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We Are Expanding Freedom And Making Russia More Open: Putin

By Vladimir Putin

Video and Transcript

Plenary session of the 19th St Petersburg International Economic Forum

Let me repeat the point that we are responding to the restrictions imposed from outside not by closing off our economy, but by expanding freedom and making Russia more open. This is not a slogan; this is the substance of our actual policies and of the work that we are doing today to improve the business environment, find new partners, open up new markets, and take part in big integration projects.

Posted June19, 2015


President of Russia Vladimir Putin: Good afternoon, ladies and gentlemen, friends,

It is a pleasure to welcome you all to this International Economic Forum in St Petersburg, a city which throughout its history has always been a symbol of Russia’s openness and desire to draw on the best of world practice, cooperate, and move forward together.

First of all, I would like to thank all of the politicians and businesspeople attending this forum for their interest and confidence in our country. Ladies and gentlemen, friends, we see in you serious long-term partners, and it is for this reason that, as is tradition, we always speak with frankness and trust at the St Petersburg Forum about our achievements and new possibilities, and also, of course, about the problems and difficulties we encounter, and the tasks we are still working on.

I saw many of you here a year ago. Over this last year, the global and Russian economies have changed, and in some areas, these changes have been very dramatic. Russia’s economy now has faces restricted access to the global capital market, and then there is the drop in prices for our main export goods, and the small decrease in consumer demand, which had previously been an impetus for economic growth. True – here, I agree with the participants in the yesterday’s discussions at the forum – demand is starting to recover again now.

Looking at energy prices, on which our economy is still very dependent, unfortunately, I remind you that the average price for Urals brand oil in 2013 was $107.9 a barrel. In 2014, it dropped to $97.6 and over January-May this year, was at $56 a barrel. According to Rosstat [Russian Statistics Agency], Russia’s GDP contracted by 2.2 percent in the first quarter of 2015 compared to the same period in 2014, and industrial output was down by 1.5 percent over January-April 2015.

What I want to note, however, is that by the end of last year, as you know very well, people were predicting that we were in for a very deep crisis. This has not happened. We have stabilised the situation, absorbed the negative short-term fluctuations, and are now making our way forward confidently through this difficult patch. We can do this above all because our economy had already built up sufficient reserves to give it the inner solidity it needs. We still have a positive trade balance and our non-raw materials exports are increasing.

Let me give a few examples to illustrate these words. Physical volumes of non-raw materials exports increased by 17 percent over the first quarter of 2015, and exports of high value-added goods came to nearly $7 billion in the first quarter, which is up by nearly 6 percent in value terms and by 15 percent in terms of the physical volumes.

We have kept inflation under control. Yes, it did spike following the ruble’s devaluation, but this trend then slackened off. We saw prices go up quite sharply over the first three months of the year (by 3.9 percent in January, 2.2 percent in February, and 1.2 percent in March), but in April, inflation rose by only 0.5 percent. That the trend is decreasing now is clear. We can see this.

Our budget is stable. Our financial and banking systems have adapted to the new conditions and we have succeeded in stabilising the exchange rate and holding on to our reserves. Let me stress too that we did not resort to any restrictions on the free movement of capital, just as was the case in 2008 and 2009.

The federal budget deficit in January-May 2015 came to 1.48 trillion rubles, which represents 3.6 percent of our GDP. We expect that the deficit will reach 3.7 percent of GDP for the year as a whole. This is in line with the budget law currently in force.

Our gold and currency reserves, which I just mentioned, come to more than $300 billion. I was speaking with Elvira Nabiullina [Governor of the Central Bank] just before, and, according to my information, our reserves came to $361.6 billion as at June 5. They are very slightly lower now, because some money has been used.

At the same time, the Government Reserve Fund came to $76.25 billion or 5.5 percent of our GDP as at June 1, 2015. Our second reserve fund, the National Welfare Fund, had reserves of $75.86 billion, again, 5.5 percent of GDP.

We have prevented a jump in unemployment, which currently stands at 5.8 percent of the active population. I remind you that during the 2008–2009 crisis, the unemployment rate rose to 8.3 percent. The imposition of sanctions forced us to considerably step up our import replacement efforts. We have made significant progress in a number of areas and have achieved some notable results. We have tremendous potential in our engineering and petrochemicals sectors, in light industry, the processing sector, pharmaceuticals, and a number of other sectors. Our agriculture sector’s results are a clear example of what we can achieve.

Of course, we still have a lot of work to do in this sector too, but our dairy production, for example, was up by 3.6 percent over January-April 2015, compared to the same period in 2014. Production of butter increased by 8.7 percent, cheese by slightly more than 29 percent, fish and fish products by 6 percent, and meat by 12–13 percent. The import replacement programme’s aim is not to close our market and isolate ourselves from the global economy. We need to learn how to produce quality, competitive goods that will be in demand not just here in Russia, but on the global markets too. Ultimately, our goal is to make fuller and more effective use of our internal resources to resolve our development tasks.

Let me repeat the point that we are responding to the restrictions imposed from outside not by closing off our economy, but by expanding freedom and making Russia more open. This is not a slogan; this is the substance of our actual policies and of the work that we are doing today to improve the business environment, find new partners, open up new markets, and take part in big integration projects. I note that more than 60 companies with foreign participation have started up practical operations in Russia over just this last year alone. Right now, while this forum is taking place, several companies are opening their doors, including here in St Petersburg. There is a pharmaceuticals company, a company producing gas turbines as a joint venture with foreign partners, and so on.

I want to thank all of our partners who, despite the current political problems, continue to work in Russia, invest their capital and technology, and establish new businesses and create new jobs here. Friends, thank you very much.

Ladies and gentlemen,

The timely measures that we took to support our economy and financial system have worked overall. Now, we are once again concentrating our focus on resolving the systemic tasks on our long-term development agenda. Our task is to ensure sustainable growth, make our economy more effective, raise labour productivity, and bring in new investment. Our priorities are to improve the business climate, train the specialists we need for the economy and public administration, and education and technology. I would like to say a few more words about each of these issues.

Let me start with improving the business climate and making Russia’s jurisdiction more competitive. Our aim is to offer the freest and most predictable and favourable conditions and opportunities for investors. We want to make it profitable to invest in Russia. We set the firm goal for the coming four years of settling tax rates that will remain stable and not increasing the tax burden on business so that companies can plan their work for the medium term.

We will stick to these decisions no matter what the external situation or the burden on our budget. You can see from the figures I cited just before that our reserves are sufficient for us to be able to carry out these policies. At the same time, we are creating new incentives for new developing companies. In this respect, let me remind you that we decided to introduce tax holidays for individual entrepreneurs, offer small and medium-sized business special tax regimes that significantly reduce their tax burdens, and give tax breaks to greenfield industrial companies.

Yesterday, I discussed with the heads of our industrial companies a number of issues that we most certainly do face. The proposal was made to offer tax breaks of this kind not just to greenfield projects, but to all new investment. We will certainly examine these proposals. Let me add, that capital and assets returning to Russia from abroad are also exempted from tax payments, and their owners are fully guaranteed from any kind of prosecution.

At the same time, we will take steps to make Russian companies and their offices abroad more transparent. We have already made the necessary amendments to our laws. Let me stress that these provisions are fully in keeping with the decisions made by the G20, FATF and other international organisations.

Furthermore, as part of our national entrepreneurial initiative, we have thoroughly updated the federal laws regulating conditions for doing business. The authorities and the regulatory and supervisory agencies are changing their approach to working with businesspeople. It is becoming more comprehensible, open and transparent. Let me note that starting in 2016, small businesses that have never had any serious violations of the rules in the past will be freed from inspections for a three-year period.

We realise, of course, that for our national jurisdiction to be competitive, we need to keep moving ahead and make constant improvements. At the same time, we also need to analyse the effectiveness of the measures we have already taken. This makes it particularly important to have effective channels for getting feedback from business. I therefore ask the Agency for Strategic Initiatives and the main business associations to analyse how the laws are enforced and study the best practice around the world, and if need be, propose new decisions.

The national regional investment climate rating also has a very big part to play. The rating is not a goal in itself of course, but will provide a working instrument for identifying and spreading best practice in the regions to the country as a whole. Incidentally, the initiative to develop this rating came from our main business associations. What distinguishes this project is that the businesspeople themselves assess the state of the business climate, the quality of public administration and so on.

More than 200,000 businesspeople throughout Russia have taken part in the surveys this year. Some of the positive examples have already been mentioned during the discussions here, but I would like to take the opportunity to name them once again. I think this is worth it. They include Kaluga Region, Tatarstan, Belgorod Region, Tambov Region, Ulyanovsk Region, Krasnodar Territory, Rostov Region, Kostroma Region, Republic of Chuvashia, and Tula Region. As I said, this rating will be a tool for helping to improve the quality of management at all levels of power. This is one of the key areas for our development today.

In this regard, the first point I want to make is that we need to develop a whole class of public administrators who know how to work flexibly, take a modern approach, and understand business’ needs when it comes to the business climate and the public administration system overall. A mechanism for ongoing improvement of public management personnel will be one of the most important steps in work in this area. We also plan to establish a centre for exchanging best practice in public administration and developing the business climate in the regions at one of our top universities. This centre will be a good platform not just for improving qualifications, but also for exchanging experience, coming up with new ideas, and developing horizontal ties between the members of different regional management teams.

Second, I think it would be a good idea to set up special headquarters – project offices, if you will – in each region. They will become a kind of managing office for development, helping to introduce the best mechanisms for creating a favourable investment climate. A comfortable business environment is one of the essential conditions for developing a mass of small and medium-sized businesses working in the non-raw materials sectors. This is a real road forward to economic diversification and job creation.

Our goal is for small and medium-sized businesses to conquer the domestic market and develop their export potential. We will therefore develop close coordination between the institutions for supporting industry and stimulating exports. They include the recently set up Industrial Development Fund, the Far East Development Fund, the Russian Direct Investment Fund, project financing mechanisms, and also the Russian Export Centre, where Russian companies can receive a whole range of services to support their goods on markets abroad.

Also, following a proposal from the business community, we are setting up a corporation to develop small and medium-sized business. Businesses will be able to obtain all of the necessary financial, legal and methodological support, including help in getting access to public procurement tenders and tenders by state-owned enterprises. Essentially, we are consolidating the support mechanisms for small and medium-sized business and we hope that this will bring us real results.

Friends, anyone who wants to take the lead in the world today has to put their focus on leaders in business, management, and, of course, developing technology and education. We have done a lot to strengthen our country’s scientific and technology resource base, bolster cooperation between the scientific community, the education sector, and industry, and get new developments into practical implementation in actual production.

Over the near future, we will undertake an extensive technological upgrading of our companies in the raw materials and non-raw materials sectors and in agriculture. From 2019, a new technical regulation system and strict environmental standards will encourage gradual transition to the best available technology. Essentially, companies will be required by law to modernise and carry out ongoing technological development. One of our most important tasks today is to give our companies incentives to invest in developing technology here in Russia. I ask the Government to propose additional decisions in this area.

We also need to make an inventory of the current mechanisms for supporting applied research and getting new developments into practical use. We need to look at how the incentives, including tax breaks, are working. As for the development institutions, they need to focus clearly on facilitating our technological modernisation efforts.

We are launching projects that will provide our companies with a powerful technological resource base not just for today but also for tomorrow. Our technological planning horizons are broadening substantially. Russian companies must take key positions in sectors and markets that will shape the economic future and the way of life of people in 20–30 years’ time, like the way the IT sector has dramatically changed our own lives over these last 20 years.

To achieve these goals, we have launched the national technology initiative, with the participation of prominent scientists and the high-tech business sector. This is a long-term project, of course, but within the next 2–3 years, we should already have new scientific laboratories, new companies, and educational programmes for training personnel able to handle the most modern tasks and work with the latest technology.

There is another very important area I want to mention. At the recent congress held by Delovaya Rossiya, one of our biggest business associations, the idea came up of organising an effective system for foreign technology transfers. We have successful experience of foreign technology transfers in the pharmaceuticals, automotive, and consumer goods manufacturing industries. It is important to give this work a systemic basis and get the development institutions’ resources involved. I ask the Government and the business associations to draft specific additional proposals on this matter, including on establishing the optimum format for cooperation between the authorities and business in the area of technology transfers.

We realise, of course, that the quality of our education system will play a decisive part in developing our country and making it more competitive. Our colleagues from foreign investment companies, who I met with yesterday, said the same thing. Training for specialists must prepare them not only for today’s demands but also take into account the best global practice and the development prospects for new technology and markets.

Our young people, students and schoolchildren, have won the most prestigious competitions in technical and scientific fields. To give just one very recent example, students from St Petersburg National Research University of Information Technologies, Mechanics and Optics have proven repeatedly that they are unrivalled in the world today. This year, the university’s team once again confirmed its absolute leadership and was a long way ahead of the world’s top programming schools. The university’s team is the only team in the world to have won the student programming championships six times. I want to congratulate the team once again on this success.

A lot depends, of course, on the heads of the universities. We need new leaders here, people with deep knowledge of production, people who know industry’s needs and follow the technological development trends. Our companies propose that we build up a reserve of management personnel for universities training our engineering and technical specialists. I think this is a good proposal and we should carry it out. At the same time, the business community should be more active in universities’ supervisory boards and boards of trustees and should work closely with teaching staff and take part in their training and ongoing education programmes. This is in business’ own interests.

Modernising and improving the quality of secondary vocational education and giving it stronger links to actual production are very important tasks. Many regions are already actively implementing with success a programme of dual education that combines time spent in actual companies with theoretical training. It is no coincidence that the regions that have made the greatest progress in developing their secondary vocational education systems are also the leaders in the regional rating and overall are demonstrating rapid socioeconomic growth.

The engineering professions and the trades require very high levels of skills today. This requires us to develop a modern system of professional standards. The employers and business associations are also playing a big part in this work through the Presidential National Council for Skills and Qualifications.

I think we need to summarise our experience, combine our efforts and build an integral system for training personnel, taking the best world practice into consideration. This system should cover every link, from additional education opportunities for developing children’s skills in technical fields, to secondary vocational education, higher education in engineering, and national and international competitions for the various trades.

Another important areas of our work for the coming years is developing mechanisms for accompanying and supporting talented children so as to help them develop their potential in full and achieve success here at home, in Russia. As you know, we are launching one such project. It is underway now in Sochi. This is the Sochi centre for children from throughout the country who show exceptional talent in sport, the arts, and science. This will be another important part of the Sochi Olympic legacy.

To be continued.

See also -

Putin says Russia weathering sanctions, lectures West: President Vladimir Putin boasted on Friday that Russia had found the "inner strength" to prevent sanctions causing a deep economic crisis, and told the West to stop using "the language of ultimatums."

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