Transcript:
Dmitry Medvedev: Isn’t this a good place (Elektrozavod, Moscow) for our meeting! You can immediately see what industrial safety is all about: everything looks very convincing here. As someone has said, the only thing we lack here to start moving in space after a discharge is Nikola Tesla (a Serbian American inventor, physicist, electrical and radio engineer).
We have met here, at this electrical equipment plant, to discuss a number of very important documents within the framework of the Open Government. They concern industrial safety. It is time we amended the relevant law, partly because the law was drafted and adopted relatively long ago, in 1997, if memory serves. The investment climate has been adversely affected by the imperfect requirements to industrial safety. I hope that we will create a document that will promote our innovative development, enhance the efficiency of industrial processes and satisfy modern requirements to the reliability and safety of industrial production. Another important provision is to protect business from major encumbrances due to the application of the current safety regulations. As I said, the law was adopted 15 years ago and stipulates standard requirements that are now applied to widely different cases. As far as I can see, the issue concerns fundamentally different industrial facilities, from coal mines to gas-fuelled boiler stations.
It is applied to the requirements of the oversight and monitoring, and to the construction conditions. It does not fully cover research and design and experimental activities, and, as all documents with certain drawbacks, it engenders bureaucracy. And the reverse side of bureaucracy is corruption. It is much easier to come to terms with those who assess the quality of the work that has been carried out, than to prove it is well done. This is probably the main defect of the current legislation. This system should be changed.
Some enterprises require strict and constant supervision over production conditions, for others scheduled annual checks are sufficient. So the approach should be differentiated; at some instances personal self-control of the enterprise’s owner may be needed.
It is important to introduce balanced and differentiated sanctions for violations to the industrial safety requirements. We must simplify the coordination procedure as much as possible. This will allow new production capacities to be put into operation more quickly, and to reduce the number of inspecting officials. The other obvious thing is that the entire system should be simplified and should become cheaper, and red tape should be eliminated. At the same time, tough control should be established over activities at hazardous industries, and especially dangerous facilities. In some cases it must be intensified. At enterprises fraught with technological risks, workers and the entire working process must be protected by law, financial obligations, and the responsibility of people in charge of the work of the entire enterprise. I am speaking about the owners and the management. Many of those present here work both for the domestic and the external market. They can compare our experience with foreign experience – as a rule, this comparison is not in our favour, though not always – also in terms of investment attractiveness. That said, we must borrow the best world practices, which would also be useful for industrial safety as well. Giving entrepreneurs an opportunity to take part in the development of the norms of legislation is basically a new approach. This practice must be applied in the future.
Today we will discuss amendments to the law that were drafted by the Federal Service for Supervision of the Environment, Technology and Nuclear Management, together with the Government’s Expert Council and the business community. I know that the preliminary discussion in the Open Government format has led to significant changes to the bill. I hope you will now provide details on that, and will say what you are content with, and maybe the issues that were not included in the draft law. Then we will discuss what can be done regarding the latter. By expert evaluation, if the changes to the bill are introduced – and we have no reasons to doubt that – as soon as we agree on them, our manufacturing industry, our economy will save nearly 20 billion roubles of the 60 billion roubles that are allocated each year for the provision of industrial safety. And when new construction regulations are introduced, the overall economic effect from the decisions discussed today may, by expert evaluation, total 1 trillion roubles, which is a substantial figure. The decisions may bring this economic effect, not to mention the benefits for the improvement of our investment climate.
We will continue working in the same way. The next step must be to improve the legal framework in other spheres, including the ecological, construction, and energy oversight. These are vital components too. I think most of us will meet again to discuss the issues.
I’d also like to note that in October amendments were introduced into governmental acts on the energy infrastructure. The list of consumers who are entitled to a three-year deferment for connecting to power grids has been extended. In this case conditions for connection cease to be individual, but common for everyone. Unified rates must be approved in each region. The rates must be based on the consumers’ categories and the voltage levels. But this is just additional information.
I’d also like to say that in late September 2012, the Government approved a special concept for the development of the national standardisation system until 2020.
The goal is to adjust the necessary parameters and to prepare the system for innovations, including issues of Russia’s integration to international systems of standardisation. And of course, we should pay attention to safety and the elimination of unnecessary technical barriers.
That’s what I wanted to say in the beginning. Let’s proceed to a discussion on the key amendments to the industrial safety law. Following our discussion, this issue will be discussed at a Government Meeting and will later become a draft law. Colleagues, please make your comments. There are several people present here who will begin the discussion. Of course I will give everybody a chance to express his or her opinion. But please, be brief. Go ahead, Mr Melamed.
Leonid Melamed (General Director of the Composite Holding Company): Mr Medvedev, members of the Government, my colleagues who form the expert council have done me the honour of entrusting me to tell you how this work was organised, but let’s first have a brief insight into the history of this work. Discussion on this problem first began in 2004, when we discussed technical regulations concerning the safety of production processes. We failed to come to an agreement, but there were lots of negotiations. In 2007, when the industrial safety documents were being amended, there was a new process…
Dmitry Medvedev: Why did you fail to come to an agreement?
Leonid Melamed: We uncovered that there is a deep ideological rift…
Dmitry Medvedev: Between whom?
Leonid Melamed: Between entrepreneurs and the Federal Service for Environmental, Technological and Nuclear Supervision.
Dmitry Medvedev: Between the entrepreneurial community and the Federal Service for Environmental, Technological and Nuclear Supervision?
Leonid Melamed: Yes, exactly.
Dmitry Medvedev: I understand.
Leonid Melamed: There were several attempts in 2007 and in 2010. Finally, in 2011 the Government approved a plan of action that stipulated amendments to the industrial safety law and the establishment of a task force under the Federal Service for Environmental, Technological and Nuclear Supervision. They failed to come to an agreement again, because entrepreneurs said that amendments proposed by the Federal Service for Environmental, Technological and Nuclear Supervision make their business expenses even higher than the expenses of their Western colleagues, and that these amendments would not improve safety. By July 2012, after eight years of heated discussions, all significant disagreements have been settled except a minor agrarian issue…
Dmitry Medvedev: And who came to the rescue?
Leonid Melamed: We staged a discussion in the expert council and in the Open Government. We created a task force that involved representatives of the Service for Environmental, Technological and Nuclear Supervision, and almost all of the entrepreneurial associations – the Russian Union of Industrialists and Entrepreneurs, the Chamber of Commerce and Industry, the Business Russia organisation and the Opora Russia organisation, and we also invited 30 experts from your expert pool and about 70 other experts. There were expert discussions that involved experts, public communications in the Russian Union of Industrialists and Entrepreneurs, in the Chamber of Commerce and Industry, in Opora Russia and in Business Russia. Several self-regulatory organisations and insurance companies also took part. There were reports on the best world practices in the sphere of industrial safety. We received about 150 proposals through the internet mechanisms of the Open Government, and that was reflected in the draft law.
What conclusions can we draw? Firstly, I would like to say that the expert platform has started working and discussing such complicated and long-standing cases as this one. Secondly, we saw how important the role of influential experts is – in this case, these were Andrei Malyshev and Yury Udaltsov, they are authoritative and respected by all of the participants of this process; all the parties agree to delegate them the power to find compromises. And finally, our colleagues have a proposal that stems from the fact that we are in the very beginning of this process, and that this law will not help solve the problems, because the application of a law could strongly differ from what lawmakers initially planned. Secondly, we are now faced with a quite complicated problem, and there are several approaches we could take to find a compromise in the legislation, our colleagues will tell you about them, we should return to them in a year to review their work and amend them if necessary. That’s why I ask you to issue an instruction, so that we automatically return to this law and review how the practice is being applied. That’s all. Thank you.
Dmitry Medvedev: Thank you, Mr Melamed. I agree that we should return to this in a year's time. Let’s do so: if we now pass all of the iterations, all discussions in the Open Government, and if the Government introduces it for consideration in the State Duma, the Duma passes it and it starts working, than we will return to a discussion on it in the Open Government a year after its adoption, or even after its entering into effect. I support this idea. Let’s do this. Mr Kozitsyn, please, the floor is yours.
Andrei Kozitsyn (General Director of Ural Mining and Metallurgical Company): Thank you. Mr Medvedev, colleagues, I would like to continue the discussion. A great deal of work has been done briefly, this happened because you issued the necessary instructions; the expert council and the Open Government in three months managed to tackle this problem that had been lingering since 2004. Nikolai Kutyin (head of the Federal Service for Environmental, Technological and Nuclear Supervision) actively participated in it, along with the Federal Service for Environmental, Technological and Nuclear Supervision. I am sure that it would have been impossible to achieve this success without the understanding all the parties showed. In my view, we tackled an impossible task. This slide shows how we organised it and how it is organised in the EU – the comparison shows that our safety rules are much more complicated.
The next slide, please. Here is the draft law that now exists. A great deal of work on the evaluation of the regulating impact has been done – and it is negative. We have reached a compromise; Mr Kutyin will perhaps speak about it in his report. The compromise is (next slide, please) that we and the Federal Service for Environmental, Technological and Nuclear Supervision have decided not to examine capital repairs and everything related to this. This makes everything easier, because in line with the project, we passed an appraisal during the process of construction, and when the building becomes operational we have to turn to the Federal Service for Environmental, Technological and Nuclear Supervision to pass this project appraisal once again. Mr Medvedev, you mentioned the figure 20 billion. That’s approximately the annual cost of these procedures in our respect. Number two: as I have already said, and you took this down for your next instruction, our principled position is as follows. The old rules used by the Rostekhnadzor industrial safety regulator, and those of Gosgortekhnadzor before that, should no longer be applied to project specification, in order for us not to have to design 21st century projects based on unclear and obsolete rules.
If this idea is signed into law – we have spelled it out here – then we will see to it that the enforcement of that law has the desired effect, after new rules and regulations are included in a roadmap.
Next slide please. This is the exact effect you mentioned Mr Medvedev. If we resolve the Number two problem, the economic result will be one trillion roubles, as you discussed, up from the current 18 billion roubles, or maybe a little more. This will certainly take time, also to assess and approve the new regulations. But this is at least the economic effect we expect, according to an estimate of the Russian Union of Industrialists and Entrepreneurs and the expert council.
There is something else: this will also give us a strong competitive edge, because we have nearly exhausted the resources we had before. We must find some new inner resources now in order to put up strong competition. What we are doing today is one way to find this competition. We see and understand this. And the Open Government sees this too, which is even more important. As I said, three months is a short time. Next slide please.
Dmitry Medvedev: Don’t invite trouble. Don’t be too happy about reaching an agreement in three months after debating for seven years.
Andrei Kozitsyn: I don’t think there can be any more trouble. That’s in the past now. What we must do now is work, and we are working.
Dmitry Medvedev: We must adopt this law, that’s what we must do.
Andrei Kozitsyn: Certainly. So here’s the roadmap, which says how we should proceed. What is important, as you said, is that some progress begins on that roadmap. I mean, the Government – the draft law – and the State Duma. It is essential that we work closely with Rostekhnadzor on how this initiative should be formalised on this roadmap. We must see some product of this work, in the form of new federal rules and regulations. I mean, any initiative can be interpreted and formalised in a variety of ways. We will wait and see the results, and whether we will be able to achieve these targets. As you said, I think much will become clear a year from now. Thank you.
Dmitry Medvedev: Thank you Mr Kozitsyn. Now let’s hear the regulator. Mr Kutyin, go ahead please.
Nikolai Kutyin (Head of the Federal Service for Supervision of the Environment, Technology and Nuclear Management): Good afternoon, Mr Medvedev. We have been working on this for quite a while now. We began really focusing on developing new approaches in August 2011, when the Government approved the action plan. After that, we moved on to draft a new bill that includes the amendments that are being introduced into concurrent regulations. The bill, as has been said, was thoroughly discussed. The main discussions were held by the Government’s advisory council and the Open Government over the last few months. Much work was put in drafting the final document, which was made available to almost all business communities and the Government Executive Office. However, the most important question is, what is it about? We have moved from a general notion of “hazardous production facilities”, 294,000 in total, to differentiating them by category. As a result, we will have no more than 1,300 facilities in the first core category instead of 294,000, and about 7,000 in the second category. All other facilities will go to categories three and four, or will even be removed from the list of hazardous facilities.
How will this benefit us? Above all, this will eliminate overlapping functions, help differentiate measures to ensure industrial safety and eliminate the barriers mentioned today, because we had conducted a self-assessment by August 2011. The self-assessment helped us identify the weaknesses that result in higher costs of doing business in Russia, such as unjustified price hikes, and that feed corruption. Above all, this had to do with obtaining permits for using technical devices and various types of expert analyses to assess industrial safety. Most importantly, even though industrial safety analyses were conducted by experts, their outcomes were approved by a federal executive body, thus contributing to corruption, which inflicted major economic damage on businesses.
This bill removes these two requirements, as well as the need to obtain a permit to use technical devices... We have drafted fairly good technical regulations. We have a good understanding of how the design process works, and we believe that design bureaus can take into account all risk levels involved in operating hazardous enterprises. Therefore, there’s no need to lay an additional burden on entrepreneurs and ask them to obtain permits for technical devices. The same applies to expert analyses of industrial safety procedures.
Certain provisions were added to the bill during the discussion. That includes issues directly related to designing and building new facilities. We realised that we could add issues pertaining to the Urban Development Code, such as design and industrial safety regulations, to the bill. Discussions led us to take a look at the issue of risk management. Along with the business community, we have found what I believe is a good solution, where we allow design bureaus to assess risks associated with processes, equipment and personnel involved in operating a hazardous facility, and then design such a facility with a clear description of safe ways to operate it. After that, we moved on to the second stage, which is the assessment. In other words, what will the oversight authorities be responsible for in this area? How will oversight work under new design arrangements, as opposed to now, where things are fairly straightforward, with an inspector coming in and assessing compliance with current rules and regulations?
We agreed that oversight authorities will focus on compliance with the requirements set forth in these new innovative designs, rather than rules and regulations, so that the oversight becomes based on the facility rather than the rules. We have this set forth in our construction oversight regulations when we issue a certificate of compliance for the entire finished facility. In fact, we will apply the same approach to industrial oversight where industrial oversight authorities come and check compliance with the design requirements for technological processes, personnel and equipment, rather than outdated rules and regulations. This is an innovative rule, which we discussed over the last few months, and we found a solution which made its way to the bill that has been submitted to the Government Executive Office for further discussion.
An important issue that I've just mentioned (I’ll digress in order to speed things up) has to do with the commissioning of such facilities. The bill that was originally proposed had the commissioning scheduled for early 2015. The date was due to the fact that the bill was planned to be submitted to the Government in December 2012. Today, with the bill ready to be passed, we believe that if we have it discussed by the Commission for Administrative Reform and then approved by the Government, we can have it passed by the State Duma as early as this year. We can then put it into effect in 2013 rather than 2015, allowing the companies to complete the re-registration process by 2014.
With regard to subordinate legislation, we are confident that if the Government approves the regulations shown in the slides, we will be able to have them ready for the second reading and also have them ready for adoption by the time the bill is ready for approval, because we understand the philosophy behind the issues that need to be regulated by subordinate legislation, in particular, the Government’s resolution or Rostekhnadzor’s orders, from our work with the Open Government’s experts. So, if the decision is made, we will then be able to pass the bill next year and enact subordinate legislation in late December.
Dmitry Medvedev: Is that all? Thank you. I agree, it’s certainly better to do so in 2014 than in 2015, because 12 months is a lot of time to waste. Information about subordinate legislation and the general description of the project are also important, thank u.
Let's hear what the Chairman of the Board of Gazpromneft, Alexander Dyukov, has to say. Please go ahead.
Alexander Dyukov (Chairman of the Board and CEO of Gazpromneft): Mr Medvedev and colleagues, I would like to begin with a short video. Initially, we thought we’d give you a presentation but at some point reconsidered and decided that the video will do a better job showing the main ideas underlying the proposed changes and improvements in the oil refining and petrochemical industry that can be implemented if we switch to new industrial safety regulations.
Roll it, please. (Video begins)
This is a very important issue for businesses as well as for oil producers and the petrochemical industry. It’s perhaps one of the key and decisive factors for modernising our enterprises, providing us with a new approach to regulating industrial safety issues. It was already mentioned today that this will reduce operating costs and improve our competitiveness and also allow us to streamline our investment and thus significantly increase our investment capabilities. Speaking about its effect on the refining industry, the new approach will allow Gazpromneft alone, which is in the process of upgrading its three refineries, to avoid the need to invest about 100 billion roubles. Speaking about Russian refineries in general, they will be able to save over 600 billion roubles (by 2020) in the process of modernisation. The petrochemical industry would be able to cut its capital expenditure by 300 billion roubles.
But it’s not about savings alone. The new approach will allow us to pursue projects that currently unviable due to high capital costs. In turn, high capex numbers result from excessive regulatory requirements. Unfortunately, current approaches to regulating industrial safety are prohibitive for many construction projects.
There are other upsides to transitioning to a new regulatory system as well, some of which have already been mentioned. Businesses that upgrade their production facilities are not the only beneficiaries, since the new approach will stimulate the growth of related industries, such as designers, equipment manufacturers and insurance companies, as well. Currently, designers and equipment manufacturers have to operate within certain limits imposed by industrial safety regulations that date back many years. They have no room for innovation or creativity. Regulations based on risk criteria will allow customers, designers and equipment manufacturers to take a critical look at existing (mostly obsolete) technical solutions and develop better ones while maintaining adequate safety levels. Likewise, the new approach will give an impetus to the insurance business. Risk analysis techniques that come with the new approach will make it possible to identify specific risks faced by insurance policyholders much more precisely and help reduce the amounts of insurance coverage and insurance premiums for policyholders and Russian insurers who reinsure risks with international underwriters. Of course, this is a very important decision. It’s all about worker safety. That is why this issue has been carefully scrutinised as was already mentioned today. The new approach has been thoroughly researched for over more than one year by Rostekhnadzor, the Russian Union of Industrialists and Entrepreneurs, experts and businesses. On behalf of Gazpromneft, which was among the originators of the discussion on changing regulations and, accordingly, participated in the preparation of these decisions and witnessed the entire process as it unfolded, I would like to thank the Russian Union of Industrialists and Entrepreneurs, Rostekhnadzor and all participating experts. Of course, a special thank you goes to the Open Government, which has given a new impetus to this work.
To conclude, I would like to say that all of us working in the oil and the petrochemical industry hope that we will have an opportunity to design and build new plants based on new approaches and pursue our work based on risk criteria. Our foreign colleagues enjoy this opportunity, so we hope that adopting the amendments and Federal Law No.116 followed by the development of industry-specific rules and regulations that will determine the levels of acceptable risk and the guidelines for calculating risks... By the way, we have already drafted such a document for the oil industry in conjunction with Rostekhnadzor and the business community. These decisions will come as a major step towards improving the competitiveness of the Russian companies and enterprises and will accelerate the modernisation of the economy. Thank you.
Dmitry Medvedev: Thank you. Colleagues, does anyone have anything to add to this? Please go ahead.
Dmitry Pumpyansky (Chairman of the Board of the Pipe Metallurgical Company): My name is Dmitry Pumpyansky, Pipe Metallurgical Company. Mr Medvedev and colleagues, I cannot help saying it again for the umpteenth time that the Open Government and the expert council have certainly proved their effectiveness today as we consider this issue. Reaching a consensus on the issue debated at length by Rostekhnadzor, the Government and leading Russian business associations in a matter of three months is nothing short of a breakthrough achievement. To put this in prospective, it took us five years to tackle a similar issue in the area of technical regulations.
I definitely agree that enacting the law will instantly benefit the industry, streamline costs and reduce the administrative pressure on businesses. Of course, we should keep in mind that this is just the tip of the iceberg and there’s a lot of work lying ahead of us, where we will need to actually implement all of these great innovations, including the risk-based approach, the notification-based declaration procedure, non-use of expert analyses during capital repairs and streamlined insurance coverage of hazardous facilities. By the way, certain insurance issues remain unresolved. We will need to refocus on this and, perhaps, draft additional regulations. However there is one thing that really needs to be addressed as soon as possible and that is updating the entire set of regulatory documents in the area of industrial safety and related fields. That’s over 600 industrial safety regulations that we inherited from Gosgortechnadzor and today’s Rostekhnadzor, more than 800 labour safety regulations and a fairly large number of industrial environmental protection regulations. Therefore, federal industrial safety rules and regulations that will introduce up-to-date requirements and supercede legacy regulations should be drafted as soon as possible. Mr Kutyin has already mentioned this.
It is good to know that our concern has been met with understanding from other people. As representatives of leading Russian business associations, we are ready to join in this process and would like to ask you, Mr Medvedev, to provide appropriate funding for this work, since it will require us to hire a large number of specialists.
Dmitry Medvedev: What work are you referring to specifically?
Dmitry Pumpyansky: Updating obsolete regulations…
Dmitry Medvedev: Outdated regulations? Documents?
Dmitry Pumpyansky: The whole legal framework for creating evidential base for the new federal legislation.
Dmitry Medvedev: And the overview department hasn’t got these funds? I mean Rostechnadzor. Well, I’ll think about it. Although each time they ask me to find funding for updating legislative acts, I ask them, “What is your department paid for?” This is the work of specific ministries, departments and finally the Government. Otherwise, even deputy prime ministers will ask me for money for drafting the legal framework. I do not oppose paying experts. This is absolutely normal because nobody works for free. If there is a fundamentally new thing involving a huge amount of work, then we can think about it. Well, I’ve taken note of that.
Dmitry Pumpyansky: And the last point. If this work is approved, there is indeed a huge amount of work ahead, work on standardisation in industrial safety and labour protection. And this legal framework is closely connected with the common task of updating and harmonising with European requirements all technical standards, which number over 20,000 in Russia. For many years we have been discussing whether it makes sense to adopt the federal law, On Standardisation in the Russian Federation. In your opening remarks, you mentioned the updating of the national standardisation concept. We need a law establishing the purpose, role and tasks of various standards and regulatory documents regulating industry in general as well as the procedure for their application in this country. The majority of nations, including the United States, the EU countries, China and Israel, initially create standards as documents for voluntary use. Essentially Russia has the same practice. However those countries have a legislative mechanism which makes some standards mandatory in industrial safety issues. To date in Russia, this is a topic of discussion. In this regard, we propose to take to the Open Government the issue of discussing the draft law, On Standardisation in the Russian Federation. If our proposal is approved, we suggest that the relevant proposals be included in the draft protocol decision. The Russian Union of Industrialists and Entrepreneurs is ready to introduce the first draft law by the end of 2012. If Russia adopts the foreign way of funding standardisation… In industrialised countries, standardisation is mostly funded with money from enterprises. In Russia, standardisation and changes to standards have been traditionally funded by the state. Today, the last several years of work have produced a 50/50 ratio: changes to standards are funded by both the Federal Agency for Technical Regulation and Metrology and by industrial enterprises, and this has considerably accelerated the updating of Russian standards. Perhaps this mechanism should be considered when creating federal norms and rules on industrial safety.
And the last point: Mr Kutyin mentioned the possibility of accelerating the introduction of the amendments to the federal law On Industrial Safety. Perhaps then it will be possible to consider speeding up the re-registration of especially hazardous industrial facilities. This re-registration is included in the draft protocol decision for January 1, 2015. Perhaps it will be possible to conclude this work by January 1, 2014. Thank you.
Dmitry Medvedev: We will ask now. Mr Kutyin, can it be done in parallel with preparations for the law to come into effect?
Nikolai Kutyin: Re-registration…
Dmitry Medvedev: Re-registration of especially hazardous facilities?
Nikolai Kutyin: Once the law comes into effect, if it comes into effect on January 1, there will be no problem within a year.
Dmitry Medvedev: It will come into effect on January 1, 2014, if we do it the way you are proposing, right? If we succeed in adopting it this year, right?
Nikolai Kutyin: It will come into a full effect on January 1, 2014.
Dmitry Medvedev: So, you propose to attend to this issue beginning on January 1, 2014, is that right?
Nikolai Kutyin: No, before January 1, 2014.
Dmitry Medvedev: Before January 1, 2014? That is, do you propose to work on this issue simultaneously? That’s what I’m asking. Because Mr Pumpyansky suggests that. Good.
Nikolai Kutyin: A brief remark.
Dmitry Medvedev: Go ahead please.
Nikolai Kutyin: Some coal producing companies are here. In two years we could issue new…
Dmitry Medvedev: You have elaborated an extensive range of standards with the coal companies, which is very good. Yes.
Nikolai Kutyin: Yes. We have updated about 30 standards and rules with due account of the capabilities of the institutions of coal companies and the expert communities that they represent. Therefore, we also act in the same vein as the Federal Agency for Technical Regulation and Metrology. Of course, the Federal Service for Environmental, Technological and Nuclear Supervision alone could not issue 600 documents within a year, this work requires the efforts of all companies and experts, and here we are ready to provide support. Again, we have conducted successful work with coal companies for two years. I suggest that the metallurgists and oil producers share our experience. We are ready to re-issue these documents, to approve federal standards and rules, but this requires mutual effort.
Dmitry Medvedev: Good.
Nikolai Kutyin: And then the state funds will not be needed.
Dmitry Medvedev: Good. Please, colleagues, go ahead.
Alexander Galushka (President of Delovaya Rossiya national public organisation): Mr Medvedev, industrial safety issues are among the priorities of the non-commodity companies and industrial companies that are members of our organisation. I have three brief comments. First, in our view, when working on this draft law the developers have essentially dropped the obsolete, Soviet concept of industrial safety and have adopted a modern concept for the 21st century. Second, thanks mostly to the Open Government mechanisms, we see the arbitration principle being implemented in practice. They have cited here some examples where the working groups were formed under the Rostechnadzor (the same is true of many other issues). When a working group is formed under this or another department, it is not very productive as a rule. But in this case they have achieved a great deal.
Dmitry Medvedev: Arbitration – do you mean mediation? Or something else?
Alexander Galushka: Arbitration means that both the minister responsible for contacts with the Open Government and the overall system make it possible to look at this subject independently, from a fresh perspective and without the old-time prejudices and stereotypes. This is a very productive result, which makes it possible in general to say that the competitiveness of Russian jurisdiction increases and more favourable conditions for economic modernisation and for new industrialisation are being created.
And the third point, which is very important and which my colleagues have mentioned. Since the Open Government mechanisms have proved effective, it is very important to develop bylaws to this draft law on the Open Government platform; it would also be very important to organise independent public monitoring, because law enforcement produces lots of problems. It is very important to have this feedback on what is happening on the ground in order to introduce timely amendments. In our view, these are the three main conclusions that can be drawn from the results of this work. Thank you.
Dmitry Medvedev: Thank you. Please go ahead.
Vladimir Lisin (Chairman of the Board of Novolipetsk Steel, NLMK): Mr Medvedev, may I take the floor?
Dmitry Medvedev: Go ahead please.
Vladimir Lisin: I will not praise the Open Government, a lot has been said about it…
Dmitry Medvedev: Yes, of course.
Vladimir Lisin: Do you remember when we discussed the situation with the blast furnace three years ago?
Dmitry Medvedev: Yes, I do.
Vladimir Lisin: Finally, after four months, we have arrived at something, and this is important. Hopefully, the State Duma will not want to modify it, as often happens. We will monitor this. So there’s only one, the most important point left.
As for the Open Government, I must make some critical remarks as well. In effect, we have identified only the first layer of restrictions and those things that are currently a burden on businesses, including in terms of oversight. For example, the Main Directorate of State Expertise. It should be understood that such a body cannot operate on the market because this is the only agency that receives expert reports, dictates prices, and consequently, this is the only agency that is entitled to make a mistake. But especially hazardous facilities should also have an alternative and should also be able to work with independent companies.
The second issue concerns construction standards and rules. We discussed this issue ten years ago; we agreed two years ago that we should use EU codes. Everything remains as it was. In addition, the updated rules have aggravated the situation… Take a look, there is a bridge crane above us. The new updated construction standards include some coefficients adding a 20%-30% weight to this piece of equipment for no apparent reason. This means that the crane legs will have more weight and so on. That means in essence we are moving backwards. If we don’t address this issue now, we will continue to lag behind our European competitors, and including Kazakhstan and Ukraine, who have made better progress than us in this matter.
The issue of buffer zones seems to be about environmental safety. But it’s a hangover from Soviet times. We have to provide incentives for industrial companies to reduce pollution of the entire area, not just for some an artificially designated 500-metre strip or kilometre width around the plant. What’s more, the existing legislation does not specify any legal functions for these zones. Local authorities and anyone else who feels like it can build whatever they want there. As a result industrial companies are fined and face endless bureaucratic formalities to shift the zones. We must put an end to this. Pollution should simply be gauged at and near industrial plants, and near pipelines.
As for waste, there are several categories in Russia – industrial waste, production waste, etc., so accounting in this field is in a muddle. Inspectors demand separate papers for reusable waste, waste that can be used in land reclamation, and so on. This creates all sorts of difficulties and restrictions for industry, so we also need to sort this area out.
There is another question I would like to ask. It is connected with the new legislation. Federal Law No. 223 is not so closely related to safety issues. However, it affects a majority of private companies and others represented in this audience because it classifies them as monopolies merely for supplying 0.5% of their output, to say nothing of municipal heat and gas suppliers. So they have to submit certificates for all the commodities they need, and buy them only at auctions as government companies should. Imagine the paperwork!
The market situation is disastrous, and still the Ministry of Economic Development and the Federal Antimonopoly Service make us go through all that. If a supposed monopoly supplies a city with 1-2% of the electricity it generates, it can purchase everything it needs only through tenders – and the list of items necessary for production could be between 20,000 and 30,000 items for some companies. They also have to comply with the strict standards that apply to state monopolies. I appeal to the Open Government to do more to try to reduce the burden on the business community and ease the monitoring requirements related to production development and modernisation. Please reflect this in today’s meeting protocol. Thank you.
Dmitry Medvedev: Thank you, Mr Lisin. Now you are given the floor.
Andrei Chibis (Executive Manager of the Development non-profit partnership for the improvement of public amenities): Mr Medvedev, my name is Andrei Chibis. I lead the expert council’s working group for the development of housing and public utilities. I don’t want to pay compliments to the Open Government but would just like to say that our group has become very active. Thanks to the support of Mr Kozak and Mr Abyzov, no important documents in this essential and socially important field get through without us being involved and joint decisions being taken. Major repairs on blocks of flats and other problems that haven’t been resolved for two years or longer can be addressed quickly because the relevant draft law is almost ready, and experts have coordinated it in essence between themselves.
Dmitry Medvedev: Who do you think should get the bonus – Kozak or Abyzov?
Andrei Chibis: Neither, I think.
Dmitry Medvedev: You think they deserve a reprimand instead?
Andrei Chibis: Just that we should save taxpayers’ money.
Dmitry Medvedev: I see.
Andrei Chibis: Safety is essential not only in industry but also in everyday life, including housing and public utilities. You were right to say that even a boiler is a hazardous facility in this country. Present standards are a burden on the housing and utilities complex, hence skyrocketing rents, mainly heating tariffs. Liberalising the standards – by that I mean getting rid of the outdated ones –will definitely bring rents down.
Secondly, regulations surviving from Soviet times prohibit, for example, upgrading boilers in apartment houses and other buildings even though modern reliable technology is available today. So we have to build new boilers and lay pipelines to them, and so on. That’s another barrier to saving energy in municipal entities that have no central heating or major power generator. That’s a big problem. So the current liberalisation of standards is a real breakthrough for modernising utilities and achieving other goals.
I would like to draw your attention to two other matters that do not concern this bill or do not concern this bill alone. That is the issue of prioritising accounting of housing safety costs for calculating rents. As things stand, inspectors record violations but when the company at fault goes to the same inspection body to amend its rates, officials say they understand but cannot do anything because of the impending elections. So there is a problem here, everybody knows it, but no one lifts a finger to do anything about it – and when something bad happens, the company alone is held responsible.
Dmitry Medvedev: I don’t quite see what you mean by “impending elections”.
Andrei Chibis: Inspectors often…
Dmitry Medvedev: I just wonder what they mean by “impending elections”.
Andrei Chibis: In fact, they have nothing to do with elections even though they represent the regional authorities.
Dmitry Medvedev: Please just repeat what these authorities say.
Andrei Chibis: They say they don’t approve our rent calculations because they don’t think the rates should be based on economic criteria due to impending political events. That’s how things are, whether we like it or not, and we think…
Dmitry Medvedev: We have elections once a year now.
Andrei Chibis: We are happy about that, Mr Medvedev.
Dmitry Medvedev: This doesn’t just concern us, it affects the whole country.
Andrei Chibis: The question is about assessing what is really necessary for safety.
Dmitry Medvedev: What needs to be done?
Andrei Chibis: The mechanism for regulating rates has to be transparent to both companies and consumers, and the authorities must assume public responsibility for their decisions. I mean if there is an application for rate readjustment, and it explicitly formulates the main things to take into account, we must explain to consumers why this or that has to be done or cannot be done, and how it will affect service quality, safety and the performance of the infrastructure.
Secondly, we are implementing a plan to attract private capital for the modernisation of public utilities. This is of course a matter of key importance for such a capital-intensive industry. So companies have no end of problems after they conclude concession agreements or long-term lease contracts with investment obligations. It takes them a ridiculously long time to extend all the relevant licenses for operating hazardous facilities. On the one hand, a contract has been signed and the infrastructure passes into other hands. On the other hand, everything remains in a grey semi-legal zone while the paperwork drags on. We could definitely make this process faster and easier.
Dmitry Medvedev: Could it all acquire some kind of legal standing?
Andrei Chibis: It concerns a draft law which…
Dmitry Medvedev: Or could we make it a bylaw?
Andrei Chibis: …also includes an amendment to the law on concession agreements. We are currently dealing with this issue.
Dmitry Medvedev: All right, thank you.
Andrei Chibis: Thank you.
Dmitry Medvedev: Please proceed.
Alexander Shokhin (President of the Russian Union of Industrialists and Entrepreneurs): Mr Medvedev, colleagues. I really want to thank the Open Government, primarily because I have additional tasks for it. In particular, I believe that it was the correct approach to continue work on coordinating positions on an almost weekly basis over the past three months. This is a good example of how one should work towards a practical result rather than just preparing a bill by a certain date even if the draft has not been coordinated with business or interdepartmental differences are still to be ironed out. Unfortunately, many departments try to submit their drafts in whatever wording, even unfinished, just to meet the approved timeframe.
Of course, I also want to thank the “closed” (though not entirely closed) Government. Mr Kutyin has been working very actively with the RUIE. We hold annual conferences on industrial and environmental safety, and Mr Kutyin has spoken at all of them, and together we have been working towards achieving practical results within this framework.
By the way, in order to draw public attention to the issue of industrial safety and ensure that the interests of business in this field are met, we set up a special committee on industrial and environmental safety in 2010. Andrei Kozitsyn is the committee co-chairman responsible for industrial safety. I believe that the importance of this agency as a public platform has been recognised by the Federal Agency on Technical Regulation and Metrology and by business colleagues: even those organisations that are not members of the RUIE have been actively cooperating with its committee on industrial and environmental safety. We also plan to establish such public forums, committees, commissions and the like in other areas where they currently don’t exist.
Why am I praising the Open Government and the “official” Government? Because we want this technology to be used. There are two related issues that need to be given priority attention through this mechanism. Dmitry Pumpyansky has mentioned the issue of insurance: a system of mandatory insurance for owners of hazardous facilities was introduced this year. Last year we tried to coordinate what seemed to us reasonable insurance rates, arguing that the current rates are sometimes 100 times higher than the previous rates and hence pose a huge burden on business. Currently, insurance companies collect approximately 8 billion roubles but pay out only one percent of that amount – 70 million roubles – in claims.
I believe that this is a reason to resume discussions of insurance rates, just as we agreed to do six months after the introduction of the new rates. We should either change the method (for example, review the rates annually like social funds do, including by taking into account the results of the previous period), or let the market regulate the rates as is done in some other cases, and approve certain rules according to which facilities cannot be distinguished in terms of risk level, and so on. We suggest that this mechanism should be amended next year. If we do this within the Open Government framework, we will achieve the goal that is being discussed today.
We not only need to reduce spending but also introduce incentives for technological modernisation, This includes the reduction of direct costs, including for major repairs, the introduction of acceptable risk and the lifting of obsolete technical requirements that were developed several technological cycles ago. This should also be our goal in the field of insurance. Insurance rates for new technological facilities should be cut dramatically, several-fold rather than by 20% or 30%. This is also a consequence of the approach based on an assessment of admissible risk.
The second issue – environmental safety – is connected with the issue of industrial safety. As far as we know, the Government wording of the law on technological standardisation will shortly be submitted for its second reading. We have been working with that law for a long time and there are many provisions in it that we don’t really like. We have used many public platforms to put our views across. It would probably be good if debates on this were held within special working groups, the Open Government and the expert council before the law is submitted for discussion at a Government meeting.
There is one more issue to which I’d like to draw your attention. It concerns regulatory impact assessment (RIA), which is a mechanism for a public, understandable and transparent system of getting business involved in the examination of draft legal acts. In my opinion, it is good that Mr Kutyin and his colleagues have accepted the negative RIA of this draft law as a reason to look for a compromise or seek another course of action.
Unfortunately, a negative RIA does not mean that ministries and agencies should submit the law in its original wording, as is often the case. I will not provide examples here, but there is a long list of draft laws which were submitted in their original wordings in the hope that the necessary amendments would be made before the second reading. However, we don’t have a RIA mechanism for a second reading.
As far as I know, the Government is ready to introduce regulatory amendments on its own operations which would allow RIA to be used for the second reading of government-drafted laws too. This is a very important issue. Vladimir Lisin has said that we would like to see the draft of the law that has been coordinated before the second reading and has become better rather than worse. A number of additions that will certainly improve the initial version can be made during the second reading, provided that there are no deviations from the basic, fundamental coordinated positions. We could try out the RIA mechanism for the second reading of this draft law.
But overall, I would once again like to stress that the mechanism of public consultations and public examination and a desire to achieve results rather than simply submit a law by a certain deadline… Unfortunately, bureaucrats in all countries, including in Russia and the Soviet Union, often focus on submitting papers on time even if they don’t get a bonus for doing so, because they don’t want to get reprimanded. We should combine these two approaches, that is, submit the item on time and also ensure a positive result. The Russian Union of Industrialists and Entrepreneurs is ready to continue participating in all such public technologies and mechanisms. Thank you.
Dmitry Medvedev: Thank you, Mr Shokhin. Let’s give the floor to our host. Mr Makarevich (Leonid Makarevich, Director General of Elektrozavod), please proceed.
Leonid Makarevich (General Director of Elektrozavod Holding Company): Mr Medvedev, colleagues, it feels like I’m dreaming: industrial safety being discussed…
Dmitry Medvedev: Some unfamiliar people in your familiar environment?
Leonid Makarevich: …industrial safety being discussed at an industrial company. I think we are the ones who have had the firsthand experience of this problem over the past year as we have built several mechanical engineering plants from the ground up. That is why we are absolutely certain that what is being discussed here today – and we pray that it is adopted – will first and foremost help reduce the time needed to implement projects. I am not in a position to give a comprehensive assessment of the potential economic effects of this law from the perspective of profits and losses for the national economy, but I can tell you that upfront time spending for the construction and upgrade of industrial facilities would have been cut dramatically if this law had been in place today. I would say this is the most important reason to adopt it.
Secondly, and no less important, if the new law as well as subordinate legislation and relevant regulatory acts are monitored in this format, it will definitely be a success. It is very important that everyone who is working on these projects firsthand is given the opportunity to speak. As for the projects to upgrade basic assets that we have been able to complete so far… We can say this for sure, in particular, a colleague of mine cited a very good example where we were involved in a project where we eventually ended up producing structural construction units several times over and above the strength we actually needed. Unfortunately, this was what happened in the past. So I am sure that this law will help regulate the design, approval and construction project stages, which will have favourable economic repercussions and shorten project implementation times. Thank you.
Dmitry Medvedev: Thank you Mr Makarevich. Does anyone have anything to add? Could you please start formulating specific proposals on how to improve this legislation we are preparing. Go ahead please.
Alexei Komissarov: (head of the Moscow Department of Science, Industrial Policy and Entrepreneurship): Alexei Komissarov, Moscow Department of Science, Industrial Policy and Entrepreneurship. I would like to briefly underline the importance of this law for Moscow with its population of 15 million if you count all the temporary residents and visitors. Safety is very important too. I would like to cite some minor side-effects. Mr Dyukov here just talked about a programme to upgrade enterprises. I can tell you from my experience how difficult it was to reach agreement and obtain approval for the Moscow Oil Refinery modernisation project. Once the project was completed, the economic effects it produced were huge, not to mention the environmental benefits. Its harmful emissions fell by more than 90%. Anyone who regularly drives past the Kapotnya district knows how awful the smell was – well, it has almost gone now, and I hope it will go away completely.
As far as the proposals are concerned, first of all I am glad there will be an opportunity to cut the number of hazardous industrial facilities (in Moscow today there are 24,617). According to our estimates though, only 117 of them, that’s 0.5%, pose any real danger, while the rest could be easily taken off the list. My proposal is to extend the lists of countries and companies whose products and solutions are recognised and certified in Russia, particularly with regard to industries which have a shortage of innovative solutions. I am referring to countries and companies which have long-standing experience in producing the products and solutions in question.
I will give you an example. We ran into a problem in Moscow while implementing a large metro construction project. There is only one company in Russia manufacturing escalators, and they cannot cope with the demand. Their technology base has not been upgraded for decades. So we invited large manufacturers from Europe, Korea and Japan to open operations in Russia. They willingly agreed. The only problem they had was the fact that collecting all the required permits takes two to three years at best, which has made it impossible for them to participate in any of the public tenders to date, so the plan had to be abandoned.
Dmitry Medvedev: So what are you proposing? Are you suggesting we should recognise their certificates so that they can bid for your projects, or do you have something else in mind?
Alexei Komissarov: That’s one possibility. They may have certificates from recognised European associations and these certificates could be accepted here, where possible. This would also require some consideration, but I believe this could significantly simplify the process and attract more foreign investors to Russia.
Dmitry Medvedev: This would just mean that we value and trust the certificates of foreign authorities as highly as our own.
If we take the Customs Union, for example, I could understand that, given all the associated costs of the formation of the union, because that at least is a common regulatory space and common economic space. As for other countries – we did adopt a resolution on using EU technical regulations. But this was a set of regulatory acts, and not an individual decision with regard to a specific company, which is different, I think. In any case, all right, I’ve heard your proposal.
Thank you, colleagues. Thank you very much. Is there anything else? Okay. Then, if I may, I will briefly sum up the results.
First, I won’t deny that I was pleased to hear all the speakers praise the efficiency of the Open Government as a consultation mechanism, if, of course, Mr Abyzov (Mikhail Abyzov) didn’t arrange with all of you individually to support the Open Government. To be honest, this is what we created this platform for. If, thank God, it helps, we will use it in all other areas – you can be assured of that. Don’t be afraid of loading too much work onto the Minister and Deputy Prime Ministers in charge of this field.
Judging by what was said here: it’s a good thing that the draft law has been drawn up. The important thing today is to get it pushed through. There are some minor details still to be ironed out, but I hope that the Government will finalise all this in the near future and the appropriate draft law will be introduced. I support the idea of following an accelerated timetable. What Mr Kutyin (Nikolai Kutyin) said is fine – let’s work precisely in this way and get the draft law to come into force in early 2014. Simultaneously we will have it evaluated and do all we can to bring the new mechanism into use a year ahead of schedule.
The suggestion was made to radically overhaul the subordinate legislative framework. I am all in favour of that! In terms of funding, I would like to ask Mr Dvorkovich (Arkady Dvorkovich) to analyse the situation and see if we can allocate funds from the federal budget, if things are really looking desperate. Obviously, part of the work is always done on a partnership basis. But if we cannot do without additional funding, I am ready to issue instructions on this matter, because it is more important for us to release this set of bylaws. Otherwise the economy and individual businesses will lose much more than the cost of getting the experts to draw up the relevant set of subordinate legislation.
Let’s discuss the draft law on standardisation. I am ready to insert the relevant entry in the minutes. As I understand, a draft has been submitted by the Russian Union of Industrialists and Entrepreneurs. Do introduce it; we should see what it is all about, as should other entrepreneurial associations. Let us first consider it within the framework of the Open Government.
Next is the issue of the re-registration of high-risk facilities. I have just spoken about this.
Mr Lisin (Vladimir Lisin) pushed for a reduction in the number of burdens and supervisory functions on industry. All right, I will enter an instruction to this effect in the minutes. Everything should be done in the same way as under Law No. 223.
I agree that environmental security could also be discussed by the Open Government. Mr Abyzov, please take note of this. I know that this issue may prove even more difficult than industrial security because of the publicity involved in some of its aspects, but you won’t be able to back out of it, given the praise lavished on the new mechanism. Please, look into what can be done in this case.
We need to consider whether it is possible to emphasise the second reading as particularly important in terms of regulatory impact assessment. Basically I agree with some of what Mr Shokhin (Alexander Shokhin) said. If regulatory impact assessment is meaningful and can influence decision-making, a situation where a draft law is introduced with a proposal to look into something at a later date is unacceptable. As a result, the assessment is disregarded and the law lacks a regulatory impact assessment when it comes into force. So if we can take this into account in the second reading, let’s do that.
I am also ready to issue instructions regarding certificates from other countries. Let’s look into it, although, to my mind, there are some problems in this area. It would be quite difficult for us to make a list of public and governmental entities which we would trust as much as ourselves when it comes to taking individual decisions in the area of industrial security. I repeat, individual decisions, not in terms of adopting legislation.
And so, colleagues, thank you for being so attentive in assessing this work. This is in the interests of business – big, medium, and even small; so let’s continue our discussions. I hope that the draft law on amendments to the industrial security law will be introduced in the very near future, given the discussions that have taken place both here and at the meeting of the Russian Government.
See you all soon. A special thanks to our hosts for organising this fine working environment. Goodbye.