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Meeting of the Open Government working group

April 10, 2012, Moscow

Dmitry Medvedev held a meeting of the working group to draft proposals for developing the Open Government system in Russia. Promoting competition and enterprise and improving the investment climate were the main subjects of discussion.

This is the third meeting of the working group. The previous meetings discussed anti-corruption efforts and human resources support for the civil service.

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Extracts from transcript of a meeting of the Open Government working group

President of Russia Dmitry Medvedev: Good afternoon, everybody,

Our Open Government meeting today is dedicated to a vitally important issue: competition and the business climate.

As agreed at our previous meetings in this format, I will not take too much time with opening remarks except to say that I have had the opportunity to read through some of the ideas that will be presented today. I liked some of them while others in my opinion require further discussion.

In any case, I think our discussion should focus on several key issues. The first concerns the state’s presence in the economy, or to be precise, reducing its presence. The second point should address the overall competitiveness of our economy and the development of antitrust regulations. In addition, we should talk about the investment climate in general.

I have probably held dozens of different meetings on this subject and a number of decisions have been adopted. Not all of them proved to be effective. Let's discuss what we can do next, because everyone realises that it is impossible to tolerate the level of business and investment climate that has emerged in our country. On the other hand not all the measures we have proposed are effective and it is clear that we still have a great deal to do.

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I think it would be useful for me to make a few remarks on some of the many specific ideas that have been raised. Some I will comment on just briefly, to give you and our viewers an idea of my position, and some I will look at in a bit more detail.

The idea of a ban on allowing state companies to expand by acquiring private assets: In principle, yes, state-owned companies buy various assets, often without any real justification, and often with some particular motivation. Whatever the case, the result is an expansion of state-owned business into areas that often have no connection to the company’s core business, and this all becomes very difficult to manage and control.

As you know, I had the experience myself of chairing the board of directors of one of our biggest companies, which also buys and sells a lot of assets. When you look at the assessments, hear the reports about this or that position on this or that acquisition, it all looks logical enough, but later, looking at the bigger picture, you realise how completely senseless it can be. 

So, I think that we should take some steps, but not simply introduce a ban, because all that would happen then would be that companies would look for ways to get around it. I think we could try a different approach, say, make these kinds of acquisitions subject to top-level approval either from the Government Cabinet or the ministry. And this should all be completely public, so that people can see that such and such a state-owned company has decided, say, to buy a media outlet or whatever other asset.

Concerning selling off state-owned enterprises’ non-core assets, I think that there is no question that we should do this. We need to draw up a programme for these assets’ sale and get it implemented through the boards of directors. 

On the idea of ending unitary companies as an ownership form, I support the idea in principle, but I think the main problem is not so much the ownership form itself. Nevertheless, we could indeed try reorganising them either into public joint-stock companies (as you know, in accordance with the amendments to the Civil Code that I have submitted to the State Duma, we will no longer have closed joint-stock companies), or state enterprises.

* * *

Civil servants on company boards should be completely replaced by independent directors. I have taken the first step here, and that caused nerves enough, but it has gone ahead nevertheless. We no longer have ministers or presidential aides sitting on boards of directors, though there are still deputy ministers in place. This step has already had a certain psychological effect, but we are to see it all the way through. 

* * *

On the court system and the idea of having judges report immediately on any contacts of theirs, their relatives and people close to them, and their colleagues that could influence cases going through the courts, and making failure to notify of such contacts grounds for disqualification, in principle this is a good idea, but the question is to what extent the judges themselves are ready. The senior judges see this as a normal step. I spoke recently with the Presidents of the Higher Arbitration Court and the Supreme Court. The judges in general should be ready for it, and for these kinds of reports to be the routine norm and not some kind of exotic thing or something that could be used to discredit specific individuals.

As for obliging judges to make public all known evidence of attempts to put pressure on any court employee on cases before the courts, this is a good idea in principle.

As for developing the arbitration tribunal system, there is no doubt that this is useful. We probably cannot oblige parties to resort to arbitration tribunal decisions; this would be going too far, all the more so as there are Russian arbitration courts and foreign arbitration courts, and the foreign ones are more popular than ours. This is not because our courts are so bad, but simply because the foreign ones have huge experience and have been working for decades, in some cases even centuries. But it is certainly something we could recommend.

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I agree that all corporations should work effectively, because only then do they have a chance of surviving on the market, but I remind you that there are companies set up earlier and that we have inherited, and then there are new organisations. Striking and maintaining the right balance is probably the toughest task for the state authorities.

On the question of mediators, this is most certainly a positive institution and is not being used anywhere near as fully as it could be. But this is really an issue for the entrepreneurs themselves, because if they agree to use mediation as a means for harmlessly settling disputes, this institution will start to be used as it is elsewhere around the world. We cannot force companies to use mediation. Mediation is something that people come to with experience, realising that it offers a means for settling disputes quickly and effectively, without using the state machinery. But this is more a question of reaching agreements, and of business culture, too.

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On the subject of land, yes, we do have land aplenty, and it is the most corruption-generating asset. No one wants to get rid of their land and they usually motivate the need to hold on to it with flimsy arguments about it being our national treasure that we must look after and not throw away lightly. And so we end up with bureaucrats sitting firmly on the land, or else land belonging to unallocated state lands or in the hands of ministries, such as the Defence Ministry, is lying completely idle, degrading, and not being put to any commercial use. The question is how to force the bureaucrats into relinquishing land. This is easier said than done after all, especially when officials know what kind of asset they control.

We have tried to set up a system that will make it possible to use municipal land as collateral to guarantee commitments, above all toward the banks. I have the impression we still have problems with this system of ours, because I have come back to this matter about five times at least, from this angle and that, and the law has been passed, but the banks still do not accept it and this is creating problems. If you have a good recipe, please present your proposals and help us here. We constantly run into the problem of not having suitable collateral, or else it is the banks that suffer, exceeding the limits allowed for individual borrowers, but not being able to accept land as collateral. 

Colleagues, the meeting was interesting and I hope has produced some results at least. Thank you all very much. See you at our next meeting.

April 10, 2012, Moscow