OREANDA-NEWS. December 6, 2011. "The people who have a special responsibility to their country and to society, and who carry out their duty, will be able to count on decent social guarantees. For our part, we expect improved performance from all the structures responsible for the security of the state and its citizens."
Transcript of the beginning of the meeting: Vladimir Putin: Good afternoon,

As you know, the State Duma elections were held yesterday. Many of those present here were actively engaged in the election campaign. United Russia is a party that the government has relied upon in its work over many years. And as I have said before, in recent years, United Russia has been responsible for a major part of the establishment of our political stability. So, the party's good performance in the elections was important not just for the government, but for the country as a whole. I would like first of all, to thank all those who participated in this work. United Russia has retained its majority in the State Duma. This will make it possible to work effectively and smoothly. Two hundred twenty six votes are needed to pass legislation. United Russia will have 238 seats, which enables us, as I said, to work smoothly and effectively, ensuring stability, which is highly important.

I would like to congratulate everyone who took part in this work, and I would like to congratulate United Russia. I want to thank the citizens of our country for their active participation in the election campaign. In general I would like to thank all those who came out to the polls and voted, for whatever party, and of course those who supported United Russia. I wanted to mention this first because it is the most topical domestic policy issue.

Now I'd like to say a few words about the agenda of today's meeting. The previous meeting of the Government Presidium approved a whole package of legal acts connected with the shift to a new system of paying salaries and pensions to servicemen and members of security bodies, and determined the basic salaries and salary increases that will be carried out as of January 1, 2012. Let me remind you that we are talking about an increase of 2.5-3 times. We will continue this work today and approve the salaries of all other security agencies, which will be raised starting on January 1, 2013.

Why do we need to do it right now? Because as of January 1, 2012 we must raise the pensions for servicemen and members of all security services. In order to accomplish that we have to determine the salaries at those agencies, which I will talk about in a moment, as of 2013. Although the salaries within these structures will be raised starting in 2013, we need to determine them today. All military pensioners and those who have equal status will see an increase in their salaries by 1.6 times on average, regardless of the agency.

Thus we will have prepared the entire legal framework for the introduction of new systems of remuneration in the Armed Forces, the Interior Ministry and other security agencies. This is a very important stage, a major stage in the work that we are going to complete today. The people who have a special responsibility to their country and to society, and who carry out their duty, will be able to count on decent social guarantees. For our part, we expect improved performance from all the structures responsible for the security of the state and its citizens.

Support of motherhood and childhood is a constant state policy priority. We are taking advantage of every opportunity, ranging from mother’s capital, tax breaks and benefits to assistance in retraining and employment. The key issue here, of course, is affordable housing. Starting this year, as you know, families that have many children are entitled to receive free land plots that are under federal or municipal ownership, including for the purpose of building their own homes. We expect that this measure will truly help families to acquire their own housing.

However, this introduces problems that we need to address promptly in order to avoid infringing on people’s interests. Under the Housing Code, if you receive a plot of land for free you are dropped from the waiting list for improved housing conditions. It may happen that families, before managing to build anything on their land, will be deprived of state support and crossed off the waiting list for housing because they have received a free plot of land. I believe that we need to do away with this discrepancy, this injustice for families with many children, and introduce the necessary amendments to the Housing Code.

On to the next item. As you know the government has made a decision on principle to limit housing and utilities tariffs next year to the rate of inflation. This should stimulate the utilities sector enterprises to review the structure of their costs, cut unreasonable losses and renew their basic assets. Today, local authorities often have to compensate the enterprises that supply heat for the difference between the actual tariffs and economically reasonable tariffs. I would like to stress once again that determining the specific utilities tariffs falls within the area of responsibility of the regions, and it is wrong and unacceptable to shift the burden of compensation for the tariff gaps onto the shoulders of the municipalities without providing the corresponding resources.

Today we will discuss the necessary amendments to the federal law on local government, which will confirm this position. And there is another agenda item concerned with improving the work of the Civil Registry Offices and with those additions that will hopefully make registry services more convenient for citizens. Remember, beginning October 1, 2011, federal services began providing state services electronically, and now they (federal services) have no right to request documents and certificates with information contained in the databases of relevant departments.

By July 1, 2012, the principles of “e-government” must operate throughout Russia, including regions and municipalities. This is very important, and, of course, represents an entirely new stage of development for “e-government”, in an entirely new quality. We expect that in many constituent entities of the Russian Federation it will happen much earlier, as early as February-March of 2012. In terms of this process, we must optimise the work of Civil Registry Offices, to place their interaction with other departments on a new, modern foundation, and primarily with migration and tax services, with the Pension Fund.

Unfortunately, at times various departments, including the tax inspectorate, send various letters and payment notices to somebody who is deceased. And this [practice] not only causes emotional damage to his relatives and his family but makes them also run around, queuing to see various officials. I think it is necessary to use electronic interaction channels more actively for sending information to Civil Registry Offices, federal authorities, to stimulate information sharing between departments of Civil Registry Offices in various regions. Our objective is to make it possible for citizens of this country to take important family issues to their local Civil Registry Office so that all these official institutions communicate electronically, and promptly and conveniently resolve all problems for people.

To make this electronic chain work coherently and effectively, we need state-of-the-art information infrastructure, reliable communication channels and data processing centres, as well as well-defined coordination between departments on issues of information support and personal responsibility of directors for the results of relevant projects. This work itself goes unnoticed by most citizens, nevertheless it is very important because its result must tell on citizens’ everyday feelings, and their relations with the state should eventually change.

I’d like to inform you that in the 2012 federal budget, 67.4 billion roubles are allocated for the introduction and use of information technologies, and a total of 181 billion roubles are allocated for the three years to come. As we work on the budget practically every day, we understand perfectly well that this is an enormous amount of money and we want it to bring real returns so that everybody can see, in practical terms, the improvements in the work of state and municipal services. I want to stress that it is necessary to create instruments of public oversight and feedback, to improve transparency of spending on the introduction of information technologies, to release information on key projects of departments and thus justify spending and show that this spending is optimal. Today we will hear the report of the Ministry of Communications and Mass Media on this issue and discuss proposals on further steps.

One more issue in conclusion. Currently, we are engaged in a large effort to optimise state oversight and supervision. We are lifting various administrative barriers. Today we will discuss a draft law on the quarantine of plants. This will make it possible to establish well-defined and clear quality rules in a major segment of the agricultural market, and will save honest entrepreneurs, producers from the need to get a great number of various, essentially formal and duplicative documents and certificates. Simultaneously [the law] should protect the interests of consumers, provide a high level of food safety on the market. This naturally should be taken into account, too. Besides, this issue is important for harmonising Russian legislation with the requirements of the Customs Union and also with the requirements of the Common Economic Space in the future. The deadline for these standards is not far away: the Common Economic Space will begin to operate on January 1, 2012.

Before moving on to the proposed agenda, I ask you to share urgent information and I want to ask Elvira Nabiullina to brief us on the results of the first session of the Consultative Council on Assessing Regulatory Impact. Please.

Elvira Nabiullina: The Consultative Council on Assessing Regulatory Impact was created with the participation of representatives of our major business associations: the Commerce and Industry Chamber of the Russian Federation, Russian Union of Industrialists and Entrepreneurs, Delovaya Rossiya (Business Russia), OPORA-Russia. Representatives of other ministries and departments participate in its work, too. The work on assessing the regulatory impact is a key element of our work to improve the investment climate and reduce administrative barriers. Let me recall that this procedure was introduced a year and a half ago. It was designed to enable us and entrepreneurs to test whether the regulatory acts we are drafting will have any adverse consequences for the business community, such as excessive barriers or extra expenses. During the past year and a half we reviewed 500 draft regulatory acts. This procedure is regulated – we operate with business associations on the basis of agreements. A third of these acts were suspended for follow-up revision because they contained excessive barriers and we suggested that they be better regulated.

We reviewed the results of our work at the first session of the Consultative Council on Assessing Regulatory Impact. All business associations acknowledged that this institution is instrumental to improving the investment climate and predictability of government regulation. Our business colleagues have suggested developing its key elements. I’d like to mention five of these.

First, it is important to assess the regulatory impact not at the final stage when a regulatory act has already been drafted but in the beginning, and this work must be done not only by the Ministry of Economic Development because it’s a lot of work – 500 acts. We hold public discussions on about 30 acts but the departments that initiated them assess their regulatory control. Thus, for instance, now we have the conclusions of a financial feasibility study – we analyse every act and assess how much money will have to be allocated from the budget for this or that purpose. In much the same way, we must assess potential expenses for the business community. The department that initiated a draft act must submit a relevant conclusion.

Second, this procedure should cover not only a draft act but the already existing acts because they also contain some excessive administrative regulation. In early November, our ministry issued an order on expertise procedures. 65 proposals have come from the business community by now. We will arrange by order of priority all acts passed previously, which require such expertise according to the business community’s opinion.

Third, the business community proposed to spread this practice to the regions so that the regulatory acts and laws they pass would also undergo such expertise procedures. We decided to choose a voluntary road here. We are currently drafting a relevant agreement. About a dozen regions are ready to develop this practice and we will spread best practices.

Fourth, we are analysing a proposal of entrepreneurs to expand such procedures and introduce them into the legislative process for the draft laws that are being initiated not only by the government but also by other bodies with the right to introduce legislation.

And finally, we want to apply these procedures to the documents that are being drafted for the Customs Union and the Common Economic Space (these procedures are in demand and the business community has suggested expanding them). We have planned to meet with representatives of the ministry and entrepreneurs quarterly in order to make government regulation more predictable. We hope this will have a positive effect on the investment climate.

Vladimir Putin: Okay. I’d like to mention one more element of this work to attract investment and improve the business climate in Russia in general. I’m referring to the transition to the International Financial Reporting Standards (IFRS). Mr Siluanov, please tell us about this. I know that this work is being completed and next year many of our companies will switch to them.

Anton Siluanov: Indeed, Mr Putin, we have completed the work on adopting IFRS in Russia. On November 25, the Finance Ministry, the Central Bank and the Federal Service for Financial Markets (FSFM) issued an order recognising the standards in this country. To begin with, this will make companies that adhere to IFRS more transparent and more attractive to investment. Furthermore, investors and shareholders will have more opportunities to receive the necessary information on their investments in various companies and the latter’s operation, which is very important and was one of the main motives of adopting IFRS. Moreover, transitioning to these standards will improve the investment climate and enhance the investment appeal of Russian companies for foreign investors.

This is also very important, in the context of Russia’s WTO entry, for anti-dumping inquiries regarding the operation of companies from both sides. We believe that this transition is a step towards more openness and transparency.

The transition to IFRS will be carried out gradually. Companies will switch to the new standards in 2013 for their 2012 reports. Those companies that issue debt securities will do so in 2015. These stages will help companies prepare to report in the new format and to study in detail all relevant requirements.

We must also draft particulars for public consolidated accounts of our defence companies because we have joined IFRS with some reservations for a number of categories of enterprises. We will complete the work on such particulars for our defence companies before the end of this year. We must also refine some provisions of our legislation to bring them in line with IFRS. We will work on this until 2015.

The main conclusion is that acceptance of IFRS is a step forward towards integrating out finances into international legislation.

Vladimir Putin: Okay. Thank you. What surplus are we going to have this year? About 0.5%?

Anton Siluanov: Yes, about 0.5%, Mr Putin.
Vladimir Putin: Is this about 350 billion?
Anton Siluanov: It’s about 300 billion.
Vladimir Putin: So, it’s about 300 billion roubles?
Anton Siluanov: Yes, roubles.

Vladimir Putin: Okay. As far as I can see, this is an opportunity to transfer some expenses from 2013 to the current year. I’m referring, among other things, to the reconstruction of some medical centres. What are these centres?

Tatyana Golikova: Yes, Mr Putin, these are our three leading high-tech centres. They include the Academician Shumakov Federal Research Centre of Transplantation and Artificial Organs in Moscow, the Endocrinology Research Centre, also in Moscow, and the Almazov Federal Centre of the Heart, Blood and Endocrinology, located in St Petersburg. You may recall that you attended the opening of the latter’s prenatal clinic.

Vladimir Putin: Yes.

Tatyana Golikova: Indeed, we are going to transfer the 2013 allocations for the construction of these centres to 2011 because construction is going fast. We have agreed on this transfer with the Finance Ministry and the Ministry of Economic Development. All in all, the federal budget will spend 12.7 billion roubles on these centres according to the construction documents (until 2013 for the first two and until 2014 for the third one).

This year, we have sped up transplantation centre funding, which will receive approximately 57.7 million roubles. With this extra grant, it will be able to perform 350 operations per year, as compared to the current 215. The endocrinology research centre, where a children’s ward is under construction, will receive 487 million roubles ahead of schedule.

Vladimir Putin: This is the Almazov Federal Centre, correct?
Tatyana Golikova: No, the Moscow centre, where Ivan Dedov is the director.
Vladimir Putin: I see.

Tatyana Golikova: One hundred ninety six new children’s beds are planned, as well as 20 intensive care beds and a therapeutic and diagnostic ward for 300 patients per year. As for the Almazov Centre, it is the most expensive project of these three. 5.9 billion is going towards it out of the total 12.7 billion, and it is also receiving 485 million roubles ahead of schedule for a therapeutic and rehabilitation ward, which is under construction. When it opens, the centre will increase the number of patients receiving medical care by 20-25% and rehabilitation patients by 20-30%. Patients will be transferred to the rehabilitation ward, and will therefore spend much less time in hospital. A prenatal clinic opened last year, and 2,295 babies were delivered in the 11 months of this year. 93.7% of the mothers had pathologies.

Such were our achievements from January through November. You see that we are keeping up with the pre-set pace of construction. We do not mean to increase budget funding yet – we are simply shifting the schedule within the year.

Vladimir Putin: Good. Thank you.

Car sales have increased by 43% in the first ten months of the year. Total sales exceeded two million cars, 67% of which were Russian-made. Mr Khristenko, please.

Viktor Khristenko: Mr Putin, we can already summarise the year for the car industry. This year will determine the future of the industry, because not only has it set the market terms, it has also brought about the signing of all principal contracts for large-scale car assembly, which is the main area of the Russian car industry now.

There are four joint projects that are currently operating: Renault-Nissan-Avtovaz, Ford-Sollers, and two independent projects – those of Volkswagen and GM, also with Russian participation. GM’s partner is Avtovaz, and Volkswagen’s is Gaz, the Nizhny Novgorod plant, along with several other companies. There is a fifth project, Kamaz-Daimler, which manufactures mid-sized and heavy trucks. All of these contracts have been signed, and they are being implemented in part already. The other projects will be launched quite soon. Together, they define the present situation in the car industry.

This is the year’s main achievement. Sales are increasing, as you said. They increased by 43% from January-October. More than 2 million cars were sold, and we expect the number of cars and light trucks sold to reach 2.65 or even 2.7 million by the year’s end. This is our own, highly optimistic forecast. It exceeds the figure of 2.2 million that was set by the national strategy.

Another hopeful point is the fact that output is growing more quickly than sales. Russian car manufacturers are increasing their presence, which accounts for more than two thirds of the total Russian-based car industry. As you said, Russian manufacturers account for 57% of the total output.

The truck and bus market is also expanding apace. However, there are alarming trends in this sector, as the share of Russian manufacturers is shrinking. We can explain this mainly by modernisation efforts that are underway in many companies, as outdated models are being discarded. There is another reason – there were large government purchases last year and, to a much lesser extent, this year. Now, large companies prefer purchases to be made in the open market, where there is tough competition. The situation demands close monitoring of every aspect.

I am pleased to point out that cars manufactured and assembled in Russia not only account for two thirds of domestic sales, but also that nine Russian models are holding steady in the top ten for sales. Moreover, 18 out of the top 20 models are assembled in Russia. The Uzbek-made Daewoo is the only exception, with its liberal distribution in Russia.

State support has had an impact on the industry. The scrapping of old cars and trucks, a very popular programme, is coming to an end. We issued 601,000 certificates, and only 4,500 cars have not been bought with them yet. The work is proceeding very smoothly. Soft car loans are in great demand. I believe we will have 250,000 borrowers this year.

Vladimir Putin: It’s 227,000 now, if I’m not mistaken.

Viktor Khristenko: Right – compared to 160,000 last year and 70,000 the year before, when the programme was launched.

Vladimir Putin: So 600,000 in total, correct?

Viktor Khristenko: No, that’s the figure for the scrapping programme. For car loans, there are 227,000 for now, and we expect about 240,000 by the year’s end. We were right to prolong the scrapping programme into this year – it has helped to smooth out the ups and downs of public demand. It appears that the growing demand has prevented market decline. On the contrary, the market is growing, and commercial demand is gradually coming to the fore. However, we must not forget that when the scrapping programme came to an end in Europe, sales fell by 25%.

Vladimir Putin: Their predictions were not entirely accurate – the greatest demand was for the cheapest cars. In Germany, for instance, it was not German cars, but French cars that were being bought up.

Viktor Khristenko: Right, even Russian car sales peaked in Germany, Avtovaz cars in particular, when the scrapping programme was starting, but sales naturally declined later on. So we satisfied the growing commercial demand, due in part to the extension of the scrapping programme into this year. Long-established low-price models also found a customer base thanks to the programme. It boosted the demand for the good old Lada 5 and 7. This demand is falling now that the programme volume is decreasing, so Avtovaz car sales shrank in November. Besides, November is usually a bad month for car traders, while December is a boom month. Still, Russia has consistently been in second place in Europe, behind Germany, for car sales throughout the year. The Russian market potential is growing, so investors remain interested in further cooperation. This next year, I believe, will be decisive for the industry.

Vladimir Putin: Well done, with all these terms!

Viktor Khristenko: Yes, the year will be decisive mainly because of two factors. First, all projects that will soon be launched on the newly signed contracts will become fully implemented. They ensure that the industry will be upgraded. They will not simply increase output – they will also deeply localise the industry (up to 60% of the added value) with engineering centres, power sets, etc.

Second, work on all contracts having to do with car parts will be fully developed. Currently projects based on 191 contracts have been drawn up thanks to the principal alliances which attracted part manufacturers. All of these contracts will be signed and will go into effect next year. This is a critical time – we are crossing the point of no return for localisation, from the perspective of investment.

Regulation is another important aspect here. We will shortly be entering the World Trade Organisation, which will have an impact on the automobile industry. We are all working to ensure that this transition meets all WTO standards, and that it is effective for one of Russia’s major industries.

Vladimir Putin: Thank you. Don’t forget the Kaliningrad plant. There are problems that need to be addressed, agreements to be made and new patterns to work out. It’s possible that papers signed previously will work, too – you know what I mean.

Viktor Khristenko: Yes.

Vladimir Putin: Please don’t forget about this.

Viktor Khristenko: We're working on it. I think we’ll have results to report in about three weeks.

Vladimir Putin: Okay. Thank you.

The housing construction market is recovering and even growing this year. It grew by 3.3% from January-October. Thirty eight million square metres have been built and commissioned. We have allocated about 28 billion roubles for state aid to citizens who are entitled to this assistance. Please say a few words about this, Mr Basargin.

Viktor Basargin: Ladies and gentlemen, the construction industry is truly going through a revival as we near the end of the year, with a 3.3% increase compared with last year. More than 460,000 flats were built over the course of ten months, with affordable housing making up 35% of the whole. There has been an increase in housing construction in 53 regions. The Chelyabinsk (33%) and Novosibirsk (26%) regions, Tatarstan (25%) and St Petersburg (19%) are doing the best.

Mortgage crediting is also regaining its pre-crisis levels. More than half a trillion roubles were borrowed over the last 11 months. As you may recall, 2008 was the best year in this respect, with 630 billion in mortgage borrowings. Now, we are approaching the pre-crisis levels.

We expect to build 63 million sq m of housing this year, just as in 2008.

As for our obligations to certain categories of people, the greatest are to WWII veterans. As of today, 186,000 flats have been moved into, with 40,000 veterans receiving new flats this year. Programme allocations consisted of 46 billion roubles. There are 53,000 veterans still on the waiting list. All of those who registered before July 1 of this year will receive flats before the end of the year. An additional allocation of 13 billion roubles will be made in January, and the amount will equal that of September 1, 2011.

We set aside 13 billion roubles for new accommodations for retired servicemen on municipal waiting lists, of whom 10,000 have moved in. This work will continue into next year.

Vladimir Putin: So the process is continuing?

Viktor Basargin: The programme will be completed next year. We expect to wrap up in the first half of the year. The number of Chernobyl rescue workers who received new flats this year exceeds that of last year by three times. Mr Putin, we planned to give new flats to 500 families, but an extra 1.5 billion rouble grant we received on your orders was enough for another 900 flats, meaning 1,500 families received housing this year. This figure exceeds the targeted amount by 200%. As for servicemen who retired in November, decisions were made in Arkhangelsk and Murmansk, where there are more than a thousand retired naval officers on waiting lists for housing. They all will receive new flats next year.

Mr Putin, I would like to say a few words about housing company interest holders who were cheated. Twenty percent of them received new flats this year, as planned. About 200 buildings were constructed and 16,000 people moved in. We will join forces with the regions next year to finish the programme. All people who were cheated will receive new flats.

The construction industry is very dynamic. I would like to cite a few figures. This year brought 210 new construction materials plants and state-of-the-art production lines. Thanks to them, as compared to last year we increased the output of wall blocks by 32%, tiles by 17%, brick by 16%, cement by 12% and concrete components by 11%. There was a shortage of construction machinery, so we joined forces with the Industry and Trade Ministry and increased the output of cranes by 55%, lifts by 32% through a housing capital repair programme, bulldozers by 140% and escalators by 82%. These are the statistics.