The meeting participants discussed strengthening the role of the Marine Board in developing the maritime component of Russia's economic potential, developing the Russian shipbuilding industry and placing orders with Russian shipyards for the construction of ships and marine equipment required for developing the continental shelf, as well as improving state support for the industry.
Opening remarks by Dmitry Medvedev:
I decided to meet with Government Marine Board members today to discuss our interests as a major maritime power, to promote these interests domestically and internationally, and also to give more weight to the Marine Board’s work and speed it up, if needed.
Everyone, including the executive and legislative branches, as well as the industry, the scientific community and businesses should be involved in this work. It is imperative for us to upgrade the manufacturing assets and keep the Navy and the civil fleet up to modern standards.
It’s not as if we haven’t done anything in this area. In recent years, the Government has created an innovative legal framework which facilitates the development of shipbuilding using modern economic mechanisms. We have also adopted several strategic documents, such as the Maritime Doctrine, the Strategy for Developing Maritime Activities to 2030, and the state programme Development of Shipbuilding, which we recently discussed at a Government meeting.
We are investing fairly heavily in building up our research and technological capacity, upgrading shipyards and building new ships. You know the figures: 416 billion roubles have been allocated to support the shipbuilding industry to 2020 under federal targeted programmes alone. Several more funding decisions have been taken under the state programme for the period to 2030. To give you an idea, the amount of funds allocated under the state programme is several times the amount of funds allocated under the federal targeted programmes.
We believe, however, that the industry’s future growth shouldn’t be based on government contracting alone. We are no longer living in the Soviet Union, so all the participants in these activities should improve their effectiveness and make it quantifiable. They should compete for civil orders, because military orders, for obvious reasons, are handled differently.
I will now focus on a number of important issues. Please note that this is not an exhaustive list. Mr Rogozin (Dmitry Rogozin, Deputy Prime Minister, Chairman of the Marine Board) and other colleagues will speak after me, so I hope that you will discuss all the issues in their entirety.
The development of hydrocarbon resources on the continental shelf is one of the most promising market segments. We are taking decisions to promote it, and I just signed another decision regarding the distribution of the shelf. According to preliminary estimates, we are talking about hundreds of platforms and support vessels over the next decade. That’s a huge market and huge amount of orders. Of course, shipbuilders must manufacture competitive, modern, and reliable equipment. For them to be able to do so, it’s no longer enough just to maintain their production processes at the existing levels. They need to improve their organisation methods and the production culture. Of course, this is easier said than done, because it requires a huge investment, but it is necessary. Transport and environmental security requires that Russian companies that have both the expertise and the requisite equipment should be involved in developing projects and monitoring the operation of marine infrastructure.
D.Medvedev: "We are investing fairly heavily in building up our research and technological capacity, upgrading shipyards and building new ships. You know the figures: 416 billion roubles have been allocated to support the shipbuilding industry to 2020 under federal targeted programmes alone."
My second point has to do with a major problem that the industry is facing. The fact is that major customers are continuing to place orders with foreign shipyards. The vessels are then registered under convenient jurisdictions and flags. This is in no way malicious. It’s just how things are done in the industry. Still, it's disquieting. According to conservative estimates, orders worth at least $1 billion are being placed with foreign manufacturers each year. As for navigation, a significant portion of our modern shipping facilities are sailing under convenient jurisdictions and flags. You are aware of the numbers, and you know which companies own what. Understandably, this is business, and we can’t force the owners to change their ships’ registration just because we think that this is the right or the patriotic thing to do. However, they should consider this, because we have to create a business environment in Russia that is comparable to that of other countries. There’s no other way to keep this process in check.
Clearly, shipping companies compete globally and line up their economic activities to best suit their interests. However, since we are talking about state-owned companies, we should also think about state interests, reviving our shipbuilding industry, and harmonising state interests and funding with routine business activities. Otherwise, we will always have a conflict of interests, and there are always good reasons to explain why things are that way and not the other way around. Why then spend all this money to support them? In that case, things can be done differently.
We have adopted a decision to place as many orders as possible with Russian manufacturers. Understandably, this is easier said than done. We understand that certain arrangements should still be preserved – in particular, cooperation with our partners. However, foreign partners should be involved in working on such orders on a case-by-case basis and in compliance with certain rules. These rules are fairly straightforward, and I'll talk about them now.
First, we must make sure that an order cannot be executed using our own capacities. There must be an expert review and a report built according to a specific form. Second, it is desirable to work under technology transfer arrangements. Perhaps this will not be an instant transfer, but at least it will be in the foreseeable future. Finally, we need to understand what is happening and how. For these purposes, we have an industry curator. Now, due to the redistribution of powers, these issues are overseen by Deputy Prime Minister Dmitry Rogozin, so the reports should go first to him, and then Mr Rogozin will report to me, so that we can make the final decisions.
There’s another issue that I would like to discuss. The Marine Board should monitor the shipbuilding programmes, participate in reviews of clients’ proposals for building new modern vessels, and improve the state support mechanisms for the industry. We need to develop a clear set of priorities and have an understanding at all times of what we are building, where we are building it and how we are building it. We also need to understand the amount of money involved, the deadlines and the outcome of this work. Of course, we need to know who’s responsible for the results. I’m saying this because if you want the Government to support such work, then it is imperative that you draw up such proposals at a Marine Board meeting. I’m referring to organising the board's work, its structure, functions, and staffing. Come up with the proposals and report back to me. If you need to speed up this work, let's do so.
That’s all I wanted to say in my opening remarks.
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Closing remarks by Dmitry Medvedev:
I hope you will be able to dive into all these problems quickly – although we understand that the corporation is very complex – and set things straight.
Mr Rogozin has outlined two issues. Transferring ships under the Russian flag is the right thing to do, and we should strive to get there, but, of course, without violating existing contracts and in keeping with existing business arrangements. We shouldn’t make any rash decisions in this regard. We should have this as a goal, fully realising that we are dealing with global competition, which I mentioned earlier in my remarks.
With regard to reinforcing the board, let's create a presidium. Importantly, we shouldn’t get lost in these bureaucracies – presidium, chairman of the presidium, deputy chairmen, etc. There must be a standing portion of the board (call it whatever you like, but the point is that it should be a working body of the board) that will continually work on promoting shipbuilding in Russia and has to be properly staffed and organised. I’m ready to support your proposals. Put them together, so that we can adopt a Government resolution.
I want the Marine Board to continue to work based on my remarks. Thank you. Until next time!