Transcript:
Dmitry Medvedev: Good afternoon, everyone. Happy holidays! I wanted to meet with you because you support United Russia's policy. Some of you are members of the party, and others may not like everything the party is doing, but we still need to discuss the issues at hand. The party is focused on the life of budget-financed employees, military servicemen, farmers and other categories of people. But this does not mean that United Russia is working contrary to the interests of the business community. I have always thought that United Russia is concerned about all people, including the business community. Therefore, I believe that we should talk about what the party and the Government can do within the framework of their programmes to improve the business environment and create conditions for the development of small and medium-sized businesses. We have been working towards this goal for some time, though not always successfully. But still, we have scored some achievements too.
By the way, United Russia has party projects aimed at developing small and medium-sized businesses. Other projects have to do with people's control, farming and the timber sector. Take the Industrial Urals – Polar Urals project, a big and very ambitious project. There are plans concerning other projects, including regional ones. Since improving the business environment is a national goal, I believe that we should have long combined discussions of party issues with debates on ways to improve the business environment. This would be completely reasonable. Honestly speaking, I wouldn't want other parties to monopolize this issue. Traditionally, the interests of business are supported by right-wing parties. Why is that? Do they have the monopoly on this? In fact, what have they done for the business community? I don't want to start polemics, but there is something I'd like to say nevertheless; it concerns the time when I worked in the President's Executive Office. At that time, different parties were represented in parliament, including the Right Cause. I feel positively toward many of those who worked and are working there – as they say, no comment. However, when we discussed laws in support of enterprise, right-wing parties assumed a highly specific stance, often joining forces with Communists.
Why did they do it? They did it to spite United Russia. It must not be like this. If you claim to be the defender of the business community, to be concerned about the development of the business class in Russia, you must forget about party preferences and vote in support of those whose interests you represent. You must agree that this is the way it should be. What I am trying to say is that United Russia should be a party of business people and a party of the public sector staff. It should represent those who work under contract and those who hold official positions at different Government agencies. This should be our goal, and you will probably tell me today what we should do in different spheres to achieve it.
This is all I wanted to say in my opening address. I think it is enough to start a discussion.
We have several presentations today, so let's first listen to what our friends have to say and then proceed with the questions. Okay? Well, then, go ahead, Mr Dymov (Vadim Dymov, Chairman of the Board of Directors of Dymov Meatpackers).
Vadim Dymov: Thank you.
May I have the first slide please? Mr Medvedev, you are absolutely right in saying that United Russia cannot oppose businesses, because the Government and the President have set an important task of creating 25 million new jobs, and they cannot be created without promoting businesses and improving business environment. As far as I know, an executive order was signed on 7 May, 2012, and one of its provisions says that Russia is to move up to 50th place of the Doing Business ratings by 2015 based on the World Bank’s data.
Dmitry Medvedev: The order sets a timeframe up to 2020.
Vadim Dymov: Yes, 20th place in 2018.
Dmitry Medvedev: That’s an ambitious and, I hope, achievable goal.
Vadim Dymov: Thank you for bringing this issue up. I believe these goals are important, because they are measurable and have deadlines. I will give you a brief overview of the Doing Business rankings for Russia. I believe that these figures may be useful even for politicians, since they help identify bottlenecks and best practices to resolve them.
You can see how Russia's ratings changed from 2006 to 2012 and our projected place of 112th in 2013. Remember, the goal is the 50th place by 2015, and 20th by 2020.
We shall see later what these ratings consist of, and I will discuss some of them in greater detail. They include construction permits, connecting to electricity grids, taxation, lending, protecting investors, international trade, contract enforcement, the resolution of insolvency problems, business incorporation, and issues of ownership.
You can see that changes in the rankings are highlighted in green. The slide clearly shows that Russia has made a substantial move up in the area of taxation. Later, I will talk about three parameters, which, in my opinion, are very important for job creation. I will even give some advice that can be used by party leaders to make a significant breakthrough in this area. Next slide, please. I took three positions: building permits, connections to electricity grids, and taxation. The first two clearly show Russia’s place in the ratings. They measure it by the number of steps involved in obtaining a permit, time it takes to obtain one (344 days for building permits) and connection costs – 129%, I believe. The calculations are made on the GDP per capita basis. Notably, indicators for Russia are mostly derived from numbers for Moscow. Please note that some of the cities in these rankings have fairly high indicators, which shows that we have a good foundation to build on. If there are representatives of these cities here, we can share our ideas on these issues. In Surgut, there are only 17 steps as compared to 42 in Moscow. In fact, this small slide shows what can be done quickly in order to improve existing indicators and achieve an economic breakthrough.
Similar approaches are used for ranking everyone in the sphere of taxation. Next slide, please, and I’ll show you what’s happening there. As I was getting ready for this presentation, I tried to choose the most vulnerable points that, if addressed properly, will lead to a breakthrough. Look, this one is about obtaining a building permit – a commonplace example now. We are required to reduce the number of steps from 47 to 20. That’s quite feasible, if we take this task on as a party. I believe we can do it. In China, they have only six steps.
Next, cutting the number of days required to obtain a building permit from 344 to 90. It’s a specific task that has a specific solution, a no-brainer, really. China has this period set at 67 days. I will stop here, you can read the rest for yourself, and I’ll continue with power supply. I won’t go into details here, either, because it’s all clear. One thing, though: I’ve been involved in the working group on grid connections at the request of Sergei Sobyanin along with the Moscow Department of Science, Industrial Policy and Entrepreneurship. This is a brief presentation (I'll leave it with the organisers) showing that significant changes have occurred. You’ll see where Russia stands in the ratings. I believe that Mr Sobyanin sought to connect businesses to the electric grid in five steps, with the process lasting no longer than 20 days. The arrangements have been agreed with the Moscow United Energy Company and the Moscow United Power Grid Company. I'll leave the paperwork here, so feel free to take a look.
Taxation is a more complicated issue. As I said, the state has done a lot of work in order to break new ground in creating proper conditions for businesses. However, the positive results of this work are offset by tax authorities, especially the lower level ones... I’m not talking about the executives who share the beliefs of our national leaders. Do you know what happens at lower levels? I believe that lower level tax inspectorates are ruining the idea. I think that Gerard Depardieu, who thought about moving to Russia, would barely be able to do business here, because it requires an inordinate amount of paperwork, which is a waste of time. No one but Russians can put up with this state of affairs.
Another important thing is the presumption of taxpayers’ good faith. For example, my company pays more taxes every year. How can that not be OK with state authorities? On the face of it, they should like it, but what tax officials (especially regular tax inspectorates) do is they send two or three of their employees to our offices. They start showing up at our offices every day asking us to produce piles of entirely unnecessary documents. Eventually, they show us a document that basically says that they have to have us pay them that way or another. Another trick is a document that says: “We cannot reimburse you for excess tax amounts, because you have arrears in the amount of four roubles.” I have an actual letter from the deputy head of a tax inspectorate that says that we have arrears in the amount of four roubles. I believe that this is a desecration of a wonderful idea that allows us to attract investors from all over Russia.
To conclude, I believe that consistent, joint efforts in these areas will help us grow the economy, improve our standing in the ratings and increase Russia’s contribution to the global economy. Perhaps, at the end of the meeting, we will create specialised working groups. What do you think, Mr Neverov? These working groups will help us make these small changes that have already been agreed happen.
Thank you, Mr Medvedev. I think this meeting is very important both for the party and for the business community because synergy and the opportunity to listen to and hear each other would ensure the adoption of these amendments. And this guarantees that the results will be achieved.
Dmitry Medvedev: Thank you very much.
Vadim Dymov: Thank you.
Dmitry Medvedev: Actually, I decided to hold this meeting two months ago, realising that the party must use its venues to meet with various groups of voters, those who really make a difference to life, those who are changing the economy and creating new jobs, as you have just said. Jobs is our future.
Incidentally, I am fresh back from a meeting of the Commission on Social and Labour Relations which comprises employers, the trade unions and the state, and this is precisely what we talked about there. You have told us some interesting things, though many probably know about them. Of course, it is hard to compare Moscow to Surgut (we spoke about it at the Government meeting yesterday) simply because Surgut is smaller and there are fewer businesses there, so for understandable reasons all the procedures go faster there. One should compare similar cities and in that sense our metropolises cannot stand up to criticism in terms of the number of administrative approvals and the time it takes to get them.
In Moscow, although the situation is changing for the better, Sergei Sobyanin has been taking many useful decisions, all the same it takes on average (I’ll tell you how long, but don’t be cross with me because you will surely tell me that it is longer) it takes about a year to get a construction permit. Just recently it took two years and now it takes about a year. This is sheer madness, I am sure no other country has this. You have cited China as an example, a telltale example perhaps, because China is also a state with a fairly strong vertical power structure where the market depends to a large extent on government decisions, not like in this country, and yet things get done much more quickly there, with less paperwork. Of course, it also has something to do with traditional Chinese discipline and many other things.
We will talk a bit more today about taxes and taxation. I would just like to say the following: Depardieu may come, we have in any case a flat 13% income tax rate and we are not going to change it, unlike some others who have jacked it up sky-high. You all know it, don’t you? 75% on incomes in excess of 1 million euros, if I am not mistaken. That is normal for people engaged in business. So, let him come, only he shouldn’t behave like some of our people who ride around on scooters after several glasses of wine.
Well, let’s move on. Alexander Brechalov, please. I understand you too have a presentation.
Alexander Brechalov (President of the OPORA RUSSIA Russian Organization for Small and Medium Entrepreneurship): Thank you, Mr Medvedev. Thank you, colleagues. We too have a presentation and we would like to take you from the global level, which Vadim(Dymov) spoke about, closer to home, to the regional level. For some years now OPORA RUSSIA (let us look at this slide) has been conducting studies of the business climate in the regions, we target various sectors and various industries. This year we carried out studies in 39 regions with special emphasis on the processing industries. Here is the rating. Different colours show areas from the Moscow Region to the Khabarovsk Territory. Next slide please.
We also took 12 cities with a population of a million plus and compared the situation in major cities according to 29 criteria. Next slide.
I would like to briefly touch on specific problems. Last time we were happy to report that high taxes dropped out of the top five problems, but now it is back in second place. A clarification is in order. I am not referring to taxes and tax administration in the classical sense, but to insurance premiums. We cannot help talking about it, we raise it at all the meetings and all the venues, but the problem is still there. Mr Medvedev, I appeal to you as the party leader: we have to go back to a discussion format, a working group to see the real profile of small businesses and how insurance premiums influence the situation and the economics of these businesses.
We were proud to report that we were gradually getting rid of the practice of “under the table” payment. Our studies (based on concrete discussions, not impressions or guesswork) indicate a movement in the opposite direction. And you know what is the most interesting thing? In reality, business does not mind. I’ve talked with many people in the regions and they say: “What’s the problem? We are back to the format that existed in the 1990s.” The tax people and the police are happy: they sit down and make a record of the economics…
Dmitry Medvedev: In other words our small businesses can operate under any conditions?
Alexander Brechalov: Yes. They are very tenacious and resilient.
Dmitry Mededev: You can do what you like: you can support business and we will survive and if you don’t support it we’ll survive anyway.
Alexander Brechalov: Sadly, the state stands more to lose in this case, and business seeks greater transparency. I suggest that we revisit this issue, discuss it in any format at any venue. You see all the other problems our business faces. The situation remains basically the same: in our previous report we also spoke about a shortage of personnel. Next slide please.
Dmitry Medvedev: That’s interesting. Can you go back to the previous slide? I don’t know, any study is objective up to a point… I have long known that corruption as a serious obstacle takes a lowly 6th place, with only 8% mentioning it. I am just curious, I would like those of you who will speak or ask questions here to tell me: do you really believe it is a factor that affects your business and makes it less competitive or is it a negligible factor? Corruption is at the focus of attention, and it is mainly connected with the state officials and all kinds of high-profile cases, but formerly it was businesspeople who encountered corruption (more serious, systemic corruption). What is the situation now?
Alexander Brechalov: I have a separate slide on corruption. Please go forward… (shows the slide) Human resources: you see the availability of qualified engineers and technical specialists and the availability of skilled workers, more than half of respondents give negative assessments.
Next. Land and property, office space, warehousing. The situation is rapidly moving into the green zone, land and production premises is still closer to 50%, ie negative assessments.
Next slide, please. The energy infrastructure is a headache, and in our study the accessibility of new energy capacity is closer to 50%, though the quality of energy supply is improving (which is good news).
Next slide, please. Administrative barriers. The overall level of administrative barriers, whether or not they are a burden and a breakdown by segment. We took that issue very seriously: the performance of the tax agencies. You see that about 19% of respondents have a negative opinion, which means that tax administration and taxes, like in our previous study, are not among the top five problems…
Next, corruption. The prevalence of corruption in various situations. Point one is access to government orders and municipal orders. Below is a footnote which says that the share of respondents who chose the answer “corruption” in this situation is a common phenomenon, and this accounts for it being in the sixth place. You have mentioned the capacity of small businesses to survive and adapt to the situation, which is why it is not singled out as the main problem. Businesses have learned to live with it. This was the last slide in my short presentation.
I would like to flag one issue that is very important for us. OPORA RUSSIA has gone further in its investigations and we now pay attention to municipal management because small businesses are registered with municipal authorities. For good or bad, there will never be big businesses in communities of less than 100,000 people. It does not pay to have a big business there for a variety of reasons, so the only way these areas can survive is by promoting small business. We would like to draw your attention to the municipal head, who is the key figure. It is no secret that the majority of municipal heads are United Russia members. Let us pay more attention to selecting these people. We have examples, I can name them.
Dmitry Medvedev: Who are they? Go ahead, name them.
Alexander Brechalov: Yes, I would like to name them. For example, Timur Nagumanov, the head of Drozhzhanoye municipal entity, Republic of Tatarstan. Three years ago it was in the bottom spot on all counts and was 98% subsidised. Since then he reduced the subsidy level of his region by 25% and (wait for it) in two and a half years there appeared 380 small businesses. 380. The population is 25,000 and it is 200 km from Kazan. I was there last week and saw for myself how the land lies there. It is a vibrant community and it will survive. In neighbouring municipalities their heads just shrug and say, we are a subsidised municipality and there is nothing we can do about it. But it is a level playing field for all of them. We see a simple solution to that problem and I think the governing party should pay attention to it. First, it should set qualification requirements to the candidate the party nominates for municipal head. Yesterday’s commander of a traffic police regiment or head of a credit card department at a major bank is not an option. Yes, the commander of a traffic police regiment, with his experience, may do something to lift up his region, but it is not very likely...
Dmitry Medvedev: I did not quite get the implication with the second character. I have no problem with the traffic police regiment commander, probably a very experienced man.
Alexander Brechalov: I know a 27-year-old man in charge of a municipality of 120,000 people. There are 38 municipalities along the Don federal highway, and there are just two roadside service stations. He tells me: “You Muscovites, public figures can be glib about these things. But I can barely make ends meet, we are a subsididsed municipality...”
Dmitry Medvedev: I didn’t understand, is it good or bad that he used to be a traffic policeman?
Alexander Brechalov: It’s obvious, I think that…
Dmitry Medvedev: And the guy who was in the credit card department?
Alexander Brechalov: I think none of them are well-equipped for the job. Timur Nagumanov is the model: he has managerial and business experience, he has an education. That’s number one.
Number two. When your representatives run for office, they should probably have concrete business plans for the development of the community over the next four or five years and later, by way of public control and public discussion, demonstrate to the voters how it all works out. Make a note of this: the Satkinsky District in the Chelyabinsk Region crashed like all single-industry cities in 2008, but now it is very much alive. Why? Because the municipal head and his team and a huge public council discuss absolutely all the plans and the results, they have arguments, but they are moving forward. And I think training is very important. I am sure that the previous speaker, Vadim Dymov, never stops learning and that is why his business is doing well. The same applies to the heads of municipalities.
And one last observation. OPORA RUSSIA has been sponsoring the federal Business Success contest for the second year in a row. The main aim is to involve the municipalities, not to show how badly the municipalities are doing, but on the contrary, to reveal best practices in the regions. The final will be held on 27 February 2013, with nearly 600 municipal administrations coming to Moscow. We want them to establish horizontal links and to demonstrate their good practices, and to show that with the instruments now offered by the state one can work and promote small business not only in cities with more than a million people, but in communities of 12,000 or 20,000 people. Thank you.
Dmitry Medvedev: Thank you. I would like to say a few words. Specific issues… We have government ministers here, they are keeping quiet but they are listening and drawing lessons. We see Anton Siluanov, the Finance Minister and a United Russia party member, which is very good. We will yet be able to discuss insurance premiums, perhaps even today.
As regards the role of municipal heads, I agree with you absolutely, 100%, not 99%, but 100%. Districts within one and the same region differ so much. Districts with the same level of budget sufficiency may differ as day and night. Frankly, the reason is easy to tell. There are exceptions, and thank God they exist, but it can easily be seen from the person’s biography: if a person has managed to organise something himself, even something on a small scale, chances are he will succeed at the municipal level. For instance, he used to have some kind of enterprise...This is not to say that he should turn the whole district into his own enterprise, and such things happen, as we know, but at least he has the skills. I always welcome it when representatives of small and medium-sized business become district leaders: this is normal, incidentally, it is considered normal practice in the whole world.
As for the suggestion that programmes or business plans should be presented during elections, election campaigns, I think that is a sound idea. The head of a municipal entity or region should present his vision of the region’s future. This should not be just a set of theses regurgitating the United Russia programme. That is too general. He must prepare a detailed plan of how the region will develop, not wishful thinking or populist slogans; it should match the real economic potential and his idea of what investors he could attract to the region.
And the last thing I would like to say at this point. It occurred to me that perhaps we could propose the Business in the Regions project as a party project. I think it is very important. Of course, big cities have their problems. But they have a slightly different business environment, as we know. Life is a bit different. The regions are a different and a very difficult problem. I would like to ask my colleagues to think about it and make comments. Needless to say, together with OPORA and other partners. Thank you.
Now, I have a suggestion to make. I have some more speakers on my list. But I think there is a sense that we can alternate speeches with questions. Otherwise we will be stuck with presentations. Would anyone like to ask a question or say something? I am just addressing it to the floor. Let us start with you and move round the room. Please introduce yourself.
Sergei Ashinov (United Russia member, Director General of Etana Pure Polymer Factory): My name is Sergei Asinov, I am from Kabardino-Balkaria, the Etana pure polymer project. The aim of our project is to provide farmers in southern Russia with quality packaging, environment-friendly containers, that is, to help tap the potential of the southern territories to grow vegetables and various food products.
Our second task is to unite around this agro-industrial park about 20 food processing projects. The project is special because it has been initiated by the primary party cell. It had grassroots support: we held two public hearings and people were almost unanimously in favour of the project. It is being implemented in areas with a Russian-speaking population: Maisky and Prokhladnensky Districts in Kabardino-Balkaria. We have acquired perhaps the best technology in the world, the most modern technology and technological solutions. Leading world companies from more than eight countries are involved. Two years ago what was a primary cell initiative developed and was backed by the United Russia party and was included in all the development programmes, integrated in the regional and local programmes. The Government started building the infrastructure (more than $50 million), and we have been given guarantees...
Dmitry Medvedev: How lucky you are. That’s the place to do business. Let us all go to Kabardino-Balkaria.
Sergei Ashinov: Please come.
In other words, everything seems to be fine, but there is one problem. For two years now the project has been waiting for Vnesheconombank’s approval. We did not choose VEB by chance, it is perhaps the best financial outfit and everything seems to be going…
Dmitry Medvedev: Why is it the best if it has been examining your project for two years?
Sergei Ashinov: The problem is precisely that the evaluation procedure is too cumbersome.
Dmitry Medvedev: So, you are addressing me as Chairman of the Vnesheconombank Supervisory Board, if I understand you right?
Sergei Ashinov: Well, we are addressing you above all as the leader of the party since it is a party project. But also of course in your capacity as the Prime Minister and Chairman of the Supervisory Board.
Time is pressing, we have to order the main technological equipment no later than May because it is imported via the Rostov port, which freezes up in winter and we are afraid that we will again have a one year lag, and we cannot let down our partners.
Dmitry Medvedev: I see. Considering that your problem, though important, has a local character and concerns only you, I can suggest one thing: pass on the materials to me and I’ll issue instructions. You have pressed me against the wall, I have no other option.
Sergei Ashinov: Thank you.
Dmitry Medvedev: All right. Agreed.
Let us move on, colleagues. Let's do it this way – first, this side, you over there, and then here, and then the people in the back on this side, if anyone would like…
Natalya Afonina (Director, Kovaniy Stil Trading House, Oryol): I actually signed up for a presentation. I won’t make a presentation, but I would like to speak a little longer, if I may…
Dmitry Medvedev: I am not against presentations. It’s just that people tend to go to sleep when there are too many of them. You know how it is.
Natalya Afonina: We’ll try to wake them up. My name is Natalya Afonina. I have a very small company in the small town of Oryol. We produce wrought iron decorations. But it is not about what we produce, but rather about how we produce. If you want to see an entrepreneur who used state support measures, that’s me. Three years ago when we started our business…
Dmitry Medvedev: Look at her, everyone, she is a rare phenomenon.
Natalya Afonina: No, not very rare anymore. But when the programme was launched in December 2009 and grants were distributed, people told us: “What do you think you guys are doing? Forget it. You won’t receive anything. Everything has been paid for and agreed in advance.” But we decided to let what would happen, happen, and we wrote a business plan. We are young, ambitious, and creative, and we want to have our own production company. Well, when we received our grant, we told everyone that it is realistic and possible, and there was a groundswell of enthusiasm. Businessmen went to the state for support. I know that young businesspeople in other regions also received state support. Not a single enterprise has been shut down in the Oryol Region, for example.
Dmitry Medvedev: Natalya, tell us what kind of support you received and how did you spend it?
Natalya Afonina: It was a 300,000-rouble grant. We wrote a business plan to open a production facility, spent some money, rented the premises for several months, bought our first equipment, and set up several workplaces to get production started... But today, I would like to ask a question as a representative of a small production firm. I have two questions. First, how should state support measures be modified, especially for production firms? There is a big problem in this regard, and I think that I am speaking on behalf of many individuals... We are moving our production for the fourth time in three years. In other words, we are constantly changing our premises – sometimes because we have to expand and other times because we cannot reach an agreement with our landlord. As a result we invest a lot of money in production, comply with all of the fire safety rules and so on, and then all of this ends up staying at the site that we had to leave... Make no mistake, we are not asking for a space for free. We don’t want that. We are entrepreneurs, but many production firms face this problem and it bothers them so much that they do not want to expand. I was shocked when I heard this. Why? People say: “Suppose we buy the equipment and create more jobs only to be asked to vacate the place that we are renting, and we’ll go bust. What are we supposed to do?”
Dmitry Medvedev: What needs to be done, Natalya?
Natalya Afonina: I have another state support measure to suggest. For example, as there is a state support fund, why not envisage subsidies on loan interest rates? Or perhaps, this could take the form of tax breaks. Let production people buy out enterprises at normal prices that are commensurate with the rental rates in the given region. Let this be for 10 or 20 years. I would like to leave my enterprise to my children. However, I do not want to be chased out of my production facility tomorrow. I want to know what I am investing in. This is my first proposal.
Second, I would like to mention a huge problem that you all know well. I think that I am speaking for all of the individuals sitting here. The problem is the shortage of working hands in production. I should tell you that we have offices and we have tried – with varying degrees of success – to work in over 15 regions of the Russian Federation. And it was the same everywhere. It is far more difficult to find a skilled welder than a deputy director, or market specialist, or whoever. This is a systemic problem and it is very important. I do not claim to have a pat solution, but I would like to draw your attention to this issue because it is important and it must be worked on. Thank you. And special thanks for lending an ear to a small company located far from Moscow.
Dmitry Medvedev: Now tell us what you do. You have intrigued me. What can a small company located far way from Moscow do for 300,000 roubles?
Natalya Afonina: We produce decorative wrought iron gates, fences – you name it – everything that looks beautiful and is made from metal.
Dmitry Medvedev: Super.
Natalya Afonina: We are modern blacksmiths, so to speak.
Dmitry Medvedev: Cool. Thank you very much.
Natalya Afonina: Thank you.
Dmitry Medvedev: A great speech.
Let me begin with human resources because the problem has many more dimensions to it, and all businesses face this problem. There is no ready-made solution in this regard. Because the system of personnel training that existed in the Soviet Union has been destroyed unfortunately, and a new system is still in the making... There are many examples of good vocational schools and colleges created with the participation of businesses – and usually with the participation of the regional authorities. And there are other not so good examples when you go to a former vocational school and it seems as though it is dead and the people who are studying there see themselves as patent losers who have no career prospects and want to while away their time without any hope.
There is only one option – to establish fully fledged public-private partnerships in this sphere. Because training skilled workers – either welders, who everyone is speaking about, or other highly skilled workers – is something that calls for a common effort. The state will never assume full responsibility for this. Why? First, because we have a different kind of state than before, and second, because we do not know what your needs are. Which types of vocational schools need to be created, and what should the joint responsibility of regional business and regional authorities be? You should go to your bosses and say: “You know, we have a deficit of such and such professions. We have a trade school. So, let’s change its core activity and train not lawyers with an uncertain background and a secondary education but rather representatives of industrial trades.” Or, for instance, you may need tourist business specialists trained accordingly… In general, this depends on the region. This should be the result of joint decisions.
We once launched such a project as part of the national Education project, and allocated funds in this regard. I remember that we allocated a total of... Let me convert this into dollars, although this is not quite the proper way... About $30 million... We allocated the funds on the understanding that the regions would allocate a matching amount, so that about $60 million would be available to open one vocational training school. Thirty regions did this on a pilot basis. Many of them are doing well. I think that this programme could continue – not necessarily at the federal level, but it would be quite appropriate at the regional level.
As for state support measures, which is another interminable topic, I think that state support measures are needed, but only over a certain period. You know that we are speaking to some extent as members of the entrepreneurial class because I too was engaged in business for a long time. It is impossible to imagine that state support measures will continue indefinitely. Otherwise, what kind of business would that be? When we had the crisis, we launched corresponding programmes and I think that we have achieved certain goals. They should continue. Not at the federal, but rather at the regional level, so that we can see which businesses need incentives, including through loan interest rates. I think that we would do the right thing by going down that road – except for cases when the state declares this or that area an absolute priority.
Let's move around the room, so that no one is left out. Would you like to begin?
Yevgeny Rodichkin (General Director, Kosmos Group, Izhevsk): My name is Yevgeny Rodichkin. I am a project coordinator in the agro-industrial complex in the Volga Federal District. I think that the time has come to discuss our agriculture, which is really a very important issue.
Dmitry Medvedev: Go ahead.
Yevgeny Rodichkin: Yes, thank you. Now, you initiated the national Agro-Industrial Complex Development project. In fact, your support gave a boost to our agricultural complex. Since then, we have doubled our poultry production and increased our pork production 1.5 times.
Dmitry Medvedev: What is your enterprise doing?
Yevgeny Rodichkin: Milk, poultry, and pork. The Volga Federal District is growing fast. Let's face it – our growth was motivated by government support. We were growing for five years, but growth stalled this year. Let me cite an example... In our region, they issue subsidies to credit the loan interest rate. This year, our people – we are referred to as “kolkhozniki”, or collective farmers, which is a kind of slang nowadays – were queuing up from 3 am in front of local agriculture ministries to get the money. The Ministry of Agriculture opened at 8 am and by 8:20 am the funds had run out after the first five customers had been served. And all of the rest went home empty-handed. They did not receive any funds in August, September, October, November or December. The funds were apparently carried over to next year. Mr Medvedev, when this project was launched in 2006, its budget was three times smaller than it is now, but it was spent more efficiently. Where are the funds going now? That’s the first question. I think that they are throwing the baby out with the bathwater. And then they are also throwing away the tub. This is the crux of the matter. This needs to be sorted out. Another issue related to these subsidies…
Dmitry Medvedev: No, they sell the tub.
Yevgeny Rodichkin: They probably do. Speaking about these subsidies.. For every tranche, you have to hire a lawyer because they immediately come to perform an inspection. Moreover, they bring along the OMON and SOBR special police forces. There was a case in Udmurtia when individuals from the Ministry of Interior came over regarding subsidies and interest rates... They summoned the head of the procurement department in charge of fodder and asked him: “Why do you buy forage grain in July and August and only feed it to the animals in October? Why? You are spending government money.” He replied: “The new harvest grain is cheaper at the time, and then the price goes up. This is normal.” They answered: “At the Ministry, we think that the funds have been misspent. Be kind enough to return the money, and we will also fine you…” Of course, the courts take our side, but we have to pay for a lawyer, and the whole thing ruins our nerves. Instead of buying grain, you have to deal with people in uniforms. Something horrible is happening in Udmurtia. We told him: “Why did you choose this job? Come to our village... We are short of workers. Buy grain for us properly. Process it like the Japanese, who only have two-week stocks.” No, they don’t want to work. They want to inspect others. This is also linked with subsidies, and it is a terrible headache.
And the last thing. From a party viewpoint, I think that the Russian Agro-Industrial Complex party project should be given a new lease on life. My personal opinion is that it is needed. The regional elections were held two months ago and 80% of the rural folk voted for United Russia. You can’t hide the truth from the people. They see that jobs are being created, wages are being paid, cowsheds are being built, pig farms are being constructed and machinery is being bought. What we had before the 2000s when agriculture shrank four times... Those times are gone. The party makes it a priority and the people respond by voting for it. Businessmen say that retaining a client is eight times cheaper than attracting a new one. Retaining a constant client. Agriculture is our constant client. Let's retain it so that not 80% but 100% vote for us. Thank you.
Dmitry Medvedev: I am not sure that any comment is needed. I think that you said it all. It is true, though, that they like to inspect things here. But, on the other hand, sometimes inspections are needed. The question is whom to inspect. Certainly not people who engage in such activities as farming.
Let's go on. We had two questions here. Let's have two questions here as well. And then we will move on. You choose who will ask the questions.
Alla Startseva (Vice President, Dominion Unified Managing Company, Vologda): Good afternoon, Mr Medvedev, colleagues. I am Alla Startseva, the vice president of Dominion. We are the management company of Vologda Textiles.
My question is a follow-up to the issue that we have raised – the mechanism of implementing private-public partnerships. Our company – together with the Government of the Vologda Region – is implementing an important project aimed at establishing a modern flax processing facility in the region. Incidentally, Mr Medvedev, the project was developed upon your direct instructions after a meeting of the State Council in Ivanovo. I reported the results to Vladimir Putin at an inter-regional conference in Cherepovets. Perhaps some of the people present remember that the project was approved by Mr Putin and was included in the list of priority investment projects in the North-West.
In 2012, the Vologda Region received a new Government and changed its development priorities. As the region faced an acute budget deficit, it decided to withdraw from the project, and dramatically cut the financing for the project from the regional budget. And yet, at the beginning of the year, 100 heavy lorries with new equipment were stuck on the border.
We have to fulfil our contracts, and assemble and install equipment. In other words, we cannot stop the modernisation. Another problem is that we are modernising with core production at a standstill, i.e. presently the enterprise is weakened as it has to work on two fronts – to manufacture products and to carry on modernisation. As a result, modernisation absorbs all of the turnover assets. The debt is growing and we had to take anti-crisis measures together with the Government in the middle of summer. To cut spending, we had to shut down an industrial site in the Vologda Region to preserve the flax-processing factory in Vologda and to continue modernisation.
As a St Petersburg-based management company that is a private investor in this project, we invested all of our assets in Vologda Textile in 2012. New equipment began to be commissioned in September. About 200 jobs were created, and wages increased 1.5 times without stopping the modernisation process. But miracles do not happen. If we as the management company continue to pay through the nose to support Vologda Textile, even though the project initially envisaged two partners – a private business and the state... A private business alone cannot fulfil this project within 10 years. This is especially so because the Vologda Region's budget does not have any funds for the flax processing industry in the near term, i.e. from 2013 to 2015.
This brings me to my question. Tell me please, Mr Medvedev, don’t you think that in this situation when the regional Government, as the public partner, is unable to meet its obligations due to circumstances beyond its control, then perhaps for priority investment projects… I believe that our project is undoubtedly a priority not only for the North-West, but for Russia as a whole because flax is our natural heritage no less than Gazprom because we have no other natural inputs for the textile industry. Of course, we too have a business plan and a transitional period. We will break even within four years. But perhaps the federal authorities should give us a helping hand during this period and develop a mechanism to help the regional budget continue the regional programme and support the enterprises that are real growth points. Unfortunately, such a mechanism – such support – does not exist.
Dmitry Medvedev: Thank you. I see Anton Siluanov’s drooping head. You know, I’ll tell you this. I was taught at university that in keeping with certain principles contracts have to be fulfilled. I don’t know under what circumstances you prepared for and signed these agreements with the former Government of the Vologda Region, but if these agreements are in force, I think that the new administration is obliged to do everything possible to fulfil them. We, the federal Government, are of course ready to help and to look at the status of your budget. We do this regularly – governors come to me and I give instructions to the Minister of Finance and the Minister of Finance grudgingly tries to see what can be done, and we make decisions. But basically, I think that everything that has been signed up for should be fulfilled. What is so special about this case? After all, the situation there is difficult. I know the situation in the Vologda Region. I recently spoke with the new governor and visited the region. I know that the budget is heavily leveraged, and I know that there are a host of problems, but still one needs to look to the future. Please prepare these materials for me and I’ll try to do something about it.
In terms of what exactly we should support, of course our light industry – the textile industry – is a difficult sphere, but it is our duty to keep it under review. I held a meeting and I think that I will soon call another meeting on this issue to see what is happening, especially now that Russia has joined the WTO.
Our colleague from Udmurtia who spoke about agriculture told us about “officials in uniforms”, and some other folks, but he did not mention the World Trade Organisation, although it seems to me… No, no, hang on a minute, I know what you are going to say. But I just want to make the point that we should pay particular attention to sensitive sectors of our industry, our production, our agriculture, and we must do everything that we can to maintain the necessary balance. For example, today we are all anxious about what will happen to our meat production – beef, pork and poultry. From time to time, some restrictions are proposed. I would like to tell you that we will keep a close watch on all of the processes in the livestock industry. We will also react to them in the framework of the agreements and the opportunities that we have managed to wrest from the WTO. Before coming here, I signed a directive on the size of the tariff quotas for 2013, which is actually a measure to support our livestock industry. And the last thing – if someone chooses to break the rules, we will carry out anti-dumping investigations and present the results to the states that produce the livestock or other agrarian or non-agrarian products. Make no mistake.
Yes, please.
Yury Kushnerov: Thank you. Mr Medvedev, I am Yury Kushnerov, representing the Kemerovo Region. I am the CEO of NefteKhimServis. This is an interesting conversation and I was particularly interested in the two first speakers, so I would like to make a few comments in this regard. We, as a company in Kuzbas, decided to launch a seven-year, 57-billion-rouble project. We do not have Moscow or Western investors or patrons in high places in Kuzbas. We went to the Kuzbas Region governor and three months later the regional Government decided to make our project a regional priority.
Dmitry Medvedev: Please divulge a secret – what is the project?
Yury Kushnerov: An oil refinery in Kuzbas.
Dmitry Medvedev: An oil refinery.
Yury Kushnerov: It was fantasy. Kuzbas is a coalfield. However, it probably has the best logistics in Russia – the Transneft pipeline, the West Siberian Railway, and four regions in Western Siberia that consume huge amounts of petroleum products. Three and a half years on, the first 17-billion stage has been launched – all thanks to the active support of the administration, the governor and two investors. The company’s authorised capital is 5 billion roubles. Today, the project employs 2,000 workers. The northern part of Kuzbas is a neglected area where coal pits have been shut down. The city of 100,000 people had no future. Today, people’s eyes are shining. They have a future. We have opened a college covering our specialities. In Kemerovo [University] we introduced disciplines to train our specialists at the chemical department. We have brought 500 oilmen to work at our plant. The reason why I am telling you all of this is that sometimes when I read newspapers and watch the television I hear about corruption and obstacles. Of course, they exist and we face them every day. I am not from the Moon, and I am implementing this project on a day-to-day basis. However, sometimes we are not being able to prepare our ideas professionally, and we end up presenting our business problems as problems with the state and the local authorities. I am now referring to major regional projects. I have heard agrarian people talk about their problems with small- and medium-sized businesses. If you have an idea and a professional team, 99% of the corruption problem goes away. It only arises when you start solving your problems without the proper preparation and ask the authorities to do something that is outside the law.
Today, I can tell you that we have invested 17 billion roubles as of today having completed this project. Now we are embarking on the second stage, which is a 25-billion-rouble investment. We owe it to Kuzbas and to the governor, who gave the go-ahead for the project that nobody sets in our way any longer. This is natural. And thanks are also due to the United Russia regional branch. However, the bottom line is that if you have a normal professional idea, there will not be any problems.
Every speaker ends his speech by making a few requests. I do not want to end mine that way.
Dmitry Medvedev: Making proposals is even better.
Yury Kushnerov: Yes, proposals. Today, many projects implemented by regional businesses – I mean major projects, major regional projects – are saddled with encumbrances by state-owned companies. This is a common phenomenon. I am referring to Russian Railways, the power industry and other state companies. I see the Minister of Finance here today. We usually agree with this. We build it all – what else can we do? But then we have to pass our projects free into government companies’ hands. More than that, God knows why we have to reimburse 20% of taxes levied on these companies for the free acquisition of our property.
We have a proposal how to get out of this deadlock without detriment to businesses. I won’t go into details now to save your time. I only say that it concerns business capitalisation to avoid free property transfers.
There is another point. Mr Medvedev, you often talk about improving the financial climate and attracting foreign investments. There are people among us in this hall who cooperate with dozens of Western businesses and hundreds of foreign investors, to whom their projects are litmus paper showing what we can do and what we can’t. When we are success, several hundred new investors join our projects at the second stage.
This particular project, worth 1.5 billion, is right at its second stage. That is how we promote investment in Russia. If the regional – or rather the federal United Russia headquarters monitors interesting and ambitious projects that are being implemented at the regional level in touch with the federal agencies, and if United Russia helps to address related problems, we participants of this meeting will bring projects attracting at least a hundred partners each, who will invest billions. That is all I wanted to say.
Dmitry Medvedev: Thank you. I think everyone sees the most effective weapon against corruption, right? It isn’t protection by a governor but contact with him when he takes a relevant project under his wing.
I am not kidding. It is regional authorities’ duty to promote important projects, whether big or small, including clusters of small-scale projects. I don’t mean a frequent pattern on which the authorities say to applicants: “Okay, I’ll help you but only if you donate 30-40% to a company – I’ll tell you which. Then we’ll promote your project together.” When, on the contrary, the authorities merely support projects they deem essential for regional development, we see actual government support, the way it should be, and it can be quite effective.
Next speaker please.
Roman Teryokhin (Director, Nalogovik Co; Presidium Deputy Chairman, Association of Young Russian Entrepreneurs): Good afternoon, Mr Medvedev. My name is Roman Teryokhin. I am a businessman, and I represent the Association of Young Russian Entrepreneurs here. The association was established in 2007 within the frame of the Dialogues party programme. Now, five years later, its achievements are here for all to see: young people are really widely involved in business. However, today’s agenda focuses on going concerns while young people just making their first steps in enterprise are the people on whom the Russian economy will rest in 2020, 2030 and 2040. They matter no less to the nation and to Russia’s stability.
You are doing much as the Prime Minister, and were doing during your presidency, to improve the investment climate and, even more important, to enhance business security. What’s being done to promote youth enterprise? Should the ABC of enterprise be taught at universities and possibly even at school? Or should the theme be discussed by the Open Government? It really takes some preparation to make a good businessman. The job demands responsibility, purposefulness, and a leader’s makings. Businesspeople don’t need grants – they make money all right. What they really need is education and training. Thank you.
Dmitry Medvedev: Thank you. Roman, I think that this is more of an intellectual problem though money does matter, too. When children are asked at school what they want to be, only 5% say they would like to take up business, as far as I know – I mean senior school students, not young kids. Several years ago, a majority said they dreamed of becoming cosmonauts or military. Now, public service is the most desired profession. Law and, at best, economics rank second (my “at best” is a joke!). All this shows a distorted scale of social values.
You are telling us what’s to be done to support businesspeople. In fact, what we need is just a change of our nation’s attitudes to businesspeople, to commerce as a whole. We must not slander businesspeople and accuse them of all deadly sins though even the authorities are doing it to meet their own ends, and oppositionists do it very often. Instead, we should demonstrate inspiring examples of people making brilliant business careers with miserly start-up capital. Such examples will improve public attitudes to entrepreneurs.
Second, we certainly need good university programmes to help one check whether he or she has the entrepreneurial gift or it would be wiser to take up another profession. As everyone knows here, business is a psychological state, in a sense. If you really want to take risks, you should go into business but if you want merely to seat out your office hours for a decent salary, you shouldn’t venture into the business world – you’ll panic and be a failure. So occupational guidance programmes helping students to test their gifts and abilities are welcome to any university – not only to law and economics departments. I think the state should launch such programmes but, as you said quite correctly, it would be wrong to make targeted allocations for them.
Let us mind our schedule, however. Speak up please on that side.
Alexander Petrov: My name is Alexander Petrov. I was a village schoolmaster for ten years, and then I spent twenty years in the innovative pharmacy industry. Now I am a member of United Russia’s General Council, and I entered the State Duma this year. That’s how my life kept changing.
I have taken part in many meetings. Today’s is no ordinary one, with its new format. I am glad that we have shifted it to the political plane to discuss our party’s relations with the business community. I am sure that the formation of an active and creative middle class should be among United Russia’s strategic goals. We should make it a catchphrase in the party programmes and slogans. We should say to everyone: “There will be no corruption where United Russia is working. We will fight for the projects we launch.”
I have stored some experience of work in the General Council already, and I am sure the supreme party bodies lack personal responsibility for regional projects and others, down to municipal ones. Should we establish a new platform, and personally monitor innovation and critical social projects? We must be the vehicle of these projects. I was Skolkovo resident No. 12 before the State Duma election, and you gave me my certificate. The project has been finished this year. You must remember it – the Triazavirin anti-viral medicine. It’s ready. Then, there was the Russian Insulin project. I launched it myself together with Mr Rossel(Eduard Rossel, former Sverdlovsk regional governor), and we are applying final brushstrokes to it. Who would dare accuse me of bribery and underhand deals? I do not try to whitewash myself. I only say that I have lobbied and will be lobbying the projects for the manufacture of Russian insulin and the establishment of a network of dialysis clinics, and I will lobby the latest project you signed, for a research and education centre in the Urals because education and workforce are the principal resources we will promote. If we have no reliable personnel, no businesses will have whatever prospects.
I also wanted to say that, apart from personal responsibility and the establishment of this new platform, we also have several party platforms and projects, and it is extremely important to monitor them – particularly the 57 projects of the All-Russia Popular Front. I think we should pay greater attention to the Popular Front. We should promote its projects all over Russia, monitor and demonstrate them, and highlight their progress. I reiterate that we need personal responsibility, with announced names of members of the party General Council and Supreme Council, and governors from among party members. Transparency will dramatically reduce corruption and draw the business community over to our side.
Businesspeople made a landmark proposal when I met with them. They asked us to authorise the establishment of United Russia primary branches at industrial plants. Though the idea comes up ever more frequently I think it’s wrong – at least too early – to set up party locals now. As for the party U-turning its attitude to the business community, you were right to raise the question today, and I fully agree with it. We have no requests to make. The Duma is very busy, and I think we will soon endorse the lobby law to avoid many accusations. Thank you.
Dmitry Medvedev: Thank you. Mr Petrov, one of our predecessors, who belonged to another party, said: “We will not embark on this road.” So I don’t think we should establish party locals at industrial plants because they might trigger off social clashes, revolutions and other bad things we know all too well. However, I fully agree that the promotion of private enterprise is United Russia’s party project, just as the support of government-financed agencies and certain social strata – especially the smaller entrepreneurs who are far more vulnerable than the tycoons who can protect themselves. I have gathered you here to say it.
As for the lobby law, I have mixed feelings about it. Many countries have similar laws, which have proved their efficacy. They usually are fruit of developed parliamentary relations advancing business and other ideas. However, there are heated debates round the lobby laws even in the countries where these laws are actively working, particularly the United States. I don’t think even State Duma deputies have developed such legal awareness yet. Although I believe that we might sometime have to pass a law regulating relations between members of parliament and those forces, which suggest that they promote various projects in order to make this aspect more civilised, I am afraid this isn’t the right time for it because we might create additional problems for ourselves.
Remark: Can we create a party platform?
Dmitry Medvedev: Yes you can, go ahead.
Alyona Orlova (member of the United Russia party and acting head of the Moscow Office of the St Petersburg is Russia’s Maritime Capital project): Mr Medvedev, may I ask you a question about small businesses?
Dmitry Medvedev: Yes of course, go ahead.
Alyona Orlova: Thank you very much. Please forgive me for being so insistent, but I am a small-business owner who was raised by United Russia. I joined the Young Guard at the age of 15, and I became a United Russia member at 18. And I can say that United Russia has played a very important role in my business career and my business concepts because I have always focused on the welfare/social side. What am I talking about? I used to install temporary mobile retail outlets in the city of Moscow. I signed contracts and agreements with agricultural companies in the Moscow Region. I sold the pork and beef you mentioned, and I worked in Moscow’s administrative areas. I received these permits during tenders. Now these tenders have been replaced by auctions. On the one hand, this is probably correct because this process is more democratic, and because everyone has an equal chance. The one who pays the highest price is right. But the welfare/social aspect has changed. When my colleagues submitted their bids, they would say that they would issue welfare/social discount cards and distribute them through veterans’ councils, or that they would stipulate various discounts ... These business people have now disappeared because the Mikoyan Meat Processing Plant can afford to pay three million roubles, and Alyona Orlova can’t. How, in your opinion, can we and the party address the welfare/social issue?
And here is my second question or request. When I was invited to work for the St Petersburg is Russia’s Maritime Capital party project and to head its Social Mobility Opportunities for Small Businesses programme, it turned out that small startup businesses, which were being started in garages and kitchens, produced rapid feedback after being assessed by interested investors. I would like to ask you to tell the party’s regional executive committees to support the development of all other federal party projects, if not our project. We have our own Deputy Governors in over 50 regions. These people are ready to implement such projects, and the executive committees are not ready for this.
Dmitry Medvedev: Alyona, what specific projects are you talking about?
Alyona Orlova: I am talking about the Social Mobility Opportunities for Small Businesses project.
Dmitry Medvedev: Social mobility opportunities?
Alyona Orlova: Yes.
Dmitry Medvedev: I see, thank you. Please have no doubt on the second aspect. I will certainly issue this directive because this is highly important for any region, not just Moscow.
As for your story, I still find it hard to agree that tenders are better than auctions. You know why tenders are often less transparent and less fair than auctions. I am not talking about your business, which should be perceived and comprehended accordingly. Yes, I agree that everyone has a different financial potential, this is understandable. But, on the other hand, tenders often conceal manipulation. You and I realise that numerous fly-by-night and corrupt companies are involved in tenders. These tenders are formulated in the following manner: The organisers stipulate a priori impracticable terms for all other bidders. These terms are subsequently made public, and a company, whose management has connections with a governor or the head of a municipal entity, wins the tender. On the whole, I believe that auctions are more fair. But this does not mean that we must completely renounce other types of tenders, including those in the sensitive welfare/social area.
You are raising your hand a bit meekly there. Ask your question, please.
Oleg Badera (Chairman of the Board of Directors at the VessoLink Telecommunications Company): My name is Oleg Badera. I am a corporate shareholder and investor, and I am a member of the Delovaya (Business) Russia Organisation. Quite a few companies, including my own company, have come together on the United Russia platform, and they would like to invest in the regions. We have launched the Intellectual City project. We visit the governors of various regions, and we offer an investment project, which requires no financial guarantees or financial involvement from governors or municipal entities. We are ready to invest up to one billion roubles’ worth of our own assets in any region, and this funding will be used to automate regional-administration projects.
A brief digression here, if I may. The entire accounting process has now become automated. As for municipal or regional management, governors or mayors often receive paper documents dealing with housing/municipal utilities and transport issues … So, we are ready to automate all these elements through an investment project. And we are launching these projects, but we face various problems. In my opinion, these systemic problems are part of any investment project being implemented in the Russian Federation and with any region.
First, if we invest without financial guarantees, and if we start requesting financial guarantees, then a governor promptly replies that his assets should be frozen and special funds created. He says it’s inconvenient. We are ready to invest without financial guarantees. In this case, this would amount to direct public-private partnership. For their part, a governor or a municipal entity will have to fulfill their obligations in line with a specific contract. And this always leads to the predictable investment collapse. It is impossible to sue our partners, if a governor or mayor doesn’t fulfill his obligations. In our case, any specific project ensures transparent financial relations in every sector, including the housing/municipal utilities and transport infrastructure. As soon as this transparency appears, many officials lose interest because this makes it possible to expose corruption and specific budget-funding embezzlement volumes. Consequently, officials become less enthusiastic about fulfilling their obligations. It is impossible to bring them to account. I have contacted various federal ministries. And I still don’t know what federal agency is responsible for regional investment, and whether there is any agency, that can support investment companies wishing to invest at the regional level. Here is what I would like to suggest: Perhaps it would be appropriate to establish a specific agency, which would oversee… which would resolve specific issues and act as an arbiter, and which could address various issues together with the governors and regions.
Second, it would be possible to create some financial guarantees in the form of bank guarantees or stipulate promissory notes at the federal level, provided that some project has been selected at a tender and has become an investment project, and provided that regional authorities do not fulfill their obligations. Can we address and resolve these issues in some way?
And I would like the governors to abide by clearer investment-project criteria. They must report on the number of investors entering regional markets. This would become a good parameter for them.
Dmitry Medvedev: Mr Badera, where exactly did you have so many problems? What governor made you suffer?
Oleg Badera: This happened in the Kursk Region, and it was terrible. The Governor of the Stavropol Territory has resigned and has been replaced by another Governor. Consequently, you have to rebuild everything from scratch. Furthermore, we sustain losses, if the governor doesn’t fulfill his obligations, and it is hard to withdraw from the project.
Dmitry Medvedev: I see, I see. You have mentioned this subject with good reason because the implementation of your programmes depends on the quality of public-private partnership. And you are right in saying that any specific contract being signed by you largely depends on the governor’s attitude. And you are right in saying hat the contract being signed by you there largely depends on the governor’s attitude. I will tell you who you need to contact. Obviously, there are no absolutely effective decisions. But, some time ago, when I was still President, I had established a special investment institution affiliated with Special Presidential Representatives. The deputies of Special Presidential Representatives address investment-related issues. People have already been appointed to these positions. I am not saying that this institution will resolve everything overnight. But these persons do not depend on governors, to say the least. But they are supposed to settle these conflicts. This is one level. The Ministry of Economic Development, which is responsible for the entire investment policy, is, certainly, the second level. And a draft law dealing with the Presidential Business Ombudsman is currently being finalised. Obviously, this official will not become a miracle-worker because he stands alone, and because the country faces more than enough problems. But this official should also monitor such relations at his level.
As for court proceedings, I believe that it is necessary to sue the governor, if you believe that you have been deceived or that they are not fulfilling their obligations, although this is difficult. You see, any decision to take the case to court spells trouble for the authorities. In effect, any normal governor would have to reach an agreement on how to behave in a given situation.
If I understand you correctly, I can hardly support your idea as regards the responsibility of federal agencies or the federal budget for specific obligations arising due to the failure to implement regional obligations as part of public-private partnerships. This would be incorrect, judging by various considerations, and national budget legislation included. If we did that, every Russian governor would refuse to do anything, and everyone would tell the Ministry of Finance about unfulfilled obligations and ask its officials to provide the required support or subsidise these debts. Of course, we will not do this because it’s impossible.
Oleg Badera: Thank you.
Dmitry Medvedev: Since we’ve been working for one and a half hours, I suggest we discuss five more questions and call it a day. I see that some deputies have questions. Colleagues, we meet with you often enough, so let’s give the business people a chance. Please, proceed.
Oleg Misevra (member of United Russia and president of steam coal producer Sakhalinugol, Yuzhno-Sakhalinsk): I am Oleg Misevra, a businessman. But I am more than that; practically, there are parts of my biography that are comparable to the backgrounds of the other speakers here. Firstly, I am a member of United Russia – since 2000, and secondly, I was a commander of a traffic police unit.
Dmitry Medvedev: Well done! Let’s applaud this man, a traffic police commander who has succeeded in business.
Oleg Misevra: In fact, I also have a military background. And thirdly, United Russia is my patron because I am implementing a United Russia project that was adopted at the meeting in the Far East. And I am willing to support the speaker from Kemerovo, who said that he receives assistance from both the regional authorities and United Russia.
I’d like to talk about my current project and also about a project that we failed to implement. It was decided to convert to gas in Sakhalin, while my company mines coal…
Dmitry Medvedev: Sorry, I said we would discuss five questions, so please hurry up or your colleagues may have no time left to ask their questions. Go on, please.
Oleg Misevra: I’ll do my best. In view of the conversion to gas, the coal industry could lose up to 70% of its companies in Sakhalin, as a result of which two or three single-industry cities would be in big trouble. The project, which was advanced and supported at the United Russia meeting in the Far East, allowed developing the coal industry through building a port and the requisite infrastructure for exporting coal to the Asian market. We are implementing this project now and have already created 700 new jobs. There are plans to double production every two years and to increase the number of new jobs to 2,000, which means that we are not losing but strengthening our position.
As for the situation in Primorye, on the other side of the Strait of Tartary, where the same decision was approved for the Vladivostok thermal power station (to convert it to gas) and where a similar township, Pavlovka, with a population of 10,000 was affected. The local coal producers there have warned that they cannot export their coal and that the township will simply die, but the decision to convert the power station to gas was made anyway. The coal producers failed to get the Government or any other authorities to listen to their problem. We tried to, but failed. I can’t imagine where the 1,200 workers at the station will find employment. What I mean is, we are ready to implement the projects, and we only ask the party to monitor them. Take my project, which turned out to be very successful. It has been supported by the regional authorities, by the governor who is building roads, and everything is just fine. At the same time, nothing like this is being done in Primorye. Really, I can’t imagine what will happen to that township. We would like to have the party monitor such projects. That’s the first thing I wanted to say.
And the second is that businesses don’t need any assistance from the party to create new jobs. What we need is your political support, your assistance in our relations with the governor in order to secure the development of the necessary infrastructure. We will do everything else ourselves, including create new jobs. Thank you.
Dmitry Medvedev: Thank you. I promised to provide political support, and we will definitely do it. In fact, this is why we are here, to talk with you about this new area in the work of the party, even if it is not entirely new. We must face our businesses, work with them and help them create new jobs and resolve various issues, including social issues.
You have provided practical examples, and I’m ready to again issue instructions to monitor the developments there. However, we sometimes need to change flags, so to speak, to close down some enterprises, but we certainly can think about ways to do it with less social impact. Yes, I agree that we should think about this. Next, please.
Pavel Skurikhin (President of the National Grain Producers Union, Novosibirsk): Mr Medvedev, I represent the National Grain Producers Union. Next year will be very important for grain producers because we have had three drought years in a row and the farmers’ debt load is very high. In addition, Russia has joined the WTO, which implies the commitment to reduce state assistance considerably, and also the Customs Union, which also includes certain commitments, in particular, to stop subsidising transport expenses, etc. So next spring’s sowing season will be quite important, because we will enter the next agricultural season with a nearly zero grain balance, and grain is the main raw material for the poultry and pig breeding industries. If the next grain season turns out badly, these industries will suffer, too.
We will hold a congress of grain producers at the end of February to discuss these issues – there are many of them and you have been paying considerable attention to these issues, which include agricultural insurance, government and other forms of support. I’d like to use this occasion to invite you to our congress, because I really believe next year could be a watershed year. Thank you very much.
Dmitry Medvedev: Thank you very much.
Irina Redikh (General Director of the Golden Beach tourist and athletic centre and twice alpine ski champion of Russia): Thank you, Mr Medvedev. Good afternoon, everyone. I represent the Sun Valley Mountain Ski resort, the Chelyabinsk Region.
I’d like to speak about the problems of domestic tourism. I’ll try to describe the situation in short. Our project is a key investment project, a priority project in the Chelyabinsk Region. We are expanding through investment, and we have a very good partner. We are implementing social projects designed to improve children’s health. At least 15,000 pupils learn to downhill ski at our resort every year during their third weekly PT lesson. Also, we actively support professional sports. We have established an Olympic training centre for winter sports at our resort. We have started expanding it this year, and Russia’s main teams will prepare for the Sochi Olympics at our resort.
But we have a problem, transport accessibility, or rather the inaccessibility of our resort, which is slowing development despite all our efforts. We raised this issue at the top level. Instructions have been issued to help us. In practical terms, it was pointed out to Russian Railways that the railway line built to the resort has not been connected to the electric grid. We proposed a dialogue to resolve this issue so that we can secure the transport accessibility of our resort by connecting that line to the grid. For 18 months since then we have been trying to resolve this issue, but unfortunately to no avail. I’d like to ask you the following: is it possible to push this issue forward, because it is really important to us and it’s vital for developing our mountain ski resort? This is the issue I’d like to raise. Thank you.
Dmitry Medvedev: Thank you. As for your issue, you have now raised it. I am willing to analyse the development of your problem. It’s very difficult for me to issue any recommendations at this point because I don’t know all the facts. If you have any documents with you, please pass them over.
And now I want to ask this audience to ask questions that would be common to everyone, if this is possible. I understand that everyone here has personal experience and unpleasant recollections of dealing with the authorities, who adopted or refused to adopt decisions on your problems. We are meeting here not just to promote individual projects but also to address common issues. This should be our focus. So, I promised to give the floor to two people. Please, proceed.
Sergei Pospelov (a member of United Russia, co-founder of the Thermodecking, an innovation production company): Thank you, Mr Medvedev. I believe my question concerns most businesses. I am Sergei Pospelov, a co-founder of an innovation company that produces thermo-treated lumber, which is a new area for Russia. Unfortunately, our technology is very energy consuming, so we need more energy to be able to grow. I believe that everyone here knows how difficult it is to be connected to the electricity grid. But I have a more specific question: My plant, which is located in the Moscow Region, will have to pay 1.5 million roubles for an additional 50 kW of electricity, which is impossible.
In my opinion, if we want to develop an innovative economy, the government should shoulder as much of the infrastructure costs as possible. What do you think could be done in this respect? Thank you.
Dmitry Medvedev: We should do what we are discussing here today, that is, lower the fees, and that’s it. Nothing good can come of prohibitively high access fees. This is a comprehensive task that we’ll address together with the energy companies.
You understand that we are living under market conditions, and that it is impossible to order companies to keep within a certain limit, but we can still do something to make them lower the fees as much as possible.
Let’s consider this a common task of the party and businesses in the regions, which we should address together.
Sergei Gabestro (Director General of online trading company Fabrikant.ru): Sergei Gabestro, Delovaya Rossiya. I’d like to wish you a Happy New Year and a Merry Christmas on behalf of our business association.
Dmitry Medvedev: And I’d like to congratulate you; the world hasn’t ended yet, although it’s already 3 pm.
Sergei Gabestro: I will try to review the investment climate, something that is common for all businesses. I am in charge of antimonopoly policy and procurement. One of the most important events in this area this year was the roadmap for enhancing competition adopted within the framework of the national entrepreneurial initiative, as well as the ensuing result. There were three major elements, all of them very important. We are grateful to you, Mr Medvedev, to the country’s leadership in general, and to the management of the Ministry of Economic Development, the Federal Antimonopoly Service and the Federal Tariff Service. The first result we hope to receive soon is the possibility for groups of private individuals to file class action lawsuits to protect the interests of defrauded people.
The second result is probably… It is possible that in 2013 not only the Ministry of Economic Development and the Federal Antimonopoly Service will be in charge of the competition policy, but also other agencies including governors, which is important because they will be responsible for the results.
And thirdly, a great deal has been done regarding antimonopoly legislation. But I’d like to speak about what has not been done and about what we consider to be very important. We have analysed various national associations of procurement institutions and all of the filed lawsuits; we have analysed all statistical data provided by the Federal Antimonopoly Service, and here are the results. This is what we see. About 12,000 lawsuits were filed under Federal Law No. 135 on competition in 2011, not including cases dealing with state contracts, advertising and antimonopoly law. This is a huge number. The average figure for an industrialised country in Europe is 100, and it is 150 for the United States – I’m telling you this to clarify the picture. Of these 12,000 cases, only 53% were initiated against state agencies and 47% against businesses, that is, against you and me. The ensuing information is very complicated, but it is thanks to the roadmap that we will be able to receive information about all the cases covered by the FAS in 2013, rather than only those that are forwarded to the courts.
As for the courts, we have calculated that the courts received 9,300 cases in the first 10 months of 2012; we have analysed all of them. I am only talking about the disputes that went to court. We have analysed them and made a representative sampling for March, according to which 56% of lawsuits were filed against small and medium-sized businesses and 44% against big businesses. If we assume that it is big business that initiates these cases, the burden on small and mid-sized business is really too large. In other words, this is an issue we must take on to reduce the burden by several times, which means that we need to amend the legislation. For example, there is a notion of the lowest threshold of domination, which is 20% to 40% across Europe and 40% to 70% in the United States. There is no such threshold in Russia; any company can dominate the market in Russia even if it only holds 1% of the market, which means that we should introduce this notion in legislation. So I am asking you to issue such an instruction, if possible.
However, we failed to agree on this issue within the framework of the roadmap. There is a notion of economic concentration. We managed to agree to cancel notifications on the issue of economic concentration, but we have not reached any agreement on the threshold of economic concentration. International practice shows that this threshold in Europe is at least 20% or 30%. These are two fundamental issues. There is one more relevant issue; it concerns Article 17 and Article 18.1 of the law on competition, which allow the FAS to inspect any company, even a private one, if a complaint is filed against any of the bidding parties. In short, the issue concerns complaints against the outcome of bidding. It covers the sale of goods by state agencies and even by state companies through bidding. It would be reasonable to approve a provision on the cutoff level for FAS inspections at state companies or state agencies. But it doesn’t seem reasonable to have such a cutoff provision for private companies.
This could create a situation where no bidding will be held. In fact, the number of biddings is decreasing. We have noticed the trend. For example, if I don’t want an FAS officer to come to my company, I will not hold a bid but will instead research the market and choose a supplier. I believe that an instruction should be issued to study this issue in order to limit the influence of Article 17 and Article 18.1. Thank you very much.
Dmitry Medvedev: Thank you, Sergei. It is always good to have a personnel reserve. I think that in time you will be able to hold the post of FAS chairman.
Sergei Gabestro: I am in your reserve, Mr Medvedev, so tell me what I must do.
Dmitry Medvedev: By the way, it’s good when these kinds of posts are held by people who can see the situation from the other side. First, we have discussed with you antimonopoly laws, and our discussions were really important and effective. Second, I believe that our antimonopoly legislation is not excessively burdensome. Third, I believe that a considerable part of our antimonopoly legislation can be improved, and FAS leadership is ready for this. The crucial part is to carry on our dialogue to consider practical legal problems that stem from our legislation and which can be described as systemic and typological, and to deal with these problems by amending legislation. I believe that we can improve the issues you have raised within the framework of the roadmap and our efforts to implement it. As for the general direction, whether it is good or bad that 50% of the lawsuits are initiated against state agencies…
Sergei Gabestro: It is very good, simply wonderful.
Dmitry Medvedev: …and 50% against companies. I believe that this is an acceptable proportion, but the trouble is that large companies have enough funds to deal with such problems and so easily negotiate a solution. I’m not just talking about corruption. Large companies can hire good lawyers or take other decisions to prevent attacks against them, leaving small companies to struggle. But this doesn’t mean that [small companies] are always faultless.
It is clear that there are real violations, collusions and division of the market. We are only at the beginning of the road [to a fair market], which is why the FAS is seen, in general, as a positive tool to be applied within the framework of roadmaps and indexes. You know that it has good standards.
Sergei Gabestro: As for indexes, there is a…
Dmitry Medvedev: Yes, I know that they are always relative. It is clear who is promoting who, and how these indexes are calculated. So let’s simply continue our dialogue on this issue. I believe that we should word all nuances of the antimonopoly legislation carefully in order to really make it more effective and less biased, so that it would listen not only to state agencies but also to business.
Sergei Gabestro: Thank you very much.
Dmitry Medvedev: Thank you. Now I have a suggestion. Let someone speak in conclusion of this meeting. I think it is time to wind things up. We shouldn’t go on for too long.
Lubov Shadrina (Head of the Union of Credit Cooperatives): Allow me to make the concluding statement – as someone who has nine grandchildren. I am also the chairperson of the Russian Union of Credit Cooperatives, a rural resident and a deputy of the municipal council, and member of the United Russia party – all in one. What I want to do is emphasise something you already mentioned briefly today: we truly need something, an interesting and clear priority initiated by United Russia. My idea is that support and development of agricultural cooperatives is exactly what we need to help us resolve a range of important issues. I am referring to social issues, unemployment in rural areas, SME development problems and other things. They aren’t all just farmers out there – there are teachers and doctors, and other professionals. Believe me, since I also live there I know these problems from the inside, from bad roads to the shortage of schools, daycare centres and things like that. So I think this should be a truly interesting project. I am sure that, if United Russia does not support it after all, the Agrarian party would certainly do. I am so confident about it because it could indeed help…
Dmitry Medvedev: You sound like you’re threatening us.
Lubov Shadrina: No, I am not. I just want us all to be on that project together. We have proposals to make. I would like to ask: please give us your support – teach us how to fish. We are ready to act if you show us how – how to ensure that financial resources reach rural recipients and how to promote the social development of rural areas. Thank you.
Dmitry Medvedev: Thank you. What’s you name?
Lubov Shadrina: Sorry I forgot to state my name. Lyubov Shadrina.
Dmitry Medvedev: Ms Shadrina, thank you very much. We congratulate you on having nine grandchildren.
Lubov Shadrina: And five children.
Dmitry Medvedev: And five children. I will not talk long about the advantages of credit cooperatives. Instead it would be better to ask the Finance Minster to say a few words. Would you like to speak, Mr Siluanov? No, he doesn’t. I think Mr Siluanov agrees that credit cooperatives are an important instrument in rural areas. We have adopted this law, and that’s a fact. Now we need to flesh it out and to fill it with real content. As for your warning that, if United Russia neglects some issue, other political forces would take it on – it is essentially true. When a ruling party ignores problems, opposition parties target them right away. This is only normal, the way things are. This is exactly how opposition activists come to power in the end. They say, look, we repeatedly pointed out these problems, but the ruling party didn’t budge, so we will come and give you solutions. No one knows if they do it, if they find the solution or not, but people start voting for them. So I would like to conclude this meeting by stressing that we must concentrate on the most up-to-date, important projects to support business activity and foster a class of entrepreneurs, to finally create the middle class that we have talked so much about. We need to create jobs, to upgrade facilitates and provide support to businesses (right now I am specifically addressing United Russia members, not just businesses). This support is as important as any other initiative we are proposing, because otherwise, other political forces will come to promote the interests of business. It is our political intention, if I may say so, to steadily increase the number of people engaged in entrepreneurship. Our aim is to have a middle class that accounts for a substantial share of the population, and people engaged in business will certainly play a central role in that middle class. Therefore, I would like us all to regard this as our party project. I would greatly appreciate you doing this.
There is something else, a very important current issue and the last one for today. We never stop talking about supporting socially unprotected groups, such as children and especially parentless children. I don’t think I need to explain or repeat slogans. All of us here are doing this every day – helping children in one way or another, helping orphans or those in a difficult situation. This is an important and noble mission that businesses have taken on. It creates an atmosphere of special trust, certain chemistry between the entrepreneurial class and the rest of society, as they say. Let’s keep doing this.
Thank you and good-bye.