“The Government of the Russian Federation <…> shall submit to the State Duma annual reports on the Government’s performance, including on issues formulated by the State Duma.” (Constitution of the Russian Federation, Article 114, Clause 1, Subclause “a”).
Remarks by Dmitry Medvedev:
Mr Volodin, deputies of the State Duma, colleagues,
Today, I’m presenting a Government report on its performance in 2018. Of course, I will talk about our current work and plans for the future. However, before that, according to the Constitution, I will talk about the Government performance and what we have done jointly during the past year.
The report always provides an opportunity to say how the country is moving forward, what challenges it faces, what goals it sets for itself and what it does to achieve them.
The goals for 2018 are special in terms of the scale and depth of the changes we need to accomplish.
What do we have in order to get there? We have nine national development goals, which the President set in his May executive order.
We have 12 national projects with funding totaling almost 26 trillion roubles. This is an unprecedented figure.
Most importantly, 146.8 million people live in our country, for whom and with whom we are doing all this.
The Policy Priorities of the Government which we have adopted and approved are geared towards achieving national development goals as well as the budget which we are jointly working on as well as the Government programmes. Of course, this also includes daily activities of the executive, to a large extent, legislative and, particularly, regional authorities.
National projects were our main priority, among other things. In a sense, they are the blueprint of Russia in the future. We only had a few months to finalise them. This was quite a responsibility. The quality of the preparatory work largely determines what the end result will look like.
I would like to thank you, colleagues, deputies, for the support you provided to the new Government and these initiatives which allowed us to quickly make a number of strategically important decisions in the economy and the social sphere last year.
As you may recall, back in 2018, the State Duma considered and adopted 312 Government draft laws, which then became laws. Most of them − 248 − were submitted by the new Government. This year already, 31 Government draft laws were approved with 261 more at different stages of consideration.
Such partner-like interaction between the Government and the State Duma is always needed, but it is especially important now, when there’s so much to accomplish.
You know, time flies. At times, it’s difficult to track its course. It seems that Crimea reunited with Russia quite recently, but it was already five years ago. The Government had very little time to resolve a very difficult, I would say, unique challenge which was to make the peninsula part of Russia’s legal framework. Of course, we did so with the help of our colleagues from the Federal Assembly. But we did it. We did it with you.
I’m sure we will achieve our national goals even though doing so will be much more difficult than developing these procedures.
I will begin with the goals that the President prioritised in his executive order, which, of course, he did for a reason. We will allocate a total of over 2.6 trillion roubles to promote the social sphere, namely, demography, healthcare and education projects, within the next three years. This is what is particularly important for people right now: health, good education, and, of course, income.
There is no need to explain that life in Russia today is far from the perfect picture we strive to achieve regardless of the party we belong to. It is difficult for many people; some of them are simply trying to survive. There are 19 million poor people in Russia today. This means that 19 million are not living as they should. Of course, there are various kinds of poverty and the reasons for it are different; separate work and methods are needed in every case, and a family’s expenses should be looked into as well as their income, as we are doing now. Then the state support will become really targeted, and this is the kind of support needed. We have begun this job; we are creating a list of poor families. It will include as much information about those who need state support as possible. The pilot project has been launched in eight regions.
Last year together with State Duma deputies we twice increased the minimum wage on the basis of which some benefits are worked out. It grew almost 44 percent. We adjusted public sector workers’ salaries to a level higher than the level of inflation, which was not envisaged in the President’s May orders. This year we have adjusted social benefits to the real inflation level for the previous year. As a result, the number of poor people has gone down: not like we would all like it to be, but still 400,000 less.
However, fighting poverty does not only include various benefits, but also the opportunities the state has to provide for the people to earn more, such as additional education, a place for children at a day nursery or a kindergarten, medical and social rehabilitation if needed, or help in finding a job or opening their own business. These are very important things. The aim of all our work in the social sphere is to overcome poverty, in one way or another. My colleagues from the United Russia and the Communist Party asked me about this, although it is clear that this topic is of concern to everyone.
Medicine is the first thing I would like to focus on. No benefits can help overcome poverty if people are not healthy. Everyone needs treatment from good doctors, preferably close to where they live, as well as inexpensive and high-quality medicine and not counterfeit medicine and, of course, regular medical examinations. Unfortunately, this situation is not good even in major cities and even worse in small villages and towns. Often people living in rural areas have to go dozens or even hundreds of kilometres to visit a doctor in a city or a district centre. Many people do not do this, because it is not possible. This means that the death rate in the villages is higher than in the cities. Regions must organise a healthcare system in villages where patients do not have to go to doctors but doctors make home visits. We must help the regions when it comes to this.
What are we already doing for this?
First of all, we are developing the primary segment: I mean the polyclinics and primary care units. The regions have already bought 350 such units. This year we will create at least as much and will try to do more. All of them are produced in Russia, which is something new and especially important. This means that all the medical equipment is Russian. There already are 246 mobile medical units. We will purchase another 500. Additional funds are needed for this. Last year we allocated almost 3.5 billion roubles from the Government’s reserve fund.
The Government regularly expands the Village Doctor programme. Last year, the programme also covered towns with a population of up to 50,000 people. Recently, the President gave instructions to lift age restrictions so that doctors and paramedics over 50 years old could participate in the programme. Surely, this will be done.
But we have areas where only air ambulances can help. Now air medical services are available in 34 regions. And this is quite good, because air ambulances were rarely used in our country until recently. This year, we will add 15 more regions and will continue to gradually expand the geographic reach. About 9,000 medical organisations have fast internet. This gives small hospitals and clinics, especially rural ones, the opportunity to hold video conferences and consultations with large medical centres.
The second thing I would like to address is the health of mothers and children. This year, we completed a large-scale project for the construction of perinatal centres; now there are 56 of them. Last year alone, we built 11 new centres, and another one is almost finished. I remember when we started working on previous national projects a little over 10 years ago, there were only a few perinatal centres, one or two, in our country. And I went to see what these centres should be like. Now the situation has changed. And of course, there are also centres built by the regions themselves.
We are moving forward in children’s medicine. In the next six years, we plan to build or renovate 40 children’s hospitals and departments.
Third is the fight against diseases such as cancer, heart attacks and strokes that affect so many families. We are re-equipping regional vascular centres and primary vascular departments. We are creating a network of outpatient cancer centres in all regions and reference centres in 18 regions. We are updating cancer treatment facilities and hospitals. Starting this year, we have allocated an additional 70 billion roubles for treating such patients and their chemotherapy. In the next six years, we will invest about 1 trillion roubles in the fight against cancer.
Medication. A number of medicines are very expensive, especially for high-cost diseases. The Seven Nosologies programme, which is financed from the federal budget, now includes five more rare (orphan) diseases.
And of course, we allocate funds to provide medical care for benefit recipients. Last year 53 and this year 36 names were added to the list of vital and essential medicines. Now there are 735 medications on the list. To keep these medicines from becoming more expensive, we continue to improve the mechanisms of state price regulation. The relevant draft law has been developed and submitted to the State Duma. I ask you, colleagues, to adopt it as soon as possible.
The fifth point I wanted to make deals with preventive care and healthy lifestyle. In this regard our focus is on regular preventive medical check-ups. Last year some 22 million people benefited from these check-ups, and this number is expected to exceed 60 million by the end of 2019. Beginning this year we expanded the programme for offering these check-ups as part of state guarantees. People over 40 will have the possibility to take these preventive check-ups annually. We also introduced new cancer screening programmes. I will soon issue an instruction on holding a nation-wide preventive medical examination in the next two years, since the necessary conditions are in place.
In doing so, we have to make sure that people do not have to visit multiple clinics and instead can have all their appointments within a single medical institution or at work. Whenever they are diagnosed with a condition, they have to receive medical advice and the possibility to continue treatment. Employers will have to provide a paid day off for the medical check-up. This is a critical requirement.
Sport is essential for a healthy life. More than 50 million people currently exercise. A Just Russia party member asked what the government was doing to promote public sport. Last year, 7,000 sports venues were built or renovated. Young people are often inspired to go to the gym or to the stadium by professional athletes, and by events like the recent Winter Universiade in Krasnoyarsk or the Children of Asia Games, let alone the FIFA World Cup that Russia hosted with much success in the summer of 2018. Twelve stadiums were built for the occasion, and 95 training camps in 25 regions were built or renovated. I would like to note that 64 of them have already been transferred to sports schools.
Improving the living standards for the elderly is our second line of action and a national goal. Elderly people are especially vulnerable in the face of poverty. This is the first time that we have offered a special federal programme for these people.
Living a long and active life means not only healthcare, but also doing something you love and feeling relevant. For that there are training courses, workshops, and tourist routes designed specifically for the elderly. These people can serve as mentors, or can master new skills.
However, if it becomes challenging for a person to live alone and he or she needs special care, beginning next year we will create conditions within the social safety net to offer a situation that is as close as possible to what people experience at home. This year, 12 regions embarked on programmes to improve their long-term care systems.
Let’s be honest that enabling people to live in dignity and have an interesting life is not just a matter of choice, but also a matter of money. Today, pensions are a far cry from what is needed to deliver on this vision. It is for this reason and for the sake of increasing the income of retirees that we undertook to overhaul the pension system. We also took a number of decisions to increase pensions. We decided that the regions have to follow a single mandatory method for calculating the subsistence level for elderly people. We will start by bringing pensions to this level, and further adjust them in order to provide people more income. The State Duma was prompt in supporting this measure, and I would like to thank you for doing so.
Support for families with children is the third area of focus. It goes without saying that clothing, toys and extracurricular activities are quite expensive, even if a family has one child. And a family with many children simply cannot do without state assistance. Over the next six years, about 80 percent of spending under the Demography national project will go toward cash benefits for children, low-interest mortgages and creating more spots in daycare centres, as stipulated by the President’s executive order.
Never before have we implemented such an ambitious system of measures: money goes to virtually every child. We have been supporting parents with first-born babies in need since 2018. These are monthly payments to families whose incomes do not meet 1.5 times the subsistence minimum. From 2020, the criterion for allocating these payments will be adjusted to double the subsistence minimum.
Families giving birth to a second child are entitled to maternity capital. For example, 35,000 underprivileged families receive standard monthly payments from this funding. We stipulate monthly payments after the birth of the third or subsequent child until the age of three. The Government will continue to co-finance part of the cost of these payments in 65 regions now requiring additional measures to improve demographic conditions. We have discussed this matter, including with the LDPR.
Low-interest mortgages (6 percent) have become a substantial asset for families welcoming a second child, and they are to be used to purchase housing on the primary market. In addition, we will forgive 450,000 roubles of the mortgage of a family welcoming a third or subsequent child. We are currently drafting these amendments to the legislation. I hope that our colleagues in the Duma will also become actively involved in this process.
The birth of a child is always a joyful event. But when a child is born with health problems, it can turn the parents’ life completely upside down. It is a very difficult ordeal. And we must do our best to make things easier for them. We have already increased state support for unemployed parents raising children with disabilities. From 1 July 2019, they will begin receiving nearly double the amount. This measure will reach about 500,000 families.
The creation of daycare groups for children under three is another major area of focus. This will allow their parents to resume work as soon as possible, provided that is what they want. In 2018-2019, 85 billion roubles was set aside in the budget for these purposes. We will essentially resolve the situation with daycare accommodation in the next three years. We are counting on your support.
Understandably, it is a problem when there is a waiting list for daycare. Still, it is good when the country has many children, although we are feeling the effects of a demographic echo of the 1990s, when mortality rates exceeded birth rates in Russia. As we know, demographers even named this phenomenon the Russian Cross. Unfortunately, few people were born in the 1990s, and we need to avoid a demographic slump. This is a very difficult challenge. Raising average life expectancy to 78 years by 2024 and to 80 years by 2030 are our national goals.
I cannot help but mention some of the results that we have achieved. Average life expectancy is increasing and has reached almost 73 years in 2019. In some regions, it has exceeded 75 years, while falling short of 70 years in others; and these regions require special attention.
Infant mortality rates and road accident deaths are down 7.3 percent and four percent, respectively. We are posting some good numbers on reductions in cardiovascular and tuberculosis-related mortality rates. We will certainly continue this work, including through the measures to support families with children and to develop the healthcare system that I have just mentioned.
My fourth point is that poverty is a function of the quality of education. The more skills a person has, the better the chances for success are. This requires a modern school with a digital environment and diverse communications, where children study in one, rather than three shifts, and where they are willing to go to study and to stay for extracurricular activities after school. If needed, a child should be able to consult a psychologist. We are building schools like this. Thanks go to all our colleagues who are taking an active part in this, because a significant number of those present here every so often ask us to support a particular school in the region that they represent. Thirty schools for more than 22,000 pupils opened last year and since the beginning of 2019. Now, 52 more schools are being built for approximately 42,000 pupils. We have allocated subsidies from the federal budget to 78 regions for a total of about 25 billion roubles for these purposes.
The construction of small rural schools with low numbers of pupils is also a very important area of focus. I have repeatedly said that such schools are in many cases a way to save a village. If there is a school in a village, the village will survive, if not, it will die, so merging them without any particular reason should be avoided at all costs.
In addition, we purchased school buses at a cost of almost 5 billion roubles last year.
A modern school is, of course, unthinkable without a modern teacher. New education standards are being discussed now. Psychology services will be set up at schools in five pilot regions.
There is one more important aspect. Children spend most of their time at school, which means they should have proper and balanced hot meals, and meal standards should be complied with, including milk, dairy products, juices, fruit, and other items. We are now developing proposals on this.
Already at school, children who are contemplating their futures should get assistance and be shown various career paths that can later become a vocation. I’m talking about additional training. This is currently available to approximately 70 percent of students aged 5 to 18. In addition to various classes and creative schools, there are already 89 student technology parks - Quantoriums - in our country. This is a really good thing. In 2018, we allocated almost 1.8 billion roubles to promote them. They are attended by future inventors, engineers and researchers our country needs so much. In future, children's technology parks will open not only in regional centres (which is truly important), but also in towns with populations over 50,000, that is, they will come to the outskirts. Almost 18 billion roubles have been allocated to this end.
Ticket to the Future is another early career guidance programme which allows schoolchildren to try a variety of areas. Practical workers from the real sector, students, post-graduate students and young researchers will help the students make a choice. They are not teachers per se, but they have a wealth of modern specialised knowledge and are willing to share it. They also should be made part of the education system at all levels. We plan to introduce a corresponding draft law this year.
We are still experiencing shortages of skilled workers ranging from auto mechanics and welders to IT and nano industry specialists. WorldSkills standards are our benchmarks in secondary vocational training. Here, we have both challenges and achievements. Our team came in first at last year's Euroskills Championship. Now, Kazan is preparing to host WorldSkills. We want our team to win and we will definitely root for it.
Universities have had good results as well. Over the past 10 years, since we started doing this, the representation of Russian universities in international rankings has increased from two to 47. We plan to increase the number of universities that receive support under the Top 100 programme. However, any university graduate should be able to easily find proper employment. To this end, we are improving targeted training. We have repeatedly discussed this matter in this room and at other venues. Since after the reform of the education system in our country in the 1990s, getting employed after graduating from the university was not, let's put it this way, implied. However, now, after graduation, a student in a targeted training programme must work at an enterprise for a certain period of time, and the region and the employer must provide employment to such graduates. We approve quotas for targeted training at the expense of the federal budget. I signed a corresponding Government resolution. Moreover, we are using these quotas to support training for the professions that are most needed by our economy.
Education is not only about studies, but also daily development that culture gives to any person. For the first time we have come up with a corresponding national programme which seeks to make cultural events more accessible to people in different parts of our country. A National Virtual Concert Hall and a digital guide to Russian museums, Artefact, were launched, of which almost 350 museums and exhibition halls have now become part of. However, the citizens of our country currently visit brick-and-mortar museums more often, which is, of course, not a bad thing. Last year, about 150 million people visited museums, which is 30 million more than the previous period.
For the first time, the Big Tour programme is now available nationwide with 260 participating theatres. In 2018, more than 40 million people visited theatres. I am confident that this number will grow even more this year, which is the Year of the Theatre.
Rural houses of culture are a separate issue. As much as 1.5 billion roubles were allocated to build, renovate and overhaul them. I believe it is imperative that we continue to finance the revival of the houses of culture, which are crucial for our country, since 25 percent of our citizens live in rural areas.
The tourist industry has also been strong, with domestic tourist volumes reaching almost 70 million people.
Only well-educated people, obviously, can create innovations and ensure Russia’s technological leadership. We are planning to focus on this within the framework of the Science national project. We will allocate almost 37 billion roubles to fund this in 2019.
Today, it is science (as it was in previous years, but especially today) that shapes the future. In this context, we will continue, in addition to developing an advanced infrastructure for scientific research and modern laboratories, to promote close cooperation between universities, research organisations, and the business community, because it is only this alliance that can develop science today. Competences centres of the National Technology Initiative have been established on this basis. At least 15 research and education centres are expected to open within the next three years. They will become venues for full cycle innovation projects. We will select the first five organisations within the next two months.
In addition, eight specialised training and research centres will function under the auspices of leading universities in each federal district. These will train advanced specialists based on a continuous education approach, which means that a single education organisation will promote a student from secondary school to university. This makes sense, too.
Modern science is unthinkable without digital technology, as is our whole life, for that matter. Each national project has a digital agenda of its own.
Last year, another 8,000 villages, each with 250 to 500 residents (which means that they are small villages and this is particularly important), were given access to communications services, including the internet. We have laid 60,000 kilometres of optical fiber lines. Internet businesses account for over 5 percent of the national GDP.
We are among the top ten countries (and this is very good because it indicates education levels) that are the most proactive in using government e-services. Nearly 80 million users have registered with the Unified Public Services Portal, or more than half of the country’s population.
Today it seems like the integrated government services centres used by everyone have always been with us. People have become used to them. Most importantly, they save time. And save frustration, of course. The integrated centre network has covered almost the entire country; 98 percent of people have access to public services close to where they live.
The Unified Interagency E-Interaction System has processed 33 billion corporate transactions. We will continue to digitalise certain agencies, such as the Federal Service for State Statistics (Rosstat). Its activities are often discussed.
Today, over 60 ministries and agencies collect official statistics, and this is mostly done on paper, the old-fashioned way. Naturally, this results in discrepancies in calculating methods and terms. These discrepancies are clearly visible and they are instantly pointed out and discussed. Obtaining precise and detailed information is in the interest of the state, businesses and citizens. Modern technologies make it possible to receive such information online, by transitioning from what we used to call representative selections to the analysis of large blocks of data in so-called streaming mode. Why is this important? Because it provides an absolutely real picture of our life, without any methods of statistical recording, various formulas, and so on. And this works, such systems work - for instance, at the Federal Taxation Service. I looked into it recently, and it is really impressive. These efforts should be continued, because it is in our interest for everyone to be aware of where we are and what our challenges, problem areas and achievements are.
Another national goal aimed at raising the quality of life is improving housing conditions for at least five million families annually. It is no secret that this goal can be compared only to the large-scale efforts to solve the housing crisis of the 1950s-1960s. Back then, the challenge was different; the purpose was to resettle people from barracks to their own flats, which were small and not always well designed - but this challenge was met, and credit should be given to our predecessors. Today is a new stage. We build a great deal of quality housing as compared to the past, and we improve the urban environment.
Now on to the year's results.
First, over one million new flats were occupied, or 75.7 million sq m. Also, 230,000 new single-family houses with a total area of 32 million sq m were occupied - this should be noted as well because this data is often overlooked as we count only flats. Our plans include creating a separate programme for developing individual housing construction, and it should definitely be supported.
Second, the average mortgage interest rate was slightly over 9.5%, for the first time in the modern history of Russia. Over half of all transactions involve mortgage loans. In 2018, 1.5 million mortgage loans were provided, worth some 3 trillion roubles, which is 50% higher than 2017. Another achievement was the volume of mortgage securities issued, totaling 150 billion roubles - which means this institution has established itself in our country and is being used.
Third, we relocate people from dilapidated housing. Almost 700,000 people have moved into new homes. Starting this year, we will continue these efforts to relocate people from dilapidated housing that has been classified as such after 1 January 2012 - which is over 9.5 million sq m.
We will continue the major repair programme. Starting from 1 July 2019, almost all residential construction will be done by project financing, which will prevent any more equity holders from being cheated. The builders will not be able to take money directly from people. In order to help those facing this problem right now, we have begun allocating money from the federal budget to finish construction. We will allocate about eight billion roubles this year. In addition, we give plots of land to the regions. Last year we gave 575 ha for construction in order to fulfill these tasks, and the local governments must help with connecting problem residences to utility grids.
There is another topic which is also partially related to housing. I held meetings with all the State Duma parties on various issues before the Government report. By the way, I find this practice very useful. These are not just meetings on the eve of the report, but a practical conversation on the most diverse areas of life in Russia. Such meetings always result in concrete instructions, and my colleagues here know that.
We discussed one topic I would like to touch on. We discussed the possibility of extending the dacha amnesty. My colleagues from the United Russia Party spoke about that, too. A Just Russia raised this topic during the meeting. I believe it is possible to extend the amnesty until 1 March 2020 and I have given the corresponding instructions to develop a draft federal law.
Only several decades ago, as many remember, it was an enormous joy to receive a flat which overshadowed any other matters. But today people care about more than what kind of block of flats they live in. Everyone wants to see a beautiful green courtyard, a nice entrance area and driveway when they leave their buildings. And, of course, to have shops, clinics, schools and kindergartens nearby. This is why we have launched the Housing and Urban Environment project. Over 3,000 municipalities with 120 million residents take part in it. About 19,000 courtyards and over 200 parks have already been improved.
In addition, we continue to build roads. Over 200 km have been built in cities – let me stress this, in cities – using federal funds. Over 560 km of federal roads were built and upgraded last year, which is 60 percent more than the year before. Of course, we will increase these numbers. Kerch Bridge opened for cars in May and for trucks on 1 October. A railway will be constructed on the bridge this December. We have also completed and opened the longest section (217 km) of the M11 motorway between Moscow and St Petersburg. We plan to open the last section by the end of this year.
Here are some statistics to corroborate these conclusions. Russia’s GDP grew by over two percent last year.
Investments have been growing at a very good pace (by over four percent) for more than a year. This is not just from the budget and major companies, but small businesses investing in their own development.
We have crafted a considered and responsible budgetary policy, and I believe that this is a very important achievement. We have posted a budget surplus for the first time in several years, that is, since 2011, to be more exact. It exceeded 2.5 percent last year.
We have expanded our international reserves by almost $30 billion, also reducing external debts by over $60 billion.
As for inflation, we know that it reached target levels in late 2018 but picked up somewhat in early 2019. We anticipated that this would happen. We hope that this short-term uptick will end, and that inflation will return to target levels. Our colleagues from United Russia and other parliamentary parties are concerned about this matter. I am convinced that all the necessary conditions are in place to achieve this.
The labour market situation remains stable, and unemployment does not exceed five percent. Of course, the situation varies greatly from region to region, this is true, and we therefore have to make targeted decisions in the area of employment.
It goes without saying that these results are quite good. By the way, international experts also acknowledge this. Today, all leading international credit rating agencies note the positive changes in the Russian economy. Today, the well-known Big Three global credit rating agencies give investment-grade status to Russia.
Our current challenge is not merely to maintain macroeconomic stability. We need to achieve growth rates in excess of global levels and solidly establish ourselves among the five largest national economies. This is also our national development goal. We need to see to it that positive macroeconomic trends are not perceived as mere news by the people, and that they become an everyday fact of life.
Of course, we will not accomplish these tasks through state investment alone. We need to actively involve private businesses and to improve the business climate. Several conditions are needed for this.
First, we need an entirely different business environment. When we ask businesses what hampers their work today, we quite often hear back that the most important thing is not to create any new problems. Instead of helping, it would be better not to interfere at all. It is no secret that the business community is burdened by various inspections. Of course, the situation is changing gradually. Seven years ago, the Doing Business ranking survey placed Russia outside the top hundred, and it has now risen to 31st place. Sometimes we hear that rankings are not such a big deal … But these are still fairly objective assessments by international experts.
Why am I talking about this? Because Russia now ranks 31st, ahead of many quite modern and successful economies, including the Netherlands, Switzerland and Belgium. We have outranked all BRICS countries for the past few years. We want to enter the top 20 economies in the Doing Business ranking, and we are planning our work accordingly in the Government. We are creating tools to rapidly respond to requests from businesses, and, of course, we are overhauling the control and oversight sphere. We have also involved over 400 regional control and oversight agencies of 80 regions in the state information system. But this is not enough, and businesses should understand what we want from them. Our goal is to rid the business community of excessive and sometimes pointless requirements that entail thousands of documents which are often duplicative and contradictory. Therefore, we have decided to break out the so-called regulatory guillotine with the aim of abolishing all previously adopted mandatory requirements.
The third point I would like to make – we need to continue improving the laws on entrepreneurial crimes, I mean criminal procedure legislation, criminal legislation. The President gave this instruction in his Address to the Federal Assembly. Needless to say, holding a suspect in custody during the investigation of an economic crime should only be applied as an extreme measure. In general, deprivation of liberty should be a relatively rare punishment in business-related cases. It is more effective to impose large fines, administrative sanctions, and payment of damages in civil proceedings. On my instruction, the concept of a new code of administrative offenses will soon be developed. Colleagues, all of you are aware of how obsolete the current code is, how cumbersome and difficult it is. We need to adopt a new code. Entrepreneurs fail to figure out what clause they might have violated, so the new code should be more concise and straightforward.
We also need to streamline foreign exchange legislation. The proposal is to abolish criminal liability for evasion of refund during export operations, and impose administrative sanctions instead. A relevant bill will soon be drafted. On the other hand, if the export of capital or concealment of property abroad is involved, businesses must bear a stricter penalty.
Now as regards competitive environment that concerns small and medium-sized businesses. Our colleagues from United Russia have asked about supporting entrepreneurship. We are attracting non-governmental organisations to the provision of public services, which means they will now bid in tenders for access to government funding. As a result, people will be able to choose where to receive a government- funded service – at a private company or a state one.
Another step toward improving the business climate is a more effective system of incentives and guarantees to attract private investment. We can see that large companies are ready to join the implementation of national projects. We have preliminary proposals involving very impressive amounts – about 75 trillion roubles.
But business people should be confident that their investment is securely protected, and that the regulations are stable. Therefore, we have made a fundamental decision – in the next six years, the tax burden will not increase. But to achieve this, we first had to adjust the tax system as a whole. In particular, the VAT rate has been increased. This was a difficult, but necessary step. That said, we kept all the VAT allowances for socially significant goods and services, and zero taxes for interregional air transit.
At the same time, the insurance premium rate was permanently fixed at 30 percent.
A special tax regime was adopted for the self-employed. A pilot project with the lowest tax rates ever – 4 to 6 percent – was launched in four Russian regions. In 2020, we plan to expand this to the entire country.
It is likewise important to create a favourable environment for bringing businesses back under Russian jurisdiction. Our colleagues from the Liberal Democratic Party, the Communist Party and A Just Russia Party raised this issue. Capital amnesty will be extended for another year. A mechanism has been created that is entirely new for our country. It includes special administrative districts – the Kaliningrad Region and Primorye Territory – where, in fact, legal and economic regulations are similar to the rules adopted by international financial centres.
In a collaborative effort with businesses, we have developed several new investment arrangements, the main task of which is to guarantee a consistent taxation and regulatory environment. Investors who invest at least one billion roubles in the social sphere, manufacturing, agriculture or digital economy should be provided with stable procedure for paying value-added tax, as well as given an opportunity to be compensated for a portion of expenses involved in building the necessary infrastructure through lower taxes.
We will submit such a draft law, which is a kind of investment code, to the State Duma in the near future. It’s been a work in progress for a long time now, and this document is almost finalised. We look forward to it being adopted during the spring session.
We are improving the special investment contract mechanisms, as they have a solid track record. In late March, a decision was made to extend the deadline for contracts to 20 years and extend tax exemptions for the same amount of time, remove the lower threshold for investment amounts, and involve in this work not only regions but municipalities as well.
The project financing factory was launched on the basis of the upgraded development institution VEB.RF.
Finally, we prepared a Government Action Plan to speed up investment growth rates and approved its industry-specific section. Exclusive terms and conditions, including special long-term tariffs, preferential taxation terms and other measures of support were offered to investors who participate in the country’s most important projects on subsoil use, power generation, agriculture, construction and infrastructure.
All the above steps are designed to secure faster industrial growth rates (I discussed industrial policy with our colleagues from the Communist Party), including to achieve two national goals at the same time, namely, speeding up technological development and creating a competitive sector in basic industries.
Last year, industry grew at a rate of about 3 percent as compared with 2.1 percent in 2017. The positive dynamics continued this year as well, which is important.
The fuel and energy complex is behind almost all of these numbers. New records for oil and gas production were set as of the end of last year. However, the best dynamics were shown by the segments that are associated with refining, which, of course, is particularly important for our country. The production of liquefied natural gas increased by 70 percent in 2018 compared with 2017.
Renewable energy is making good progress. Creating green capacities is also very important. They grew by a factor of 2.5 last year.
Manufacturing industries have also experienced accelerated growth, albeit uneven. The industries that combine good export potential and demand for advanced technology showed the highest growth rates. This includes the automotive industry, shipbuilding, pharmaceuticals and a number of others.
Here’s an overview of a number of positions regarding investment engineering and our engineering goals in general. Heavy engineering and power engineering grew by over four percent. Our machine tool industry has performed well on exports with an increase of almost 17 percent. This is a very good result. Truth be told, our base is not as large as we would like it to be.
As regards the pharmaceuticals industry, the production of drugs and medications grew by 3.5 percent. The decisions earlier taken by the government on certain restrictions on purchasing pharmaceuticals abroad (to a certain extent, of course) allowed us to increase the share of domestically produced pharmaceuticals in volume terms to almost 80 percent (I mean the segment of public procurement). This is very important because Russian medications are cheaper than foreign ones.
The auto industry. Last year, we manufactured 14 percent more vehicles of all kinds than the year before. This means a revival of the market. We sold 12.4 percent more vehicles, which indicates a recovery in consumer demand and certainly shows that the domestic economy is recovering. Vehicle exports grew 11.3 percent in numerical terms.
The commercial aircraft industry. Our colleagues from the Liberal Democratic Party were interested in this. We all remember that just recently we manufactured only a handful – one, two or three aircraft a year. Last year our aircraft industry manufactured 100 commercial airplanes and helicopters. Maybe not great results but still this is a good trend.
Last year we also successfully certified the new PD-14 engine which we need for the new Irkut MC-21 plane.
Air passenger volumes increased by more than 10 percent. Last year Russian airports served over 200 million passengers. This is the largest number in the history of the Russian air travel.
The shipbuilding industry. Last year customers received 105 commercial vessels, up from 83 in 2017.
We continue working on our multipurpose nuclear powered icebreakers. Last year, the design work for the Leader-class nuclear icebreakers was completed. This icebreaker will provide year-round navigation on the Northern Sea Route.
Transport engineering also showed double-digit growth rates, which is very gratifying. The aggregate output of freight cars grew by almost 19 percent, and the production of passenger and metro cars, by over 50 percent.
We discussed transport engineering at a meeting with our colleagues from the Liberal Democratic Party. They brought up the shortage of parts for railway rolling stock. I gave an instruction to submit proposals for the manufacture of components for transport engineering.
There are also other industries that I would like to speak about.
Production of building materials has increased by five percent in monetary terms.
The production of chemicals and chemical products last year increased by 2.7 percent.
There was two-percent growth in the clothing and footwear industry.
Export figures are good enough. Exports of building materials have doubled. Currently, approximately a third of waterproofing, soft roofing materials and glass are exported, that is, the industry has export potential to build on. This is good. The chemicals industry saw exports grow by almost 14 percent and the clothing and footwear industry by 4.6 percent. I simply have to mention this, because it really welcome news – by which I mean the excellent export figures for agriculture. A year ago, we analysed the sector’s performance in 2017. Over the last year the sector grew by almost one-fifth, or 20 percent, reaching $25 billion. Russia is the world’s largest exporter of wheat. Exports of other products are also increasing, including meat and milk.
It is important that the growth in agriculture boosts production across allied industries, like the production of mineral fertilizers and the manufacture of farming machinery. The manufacture of farming machinery has outperformed other industries in terms of exports, which were up 40 percent. This means we really manufacture quality farming machinery. This is the result of direct governmental support.
Allow me to say a few words about the defence industry. This is one of the sectors where the most advanced technological solutions are being actively introduced and import substitution is progressing. The most important thing for the defence industry is to maintain the country’s defence capability at a level that will prevent anyone from even thinking of relying on force in their dialogue with our country. Our armaments have a worldwide reputation for quality and reliability, that is why we see attempts to impose various sanctions on this sector. Sanctions notwithstanding, we clearly continue to get a lot of orders for Russian military hardware from abroad. Currently, we have orders worth approximately $54.5 billion from 100 countries.
Also, the defence industry is successfully addressing the task of diversifying its production. Last year, civilian goods accounted for more that 20 percent of overall production in the defence industry. This is the goal we set. The Industrial Development Fund has launched a programme to provide financial support to the effort to diversify industrial production on affordable terms.
The development of industry is becoming possible due to the implementation of a whole range of measures, such as the package of solutions to increase the competitiveness of Russian products. Those enterprises that take on the responsibility to implement the programme to raise competitiveness will receive preferential bank financing. This year, 14 billion roubles were allocated to compensate these costs.
Integration in the Eurasian Economic Union will give an added boost to expanding exports and increasing competitiveness. Let me remind you that the union marks its fifth anniversary this year. We are making mutual trade and investment easier. The Customs Code is operating in full, the digital agenda is being implemented, and we and our colleagues are trying to move all of this forward.
By supporting industry we not only increase the manufacturing of certain products but help develop the regions where the enterprises are located, preserve and create new jobs and strengthen the economy. Regions are different: some are rich while others are far from rich. The main goal is to help every region find an internal source of growth, and we in the government are counting on working closely with you, colleagues.
This is the goal of the Spatial Development Strategy, which was approved and is intended to create conditions for every region to find its own place in Russia’s economy. The draft plan of concrete measures under the strategy is being developed right now together with the regions and must be submitted to the Government next month.
In order to develop normally, regions need stable access to main transport routes and electrical grids. Eliminating infrastructure constraints is critical for our enormous country. Last year we adopted the Comprehensive Plan for Updating and Expanding Main Infrastructure through 2024. It is synchronised with national projects; it is, in effect, a national project of its own.
The main transport routes will be expanded, the West – East and North – South corridors above all. This is the logistics infrastructure that supports transit and exports, sea and air ports, roads and railways. The plan envisages the building of new power stations this year (one in the Kaliningrad Region and one in the Chukotka Autonomous Area) as well as several hundred kilometres of new electricity lines.
But, of course, the main work to develop the country will be carried out under national projects. They must be tailored to every region’s specifics; they set benchmarks. We plan to allocate about 600 billion roubles for national projects in the regions this year. Let me draw your attention to something we have not done before, but which is very important because there is no other way: in some cases, we will provide funds covering 99 percent of the region’s expenses. This is the only way to implement these projects.
In recent years we seriously improved the health of regional finances. This is a very important issue because the situation was far from satisfactory. Incidentally, our colleagues from United Russia and the Communist Party were interested in this subject. Last year, for the first time since 2007, we fulfilled regional budget plans with a surplus of over 500 billion roubles. The income grew by 15 percent. The number of regions with budget deficits has dropped threefold (from 47 to 15). This is very important indeed. Regional government debt has dropped by almost five percent.
We have made a whole range of decisions on excise taxes on oil products, promoted inter-regional growth with grants (you know about these decisions) and, of course, supported them with inter-budgetary transfers. Last year it was over two trillion roubles. We will definitely continue all this in equal numbers this year.
We will draft supplementary measures for regions of low socioeconomic development levels. I called a meeting about this recently. A hands-on approach is not ideal here but in this situation I believe it important for such regions to have a supervisor from the Government to assist these regions in making important decisions. I have already decided who will be responsible for several regions and our colleagues know their duties.
We will do everything possible to make the money allocated to regions start working as soon as possible. This money is to turn into new nursery schools, outpatient clinics, roads and landscaped parks, all strictly according to schedule. Naturally, all obstacles in the way of progress must be removed and we must sign agreements on subsidies with regions as early as possible and not at the last moment – in the middle of February, when it is traditionally done. Let’s face it, we take ages to get moving. Regions must start tender procedures – and I want to say this again in the State Duma assembly hall – immediately on receiving notifications that transfers have been granted. And when does this take place? This notification, in fact, means the appearance of a budget obligation inside the budget process from the moment limits are approved, and limits are approved under the federal budget law, which you, colleagues, adopt and the President signs. As soon as the budget is signed, we can start signing the documents. I would like to draw everyone’s attention to this again. And I ordered that proposals on national project deadlines be submitted by the end of April.
There is another topic related to inter-budgetary transfers, which are distributed over three years in the budget law. Agreements with regions must be concluded for the same term. We have finally reached this understanding, because, to be candid, both in the Government and in other government bodies there was a lengthy discussion on this subject but now this discussion is over. We must conclude agreements for the periods for which respective transfers are provided and, of course, guarantee the exact distribution of these three-year transfers among the regions. In addition, the timeframe should be legally determined for concluding federation-region and region-municipality transfer agreements. We are talking about 15 days here. The deadline for concluding agreements on subsidies with publicly funded and autonomous institutions and organisations should be set at 15 February.
Of course, the redistribution will still take place. It should be carried out as quickly as possible. That is why I decided that these acts and decisions should be taken by the people in charge of national projects themselves rather than by the Government and not be reviewed by the Presidium of the Council, which I head. This is just to speed up the work.
We will also upgrade the contract system. We proposed making changes to it. The draft law was reviewed at a Government meeting two weeks ago and thanks go to our colleagues from the State Duma for adopting it in the first reading. The document helps cut the time involved in municipal and government procurement, and improves and simplifies dealings with the contractors, including the choice of new contractors. I look forward to continuing our joint work in this area.
Last year, we paid special attention to geostrategic territories, which include Crimea, the Caucasus, Kaliningrad, the Russian Far East and the Arctic, and we continue to focus on them this year.
This year, we approved a state programme for developing Crimea and Sevastopol. A multi-purpose medical centre will be built and properly equipped already in 2019. We will be building Tavrida Motorway. This is the main route for tourist travel around Crimea. There are some issues there. When I met with my colleagues from the Communist Party before the Government report, they brought prices for fuel and lubricants in Crimea to my attention. I issued a directive to submit proposals for cutting these prices on the peninsula on or before 15 May. Our colleagues will soon report on what can be done.
Tourism remains the most promising sector of the economy in the North Caucasus. Last year, new resorts opened there, with ski slopes created in the Chechen Republic and Arkhyz. The number of tourists is growing, which in itself is not bad.
The construction of the northern expressway bypassing the city and the Vostochnaya flyover, as well as the Khrabrovo Industrial Park infrastructure, continued in the Kaliningrad Region.
The Russian Far East is, of course, a priority. Our colleagues from United Russia and the Communist Party were asking about it. The priority development area and the free port of Vladivostok are now going through a boom in private investment. Last year, it exceeded 190 billion roubles. More than 400 schools are being built and repaired. The situation with schools, kindergartens, hospitals and houses of culture is really bad there. Of course, we will need to continue to focus on that in the future as well. The Government will continue to support air travel from the Russian Far East. Starting this year, the discount programmes will remain available year round.
The Arctic also has a special meaning for our country. The research expedition Transarctic-2019 started out in March for the first time in many years to explore the Northern Sea Route’s capabilities. The construction of the Sabetta seaport has been completed. The Yamal LNG project reached its full capacity. In addition, the construction of the Northern Latitudinal Railway and the modernisation of the regional railway network are now underway − let’s not forget about it − since we should really focus on the Arctic.
Colleagues, it’s probably time to wrap it up, as my remarks really were quite long. But I wanted to provide you with a good overview of what we did together last year and of our plans for this year.
Once again, Crimea.
The opening of Crimean Bridge to traffic was a landmark event in 2018.
The national projects, which I covered in sufficient detail in my remarks, represent a bridge as well. National projects and this bridge connect the Russia of today with the Russia of the future, which we will inhabit five years from now. I’m sure that if we work well, we will succeed.