Prime Minister Vladimir Putin chairs a meeting at AvtoVAZ (Togliatti) on the development of the automotive industry in the context of Russia’s accession to the WTO
Transcript of the beginning of the meeting:
Vladimir Putin: Good afternoon, colleagues.
Naturally, being here, at AvtoVAZ, we will address the issues of the automotive industry's development. We have already gathered on numerous occasions here, as well as at other enterprises of this industry, during the hard times of the global economic crisis. We made a number of decisions at that time, including decisions concerning AvtoVAZ. I am happy to say that they worked on the whole. Today we need to discuss the long-term prospects for the development of the industry.
I must say that the country’s automotive industry has shown positive dynamics in the last few years. The qualitative changes are obvious: large-scale investment is poured into the industry and new technologies are used. I would like to repeat that this is a positive trend. And all of us need to work together to strengthen it.
Let me note that in 2011 growth was obvious in every segment of the automotive industry: the production of passenger cars, light commercial vehicles, trucks and buses. The production of passenger cars totaled over 1.7 million cars, which is a record-breaking figure in the history of Russia’s car industry. Our largest pre-crisis figure was 1.4 million cars in 2008. Let me repeat: last year it was 1.7 million cars. The Russian market, with sales of about 2.8 million cars (as of 2011), is becoming one of the world’s largest. In terms of market size Russia ranks 2nd in Europe after Germany and 4th in the world after China, the United States and Germany.
It is not by chance that our foreign colleagues and national investors are taking an interest in the Russian automotive industry. Even the crisis has not cancelled the projects on the establishment of new car production enterprises in Russia and the modernisation of the existing technological platforms. Major car clusters are successfully developing here – in Togliatti, Kaluga, St Petersburg, Tatarstan. AvtoVAZ is implementing major re-equipment programmes in partnership with our friends and colleagues from Renault and Nissan. Incidentally, today, on April 4, AvtoVAZ launched the production of the Lada Largus. This car will be assembled on the platform developed by the Renault Company. I would like to congratulate all participants in this project and thank them for their work.
Allow me to recall that world carmakers use the "industrial assembly" regime in Russia, which entails certain benefits for importing components. In late 2011, we accepted new conditions for industrial assembly, aimed at increasing the localisation level and encouraging enterprises to expand their production capacities and establish research and engineering centres in Russia. The total amount of investment declared under the new conditions of industrial assembly is in excess of 300 billion roubles. Four agreements on these new conditions have already been signed with leading companies, including Nissan, Mercedes-Benz Trucks, the Ford Group, Volkswagen and General Motors.
According to the strategy for the development of the automotive industry through 2020, the plans are to increase the production of all vehicles up to 4 million, and the production of passenger cars up to 3 million cars a year. We must make every effort to ensure the sustainable development of the national automotive industry. It should meet the demand of the domestic market and enhance its export potential, create new jobs and orders for related industries, and certainly, maintain its competitiveness.
I would like to stress that the conditions of the agreements on industrial assembly that have been signed will not be altered until July 2018. As for reducing import duties for motor vehicles, it will be extended for several years – that is to say, the issues concerning Russia’s accession to the WTO, our obligations. We will use a whole arsenal of flexible support for all manufacturers operating in Russia, while complying with the WTO norms. Such mechanisms do exist and we will certainly use them.
I would like to draw your attention to the following. First, our market must be protected against various kinds of motor junk, against the import of used cars at giveaway prices. This issue is very important for ensuring environmental well-being and traffic safety.
Of course, we should move towards introducing differentiated rates of transport tax and compulsory car insurance. In this regard, I would like to draw the attention of the Russian government and heads of the relevant departments to the fact that all these initiatives should not affect individuals, as we agreed earlier. These rates concern legal entities and enterprises and need to be calculated based on the age of the car. I repeat once again: it is unacceptable to make a retiree who has an old car immediately pay much more. The treasury won’t benefit much from this, but it will cause harm to citizens. That is why I ask that you consider this issue thoroughly and make the most logical decisions in this area. I have already issued an instruction on compulsory car insurance to the Ministry of Finance and I ask that you accelerate this work.
As we have already agreed on the decision concerning road funds, we will gradually stop collecting transport tax and change its nature to one of ecological dues. We will begin with trucks, buses and light commercial vehicles.
Second, we should provide additional support to national producers. I think all producers will be happy to hear the following news – both those who operate 100 percent Russian capital and our foreign partners. I believe that all government and municipal agencies, contractors and enterprises financed out of the federal budget soon will only have to buy motor vehicles produced in Russia and in the common economic space, i.e. Russia, Kazakhstan and Belarus. This doesn’t contradict the principles and norms of the WTO: during negotiations with the World Trade Organisation on Russia’s accession to the WTO we agreed that the so-called state order, state purchases would be regulated based on our internal rules. As I have said, this doesn’t contradict our agreements with the World Trade Organisation, but, as we see it, this is a substantial part of an order, and a guaranteed one, for that matter. I hope all relevant agencies are capable of translating this into reality. Surely we’ll be coordinating the effort with Belarus and Kazakhstan, the two states in the Common Economic Space with us.
Next. Many automotive plants have launched ambitious projects to build new production lines and upgrade existing ones. They take big loans to finance such projects. And it costs a lot to service those loans. What I’m referring to here is the attitude toward the automotive industry as a whole and the need to support this sector.
We suggest using federal treasury funds to cover part of automotive plants’ interest payments on loans taken through the year 2014. Compensations on such loans will be provided till 2020. See what it means? It means that until the end of this decade we’ll be paying compensation on loans taken before 2015. I should note here that this privilege will be granted exclusively to those who implement their investment plans consistently and rigorously.
A situation where the state delivers on its obligations while private investors fail to meet theirs is not uncommon in times of economic crisis, unfortunately.
So we’re going to partially compensate the loan servicing costs only if the private investor meets its investment-related commitments. I would like the Ministry of Industry and Trade and the Finance Ministry to properly monitor all the work we’ll be doing here together, as well.
Fourth, we’ve invested considerable funds in the renovation of public and municipal transport of late. And this, incidentally, has become a good supportive measure in times of crisis, with additional sales provided with a government contract. But the problem has not been fully resolved. More than 50% of our bus fleet has been in service for more than 15 years. In Europe, meanwhile, buses and coaches are normally being replaced with new ones every ten years – for safety reasons. And in some countries, the use of buses aged 10-plus as passenger carrying vehicles is not allowed by law.
We propose releasing additional subsidies to the regions so that they could upgrade their bus fleets, but only on condition that they go for vehicles running on a cleaner fuel, gas. Preliminarily, we’re going to earmark 3.5 billion roubles for the purpose. We’ll see how it works and will then try to come up with other measures that could help the regions upgrade their public transport.
Ivan Blokov (programme director for Greenpeace Russia): May I make a brief remark, Mr Putin?
Vladimir Putin: Please do.
Ivan Blokov: My name’s Ivan Blokov, I’m from Greenpeace Russia. You have overlooked the problem of car recycling, which is of great importance environmentally. The recently launched car-recycling programme has covered 2% of the vehicles to be recycled in the next five-seven years if all goes well. The only solution we can see looking at the world’s experience is the introduction of a recycling deposit for manufacturers so as to make them responsible. It is to be provided by manufacturers or by importer companies who may or may not have production facilities here, in Russia. This would be a perfect scheme to us as it provides a solution to the problem of junk cars. But with the accession to the WTO, cars in Russia could be scrapped thanks to a system of monitoring individual cars and their owners. We can see what happens to them visually and we can feel and understand the impact on the natural environment.
Vladimir Putin: Is it Russian Greenpeace that you represent?
Ivan Bokov: I work for Greenpeace Russia, yes.
Vladimir Putin: This is a pretty civilised proposal, Mr Blokov. Many countries charge disposal fees already. Nothing prevents us from introducing such fees here, in Russia. Those fees should apply to imported vehicles as well as Russian-made ones. As for Russian manufacturers, we’ll see what support measures we could offer in this area. I’d like the ministries of industry, economic development and finance to elaborate an appropriate mechanism. How much time will it take, do you think?
Denis Manturov (Acting Minister of Industry and Trade): Within the next month, at the latest. We could prepare a draft proposal before the end of this month.
Vladimir Putin: Yes, before the month’s end, say, on the 25th of April.
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Vladimir Putin’s closing remarks:
Colleagues, today we gathered to discuss issues of the automotive industry’s development in the context of Russia’s accession to the WTO. As I said at the beginning, and all of us confirmed, the automotive industry is developing very successfully in Russia. This is evidenced by the number of the cars that were produced and sold on the Russian market. The industry’s prospects for development look quite impressive and we have the right to be optimistic about this.
At the same time, we have discussed today the problems that arise in the course of Russia’s accession to the WTO. We see that all these problems can be resolved through our consolidated position and the focused efforts of the Russian government and our partner manufacturers. We will have no need to violate the rules and conditions of our accession to the WTO. According to some colleagues, this creates the necessary conditions to make this industry as well as other related industries become more civilised and transparent, comply with comprehensible rules, develop as an innovative segment of the national economy and become part of the global automotive industry and the global economy on the whole.
I would like to thank you for your active participation in today’s meeting. Let me assure you that the bulk of your proposals will be considered and taken into account. We will formulate them as appropriate and incorporate them in our decisions today, which are the decisions of the Russian government. They will be accepted for implementation and we will work together with you to resolve the issues that we discussed today.
Thank you very much. I wish you success!
