Putin sets forth national plans up to 2020.
Russia must become the world's fifth largest economy, double its labour productivity, fully re-equip its army with modern weapons and build infrastructure from scratch.
In his report to the Duma, Prime Minister Vladimir Putin reported that, on par with economic restructuring, the government will guarantee income growth over the next few years by increasing pensions, scholarships and salaries for public sector employees.
Under the Constitution, the prime minister must report to the Duma on government performance every year.
Putin started his report by saying it is impossible to speak about the country's sovereignty without a strong economy. As soon as the country runs out of money and has to ask its neighbours or partners for help, independence becomes an empty word. Having found themselves in a bad financial position, Portugal, Greece and Iceland asked the EU for assistance. The EU granted this help, but set forth a number of terms. They will have to fulfil them, although this will be difficult because some terms require a reduction in social spending, he added.
The lesson worth learning here is that economic and government weakness and susceptibility to external shocks inevitably threaten sovereignty, Putin said. The world knows very well that if a country is weak, there will always be someone eager to advise its government on where to move, which policy to pursue and which development path to choose. These seemingly friendly and unobtrusive recommendations may look good, but in fact they camouflage diktat and gross interference in the affairs of sovereign states, he stressed.
Russia is perfectly aware of this, Putin said. The country used all its stashed reserves during the crisis, but did not ask anyone for money. Now its investment has been justified both directly (banks returned the loans with interest – plus 200 billion roubles) and more (last year, the Russian economy grew by 4%, leaving all the G8 countries behind).
This year, Russia expects the GDP to increase by 4.2%. This positive trend must become the norm. Moreover, Russia must become the world's fifth largest economy and reach over $35,000 in per capita GDP. But the country has to create conditions for this.
"This country requires decades of steady, uninterrupted development without sudden radical changes in course or poorly thought-through experiments based in unjustified economic liberalism or social demagogy," he said. "We need neither. Both will distract us from the general path of developing the country."
Putin emphasised that Russia should maintain civic and inter-ethnic peace, and put a stop to any attempt to cause society to split and quarrel among itself.
"We must find the kind of solutions that will give Russia the opportunity to go forward confidently and build a strong, innovative economy," he said. "And each year of this development must bring real and palpable improvement to the people -- for the absolute majority of Russian families. This is the thrust of our policy."
Now a large group of experts are putting the final touches on a strategy until 2020, Putin said. It deals above all with the search for new growth reserves and the appropriate priorities. Only by adopting a correct line of conduct and financial management can Russia reach its goals and change reality, he added.
The reality is such that there is no other way out but to raise labour productivity, the prime minister stressed. At the very least, Russia must double it over the next decade, perhaps even raising it threefold or fourfold in key industries, he said.
Russia will have to increase the share of innovative production in total production from today's 12% to 25% or 35%, Putin noted, adding that many countries long ago embarked on this road. The country will also have to deal with infrastructure, he stressed.
The year 2011 should become a year of major construction projects, the prime minister said. This means completing large-scale transport and energy projects. In fact, Russia will have to lay the foundation for a new infrastructure in the next decade, Putin said.
In the coming decade, Russia will need to almost completely rearm and re-equip the armed forces, he added.
"There has been a lot of speculation recently as to who is going to receive state contracts worth trillions of roubles," Putin said. "I am absolutely convinced the modern weaponry for our army and navy can and must be supplied by the Russian defence industry."
Russia will carry out all these strategic objectives during the next decade with an understanding for the sake of what or rather whom the country is doing this, he said. Making investments in human resources must move to the top of the list of priorities, he added. New production lines mean new jobs and sound financial performance at enterprises results in growing incomes for employees and a replenished treasury through taxes. A steadily high flow of revenues will allow Russia to fulfil its social commitments, whatever happens, the prime minister said.
Russia has raised labour pensions by 8.8% from Feb. 1. It is also planning to adjust for inflation social pensions in two stages – in April and June, Putin said. Later on, the country decided to adjust them in one go. From April 1, social pensions were given a 10.3% increase. This measure raised the pensions of about 4 million individuals, he added.
"If inflation exceeds 6% in the first six months of 2011, we will further raise pensions from Aug. 1," Putin said. "We will need 75 billion roubles for this and we propose that this sum is set aside."
Russia will increase the student stipend fund by 20% from Sept. 1, and student stipends will be indexed by no less than 9% rather than earlier planned 6.5%, Putin noted.
"This decision will enable universities to offer greater support to students in need, and it will also provide incentives for our educational high-achievers," he said.
Russia will also increase the salaries of teachers and medical workers, Putin stressed. Starting in January 2012, Russia will introduce a new system of payments for service members and employees of law enforcement bodies.
In the Interior Ministry system, the base payment for a police lieutenant will be 33,000 roubles, the prime minister said. With all the incentives, the salary will reach 40,000 roubles. Meanwhile, Putin added, in the armed forces, the base salary will be 50,000 roubles and will further be adjusted depending on the place of service. Military pensions will increase at least by half starting next January.
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Direct speech
On doctors' salaries
I would like to emphasise the fact that raising the wages and salaries of medical personnel is a key objective of regional healthcare modernisation programmes. The relevant wage fund will grow by 30-35% in the next two years. All repairs will be completed and new equipment installed by 2013. After that, all deductions to the Mandatory Medical Insurance Fund will be spent entirely on funding healthcare services, including the wages and salaries of medical personnel. This should result in an increase in their wages and salaries.
On education
The key goal of this project is to raise teachers' incomes. The additional funds supplied by the regions, and other funds that are freed up, will be spent on that.
An agreement will be signed with each Russian region no later than Aug. 1 stipulating the criteria for evaluating their modernisation programmes – how effective they are. We did the same with healthcare. It will take time to work this out. But I think, if we start right now, we're in mid-April, right, it gives us May, June, July and August. The draft agreements will have to be ready by then. The key criterion would be a 30% pay rise for teachers starting from Sept. 1. Then, within two years, we need to ensure that the average teacher's salary is equal to the average salary in the respective region's economy.
On support for agricultural producers
On top of that, we have drafted a number of additional measures, and will ask deputies to support changes to this year's federal budget in order to plough another 13 billion roubles or so into developing and supporting rural communities.
First, Rosagroleasing (the State Agro-Industrial Leasing Company) began selling agricultural equipment and farming vehicles at a 50% discount in April, thereby allowing farmers to acquire about 6,000 pieces of equipment. Rosagroleasing and other agencies presently have a total outlay of 3.7 billion roubles.
Second, we shall use federal and regional budget resources to help farmers formalise land ownership. We are not talking big money here, but it is a significant issue that means a lot to farmers. It will require about 120 million roubles. We have ring-fenced these funds.
Third, a decision has been taken to inject up to 9 billion roubles of extra funds into the development of pig and poultry farms in 2011.
On land
I would like to outline our concerns. We must make sure that we do not allow just anyone to build what they want on agricultural land. I was only referring to farmers and this must be clearly spelled out to so that ineligible persons do not get this right and no unlawful residential developments are built on farmland.
That is why we will need to carefully consider this mechanism together. For example, if we give farmers the right to build homes on agricultural land, perhaps this should only apply to the farmers who are listed in the corresponding registries. There may be some other protection mechanisms, so let's think about it together.
On the labour market
At the height of the crisis, we launched large-scale employment programmes, which covered a total of 4 million people, no, even more than that, 4.8 million.
Most retained their jobs or found new employment, and many upgraded their skills or opened their own small businesses. As many as 326,000 people started their own businesses in the past two years thanks to employment programmes and government assistance.
We will allocate another 105 billion roubles in social support for the jobless and for employment programmes this year, which will focus not only on providing jobs, but also on upgrading workers' skills and creating conditions in which people will be able to receive new, higher paid jobs that are in demand.
On cooperation with the EU
We propose negotiating close partnerships in technology and the economy, facilitating dialogue between the Common Economic Space and the EU, creating free trade zones at some point, as well as introducing more advanced forms of economic integration.
We have a lot to strive for because we can eventually end up with a common continental market worth trillions of euros. To start, we are calling on our European colleagues to implement projects that will help remove obstacles to our cooperation and to realise the idea of establishing a joint energy industry of a greater Europe.
The introduction of visa-free travel could serve as a starting point for the launch of real integration processes between Russia and the EU. We are actively discussing this, and we are ready for this.
On modernising the defence industrial complex
The re-equipment of the Russian Air Force and air defence systems will become a priority aspect of the armed forces' short-term development.
Air-defence brigades are already receiving new S-400 surface-to-air missile systems. The production of S-500 surface-to-air missile systems will begin in the future. This system can support air defence, missile defence and destroy targets in the near-Earth space.
New strategic and short-range missile systems, including the Yars, the Bulava, and the Iskander-M, will be adopted. The production of strike missile systems is expected to double starting in 2013.
We will also upgrade our civilian launch vehicles. There are plans to conduct initial flight tests of light-weight and heavy-lift Angara rockets in 2013. The Rus-M launch vehicle, due to be developed by 2015, will lift off from the new Vostochny space centre. It will orbit manned spacecraft and cargo spacecraft.
On flats for the military
We intend to purchase about 77,000 additional flats for service members through 2013. In fact, this will eliminate housing waiting lists in Russia's armed forces.
We will also correct the injustice done to those service people who retired from the armed forces in the mid-1990s when the government could not provide housing for them. They were simply put on municipal housing waiting lists, which were pretty long. In fact, many of these service members did not receive anything and are still waiting. Retired service members who are on municipal waiting lists must and will receive housing. We have set aside 36 billion roubles for this purpose.
On mortgage
There is a general revival of the demand on the housing market. The number of mortgages grew 2.5 times last year. The average interest rate is dropping. In 2009, it was 14.3% in roubles and last year it dropped to 13.1%. Today, you can get a loan at 12.5%. The rate depends on the creditor and the various terms and sometimes it is lower. However, the average is still 12.5%, which is still too high. It is still an expensive loan for the time being.
This is why we have decided to make a mortgage more accessible. We must continue our work to bring mortgage interest rates down to 5-6% per year.
On flats for war veterans
Over 125,000 of the newly registered 180,000 veterans have already received housing. So, about 55,000 are still on the waiting list. Around 10 billion roubles were earmarked in the 2010 budget to resolve their housing problems. To speed up this work, and in view of the more ambitious targets, we are attempting to achieve, we will provide an additional 13.7 billion roubles for this purpose.
Comments
Sergey Shugayev, the chairman of the Selskaya Rossiya (Agricultural Russia) national public organisation:
"We enthusiastically support the scheme for scrapping agricultural equipment, all the more so since it will help both farmers and producers of combines, sowing machines and tractors. Our plants are in a much worse position than their Belarusian counterparts. But through what mechanisms will this assistance be rendered? There is a risk that the programme may be reduced to just another campaign that will help bankers make more money. Most likely the funds will be allocated through Rosselkhozbank, which will retain part of them. This is wrong. The funds must be transferred to the farmers directly or through the Agriculture Ministry. In this case, every farm will receive them rather than only those farms that are doing fine as it is."
Irina Sokolova, the deputy chairperson of the Duma Committee on Family, Women and Children:
"The prime minister emphasised the urgent problem of the shortage of places in kindergartens. Indeed, more than 1.6 million children in Russia cannot get into kindergartens. To resolve this issue, we must build new and restore old institutions for children. It is also important to develop alternative forms of preschool education in every possible way – to establish preschool groups at general educational schools, if possible, and to expand the network of private and family kindergartens. It is also possible to set up development centres or children care groups instead of usual kindergartens. There is a legislative basis for this, in particular owing to the new sanitary and epidemiological requirements for preschool organisations that were adopted at the end of the past year. However, all these measures will not substantially improve preschool education without a considerable increase in the salaries of kindergarten employees."
Yevgeny Yasin, the scientific director of the Higher School of Economics:
"For the time being, the scenario whereby inflation will not increase beyond 6.5%-7.5% seems unrealistic to me. Usually by summer and autumn, the inflation figures even out, but there are no prerequisites for this now. Moreover, the government's huge spending may even further accelerate price hikes. I think inflation will be about 8%-9% this year."
Sergey Smirnov, the director of the Higher School of Economics' Social Policy Institute:
"Labour productivity is very transient. When talking about labour productivity in general, we do not consider its distribution in particular industries. The issue of quality also matters. Thus, cars produced at domestic plants are traditionally inferior to their Western counterparts. The quality of work at assembly plants is better, but we look at our automobile industry as an integral whole. I think that in carrying out the prime minister's instructions (on doubling labour productivity -- Izvestia), we must be very careful in deciding where to do this, using which funds and why. We need labour productivity to meet the demand, but what if we produce millions of Zhigulis without thinking twice what will we achieve if nobody buys them? This would be the same as in the Soviet Union where factories had to implement plans on producing strange fabrics and other useless commodities."
Konstantin Makiyenko, the expert of the Centre for Analysis of Strategies and Technologies:
"The prime minister made it clear that the arms systems that were recently criticised by a number of Defence Ministry officials, for instance First Deputy Defence Minister for Arms Procurement Vladimir Popovkin and Ground Forces Commander Alexander Postnikov, are not as obsolete as they claimed. The basic T-90 tank is the world's leader in sales. In 2006-2009, Russia sold 482 tanks worth a total of $1.57 billion – more than any other country. How can they claim our hardware is bad? However, the prime minister said: 'Our weapons must be superior to the world's best in their range of fire and precision. I'd like you to listen to what I've just said – in range of fire, precision, and combat power. The word 'superior' is the key one in this context. This is why the government allocates huge funds for modernising the military and industrial complex and increasing the state defence order that already exceeds foreign trade profits from military and technical cooperation."
Vadim Kozyulin, a professor at the Academy of Military Sciences
"Advance funding of arms purchases under the state defence order is a key issue. Before, enterprises signed contracts at the beginning of the year and the government transferred funds at the end of the year. They had to take loans and were hugely in debt. As a result, the Defence Ministry did not receive the required amounts of arms and defence enterprises had no current assets. In this context, it is very important that Putin said: 'All contracts must be signed by the end of May and the government must pay off about 80% of this year's state defence order. The Defence Ministry has deliberately left 20% for the latter half of the year as an incentive for contracted enterprises.' No doubt, this will help them fulfil the state defence order."
Yelena Shishkunova and Yulia Shestoperova