Working Day

11 april, 2012 12:00

Prime Minister Vladimir Putin delivers his report on the government’s performance in 2011 to the State Duma

Prime Minister Vladimir Putin delivers his report on the government’s performance in 2011 to the State Duma
“We share one country; therefore, the different political forces willing to make constructive efforts should adopt, and be united by, the goal of advancing Russia’s development.”
Vladimir Putin
During the report to the State Duma on government performance in 2011

Vladimir Putin’s speech:

Mr Naryshkin, esteemed deputies, colleagues,

I am glad to meet all the State Duma sixth convocation deputies from all political parties.

Our country has just recovered from the great strain of the parliamentary and presidential election campaigns. The repercussions of the emotion upheavals and political battles fought during this time can still be felt. However, it is in the logic of a modern democracy that election campaigns end, giving way to much more important periods of cooperation. We must look to the future now. It is my understanding that we share the responsibility for our country and for the well-being and living standards of millions of Russian families.

We share one country, therefore, the different political forces willing to make constructive efforts should adopt, and be united by, the goal of advancing Russia’s development.

At the start of 2012, Russia’s GDP was higher than before the crisis, as we had planned. This means that the national economy eventually recovered from the consequences of the recession of 2008-2009 (and 2010 in part). Allow me to cite a few figures. Russia’s GDP at 2008 prices totalled 41.421 trillion roubles in 2011, up from 41.277 trillion roubles in 2008. It is just slightly higher than the pre-crisis level.

I’ll now report on our results for 2011 and for previous years. I would like to say that we have nothing to be ashamed of because these are good results. I would also like to note, and to stress, that these achievements should not be credited to the Government alone. They are primarily the result of our people’s hard work in all sectors of industry and public service. These are our joint results – I am referring to the ruling party which enjoys a parliamentary majority as well as the political forces opposed to the government, because the solutions worked out through heated debates and cooperation, have led eventually to the good results I will speak about shortly, and we do have good results as I said.

We all remember that Russia was faced with an unprecedented financial and economic crisis. In fact it was the first such global crisis ever. It was much larger in scale and far more dangerous than the crisis of 1998. I think that those politicians and analysts, who said at the time that the world was on the brink of pivotal, dramatic change, were right after all. It was an enormous challenge for Russia. Had we not been able to respond to it, we would have sent our economy and social security system tumbling, and what’s more, we would have jeopardised Russia’s very sovereignty and geopolitical sustainability, thereby burying any hope for modernisation and development.

We can see what has been happening recently in many European countries. I will say more about this – some of them are truly losing part of their sovereignty, when decisions on absolutely sovereign affairs are handed over to supranational bodies. This would have been especially hard on Russia. However, we did not crumble, but stood our ground as a mature, creative and confident nation with great inner vitality and strength.

Today I would like to thank all Russians again for their resilience, patience and trust. I am confident that we have come through our trials because of our shared responsibility, social partnership and civil solidarity.

I think our most valuable achievement has been to stabilise and increase the Russian population: by the end of 2011 it stood at over 143 million. We did not allow the crisis to reverse the previous positive demographic trends.

You probably know from media reports that the population of Krasnoyarsk, in Siberia, has reached one million.

Perm returned to the million-plus category; Voronezh and several other cities are expecting their populations to hit the one million mark. This year, there will be 15 million-plus cities in Russia. In 2008-2011, over 7 million children were born in Russia, making it one of the highest birth rates we’ve seen in the past few decades.

There is a curious fact that, frankly, I was not expecting, although I deal with these issues on a daily basis: I reviewed some figures while preparing this report to parliament. More and more Russian families are deciding to have a second or even third child. Over the past five years, the number of families with two children has gone up by 45 percent, and the number of families with three or more children by 62 percent. This is, of course, a reflection of people’s confidence in their own potential, their families, their country and their future, and in their government’s competence and responsibility.

There is a professional term used in these situations – expanding one’s planning horizon. This happens when people feel a certain stability.

In 2009, I stood here in the same room presenting the government’s anti-crisis programme to deputies of the State Duma of the previous convocation. I said then that our efforts would be primarily focused on the wellbeing of Russian families, that we would not just work to overcome the crisis, but would continue working towards our long-term goals and would eventually overcome this crisis through development.

Regrettably, for objective reasons it was impossible to help all those who needed help and faced problems, but we tried to protect the interests of the absolute majority of our people. Unlike the early 1990s and 1998 when economic blows came as a severe shock to millions of our people, during the crisis of 2008-2010 the government proved its ability to withstand trials.

I’d like to emphasise that we did not go back on any of our declared commitments. Of course, we could have pointed to all the objective difficulties, and this would have been absolutely normal. Moreover, the majority of people would have understood this. All countries of the world acted like this. We could have also pointed to the circumstances and done nothing. We could have simply made no response but this would have been wrong socially, politically and even economically. The most important thing is to always speak the truth and to always be responsible for your words.

It is unprecedented that despite the crisis and its consequences real income of the population in Russia did not drop on average, but even grew, albeit slightly. This trend continued during the past four years, including 2009, the most difficult year. In fact, during that year growth was even a little higher than before. Here are some figures. In 2008, the growth of inflation-adjusted income was 2.4%, in 2009 – 3.1%, in 2010 – 5.1%, and in 2011 – a mere one percent. As for average wages in the economy, in 2008-2011 they increased by 18%. I’m referring to real, inflation-adjusted wages. Nominally the growth was almost 75%. In 2007, average nominal wages in the economy were 13,593 roubles per month and in 2011 – 23,693 roubles per month.

However, as we all know we still have a big material gap. The incomes of the wealthiest people – and I’d like to speak about this issue because this is really a problem for us – are about 16 times higher than those of the poorest. Regrettably, this gap has remained practically unchanged in the last few years. We must pay very close attention to this problem. It is fraught with enormous social, political and economic risks.

I’ll quote some figures to show how we compare with other countries in this respect. In Germany, Austria and France the gap between the richest and the poorest is 5-7 times and the majority of experts consider it the best ratio. In the United States the gap is 15 times, almost the same as we have, while Brazil, a BRICS country, has a much bigger gap – 39 times.

I believe we must return today to one of our major tasks and make sure that minimum wages match the subsistence level in the next few years. In the process we must upgrade the mechanisms for determining both by updating them and making them more fair. During the very difficult recession years, we also made a reassessment of Soviet pension rights. In effect we restored justice for seniors. Since 2008 the average labour pension in Russia has increased by 150%.

You know what happened and is still happening in other countries against the backdrop of persisting crisis phenomena. Ukraine has raised the retirement age; France increased it from 60 to 62 years, and I believe they don’t distinguish between men and women. You know what problems Greece is facing in implementing its stabilisation programme – I won’t even talk about them.

Since January 1 of this year, pensions of all retired military were raised by 60% regardless of their departmental affiliation. Also since January 1 the base pay of military personnel has been tripled; it has been raised substantially in the Ministry of the Interior as well. Starting on January 1, 2013, salaries will be considerably increased in all other law-enforcement agencies and secret services.

About 1.5 million people have received housing with the direct support of the state, including more than 200,000 veterans of the Great Patriotic War, in the past four years.

In addition, maternity capital has helped more than one million families to improve their housing conditions. By the way, we continually adjust this capital for inflation as we promised. In 2008, it was a bit over 276,000 roubles whereas in 2012 it is 387,640 roubles.

We have continued large-scale repairs of residential buildings and the resettlement of people from dilapidated housing. This project has affected about 16 million people.

During the past few years, we have carried out a programme for the construction of 23 perinatal and seven high-tech medical centres, and established nine federal universities and 29 national research universities. Every year, about 5,000 sport facilities are opened in Russia. Compared to 2008, the number of people who regularly go in for sports has increased by six million. Sport has made a comeback in schools – now pupils have three mandatory classes of physical fitness per week. Of course, this is not enough. If we look at our neighbours in Scandinavia, the ratio of people going in for sports is much bigger than here, but the trend in Russia is absolutely positive.

In the last four years, the number of stadiums and swimming pools alone has increased by 20%. Today Russia has twice as many swimming pools as in the Soviet Union. In the coming months, key facilities will be opened as part of the preparations for the APEC forum in Vladivostok, the Student Games in Kazan and the Olympics in Sochi. We are launching the construction of infrastructure for the FIFA World Cup in 2018. All these projects are impressive, even by world standards.

It goes without saying that the crisis was a trial for us, and a difficult one. We lost time and pace in implementing some reforms, but we have kept up the forward momentum.

Yes, the decline was tangible. We know and remember this, but we recovered much faster than many other countries. Today we have the highest economic growth rates in the G8 and one of the highest among the world’s major economies. For comparison’s sake, the growth rate in the United States is 1.7%, in the Eurozone 1.5%, in India 7.4%, in China 9.2% and in Russia 4.3%. We are third among major economies.

I’d like to make a special mention of our agricultural recovery after the

severe drought of 2009 and 2010. Not only did we face a global financial and economic downturn, we also had a drought for two years running. Nonetheless, all the support measures and the efficient work of our agricultural producers led to good results. Russian agriculture grew by 22% in 2011. Russia is becoming the world’s second largest grain exporter.

In 2011, investment in fixed assets reached a record 10.8 trillion roubles. In four years we doubled investment – from 17.9 trillion roubles in 2004-2007 to 36.7 trillion in 2008-2011.

The profits of Russian companies went up by almost 16% in 2011 and tax revenues to the consolidated federal budget increased by 27%.

Russia is showing positive dynamics on all key indicators of development without exception, whereas in some European and other countries the crisis has developed into a chronic condition, producing a protracted recession and growing unemployment. As I’ve already said, budget deficits and the bankruptcy of public funds has become an albatross on the neck of states that are losing the right to sovereign decision-making.

According to IMF estimates, world public sector debt grew by 14% in 2008-2011. This compares with almost 90% in the entire Eurozone; in the United States the debt has exceeded 100% of GDP; the relevant figures for Italy and Japan are 100% and 226%, respectively; in China it has grown by 10% to reach almost 27% of GDP. We have less than 10%, out of which the foreign debt is a little over two percent.

We have overcome the crisis, while avoiding serious risks and a debt trap. We have preserved the stability of our national currency and the budget system. Russia is the only G8 country without a budget deficit in 2011. In fact, we even have a small surplus.

In the United States the budget deficit is 8.7%, in Japan 8.9%, in France 5.7% and in Canada 5%.

As of April 1, 2012, Russia’s international reserves amounted to more than $500 billion – $513.9 billion, to be precise. We have the world’s third largest foreign exchange reserve after China and Japan. Our National Welfare Fund and Reserve Fund are growing. The Reserve Fund increased by 36 billion last year to reach 1,826 billion roubles now. The National Welfare Fund is also growing and stands at 2,624 billion roubles today.

Thankfully, we don’t have to approach anyone with hat in hand. As I said, our aggregate debt is less than 10%. This is among the best in the world and the best figure not only among G8 but also G20 and BRICS countries.

We have curbed inflation in the past four years, and I’d like to draw your attention to this because this is a very important indicator. We have reduced inflation from 13.3% to 6.1%. We have never had such low inflation in our recent history. In fact, we have halved the inflation burden on our people and the economy. It is still high compared with the industrialised market economies, but we are approaching good results. For comparison’s sake, in Britain inflation stood at 4.5% last year and in the United States 3.2%. We still have 6.1% inflation, but it’s falling at a very high rate.   

During the crisis we spent huge funds on combating unemployment. Now the unemployment level is even lower than before the crisis, and this is a major achievement.

As you know, in the most problematic countries, such as Spain, unemployment stands at 25%. Just imagine – every fourth person in the working-age population does not have a job! Other countries are also in a bad shape in this respect.

Again, despite all the trials, we have deliberately chosen the path to development rather than a psychology of survival.

We are often criticised. Criticism is essential, and it is justified to some extent – I will speak about this a bit later. But in the last four years Russia has built and commissioned more than 2,000 plants and production lines in various industries, including the pharmaceutical industry, IT and nanotechnology, construction materials and timber processing.

Look at how drastically the picture has changed in the Russian automotive industry. In the early 2000s and before, and especially during the crisis, many proposed shutting down some enterprises altogether. Of course, we did not do this; we did the right thing. What do we have today? We have several major auto manufacturing clusters. In 2008, we imported more than two million cars and lorries, whereas in 2011 this figure was cut in half and the share of Russia-assembled cars in the market grew from 40% to 70%. The Russian car market is growing very fast and is already second to Germany in Europe and fourth in the world.

We said that the crisis should mobilise our economy and encourage our businesses to become more efficient and modern.

Importantly, these processes are underway. In 2011, more than 60% of Russian enterprises invested in upgrading fixed assets, technological re-equipment and greater energy efficiency. In 2008, the share of new equipment, up to 10 years old, at domestic enterprises was about 30%, whereas by the end of 2011 it increased to 40%.

We know the headaches of our aircraft manufacturers. Of course, there are still many problems in our space industry, our defence industry, but nonetheless, we have launched a new Russian passenger liner, Superjet-100, which has been made in digital format for the first time. Our fifth generation fighter is undergoing tests. We are launching the construction of our new national space port Vostochny, which will be exclusively oriented toward civilian programmes. The formation of the GLONASS satellite group has been fully completed. Of course, you can be as ironic about it as you wish. Of course, there are many problems with this system, but this is a vital direction for our defence industry, security, economy and technology.

Incidentally, we have launched this project simultaneously with our European partners. I believe they have five or six satellites in orbit now whereas our group has been fully formed. This is probably one of the few fields in which we have really surpassed our partners. The People’s Republic of China is also trying to develop a similar system. We have developed it even faster than we planned initially. Of course, we must deal with map-making and make the signal more precise. There are many problems, but still we have come a long way on this programme, and this is important. As for the defence industry, it has increased production by almost 50% compared to 2007.

The last four years have brought to our national thrift box the oil and gas of Vankor and Talakan, new deposits of Yamal, Yakutia and Sakhalin. Our companies have started working on the Caspian Sea and the Arctic shelf. The first stage of the Eastern Siberia-the Pacific oil pipeline has been completed. We have started exporting our products to Asia and the Pacific, a very promising region that is making rapid progress. We have even supplied a new mixture to the world market.

Last year, we gained direct access for the first time to the European gas market, having launched the Nord Stream, a gas pipeline running along the bottom of the Baltic Sea. You no doubt understand how important this is for us – after the Soviet Union’s disintegration we found ourselves beholden to a host of mediators and transit countries. We plan to start laying the South Stream on the Black Sea bottom at the end of this year.    

During the past four years, over 12 GW of new power capacity has been put into operation. Just imagine – 12 GW! This is the best achievement in the last few decades. I will quote the figures for the following years: 2008 – 1.7 GW; 2009 – 1.5 GW; 2010 – 3.2 GW, 2011 – 6 GW, and during this year alone we are going to commission another 8 GW of capacity.

In 2010, the construction of the Chita – Khabarovsk Motorway was completed. The Far East was integrated into the national road network for the first time in the Russian history. We must now bring this motorway in line with the most up-to-date world standards, including access to towns and villages, and build the necessary road infrastructure.

The programme for high-speed railways has been launched. Over 50 highly complex tunnels and railway bridges have been built. The modernisation of the Baikal-Amur Mainline and the Trans-Siberian Railway is underway.

Incidentally, transportation on the Far Eastern Railway today exceeds the best Soviet indicators achieved in 1988, which is a very significant milestone. Just imagine – the growth is 75 per cent higher than at the peak in the Soviet time.

There is another important example. After the collapse of the Soviet Union, almost all major trade merchant harbours remained abroad – on the Baltic, the Caspian, the Black or the Azov Sea. Overnight Russia has lost all of its large ports, though the Soviet Union invested billions of dollars in them. To be honest, at that time it seemed impossible to get away from this infrastructural dependence. I am happy to report that today the capacity of the Russian sea ports exceeds the transshipment of the Soviet ports by almost 50 per cent. By 2015, the capacity of the country’s ports will be increased by another 50 per cent.

According to our overview of the past four years, we can state with confidence that Russia has not only recovered from the crisis but has also made a significant step forward. We have become stronger.

Esteemed colleagues, you are aware that in the course of the past election campaign I listed our priorities, at least as I saw them as a presidential candidate. My first presidential decree will include a roadmap for all the initiatives that I announced. Moreover, work on them has already begun. I believe that we must focus on the issues of strategic, fundamental importance that have to do with our historical prospects as a nation. Firstly, it is the demographic situation in Russia.  Every Russian citizen counts today. We must realise that we will face a serious challenge – the demographic echo of the 1990s, when the country saw its most severe demographic decline. We need to take new decisive steps to maintain and raise our population numbers. However, unless we revive the traditional attitude to basic moral values, no socio-economic policy will produce stable results. The efforts of the state, society, religious, educational and cultural organisations should be aimed at promoting a close-knit prosperous family with many children.

Secondly, Russia has the world’s largest territory. We must preserve and protect our territory from external threats and provide modern living and working conditions in all the country’s regions. We must pay a great deal of attention to the development of the Far East and Eastern Siberia. This is an essential geopolitical task. We need to ensure higher growth of the gross regional product in Siberia and the Far East as compared to the growth of the national GDP. This trend needs to continue for at least 10 to 15 years. Certainly, we will try to achieve a stable demographic increase in these regions instead of an outflow that is still observed. Its pace is decreasing, but, unfortunately, the outflow is still there. We must ensure population growth.

We are now discussing the establishment of a specialised agency that will coordinate and oversee the implementation of projects aimed at developing the Far East and Eastern Siberia. The decisions will be submitted soon.

Out third priority is the creation of new and sound jobs. Millions of people are now employed in outdated, ineffective workplaces with low wages and zero prospects. We must provide them with other jobs, interesting and well-paid, which can give them high living standards, good pay and the opportunity to support a large family. The average real wages in Russia need to grow by at least 37-41% by 2020. We must also encourage active employment of people with disabilities, which requires building a nationwide barrier-free environment. We have adopted such a programme and you are aware of this.

Creating sound jobs is essential to meet the demands of our human resources. An extensive middle class is a key for victory over poverty. This is an opportunity for millions of people to fulfil their dreams and it is a way to a true diversification of the national economy.

Hence, our fourth basic goal is to build a new economy. It is not fourth in terms of importance. In terms of importance, this is probably the key one. The economy must be stable and capable of showing qualitative growth under tough competition. We must be prepared for any external shocks. As you know, the possibility that they will happen again is quite high. The world has entered the age of turbulence. In addition, there is a wave of technological changes; the configuration of global markets is also changing.

There were some questions from the parliamentary parties ahead of our meeting today. I will try to answer some of them in my speech. For instance, the United States has actively developed the technology of shale gas production over the past years. Colleagues from LDPR  ask about this issue and our attitude to it. This can dramatically restructure the hydrocarbons market. Russian energy companies must certainly meet this challenge. I agree with the deputies’ proposal on the creation of a better long-term system of macroeconomic, financial, technological and defence forecasting. It’s all the more important given that the 21st century promises to become the age of new geopolitical, financial, economic, cultural and civilisation centres.

Hence, our fifth priority is strengthening Russia’s positions in the world, first of all, through new integration in the Eurasian space. Esteemed colleagues, the creation of the Customs Union, the elimination of border barriers allowed for an increase in the mutual trade of Russia, Belarus and Kazakhstan by 37 per cent last year. Beginning this year, we are working in a closer integration format within the framework of the Common Economic Space with a free flow of goods, capital and workforce. Incidentally, the mutual trade of the three countries went up by another 13 per cent in January – February of this year.

Together with our Belarusian and Kazakh partners, we have delegated the essential powers in the field of macroeconomics, customs activities and technical regulations to a supranational agency – the Eurasian Economic Commission. In fact, this will make the integration processes irreversible.

Here I would like to emphasise that the creation of the Customs Union and the Common Economic Space has been the key geopolitical and integration event in the post-Soviet space since the collapse of the Soviet Union.

Our next step is to launch the Eurasian Economic Union from 2015. We expect to gain new partners who are interested in a more advanced cooperation join Russia, Belarus and Kazakhstan.

The idea of new integration in the Eurasian space is becoming more and more attractive. The realities of our life and the experience we have gained over the past 20 years have put everything in place. It has become clear that alone one cannot cope with the present challenges of global turbulence. It is no surprise that the CIS partners have demonstrated much more common sense and interest in collaborative work. For instance, broad discussions on a free trade zone in the CIS were held for over a decade without success. Last year the Free Trade Agreement was professionally discussed, promptly coordinated and signed. I am grateful to the Russian parliament, which was the first to ratify this strategic document.

Esteemed colleagues, according to our estimates, Russia will become one of the world’s five largest economies in terms of purchasing power parity within two or three years. However, we lag behind the world’s most advanced economies in terms of labour productivity, or, in other words, in terms of the quality of the economy by 67-75 per cent.

The natural solution to the problem of low productivity is creating brand new jobs. I have already mentioned the figure: we must create at least 25 million [jobs] in the coming years. Our strategic goal is to launch the mechanism of constant renewal of jobs and the economy on the whole. Jobs are created through direct investment, primarily private investment. We need to bring the investment level up to at least 25 per cent of the GDP by 2015, and later by up to 30 per cent. This objective is absolutely attainable. In 2011, we had about 20 per cent, so the growth of 25-30 per cent is absolutely possible.

A favourable, competitive investment climate needs to be created in Russia. We have set the goal to make 100 steps forward in this direction and move up to the 20th place from the 120th in the near future. Incidentally, Japan is in the 20th place today and Latvia is in the 21st. Our partners in the Customs Unions and the Common Economic Space are considerably ahead of us. Belarus is in the 69th place and Kazakhstan is in the 47th.

Entrepreneurs have a great and legitimate demand for comfortable and open business environment today. This need to realise one's potential, to create, to find demand for one's talent and work, the wish to serve Russia exists in almost all spheres of our life. We should certainly fulfil this need.

The creation of the Strategic Initiatives Agency has become a new format of direct dialogue between society and state. Today, it has become a real instrument for the promotion of social initiatives and business proposals, spreads and supports best practices and projects, provides opportunities for new people with a positive and creative motivation. In fact, the agency is also a new format of growth management in the economy, the social sector and government agencies.

In December 2011, an idea of a national business initiative was advanced. It implies that the business community should formulate proposals to improve the investment climate. We will continue to pay a great deal of attention to this. If we don't improve our business climate, we will not be able to attain any of our goals in the economy and the social sector.

I mentioned the positive developments and there have been many, but now I would like to speak about assessments of our business climate. There is a rating agency called "Doing Business," a stable agency with an impeccable reputation, and according to its rating, Russia occupies the 178th place in the world in terms of doing business in the construction sector. Just imagine, the 178th place.

I speak about measures to be implemented in this sector at almost every government meeting, but progress has been very slow. I would like to ask you, colleagues, deputies to think together about concrete steps (I will mention them now), about our joint efforts in this area. By the end of this year, we expect to introduce a set of amendments to laws that are aimed at improving the business climate considerably and creating extra guarantees for investors. In particular, we will establish an institute of an ombudsman for the protection of entrepreneurs' rights both at the federal and the regional levels. Yesterday, Mr Medvedev and I discussed whether we should set up a special prosecutor's office to deal with these issues. We will ask for your advice. Let us seek together the most effective means to address the current issues. I ask the deputies representing all political parties not only to consider our draft laws for the improvement of the investment climate on a priority basis, but to become true co-authors of these laws.

We will submit the proposals on tax legislation to the parliament at the beginning of our new budget cycle. It stipulates keeping the fiscal burden light for the manufacturing sector and investment while increasing it for inefficient consumption and annuity payments. We need a fair tax system that promotes development.

Next, the volatile world financial markets have taught us that we should finance our modernisation by ourselves. We should focus on the banking system, development institutions and the stock markets.

This year we must make the decision to enhance opportunities for the investment of national savings this year. First and foremost, this includes long retirement funds. Naturally, the key condition is to ensure decent return and absolute safety of pension savings.

As for the Reserve Fund, which I already mentioned and which has slightly increased, the National Welfare Fund, these funds play an essential role in ensuring macroeconomic stability. The 2008-2009 experience proved the importance of having such safety cushions. I believe that we should be very careful in this regard. It's easy to spend our savings as there's never enough money but losing this reserve will be very dangerous, especially in the modern world, in the face of the volatile and uncertain global economy.

Who could we ask for help? For example, Greece can ask Brussels for money, and Brussels gives it money. But who will give money to us? Someone may loan it but on what conditions? Even Greece is losing its sovereignty in taking certain decisions, and it will be even tougher for us. I can well remember the events of 2000, when we were heavily in debt and conditions were put to us. I won't even speak about this so that I don't upset anyone. Russia is a special case. Being left without any reserves is very dangerous.

However, we can think about it. Our government experts have tough debates and arguments about this issue. For instance, some of them believe that we should use the gains received from the management the National Welfare Fund. That means using these gains for development purposes, without touching the principal. These funds can be used for the development of Eastern Siberia and the Far East. According to some experts, some of the money from of the National Welfare Fund can be used to invest in long-term risk-free strategic projects, primarily in infrastructure development. We can think about it, but let me repeat that we must be very careful.

We must reach an absolute consensus on this issue at the expert level before we make a decision. We should strive for consensus in such issues, all the more so that we have lived without it for some time and still have been developing. But we need a faster pace. These are Olympic slogans: higher, faster, stronger. We must be very careful in the economy and the social sector but nothing is excluded from discussion. Let us think and make decisions together.

We will develop the banking system to increase the availability of loans for the real sector and decrease interest rates. I have already issued instructions to establish an effective lending rate for businesses and individuals, and, most importantly, to make this work absolutely transparent and to exclude any hidden banking fees from it.

Next, we have formed a set of development institutions over the past years. However, some of them are not quite accessible and efficient. They often lag behind their foreign counterparts. We need to provide international competitiveness of our development institutions, to audit them together with business associations and to formulate proposals on improving their activity.

Development institutions are designed to serve as a business lift for thousands of our companies. Thus, beginning in 2012, the Russian Agency for Export Credit Insurance will provide support to small- and medium-sized businesses that enter the world market with high-tech products. We must at least double our high-tech exports by 2020 and increase the share of high-tech and intellectual sectors in the GDP by 1.5 times.

By 2013, the domestic demand for innovation will amount to 1.5 trillion roubles just through the programmes pursued by companies partially owned by the state. The federal government will invest directly in innovative activities and the support of critically important industries, such as machine-tool building, engine building, innovative materials manufacturing, pharmaceuticals, and aircraft- and ship-building.

Our colleagues from the Communist Party asked us in writing about our future steps in this area. I will provide more details later when I take questions from the audience.

Importantly, innovation should be beneficial for businesses. We will continue to support technical alliances between Russian companies and leading international manufacturers. We will focus specifically on full-cycle production processes and design centres, which are very important to us, and also on innovative industrial development specifically within Russia’s borders. Localisation and requirements for a greater share of equipment – up to 60%-70% – manufactured in Russia are not the only prerequisites that we are advancing in our dealings with foreign investors. We are also trying to promote the establishment of design and technology centres.

We will encourage the establishment of innovative industrial growth centres and territorial industrial complexes. We will build 20 to 30 of these key clusters in the near future, ranging from machine building and pharmaceuticals to nanotechnology and electronics.

Defence contracting will also become a resource for modernisation. As you are aware, about 23 trillion roubles will be allocated for re-armament of the Army and the Navy and modernisation of the defence industry over the next decade. Our defence and civilian plants, as well as research centres and leading universities, will receive large government contracts.

The rules for placing government defence orders have been toughened in order to preclude any setbacks. From now on, we will be signing long-term defence contracts for three, five and even seven years. Changes in job specifications will be made based exclusively on instructions issued by the prime minister. Such changes with regard to priority armaments will be effected only with presidential authorisation. Our colleagues from the Communist Party asked us about our future steps in this area. I have just provided an outline of our future work.

We must complete all procedures involved in placing government contracts for 2012 by April 15. By the way, the size of the government order this year is slightly higher than it was in 2011. We will clamp down on abuses in the military-industrial complex. Corruption in this sphere is unacceptable. This applies to inflated prices, commercial bribes and so on. We should act resolutely in this area.

Of course, the new quality of government administration, new work practices and new rules of conduct for government officials have helped reduce the scope of corruption in a major way. As you may be aware, President Medvedev has submitted a draft law to the State Duma on requiring government officials to declare their expenses. I fully support this move. I am confident that in addition to government officials, senior executives at major state-run companies, rectors of state universities, senior executives at major healthcare centres and possibly other administrative staff of state institutions, should report annually about their incomes and property.

We will introduce public control over government purchases exceeding one billion roubles. All major investment projects with state participation should also be subject to mandatory public technical and price audits. Finally, we will start building the federal budget based on state programmes that involve a clear indication of their performance results and public monitoring of their implementation.

Let me reiterate: each state programme, such as Promotion of Health Care, Promotion of Education, Russian Culture, Social Support and so on, should contain clearly and plainly stated priorities of development, specific targets for each area, tools and performance results.

Education and science should become top budgetary priorities. We are well aware that these two areas define the intellectual and technical strength of Russia and the quality of our human capital. Approaches to developing the long-term fundamental research programme will be improved. This programme should combine work performed at state-run academies of sciences, research centres and institutes of higher education. This programme should focus on those designs that will help Russia become a technically and scientifically advanced country.

We plan to consistently increase the financing of research at institutes of higher education, especially at national research universities. I believe that we should toughen requirements for all higher education institutions and should establish effective forms of responsibility. Diplomas issued in Russia should be recognised both domestically and internationally.

The average salaries of research associates at state-run academies and research centres, and those of faculty at higher education institutions will equal the average salaries available in their respective regions in 2012-2013, and will be double that amount by 2018.

We will renew the programme for bringing top international experts to our universities and research laboratories until at least 2015. The financing of specialised foundations supporting scientific research will increase several times over by 2018 to a total of 25 billion roubles. This includes the Foundation for Fundamental Research and the Foundation of Humanitarian Studies.

In addition, the best research studies conducted by students will receive special grants. Speaking of bringing in top international experts, I must say that this programme is working effectively in this regard. As you know, I travel a lot across Russia. I had an opportunity to visit such labs and meet these people. Some of them are our former countrymen who have worked abroad for a long time; some are foreign specialists who came to Russia to work.

One condition we have is that foreign specialists must spend at least three months at one of our universities or laboratories. However, they end up staying for as long as six months working and building teams here. Their goal is not only to create a product, but take it to the market, which is what they are effectively doing.

New student dormitories with a total area of at least 500,000 sq m will be built in 2012-2014. In addition, we need to establish a system of associated student loans, so that students will be able to cover their boarding and other expenses while they are studying.

As you may be aware, we are providing student loans now, but they are intended exclusively to cover the cost of tuition. These funds cannot be used to cover other expenses. We will take on this issue and provide loans that can be used for other purposes as well; all the more so, since the number of tuition-free spots at out universities will increase.

One more thing. In one of my articles, I wrote that study allowances for students in need who show good performance results should be at least 5,000 roubles a month. Well, the decision has been made.

We should also create a modern system for training skilled workers. We won’t be able to resolve this task unless we promote the social status of faculty and vocational instructors at lyceums and technical colleges. This level of education is the direct responsibility of the regions, and they should bring the average salaries of faculty at technical and vocational schools in line with the average salaries in each respective Russian region. Please note that unconditional compliance with this mandate will be a prerequisite for provision of all federal interbudgetary transfers.

Of course, we need to solve the basic problem of upgrading vocational training institutions, bringing them in line with the needs of the economy by giving employers the ability to be directly involved in vocational training administration.

You are aware, of course, that the old system does not work. Is there any new alternative? There is indeed, and it’s very attractive. We need to expand this practice, since it has been used very minimally so far. But this area is very important.

We need to develop national plans for the development of professional standards before the end of 2012. An effective system of professional competence should become the most important career opportunity and social lift.

Colleagues, allow me to say a few words about Russia's accession to the World Trade Organisation.

There were questions on this subject from United Russia, the Liberal Democratic Party, and the Communist Party.

I am convinced that our WTO membership will provide a long-term powerful impulse for the dynamic and innovative growth of our economy. Its openness and increased competition will benefit the Russian people, and our manufacturers will receive the necessary impetus for further development. Our WTO membership is also about new markets and new prospects that we are not yet accustomed to seeing and assessing properly. Finally, membership in the WTO provides the possibility to defend our interests in a civil and legal manner.

The completion of negotiations on our accession to the WTO will create the conditions necessary for Russia to join another multilateral structure: the Organisation for Economic Cooperation and Development. We are already conducting such work. Accessing the OECD would mean stamping a global mark of quality on our economy, both in general, and in terms of individual manufacturers. I would like to elaborate on this issue.

Of course, one can access the WTO without giving it much thought and without getting much out of it. You can even harm yourself in the process, and we are aware of this happening in the past. However, you can do so the way some other countries did that managed to squeeze out maximum benefits from their WTO membership for their own growth. We too need to use the WTO's tools for our own interests, as is being done by this organisation’s long-time members.

In addition, we now realise that new realities and the growth of competition are a serious challenge for the Russian economy and for many of its industries. Together with businesses and industry associations, we are considering all the sensitive aspects of the situation and are developing specific mechanisms for providing flexible support for domestic producers, especially in the automotive industry, the agriculture industry and the agricultural machine-building industry.

With regard to agriculture, this year we will adopt a new agro-industrial development programme until 2020, which will be fully adapted to WTO requirements. One of the priorities of this programme includes the use of unfarmed arable land. I know that there are many questions with regard to this issue. We plan to increase arable farmland by at least 5 million hectares within the next seven years.

Colleagues, I would like to elaborate separately on the work of regional and local authorities. A significant number of problems and concerns are being addressed at this level, and a comfortable living environment is being created at this level, too. The e-government mechanism is already available at the federal level, and hundreds of thousands of people no longer have to go from one government building to another in order to obtain the necessary papers. Earlier, I cited rather unpleasant figures about Russia’s business environment and other similar rankings compiled by the United Nations. But as far as e-government goes, in a matter of one year Russia managed to move up more than 30 positions from 59th to 27th place. Beginning July 1, 2012, all government agencies in Russian regions and municipalities should go electronic.

Colleagues, this task is much more complicated as compared with what has already been done by the Russian government. It’s a real challenge for the government, but it was being addressed in a centralised manner. Our next step involves transitioning to electronic services in the regions and municipalities, which is much more complicated. Since you're based in the regions on a permanent basis, I would like to ask you to focus very hard on this issue. Indeed, the quality of services will depend directly on you.

Of course, we should continue providing one stop shop services, including at multi-purpose centres. Funds for the establishment of such centres can be obtained by streamlining bureaucracy. That’s exactly what we are doing in the federal government: by 2013, staff cuts in the agencies accountable to the federal government will amount to 100,000 people. We are introducing individual performance evaluations for federal ministers and department heads.

I believe that regions and municipalities should introduce the same scoring system for evaluating government officials. This should be based on clear quantifiable indicators.

We have launched a project to introduce a standard for creating a favourable investment climate in Russia. The goal is to make the best business practices available to all regional administrations. I’m sure you are aware of the positive examples in which regions without oil and gas fields or gold deposits achieve great results, and the volume of investment, including foreign investment, and the growth in the GRP are much better than the average figures in Russia.

As a first step, taxes will be transferred to the municipal level in order to give greater independence to regions and municipalities. Taxes from small businesses that currently operate under special tax regimes will be transferred to the municipal level.

In addition, we should develop clear mechanisms for determining the volume of regional subsidies to municipalities. People constantly complain that things are a mess there. There are no clear rules for who gets how much. This must be sorted out. Again, we are ready to transfer funds to the regions, but it is important that the regions and municipalities use them wisely and focus on priorities that improve people’s lives.

We have already enshrined in law the concept of “improvement,” have established the responsibility of municipalities in this area and will assist local governments in this work.

In 2010-2011, road maintenance and improvement work was conducted in all capital cities of the Russian regions with support from the federal budget. Now, it seems logical to extend such work to all other localities.

Therefore, we have identified three priority areas for spending from regional road funds. They are being set up, and major resources are being concentrated there. In some regions, spending on road construction this year will be tripled as compared with previous years.

The priorities include rural roads, provision of urban amenities to small and medium-sized towns, villages, and repairs of urban and rural roads. About 130 billion roubles are scheduled to be used for these purposes within the next two years, including, wherever possible, for building paved rural roads.

We will double the amount of road construction across Russia over the next decade and will build about 120,000 km of federal and regional roads, according to the internationally adopted one-lane calculations.

The deputies from Just Russia asked me about the construction of the Lena River crossing near Yakutsk.

Colleagues, this project is very expensive. According to preliminary estimates, it will cost 79 billion roubles. We should crunch the numbers and determine the best options, which may include tunnels, bridges and the like. We need to understand where this road will lead us, and what will be the economic effect of this construction, as 79 billion roubles are at stake. I'm not saying that it does not need to be built, but we have to weigh all the factors and give it some good thought.

Colleagues, life expectancy in Russia has increased by 2.4 years over the last four years, and is now over 70 years. We should be striving to achieve an average life expectancy that exists in the most developed nations. I want to remind you that the Concept of Demographic Policy, which we adopted in 2007, provides for a growth in life expectancy in Russia to 75 years by 2025. However, looking at the current trends, experts believe that this level can be achieved as early as in 2018. I believe that we should set exactly this goal for ourselves.

We still have huge untapped reserves for reducing mortality rates. I’m referring primarily to the so-called preventable causes of death, such as traffic accidents, occupational injuries and all kinds of poisoning, primarily alcohol poisoning; we should also strive to reduce mortality from tobacco-related diseases. We need to strengthen the system of prevention and improve treatment of tumours, and cardiovascular and infectious diseases.

Smoking, alcohol abuse and drugs claim the lives of 500,000 of our compatriots, without any wars or global disasters. This is simply a horrific number. Very soon a system of early detection of drug addiction among schoolchildren will be introduced.  We will subsequently have to consider introducing a similar practice among college and university students.

Also, legislation should be amended to make punishment tougher for drug dealing and trafficking, for violations in the sale of alcohol, for getting minors involved in drug and alcohol use. 

For families struggling with hardships we have to offer a social contract – targeted support on the condition that they lead a normal human life, which means primarily taking care of their children, doing public work, giving up drinking and anti-social behaviour.

I should note that the programmes we have already implemented – programmes for family support, protection of motherhood and childhood – have proved to be effective. For example, note that infant mortality immediately fell by about twenty percent in those regions where prenatal centres were opened, such as Yaroslavl and the Yaroslavl Region, in Mordovia and other regions of the Russian Federation.

A decision was also taken on free allocation of land to families with three or more children. Unfortunately, we have instances of violations or even sabotage of this measure on the part of local bureaucrats.  I would ask the deputies to monitor this situation as well. The decisions related to the allocation of land should be accompanied by other decisions at the regional and municipal levels. What good is a piece of land? We have to build infrastructure there as well.

We will, of course, add new measures at the regional and federal levels to support families.

As I have already said, special allowances will be introduced for families after the birth of a third and subsequent children in the regions of the Russian Federation with negative demographic trends that have persisted for several years. Those will be monthly payments of up to seven thousand roubles until the child is three years old.

Another important issue: Women on maternity leave until the child is three years old should be able to maintain and even improve their professional skills. Mothers of many children and those raising disabled children should get assistance, as they find it hardest to find a place in the job market.

And we definitely have to solve the problem with pre-school education. Last year the capacity of kindergartens was increased to accommodate over 200,000 more children within the framework of the preschool education development programme. We have not seen such results for many years.

There’s something I would like you to pay attention to, and I would ask you to focus on this with your colleagues at the municipal and regional levels as you are the people who visit the regions weekly. I have already mentioned the demographic gap of the 1990s. We had a “hole”, now we are experiencing growth, but after a few years there will be an “echo.” This means we can build an enormous number of kindergartens now but the demand for them will fall, and we will have to find another use for them again. That is why it is a better option to build them next to other educational facilities, next to schools so that they could be expanded. More discretion and consideration beforehand should be exercised.

But waiting lists for kindergartens should be completely gone within four years, in part by developing private pre-school educational facilities. The regions should first of all raise the salaries of pre-school employees to the level of the average wage in education, and this should be done within two years, no later than that.

We are going to increase state support of the social sphere. Each rouble from the budget should raise the efficiency and quality of social services. Thus, we have considerably increased funding for healthcare. The wages of medical workers are also going up. By 2018 the average wage of a qualified doctor should equal the average wage in the region’s economy. Owing to the project to support Russian schools, the average wage for a teacher in all the Russian regions in the current year is to reach or exceed the average wage in their region. We should maintain that result and make sure that we don’t see the opposite trend, a decline in teacher wages relative to the average.

We expect higher wages and the elevating of the social status of specialists in healthcare and education to directly result in higher quality of their work. The radical changes in the social sphere are impossible without positive motivation and a strong moral underpinning.

What are the points I would like to emphasise? In the coming years we are going to have one million more schoolchildren, and we should take steps in advance so that the children can learn normally and comfortably. Russia should have no schools in emergency conditions. We have to solve this problem within five years, and in the same time span the regions plan to build around one thousand more schools, new schools, while the number of schools that are handicapped-accessible should reach ten thousand.

And one more proposal: During the preparations for the presidential election we set up a system of video monitoring at all polling stations. Some of your colleagues criticised me for allocating a significant amount of federal funds for this. I believe that this infrastructure, including modern communication channels and high speed Internet, should be used in the interests of our education: to develop distance learning, for schoolchildren to have access to large library and museum funds.  That would be absolutely fair, and all this can be achieved on that basis.

The primary principle for us is undoubtedly free schooling in accordance with educational standards. I would like to stress that the existing so-called extra paid services at schools threaten to erode the principle of free education. For example, in some schools the formation of classes is linked to the condition that schoolchildren will attend a certain set of paid classes, or additional paid consultations are introduced for preparing the students for the unified state exam, whereas the school is bound to provide comprehensive preparation for the exam under the state funding. The school thus becomes a source of social inequality rather than a means of social mobility. Let’s be clear: paid services can exist but only outside the main educational process.  

In this regard, I feel it important to pay some attention to the fundamental approach to the development of the social sphere. The state should not control the everyday performance of tens of thousands of kindergartens, schools, hospitals, polyclinics, and social centres, but it should unconditionally guarantee free and quality services to the people.

The articles of Federal Law 83 considerably expand the independence of social institutions. They are designed at increasing the quality and availability of social services and the transparency of the social sphere, as well as creating additional motivation for its employees. And the task is surely to eradicate direct and disguised extortions and the false impression that services provided by many state and municipal institutions are free.

What I would like to emphasise is that a modern, rapidly developing social sphere should be set up in Russia in the next six to ten years. What comprehensive systemic issues must be resolved to achieve that? 

First, an independent scheme should be designed for quality assessment of the performance of social institutions, including indicators of efficiency, their public ratings, and their adoption of professional and ethical codes.  

Second, a set of modern social services should be identified that are needed for people under the conditions of a continuously developing society.

Third, the social sphere should be opened up to entrepreneurship, non-profit and public organisations that are ready to offer quality education, medical treatment and social assistance. This is a way for us to create the natural, vibrant competition that our social sphere needs so much.

And, of course, we should create most favourable conditions possible for the social duties performed by our traditional religions.

We should review legislation on public-private partnership and take the necessary decisions. I am confident that public-private partnership must become an important tool for pursuing our programmes in the social sphere.

Russian culture is an extremely important foundation for developing human potential and preserving our identity as a single nation. We have approved the Russian Culture federal programme and are planning to allocate around 200 billion roubles for t. We will undoubtedly help the regions and municipalities upgrade and build new palaces of culture, theatres and libraries. I think a special emphasis should be placed on small towns and villages. Over forty-two billion roubles are to be allocated on the restoration of the cultural heritage of the Russian peoples.

One more priority is the development of museums, which play a significant role in the life of society and the preservation of the national memory, and which ensure the historical link between generations. Budget funding to support museums will increase four-fold in the coming six years to reach 67 billion roubles.

We shall introduce information technology throughout the country for all citizens regardless of their place of residence, so that they all have access to national and world cultural treasures. We are going to set up nation-wide electronic libraries, and free online viewing of films and theatre performances from the national art foundation.

Immersion in culture definitely starts at a very young age, and that is why in my articles, as you are aware, I proposed to create the position of children’s art organiser and also to increase the amount of grants distributed competitively among youth art groups. 

Moreover, I am glad that the idea of the hundred books every young Russian should read sparked a broad public discussion. And we definitely should raise the social status and standard of living of cultural professionals. Our task is to gradually increase their wages to the amounts comparable to average wages in other budget-funded sectors of the economy.

Esteemed colleagues, the coming decade offers everything we need to make fundamental progress in solving the eternal housing problem. Most Russian families should have an opportunity to get a house with government support, with an affordable mortgage, through the development of private and cooperative construction and by launching a segment of affordable rental housing.

In 2011 housing construction volumes rose again. We have reached the largest number of flats built since 1990, totalling 780,000. The area ( in square metres) of the housing built is a little bit less compared to last year, but the number of flats – and the demand for smaller flats is dictated by the market – is the largest.

We are set to increase construction 1.5 times to 90 million square metres a year by 2015. That means approximately 1.5-2 million new flats and houses a year.

What is of principle significance here? First, work should continue to bring land and construction markets in order and to drastically reduce administrative hurdles. I have already spoken about it. According to builders’ estimates, going through all the procedures of connecting to infrastructure may cost up to thirty per cent of the total cost of the object. Many problems are caused by the lack of legislative rules for territorial planning, land use and construction. I think we should develop a tool, find resources and solve that issue as soon as possible.

Second, we have huge land resources. They should be involved in construction by developing local road and utilities networks, enlarging the agglomeration radius around large cities. Evidently, it is easier and just cheaper to build around a metropolis. We are also going to recall inefficiently used land from state bodies and offices and offer it up for construction.

Third, if we manage to curb inflation, then we will ensure mortgage rates of 6.5% in the coming years. I am convinced that this task is quite solvable. Young specialists and young families, for example, could be offered an even lower mortgage. Actually, such programmes are already progressing. Loans can and should be given for 20 to 25 years. The regions should jump on the bandwagon, of course. For instance, helping with the downpayment. In that case mortgages will really start working.

By the way, we have already started implementing the discount mortgage for young teachers. You know that. We are set to actively use the capacities of the Housing Development Fund, which will design project documentation, allocate land, and prepare infrastructure for housing cooperatives for free.  This programme brings expenses down by 25-30 per cent. The fund’s programme has commissioned or has under construction housing projects totalling over ten million square metres. In 2012-2013 all servicemen should be given permanent residence.

In the near term we will also completely solve the housing problems of Chernobyl veterans. The numbers of housing certificates to resettled people will increase several times over. In the current year the regions should basically resolve the issue of defrauded housing co-investors.

I would like to stress that heads of the regions used to tell me two years ago that they would resolve the issue, and they must do it. This is not a matter for the federal authorities to handle, but we will watch closely how this problem is dealt with at the regional level. There is some progress there, but there are also difficulties. They are acute, people feel cheated, they should be given help, it is obvious. The problem is being dealt with. I am not going to report the exact number of flats given to such people, but the number is considerable. There is some progress, but there is a lot to be done. And the main thing is that it can be done.

One more urgent issue. We have taken a decision to extend the operation of the Fund for Housing Utilities and Maintenance Reform to 2015. I believe the fund should focus its resources on the complete elimination of dilapidated housing in Russia.  People should be taken out of these slums! Such houses are impossible to live in; they are a direct hazard to people’s health and safety.

Affordable, comfortable housing also means high quality utility services at clear and fair prices. The housing sphere should be turned into a modern efficient branch that is open for competition and attractive for private investment. The cost of utilities should be reasonable and predictable for residents and investors. That is why we propose setting up rates at least for three years in advance.

Let me remind you that the government has taken a decision on raising the 2012-2013 natural gas, electricity and heating tariffs in the middle of the year so as not to provoke inflation at the beginning of the year. The hikes in most cases are limited by the targeted inflation level. The heads of the regions were instructed to make sure utility rates are not going to skyrocket. We are going to keep the situation under control. I suggest you join in.

Inflation in the first months of the current year reached 3.7 per cent compared to 6.1 per cent last year. This is clear, almost mathematical proof of the contribution of infrastructure monopolies to price hikes. In this regard, I think the new government should carefully design a mechanism and the level for indexing tariffs of the natural monopolies. The cost structure, investment project transparency, financing schemes of such companies should be given proper consideration. Citizens and industrial businesses should not pay for someone’s inefficiency. This is obvious.

The price of the question is low inflation. And what does that mean? We understand it. It means education credits, affordable mortgage, etc. Actually, it means a different economy.

Esteemed colleagues, in December next year we shall mark the 20th anniversary of the Constitution and the country’s current parliament. However, we should not neglect that this Duma is the tenth convocation in Russian history if we start counting from the first Russian Duma of 1906. I am convinced that we should work together to raise the prestige and significance of the Federal Assembly within Russia’ system of governance as well as to enhance the role of regional legislatures and local councils across the nation.

I am prepared to work with the State Duma to improve the institution of parliamentary investigation, to consistently seek to strengthen the judiciary, to renew and improve law-enforcement agencies and eradicate corruption. These are undoubtedly our critical tasks, and they should be shared by government and the opposition.

For my part I expect constructive interaction throughout the constitutional term of our authority. I also hope that the legislative and executive branches will show mutual respect and act jointly to develop the Russian economy and achieve a better quality of life for our citizens. I would go further – today this is the only way forward if society is to continue trusting government as a whole.

Esteemed colleagues, having restored the country after the upheavals that befell our people at the turn of the century, we practically drew a line under the post-Soviet period. Ahead lies a new stage in Russia’s development – the stage that will see the creation of state, economic and social order and a social structure that can ensure prosperity to our citizens for decades ahead.

It is symbolic that we are embarking on this work in a year that has been declared the Year of Russian History. The destiny of Russia and its thousand-year journey have been determined by historic milestones. Our generation must be worthy of that great history and of our great people who created this great country. Today we, like our ancestors centuries ago, must draw inspiration from faith in and love of Russia. We shall achieve success. Thank you for your attention.


* * *

Vladimir Putin answers questions from parliamentary parties

Sergei Gavrilov (CPRF): Mr Putin, our economy is indeed riddled with bureaucracy, and many federal and municipal unitary enterprises serve no useful purpose. But it is obvious that when it comes to the new industrialisation and modernisation of our country, the unique defence industry enterprises, the Academy of Sciences institutes, state-owned corporations and banks with state participation are the drivers in promoting new technologies and protecting the interests and security of our country. It is not by chance that during the course of discussions on our accession to the WTO, our foreign rivals demand accelerated privatisation of strategic enterprises.

As chairman of the Property Committee I would like to ask you this question:  don’t you think that a new round of sweeping privatisation in our country will result in strategic enterprises being seized by foreign competitors, a spate of bankruptcies and raider takeovers, as happened in the 1990s during the dodgy and unfair privatisation, especially in the context of the financial crisis and decreased capitalisation of our industrial assets and the inevitable growth of tariffs and disruption of investment programmes? What measures can help recover the financial health of and support for state-owned enterprises? Is the government prepared, as before, to seek parliamentary approval not only of the budget, but also of the privatisation programme?

Thank you.

Vladimir Putin: I would hate to see our strategic assets seized by anyone. Together we should do everything to prevent that happening. I assure you that we are allies on this issue.

Conceptually speaking, whether privatisation is good or bad, obviously you are asking this question on behalf of the Communist Party and the Communist Party has a certain attitude to privatisation. I would not like this discussion to drift into politics. It is obvious –  and international experience proves this – that privatised enterprises are more efficient than state-owned ones.

For an ordinary citizen… Just a minute, be patient. You will like what I have to say, honest, you will like it, I’m serious. An ordinary person, a worker, does not care whether he works at a public or private enterprise. What matters for him is the pay, the working conditions, occupational safety, the responsibility of the management and the owner, be it the state or an individual or a group of individuals. What matters for the state is, first, that the enterprise (whatever its form of ownership) develops rapidly, introduces new technological standards and duly pays its taxes while we accumulate these taxes in the state budget and use that money effectively for defence and social needs.

Is that what we get when we privatise our enterprises? No. I agree with you here. I told you that you would like what I had to say. Let’s put it this way, it is by no means always the case. It may be the case in the economy at large, but not always for some major companies. Moreover, private owners steal revenue, money and property from one another.

I hear applause from the Communist Party. A unique occasion – it should be recorded in parliamentary history. But what I say is true. You know that they are right. Unfortunately, such abnormal things happen even at privatised enterprises.  I know why it happens. We still have a long way to go before the positive things I have mentioned about privatisation begin to benefit society as a whole. We need to give it more thought and improve legislation. But on the whole the trend is right.

If we revert to state ownership nothing good will come out of it. We are talking about strategic enterprises because that was what the question was about.

We have worked out some systemic safeguards and state control measures. What are they? Some enterprises can only be privatised with the president’s consent. That is the first line of defence.

The second line is the special government commission whose task is to attract foreign investment in strategic sectors and strategic enterprises.  We took that decision several years ago precisely in order to prevent things developing according to the scenario you have just described. That applies to defence industries, extractive industries and major mineral deposits. We take decisions on a case-by-case basis.

It would be a big exaggeration to say that our defence industry enterprises present great interest for our rivals although of course some enterprises do present such an interest to our competitors. We will make sure that it does not happen.  We will allow foreign investors in judiciously, but, like everywhere else in the world, we will control them at the government level.

I think the commission that has been set up will suffice for the time being. We will take counsel with you if we see that something wrong is happening.

There is of course one more thing to keep in mind. It is not related to the defence industry, it is related to the economy in general. We should look carefully at what the state gains from privatisation, what the returns are.

There are two main components. First, the aim of privatisation is to improve the economy and make it structurally more modern and efficient.

Some experts say it does not matter at what price we sell as long as the above goal is achieved. And the second goal is fiscal, let’s face it: we should get more money for the assets. I think we should seek to combine the two tasks, let’s proceed on that basis.

Igor Lebedev (LDPR): Esteemed Mr Putin. In recent years events in the Middle East have brought nothing but disappointment in terms of our economic interests. Until recently Russia’s political and economic position in the region was strong. But the wave of so-called revolutions that swept the region brought heavy losses to Russia. In spite of the huge sums of money that we invested in these countries, we have been ousted from Iraq and we have practically lost all our assets in Libya. The number one issue on the agenda is our interests in Syria, and the issue of Iran is looming. We find ourselves on the short end of things everywhere.

I would like to ask you when shall we learn to defend Russia’s economic interests abroad, as other countries do, and what will be the future policy of our government and state in that region?

Vladimir Putin: About being on the short end of things.

If the economy functions well we will be attractive partners for cooperation regardless of regime change in any country. They will be drawn towards us not for  hand-outs but for genuine cooperation.

Back in Soviet times, you’ll recall the developments in Egypt, where we invested unilaterally for political and ideological reasons. And then – bang – the situation changed, and where did all our investments end up?  It would not be proper to say it to this audience, but you understand what I mean. You remember Gamal Abdul Nasser and others in that period when Egypt turned its back on us? Some say it was our oversight. But what do the intelligence men have to do with it? I am not going to point my finger. I do not know how I would have acted in this situation. I would probably have acted like the former Soviet leadership did. The long and short of it is that we dragged certain countries into our orbit and paid them for it and then – bang – the regime changed, and all our investments went down the drain.

I would like to tell you that in the past decade we did not make any major investments in any country for ideological reasons. Everything what happened was on a market basis. We did not present any gifts to anyone. So, it would be wrong to say that we have lost something. One may of course, I would agree with you, speak about lost opportunities, that is true.

For example, we had contracts with Libya in the railways construction and mining industries. We were going to develop the Elephant oil and gas field together with the Italians, and we have contracts to supply arms and special technology. There was money to be made there in the good sense of the word. It would have been good for the Libyan side and for us. For now we have lost these opportunities although the new Libyan leaders are already signalling that they would like to maintain economic ties. We keep our fingers crossed that the country will survive. We are aware of the dire processes taking place there. The country may simply break up. But can these processes be stopped? Probably not. That is a separate story. You know that the fundamental interests of Russia are to a large extent similar to those of many countries in the region. I have no doubt that we will achieve new forms and horizons of cooperation, new levels of cooperation. But Russia of course should always act bearing in mind its national strategic interests and uphold them at all levels and in all international organisations.

Sergei Krivonosov (United Russia): Mr Putin, you have set ambitious social and economic tasks for the development of our country. Given current oil prices, they are feasible, but the systemic problems of the world economic crisis have still not been solved. What is being planned to address this problem if it arises, in terms of the international economic situation?

Vladimir Putin: It’s as if you weren’t a member of United Russia. It’s a good question though. I am grateful to all the parliamentary parties for these questions because they make it possible to explain our position and address some concerns that arise among the deputies. I would like to say that all the initiatives I have mentioned –  one may disagree on how much they will cost, but they are not connected with oil and gas revenues, most importantly, with big oil and gas revenues. We plan our budget based on a conservative forecast for global hydrocarbon prices. Even if the price drops, say, to $70 per barrel, we will be able to meet our commitments.

Yes, in that case we will have to review our priorities just like we did in 2009-2010, we will take these steps together with parliament if the need arises. If the need does not arise we will, proceeding from conservative forecasts of hydrocarbon prices, take another look at our priorities, including those set forth in the articles you have just mentioned. There are different estimates, from 1.5 per cent of GDP to 5 per cent. That is wrong, totally inaccurate. We can say up to 1.5 per cent. We have all run these numbers. I assure you, everything I wrote in my articles I first discussed with specialists, with the Finance Ministry, which, as you know, is very stingy and has been objecting on every issue. But eventually we came to the conclusion that this is possible.

Let me remind you of the gist of the matter. I was just talking about it. For example, the allowance for the third child in the amount of 7,000 roubles, I repeat, to needy families in demographically depressed regions. To bring the stipend to 5,000 roubles for needy students who study well. We should make our social support more targeted. And the same goes for other issues, for example, the salaries of university professors, etc. All these are quantifiable items.

We are currently taking another hard look at all these items. How to finance them? We must cut costs, increase tax collection and manage the economy more efficiently. We can do it. There will be a positive yield of about 1.5 per cent of GDP on every item, if I start enumerating them. And there are many items. But of course that would call for serious administrative and legal work to support the declared priorities. I hope that together we can do it.

Yelena Drapeko (A Just Russia): Mr Putin, on 4 March  mayor was  elected in Astrakhan. There were gross violations of electoral law and A Just Russia did not recognise the results. In protest against widespread vote-rigging our colleagues, led by Oleg Shein, went on an indefinite hunger strike on 16 March.

It was on your initiative that web cameras were installed at polling stations. Now that we have received the video recordings from the polling stations we can officially declare that the results of the election of the mayor of Astrakhan do not reflect the real will of the people. Where there is video evidence of perpetrated crimes our comrades file a lawsuit. We know that a court ruling is the only way to overturn the results of elections and declare them invalid. You know the situation of course.

I would like you to comment personally on the shenanigans in Astrakhan.

Vladimir Putin: You know, as far as I know (and Sergei Mironov told me about it about a week ago), the prime minister and the president have no right to overturn the results of elections. I cannot influence that process.

We are now discussing the option of restoring gubernatorial elections in the regions. I think there will be many such rows and disputes. But under the draft law the president has no right to overturn the results of elections. If you think that the president should be vested with such powers, let’s think about it.

But I think that in that case the president will simply get bogged down in constant arguments over whether the elections were held correctly or incorrectly, what was the nature of the election violations. Naturally, if you want to know my opinion, I think that if the election violations can put the results of the election in doubt, then the court must cancel the elections. But if the court finds no grounds for cancelling them, well, then people have to accept the results. As far as I know, your colleague (Oleg) Shein started a hunger strike but he has not appealed to the court. To be honest, I find that rather odd. Why starve yourself? Maybe the court will sort everything out, and everybody will agree with the results of the court proceedings. I think he should appeal to the court. 

Honestly, I do not know the details. I am saying this sincerely. This morning I watched the news on TV (I do not remember which channel) and saw the Astrakhan prosecutor speak. He said they have looked into the complaints, found violations, but they do not consider these violations to be significant or sufficient grounds for cancelling, but it is up to the court to make the final ruling. I repeat: this is a case whose ruling should be accepted by all of us.

Sergei Shtogrin (CPRF faction): Mr Putin! Everybody knows that in recent years the Russian economy has become very dependent on exports, exports of  raw materials in particular. This is especially obvious in the case of the Far East, which has become a transit point for the movement of natural resources as well as an area which extracts and produces raw materials. We know that in Soviet times, they built the Komsomolsk-on-Amur Aircraft Building Plant (KNAAPO), the Amur Shipbuilding Plant, the Amurstal Metallurgical Plant, five manufacturing enterprises in Birobijan, and entire complexes of agricultural enterprises, greenhouse centres, and livestock farms around Khabarovsk. And what has been built in the Far East in recent years? A pipeline, a coal terminal for 13 million tonnes in the Vaninsky District, a gas pipeline and a liquefied petroleum gas plant on Sakhalin Island. Why is this happening? Taxes are the same as in the rest of the country, but wages are lower than in the central regions. What has the government done in recent years and what do you intend to do to make the Far East a truly industrialized region so that people actually want to live there, instead of running away as fast as their legs can carry them? Thank you.

Vladimir Putin: These are both strategically important areas. I completely agree. I said so in my speech. And I want to tell you that I am concerned about this, like you are. I think your concerns are justified. I have already said that the rate of migration from these regions has slowed considerably but all the same, even compared with 2010, there was still a small migration from there in 2011. This means that our efforts to at least stabilise the situation – or, preferably to improve it – are not enough. Is anything being done or not? Yes, definitely. We have a programme, one of seven regional programmes funded by the federal budget, for the Trans-Baikal Region and the Far East. It is one of seven regional programmes. I will not talk about the tens and hundreds of billions being invested as part of this programme, but it is still not enough. We need to think through a system of special preferences. However it happened, in Soviet times these preferences actually worked. They meant that people in the Far East and eastern Siberia were able to earn much higher salaries compared to people living in European Russia and so in effect they put up with the infrastructural inconveniences that existed there in Soviet times.

All those inconveniences are still there, you could even say the situation has got worse, especially taking into account the high cost of train tickets and the even higher air fares. The income gap between those living in European Russia and in the Far East and the Trans-Baikal Region has narrowed significantly.  

Of course, we need to think through together how to improve the situation. But it would be untrue to say that nothing is happening there; that is not the case. It is just not enough. That is why I proposed creating either a corporation or a separate body for the development of eastern Siberia and the Far East. A lot has been done there in the raw material sectors: oil and gas production, an LPG plant. That’s not bad, by the way. For example, the liquefied petroleum gas plant uses the most advanced technology which means increased productivity in the region and higher regional budget incomes, as well as an improvement in jobs and salaries, and so on. Currently we are working on creating a shipbuilding enterprise. As you know, the well-known Sukhoi [Sukhoi Aviation Holding Company] enterprise operates there. They also make the Sukhoi Superjet 100 there, which I have already mentioned and which everybody knows about. In addition, most of a fifth generation aeroplane is manufactured there. None of this has gone away, people are still working there.

We are going to create two shipyards there, a shipyard to be built jointly with Singapore, and another one with South Korea. We are supporting a metallurgy enterprise: it went through a bad time following the crisis, but I am sure it will survive; we are supporting the aviation industry. We have launched the Bureiskaya hydroelectric power station. We have made significant progress in the energy sector. We have made good strides forward. The launch of the Bureiskaya HPS has eliminated power shortages in the Amur Region. This establishes the right conditions for creating industrial clusters. We should do this. Let us think jointly about how we can do so using modern, efficient means so that each rouble invested is put to good use. This problem exists, and it is one of the strategic problems for this country to solve.

Yan Zelinsky (LDPR faction): Mr Putin, the government did a lot of things in 2011, and failed to do even more. The Russian provinces failed to meet the goals and objectives that you set for them. People have not seen any noticeable changes for decades and they do not believe in the future. People cannot take the figures you are quoting and put them in their mouths or feed their children with them. I do not doubt your aspiration to help the population but the individuals in your team are not people to be relied on. You should face the truth: the Minister of Defence decided to purchase military equipment abroad; the Minister of Education and Science is promoting a policy of mental debilitation of our children; the Minister of Healthcare and Social Development is promoting the inefficient and useless Arbidol [flu antiviral drug] throughout the country. I do not have time to list all the “merits” of these pseudo reformers and current ministers. I am sure you do not think the same way as they do. Maybe it makes no sense to shuffle the cards and it is high time to replace the top officials since you have alternatives at your disposal for staffing those close to you.

Vladimir Putin: Are you dreaming of working personally? That’s what I thought. Well done!

You are right. We have many problems, and we are a long way off solving most of them. The figures that I quoted or any other figures are not designed to be eaten, but they are objective figures. They show the rate of our development. This is an absolutely precise and undeniable fact: they are positive. On the whole, we can be proud of this together; that includes you and all the State Duma deputies, whatever their factional allegiances. We have done a lot, but a lot has yet to be done and I have mentioned this repeatedly. Are there any problems in the sectors you have mentioned: in healthcare, in education, in defence security? Of course there are. There are lots of problems. I assure you that there are lots of problems in any country, even one with a well-developed social infrastructure. And it’s good that we can talk about all this openly and directly, face to face. Because it saves us having to beat our own drum all the time and talk about our successes. You are right, we have to be constantly paying attention to what is still to be done.

Suppose I have a lot of questions about the Unified State Exam, which is being introduced by the Ministry of Education and Science. There is a lot of corruption associated in this area, but the overwhelming majority of teachers and parents appreciate the positive aspects of this process on the whole and that’s a fact. You know that last year about 70% of people starting their studies in our major universities, for instance, in the Ural State University, were students from rural areas, - this has never happened before, - and from other regions of Russia, not only those who live close to the university. This is one way of reducing corruption in this area.

Of course, we need to implement a lot of reforms and we need to set our minds to this task. I have just quoted some data on demographic changes. These changes have not come about all by themselves. There has been a fall in the number of road deaths, Russia has seen a reduction in the mortality rate in all critical areas, including in oncology, only a slight decrease unfortunately, but a decrease nevertheless, in cardiovascular diseases and so on – this is also the result of the work of the Ministry of Healthcare and Social Development and their colleagues in the provinces. Let us be objective and look at what is really happening in the country. I understand that the logic of the political struggle gives you grounds for saying: they are lying to us, this is wrong, that is not so. But to make effective decisions you have to look at the actual figures. If you think that the statistics are wrong, then let us take another look at the statistics. But I assure you, everything is as it should be, everything is fine. The figures have been checked many times.

For instance, there are a huge number of questions and problems associated with primary healthcare. It goes without saying that we have to work on this together and that is what we will do. But we have to use objective data.

With regard to personnel issues, I have said so many times and I want to confirm that we will make substantial changes to the management team. But not because the officials do not deserve a positive and satisfactory assessment of their performance, but just because they work in an area where regular reshuffles go with the job. It is just very hard to be under constant pressure in certain areas. There are so many different groups, each with their own interests. And in general, our personnel policy will focus on making replacements, including with representatives of various political forces, I do not rule out this possibility. It is important for all of us that they are people with a solid professional background.

Ayrat Khairullin (United Russia faction): Mr Putin, if the WTO was a bad thing, then Russia would probably have been admitted a long time ago. However, in the summer this country will become a full member of the World Trade Organisation and this means not only further integration into the global economy and additional trade privileges, which you have mentioned in your speech. It also means in the first instance taking on additional responsibilities. In this respect, please tell us whether, under the burden of these additional obligations, we will be able to ensure the necessary level of protection of our producers, including the ones you spoke about, in engineering and agriculture, especially dairy farming. These industries provide the highest employment levels and face the biggest risks from our joining the WTO. Thank you.

Vladimir Putin: Of course, these fears are justified, and we need to think about this: do we want to put our own producers under worse conditions than their rivals from other countries on our own domestic market? Do you remember the famous line from the film – “I myself do not want that.” We are all the time thinking about how to prevent that. We must join the WTO and we must prevent the risks you have mentioned. This is not just about agriculture, agricultural machinery production is also a very sensitive area in this regard. Agriculture itself, of course, and the car industry.

During the negotiating process, which took 18 years, we received the tools that will help us to maintain the competitiveness of our producers. For instance, in the car industry we have developed new mechanisms, called auto assemblies, in other words we were able to attract foreign investors with their technologies to Russia. I have said this, on condition they relocate their technology and research centres to Russia and create local production facilities, manufacturing up to 60-70% of the components locally: propulsion devices, painting, lacquering, transmission systems and so on, that is major assembly units. Just as an example.

During the negotiations with the WTO, some European countries insisted that we bring these special conditions for our producers forward from 2020 to an earlier date, that we just limit this preferential treatment and benefits for the import of component parts to the middle of 2018. And we agreed to this.

But since we did not want to let down our investors with whom we had already concluded relevant agreements, we decided to subsidise their work directly with federal budget funds for a period of two years, in order to create a modern look for our domestic car industry. On the whole, everybody agreed to this and in that way we were able to arrive at a compromise in the automotive industry.

I have already said that we recently held a meeting at AvtoVAZ. There are perfectly legal tools which are used by other WTO member states. For instance, an environmental organisation drew our attention to the fact that we have more and more scrap cars piling up. All right. We will introduce an environmental tax. For car manufacturers based in Russia – a letter of guarantee (you know what that costs) and for car importers – an appropriate amount of money equivalent to the difference in the reduction of the customs duty on imported cars after Russia’s accession to the WTO. That’s just one example. 

Other examples: a very sensitive sector, as you said, is agriculture. Agricultural producers have constantly made us aware of the problems they face. I have said that overall Russian agriculture has produced good results. But that does not mean we should not protect them after Russia’s accession to the WTO. Our subsidies [to the agricultural sector] currently total $4.5 billion. And we have agreed that under the agreements on accession to the WTO, for the next two years we can extend subsidies of $9 billion to the agricultural sector, not $4.5 billion, but $9 billion with a gradual reduction thereafter. But we are not in a position to do even that. In other words the terms we agreed on have been very acceptable for us.

A sensitive area (I could talk about this for hours) is red meat, especially pork. We put a lot of work into this area. Of course, we are doing our best to cover every detail. The discussions with our partners, the WTO member states, were a very difficult, complex, controversial process. But overall I think we arrived at compromises. And there are additional tools we can use to safeguard our interests.

We will now think through with the agricultural producers about how we can bring them on board too, like I outlined with regard to the automobile industry.

Nikolai Levichev (A Just Russia): Mr Putin, I’d like to resume the discussion of the public education system which, in my view, is developing in a rather unbalanced manner. The ministry is making a lot of effort to develop assessment and gauging procedures, such as tests, reports and so on.  A lot of money has been spent on the introduction of the Unified State Exam (USE) in recent years. According to expert estimates, the USE costs us an annual 6 billion roubles, which accounts for about 20% of secondary education spending. We believe this is over the top. A decision has now been made to introduce the USE for Bachelors, which means further costs. Is this feasible? The checks are becoming increasingly rigorous, yet the decline in the quality of education continues.

Would you agree that we have chosen the wrong vector for the development of the national system of education and that our preoccupation with testing procedures undermines the efficiency of the learning process as such?

Thank you.

Vladimir Putin: I partly agree that testing procedures alone won’t help us discover young talent. But there is also a system of academic contests and competitions of all kinds. And then again, major Russian universities, such as the Moscow State University, admit aspiring students on the basis of their in-house entrance interviews as well [as the standardised academic aptitude test results].

I agree that by focusing exclusively on such tools, we will end up in a high-risk zone. We'd do better to combine what I’ve just mentioned with the aspects that you find disconcerting.

By and large, though, I believe that we’ve taken the right course. Our aim is to make the education system more efficient and modern.

Speaking of the Bachelors, if we want our university graduates to feel confident on the international labour market, it would not hurt to embrace this system. It could also help us make the national education system more competitive. Every resident or non-resident entering a Russian university will then know that upon graduation, he or she will be qualified to work in any country in the world. This will raise the competitiveness [of our education system] and attract skilled personnel. This is crucial, in my view. So, on the whole, I think we are moving in the right direction. 

Nikolai Kharitonov (CPRF): Mr Putin, what kind of philosophy, conditions and legislation do you think we need for the even and equal development of the Russian provinces? The Regional Development Ministry does try to nurture all the regions in equal measure, but it hasn’t been particularly efficient in its efforts so far.

Vladimir Putin: Well, this is something we should think about all together. This is not an easy question. In recent years, we’ve disbursed almost half a trillion roubles in budget allocations for regional programmes. We are running seven regional programmes, one of which I mentioned earlier today. They target Russia’s Far East, the Trans-Baikal region, the Chechen Republic, the South of Russia, the North Caucasus and the Kaliningrad Region. Seven programmes, I repeat, and we allocated half a trillion roubles on them. These programmes are quite efficient, by and large. But there is much more to be done, of course. The Regional Development Ministry needs to think of ways to organise its work in the years to come in a more efficient way. I agree with you here. We should concentrate our resources on key areas of regional development and build general rules of conduct on key issues, making the most of the assets of each particular region. That’s how we will go about it.

If you have any concrete proposals on how work should be organised, we will be only too glad to consider them.

Yaroslav Nilov (LDPR): In your report you touched upon outside threats, Mr Putin. Our party would like to know where you stand on the following issue. It is no secret that NATO was set up as a rival military alliance [to oppose Russia and the Eastern bloc]. We cannot help but recall U.S. presidential candidate [Mitt] Romney’s words about Russia being his country’s principal foe.

The Russian government has always tried to prevent the deployment of any foreign military bases inside the country or near its borders. And our LDPR party has been working to prevent NATO’s eastward expansion. But now NATO is reportedly set to deploy a military base in Russia’s Ulyanovsk Region. So the question is: Has the government’s position truly changed? Or have we just misinterpreted matters? Please comment on this. Thank you.

Vladimir Putin: I believe that NATO is a relic of the Cold War era. It emerged at a time when we still had a bipolar global system. NATO came along first and then the Warsaw Pact was established as a counterweight. Today, the situation is different. So I'm at a loss as to why we need an organisation such as NATO. But this is a geopolitical reality, and we have to reckon with it.

Admittedly, NATO sometimes plays a stabilising role in international conflicts these days. Though it may meddle in affairs beyond the scope of its mandate, and we should respond to such cases accordingly. This is only natural. But as I said, in some instances, its role is that of a stabilising force.

In Afghanistan, for instance, NATO is operating in line with the UN mandate. I’d like to address all those present here today, whatever their political convictions. We are all aware of what is going on in Afghanistan. And we would like the situation there to remain under control. Right? We wouldn’t want our soldiers to fight on the Tajik-Afghan border, would we? So let NATO and other Western contingents do their job.

We’ve agreed to support air and overland transit of certain countries, including the United States, Germany and France. In my view, we must help them in their efforts to restore stability in Afghanistan. Otherwise we will have to do that ourselves. You see the kind of dilemma we’re facing?

Speaking of NATO, we have already allowed the right of transit to certain NATO member states. But we should be very pragmatic about what we do, accepting things that are in line with our national interests and abstaining from those that run counter to them. Maintaining stability in Afghanistan is in our national interest and so we declare that we are willing to provide assistance with transit.

As for Ulyanovsk, the plan is to arrange a launching pad for freight transit as the military say, not a military base. Nothing that contradicts our interests is being done there. On the contrary, we stand to benefit.

Adalbi Shkhagoshev (United Russia): Mr Putin, I have two questions, both of them political. The first is related to the revival of direct gubernatorial polls with an “election filter.” Despite the fact that we’ve approved today the idea in principle, many of us just don’t know what to make of this filter. We’ve been wondering therefore how you see it personally, and whether you think it will be able to cope with two important tasks: a) supporting good candidates; and b) preventing politically weak candidates or ones with criminal records from taking power.

And my second question or, rather, request is to ask you to comment on the newly adopted amendments to the law on political parties, concerning registration or...

Vladimir Putin: Let’s begin with your second question. Well, the law has been adopted, and we should abide by it. It’s important that we prevent new parties from being set up on the basis of religious, ethnic or regional principles. Our federation is based on a complex structure. Such decisions can only be made after a serious analysis of potential consequences. We should pay close attention to how laws are applied in practice so as to prevent the emergence of parties on separatist or ultranationalist platforms. Our country is a multi-ethnic one, is it not? And our federal state is intricately organised. So I do understand your fears and share some of them.

On the other hand, though, we ought to be mindful of society’s needs. The public should feel that it is they who form the government. Only then will we have a stable social life and a balance of political forces. In Sweden, for example, there are as many as 700 parties, despite the country being so small. Only 30 parties run for election, though, and the parliament is formed by six or seven parties. There are a great deal of parties in the United States as well, I even don’t remember their exact number, but only two of them play on the nation’s political scene.

People feel free, and they are given the opportunity to form political parties and participate in politics. But the system is built in such a way that it stabilises the state instead of splitting it. This is what we, too, should strive for. The country’s political well-being and its future will largely depend on how we apply this law.

Speaking of gubernatorial elections, I was one of the people -- perhaps the only person -- behind the previous mechanism, which had to do with the president’s appointment of nominees proposed by parties winning elections in their respective regions. It would have been hard for federal authorities to impose someone. Not that they sought to do so… When I was president, MPs of a regional legislature warned me that they would vote down the candidate I was going to nominate. It was in Volgograd or in Nizhny Novgorod, I think. And so I ended up proposing another nominee. In those days, I believed there was a high risk of criminal and ultranationalist forces getting into power in the regions, with the nation recovering from a civil war. So I thought this scheme would be appropriate for the circumstances we had at the time. It was mindful of the national as well as regional interests, with all governor nominees to be confirmed by regional legislatures.

When assessing an official’s performance, we tend to concentrate on the failures and we overlook the achievements. And if an official is appointed, responsibility for all things negative is usually shifted toward the one who hired him or her. And in that particular case, it was the nation’s president. But members of the public who vote by direct secret ballot should also feel responsible for those whom they bring into power. This is important from the point of view of internal democratic processes.

In this country, ultranationalism and separatism may prove to be in high demand on the election market today, and these tendencies do pose a threat to us, as you rightly pointed out. So we should proceed with caution.

How should we build those filters and what should they be like, you ask? I don’t know, really. This is up to all of us to decide. I think they should be effective in sifting out candidates with extremist ultranationalist views or with criminal records. On the other hand, though, they should not function as an impediment to the process of voting. I'm with you here.

One of the options proposed in the bill that you mentioned involves a preliminary vote by MPs of municipal legislatures. Such a tool already exists. It has been employed in presidential elections in France, for example. If a person wants to run for governor, he or she will have to hold consultations with members of local legislatures first. At the end of the consultations, the lawmakers will rate that person (from 5 to 10%), for example. Such a mechanism seems quite workable.

But are any such filters possible or necessary at the federal level, in presidential elections, for example? Well, if we invent an appropriate mechanism, I will lobby for it, of course. But, as I said, it should be easy to comprehend and it should be transparent, so as to prevent the president from barring some candidate unjustifiably. And by no means should it be burdensome for voters. But for now this is a work in progress. So let’s see how that piece of legislation works. We’ll be able to amend it later on, if necessary. But first we should see it in action. But until it is signed into law, feel free to make proposals.

Mikhail Yemelyanov (A Just Russia): In your speech and while answering the question of deputy Khairulin, you spoke about the positive international experience of our WTO accession. But China, India, South Korea, Asian Pacific countries and other modern economies did not open themselves to the outside world until after they had modernised their economies. You said that almost 70% of our capital assets have depreciated. This means we’re opening our economy to the world before bringing it up to date. This is a strategic error, in my view. How can we seriously speak of equal competition with foreign importers given that most domestic enterprises are likely to become unprofitable or even loss-generating upon Russia’s accession to the WTO? Where will they get the money to modernise themselves? No one is likely to give them loans or invest in them. I’ve been wondering therefore which of the economic sectors stand to benefit from the country’s WTO accession – not in the hazy medium term, but immediately? And which sectors may collapse or face recession as a result? I’m putting this question to you personally because officials directly involved with the WTO normally try to avoid giving concrete answers. Can you say something concrete about this? Have our prospects been analysed?

Thank you.

Vladimir Putin: You remember the joke about which came first, the chicken or the egg? The answer is: we had everything earlier. However, it is not correct, because there was a time we had neither chickens nor eggs in Russia. The poultry on offer at our shops was scarce, and it was of inferior quality. But in recent years – just to give you an idea – our poultry output has nearly tripled.

Remark: Are you referring to chicken imported from the U.S.?

Vladimir Putin: No, no, I’m talking about domestic produce which almost tripled. The production of pork has increased by a factor of 1.5, meanwhile. Meat consumption in Russia also continues to grow. In the Soviet era, the [per-capita] meat consumption rate never exceeded 67 kilogrammes per year.

Remark: 75.

Vladimir Putin: No, no, it’s 72 currently. It was 67 before. Now 72 is the best indicator.

You were wondering whether it would not have been better to modernise first and join the WTO afterwards. Many experts, an overwhelming majority of experts believe that we won’t be able to modernise our economy without joining the WTO. That is the whole point. And, frankly, I would never have agreed to our WTO accession had I not agreed with that viewpoint after very prolonged discussions.

You see, the fact of life is, as we say, “a man doesn’t cross himself until he hears the thunderbolt.” It’s the same in this case: until there is an awareness of real competition, there will be no investment in modernisation. I have already mentioned that during the crisis the amount of new equipment at our enterprises increased by 10%. Why? The crisis forced them to do this, they simply had to do it, especially, for example, in the power industry and in the chemical industry. It’s the same case here.

When an enterprise has to modernise it springs into action. If the market is closed and your wares are being purchased anyway, you are not too keen to modernise. And they turned the issue around. Shut down imports. But there is no way imports can be shut down, they carry on growing all the same.

You know how it happens: as soon as real incomes increase ever so slightly, imports increase many times over. Why does this happen? Because our economy and our industry do not meet the modern standards in terms of quality and price. To finish my answer to your question I would like to say that I am concerned about this as well, but I still hope that increased competition will spur the modernisation of our economy. There are some key issues, as I have mentioned – agriculture, the automobile industry, production of agricultural equipment and technology. Of course I agree with you that there are some questions, but we should actively look for instruments to protect them over a certain period of time using WTO instruments (which is what we are currently engaged in). These instruments exist. I have already mentioned those in the automobile industry. And instruments can be found for other sectors, for agriculture and so on.

Sergei Naryshkin (State Duma Speaker): Thank you. Colleagues, all the questions have been asked, and answers have been given. Deputy Oleg Nilov has suggested that questions could be asked in written form, and we had an opportunity to do so.

Vladimir Putin: I suggest the following. If there are any additional questions that you want to ask, that you consider to be important, let us have one more question from each party. Yes, please.

Vladimir Bortko (CPRF): Mr Putin, forgive me for asking you a political question that is not just in your capacity as Prime Minister, but also as the future President.

Considering the aim of expanding democracy, what would you say about the Duma striking out from the draft the words “two successive presidential terms”? That is number one.

Extending presidential powers, would you take offense if we introduced such a proposition in order to define you not as a representative of the legislative branch but of the executive branch, and, pardon me, to strip you of the right to initiate legislation, just in order to indicate that you are the representative of the legislative branch? And the last question. What would you say if we introduced an initiative to change the preamble to the Constitution to say that we are not a multinational people, as it currently reads, but that we are the Russian people and the peoples who have joined them?

Vladimir Putin: First, regarding the removal of the words “two successive terms” from the Constitution and leaving only the words “two terms” -- I think this makes sense, we might think about it. We should consider this along with all the parliamentary parties.

I'll be quite frank with you and not only because it affects me to a lesser degree, as you understand (let us be true, we understand what we are talking about, we're all grown-ups here). The law cannot be applied retroactively, from the moment it is passed I will have an opportunity to serve now and for another term, no problems there, but only if the situation permits it and if I want it.

You see, there comes a moment in the life of every person, and I assure you that it has occurred in my life, when there is no longer a need to cling to something, and a person can and must think about the destiny of the country.

I agree with you that we should constantly think about improving our political system in such a way that will make it stable, reliable, efficient and flexible in terms of reacting to the processes taking place within and outside the country. Let's think about it together. Actually, to me, this is an overarching task, the overarching task of all my work and probably my life. So I do not rule out discussing any options. That’s number one.

Number two. Regarding the right to initiate legislation. Why should the president be stripped of such a right? I am not talking about myself, I mean in general.

Vladimir Bortko: He is a symbol.

Vladimir Putin: A symbol? And who is going to work? If the President is a working entity he must have an opportunity to submit his proposals on improving the legal framework to society, to parliament. I think that would be wrong. I cannot go along with that.

Furthermore, as for replacing “multinational people” with “the Russian people and other peoples who have joined them.” Do you know what would happen? Part of our society would become first-rate people and another part would become second-rate people. That cannot be done. We want to be a single strong nation, a single people, so that every person who lives in this country feels that this is his homeland and that there is and cannot be any other homeland. For every person to feel that way we must all be equal. That is a fundamental issue. There is no doubt that the Russian people form the backbone, the foundation, the cement of the multinational people of Russia.

And you know, I can well afford to say this, I have already said in public that they have dug up some church documents dating back to 1600 or thereabouts, and all my ancestors have lived in the same village 120 or 180 km from Moscow and for more than 300 years they went to the same church. I feel it in my gut, I feel a gut connection with this country and its people.

But dividing people into first, second and third categories, you know, that is a very dangerous path. We shouldn’t do it.

Leonid Slutsky (LDPR): Mr Putin, we are one country, we have a single foreign policy and I think my colleagues from all the other parties will agree with me if I say that for us the moment of truth is whether the Eurasian Economic Union will be created in 2015 and whether it will, within a short span of time, once again emerge as a pole in world politics and international relations.

Today we are working hard, I can say this as chairman of the Committee for CIS Affairs, in order to envision the parliamentary dimension of the future Eurasian Union. But we still have many hangovers and rudiments, as you said with regard to NATO, of our shared recent history with the near abroad countries, the recent history when work in the CIS space, to put it diplomatically, was put on the back burner.

That brings me to my question or proposal: over the next few months – the time when we will adopt the 2013 budget is not far away – we should bring in representatives of the Committee for CIS Affairs jointly with the leadership of Rossotrudnichestvo and discuss the remnants from the past that we still have concerning the programme of relocation, the International Development Agency and some other outstanding issues. In this way, all the masses of our fellow countrymen and citizens in the Eurasian space would support us, the Eurasian Union. All these issues must be discussed and synchronised, and certain decisions should be made in the Russian Federation within the next few months. I would like to ask for your support on this.

Vladimir Putin: I agree with you. I have nothing against it, indeed, we will support it. Moreover, I believe that deepening integration in the post-Soviet space is the key task of the economy and Russian foreign policy, it is absolutely the key task, there is no more important task. Our future depends on it.

Still, as for the question raised by Vladimir Bortko, we should make our country a magnet that will attract other peoples to join us -- if for example some former republics of the Soviet Union that stayed out of the deep integration processes, give a second thought to what they stand to gain from it, such that nobody in these countries could say, “why should we join them if they have no equality within their country?”

You see, this is a very important structural matter. I think that all these integration processes that have been launched and are yielding real results must be and will be our priority. But I cannot agree with you that these issues were put on the back burner in previous years.

If these issues had been neglected, we would not have had the Customs Union or the Common Economic Space.

Andrei Isayev (United Russia): Mr Putin, I think it is very important that the social theme had a substantial presence in your report today and that you have spoken about social guarantees. This means that the huge number of TV viewers who were watching this have been infused with a sense of confidence in tomorrow (that was probably the best thing in the Soviet times). But I would also like to say that you have touched upon an issue that is very important for us, and that is raising the minimum wage to the level of the subsistence minimum.

I remember that when you started as Prime Minister you insisted on such a decision being made in 2008. You are raising this topic again now. It has been growing slowly during the crisis period. You also said that the minimum wage should be increased little by little over the course of several years and that it should be brought up to modern standards. What are your thoughts on this?

Vladimir Putin: This is a very sensitive topic. I would not like to go into this discussion now.

The minimum wage must be raised, we must think about how we calculate the subsistence minimum. You know that many countries proceed based on hourly pay. Even if we adopt that approach some day we must work out mechanisms that would prevent a decrease in the incomes of our people whose pay is modest as it is. Conversely, we should map out a path that will lead to an increase in these wages.

We will have to discuss this in the government and at the presidential level (the Presidential Administration has a relevant directorate), and of course, the trade unions must take part. There should be a broad discussion in parliament. That is a very sensitive area. It is not enough simply to adopt an hourly measure of pay and say that we will proceed from it in calculating the subsistence minimum and the living standard. We should be quite clear on what this will lead to in practice.

That is why I touched upon this topic in my report but did not elaborate on it, because before saying anything specific we should immerse ourselves in this problem at the expert level and understand the consequences of each of our moves. But there is no doubt that these social policy instruments must be modern and must reflect current realities. I suggest that we think about this together.

Alexei Mitrofanov (A Just Russia): Mr Putin,

Private security firms have been springing up in the world in recent years. The Americans spend almost $350 billion providing these services. Private security firms protect foreign property and train foreign personnel, they guard infrastructure facilities and deliver a huge amount of services in Iraq and in other countries. Don’t you think that we too should be represented in this business because we understand that this is a certain lever of influence? Would you be prepared to set up a working group to study this issue?

Clearly, this issue falls under the President’s jurisdiction only, because it involves companies that have weapons, and not just small arms. So, it is a serious matter.

Vladimir Putin: I understand your question.

I think that it is indeed an instrument for promoting national interests without direct participation of the state. You are absolutely right. I believe we could give some thought to it.

As for using such institutions inside the country, that practice is already developing, but this is called outsourcing. You know, it is very expensive, it may be worth it in some cases. The Defence Ministry is introducing it. Honestly, I try to restrain them a little bit because it is just too expensive and calls for major budgetary outlays. But on the whole it's moving in the right direction, because then servicemen are relieved of various economic chores and will pay more attention to combat training.

This has to do not only with economic functions, but also with guarding facilities, weaponry and so on.

Yes, I agree with you, we can and must think about how to implement these plans.           

* * *

Vladimir Putin’s concluding remarks:

Esteemed colleagues,

I have expressed my views in some detail when answering your questions and I think I have made my position clear on some key issues of the development of our country. What can I say in addition in response to the remarks our colleagues have made from this platform?

I was handed a note from the KPRF suggesting that Rosstat (the Federal Service for State Statistics) should report directly to the prime minister or even to the president. This is an idea worth considering. As you know, executive bodies are more interested than anyone in the objectivity of these figures, otherwise it's impossible to plan anything. So, let's look into this proposal, I have nothing against it. On the contrary, perhaps this is the best thing to do. I am not ready to give you a direct answer at this point as to whether or not we will do it, but we will certainly discuss it very seriously. I think there is logic to this.

Now specific comments on the remarks that our colleagues have made.

Gennady Zyuganov said that there are many serious system-wide problems in European countries and in other parts of the world and that things are unlikely to be better here than they are over there. But we are already doing better than they are, this is evident. I have said that unemployment in Spain stands at 25%, as you know. Not so in our country... Yes, I am aware that there are many unemployed people here, but it's not one in every four people, like in Spain. I am sure you are aware of this.

You know, some things have to be taken as they are, without politicising them and without any wishful thinking. Do you want to see the same rate of unemployment here as in Spain? Surely not. You are in favour of full employment. We should put our heads together to think how to achieve this.

Or take GDP growth, industrial output. I reported the objective data to you – we have a growth rate of 4.3%, the third fastest in the world. Is this better than over there? It is better than in many countries. Among developed economies only Germany has a higher industrial output growth, and not much higher at that. Is this better than it is in many other countries? Yes, it is.

It is for this reason that we can aspire for more, that is the message I want to get across. We should do away with our ingrained attitude that things are better elsewhere and that they can never be better here than they are over there. They can. And we are achieving these results.

While on the subject of energy. I agree, it is absolutely true that unless we introduce new capacities we will not meet the targets set for the country’s economy. That much is true. I have cited the figures. We launched 12.5 GW in the past few years and we are set to launch 8 GW during this year alone. Does this not mean that we are moving forward? Of course, we are.

Regarding Lenin’s New Economic Policy (NEP). Make no mistake, I am not going to make any political assessments, but when it became clear that the planned economy was not working, Lenin introduced elements of a market economy. This is what he did. So, it is wrong to say that everything about the market economy is bad. Even the Communist Party introduced elements of market regulation when other approaches failed. It was only later that Stalin liquidated all these market instruments. Of course, this made it possible to concentrate resources. I will speak about this in a moment when I respond to the remarks of our other colleagues.

As you know, the advantage of a planned economy is that it makes it possible to concentrate the resources of the state in the most important, critical areas of the national agenda, for example, on defence and security, but in general it is less efficient than a market economy.

History has staged two experiments that are very well known in the world: East Germany and West Germany, North Korea and South Korea. These things are obvious. But that does not mean that everything about the market economy is fine. If we introduce a so-called “savage” capitalism, no good will come of it. So, what is our goal? A market economy, but one that is socially oriented. We will all work together to seek the golden mean in our practical work.

As for our dependence on energy resources, that is also something that we inherited from the Soviet era. This is an obvious fact. The same is true of the aviation industry. Of course, we are proud of our aviation industry. Didn’t I speak about this? I think I spoke about it last year. But our aircraft are not up to standard in terms of noise and fuel consumption…

Clearly, investments must be made, but only investing public money is not effective. You know what is happening there.

And of course, in the 1990s, the previous parliaments made so many decisions concerning the privatisation of key sectors that it took us several years to pool all of our resources, several years of strenuous efforts and day-to-day practical work. It was impossible to pool all these resources. Was it me who made all these decisions? No.

We are talking about serious matters there. And I agree with our left-wing opposition that there are sectors in which the state should work and should be directly involved. Because, for example, in the aviation industry, there are no more than two or three competitors in the world, and they all operate with state support. That is an obvious fact.

Are we proceeding any differently? We are doing exactly the same thing. Why did we create an aviation holding? We are doing exactly that, and we are doing it directly. And as for ship-building, what are we doing there?

I agree. But you know, we spoke about our WTO accession, to be followed by modernisation. But that was not how it actually played out. Of course, South Korea, for example, passed laws in support of ship-building in 1962, including direct injections of cash by the state. They did this and later phased out these subsidies and put the industry on a market basis. Listen, that is precisely what we are doing in creating major holding companies, including under the auspices of the Russian Technologies State Corporation. All these things take time if we want to operate within the law, but we are moving in that direction.

Again, like I said before, we do this not in order to nationalise these sectors and maintain a state presence there forever, but to get them on their feet, to make them competitive within the country and on the international arena and to have the state gradually withdraw from these instruments, but doing so in such a way as to be able to influence these sectors and support them. This will be our tactic. I believe it is reasonable and highly balanced.

As for the fact that our budget revenues depend on the growth of energy prices – listen, that is how it should be. As soon as world energy prices grow our budget revenue grows, this is an objective factor. Are we supposed to not take this money? It is coming right to us.

Unfortunately, this is taking place too slowly (and in this respect I am in agreement with Gennady Zyuganov), but still diversification is taking place. A larger share of last year’s additional revenues came from the manufacturing industry. And what is important, and what I would like to draw your attention to because you will be working on the budget, is that in the medium term we are planning for the share of oil and gas revenues to diminish and for the share of revenue from the manufacturing industries to increase.

Food imports. Vladimir Zhirinovsky has turned in his proposals. They are interesting. I will not go into them now. But there are indeed many useful ideas. We will try to take your proposals into account.

Mr Zhironovsky, colleagues from other parliamentary parties, unfortunately, we cannot abruptly cut food imports, much as I would like to do so. We all know why. Prices will skyrocket. We are trying to steer our way between Scylla and Charybdis.

As I said, in recent years we have increased poultry meat production by almost three times. Three years ago we imported 1.6 million tonnes of poultry meat. Last year we set a quota of 300,000 tonnes but wound up importing even less.

Is Viktor Zubkov here? How much poultry meat did we import last year?  About 250,000, yes? Yes, about 200,000 tons of poultry meat. Just recently we were importing 1.6 million tonnes and last year this figure was just 200,000 tonnes.

But we cannot afford to stop imports altogether. And not because we care about foreign producers but because we must think about food prices in big cities.

Do we have problems there? Yes, we do. It has to do with cattle and beef.

By the way, we increased pork production by almost 50%. But pork is a real problem in connection with our WTO accession. We are thinking about how to support our domestic pork producers.

As for cattle. Unfortunately, last year there was a dip in production, not a big dip, but it happened. We are looking into the reasons why, and we will support major investment projects in the livestock industry.

In Central Russia alone we have several projects under way, one of which has to do with cattle and beef production and it is worth almost a billion dollars, about 30 billion roubles. I know that KPRF, LDPR and A Just Russia, not to mention United Russia, have specialists in the field of agriculture.

Can you think of just one European project on a comparable scale? No, because there are no such projects. Their agriculture is going downhill, or at least is stagnating. By contrast our agriculture is becoming more and more attractive for investments. This is not the only such project, we are thinking about ways to support other similar projects. And I am not talking about some other areas.

We are planning to bring in 5 million hectares of new lands to use in the near future. Such farms and projects will contribute to the development of agricultural lands. The enterprise I mentioned will develop 200,000 hectares, and that’s just one enterprise. So, we will of course move in that direction.

And let's face it, you spoke about piggybacking on the achievements of the Soviet period, but beef production was not one of these achievements.

(Voice from the floor)

I am speaking the truth, and you ought to know it since you are engaged in this area because we did not have a livestock industry in the Soviet Union – listen to me and you will surely know about it.

(Voice from the floor)

There was no beef production in the Orenburg Region or anywhere else in Russia.

I have been engaged with this subject for many years and I listen to our agricultural producers very, very attentively. Go visit them and talk with them. Talk with Mr Zubkov, who has been engaged in agricultural matters since his young days. He was the manager of a state-owned farm and a collective farm, and unlike many of those present, he restored ruined farms and he knows about how to do this work. I meet with him almost every week, almost every week.

The Soviet Union did not have a beef industry. We simply slaughtered cows when they stopped producing milk…

(Voice from the floor)

We are not talking about the cattle population. In the Soviet Union we always had a lot of heads of cattle and not enough meat. That was the problem.

I'm sure you remember the commuter trains. There was a joke at the time: What's long, green and smells of sausage? A commuter train from Moscow. We all know it, what is there to discuss?

I don’t want to enter into an ideological argument with you. This is not about ideology. The point is that we must get our economy to function efficiently. This is the point.

We did not have a livestock industry in the proper sense of the word. Today we engage in selection breeding and import cattle from abroad. It is very painstaking work that has a long cycle – about 8-10 years. You surely know this. We will solve that problem just as we are solving it for poultry meat and pork...

(Voice from the floor)

No, they say many things that are right, but they are saying it for the sake of argument. It is true that the cattle population was large, but the amount of meat that every cow yielded was miniscule, that was the problem. Because it was a population that produced milk and could not produce meat.

Milk is another problem in the livestock industry. Last year our milk output dropped slightly. Part of the reason has to do with the big subsidies that agriculture receives in other countries. That is true. Now we have agreed with our Belarusian partners within the Common Economic Space that we will even out these subsidies. As for milk, the gist of the problem lies in the procurement prices and the level of subsidies. We will try to set these things right.

These are obvious issues, believe me. I would hate to get into an argument, but this is true. There is nothing wrong about it, that is the way agriculture is structured. We have lived with shortages and this is a fact that everybody is aware of. The time has come to change the situation. There is nothing wrong or shameful about it. I am not going to blame anyone.

Regarding speeches to the military. We should not drag the Armed Forces into political struggles, but it would be a good idea for the heads of parliamentary parties to address cadets at the General Staff Academy, for example. I think it would be reasonable, and people would be interested, though I urge you to steer clear of polemics and politicking. But it is important for our military and for our cadets at the General Staff Academy to meet you in person, to listen to you and to be able to ask questions. I think there is nothing wrong about that.

Regarding the barrier-free environment and the housing and utilities sector. As you know, this is one of our biggest problems. You are right, we have a lot of problems, a whole host of problems. I have already said this, and I would like to say it again. There are things for us to be proud of, but we also have very many problems.

The main problem has to do with the need to raise the incomes of our people. That is the pivotal task. The entire mood of society depends on it.

Regarding the Astrakhan elections. I see that Sergei Mironov has left. What can I say? Why refer to this as a provocation? They are doing their job. These are elements of political struggle. I can understand this. But it is not within the competence of the prime minister or the president to assess the results of elections or to cancel them, especially at the municipal level. So, we should all remain within the current legislation. We must respect each other, listen to and hear the minority both inside and outside of parliament, and draw conclusions. But the minority must respect the choice of the majority. What are the procedures? Perhaps they need to be improved. Let us think about it together.

What would I like to say in conclusion?

We all need to upgrade our political culture, we should not take things to a personal level here in this room or in our polemics in general. This is very important.

Secondly, with regard to ethnic issues. I would like to urge you not to speculate on ethnic problems, this is a very sensitive topic in our country. I am calling on everyone – representatives of United Russia, A Just Russia, the Communist Party and LDPR.

You know, there is no doubt that the Russian people, I mean ethnic Russians, form the backbone of our society and state. But if we permit ourselves in the course of some political debates and internal processes to try to profit from the ethnic theme, we may shake the internal unity of Russian society and ultimately the Russian people will suffer because we will be destroying our country and our Federation.

I would like to thank you for today’s meeting and I look forward to working alongside you.

Thank you very much.