Russian Federation Prime Minister Vladimir Putin

Remarks during the United Russia Party Interregional

Conference on the Development Strategy for Central
Russia through 2020
Transcript:
Vladimir Putin: Good afternoon, colleagues,

Bryansk has welcomed us with good weather, which instantly puts one in a positive, spring
mood. We are holding our first interregional party conference in the new year of 2011 in this
almost festive or at least pre-holiday atmosphere. We are to discuss projects concerning the
development of the Central Federal District. First, I'd like to say a few words about what we have
achieved, and then allow me to make a number of proposals.

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We realise full well that if a political party claims the support of the people, it should know these
people and their needs and put them at the top of its agenda. It is no accident that United Russia
has undertaken to draft development projects for all regions of Russia – from the Far East to
Kaliningrad. At our interregional forums, we discussed many important and urgent issues and,
most importantly, we started implementing our initiatives.

Following the party's conferences, our government has made a number of decisions – for
instance, to reduce the price of gas for Kamchatka. I will simply remind you of the decisions that
have been made at preceding regional party conferences and what has been done. So, to repeat,
we have decided to reduce the price of gas on Kamchatka and expand the programme of discount
flights for the residents of Siberia and the Far East. We have allocated funds to restore the forests
burnt by fires in the Central Region and launched the programme for modernising AvtoVAZ and
improving municipal development in Togliatti and other single-industry cities. VEB is taking
part in establishing a fund for direct investment in the projects in the Far East. We are also
working on institutions of development for the North Caucasus.

We have supported these measures with more than 3 trillion roubles spread over 100 investment
projects in the Volga, Siberian, and Far Eastern Regions. In the North Caucasian Federal District
alone, 37 major projects worth 400 billion roubles will be started this year alone. This is quite a
significant sum for this district. No doubt, we will accomplish all our plans despite attempts to
hinder the normal development of the North Caucasus.

Last year, our GDP grew by 4% and the real incomes of the population increased by 4.1%. I
would like to reiterate that I'm referring to real incomes, or incomes after accounting for
inflation. Industrial production grew 8.2%, and the processing industry grew by 12%. The
growth in individual economic sectors was even higher. For example, Russia's automotive
industry doubled its output as compared to the crisis year of 2009. Car sales grew 30%, truck
sales surged by 122%, and buses – by almost 30%. And it was Russian car makers that benefited
the most from all this. For your reference, cars assembled in Russia now account for 70% of
sales, and nine out of the ten most popular models are produced in Russia.

The automotive industry displayed the following performance in 2009: the manufacture of cars
dropped by 60%, trucks by 65%, and buses by 47%. In 2010, the manufacture of cars grew by
101.4%, trucks by 74.5%, and buses by 23.6%.

Our financial institutions and banks are again expanding their investment in Russia's economy.
The loan portfolio grew by more than 12% in 2010. Mortgage and consumer loan markets are
recovering.

You know that during the crisis, the Central Bank and the government were providing the
necessary resources and liquidity to our banking sector. This aid reached 5 trillion roubles in late

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2008. This is an immense sum for Russia. The government is currently recovering these funds
with surplus interest. The government has already earned 200 billion roubles. The funds we
provided to banks were not a sop or a gift. All in all, there are positive trends in our economy.

At the same time, I would like to urge you not to rest on your laurels. This year will be very
important for this country. We are transitioning to post-crisis development and recovery. This has
been achieved in certain economic sectors, but not in all.

At the peak of the economic crisis, we had to focus on emergency measures and on helping our
citizens, individual sectors, and enterprises. And as we see in the automotive industry, there are
positive results. Naturally, we will continue our long-term programmes. It is also evident that
several systemic problems have accumulated over this complicated period, and they need to be
addressed. We need to draw conclusions and learn lessons from the crisis and recover as rapidly
as possible, but we have to think in terms of qualitative development. We talk about this all the
time. Whatever the situation in global markets, Russia needs to do away with its dependency on
natural resources, and that is evident.

The current favourable conditions for our hydrocarbon, metallurgical, and chemical sectors
should not put a damper on our ardour or be a pretext to let old problems drag on. This is why in
maintaining the fundamental goals and principles of the development strategy through 2020, we
need to find new flashpoints for growth, introduce new factors into the development of industry
and business and identify reserves for boosting Russia's international competitiveness.

I would now like to say a very simple thing that we rarely say. United Russia played a very
significant role in Russia's contemporary history, especially during the crisis, when decisions had
to be made very promptly – I mean what I say. What has been and what is United Russia's value?
It is the fact that the party is the cornerstone of Russia's political and economic stability. Thank
you for your applause.

But I would like to tell you that this is not enough anymore because we need to move forward.
We need a model based on highly qualified and professional people, on smart governance, and a
clever investment policy, on dramatically improved efficiency, and on creating conducive
conditions for the success of small and medium-sized businesses. We need to advance and look
into the future. And the United Russia party needs to mobilise its resources. It must find and offer
our society appropriate short-term and strategic long-term solutions to the problems Russia is
facing.

Earlier this week I met with farmers in Tambov. The government has to continue supporting
Russian agriculture. All the more so, since this issue involves the country's food independence
and affordable, high-quality goods for our people. One of the most topical issues today is the
growth of food prices.

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I would like to request regional leaders and United Russia deputies to intensify price control,
react flexibly to the situation, set up regional agricultural funds, and establish efficient
interregional cooperation. We are using a mechanism like this in the grain market: to support
cattle breeding, we are providing fodder grain to regions at prices lower than the market value.

We know that prices keep growing on the international market as well. And they are putting
some pressure on the Russian market. Our farmers have gone through two lean years,
compounded with the consequences of the global economic downturn, which had a negative
impact on our economy and thus affected the social sphere and the country's standard of living.
Russia, unlike some other countries, including those with stable and developed economy, did not
cut wages of public sector employees, did not reduce pensions, or increase the pension age – all
of you are well aware of this. We have been fulfilling all of our social obligations. But many
Russian citizens are nonetheless facing unemployment and a drop in real wages and incomes. We
didn't adjust wages of budget-dependent employees at all last year, and their wages are very low.
But, in general, we implemented all our programmes of social development. For example, we
increased pensions by almost 46%, as you know. We are getting additional opportunities today,
and, of course, people want to see how we will use them and what we will make a priority.

The expert community offers various recipes, but there is one thing we know for sure: we can't
neglect our social obligations. And, of course, we will not leave the people to fend for
themselves, while promising them future prosperity, the way it was decades ago. This has
happened many times over the course of our history, and we know how such stories end.

We must find solutions that allow the country to develop steadily while also giving the majority
of citizens the opportunity to experience the impact of this development in their own lives, to see
for themselves how it has improved their lives and the lives of their children, to reap the benefits
of this development – not in the remote future, but today.

Despite all the difficulties and limited financial resources, we, as I have already said,
significantly increased pension payments in 2010. Labour pensions have been again adjusted for
inflation by 8.8% in Russia since February 1, 2011.

We are preparing to adjust social pensions, also by 8.8%, as of April 1. We still have some
obligations to fulfill. We will consider what to do next in this field. We can't do otherwise: in
most cases, pensions are the only or the primary means of subsistence for the elderly. We didn't
let their incomes fall during the crisis, and we can't let it happen now.

Now I would like to speak about other things we have to do. This year we will have to make a
decision on increasing the scholarship fund because we haven't been indexing it for two years.
We need to support Russian students. We increased the wage fund of public sector employees by
30% in late 2008, and they lived through 2009 more or less successfully against a backdrop of

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falling wages in the country's economy in general. But in 2010, their wages again sagged, and
scholarships hadn't been increased in two years. We examined the issue, and I can say, as I have
already mentioned, that scholarships will be adjusted by no less than 9% as of September 1,
2011. We will do our best to make the figure higher.

In 2012, we will start introducing a new salary system for military officers and employees of
law-enforcement agencies. The system allows for substantial increases in wages according to
ranks and positions. The wages will depend on the level of the servicemen's professional
qualifications and on the complexity and responsibility of the tasks they are charged with
performing. We have already cited the figures. Lieutenants serving in the interior ministry
agencies will get wages from 33,000 to 45,000 roubles, and lieutenants serving in the armed
forces will have a wage of 50,000 roubles. The wages of those service members who risk their
lives or work in extreme conditions will be higher. Novice officers may have a salary of 80,000
or even 90,000 roubles. Military pensions will be increased by no less than 50% since January 1,
2012.

I have already started speaking about public sector employees. I can only repeat that their
situation is the most difficult. First, we haven't adjusted their wages in two years. I have already
said that we increased their wage fund by 30% in 2008, and we lived well through 2009, but we
had difficulties in 2010. Second, there is quite a big income gap in different regions of the
country. The average wage of teachers and doctors working in the constituent entities of the
Central Federal District, not counting Moscow and the Moscow Region, is about 10,000 roubles,
and this leaves much to be desired. In reality, wages of employees working at regional clinics
and hospitals are smaller, much smaller.

We will be adjusting public sector employees' wages by 6.5%, as stipulated by the law on
budget, starting June 1, 2011. But, of course, we understand that this is not enough, and that's
why we will continue thinking about taking a second step in autumn. Dmitry Medvedev shares
my opinion; we spoke about this two days ago.

Let us be realistic and keep within the budget. We will certainly take the next step in September.
I am sure that accumulated inflation will not exceed 6.5% by June – it will be around 6%,
slightly above the current six-month inflation. We'll take the next step in autumn – and we'll see
what that step will be.

I would like to emphasise to the regional governors present here, as well as the heads and
members of regional legislatures, that regional policies make all the difference in the effort to
increase the incomes of teachers, doctors, librarians, and social workers.

Let's see. In the Belgorod Region, the average salary of a teacher is 40% higher than in the
Bryansk Region. In the Kaluga Region, it is 30% higher than in the Kostroma Region. There are

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more examples of this discrepancy, not only in the Central Federal District. These figures show
how regional governments' priorities differ across the country. They show which regions are
more determined to improve their social policy.

Colleagues, as I have said, this year is going to be a crucial one for any political party, including
United Russia. You know why that's the case. The parliamentary vote is scheduled for December
2011. The party has been working hard to get fully prepared for this important event: it has
initiated a law assuring each political party equal access to media resources and reducing the
State Duma eligibility barrier. Why am I saying this now?

The strongest party is the one focused on its voters' needs, not the one supported by a group of
high-ranking officials. Only a party that is sensitive to public sentiment and is capable of meeting
their expectations wins in the end. What it wins is worth more than seats or some abstract
proportion of the vote. Its prize is the mandate of public trust, which it can use effectively to
pursue the policy that it deems right and appropriate for the benefit of the country. What I'm
saying is, this should be our position of principle. This kind of attitude will lead us to effective
decision-making.

We decided at our last congress to hold an intra-party vote on the candidates we nominate. I
believe this approach has proved effective during regional election campaigns. This intra-party
democracy helps our members get to know the candidates better. It puts the candidates to an
important test. It also consolidates the party as regional branches learn to nominate their
candidates with greater responsibility. There should be no outsiders or dark horse candidates. We
need responsible and effective people, professionals who will represent United Russia in the
parliament.

We have heard a lot of clever anti-corruption rhetoric. We all agree that anyone who goes into
politics must be transparent and must disclose his or her income. Disclosing expenses is also a
good idea; we need to discuss potential tools for this initiative.

We will finalise our list of candidates at our September congress and adopt our election
programme. Incidentally, if we are to start working on a national development programme now
and United Russia's programme for the period after 2012, then we must absolutely include an
agenda for regional development, incorporating all the work that has been done at regional
conferences. This will make our strategy clearer and easier to understand and will make the party
better organised.

Colleagues, when drafting our regional plans, we try to build on the specific competitive
advantages that I am sure all regions have. Central Russian regions have advanced industry and
technology, a developed educational system, and intensive business activity, which therefore
attracts investment. Central Russia has unique historical and cultural heritage, which is

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internationally recognised. In short, this region has vast potential and is bound to be a leader in
the development of an advanced high-tech economy and strong industry.

Why is modern industry important for us? Because it stimulates the creation of engineering and
research centres, the demand for a quality engineering education, for research and development,
and is a powerful element of the national system of innovation. We will continue to stimulate
industrial development programmes, will subsidise interest rates on loans for the modernisation
of production, and will assist those who export high-tech products. This is for the first time that
we have introduced such an instrument (we had no such instruments before). Last year, 13 billion
roubles were allocated to enterprises in the Central Federal District for these purposes. The
recipients included machine-building, chemical, aeronautical, automotive, radio-electronic, and
engine-building enterprises.

The first sectors to be converted to new technologies will of course be those that pose
environmental hazards. For example, major oil refineries – in Moscow, Ryazan, and Yaroslavl –
are located practically within the city limits. Residents reasonably complain about the
environmental hazards they present: chimney stacks spewing smoke, inefficient purification
systems, etc. Over the next few years a drastic modernisation of all of these oil refineries will
take place. Companies will invest about 118 billion roubles in modern equipment and
conservation efforts, and harmful emissions will be cut almost by half. About 56 billion roubles
will be invested in the Moscow refinery, 19.5 billion in Yaroslavl, and 42.9 billion in Ryazan.

In the energy sector over the next ten years, we will replace nearly 25% of the district's
generating capacity and decommission all the outdated, so-called dirty and inefficient power
units, which are 50-60 years old and older. By 2020, 11.5 gigawatts of generating capacity will
be introduced in the Central Federal District.

We cannot afford to forget the lessons of this winter. We should do everything in our power to
prevent the recurrence of the massive power failures we saw to residential and strategic facilities,
towns, and villages.

More than 60,000 kilometres of power grids, half of the existing lines, will be repaired or built
this year in the Central Federal District. That is a large number that calls for a lot of work. The
implementation of such a massive programme will require a lot of funding: over 100 billion
roubles this year and 0.5 trillion roubles until 2015. I would like you to note that we have
decided to limit the growth of prices in the energy market to an average 15% nationwide. And, of
course, I think it is inadmissible when an investment programme (important as it is for
maintaining the networks in proper order) that is intended for five years is crammed into a one-
year period. It pushes electricity prices up 30-50% and in some regions by 70%. But why do it?
Why? Frankly, all sorts of suspicions arise that somebody just wants to load some crony

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companies with money: hurry, hurry, don't miss the train. The network infrastructure should of
course be supported, and investment programmes should be carried out, but all this should be
done at an even pace and at the right time.

Our basic position is that neither the economy nor the individual consumer should be made to
pay for infrastructure modernisation. Otherwise, by solving some problems, we will simply
create others. Let me remind you that the Central Federal District is the epicentre of our light
industry and textile industry, and some factories are several hundred years old. After the breakup
of the Soviet Union, all our sources of raw materials were lost, the equipment has since become
obsolete, and it is hard to compete with imports, many of which are often illegal or only semi-
legal.

But in spite of this, we managed to build up competitive production. It needs our help. It would
open up prospects for many towns and settlements, for tens of thousands of people. We propose
taking action in several areas. First, we need to put the domestic market in order, sustaining the
fight against fraudulent goods and adopting modern technological rules and quality standards.
Second, we need to develop the production base and search for niches in which Russian products
are in demand, not only in the domestic but also in the global market. For instance, there is
growing global demand – in construction, biotechnology, medicine, and chemistry – for natural,
environmentally clean textiles and fabrics. They can be produced at textile clusters being created
in the Ivanovo, Yaroslavl, and Kostroma regions. These and other light industry projects can be
assured of our support.

Another key industry for the country as a whole and for the Central Federal District, in
particular, is aircraft building. All the main aviation design offices, research institutes, and the
legendary Central Aerohydrodynamics Institute (TsAGI) are located in the district. This is an
intellectual and technological resource that must be used effectively for the benefit of our entire
economy. We are creating a National Aircraft Building Centre. It will be located, as we have
agreed, in Zhukovsky outside Moscow. It is a convenient location that has traditionally
facilitated such plans. It will comprise the Gromov Test Flight Institute, and the Sukhoi, Ilyushin,
Yakovlev, Tupolev and MIG plants and design offices. We are planning to turn it into a powerful,
high-tech research and production cluster, effectively an innovative zone for the country's
aviation industry. Even during the difficult crisis years, we continued to shore up the aviation
industry.

About 200 billion roubles were allocated to support the aviation industry in 2009 – 2010. As a
result, we were able to continue projects that are critical for the future of both our civil and
military aviation. Just a month ago, the Sukhoi Superjet 100 was certified. I might add that 150
such planes have already been ordered. The Saturn plant in Rybinsk will produce 30 Superjet
engines this year, and about 70 next year.

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The Voronezh aviation plant is deploying serial production of the passenger version of the
Russian-Ukrainian AN-148 and a special version for the Russian Emergencies Ministry. These
will be unique flying hospitals delivering emergency medical assistance. The Mil and Kamov
design offices are working on modern high-speed Mi-38 and Ka-62 helicopters. Tests continue of
the fifth-generation fighter plane. As you know, the second such plane took off from
Komsomolsk-on-Amur yesterday.

Defence industry output in Russia increased by 13% in 2010. The average pay in the sector
increased by more than 16%.

More than 0.5 trillion roubles worth of orders were placed with the defence industry plants in the
Central Federal District in 2009 – 2011.

True, the situation varies in different parts of the Central Federal District, and certain regions are
experiencing difficulties. For instance, there are certain issues in Bryansk that the governor has
reported to me, but this is a special case, and we will look into it.

Still, it is pleasing that young people are choosing to work in the defence industry. For instance,
Rosatom enterprises based in the Central Federal District offer jobs to some 500 university and
vocational school graduates annually. The government has adopted a decision to pay monthly
grants to the best young workers, engineers, and designers at defence enterprises. I am speaking
of a special monthly scholarship of 20,000 roubles granted to over 1,000 people and paid for up
to three years. Starting with 2009, the district-based defence enterprises have received orders
worth over 0.5 trillion roubles, as I have already mentioned.

As you know, the government has developed a new state armaments programme that aims at the
overall re-equipment of the armed forces. This is a budget-consuming programme and is very
difficult to handle – but it will certainly serve as a new start for the defence industry because
along with the armaments programme, we will have to adopt a programme for re-equipping the
defense industry itself, which can only produce new armaments if provided with up-to-date
equipment. In addition to the armed forces' re-equipment programme, the government has drawn
up plans for the large-scale modernisation of the military-industrial complex, with substantial
financing directed at research and development.

I believe that we have to break bureaucratic stereotypes and practices. I suggest that we put an
active effort into attracting the resources of our civil innovative and industrial clusters for the
benefit of scientific work in the defence industry. This approach would make for dual-purpose
advanced technologies. In this regard, I consider the greater volume of defence orders one of the
major instruments for modernising both the military-industrial complex and the country's
economy.

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You know that it is always gratifying to see joint work and the efforts of thousands of people,
despite all difficulties, produce real and tangible results. At the beginning of my address, I
mentioned the success achieved by Russia's car industry, with more of the world's top auto
concerns and carmakers entering the Russian market. Currently, we are setting new requirements
on the industrial assembly process aimed at increasing industrial localisation – that is, raising the
volume of spare parts and components manufactured at Russia-based enterprises. They are
delivered here for further large scale assembly in order to establish a network of small and
medium-sized enterprises, allied suppliers, and car components suppliers, such as the automotive
paint manufacturing plant based in the Tver Region.

But the prime example would be the Kaluga Region, whose car industry was developed from
scratch and has become one of Russia's auto industrial centres. I am sometimes amazed at how
they managed to accomplish it. The governor will probably give the details. They started the
industry from next to nothing, and now they have Volvo, Volkswagen, Peugeot, Citroën and
Mitsubishi operating there, with some 10,000 people now employed at well-paid jobs and
additional investments going to the local social sector and education.

In 2010, the Kaluga Region attracted almost 8% of all direct investments into Russia's economy.
But the region is small, indeed, without any gas or coal reserves – just people ready and willing
to work. By 2012, the region will be fully self-sufficient.

The experience gained in Kaluga, Belgorod, Ryazan, Voronezh, Lipetsk, and Yaroslavl reveals
that the reasonable choice of investors, the abolishment of bureaucratic practices, and
investments in infrastructure and personnel training can bring impressive results. I believe that
the assessment of the regional governors' and officials' work to attract investment and support
businesses should be as open as possible, hence our proposal to make an annual public rating of
Russian regions' favourability for investment.

I am also certain that we have to provide greater freedom for leading regions. The stimulating
role of federal budget support should be strengthened and financial autonomy extended for those
entities that succeed in developing the local economy and modernising the social sector.

Currently, the government is developing relevant proposals, and soon we will adopt a decision on
ways to stimulate regions' efforts. I can say with absolute certainty that the 2012 federal budget
will be prepared using new approaches.

There are plans to establish an incentive fund, and I can tell you about it in more detail. The fund
will have 10 billion roubles in its first stage, and constituent entities will be able to use this
money to pay back loans on infrastructure, high-technology, and other development programmes.

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It is worth noting that the Kaluga Region’s economy is not limited to the auto industry: it is
developing the pharmaceutical sector as well. The region is using a high-technology park in the
science centre of Obninsk as its platform.

Modern pharmaceutical enterprises are being opened in the Orel and Yaroslavl regions in
partnership with leading foreign manufacturers.

There are also plans to produce medical equipment in the Dubna special economic zone in
partnership with RusNano. RusNano invested a total of 186 billion roubles in the high-
technology sector of the Central Federal District.

Realising the importance of cheap, high-quality drugs for the population, we are going to invest
over 120 billion roubles from the federal budget to improve the pharmaceutical and medical
industries in the coming years.

This money will be spent on new equipment for over 160 medical enterprises. We plan to
establish 17 science and research centres to develop drugs and medical equipment and involve
Russia’s leading universities and science organisations in this work. We will also extend our
partnership with foreign partners.

Moscow State University has now organised a biomedical innovation think tank that integrates
research and educational platforms, a technological transfer centre, and pilot production
programmes.

I am convinced that, stage by stage, we must form a powerful, knowledge-based intellectual

service and high-technology business sector in the Central Federal District. Over 120 local
companies are already operating in the three special economic zones of the Central Federal
District: Zelenograd, Dubna, and the Lipetsk Region. The volume of declared investments in
nuclear technology, bio-technology, electronics, chemistry, and the production of advanced
building materials is at over 160 billion roubles. 

Conversely, many regions of the Central Federal District have accumulated positive experience
in developing industrial parks, technological parks, and business think tanks. For instance, four
industrial parks engaged in different industries were established in the Belgorod Region. The
same can be said about the Bryansk Region, which has included a business think tank and
training centre in the Morozov Project national initiative. The Rodniki technology park,
established through private investment, is successfully operating in the Ivanovo Region. I would
like the regional authorities and our party organisations to study their neighbours’ experience and
help use it in other areas. You have all the necessary resources, including highly skilled
specialists. Russia’s central region has historically been the core of the country’s leading
universities and science centres. Half of all Russian scientists work there.

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In 2011, federal spending on civil science will equal 228 billion roubles, which is twice as much
as in the pre-crisis year of 2007. This money must be used effectively. Eleven out of fourteen of
the country’s science cities are located in the Central Federal District, and this is, of course, a
source of pride and national wealth. We provide federal support for science cities to improve
their social, engineering, and innovative infrastructure. In 2010 – 2013, the eleven science cities
of the Central Federal Districts will receive 1.6 billion roubles from the federal budget.

We will soon study these issues in detail. The contributions being made toward technology and
innovation in the Central Federal District are great, and I would like to emphasise that. We plan
to increase investment in this area and better distribute resources, in particular through the
organisation of contests and grants.

Science cities, that achieve the best results in the sphere of innovation, complete ambitious
science and technology projects, successfully commercialise these intellectual products, and
integrate science and production, will be the first to receive money from the federal budget. In
modern times, rapidly changing global tendencies require sharp competitive growth in Russian
education and science. It is necessary to attract the best Russian and foreign specialists in
Russian institutions of higher education. To that end, we are launching a grant support
programme. The first forty grant winners have already been chosen. They include Nobel Prize
and Fields Medal winners. The grant winners, including our compatriots working abroad and
foreign scientists and teachers, are ready to work with Russian universities and laboratories. The
grant amount is 150 million roubles over a three-year period. So, we are giving these grants not
to institutions or teams but to specific scientists to develop their ideas. Starting in 2006, 24
leading higher educational institutions of the Central Federal District received support under the
national programme for education.

The next step we made was adopting a special development programme for Moscow State
University and developing a network of 12 national research universities in the Central Federal
District. These institutions of higher education will be given around 30 billion roubles to update
their research platforms and implement scientific projects.

In 2009 – 2010, the national research universities of the Central Federal District received 5
billion roubles from the federal budget. In 2010 – 2011, they will receive another 5 billion
roubles towards improvements.

We allocated another 19 billion roubles to help higher educational institutions and private
businesses implement jointly developed high-technology projects. Russian companies will be
able to benefit from R&D and introduce new products and technology on the market. As for the
universities, they will get the opportunity to update their research platforms and provide
ambitious and promising work for their employees. We must pay special attention to the

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following: it is particularly important to attract students and post-graduate students to this work,
giving our young people the opportunity to experience professional fulfillment and find their
place in the sphere of science and high technology.

The procedure is as follows, as you remember: money must go through industrial enterprises that
work with institutions of higher education by contributing money, concluding contracts, and
providing the institution with access to the sector in which they are engaged. We hope this tool
will prove effective.

In 2009, the United Russia faction of the State Duma ensured the speedy adoption of necessary
amendments to laws. Our science and educational centres were encouraged to found small and
medium-sized companies in order to make use of their intellectual discoveries.  Over 700 such
enterprises were established across the country, including 200 enterprises in the Central Federal
District.

I already mentioned the great potential for entrepreneurship in the Central Federal District. Last
year, over 20,000 small and medium-sized companies were founded and private entrepreneurs
started business there. Still, we have to guarantee faster improvement, help new enterprises
emerge on the market, and give people a clear and attractive picture of independent
entrepreneurship.

Despite the budget deficit and post-crisis challenges, we provided benefits to small businesses
engaged in the real economy, high technology, and the agricultural sector; residents of
technological development zones; small enterprises operating under scientific centres and
universities; and private entrepreneurs providing social services.

We understand clearly how important it is to develop entrepreneurship. This is why we

consistently work to bring down administrative barriers and get rid of various unnecessary and
imposed inspections. I would like to seize this opportunity to request our deputies to boost the
adoption of the new law On Licensing. This law envisages indefinite licenses and will almost
halve the list of activities requiring licenses.

Naturally, we need efficient regional programmes to support small businesses, including the
expansion of loan guarantee funds. The total capitalisation of all guarantee funds in the Central
Federal District is a little over 8 billion roubles. But it has already helped small businesses to
take out loans totalling more than 33 billion roubles. Can you sense the difference? Some 8
billion roubles from the guarantee funds and 33 billion roubles in loans. If regions increase their
funds – and this can be done – they will create better conditions for taking out loans. It is
especially important to help young entrepreneurs through financial grants, microloans and
creating a consulting and legal advice system.

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And there’s another important issue. We have given regional authorities the right to cut the rate
for simplified taxation from 15% to 5% – we did this during the crisis. But only few regions used
this measure to support small businesses. The Central Federal District, the Kostroma, Voronezh
and Vladimir regions have not made a decision on the tax rate. Other regions set it at between
7% and 10%. I’d like to request that our colleagues in regional governments consider their
budget capabilities once again and cut the tax rate as much as possible. Clearly, there is the
temptation to dramatically increase tax revenues during a period of economic recovery and
growth. But regional and municipal authorities pursue a flexible policy that shows foresight and
supports businesses today so that they will benefit much more tomorrow.

Naturally, we need to help those cultivating land to become owners of the land, as agreed. This
too was one of the key issues discussed at my meeting with farmers two days ago.

I would like to point out that we want all forms of farming to develop successfully, including
farm holdings, individual farms and major companies. For example, a meat production project
employing advanced technology is being carried out with the support of Vnesheconombank in
the Bryansk Region. Is the region’s governor here? How much investment does the project
require? $250 million?

Remark: About 200 billion roubles.

Vladimir Putin: Yes. So, between $230 and $250 million [about 7 billion roubles] will be spent
on this good project, a good company is carrying it out.

And the number of such breakthrough and high-tech ideas and business initiatives in Russian
agriculture is on the rise. Almost all regions of the Central Federal District have projects like this.
The Smolensk Region, for example, intends to set up a network of hothouses. Money is being
invested in poultry farms and raw material processing in the Belgorod, Orel and Moscow
regions. I remember visiting the Belgorod Region last year… You know, when we were investing
in the development of livestock breeding and were providing large subsidies, there were serious
concerns about how these funds would be used. It is a pity that everyone cannot take a helicopter
over the Belgorod Region. It cheers the heart to see all the new roofs shining in the sun and the
brand-new high-tech livestock breeding facilities. I was astonished to see all that. It is a very
good example to follow.

We naturally need to think about providing our farmers with new equipment. You have possibly
heard that a decision has been made to set aside an additional 4 billion roubles for the agro-
industrial leasing company Rosagroleasing to sell the new equipment it has to farming
companies at  half  the price. And by selling these machines, even at half the price, the leasing
company will be able to place new orders at Russian machine engineering plants. How many
pieces of equipment do you have – 5,000 or 6,000 units?

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Ladies and gentlemen, the Central Federal District is the most populated federal district in
Russia. It is rightfully considered the most favourable one to work and live in. Yet, it is also
evident that the region’s infrastructure, including the transport, social, and housing
infrastructures and public utilities, is being strained. It is often pushed to its limits and fails to
meet the growing demand of the economy and the people.

New major projects, such as the establishment of an international financial centre in Moscow, of
the logistics of the North-South and West-East routes, the formation of tourist clusters,
immediately come up against the wall of infrastructural limits. Our goal is to reverse these
negative trends and remedy the emerging imbalances to make people’s lives more comfortable,
provide them with high-quality social services, give them the opportunity to solve their housing
issues and have access to the most modern infrastructure.

A total of 61 billion roubles will be allocated in the next three years to rebuild all key federal
highways running across the federal district, including the M10 Russia, M4 Don, M6 Caspian,
M5 Urals, M8 Kholmogory, M9 Baltic and M7 Volga highways as well as the A108 Big Ring
and A107 Small Ring of the Moscow Region.

The United Russia party has initiated a project to renovate town roads and courtyards in
administrative centres of the Central Federal District. In total, over 22 billion roubles will be set
aside for this purpose, and 11.5 billion of that money in the Central Federal District. I would like
to point out that all necessary underlying regulations for this have been adopted. This is why I
am asking those in charge to sign the corresponding agreements with the Ministry of Regional
Development by the end of March so that work can begin in April.

We need to optimise traffic flows in the Central Federal District and consider setting up modern
logistics centres, e.g. in Smolensk, Bryansk and Belgorod. We need to use their favourable
locations and the advantages of border towns and cities above all to strengthen trade and
economic ties with Ukraine and Belarus, our closest neighbours and partners.

I would also like to mention that the modernisation programme will include Moscow’s
Sheremetyevo, Vnukovo and Domodedovo airports.

Dobrynskoye airport in Vladimir is to open in 2014 after renovation. Moreover, up-to-date

equipment will be installed at airports in Voronezh, Smolensk, Kursk, Belgorod, Tver, Bryansk,
Kostroma, Lipetsk, Tambov and Orel. This new equipment will help increase flight safety, cut the
time needed to process flights and improve the quality of services for passengers. All in all,
almost 50 billion roubles will be invested from the federal budget in the development of the
Central Federal District’s airports.

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I also believe that the regions of the Central Federal District do have the necessary resources to
catch up with leading countries in mobile and landline communications, internet, digital
television, and e-government. This goal must be set today. The federal government does
everything in its power to assist the regions and hopes to further strengthen its cooperation with
them in order to promote the adoption of new technology across the country.

We must increase the rate of housing construction in the Central Federal District and in Russia in
general, reversing the current negative trend in the industry. In 2011, housing construction is
expected to increase by two million square metres in this federal district and by five million
square metres across the country. So these regions will account for almost a half of the total
growth. On the whole, in 2011 we plan to build 63 million square metres of housing. We have
everything we need to meet this target. The demand is rising, and the state is continuing its large-
scale housing programmes.

By May 2010, we provided housing to all veterans of the Great Patriotic War in the Central
Federal District that had been put on the waiting list before March 1, 2005. A total of 5,222
veterans benefited from this programme. After that, an additional 34,000 veterans registered for
new housing. I’d like to underscore the fact that we received 34,000 applications after providing
housing to 5,222 veterans. I’m sure you understand the scale of this challenge. Last year, 25,000
people took advantage of this programme, and I expect that in the next few months, we will
fulfill this commitment to the letter. I’d like to reiterate that we will not set any excessive
requirements for such applications.

I would like to say a few words about one important and, to put it bluntly, very painful problem –
the so-called defrauded real estate investors. There are over 74,000 such people in Russia,
including 6,000 in Moscow alone and almost 18,000 across the Central Federal District. Their
rights and interests have been wantonly violated. Many lost their money and savings and found
themselves in debt, but didn’t receive new flats. Of course, it’s understood that one must be very
careful on the housing market and not enter into dodgy agreements. But clearly, the state also
bears responsibility for this problem. It failed to protect people from crooks and scammers,
overlooking flaws in legislation.

As a follow-up to a government resolution, federal authorities are taking an inventory of

abandoned and frozen construction sites and developing proposals on financing construction
projects in the final stage and attracting investors to the industry. This issue was raised at a recent
government meeting. I would like the regions to join us in our efforts. We understand where and
how the responsibility is to be met, so that by July 1, 2012, we will have resolved the problems
of the majority of defrauded investors, completely settling them by the end of next year. The
issue is complex and requires substantial funds, but the Ministry of Regional Development says
that we have the necessary resources, so we need to move forward with it.

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I have already said that higher education standards are rising. This is also the case in
kindergarten and secondary education. Over the past three years, more than 1,000 kindergartens
for 131,000 children were built and opened in the Central Federal District. Meanwhile, the
number of children on the kindergartens’ waiting list increased from 113,000 to 320,000. We are
failing to keep up with demographic trends, in particular growing birth rates. It is very good that
they are on the rise, but it’s bad that there are not enough kindergartens. Regions and
municipalities must pay special attention to this problem. We must support early education,
including corporate and private kindergartens and preschool education centres. Kindergartens
should reclaim the facilities that were transferred to firms, companies, and municipal authorities
and currently serve as office buildings. It is difficult to do so in case ownership rights were
transferred irretrievably to a scrupulous acquirer. But many such buildings house the offices of
municipal agencies. There are quite a few such buildings. And this property must be reclaimed.
The federal government will certainly support the regions that address this socially important
issue.

Through the national project 'Education,' we have provided new equipment to schools and
introduced advanced educational programmes and new forms of long-distance learning for
children with disabilities. All schools of the Central Federal District have been connected to the
internet. The share of students taking advantage of modern education benefits has increased to
70%. This work must certainly be continued.

In moving towards new education standards, however, we must avoid making rash decisions
behind closed doors or inside government agencies. And we will not allow this to occur because
we understand that this issue affects the interests of all Russian society. There is no room for
mistakes. We must work in close contact with the public and parents, and primarily with students
and teachers. This work must be absolutely transparent.

Next, as we agreed, governors and branches of federal parties must place particular emphasis and
control on regional programmes in healthcare modernisation. The regions of the Central Federal
District will receive 114 billion roubles through these programmes. I’d like to stress that one of
the main priorities of regional programmes should be better salaries in the industry. We have
reviewed most proposals submitted by the regions of the Central Federal District. I am asking
federal authorities to expedite the adoption of these programmes and the signing of agreements
with the regions. Their coordination must be finished as soon as possible so that we can embark
on their execution and provide the funds. I’d like to add that one of the main priorities for this
federal district must be healthcare in rural areas, where death rates are higher than in urban areas.

We will carry on with the national project 'Healthcare,' allocating 488 billion roubles towards it
between 2011 and 2013. The Central Federal District will receive about 110 billion roubles. This
is in addition to funds to be provided through the healthcare modernisation programme. In 2011,

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the Lipetsk, Belgorod, Tula, Yaroslavl, and Moscow regions will join the 'Blood Service'
programme, for which they will receive 900 million roubles this year. Last year, high-tech
services were provided to 100,000 people in this federal district, which is 15% more than in
2009. By 2013 this rate must be increased to 86%. Currently, it stands at 76%.

We must meet the demand for such services to the letter, and they should of course be provided
free of charge. I’m sure we all understand that behind these seemingly dry figures are the lives
and health of ordinary people. If we have met the demand by only 76%, then obviously there is
someone who still can’t afford an operation. Some such patients have to borrow money, but not
everyone has even this opportunity. This is why our project for healthcare modernisation is
critically important for the country – for the nation’s health.

In 2011, we also plan to open the Federal Centre of High Medical Technology in Smolensk (it
will specialise in orthopedics and traumatology), and we will build five perinatal centres. The
centres in Tver, Kursk and Ryazan have already become operational, and the centres in the
Voronezh and Yaroslavl regions will open their doors for patients in the coming months.

We have allocated substantial funds for these projects and created the necessary infrastructure.
Regions must provide all necessary support and assistance to these centres. First of all, it is
necessary to create strong professional teams and attract good specialists, providing them with
housing and organising their training in leading clinics, both here and abroad. As you know, this
programme is well underway. I have toured several clinics in remote regions, and I can tell you
that strong teams have been created even there. But this is possible only when regional
authorities address this issue with full responsibility and rationality. Doctors themselves are
usually so dedicated to their profession that they can go to any place where they have an
opportunity to work effectively and take advantage of modern technology. And we do provide
the most advanced equipment to our new centres. However, we need to create the necessary
conditions for a high-class specialist to come and work in a remote region. And first and
foremost, he or she needs a flat.

We must also continue to develop the infrastructure for public athletics in cooperation with
regions and municipalities. We should focus on the construction and modernisation of sports
facilities and create the necessary conditions for playing sports in schools, universities, and
public areas. Over the past four years, 242 sporting facilities were built or reconstructed in the
Central Federal District using federal allocations alone. United Russia helped equip 60 fitness
and recreation complexes. Local stadiums received 25 new turf fields through our project to
promote football. Thirteen more fields have been planned for 2011.

We must take advantage of our preparations for the Olympics and the FIFA World Cup in order
to promote the values of athletics and a healthy lifestyle. This can foster the construction of new

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training centres, stadiums, and, significantly, hotels, tourist centres, and other service
infrastructure. The facilities that will be used during these major competitions, including the
FIFA World Cup, should be made available to ordinary people after the events are over.

As a major international event, the World Cup gives us an excellent opportunity to promote our
country to tourists. And we must take full advantage of this chance and use it in the most
effective manner.

Currently, about 10 million tourists visit the central regions of European Russia each year. Taken
at face value, this number is quite high. But still, it does not really match the region’s capacity.
We have unique potential, but we fall behind in quality and promotion. If we tackle this issue in
earnest, we will certainly create a strong tourism industry and increase the number of tourists in
the coming years.

There are a great deal of places in this region that are familiar and dear to each of us and to every
Russian. Borodino, Prokhorovka Field, Suzdal, Vladimir, the Moscow and Smolensk Kremlins –
these sites are part of our common legacy, our roots, which make us a truly united nation.

I suggest that United Russia should propose and execute a special, socially important project to
support Russian museums and contribute to restoring sites of historical or cultural interest. War
memorials should receive special attention. While moving forward, we must always remember
that we are building our future on a strong foundation – the 1,000-year history of Russia, its
accomplishments, the courage and patience of our fathers. They succeeded in creating a mighty
state. Today its future depends on us.

I am confident, in considering our responsibility and our power, that we are capable and
obligated to succeed.  Thank you very much for your attention.

***

Vladimir Putin: Ladies and gentlemen, let’s see what the experts have to say about how work in
their respective fields is organised in regions across the Central Federal District.

Let’s hear first from Vladimr Kononov, director general of the investment and construction
company Konkor, specializing in high-tech medicine and plasma filtration. Please go ahead, Mr
Kononov.

Vladimir Kononov: Ladies and gentlemen, I’d like to tell you about a unique project in high-
tech medicine. It’s about the production of equipment for plasma filtration or, in a layman’s
terms, for the purification of blood.

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Our enterprise is fairly young by European standards, but not so young by Russia’s. The group
traces its history back to 1991. In 1998, with a financial crisis in full swing, we began to build
our research and production compound Alpha in Dubna, outside Moscow. But we went ahead
with our investment, and we’re happy we took the risk.

Vladimir Putin: How much have you put in?

Vladimir Kononov: 2.7 billion roubles so far. We’ve built one plant already, and are in the
process of building a second one. You can see the operational enterprise in the screenshots.

Vladimir Putin: Those responsible for the display have a fear of blood. Do we have such people
here? There’s nothing to be afraid of, is there?

You’re accustomed [to seeing blood], and have no fear, whereas we may find the sight of it
somewhat frightening …

Vladimir Kononov: In 1998, when we were launching this project, the word “blood” made me
shiver, but it’s not a problem for me any longer, as I perform plasmapheresis on myself once a
year.

Vladimir Putin: Why do you do that? Because it’s free for you or because there’s a need? Why
don’t we, too, take up the practice if it’s so good for you?

Vladimir Kononov: Well, it’s normal for an engineer to go under a bridge he or she has
designed when a train crosses it.  And if you’ve built a plant producing blood filtration devices,
you should be the first to test them. 

Vladimir Putin: People with infectious diseases can benefit from this device, right?

Vladimir Kononov:  Yes, but not only people with diseases. It can be used preventively, as well.
In fact, each and every one of us in Russia should undergo the procedure of plasmapheresis at
least once a year – people will become healthier; they’ll live longer; and they won’t lose money
by taking time off work.

Vladimir Putin: They’ll be paying you instead?

Vladimir Kononov: We share our revenues with the state. 

Vladimir Putin: Mr Kononov, what’s the price of the procedure?

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Vladimir Kononov: The cost of the expendables – around 1,000-1,200 roubles – plus a doctor’s
salary, which adds up to 1,500-2,500 roubles. At the moment, there are about 700 such devices in
use in Russia.

Vladimir Putin: Okay, but how much will an ordinary person have to pay for the full procedure?

Vladimir Kononov: We’re manufacturers, you see; we produce equipment and supply it to
healthcare institutions. I’m not responsible for these institutions, nor for the prices they set. But
as far as we know, clinics charge between 2,000 and 5,000 roubles. I admit that it’s not very
cheap.

Vladimir Putin: Is this the price of the full procedure?

Vladimir Kononov: Yes.

Vladimir Putin: But one will be able to save money on medication later on, right?

Vladimir Kononov: Of course. And the person’s life expectancy will be higher. As I said, our
enterprise is pretty young by European standards whereas by Russian standards, it’s already seen
as a seasoned enterprise.

We began to build our Alpha compound in 1998, with a financial crisis in full swing. In those
days, Dubna wasn’t a research centre yet, and there was no special economic zone there. Yet it
offered qualified personnel and favourable conditions for doing business. From day one, we felt
the support of the region and the town. The world’s first industrial accelerator was designed and
built for us here, in Dubna. You can see it in this screenshot – something of a miniature collider.
All over the world, cyclotrons are used for scientific research, whereas our accelerator operates
for the benefit of the public.  It now operates as an industrial facility, a factory of some sort.

What is Alpha like today? It’s a modern plant turning out products up to European quality
standards. Our enterprise, employing 250 people, produces high-precision medical devices for
blood filtration. The production is based on nanotechnology, which has been talked about so
much these days. The particular technology that we use saves human lives on a daily basis.

In our case, it is nanotechnology. It works every day to save human lives. We have not rested on
our laurels after building the Alpha centre and developing the business. On the contrary, we will
soon establish another research and production centre, the Beta, to employ 450 people, with a
manufacturing capacity of 1.6 million modified plasma filtration devices and 1,500
HemoPhoenix units. So we have two plants now – one operating and the other under
construction, and we intend to invest 2.7 billion roubles in both. So much on the matter you
inquired about.

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You see the Beta construction site in this photo. We drove the first pile into the ground five
months ago, and the work is progressing at a good pace. The project has government support,
and the Rosnano state corporation, our strategic partner, has purchased 48% of our shares to fund
the project.

Our products are highly in demand in Russia and other countries, and compete with foreign
brands such as Baxter and Haemonetics. As you see in the graph, we charge a mere 20% of their
prices and use cheaper materials, so treatment costs less. One session of plasma filtration, which
entirely purifies the blood, costs a staggering 60,000 roubles with foreign equipment, compared
to the 6,000 roubles we charge, which makes the treatment accessible to a greater number of
patients.  This technology promises to save at least 12 to 15 billion roubles for the federal budget
within three years.

This slide shows the new unit, exhibited at the Russian pavilion of the Shanghai Expo in
September 2010.

Our technology is indispensable in all kinds of emergencies, even the gravest, whether it’s an
industrial or natural disaster – or any other situation endangering human lives.

It is significant that our devices can be used not only in hospitals but also in field conditions
away from power sources, and even at the epicentre of a disaster. More than that, there are no
foreign analogues that can  be used on babies. This slide shows Dr Valery Voinov of St
Petersburg filtering an eight-month-old girl’s blood.

We think this project, launched in the late 1990s, is of tremendous social significance. There are
about four million cardiovascular patients in Russia now, and more than a million of them die
every year. In other words, this country is annually losing 1% of its population, which is
shrinking as it is. These are startling, unsettling statistics.

Our devices and plasma filters cannot save millions of lives, but they can rescue tens and even
hundreds of thousands, as practice has proved.

There is another unique project we intend to launch quite soon – the manufacture of dialysis
units and kidney machines. We will build another research and production centre for it. We have
a remarkable partner for the endeavour – Fresenius Medical Care, one of the world’s leading
companies. The name of our joint venture is Frerus, abbreviated from “Fresenius for Russia.” It
extends our team’s noble social mission, with many people suffering from kidney disease in
Russia.

I would like to say in conclusion that it might appear from what I said that everything is just fine
and that we have no problems at all. That would be the wrong impression. There are always

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problems involved in high-tech industries. You know this better than I do. Now, what assistance
do we need from the state and the government?

Mr Putin, we are certainly doing business (you noticed this, or you wouldn’t have said that we
will be making more money now). So, naturally, we want to step up production and make greater
profits. Though we are active exporters, we are also domestic manufacturers. The benefits that
our work brings Russians matter most to me, so I cherish the hope that ordinary Russian clinics
and hospitals will possess our equipment. Thank you for your attention. I look forward to your
support in this.

Vladimir Putin: Mr Kononov, I would like to clear up just one point. I have seen your slides. Is
your equipment for people with blood diseases?

Vladimir Kononov: Yes, blood and its circulation.

Vladimir Putin: What are these diseases?

Vladimir Kononov: There are about 70 nosological forms – for example, atherosclerosis.

Vladimir Putin: But good old leeches are cheaper.

Vladimir Kononov: Using leeches for medicinal purposes is sheer shamanism…

Vladimir Putin: Now you are talking nonsense! A leech is a leech, and a shaman is a shaman…
Using leeches costs much less.

Vladimir Kononov: No! No! That’s a completely archaic method.

Vladimir Putin: They say leeches excrete some substance into the blood, and so thin it.

Vladimir Kononov: I know that they suck blood. But then, possibly they also

excrete something as they suck…

Vladimir Putin: Yes, they first excrete, and suck only after that. That’s how they thin the blood.
Mind you, leeches cost much less than…

Vladimir Kononov: Possibly. But when mushrooms are cultivated they need huge cellars to
grow in. So now we’ll need also huge marshes to breed leeches…

Vladimir Putin: Why, I was just kidding! But, Mr Kononov, speaking seriously now – though I
really mean it about leeches… We are talking a lot about the modernisation of healthcare. As I

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said in my address, 460 billion roubles are earmarked for it nationwide, and the Central Federal
District is entitled to a great share of this money.

Almost all the regional governors are here. They have submitted their programmes for
modernising healthcare to the Ministry of Healthcare and Social Development. We will call on
them now to take notice of your research and specify the need of healthcare institutions in the
Central Federal District and the whole country for what you are offering. Of course I will explain
it to Health Minister Tatyana Golikova.

I think Rosnano has good reason to acquire a 48% share and credit the project. I am sure the
project has been seriously appraised. You are doing a big job if Rosnano is involved. Your
equipment must be in demand. I will surely say so to Ms Golikova, and I would like the regional
governors also to pay close attention and consult with your experts in the Central Federal
District. Moscow, the region around it and all of Central Russia employ the best professionals –
or at least some of the best. Let us put it like that before anyone is offended. At any rate, there are
people to get competent advice from. We should look into the matter.

Vladimir Kononov: Good, thank you.

Vladimir Putin: It is I who should thank you, Mr Kononov. I must say that we need more such
research and development. It is our duty at least to guarantee you opportunities in the domestic
market. We will work on this.

Vladimir Kononov: We really like Philips, Siemens and other foreign machinery – but enough
is enough! We should buy Russian! Can’t we make good things, after all?

Vladimir Putin: I think you are right. We must team up with foreign companies, we must attract
them and offer them favourable terms if we want them to cooperate – provide us with
technology, above all. But then, we have our own R&D. Believe me, I saw our new medical and
pharmaceutical equipment with my own eyes. You know, I travel a lot, and see a lot of people.
So I can recognize when something is unique. To ensure that there is a place on the Russian
market for your products is the least we can do. We’ll work on it.

Vladimir Kononov: Thank you for your support.

Igor Zorya: My name is Igor Zorya, I am a paediatrician and head physician of the Kursk
regional children’s hospital.

Mr Putin, the Kursk Region received considerable grants for healthcare modernisation. Most of
those funds were spent to upgrade equipment and renovate regional and specialised medical
institutions. But the money should not have gone exclusively to central hospitals but also to

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ordinary clinics, which cater for a majority of patients. It is especially important for patients who
come back to the primary healthcare network after treatment in federal and special hospitals. Not
all of them can offer the treatments required. We should never forget ordinary outpatient clinics
and district hospitals, which you have just spoken about.

We know that you monitor many issues that concern millions of Russians. Could you please tell
us what should be done for funding to reach primary healthcare services, where the majority of
patients receive treatment. Thank you.

Vladimir Putin: Mr Zorya, this programme is intended for the modernisation of primary
healthcare institutions. That is why we have ceded decision-making on it to regional authorities,
the governors and their advisors (they should also consult such experts as you) to draft a regional
system and modernisation programme and submit it to the Ministry of Healthcare for approval.
The Bryansk Region has received for two years… Exactly how much?

Remark: 3.27 billion [roubles].

Vladimir Putin: Yes, 3.27 billion for two years. It’s a large amount for the Bryansk Region,
believe me. It should be spent carefully, which means that expenses should be prioritised
correctly. When I met with colleagues working in agriculture, insistent requests were made to
pay attention to healthcare in rural areas, particularly village health centres, clinics, etc. I asked
the governors and the Ministry of Healthcare to bear this in mind. I can say it outright that I
received a positive response. Rural healthcare grants have increased substantially.

However, decision-making in this field should be the responsibility of experts such as yourself
and regional authorities. We are willing to support you when necessary. It is evident that this very
level of healthcare is the best field for improvement. That’s why our grants are so generous –
they aim to provide a smooth shift to medical insurance because there is no room for insurers in
an utterly neglected, decaying industry. That is my first point.

Second, the regional healthcare system needs a new basis. That’s our goal.

Yekaterina Melyukova: Good afternoon, Mr Putin. My name is Yekaterina Melyukova. I am the

head nurse at a first aid hospital in Vladimir. Our nurses’ salary is 4,300 roubles a month, with
the subsistence level at 5,700 roubles. How can we make ends meet with such low salaries?
Doctors work is very demanding but make no mistake, nurses work just as hard. They attend to
patients daily needs, which requires more than medical care but also compassion and kindness.
The psychological stress is tremendous. How can they do their jobs well with their miserable
earnings? And now we can see that nurses are voting with their feet. They are leaving their jobs
en masse. Our profession is in a crisis. The situation is this bad not only in healthcare but also in
education and culture. What can be done about our salaries now? Thank you.

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Vladimir Putin: Ms Melyukova, I can repeat what I said in my address. Just now, as I was
discussing healthcare development with my colleagues, I said that we were planning to
modernise healthcare. That is the first step in our drive to raise the salaries of healthcare
personnel. The system will get new standards. I think medical professionals understand what I
mean.

For the people not working in healthcare, I would like to explain that changing standards implies,
for example, an increase in allocations for drugs. Prescriptions are made for every health
problem. For instance, the flu is treated with such and such drugs. Their price certainly hikes up
when they become a standard set for obligatory use. Some other diseases might require blood
purification. It, too, will have a set price. The standards will also include healthcare workers’
remuneration. That’s the first way to increase their incomes, which the modernisation programme
explicitly stipulates.

Second, as I said in my address, we will adjust the salaries of all public sector employees, with a
6.5% rise on June 1, and another rise in early autumn. That’s a promise.

And, finally, there is a third approach connected with changes in the operating principles of
budget organisations. In this case, the heads of organisations would have the opportunity to
optimise work and increase salaries.

But the focus remains on social healthcare modernisation programmes. Shall we continue?

Alexander Nikitin, Tambov Region, on the project “The Modern Agricultural University: from
Science to Production.” Please, go ahead.

Alexander Nikitin: Mr Putin, conference members, I would like to tell you about cooperation
between university science and agricultural production in the science city of Michurinsk,
Tambov Region.

The goal of this project – and the goal of these relations in general – is to make healthy products
and introduce them on the domestic market. I have in mind berries, vegetables, fruits, and the
products we make from them, as well as healthy dietary products and baby food. The situation on
these product markets is, to put it mildly, rather bad. For example, I can tell you that the apples
we eat are Polish, Chinese, American… And you know quite well that they grow in gardens with
such a high concentration of pesticides that even flies stay away.

Conversely, inhabitants of Russia’s only agricultural science city, Michurinsk and inhabitants of
the Tambov Region have eaten Michurinsk apples and peas (and this is really one of Russia’s
recognised agricultural brands). The situation on the vegetable market is also grave: over 60% of
products are imported.

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The question that comes to mind is: don’t we have our own vegetables? I can prove that we do,
taking the example of Michurinsk. Michurinsk scientists have recently developed a new variety
of pumpkin. This new variety has more natural sugar in it than melon. It is sweeter than melon.
The positive dietary influence of this traditional Russian vegetable is obvious.

Vladimir Putin: Is it sucrose or fructose?

Alexander Nikitin: It is natural sugar, fructose.

I would like to draw your attention to another novelty: a new variety of cherry tomato has
attracted the attention of the Institute of Nutrition at the Russian Academy of Medical Sciences
and the Institute of Biomedical Problems at the Russian Academy of Sciences… These varieties
have the highest amount of carotene and lycopene among any Russian or foreign varieties. This
means that they decrease the risk of cancer, as you might have guessed. These results of artificial
selection were used as the basis of the diet for our cosmonauts under the Mars-500 project.
Seventeen new meal products were made on the basis of these varieties.

Vladimir Putin: At the ISS?

Alexander Nikitin: Yes.

Vladimir Putin: That means that foreigners also ate it. They ate our apples.

Alexander Nikitin: Yes.

Vladimir Putin: With fructose.

Alexander Nikitin: As for the new varieties of the black, white, and red current, they contain
three times more vitamin C than a lemon.

Vladimir Putin: Yours is a rather mouth-watering speech. You should have brought some here.

Alexander Nikitin: Colleagues, I want to say that we developed this fresh vitamin production
line. For example, the wild strawberry… now I'm arousing your senses.

Vladimir Putin: I see that.

Alexander Nikitin: We have created a fresh vitamin production line. People living in the Central
Federal District (the Tambov Region, the Lipetsk Region, etc.) will be able to eat our raspberries
and wild strawberries until late September. We could not even dream of such things before
because of our climate and natural environment.

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 Of course, this all is the result of cooperation between science and production. A new research
institution is now being established under Michurinsk State Agricultural University to work
together with the institutions of the Russian Academy of Agricultural Sciences. It is here, in
Michurinsk, that new technology for intensive orchard production is being developed. This is our
best resource, I think.

Our Michurinsk orchards have been bringing produce to market for two years already. Their
yield is five times higher than the yield of ordinary orchards, but the recoupment is only half as
much. It is thus pleasing that the creation of such orchards has become one of this year’s
agricultural priorities in the federal budget.

I wish to say that this is the achievement of the innovation infrastructure established at the
agricultural university. We have set up 20 small enterprises in recent years. All of them are
research-oriented.

We have set up a technological transfer centre. However, the volume of production is

unfortunately very small. In order to sell these healthy products across the country, we need to
cooperate with the industry.

The Tambov Region today has a project to set up an agricultural research and production facility
which will become the basis for three new plants. One will be producing processed foods, such
as vitamin-rich juices, jams, fruit mousses and vegetables in fruit sauce.

There is another project for an interested party to produce frozen foods. It goes without saying
that foods that reach the consumer must be fresh, so storage issues are of key importance here.

It is also planned to build a plant to manufacture packaging materials based on polylactide, a

biodegradable polymer. It takes this chemical 40 days to decompose to a non-toxic condition in
the soil.

Today, in order to launch these plants, it is necessary to have extensive primary resources, and
such resources are already being produced in the Tambov Region.

Since 2009, we have been establishing berry and bush plantations using the most advanced
technology. And, of course, the personnel issue is also a top priority. I must say our training
facilities have been preserved intact. With other regions interested in similar projects, we could
train staff for them on a contract basis, too.

What is central to making these projects more effective, better and productive? In the first place,
it is innovative higher education agriculture programmes. But today, although we produce
limited amounts of pilot products, we do not get any tax exemptions. Our status is not that of an

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agricultural producer, and so we cannot take advantage of state support in its many forms. If we
could, that would be great help indeed.

And my last point. These projects are not only economically efficient, but also socially
beneficial. If they are included in a state programme of farm development (not only hothouse
methods, but also the full range of products – fruit, berries and vegetables), and are granted loans
at subsidised interest rates, their effect and their economic performance will be much better.

In conclusion, I would like to say that these projects should get special state support and
attention because they are concerned with the health of the nation – the main ingredient of
national security. Thank you.

Vladimir Putin: Mr Nikitin, all the things you mentioned are very important. But you must be
aware that the state has been investing heavily in farming in the recent period. This year alone,
we plan to allocate 250 billion roubles for this sector. Last year it was 150 billion. Each year, we
subsidise interest rates and extend previous loans. And this extension requires additional money
from the federal budget, because when you fail to pay off your loans on time, we must do it for
you. We also subsidise leasing rates. Now we have decided to allocate an additional billion
roubles for seeds and another billion for seed purchases. We have cut fuel and lubricant prices by
10% and not from today’s levels, but from the November 1, 2010 benchmark – that means, 30%
to 37% down from the current levels in some regions. We propose to allocate a further five
billion in support of farms that will not cut down their livestock numbers by this spring. Another
decision concerns equipment sales from Rosagroleasing, at a 50% discount. There is a plethora
of other measures and we can see that farming is indeed yielding real and tangible results. It is
growing perhaps faster than any other branch in our economy.

In this context it is very important to know what research centres are doing. We were once very
competent in this field and had good academic traditions. We may be lagging behind in some
areas now, but we are absolutely competitive in certain ways. So what you said deserves every
support. You said your educational establishment is growing into a practically new institution of
learning – a federal research university. Is that right?

Alexander Nikitin: Yes, that is our objective. We are actively collaborating with the research
system and incorporating secondary vocational colleges, with the focus on the research
component. We strongly hope that if we obtain the status of a research university …

Vladimir Putin: But you haven’t got it yet, have you?

Alexander Nikitin: No, it has not been granted, but we have taken part in every contest and each
time made a convincing case for our educational establishment.

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Vladimir Putin: Alright then, we will look at your application once more. Do you fall under the
Ministry of Agriculture or in general education?

Alexander Nikitin: The Ministry of Agriculture.

Vladimir Putin: Good, we’ll see to it.

Alexander Nikitin: Mr Putin, we also won a contest among Russian colleges and universities
last year for a government grant to develop innovation infrastructure. It helped a great deal with
the problems I just described.

Vladimir Putin: We will revisit the issue, agreed? Will you be making a new bid or will it be the
old one?

Alexander Nikitin: No, we will be making a new bid.

Vladimir Putin: Good. We’ll see.

Alexander Nikitin: Thank you.

Vladimir Putin: This was one aspect. But apart from farm products you also spoke about a
modern packaging material that is self-decomposing, which is of key importance for the
environment. Our European colleagues value that very highly. The Italians are leading the field
in that area, I think. You are probably better informed,  and can correct me if I am wrong. Our
friend, Silvio Berlusconi, is not just interested in chasing girls, he also does business. The most
stringent standards among European countries are in Italy – the country has lots of packaging
material. And so will we. And unless we start the production in good time, we’ll be facing a real
problem. It is already a major problem, and we can expect it to deteriorate. The course you are
working in the right area.

Now concerning an issue that, I believe, is key for you. It concerns giving innovation-based
educational institutions like yours the status of a farm producer to qualify for the benefits I just
mentioned. I am referring to subsidised rates and lower costs for fertilisers, fuel and lubricants. Is
that what you had in mind?

Alexander Nikitin: Yes, grants to compensate for costs, and such matters.

Vladimir Putin: You see, Mr Nikitin, the point is that you are a higher educational institution
and seek a research status for it. If you get one, it will give you certain privileges as an
innovation-oriented institution of learning. Such privileges will become available to you.

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But the principal objective of educational institutions is to provide teaching services and do
research, not to make profits by growing potatoes, apples and other products. Where do I see the
danger? It lies in that you may switch over to direct production and give up research altogether.

But do you know what I thought? You said you were planning to build three plants. They would
be production facilities  and legal entities in their own right. It seems to me we could find some
way of extending the benefits to them as well, just as we do with research and high-tech
enterprises set up by universities. As I said, there are 700 of them across the country, with 200 in
the Central Federal District. That’s quite an army.

Economic Development Minister Nabiullina is sitting there, nodding. This means she agrees. Ms
Nabiullina, have a think about that and submit your proposals. Clearly, colleges and universities
cannot qualify for such benefits. It is logical: their job is to teach. But if they set up affiliate
production units, why can’t these enjoy such benefits? This is a proposal worth considering.
Could you calculate the costs and draft a proposal?

Elvira Nabiullina: I will.

Stanislav Obolentsev: Stanislav Obolentsev, general director of Agrotekhnologii, Smolensk. Mr

Putin, you said in your speech that food security is one of the government’s priorities. But you
only need to go into a food store to see that although there is a considerable amount of Russian-
made meat and fish products, the share of imported fruits and vegetables, especially in winter,
has grown from 60% (average level for the whole year) last year to as high as 80%.

Vladimir Putin: Yes, this is true.

Stanislav Obolentsev: Moreover, these products are mostly imported from the countries to
which we sell energy, which they use for their greenhouses. My company builds and services
greenhouses. Take Poland, to which we supply energy: it exports vegetables and other foods to
us.

On the whole, this is a branch of agriculture that is not developing in Russia. The number of
greenhouses has been decreasing since the 1990s, although there are objective conditions in
Russia, such as energy resources, to make it one of the world’s leaders in this area.

There are several problems hindering this. You have outlined a solution for one of them during a
meeting in Tambov; it implies fines for [excessive gas consumption]. Gas consumption in
greenhouses depends on the weather, which we cannot predict.

Another problem, which is very important for us and which explains why the greenhouse sector
is not developing in Russia, concerns connection to electricity grids.

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You mentioned that the cost of infrastructure development should not shouldered by consumers
and the people. But the greenhouse business is very energy consuming: it takes nearly 2 MW of
electricity to heat one hectare of a modern vegetable hothouse. More precisely, we need 1.8 MW
to ensure 15,000 to 18,000 lux per square meter.

This is why greenhouse companies cannot keep within the boundaries of electricity supply
assigned to them, and the contracts we sign with energy suppliers are very expensive, sometimes
they can be up to 60% to 70% of business worth. . These problems are resolved in other
countries through long-term loans and other measures. How can this financial pressure on
greenhouse companies be reduced?

Vladimir Putin: First, I think, as I’m sure you will agree, that building hothouses in Krasnodar
[in south Russia] is much easier than in Krasnoyarsk [in east Siberia]. You must agree that there
is a difference, and energy costs are different too. Of course, Russia is a northern country and
hence the greenhouse business is more expensive here, especially in its northernmost regions.
But this does not mean that it should not be developed. Where the problem is addressed
reasonably, the business grows and is quite effective. Here is an example from the Northwestern
Federal District. The Leningrad Region imported nearly 100% of flowers from abroad only
recently, but now it grows almost everything it needs in the local hothouses.

As for connection to grids, I fully agree with you that, although we should also take the grid
companies’ requirements into account, the problems of connecting users to the grids and of
insufficient or excessive consumption of electricity and gas have not been addressed properly,
which hinders business development. I have said at a recent meeting with farmers, and you have
mentioned this too, that a decision has been made. Two days ago I signed a government
resolution to change the procedure for payment for excessive or insufficient use of electricity.

The procedure has been changed. Small and medium-sized companies used to pay for the
electricity they consumed at a higher rate than was approved for large companies, which
consume about 4.5 kW a year. We have now decided to approve an average consumption figure,
so that small and medium-sized companies, which consume 1.5 kW to 2 kW, will not be fined for
excessive consumption or insufficient use of electricity.

Gazprom has made a different decision: it cancelled the penalty for 10% of excessive
consumption and for 20% of insufficient consumption. But I think the corridor should be
broadened; we will discuss this issue with Gazprom. Or we may convince it to cancel the fine for
small and medium-sized companies. But first we should approve a criterion, which will also take
into account the interests of the power industry. Do you agree that we need to comply with
business discipline? Otherwise the power industry will have problems. Power generation is a
complicated industry that needs help and attention, but extremities must be precluded.

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We will certainly do it, and we will also consider other options, including non-tariff measures of
regulating the food market and supporting domestic producers. We will certainly continue to
subsidise our producers. European countries have much larger subsidies for their producers. We
will gradually increase subsidies and will also use measures of non-tariff regulation. Our rivals
[in Europe] also use them, and very effectively.

There are problems with retail chains. You know that we have held lengthy and fruitful debates
before approving a law on trade and a decision to facilitate the access of our products to retail
chains. We have made a decision stipulating payment for the supply of perishables within ten
days. We have cancelled bonuses for stores’ supply managers. But if you see some other
problems…

I hope I have answered at least part of your question. If you have more questions, please feel free
to ask them. As I see it, all of us here are United Russia members. You can ask your questions
through the party or through the governor. We will discuss all of them. Thank you.

Svetlana Orlova: Svetlana Orlova, member of the Federation Council. Mr Putin, projects are
part of our development strategy. As the leading political force in the country, Untied Russia has
assumed part of responsibility for the people, for the country, for our children and grandchildren.
We are not afraid of discussing acute problems even when they are very unpleasant.

Strategy 2020 is a vital document. We have held 28 conferences in the regions to discuss it.
People want to know what their lives will be like today and in eight years, how our industries
and cities will develop, if the environmental will be comfortable, and if we will have
domestically made products enriched with vitamin C.

You know, I think we have something to say to the liberals. We have overcome, or almost
overcome the crisis, thanks to systemic measures, as you have said. Financial and legal
provisions were approved to support these measures. The distribution of budget funds is a major
problem, and the energy reform is also a challenge. But I wonder why only experts from the
liberal wing have been selected for the commission we have established today? Let’s invite all
Russians to contribute to discussions through United Russia. We have many experts who could
participate. Is there competition or not? I think so. Let’s compete [as equals], and then start
implementing the post-crisis development strategy through 2020 jointly with the liberals. Thank
you.

Vladimir Putin: You know, it will be rather difficult to involve everyone in the commission’s
work. There was a good example in our history, although from a different area, northwest Russia.
I am referring to the “Novgorod veche”, a popular assembly in the Middle Ages, when people
gathered in central square to discuss a problem. Solutions were found in a simple way: approval
went to those who shouted louder.

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But this method is unlikely to be effective now, although the expert group you mentioned
comprises people holding different views. But if you think that several other experts should be
added to the group, you can submit your proposals and the specified persons will be
automatically included in the group. Have we agreed? Yes, let’s add a few more experts.

In general, opinions always differ, and this is as it should be. Our economic policy was largely
based on the liberal views, although we have always adjusted them to reality, and I think we
were right to do so.

Colleagues, you know that when production slumps during a crisis it is deemed right to freeze
the growth of wages and social payments, or even to cut them in order to reduce budget
spending. This is logical, because when production slumps, tax collection falls and budget
revenues decrease dramatically. If we continue to honour all the obligations we assumed in the
previous years, the budget deficit soars and we have to borrow funds. Where can we get the
money we need? The economy doesn’t generate money, so there are no revenues while
expenditures remain large. Where can we get the money? You have to borrow in the domestic or
foreign markets, increasing the sovereign debt.

If we start borrowing money on the domestic market, let’s say, if we get the money from the
banks or from other lenders, the banks will be happy to oblige, the banks are always there to lend
money to the government against various government securities, because it’s a safe loan. But
when we remove liquidity from the domestic market, by the same token we remove liquidity
from the real sector of the economy that also needs money to stay afloat during the crisis. But
there’s no money left, the government took it all. That means we either have to turn on the
printing press or borrow on the domestic market, where the interest rates go up during economic
turmoil. The expenses are huge.­­

Therefore, all leading economists believe that social expenses should be cut during the crisis;
there must be no pension or benefits indexations or pay rises. On the contrary, although it’s
understandably hard to do, the authorities must assume the responsibility and say upfront that
this is exactly what needs to be done.

This is the right thing to do if we follow the economic logic. However, we failed dismally in this
respect and increased the pensions by 46%.  When I mentioned the figure 46% to my European
colleagues whom I had known for many years, they nearly fell off their chairs. They just couldn’t
believe it. I explain that people in Russia have smaller savings than in the West European
countries. If we take a look at the accounts held by retired people in a Western bank, we’ll see
that each one of them has at least 300, 400, or 500 euros. That’s not a lot, not for a person who
had worked all his or her life, but everyone has some money for the rainy day, while the Russians
don’t. Russia’s social sphere is different. Russians live from paycheck to paycheck, from pension

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to pension, they have just enough money to last till the next payday, and they don’t have any
savings. This is the first point.

Secondly, we were building up our reserve funds with a specific purpose in mind. What was it?
We have established a National Wealth Fund and, when the foreign trade situation was favorable
and prices for Russia’s traditional export items were high, we deposited money into it to bolster
Russia’s pension system.

We have established the Government Reserve Fund for a reason. The reason is that when prices
eventually fall, we’d be in a position to keep the expenses at their current level and keep our
promises to Russian people. That’s exactly what we did. That is why we had an opportunity to
support the economy, finances, banks, real sector, and enterprises without having to cut our
official obligations. However, we were able to do so only due to smart economic and financial
policies of previous years. If it were not for these reserves, we would be going through rough
times now. We would probably have to do what they did in Greece and cut all expenses or
increase the retirement age. Would there be any other viable option? Getting into debt? I’ve
already said how that usually ends. Certainly, no matter what they say, foreign debt is a straight
path to the country’s eventual loss of its sovereignty. Russia is unlike any other country. We
should always keep this in mind and never come close to this edge. Ever.

The liberals you’ve mentioned aren’t all alike. There are some who are not really liberals, just
talkers; others are serious people with sound economic reasoning.  What is the difference
between people in power and observers? We have responsibilities to the people, and they don’t.
They build theories, occasionally say the right things, but their theories are hard to implement,
sometimes even impossible. I’m also talking about the Russian mentality. Let’s admit it, most
Russians expect the government to come out and support them. This is what reality in Russia is
like. We can’t pretend that we live in a different country or just came from Mars.

Even if we realise that we should have done things a little bit differently, at times we still act
contrary to the economic logic. However, I believe that it is extremely important that we
managed to retain people’s trust in what we do. This is important; this is our basis for moving
forward. When foreign trade and other factors are right, we make appropriate liberal decisions.
However, there’s no way to accomplish anything without public support. That is why I address
you again, all of you. This is the most important aspect in any political work. What matters is not
to score big or be the first to cross the finish line, like in sports, what matters is that we keep
people’s trust, and this is quite a delicate issue. Crude errors of judgment have no place in the
economic policy, but we should still always strive to meet the expectations of the Russian
people. We should keep moving ahead with our social sphere, sometimes making just tiny steps,
one at a time, but we must do it and we will do it.

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Let’s continue. Anna Grushevich, Russia’s Golden Ring Project.

Anna Grushevich: Mr Putin, colleagues, I represent the Yaroslavl Region, the international
Golden Ring Resort. Russia’s Golden Ring is a popular tourist destination combining several
cities and towns in northeastern Russia. As a matter of fact, it’s the first product of the Soviet
tourist industry, which has retained its popularity and unique nature and still enjoys demand
having a niche of its own among other Russian attractions. Over six million tourists travel this
route every year. The cities included in the Golden Ring tell the story of all evolutionary stages
of the Russian state, Russian culture, and Ancient Rus architecture from the white stone temples
of the 12th century to outstanding architectural masterpieces of the 17th – 19th centuries. This is
the place with the highest concentration of Russia’s historical landmarks: 22 monuments per
1,000 km2 as compared with only 4 per 1,000 km2 for the rest of Russia.

The Yaroslavl Region with its four Golden Ring towns is the Golden Ring’s main attraction and
its historical center. One of these towns is Pereyaslavl-Zalessky, one of Russia’s oldest ones, a
popular tourist destination you are all familiar with, which was founded by Yury Dolgoruky in
1152. It is the home town of St Alexander Nevsky and the birthplace of the Russian Navy. The
city’s 134 cultural heritage monuments, unique tourist trails and the available hospitality
infrastructure attract 300,000 tourists on an annual basis.­­

Just like other Golden Ring towns, Pereyaslavl-Zalessky has changed a great deal. All of these
towns did their best to keep up with the tourists’ changing interests and needs. As you are
probably aware, small private museums have sprung up in these towns in addition to existing
architectural landmarks. These include the Museum of Myths and Superstitions in Uglich, the
Museum of Mouse and Russian Felt Boots in Myshkino, the Music and Time Museum in
Yaroslavl, as well as the Museum of Irons, the House of Legendary Tsar Berendei (a character
from the Snow Maiden fairytale) and the Museum of Teapots in Pereyaslavl-Zalessky.  One may
wonder what’s so special about a collection of old irons or teapots. The answer probably lies in
the new interactive museum format where each visitor gets the chance to touch the cultural
artifacts that are part of Russia’s historical legacy.

Indeed, we can see that the popularity of the Golden Ring with tourists keeps growing. But 
tourist traffic is held back by aging  tourist and recreation infrastructure that dates back to the
Soviet era.

The deteriorating road infrastructure, a shortage of much–needed budget hotels, parking lots and
recreation  and entertainment facilities, and a poor price to quality ratio – all these problems are
typical of towns in the Golden Ring.

A lot is being done now to improve the situation. Work is underway to build new hotels (large
and small), catering facilities and museums; many of the cultural heritage sites are being

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restored, including, significantly, with money from private investors. But this is just the
beginning.

One way to improve the Golden Ring’s tourist infrastructure is by creating multifunctional
tourist complexes that would offer a whole range of services while also addressing the problem
of seasonality in Russian tourism.

Our project of a world-class resort 10 kilometers from Pereslavl Zalessky is aimed at creating an
atmosphere of truly Russian hospitality, and we hope it will change the spectrum and the quality
of services for local and foreign tourists. The resort will be built on an area of 200 hectares. Its
hotel facilities will have a total capacity of 1,800 rooms to accommodate 3,900 guests. Total
investments at the current stage amount to 12 billion roubles.

The construction of such a resort is of great socio-economic importance not just for the Yaroslavl
Region, but for the entire Golden Ring area as well. Small and medium-sized businesses are
becoming more proactive in tourism and the associated sectors, including in culture, sports, and
in arts and crafts. According to preliminary estimates, 5,000 new jobs will be created in local
tourism-related industries. This will raise the quality of life in the area and reduce migration
among young people, who will have more career opportunities at home.

Also, people living in Moscow will have a place nearby to get away to for high-quality, yet
affordable holidaymaking. Here they could recharge their batteries, benefiting both from the
area’s clean natural environment and its rich cultural landscape. Such a resort will boost the
development of cultural tourism in the Golden Ring area. It could become a popular destination
for family and business trips and a venue of various national and international events, including
ones to be staged as part of the 2018 FIFA World Cup.

State support for this project and its inclusion into the federal targeted programme on tourism for
2011-2016 will ensure that this project is successfully carried out, encouraging the development
of the surrounding areas and further promoting  the Golden Ring as a tourist destination.

The federal programme has been outlined and all agencies concerned have approved it in
principle. But it still needs to be coordinated with the Economic Development Ministry. All of
the areas comprising the Golden Ring are eagerly awaiting this programme. And it has been
drafted with careful consideration of the interests of each. Hopefully, it will be adopted before
long.

I personally live in the Golden Ring area. I was born here, and I live here now with my family
and friends. My work’s in the Golden Ring, and I have no plans to leave. I love the area and feel
proud of its heritage. In my view, investing in the promotion of the Golden Ring as a Russian
cultural brand is tantamount to investing in the nation’s future.

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Vladimir Putin: Of course, the Golden Ring is a world-famous Russian brand, which rings a
bell for many. It’s highly popular with Russian and foreign tourists alike.

But why do you call your project a ‘resort,’ Ms Grushevich? This term is normally associated
with health, right? In the Caucasus, for example, we’ve got spa resorts where people come for
treatment and rehabilitation. But your Golden Ring ‘resort’ is quite another story, is it not?

Anna Grushevich:  It’s about a multifunctional tourism complex located near a national park
outside Pereslavl Zalessky. Beside the park is Lake Pleshcheyevo, one of central Russia’s largest
and cleanest lakes. Why do we refer to our project as a resort? The reason is its versatile nature,
with opportunities to develop many different types of tourism, including health tourism.

Vladimir Putin: I see. Well, Vitaly Mutko brings this up all the time during cabinet meetings.
And he tries to prove the necessity of adopting the programme that you just mentioned.

Let me make this clear. Initially, this was a serious programme with large-scale investment. But
in 2009-2010 we had to cut down on the number of areas covered. This arose from the need to
meet the investment targets we had originally set for 2009 and 2010. At the same time, we had to
divert some of the money to solve problems brought about by the crisis. We had to tackle
unemployment, a decline in production, and a host of problems that surfaced in single-industry
towns. We also had economic sectors to bail out, notably the auto industry.

With only one-sixth of the original funding left, the programme became impractical. Which is
not to say that we don’t need it. It’s about our cultural heritage as well as about business, and it
could help us to instill patriotism in our people, among other things.

We’re already running similar programmes in some regions of Russia; they have proved to be
effective in Siberia and the Pacific Coast. The Central Federal District, too, should benefit. So,
we’ll get back to this by all means and see what we can do.

Anna Grushevich: Thanks.

Lidia Likholit: Good afternoon, Mr Prime Minister. My name is Lidia Likholit, I am the head of
the social security directorate of Moscow’s Yakimanka district.

I like to travel around Russia’s Golden Ring with my family, and I usually take my son with me
so that he learns about Russia’s historical legacy. We have already been to Rostov, Suzdal,
Pereyaslavl-Zalessky and other towns. However, hotel and camping rates are much too high, and
the price does not reflect the quality. I’d like to know which measures will be taken to improve
the situation in family tourism.

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Vladimir Putin: Our colleague has just made a very good point. Clearly, prices are formed
based on the relationship between demand and supply. A price is fair if demand matches supply.
If not, the system is distorted. How can the state help in this situation? Well, it can help by
implementing its tourism programmes, developing infrastructure, creating good conditions for
businesses, giving them an opportunity to reduce their costs if they build hotels, provide various
services, set up cafes and other catering facilities where service is good and prices are low. To
this end, businesses need to invest in infrastructure, but they don’t always have enough funds for
this. This is the aim of the federal targeted programme for domestic tourism. We will return to
this issue later, because it pertains to roads, heat and gas supplies, security and healthcare. There
are many areas where the state could invest, but this can place a large burden on the budget.
Nevertheless, we will allocate funds, I don’t know yet how much but we will certainly provide
them.

Mikhail Kiselyov: Hello, I am the director of Kalashnikov River College, the branch of Moscow
State Academy of Water Transport in Rybinsk, Yaroslavl Region. This year our college will
celebrate its 135th anniversary. Yury Andropov studied here.

Mr Putin, I live in Rybinsk, seated on the banks of the great Russian river, Volga. The river fleet
gave me everything – a profession, a job and confidence in the future. But this fleet is becoming
old and redundant in front of my very eyes. It’s already fourty years now that we don’t build
river ships. Former Communist countries, such as Czechoslovakia, Romania and East Germany,
used to build ships for us, but they don’t any longer, and we don’t build ships for our fleet either.
What future are our graduates facing? We produce high-class specialists, but they can find  jobs
only outside Russia. They are patriots of Russia and want to operate new ships. They are eager to
fulfil any tasks and do their best to strengthen the economy. Our graduate Batunov was awarded
the Order of Courage in August. I am confident that our graduates will perform any job very
well.

Mr Putin, I’d like to hear from you how you see the future of the river fleet. Will it receive
support? What plans do you have for it? The problem is that not only ships are becoming
obsolete but also the infrastructure, including moorings, quay walls, docks and waterworks.
Shipyard facilities are becoming dilapidated since they are standing idle. Naturally, the technical
fleet, which escorts ships… I will return to my hometown today, and my students are certain to
ask what you replied to me and if you gave me confidence in the future.

We pin our hopes on you, Mr Putin. We want to believe that our students will find a job in this
industry. Since the issue of tourism has just been raised, I’d like to note that we also have to
transport foreign tourists across the Golden Ring aboard modern ships in order to raise the
industry’s revenues. Thank you.

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Vladimir Putin: It’s not a simple question. You know why?

You said that “in the Soviet times, we got river vessels from the German Democratic Republic,
Czechoslovakia, etc.” Not because we could not build them ourselves, but because we divided
functions within the Council for Mutual Economic Assistance: they were in charge of this
function while the Soviet Union hardly built any river vessels. Similarly, we turned over a large
part of the shipbuilding industry to Finland. By the way, when we stopped ordering ships from
Finland after the breakup of the Soviet Union, it experienced a systemic crisis in the shipbuilding
industry. But we are the world’s biggest country, and rivers play a major role as transport routes.
Rivers helped to establish Kievan Rus. According to our most prominent historians, such rivers
as the Volkhov and the Neva made a major contribution to the growth of the Russian state.
Rivers were important transport routes, so people built settlements along their banks. This is true,
and I agree with the theory that rivers played the greatest role in the establishment of a
centralised Russian state.

Today rivers continue to play a great role in the country’s economy. There are many urgent
challenges in this area, including property issues. There are disputes, as you may have heard,
between different economic entities and owners. Unfortunately, the state invested little in the
maintenance of hydropower facilities, did not help to deepen riverbeds, etc, so today navigation
problems occur on many rivers, even on the Volga River. However, the transport development
programme until 2030 and the shipbuilding programme allocate the necessary resources to revive
the national shipbuilding, reconstruct hydropower facilities, deepen riverbeds, etc. We have
started investing this money to achieve the goals you named.

Of course, we can’t do it in a single step because we have lost whatever expertise we had in the
past. But there is no doubt that we will revive the Russian shipbuilding industry, including river
shipbuilding. As a specialist, you must know how popular river transportation is, for example to
transport oil, oil products, metals, building materials and agricultural products. They are very
popular. The country cannot exist without river transport, so there is good potential for
development.

Let’s go on? Maxim Shereikin, coordinator of the project Innovation in the Kaluga Region. Go
ahead, please.

Maxim Shereikin: Mr Putin, after what you said about the Kaluga Region, the audience is
probably expecting me to reveal the secret of Kaluga Region’s great success in attracting large
industrial investors. The focus of our project is to build an innovation economy and supporting
innovation project. This issue is very important for the Kaluga Region today; it is a new step
after industrialisation.

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As for our secret, it is not just the fact that every investor has the Governor’s mobile phone
number. First of all, it is the system we created and a team of professionals that each day
addresses the investors’ needs and resolves their issues, helping to implement investment
projects. Where else can an investor build a plant in under a year? On the basis of this
industrialisation experience, the Kaluga Region government initiated and financed a project to
establish a similar system for innovation companies, as large industrial investors and innovators
and researchers are two completely different target audiences with different needs. Their needs
must also be met.

When we discussed the necessity to improve production and the uncertain need for some abstract
innovations, proposing to modernise the existing enterprises instead, in the backrooms at the
forum, I cited the example of the Apple iPod music player. In 2007, it cost $299, and the Chinese
manufacturer got only $4 for them. The rest went for research, development and marketing. We
can see a similar situation in the Kaluga Region. In ten years, the physical volume of production
grew 300% due to import of technology, but the volume of the gross regional product grew only
100%, i.e. the income of the population, of the budget, of businesses themselves from imported
technology grew less than the volume of production. Of course, we do not want to be like China.
We want to make money by selling Russian technology and intellectual property. This is why we
developed a project whose aim is to encourage innovation business in the Kaluga Region.

I often hear people ask where we are going to get these innovations. There are many ideas and
ways of supporting them around the country and in different regions. Venture capitalists have
money to invest in projects, but they will tell you that there are few finished, promising,
challenging projects 100% ready for financing.

Our objective is to tackle this problem, at least in our region, by organising an R&D process that
could lead to a finished product with the help of the state, through various measures of
government support. How does this process work? Through subsidies, grants, education, venture
financing, allocating benefit space and equipment in the technology park that we are now
building in the Kaluga Region. The first large business incubator (7,500 square metres) will open
in 2012.

The most important aspect is not fixed infrastructure or equipment; it is projects themselves and
a flexible infrastructure to support them. This is why, after having made some mistakes at the
first stage of supporting innovation projects and having felt a shortage of projects, we have
established the Innovation Development Agency, not as a state agency but as an open joint-stock
company, so that it can work on the market and respond to the innovators’ needs. The main goal
of this agency is to find projects, put in support mechanisms for each project using existing
resources and become a partner in the implementation of these projects. This is not an

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intermediary between the innovator and the venture investor, but a partner that helps them reach
agreement.

This problem is common around the world. It is no accident that the process of turning research
findings into finished products is called “the death valley” in many countries, not only in Russia.
It is not the result of a business-friendly environment, but the aspect of the innovation technology
business. This is not just our view of the possible ways of developing business: we already have
certain projects. For example, we have a technology partner, the Medbiofarm company. It builds
a similar infrastructure to commercialise projects on the basis of our technology park in Obninsk.
Commercialisation in the pharmaceutical industry goes through the following stages: research,
preclinical studies, registration of substances, clinical studies – all this takes from five to ten
years.

The company is basically called on to establish the required infrastructure and a team of
professionals, which is already working to collect the so-called active molecules, future
substances and medications from research institutes. The company’s portfolio currently contains
research on 14 molecules. They are assuring us that two of those molecules are in a high stage of
commercialisation. They are negotiating the sale of this intellectual property at this stage, even
pending clinical tests, and they plan to earn about a billion roubles from each molecule. This is
what intellectual business is all about.

Vladimir Putin: Yes, I’ve seen these R&D projects.

Maxim Shereikin: They include cyto-protectors for treating malignant tumours, the
development of a less toxic new generation anti-virus drug, and cardio-markers for early cardiac
infarction diagnosis. In effect, this is what we should promote along this conveyor, so that these
products could be used to help the people.

In reality, everything is going well. The region’s governor is tackling many problems. But, as you
understand, the establishment of a special innovation technology economic zone is the logical
end of creating this conveyor. Consequently, we would be able to take these innovations from the
technology park and the business incubator after venture funding and transfer them to the
respective special economic zone. This way we would not waste them in our industry park,
which has major engineering production facilities.

I think what has helped us today can be… We are currently co-financing the high-tech
technology park together with the Ministry of Communications and Mass Media on a parity
basis. We have involved a private investor in the construction of the engineering infrastructure,
including a gas turbine thermal power station, at our technology park.

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In our opinion, it would be fair if such private investment was included in regional financing
obligations. We don’t necessarily have to waste budgetary allocations and regional allocations in
order to fulfill co-financing obligations. If we find a private investor, then we can save our
budgetary allocations and invest them in new innovation projects. On the whole, the project’s
objective is to make a profit from intellectual property and intellectual business. In that case, we
would have entirely different wages and salaries, as well as entirely different regional budgets. I
hope we will implement this project in the Kaluga Region and will also expand it to the entire
Central Federal District because every region can establish its innovation development territory
similar to Obninsk in the Kaluga Region. Thank you.

Vladimir Putin: First, I would like to tell you that all this is very interesting and in high demand.
Indeed, this is not some kind of primitive intermediary work. This implies intellectual
involvement in production organisation. This is very interesting and important – a modern way
of supporting and promoting intellectual products and innovations. This is my first general and
positive impression. And now we’ll find out whether such projects can evolve into special
economic zones. Ms Nabiullina has the floor. Please, give the microphone to the Minister of
Economic Development.

Elvira Nabiullina: The governor and I have already started discussing the prospect of
establishing special economic innovation technology zones on the basis of such projects. I
completely support this. As long as the system of tenders exists, this country has four innovation
technology zones so far, selected during tenders. But, in my opinion, we could do this where the
regions have already made headway and have established a management company.

And now the second question raised by our colleague, if I may. He wants to know whether
private investment can be included in place of regional obligations.

Vladimir Putin: I don’t know what you are about to say but can I say what I think? Everything
can be included. But is this necessary? This is private investment, you know. What have we
agreed on with the regions? We invest 50%, and the rest comes from the regional budget. If we
burden private investors with financing infrastructure, they would channel less into the project’s
essence.

Elvira Nabiullina: On the whole, I would like to say that this is not limited to technology parks
alone. Technology parks were listed among regional areas of responsibility, and the Ministry of
Telecommunications and Mass Media should take a look at this aspect. As I see it, new dialogues
and a new stage in the development of economic zones and technology parks should stipulate the
involvement of private companies that would provide investment and finance the infrastructure.
This is becoming a business with more cost-effective management. And many projects that today
…

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Vladimir Putin: Do you see how democratic our government is? I have spoken my mind, and
the Minister replies that she thinks otherwise. But this makes things easier for the regions.
Considering the fact that we subsidise a considerable number of regional budgets, this takes the
burden off the federal budget as well. In my opinion, it would be better to channel private
investment into the essence of the project. Although if the Ministry agrees with you, we can
liberalise this.

Elvira Nabiullina: Mr Putin, this is not a burden on private investors financing the projects. This
is a special category of investors financing the infrastructure and possibly profiting from this.
Numerous projects presented at the exhibition here today, numerous technology parks and
industrial parks being established by the regions and supported by United Russia are based on
this new principle. I think we should reassess our approach.

Vladimir Putin: In that case, we must see how the regional budget funds  investment projects.

Elvira Nabiullina: In addition, we will cut back on federal spending and shift part of the burden
on the regional budget.

Vladimir Putin: You see, this is the right approach. We should assess the regional budget’s
investment projects. The regional budget must also invest in projects. This is not because
allocations have to be squeezed out of the regional budget no matter what. You see, investors
treat any specific project in a more frugal manner.

Remark: A final comment, Mr Putin, about one of our secrets in the Kaluga Region. Originally,
we had invested 1.5 billion roubles in the industrial park infrastructure, but then we realised that
it was a mistake and abandoned the idea. Instead, we set up a private company, the Kaluga
Region Development Corporation, and borrowed funds from Vnesheconombank. In other words,
we substituted budget financing for private financing. Of course, Vnesheconombank is a state
bank, but it is still a business model.  

Vladimir Putin: Since the Economic Development Minister supports you, I second this position,
as well. Good for you.

Remark: Thank you.

Marina Troitskaya: Marina Troitskaya, Nordtex Corporation, Ivanovo Region. Mr Putin, we are
also creating a technology park based in the single industry town of Rodniki. We have our own
substation, a consultancy that provides assistance with all business registration issues, and
investors have been given a green light in the town. Currently, there are already six resident
companies in the park, and five more are preparing to launch operations. For a single industry

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town like Rodniki with population of 27,500, this means additional jobs not only in textiles, but
also in other industries.      

But we have a problem. We want to develop and expand, but there is not enough land. The
neighbouring state company Svetoch owns 300 hectares of land, which it is not using due to
economic difficulties. We can and are very keen on using this land. We have already spoken with
Minister of Economic Development Elvira Nabiullina at the exhibition, and want to also request
that you instruct the Federal Agency for State Property Management to transfer these lands to the
region. Thank you.  

Vladimir Putin: Ms Nabiullina, please look into this. I understand you have a successful project
and would like to build something on this land, is that right?

Marina Troitskaya: We have ambitious plans of attracting large Russian and foreign investors.
Currently, we have 79 hectares of land with 25% of the production facilities in use. We are
currently in talks and have a great need for more land to expand and attract new investors.

Vladimir Putin: Under which ministry is Svetoch? What field does it work in?

Marina Troitskaya: These are agricultural lands.

Vladimir Putin: Agricultural lands?

Marina Troitskaya: That’s right.

Vladimir Putin: And you would like to build an industrial facility there?

Marina Troitskaya: Yes.

Vladimir Putin: This means the land use category will also need to be changed? Plus, if I am
not mistaken, there is also some ongoing commercial litigation, correct?

Marina Troitskaya: I can’t say for certain, but I think that is correct.

Vladimir Putin: Yes, there is an ongoing litigation over these lands involving the company.
Let’s return to this issue once there is a court decision. The project needs to be evaluated. Ms
Nabiullina, please coordinate this and help the colleagues with this. The Agriculture Ministry
should also be consulted as to the efficiency of using the land for agricultural purposes before the
final decision is made. If the project is promising, it should definitely be supported.

Marina Troitskaya: Thank you.

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Vladimir Putin: Let’s move on. Mr Gorelov, please. The Tver paint and varnish plant, New
Russian Plants project.

Alexander Gorelov: Mr Putin, colleagues, I am very happy to have the honour of presenting our
project at today’s meeting, all the more so as we put all our energy and souls in this project. We
started in 1993 as a small paint selection laboratory employing just 3 people. By 2001 we
became market leaders in auto repair painting materials in Russia. Unfortunately, the painting
materials have always been imported. In 2008, we launched the construction of the Tver paint
and varnish plant. One may ask why. The company was steadily growing, and by and large
things were going well. 

First of all, the idea of import substitution has always been right on the surface. Secondly, my
partner and I have always been interested not just in making money, but also creating a
substantive and large-scale project. And I believe building this plant from scratch was really an
interesting and extensive project. In addition, I believe any Russian would be happy to contribute
to the innovative development of his country.

Why did we choose Tver for our project? First, logistically it is an ideal location for our
business. Second, there is a good situation with the workforce. And the third important factor is
the favourable investment climate in the region.

These images show the progress of our project. In 2008, we launched the construction, the
framework was built in 2009, and at the end of last year we fully completed the construction and
landscaping work. Currently, we are finishing the equipment installation and preparing to launch
the plant.      

I will not go into the technical details of the project but I would like to note that we invested over
1 billion roubles in it and continue spending on the equipment. The plant will employ up to 250
people.

As of this February, the average salary at the plant is 33,000 roubles. I would like to underscore
that this average rate is not achieved due to extremely high managerial salaries. It is a real
average wage, as the minimum salary at the plant is 20,000 roubles. This means that there are no
employees at the plant with a salary of under 20,000 roubles per month, including workers, yard
cleaners and janitors.

The basic principles we were guided by when creating the project were the environment, safety
and creating our own research base. We have already set up a well-equipped research laboratory,
which controls the quality of raw materials and finished products, and works on developing new
products.

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We have also established an educational centre at the plant, where we train painters and our
clients to properly use our materials and comply with the technology. The centre also conducts
regular professional training courses for our employees. This is what our plant looks like. We
tried to create a comfortable work environment for our employees. This is the plant canteen for
the employees.

In conclusion, I would also like to mention some problems we have encountered with customs
regulations. Today, we are facing a strange situation when the customs duty on raw materials for
our products is 10%, while the duty on importing finished paint is 5%. This inconsistency clearly
hinders the development of paint production in Russia. It is cheaper to import, which is exactly
what we have been doing for 17 years. But we want to finally start producing paints in Russia.
Thank you and I will be glad to answer your questions.

Vladimir Putin: What raw materials you are referring to, Mr Gorelov?

Alexander Gorelov: Above all it is the acrylic resin.

Vladimir Putin: Acrylic resin… Because you have a 0% and 5% duty on other components.

Alexander Gorelov: Mostly it’s 5%. But the major problem is the acrylic resin – 10%, and
isocyanates, which is 7%.

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