OREANDA-NEWS.  January 31, 2012. Vladimir Putin’s opening address: Good afternoon,

We have gathered here today to hold the first meeting of the Government Commission on High Technology and Innovation of this year. It is no accident that we are here, at the Tikhvin Freight Car Building Plant. This is a new green field enterprise. In other words, it was essentially built from scratch. I don’t know if you have been able to acquaint yourselves with it, but I have looked around and I’m very impressed.

We have established that this is a major construction projects in this country in the last quarter century, and one of the biggest – perhaps even the biggest – project of its kind in Europe. It's not only a matter of scale but of quality as well. This enterprise has the best, most state-of-the-art equipment from all over the world. It is high-tech projects such as this that will gradually change our economic structure. The opening of a modern plant here in Tikhvin is a very good example of a public-private partnership with the participation of our development institution.

Three financial institutions have funded this project – Vnesheconombank, our Development Bank with Kazakhstan and Nomos Bank. More than half of the funds came from two state financial institutions – one international bank, but with our controlling interest, and Vnesheconombank, which is strictly our development institution. This is a very good instance of resolving economic and social issues.

I’d like to note in this context how decisions are made to attract personnel. You have probably seen new, modern buildings here. There are both houses and apartment buildings. This is how the most urgent issue – the housing issue – is being resolved. Good financial institutions have offered flexible mortgage plans – loans for 30 years at 10.5% interest, an opportunity to use maternity capital and other sources of funding. These housing projects are quite feasible.

Today, let’s discuss how to make the best use of such mechanisms in the formation of a new domestic economy. The challenges of the 21st century are well known: steadily rising competition for people, ideas, smart investment and technology that create high-tech and well-paying jobs, thereby setting modern living standards.

Wages at your plant are higher than the national average. I have spoken with some of the plant’s workers. Those with whom I spoke, at any rate, all have a higher education and operate lathes. I must admit I would not be able to operate such a lathe. Well, I probably could if I received special training. These aren't only locals who work at the plant – interesting jobs attract people from other regions as well.

As I have already said and as you are well aware, it is not only our regions that compete for such projects and specialists with such skills and competence. This competition is also taking place on the world arena. In fact, this is competition for the future. It will be won by those states that create the best, the most attractive conditions for the birth of ideas, for the self-actualisation of specialists and for capital investment.

We must ensure the creation of new enterprises and good jobs in Russia, and minimise the distance from business ideas and innovations to the end product and the market.

Unfortunately, we are all well aware that this is far from the case in this country – this distance is very long here. We must provide government support for private companies that are ready for innovation and development. This is the formula for responsible government thinking. Last year the government approved the strategy for Russia’s innovation-based development until 2020. That document outlines ambitious but entirely realistic targets that are adequate for the requirements of our society and for our competitiveness. Over the next 10 years the share of innovative products in our industry must grow from the current 4.5%-5% to 25%-30%. By 2020 expenses on R&D should also almost double to 2.5%-3%. Unfortunately, they are as low as 1.16% now.  We will need to both carry out modernisation and create new industries. Retrofitting should become a widespread practice and an effective development model. In addition, Russia will need to significantly expand its presence on global high-tech markets. To this end, we plan to increase the funding for research and university centres, and to provide greater support for innovative businesses and breakthrough projects. Most importantly, we should form long-term and stable demand for innovations in the economy, and partially state-owned companies should play a critical role here.

Please note that partially state-owned companies should not act as substitutes for private businesses. Instead, they should act as catalysts for innovative processes, particularly when a process involves known elevated risks, through major investments in research, production and the purchase of modern goods or services on the domestic market. This is exactly why a decision was made to draft and approve special innovative programmes for all major companies partially owned by the state. We will look into this work today. Considerable amounts of money are concentrated in this sphere. This year companies partially owned by the state will put about 950 billion roubles toward innovative programmes. Next year, state-owned companies’ demand for innovations will increase to 1.5 trillion roubles.

Colleagues, I’d like to call your attention to the fact that, first, programmes for the innovative development of state companies should be tied in with their investment projects and financial plans, and also be deeply integrated with business strategies. Of course, the point is not in simply disbursing the funds allocated for innovations, but in using such funds to make the Russian economy and individual companies more competitive.

Second, I believe that the compensation of executives and top managers should be tied to achieving key targets of innovative development.

Third, these targets should be quantifiable and meaningful so as to show effective changes in corporate operations.

Finally, I suggest expanding the list of partially state-owned companies that are charged with the task of developing innovative development programmes. I’d like the Ministry of Economic Development to develop proposals regarding these issues and to think in general about enhancing the effectiveness of the innovative programmes pursued by partially state-owned companies. This is also true of another new form of partnership between the state and private businesses that we are currently introducing. I’m referring to what is known as technology platforms. I believe we have 28 such platforms in Russia. They make it possible to focus the efforts of the state, science, education and business on breakthrough projects precisely in the industries that will define the new world order in technology. I’m referring to medicine, biotech, energy, the space industry, as well as nuclear and information and communication technologies. I would like to see all major partially state-owned companies to get involved in this work and develop customised plans for participation in the work of such technology platforms.

There’s one more item on our agenda today. As you may recall, Vnesheconombank, the Ministry of Economic Development, Delovaya Rossiya and the Strategic Initiatives Agency signed an agreement to support major territorial and industrial clusters at a Delovaya Rossiya convention. I believe that such a mechanism for the comprehensive development of Russian territories should be actively used and promoted on the basis of international as well as our own experience. For example, such a cluster is already operational in the Tomsk Region’s special economic area. Rosatom, for its part, is developing cluster projects in the Ulyanovsk Region and the Krasnoyarsk Territory.

Clearly, regions, municipalities and production businesses are interested in implementing such projects. The Russian regions and local authorities receive additional revenue; new jobs are created; and many social problems are resolved. Businesses, for their part, will receive real support during the start-up period, and reduce their risks and expenses on their way from business concept to the opening of an actual production facility. We need coordinated, comprehensive approaches toward the establishment of territorial and production clusters with clearly defined responsibilities of all participants in this process. We need to have a clear understanding of who is going invest in the construction of transport, energy and housing infrastructure. We need to know how we can engage development institutions and partially state-owned companies in the implementation of cluster projects. We also need to know how to minimise risks involved in research and design. In this regard, I’d like the Ministry of Economic Development to quickly draft a list of pilot projects for developing territorial clusters and submit them for consideration by the government. I’d like to see the operation criteria and effectiveness indicators established right at the outset. This is all I have to say at the beginning of our meeting.

Mr Klepach, please go ahead.