OREANDA-NEWS. April 06, 2010. Prime Minister Putin's introductory remarks:  Good afternoon, ladies and gentlemen, We have held a series of meetings over recent months to discuss the development of Russia's defence industry. We reviewed the progress that defence holdings and other companies in the sector have made to meet the challenge of the technological modernisation of the Army and the Navy, and outlined the modernisation priorities necessary to improve the performance of our country's defence industry.

Today we will sum up the results of this work, specifying the basic requirements for new equipment and machinery, and the financial parameters for essential programmes.

Indeed, most of our defence companies have serious development potential. Many of the solutions they develop and produce are in no way second to their international counterparts, and even have the edge over them. These solutions are quite rightly in demand on the global market.

In addition to this, Russian defence companies managed to retain their highly qualified personnel and their R&D potential. We must take advantage of this competitive edge to address defence challenges and modernise the whole economy.

The sector is on the rise. Despite the difficulties of last year's economic downturn military production increased by 13%, with defence and industrial production growing by 4%.

The government's anti-recession programme, in particular the substantial financial support for defence companies, proved effective. We allocated a total of 93 billion roubles to defence companies in 2009, and will continue to support the industry this year and next.

I have already mentioned the industry's successful efforts on the international market. We will also continue to support the export of weapons.

As you know, our delegation has just returned from Venezuela. Our visit was most fruitful. Venezuela will place orders worth over USD 5 billion with Russia's 13 largest defence companies, including Izhmash, a Tula-based company, among others.

This is in addition to our USD 2.2 billion loan. We have defined and agreed on the sources of funding with our partners.

Turning our attention once again to the development of the Russian defence industry, our main objective must be the radical modernisation of defence production facilities. New Armed Forces are impossible without a new defence industry.

We must do everything in our power to eliminate the dangerous disparity between the technological capacity of defence companies and the needs of the Armed Forces, increasing both production quality and volume.

In recent years we have allocated quite sizeable funds to the modernisation of the defence industry. Unfortunately, output has on occasion been insufficient. We must concentrate our resources on promising projects, creating favourable conditions for companies through clear-cut upgrade and modernisation plans.

We must also increase the responsibility of those organisations that were set up to facilitate the defence industry's modernisation.

I would like to remind you that we approved the Guidelines for the Government Defence Policy up to 2020 and beyond. I would like to hear today about the measures to be taken in the framework of this programme.

Today we will also discuss the funding of the Federal Targeted Programme of the development of the defence industry in 2011-2012. It is obvious that while debating the amount of allocations we must be guided by the objectives of the new government programme of rearmament.

Next, today we must define the tactical and technical requirements for new weapons. I would like you to take this issue with all seriousness. We must understand which machinery the Armed Forces need and for which purposes. The Armed Forces must make sure that the orders they make with the defence industry will benefit them both.

With this regard, I would like to draw your attention to the effectiveness of the interaction between government-funded customers and machinery suppliers. Practice shows that there have been quite a few shortfalls in this area, and parties are often dissatisfied with each other's work, which they pointed out at each of the six meetings we held. With this regard, I should emphasise that our work was very useful for the Armed Forces and the defence industry.

Figures speak for themselves: Some 40% of R&D projects have stalled. There is no lack in investment and new solutions are being developed, but they often fail to find application. This situation must be rectified. New solutions must comply with the industry's needs.

I understand that a part of them could never be used by the Armed Forces, but 40% is too much.

It is necessary to carry out an audit of R&D projects in the defence industry to make them more relevant.

I would like you to draw up a list of measures to resolve the mentioned problems and submit it for approval.