OREANDA-NEWS. January 11, 2012. “Of course, we must make sure that the results of work and economic effectiveness of a particular region’s team have a direct bearing on the quality of life of the citizens living in the region, and that there is no gap between the paper reports and the actual social wellbeing of citizens.”
Transcript:

Vladimir Putin: Good afternoon, colleagues. Happy holidays. I suggest we all get back to work without delay.

At a meeting of the state council on extending the authority of the Russian regions at the end of last year, we spoke about assigning additional tax sources to them. We all understand very well and have repeatedly expressed the same absolutely correct idea, which is that the development of the regions is directly related to the wellbeing and development of the entire country.

There are also constitutional requirements, such as the requirement to ensure equal living standards for all citizens of the Russian Federation regardless of their location. We are redistributing resources through the federal centre exactly for this purpose, which, understandably, provokes a negative response from the regions that provide the funds to be later redistributed. But you know that lately the Finance Ministry has maintained federal support for several years for the regions that show positive results provided that there are sufficient tax revenues. Both the Ministry of Economic Development and the Strategic Initiatives Agency that we established have proposed further steps in this regard, but this requires additional consideration in cooperation with the Finance Ministry.

I would like to note that the situation in a particular region is not determined solely by the availability of mineral resources or support from the federal centre; however, it is to a large extent determined by the enthusiasm and performance efficiency of regional officials. As you know, we have worked out a system of criteria to assess the work of regional authorities, and this system is currently in place. But a comparison of paper reports to actual results proves that the system is not very effective. Moreover, you often criticise this assessment system. You keep saying it is flawed. I agree with you and this is what we will discuss today. Even with equal budget funds and comparable federal support, some regions do well and others lag behind.

I would like to mention several key points in the system that we drafted to assess governors' performance. This system takes up volumes – as I recall there are about 300 criteria and quite often, as I have said, the results look good on paper, but people have a very low opinion of their governors' work. This incongruity between the paperwork and the people's attitude towards these quasi-achievements compels us to think about these assessments' validity. Thus, judging by the current criteria, the Saratov, Arkhangelsk, Volgograd and Murmansk regions are not in the lead, but rather somewhere in the middle of the list, although their residents are very negative about their regional teams' performance. Of course, we must make sure that the results of work and economic effectiveness of a particular region’s team have a direct bearing on the quality of life of the citizens living in the region, and that there is no gap between the paper reports and the actual social wellbeing of citizens.

 As I have already said, many existing criteria do not address systemic changes in the regional economies and the social sphere. They do not reflect improvements in the investment climate or living standards. Thus, efficiency criteria in education are often made to look good and this is being done using unjustified methods…

I am referring to the closure of small village schools. I am not saying that this should not be done at all, but this is a very sensitive issue. Some schools cancel the positions of school psychologists, speech therapists and other indispensable specialists. Their reports look good, but schoolchildren, whole families and villages are in trouble.

We have already taken a number of steps to change the system for evaluating the performance of regional authorities. We have introduced new assessment criteria such as attraction of investments, consolidation of the regional tax base and provided additional financial support for regions carrying out development projects. We have several strong regions. Tatarstan, the Krasnodar Territory, Tyumen, Belgorod and some other regions are our traditional leaders. Importantly, they are being joined by new successful regions. The Penza Region and Kabardino-Balkaria show good results. I would like to ask the Ministry of Regional Development, the Ministry of Finance and the Ministry of Economic Development to step up their elaboration of the new criteria for assessing regional performance.

I would like to make a number of important points. First of all, this performance should be primarily assessed on transparent, clear-cut criteria, including public opinion, which is neglected today.

Furthermore, it is necessary to design a comprehensive appraisal system that will encourage the regions to work for balanced development. We must prevent such a situation where investment seems to be growing, the economy seems to be gaining momentum, but people, as I have just said, do not see real changes for the better. Such economic success has no bearing on their living standards, the social sphere, the condition of roads, the housing and utility complex, or other vital infrastructure. The development of the regional economic potential should take into account people’s needs above all else. Certainly, clearer and better criteria should allow us to objectively assess the work performed by the Russian regions, and to support the leaders and those seeking to be among the best regions. That is why we are saying that the interbudgetary system needs to become fairer and more rational, and that the mechanisms for providing financial assistance to the Russian regions need to be improved. I would like our colleagues who are present here, the finance minister and deputy prime minister in charge of regional development, Mr Kozak, to share their proposals with us. We all know that the Finance Ministry has always erred on the conservative side, but it was precisely its idea to maintain federal support of those regions which show good performance results. Let’s discuss this matter once again today.

Finally, one more important point. The new assessment mechanism for regional executive bodies should be developed in close cooperation with the public opinion, the business community and trade unions. I would like to emphasise once again that this country’s development and improvements in the quality of life depend on the coordinated efforts of all levels of government, and in large part on the work of regional administrative teams and heads of constituent entities that are personally responsible for the situations in their respective regions. I want to make sure that everyone understands this in the same way.

And one other point, colleagues. We need to keep close track of everything that is going on out there. I understand that you are extremely busy. We in Russia have small regions as well as vast regions that are comparable in terms of their area and population to entire countries. It would seem these regions are facing different tasks. However, the level of such tasks and the level of responsibility is the same across all regions. It may seem as though you can’t really keep track of all of them, but there are still certain things that should not escape our attention. How can it be that hot water tariffs were raised by 40% in Kirov twice, the last time on December 4? There is a town called Novovyatsk where they also raised tariffs by 40% at once. Do regional authorities ever look at these things at all? Water management is part of your responsibilities. Is this done by the billing centre? The managing company is called “The Development of the Urals Territories.” Everyone knows it. Where do these leaps in price come from, and why? We have discussed many times now that things need to be done in a timely manner. That way we can avoid causing painful shocks to the people. Do we have Kirov on the line? Let’s bring in Kirov.

Alexander Kuznetsov (deputy governor of the Kirov Region): Good afternoon, Mr Putin.

Vladimir Putin: Good afternoon.

Alexander Kuznetsov: My name is Alexander Kuznetsov, acting head of the region.

Vladimir Putin: Where is Mr Belykh? (Nikita Belykh, governor of the Kirov Region)? Where’s the governor?

Alexander Kuznetsov: He’s away on vacation.

Vladimir Putin: On vacation… So he has not returned from vacation yet. What's the date? It’s January 10, a work day. Please let him know that it’s time to wrap up his vacation and return to work. It’s time for everyone to get back to work.

Please go ahead, I’m listening.

Alexander Kuznetsov: As for the information concerning the increase in tariffs in Novovyatsk, which is a suburb of the city of Kirov, we will verify this information within the next few minutes. So far, we haven’t had any information about such a sharp increase in tariffs, including hot water.

Vladimir Putin: Excuse me, what’s your name?

Alexander Kuznetsov: Alexander Kuznetsov.

Vladimir Putin: Mr Kuznetsov, you don’t have this information, but people paying their hot water bills do have it. Please take a look at the monthly bills. Please look at me in the camera. Here they are, can you see them?

Alexander Kuznetsov: Yes, I can.

Vladimir Putin: I have these bills, the consumers have them, but you don’t. And your governor is still on vacation. I have a request for you. Could you please focus on addressing this issue?

Alexander Kuznetsov: I will.

Vladimir Putin: And inform the governor about my request.

Alexander Kuznetsov: Of course.

Vladimir Putin: Mr Basargin, please go ahead.

Viktor Basargin: Mr Putin, allow me to begin with the situation in Novovyatsk. We have notified the governors on two occasions that energy commissions were considering tariff increases. We reminded them that they are responsible for overseeing this work and for conducting hearings of tariff regulation in their respective governments. We mentioned the hot water specifically because it’s a regulated tariff, and the regional energy commission was expected to make all decisions regarding utilities tariff regulations. We were not supposed to raise tariffs on January 1; therefore, we will join them, and a commission will go there soon to see how tariffs have changed in Novovyatsk and the Kirov Region in general.

As for the effectiveness of the regional government, we have been conducting this work for four years now. It has become clear that assessing effectiveness of the regional executive bodies’ performance is an essential component of regional policy and one of the tools that can be used to promote positive changes in the Russian regions. This assessment has improved over the past four years, and helps make effective administrative decisions. I would like to remind everyone that in 2007-2008, we formed the regional rating based on the effectiveness of local authorities. There were about 10 to 20 regions that topped these rankings for two years, after which we decided to draw conclusions using effectiveness indicators. We made this change in 2009. We were heavily criticised for doing so, because it turned things upside down, and those who were at the bottom found themselves in leading positions in the ratings and vice versa.

We used this comprehensive assessment method for the first time in 2010. This is also a mechanism to improve the ratings, because we used to rate regions according to their effectiveness and by performance indicators. When summing up the results for 2011, we used the transport access ratio and settlement ratio in addition to these changes to calculate ineffective spending. This helped us account for regional features, or what is known as the population density. This has to do with streamlining our social network, including healthcare and educational facilities. In other words, we have suspended all these processes.

Mr Putin, we are monitoring the work performed by the Russian regions using the indicators that we used back in 2010. Our monitoring takes into account 329 parameters of the socio-economic development of the constituent entities of the Russian Federation. Notably, we summarise the results and determine the rating position using only 63 indicators. You have already mentioned, Mr Putin, what’s on the other side of the scale. What exactly are we assessing? Our assessment covers 93 powers carried out by the Russian regions, 105 powers delegated by the federal government and 39 powers performed by the constituent entities; in other words, we are using 63 indicators to assess work performed under 250 powers implemented by constituent and municipal entities.

A few words about the results. The effectiveness assessment system has proved its value. As compared with 2007, only 13 Russian regions reduced ineffective spending in 2008. In 2009, there were 37 of them, and in 2010, 65 regions cut ineffective spending. The total amount of ineffective spending was reduced by almost 30 billion roubles, or almost 10%, in 2010. It was down 1 billion roubles, or 1% - 1.5% each in healthcare, state administration and public utilities; and it was down 26.4 billion roubles in education. The Republic of Mari El and Kabardino-Balkaria have halved their ineffective expenses. The Primorye Territory and St Petersburg cut ineffective spending by 33.5%. Tatarstan, the Omsk, Kostroma and Tyumen regions decreased it by 30%. The best performers include – you have already mentioned some of them – the Republic of Tatarstan, the Tyumen, Belgorod, Kaluga and Omsk Regions, the Krasnodar Territory, the Republic of Chuvashia, St Petersburg, and the Kemerovo and Tomsk Regions. The worst performers include the Tver Region, the Republic of Sakha (Yakutia), the Jewish Autonomous Area, the Republic of Kalmykia, the Nenets Autonomous Area, the Volgograd Region and a number of other regions. In all, 35 regions improved their ratings in 2010, five retained their previous positions and 43 fell, of which 22 lost more than 10 points, including the Ivanovo, Lipetsk, and Tver Regions, the Yamalo-Nenets Autonomous Area, the Volgograd and Vologda Regions and some others.

On the whole, the results of the comprehensive assessment coincide with those of the monitoring of the regions’ socio-economic development. They were the same in 80% of all cases in 2011. At the same time we understand that there is room for improvement in this method and we have not forgotten the instructions you issued last November.

We formed a panel on this issue at the Ministry of Regional Development. We established a working group of experts who criticised many provisions of the old methods of assessing regional bodies’ performance. They are already in the process of wrapping up their work. They have concluded it would be best to retain 223 criteria.

In addition, we have drafted proposals to adjust the methods of calculating ineffective expenditures in housing and utilities. The new methods allow us to take into consideration the specific features of northern territories and other comparable territories. We will use them in the 2010 report and will continue improving them this year.

In education, we are adjusting the same methods in regard of urban and rural areas in order to streamline the educational system in the countryside.

In healthcare, we are endorsing regional standards regarding the number of doctors and other medical workers to reduce ineffective spending as well.

We are also planning to change these methods as regards government management. We will monitor not only expenses involved in maintaining workers of the public sector and local government but also all other expenditures on top managers. In particular, we will check what cars they buy and when in order to do away with all this gossip.

We are also planning to pay more attention to the sociological indicators showing whether the public is content with the performance of the authorities in the social sphere. This is what you have just mentioned, Mr Putin. We propose changing the ratio of the indicators – 50% will show the results of performance and 20% (and perhaps even 30%) will reflect the public’s attitude to the services provided. In this way we will enhance the public’s role in assessing the performance of the authorities.

We want to measure not only the socio-economic indicators of the regions but also the ability of government at all levels – municipal, regional and federal – to influence the existing situation. To achieve this we suggest increasing the role of independent expert review in our efforts. We are also working on reducing the timeframe for submitting reports. It was wrong to submit reports in October or August. This year we are planning to submit the report for 2011 in April or May. We hope to submit the report on the performance of the authorities in May at the latest, if Rosstat (Federal Statistics Service) is ready.

To sum up, I suggest including in a draft resolution a proposal to change the deadline for submitting such reports from August to April or May. We and the Finance Ministry should also submit proposals on inter-budget bonuses for regions that have raised living standards. Together with the relevant federal executive bodies we must submit to the government our proposals on improving the entire system of assessing the performance of the authorities. We also propose regular monitoring of the regions in the bottom 30 positions in the ratings.

There is a lot of work. We are planning to complete it in the first quarter of this year and hope that the regions will also present to us their own proposals on improving the methods. Thank you for your attention.

Vladimir Putin: Thank you, Mr Basargin. Let’s give the floor to our colleagues in the regions. Mr Bochkaryov, please go ahead. Mr Bochakyov is the governor of the Penza Region.

Vasily Bochkaryov: Good afternoon, Mr Putin. In its 2010 report on the performance of regional executive bodies, the Ministry of Regional Development has ranked us 29th in terms of integral indicators. We have room for improvement. Last year we drafted several programmes. The first one deals with industry, of course; the second one provides for support of medium and small private companies in agriculture. We also paid attention to education and healthcare, mindful of the public grievances in these spheres. The subsidised refinancing rate of the Central Bank for our industrialists – and we make up for two thirds of it from our regional budget – has allowed us to substantially upgrade a number of old industrial enterprises.

We have seen hundreds, thousands of units of new equipment arriving to the workshops of our plants and factories, and this has attracted younger high-tech experts, primarily graduates from our institutes. And naturally, at that time our enterprises filed complaints about the quality of vocational school training, and so we have begun to invest in the modernisation of our secondary vocational technical schools and vocational colleges, because we needed other workers. Of course, we saw points of growth: the confectionary cluster, the furniture cluster, small and medium-sized businesses. We decided to subsidize up to 100% of the Central Bank base rate in order to purchase new equipment, although the equipment is mostly Italian, German, Scandinavian, and not Russian, which is regrettable. But the main thing is that labour productivity has improved many times over, and the personnel have become younger. It has become clear to me that vocational schools are seriously training young people for the furniture and confectionary clusters.

And of course, we are investing large funds in education, especially in 2011. We have purchased thousands of new computers, and have created networks in every school (we have installed servers), we have purchased interactive boards; we have held tenders in December and we decided: every school that demonstrates potential, every special subject classroom, every classroom will be equipped with an interactive board in January or February.

We are currently developing a new project in conjunction with our Swedish partners, a so-called educational entrepreneurship, and we have begun to do it at our school, Mr Putin. This project has been very interesting both for parents and teachers. And now there are some students who are registering their businesses at schools. The same important work is currently being done at higher educational institutions: enterprises are being set up and registered, and they are receiving the benefits that we have prepared. In 2011 alone, we completed work on five additional business incubators, platforms that we created for our students and young teachers, and they are setting up and registering their businesses there. Of course, this current policy that we had failed to implement in previous years has begun to produce results.

Now, let us look at agriculture. You know, 2010 was a fairly complicated year. 2011 saw efficient plant breeding and animal farming. We can see positive results in the growing of cereals, beetroot, and milk… If you recall, we presented the Turkey Meat project. The construction of this cluster has been implemented fairly well: incubators, henneries and a meat-preserving factory are being built. In 2012,  we will launch a project  for 17,000 metric tons of turkey. In total, 60,000 tonnes of meat will be produced annually under this project.  

I’d like to draw your attention to one more point of concern for me. I do not know whether other governors would agree with me, but the indices are too numerous, Mr Putin. At the beginning of your address you said it makes the assessment more difficult overall. Let's take a look at where people are focusing their attention. First (as you are aware, you mentioned the situation in the Kirov Region), this is utilities, transport, education, healthcare, jobs… These are the main points of assessment in the constituent territories of the Russian Federation. This is too large a package. And finally I’d like to say, perhaps we should form a small working group of members of government and heads of the constituent territories of the Russian Federation and review this difficult work on preparing a mountain of papers, including their electronic versions. This is my petition, Mr Putin.

Vladimir Putin: Good.

Mr Bochkaryov, I looked at the data for the Penza Region, it is quite respectable and good. Industrial production has grown considerably, by more than 17%, and agriculture is up 54.6%. Particularly pleasing is that housing per capita is 20% higher than the national average – this is also pretty good. And the growth in real incomes in January-October – year-end data is not yet available – is 1.5%. This is not much, but it still is more than the national average. We have 0.4-0.5% growth across the country – a very slight increase, but you have 1.5%. In general, these are good results given current economic conditions. Yes, it is especially nice, I want to thank you for it, Mr Bochkaryov, if these data are correct, of course – you have higher teachers' salaries than the regional economy’s average, and your doctors earn even more than the teachers.

Vasily Bochkaryov: Mr Putin, sorry, I just want to inform you and my colleagues – salaries over the last four months, from September 1, have actually doubled compared to last year! This is real.

Vladimir Putin: Nevertheless, many people are still unhappy with the state of affairs in education, health and housing. Take a closer look – what are the reasons? The trends are obviously positive, but we need to examine the reasons for this dissatisfaction more closely. But in general, the objective picture is very good. Again, your salaries in very important areas such as education and healthcare are increasing. This is the tangible result of your work, and I want to thank you for it.

If you please, Mr Yakushev (governor of the Tyumen Region).

Vladimir Yakushev: Good afternoon, Mr Putin. Good afternoon, colleagues.

I would like to start with state administration of the economy. Mr Putin, you are right in saying that the indicators assessing investment actually reflect the investment climate and overall economic situation that is emerging in the region.

In 2010, the volume of capital investments in the region increased by 12.9% to 164.9 billion roubles. According to preliminary estimates, in 2011, we need to grow by 9% and this amount will be 194.5 billion roubles. In the region, we have been quite actively – I would say, proactively – implementing our investment policy for many years, and we have set the necessary standard for a region of the Russian Federation. Today, we are implementing about 40 investment projects under our direct control, and these are diverse – the minimum value is 350 million roubles, this is the smallest investment project, and the largest is 127 billion roubles. And given such consistent work, we have been able to maintain the level of investment.

In 2010, we commissioned 1.1 million square meters of housing, of which 401,000 square meters are individual dwellings. In 2011, according to preliminary data, we commissioned 1.2 million square meters of housing. We were able to achieve these high rates because we have worked rather closely with the Federal Fund for Housing Development, and I would like to take this opportunity to commend this institution, because we were able to rather quickly resolve issues related to federal land in our region that was being used inefficiently, and now this land is being used for construction. As a result, we have been able to... even though we generally expected a correction in 2011, since some of the effects of the 2008-2009 economic crisis impacted our region, but thank God, this did not happen, and we, on the contrary, have even grown.

Regarding the expansion of business activity, our regional programme has been in operation for three years, and as part of this regional programme, we have funded small- and medium-sized businesses to the tune of USD 1.4 billion, and we were able to attract extra-budgetary funds by 9 billion roubles through co-financing – these are funds from leasing companies and banks, and we have received 400 million roubles from the federal budget for our joint programmes. So this is a fairly serious step forward, and I must say that our businessmen have rated this initiative rather highly.

As for the situation in the regional labour market, the unemployment rate in 2010 according to the International Labour Organisation’s methodology was 7.2%, and in 2011 it fell to 6.4%. Incomes grew 18.7% in 2010 compared to 2009, and in 2011 we hope that they will grow another 2.5%.

Regarding education, since 2005 we have been operating under the principle of per-capita funding – we have implemented an industry wage system, so in that respect all of these mechanisms have been refined and streamlined. The Education Ministry has estimated that about 88% of our students to date are studying in modern conditions.

Regarding healthcare, we have re-organised healthcare facilities. Since 2005 we have been using a single-channel financing system. Since 2006, 238 medical and obstetric centres have been replaced with modular structures, and the material-technical base of more than 300 healthcare facilities has been brought into line with regulatory standards.

Regarding wages, Mr Putin, in 2011 we increased the salaries of public sector employees twice. The first increase was 6.5%, and then we increased this fund, which was increased by 6.5%, by another 22%; in other words, on average, by using a progressive scale, we made an increase of 30% throughout the public sector. Today our doctors' salaries already exceed the national economy average. Even if we exclude the public sector and take only the national economy average, our doctors earn more. In other words, the average is 24,400 roubles, and our doctors are now earning 26,600. We have agreed with our deputies that in the first quarter we will decide on salaries for categories of teachers and pre-school teachers, because despite the 30% increase, we have not exceeded the economy average wage in this sector. In first quarter of this year, we should also be able to exceed this level for teachers and pre-school teachers, and the average wage in the region should be equal to the national economy average.

As for the main economic indicator – the growth of the gross regional product in 2010 – it grew by 4.6% in relation to 2009 and will grow 5.3% in 2011 compared to 2010. This is an estimate and is, of course, approximate.

Another important indicator that you talked about during your meeting with Delovaya Rossiya (Business Russia), Mr Putin, is the share of investment in the gross regional product. So, in 2010 the share in the Tyumen Region was 33.1%, and in 2011 it was 34.1%. Regarding the list of indicators, Mr Putin, we are working very closely with the Regional Development Ministry and we fully support the proposals set forth by the minister of regional development – we have consistently participated in this discussion. Thank you.

Vladimir Putin: Thank you. You said that the real incomes have grown some 2.3%. This is a very good figure in today's climate. This 2.3% is January-October data, right? If I understand correctly, they will grow even more by the end of the year.

Vladimir Yakushev: Yes, there should be an increase by the end of the year, Mr Putin.

Vladimir Putin: Mr Yakushev, I have another question. Your figures are indeed all very good – better than the national average in almost every category. But I noticed something – you have 47% more new housing than the national average, but the total amount of construction work in January-October rose by only 2.2%, while it grew 4.8% nationwide. Do you anticipate a decline in construction next year?

Vladimir Yakushev: No, Mr Putin, we do not expect a decline. On the contrary, we expect that there will not be a decline in housing because the market is currently growing and demand is growing. All the programmes that we are currently implementing both at the regional level and jointly with the federal government – for young families, veterans, orphans and so on – all these programmes will still be operational next year, the entire construction industry knows this, and is now actively engaged in building. We already know approximately how much housing we will commission next year – the construction industry is building precisely the housing that people in our region and all of Russia need now. This is affordable housing, and the amounts of housing that we currently have in blocks of flats and the inherent capacity for individual housing construction suggest that there should be no decline in this sector. I say this, understanding fully...

Vladimir Putin: Look at it more closely – the amount of construction in January-November 2011 grew 2.2% in your regions, and 4.8% nationwide.