by January 2013 and we will submit it to you for endorsement. Concerning the handover: we plan to hand over 15,000 units to the regions and municipalities, mainly to the social sphere, before this year is out.

Staffing the Armed Forces with servicemen under contract: by the end of the year we will renew the attestation of 180,000 contractees that we have at present and beginning from next January we will add 50,000 annually. By the end of 2016 we will prepare a plan for hiring and training servicemen under contract.

The creation of the military police: by December of this year we will prepare a concept of the development of military police until 2016 and submit it for your approval. On the development of the institution of the military clergy: we have approved a structure and a payroll for military chaplains for the Armed Forces. For this year 11 persons have been admitted (but the figure may change).

Enhancing the prestige of conscription service and related issues. We will prepare plans by January 2013… The idea is that after completing military service a young man should be able to finish preparatory courses and be admitted to a higher education institution.

Developing the concept of the national reserve of the Armed Forces. We will prepare the corresponding regulatory framework by January 2013. Interaction with Cossack societies on the issues of military service and military patriotic upbringing of young people. We will prepare proposals for expanding military units where Cossacks will do their military service by January. At present there are two such brigades.

Organising military-patriotic upbringing of school pupils, development of paramilitary kinds of sport and physical culture in general. As I said, we have adopted a social development strategy until 2012, some of the relevant issues have been included and we will prepare amendments by January 2013. And the last thing is organising interaction with DOSAAF (Voluntary Society in Support of the Army, Navy and Air Force). We will develop a comprehensive plan for working with young people of conscription age by January 2013 and accordingly for the period until 2016.

Vladimir Putin: Thank you. Denis Manturov, please report on the defence industry complex.

Denis Manturov: None of these tasks can be fulfilled without a radical modernisation of defence industries. In your article you referred to the complexities and difficulties in securing approvals of the basic programme for modernisation of these enterprises. We adopted this programme – the federal targeted programme Development of the Defence Industry Complex – in early March, and all the measures are being implemented. During the past four years we have formed the nucleus of large integrated structures in the defence industry, largely stabilised their finances and thus prepared grounds for large-scale financing. Today the technological development of the defence industries proceeds under an integrated complex of programmes and by 2020 we should complete the activities that will ensure the fulfilment of the state munitions programme. In the first phase, until 2015, we have to modernise more than 500 enterprises involved in fulfilling the state munitions programme. In addition to investment projects envisaged under the programme, a wide range of R&D activities is envisaged, with the main focus on the development of fundamental and critical technologies, primarily the radio electronic complex.

It is impossible to develop modern weapons without modern electronics. The programme is designed to put our industry on a new technological footing, with new competence centres that produce high quality competitive products for the Armed Forces and for export. The share of the active part of basic production assets should increase to 87%. The enterprises involved in this programme must obtain management quality certificates and introduce a modern, frugal production system, so-called lean technologies.

The implementation of such a massive investment programme calls for an improvement of the current rules of the game and revision of some regulatory documents. To ensure proactive modernisation of enterprises we have prepared some additional proposals that pertain to the system of crediting enterprises with subsequent compensation at the expense of the federal targeted programme, something we discussed in detail in Komsomolsk-on-Amur in late February. We deem it necessary to introduce amendments to taxation to reduce taxes on some new equipment that is procured under the federal targeted programme.

Vladimir Putin: What is there to reduce? In some cases we introduced the zero tax. You should come forward with these proposals more actively. On some groups of goods the tax rate is zero.

Denis Manturov: If the property tax is set at zero then all this money…

Elvira Nabiullina: It’s the rate of import VAT that is zero, but now we propose to introduce a zero rate also for the newly imported property and equipment…

Vladimri Putin: Please clarify.

Denis Manturov: We have indeed zero customs duties when importing from abroad, including on VAT.

Vladimir Putin: OK, what are your suggestions regarding property?

Denis Manturov: We will submit them shortly.

And of course the dividends of the enterprises involved in fulfilling the actual programme. Perhaps not sweepingly for all the enterprises, but at least for those enterprises whose financial status is not sufficient to ensure off-budget funding of the programme, and its overall proportion is about 36% today. That is, it is impossible to implement the whole programme without off-budget components, without committing the enterprise’s own money: about 3 trillion roubles (2.8, to be exact), and budget money accounts for 1.8 trillion of that sum.

I would like to mention yet another area… you wrote in your article about “modernisation of the enterprises we have inherited from the USSR”… we interpret this to mean that these are mainly conventional weapons enterprises, above all those that produce ammunition, which face serious problems in connection with the reduction of the state defence order. We are well aware of that, but we should keep in mind that these are the commitments of the state. We are working together with the military-industrial complex on the programmes to reform ammunition enterprises, we will shortly submit proposals to the government taking into account all the possible nuances connected with the restoration of that sector, with the participation of private companies, foreign investors in order to speed up the process.

In conclusion I would like to mention contracts and the profitability of contracts signed as part of the State Defence Order. Their modern character and profitability also make a difference to off-budget funding. One must give due to the Defence Ministry and the defence industry complex. This year the situation changed dramatically and the main contracts have already been signed. I think that if we find compromise solutions on profitability we will ensure that the programme is fulfilled in a timely manner and modern weapons are supplied. Thank you.

Vladimir Putin: Thank you.

Dmitry Rogozin: Mr Putin, I would like to add a couple of words to what has been said by previous speakers about national defence. First, the Military-Industrial Commission has adjusted its schedule in accordance with the provisions mentioned by Anatoly Serdyukov and Denis Manturov. Practically all these issues, especially strategic ones, will be on the agenda of these meetings especially since it is within the Military-Industrial Commission that the Defence Ministry, the defence industry and military science are interacting. So, all the actors are brought together here and we will achieve coordinated decisions. Second, with regard to the targeted programme Development of the Defence Industry Complex, we are currently contemplating with the Ministry of Industry and Trade the creation of a databank on all the positions, on products and services that the defence industry has to offer.

You see, if we are thinking about buying new assembly lines and machine tools to modernise our enterprises, we should proceed not only from the needs of any specific enterprise, because some of that equipment can be used by several enterprises at once, for example, the enterprises that form a cluster or a whole region.

So such a database will soon be created under the programme.

And my third point. This is connected with what Denis Manturov said about ammunition (small arms and also special chemistry): it makes sense to create or enlarge a concern because these are closely interconnected things.

This week we completed work to create a single testing centre of the Military-Industrial Commission to form an order for updating small arms and ammunition. So I think that we will soon have an absolutely common approach and an idea of which enterprises have defence orders and which enterprises stand ready for modernisation in order to be able to deliver products of a totally different quality and technological standard within a few years.

This work is ongoing and I would like to say again that your article is concrete, doctrinal on all these provisions and it will be implemented if we put our mutual relations in order.

Vladimir Putin: Make sure that these enterprises are not left without an owner. And we should not leave the workers and the enterprises in the lurch when they happen not to have a state defence order and modernisation has not yet started.

Denis Manturov: We are not planning to modernise the enterprises that are not involved in fulfilling state munitions programmes. We know full well that it is impossible to preserve everything, so we will try to optimise things.

Vladimir Putin: Splendid. Then we should address social issues, and together with the Ministry of Economic Development and the Ministry of Healthcare and Social Development change the core activities of enterprises wherever possible. We cannot afford to leave these enterprises without our attention and support, that is my point.

Denis Manturov: That is how we see our task.

Dmitry Rogozin: With the regions taking part of course.

Vladimir Putin: Yes, of course. Thank you. Anton Siluanov (Minister of Finance), tell us about the financing of this whole programme.

Anton Siluanov: Mr Putin, indeed all the measures discussed today will require additional budget outlays and the brunt of it will be borne by the budgets of the constituent entities of the Russian Federation. I am referring above all to the increased cost of raising wages and measures of social support of certain groups of our citizens. It may be just as well that we are starting to implement these measures now because their implementation will enable us to reform the corresponding sectors. First of all, the reforms should be carried out in such a way that budget money flows into the spheres where budget-financed services are delivered most efficiently. These are our core tasks that must be fulfilled within a short period of time both at the federal level and at the level of Russian regions. There must be tougher competition for federal budget money and as a result of that competition the entire budget sphere should become more effective.

Besides, in our opinion, a whole range of structural tasks in the budget-financed sectors must be accomplished. We must optimise the total number of public sector workers, which has substantially increased in several sectors in recent years. We have a large number of public sector workers per 10,000 of the population than in the Soviet period and in our opinion this is the time to revisit this issue.

Next issue. Wage raises, we believe, should be granted above all to those workers who are the most efficient and competent. In our opinion, there should be no levelling in pay for public sector workers, and those specialists who render public services most efficiently should get a bigger incentive.

The next proposal is that in raising pay we should take another look at the in-kind benefits that have survived since earlier times. For instance, we have raised the salaries of servicemen and simultaneously reorganised substantially the system of remuneration and replaced in-kind benefits with cash. I think that a similar process must be conducted as part of the overall increase of public sector wages.

Furthermore, we must adopt amendments to the legislation that would enable us to match the social support measures with needs. First, that would be helpful and provide extra resources for greater flexibility of regional budgets which will bear the brunt of the task of implementing the initiatives contained in your articles, Mr Putin.

Nevertheless we will have to carry out a range of further measures to balance the budget. What are these measures? We have prepared proposals to carry over some of the spending envisaged for the coming years into a later period. We propose to implement together with the Ministry of Healthcare and Social Development measures to ensure the balance of the pension system in the next several years. This should happen gradually. We have prepared the appropriate measures and that will also improve the federal budget balance. Besides, we must implement the proposed measures for tax manoeuvre discussed as part of Strategy-2020. Thus in our opinion the implementation of structural measures in the public sector and budget consolidation measures will ensure a balance of the budget system on the one hand and will make it possible to implement the whole range of measures set forth in your articles, Mr Putin.

Vladimir Putin: As regards benefits, we should tread carefully. There has been a substantial increase in the Armed Forces. We are not planning on a similarly big increase in the budget sphere. The increase is noticeable, but in the Armed Forces the increase was by several times, in the budget sphere we are not making such plans, so we should proceed very carefully (we remember the cash-for-benefits experience) to prevent the abolition of in-kind benefits from cancelling out all the pay raises. We should have a real increase, and I’d to underscore this. That is the first point. Secondly, we will hold a meeting on every sector individually in the near future because today I have asked you to gather here and we have discussed the overall picture to make it clearer. But we need to immerse ourselves in each sector and discuss every sector separately.

Then we should prepare… I would like to ask the government staff to prepare instructions for every area and the general instructions. I should note that corresponding instructions will be reaffirmed in May by decrees or executive orders of the president so that nothing of what has been said and proposed as a goal should fall through the cracks, so that everything should be realised.

I would like to ask Andrei Fursenko to think about how to improve welfare in the sphere of education, with special reference to vocational technical schools, lyceums and professional higher education, because we have somewhat neglected that sphere.

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