OREANDA-NEWS. March 30, 2011. At its 22nd meeting, the Commission for Modernisation and Technological Development of Russia’s Economy summed up the results of its efforts to support the engineering profession and technical education.

A special subject on the agenda was Russia’s investment climate. In his opening remarks, Dmitry Medvedev named ten priority measures to improve the situation.

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PRESIDENT OF RUSSIA DMITRY MEDVEDEV: Colleagues,

We are meeting at one of our country’s very symbolic places today: the Magnitogorsk Iron and Steelworks. Before we turn to the main item on the agenda of today’s meeting of the Commission for Modernisation and Technological Development of Russia’s Economy, I first want to discuss another issue that I think has strategic importance for our overall economic modernisation. I want to set out my proposals on priority measures for improving our country’s investment climate.

Achieving modernisation, which is the purpose of this Commission’s meeting, requires a major increase in investment. We need technology and we need money in amounts corresponding to Russia’s huge potential. We need the confidence and interest of Russian and foreign investors. But what do we see today? Unfortunately, we see that this confidence is lacking, to be honest about the situation. I already gave in the past my assessment of the investment climate in our country: it is very bad, very bad.

Business conditions for relatively small companies have not improved this year but have perhaps even worsened. This is for several reasons. As we all know, compulsory insurance payments were increased, electricity costs have gone up in most regions, and this had added to the price hikes for a number of other goods and products. Corruption continues to affect the general economic situation, maintaining a stranglehold on the entire economy, and this hold is still as strong as ever. The result is clear for all to see: money is fleeing our economy. Not as many people believe in the possibility of doing safe and successful business in Russia as we would like. Not so many businesspeople have this confidence. We cannot let this situation continue. I cannot let it continue, and nor can the Russian Federation Government.  

Until we make our country attractive for business and private innovative initiatives, we will not achieve our main goal of improving the quality of life for our people. This is the goal of any state leader’s work, any government, ruling party, and regional and municipal public officer’s work. Only investment growth will enable us to build a new economy and give people the kind of creative and well-paid jobs that have been the focus of so much of our commission’s efforts. Only this will make our society richer and freer, reinforcing the material foundations of our country’s security and democratic development.

I will name the package of measures which could improve the situation. This is not an exhaustive list. We will take further steps in this direction of course, including decisions on dismissals, especially with regard to those who fail to realise that ensuring good conditions for honest entrepreneurs and investors is an unquestionable priority for any public servant. We will have no choice but to dismiss those who continue to erect various barriers and obstacles, give preference to their friends, or fail to take the required action on the basis of pretended state interests that have nothing in common with our people’s interests.

These are the steps I will take in the nearest future.

First, I agree that the burden of costs involved in the need to raise pensions and finance healthcare programmes is not distributed in the best way at the moment. There never is any ideal system in this respect. We approved the scheme in place now, but this does not mean that it is fixed for once and for good, and that other decisions cannot follow in the future. The 34-percent rate that was set could indeed be too great a burden for many types of business. I therefore give the Government until June 1 to draft proposals on possibilities for lowering the compulsory insurance payments as from January 1, 2012. This will require us at the very least to cut state procurement costs and adjust the social insurance payments scale.

As a target, it would be best to set the maximum rate at something close to the old rate, but this is evidently easier said than done. I have discussed this subject many times with the Government. I spoke about it yesterday too. All of the calculations first have to be made of course, taking into account the state budget’s current obligations, and only after this can a final decision be made.

The situation is far from ideal as far as state procurement goes too. The ministries are fully capable of carrying out their planned purchases at considerably less cost, around 15 percent less on average. In fact, I think that even greater effectiveness could be achieved. I hereby give the Government until May 15 to draw up coordinated proposals on this matter. Of course all decisions in this area must make provisions for carrying out all of our obligations to raise pensions, develop healthcare, and raise service pay for people in the armed forces and law enforcement agencies. I agree with my Government colleagues that it is very important at the same time to keep the budget deficit within acceptable limits, safe limits for our country’s macroeconomic stability. It is up to the Government to decide how to do this, especially taking into account the fact that this year will probably bring us some additional revenue.

Second, I instruct the Prosecutor General, starting in May, perhaps (a draft law can be drawn up quickly), to introduce a special procedure for examining complaints about state agencies’ actions or inaction that contain allegations of corruption. This procedure should involve not just verifying the information, which is already one of the Prosecutor General’s Office’s duties, but also make it a duty to publish the results of these checks if the original information came from a public source, in other words, if the check was made at the request of a concerned party. Publication should be made using the information source, including the media, that the party making the request used. This can include newspapers, radio, television, blogs, and other types of mass communications.

If the checks confirm the information’s veracity, the guilty parties must bear liability of course, in accordance with the law. If the number of complaints about a particular agency does not fall within a set timeframe the agency’s executives will have to take personal responsibility for their employees’ actions, and the draft law should include this in its provisions.

Third, entrepreneurs and investors constantly repeat that the authorities make it hard to do stable business because state agencies take unpredictable decisions and action. They often say, and to me too, ‘You should decide for once and for all what exactly you want, and why internal contradictory decisions get taken that paralyse earlier decisions’. I agree that this is a real problem in many situations, although we already have in place a procedure requiring many documents to first go through an expert evaluation at the Economic Development Ministry. Furthermore, the Federal Antimonopoly Service has the right to give instructions that must be carried out. But this is still not enough.

The Economic Development Ministry will therefore get new powers to propose that the Justice Ministry take action to repeal state agency regulations that unjustifiably obstruct business and investment activity. The Justice Ministry for its part will then have the duty to demand that the agencies immediately repeal the anti-business regulations in question. This provision will be included in the law On the Government and other statutes, and will apply to all federal agencies without exception. The Government is already examining as it happens a draft law making it possible to lay complaints about the quality of service provided by this or that state agency, and introducing strict liability for civil servants who fail to perform their duties properly. I hope that this draft law will be examined rapidly and submitted no later than the second half of this year. This procedure has to start working.

Furthermore, agencies’ regulations and instructions should be the subject of preliminary discussions with business and professional associations. This is already the case for some documents, but by no means all. The results of these discussions should be published and taken into account in approving the relevant legal acts, and also during their examination in the Economic Development Ministry.

I hereby instruct the Presidential Executive Office to draft a presidential executive order on this issue. These provisions should also be introduced at the regional and local government levels.