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Meeting participants discussed the creation of a good investment climate and the evaluation of new ASI-supported projects.

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President of Russia Vladimir Putin: Good afternoon, colleagues,

Today we are holding our final meeting this year. So I would suggest saying a few words about the results of our work and outline the Agency for Strategic Initiatives’ plans for 2014.

I would like to say at once that the Agency has already established a solid list of projects to facilitate the implementation of the national entrepreneurial initiative. With the ASI overseeing the work, a regional ranking for cooperation with investors will be established throughout Russia.

All of this directly contributes to improving the business climate, developing modern industries, creating new jobs and encouraging investment. And in this sense, I would like to thank you for the work that is being carried out. Its results are obvious – and perhaps they could be even better – but what is being done is generally perceptible. Not only by us; we also see the endorsements of our foreign colleagues, including those of the various agencies that compile well-known rankings.

It is particularly important that you work actively with the regions of the Russian Federation, that you involve talented, energetic and young entrepreneurs in these processes, and create the conditions so that their ideas and suggestions can be included in the national agenda, and incorporated into laws and government decisions. This work is proceeding through various channels, including the so-called Leaders’ Club.

I would urge you not to rest on your laurels, but to work actively, assertively, and according to principle, devoting particular attention to improving the business climate.

What do I think is especially important? In the road maps we have identified specific steps to improve the regulatory framework of this work. I expect that nearly all of them will be implemented already next year, in 2014. But simultaneously with the adoption of laws, we must pay particular attention to the quality of law enforcement, and look at what is being done locally and what happens in practice. So for that reason we need a comprehensive, objective picture of the country, of each region, and what is being done to improve the investment climate. So that one can see whether deadlines are being met, for example, with regards to connecting to energy grids and issuing building permits.

We all know that especially with regards to the first issue, but actually also with regards to the second (for building permits maybe it was always worse, and it remains fairly dire), there are huge regional differences. And if you compare what is happening in these areas with what we see our neighbours doing abroad, then it simply doesn’t cut it. But once again, the situation is nevertheless changing for the better, and a positive dynamic exists. We need to drastically improve it.

We must look at how we can reduce administrative burdens on business, what kind of support regional and municipal authorities should provide to entrepreneurs, and how infrastructure and utility companies operate. In short, we need a domestic mechanism to evaluate the implementation of the national entrepreneurial initiative, and a regional ranking for each region of the Russian Federation.

”The Agency has already established a solid list of projects to facilitate the implementation of the national entrepreneurial initiative. With the ASI overseeing the work, a regional ranking for cooperation with investors will be established throughout Russia.“

The rankings that I mentioned earlier are important, and we also need to listen to our international colleagues. But we need our own evaluations, too. We cannot simply brush this to one side; on the contrary, we have to ensure that they are objective and reflect reality, and are not only words on paper.

I am convinced that the creation of a transparent, public national ranking motivates regions to focus on leaders’ experiences, on success stories as we call them, and will help locate and disseminate the best practices for cooperating with investors.

It is important that this national ranking is fully objective, as I said before, impartial, and enjoys the absolute confidence of entrepreneurs. Therefore, it should first and foremost reflect the views of entrepreneurs themselves. We presume that aggregating their opinions will provide us with an integrated indicator of the quality of the investment climate.

I know that Russia’s leading business associations are participating in setting-up this ranking. I would ask ASI to coordinate this work, and to be very actively involved in coordinating and working at this.

Next. Today we are going to approve another two road maps, on improving tax administration and evaluation. We will continue work to harmonise tax and accounting records. We’ve been doing that for many years now; this work is proceeding actively within the government, and I think that this is absolutely as it should be. No matter what bureaucratic problems this might cause, it is absolutely the way to go.

We need to work on optimising workflows, including in the interests of small businesses. We should also establish an objective mechanism to assess property.

And another topic that we will definitely work on today involves a return to the Agency’s core mission, that is supporting specific initiatives. Its very name is: the Agency for Strategic Initiatives.

”It is particularly important that you work actively with the regions of the Russian Federation, that you involve talented, energetic and young entrepreneurs in these processes, and create the conditions so that their ideas and suggestions can be included in the national agenda, and incorporated into laws and government decisions.“

Each of the projects that we are reviewing today does not simply resolve a particular, concrete problem, but rather leads to changes in legislation, to the approval of modern technical standards, and service standards. In short, they all have a systemic effect, which is crucial for the Agency’s work. Let me say again that ASI-supported projects should act as the basis for reviving entire sectors of our economy and social sphere.

In this regard, today we shall review your ideas for the development of education. I see one of the Agency’s important roles as helping shape the legal framework of public-private partnerships in this sector. And of course, it is also involved in transferring good practices, the best international practices, into our lives, capital cities, and peripheries – throughout the entire territory of the Russian Federation.

I know that you have specific proposals for developing education in Russia. They have different names, including dual education. In fact, everything new is actually good old things that have been forgotten. At our vocational schools it was always the case that guys trained there, and then they got concrete work experience in companies. If this dual degree provides a combination of theory and practice, then naturally this is probably what we need today, using modern methods and equipment. Because if all education proceeds with equipment from 1938 no good will come of it.

Meanwhile, we have some good examples, not only in St Petersburg where there are excellent schools and where kids study with the most up-to-date equipment, but in other regions too. All this must be introduced into real life. There is an interesting example of implementing such a model in the Kaluga and Sverdlovsk regions, and so on.

It is largely thanks to the efforts of the ASI that Russia launched its first WorldSkills National Competition. Naturally, the idea is very important, interesting and useful, especially in terms of raising the prestige of professional skills. I propose that we have Russia bid to host the WorldSkills International Competition in 2019 and would ask the Agency to organise this work. We are hosting a great deal of sporting events; just recently we were accepted to host the Winter Universiade in Krasnoyarsk. It seems to me that hosting the World Cup of skilled professions is more in demand than ever, and particularly in demand in Russia today.

With regards to education, I agree with those who believe that we need to use all of our capacities, including by preparing our teachers in the world’s leading universities, in leading centres. We are working on this issue and have prepared a draft presidential executive order; now we must act on this decision. In principle, it is already agreed, we just have to think through all the details related to the fact that people leave Russia and don’t look for new jobs somewhere else, but rather come back with new skills and continue to work in the Russian Federation.

”It is largely thanks to the efforts of the ASI that Russia launched its first WorldSkills National Competition. Naturally, the idea is very important, interesting and useful, especially in terms of raising the prestige of professional skills. I propose that we have Russia bid to host the WorldSkills International Competition in 2019 and would ask the Agency to organise this work.“

Let’s discuss all of these issues.

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President of The CHAMBER OF COMMERCE AND INDUSTRY OF THE RUSSIAN FEDERATION SERGEI KATYRIN: Mr President, I would like to ask a question if I may.

Vladimir Putin: Go ahead.

Sergei Katyrin: I think you are well aware that a public discussion is currently underway, sometimes a rather heated discussion, on giving the police the right to initiate criminal proceedings for alleged tax crimes. Understandably, this is causing tension in the business community, and even some government officials have spoken out against this measure. Naturally, I think both business and the wider public are interested in the President’s position, in your position. I would like to ask you to comment on this issue.

President OF THE RUSSIAN UNION OF INDUSTRIALISTS AND ENTREPRENEURS (RUIE) ALEXANDER SHOKHIN: Mr President, can I add something? Following your request – yesterday, you asked me to prepare proposals on this issue – I have prepared the RUIE’s suggestions. I have discussed them with Presidential Aide on Economic Affairs Andrei Belousov and Interior Minister Vladimir Kolokoltsev, as well as Federal Tax Service Director Mikhail Mishustin and Presidential Aide Larisa Brychyova. Here, we have made the first step in this discussion and I would just like to give you the textual proposals for the second reading of the draft law.

Vladimir Putin: Thank you very much. We have discussed this matter; I personally discussed it with the Interior Minister, the Chairman of the Investigative Committee, the President of the Supreme Court and Ms Brychyova, as well as our legal experts and my aide, the former Economic Minister.

I would like to say the following on this topic. In 2011, we made the decision to liberalise this field. This was done because at the time it seemed that Interior Ministry agencies often abused their rights and terrorised businesses, as some people would put it, making it impossible to conduct business. And you and I – I also spoke about this today – must fight to create more favourable conditions for business. This was done consciously. But, of course, we must look at how events are developing, look at law enforcement practice and see what our decisions lead to.

Here is what our experience demonstrates today. It shows that after this decision was made, articles 198 and 199 stopped working almost entirely. In some regions of the Russian Federation, proceedings on tax crimes stopped being initiated completely. Meanwhile, throughout the world, and I want to stress this, throughout the world, tax-related offences are considered increasingly detrimental to public wellbeing.

This does not mean that we must return to earlier practices, which have also been recognised, entirely objectively, as not corresponding to our needs and our desire to create favourable conditions for conducting business. Right now, no one is suggesting that we return to the previous practices and the previous legal regulation, and nobody is suggesting we once again give the Interior Ministry agencies the right to initiate criminal proceedings for tax-related offences based on articles 198 and 199. So what is being suggested? The suggestion is to give the Investigative Committee the opportunity to accept these materials from the Interior Ministry and decide for itself whether to initiate proceedings.

This is a sensitive issue: according to the rules currently in place, these proceedings can be initiated based only on the materials presented by the Federal Tax Service. What has happened is that we have essentially made the tax service responsible for the decision to initiate criminal proceedings. The tax service does not initiate them, but that is essentially where the decision is made.

Yet the tax service is not a law enforcement agency. I think – and Mr Shokhin and I talked about this yesterday and I fully understand the concerns of the entrepreneurial community – that we must find an approach that will meet the government’s needs and will not cause any damage to the business climate that we have been discussing at length recently and which we talked about today.

”We will be fighting bribery and corruption regardless of the individuals’ rank, position or party affiliation. We will continue to this work very seriously, eradicating this disease.“

For example – and I am not saying that this is the final decision – the tax service could be required to present its information and its conclusion regarding a given case, and the Investigative Committee as a law enforcement agency must make the decision whether to initiate proceedings or not. Let me draw your attention to the fact that in this instance, the case always goes to the court, and the court has the opportunity to assess who is right.

The decision we made in 2011 also contains clearly contradictory elements. For example, the tax service, which as I already said has the authority to determine whether proceedings are to be initiated or not, can carry out audits spanning no more than three years back, whereas the statute of limitations for tax crimes, in accordance with the Criminal Code of the Russian Federation, is 10 years. How can we audit individual events, say, from four years ago, if the tax service cannot investigate four-year-old cases? I am not saying that everything should be left as it is, and I am not saying we need to either increase the statute of limitations or increase the span of the audits conducted by the tax service, but these elements should be aligned with one another. That is clear. This discrepancy should be eliminated either in favour of one side or the other.

What is this leading to, in practice? Or, more accurately, what has it already led to? Look at today’s state of affairs, say, in Moscow. It is a proven fact, following multiple court decisions and sentences, that tax legislation violators were supposed to repay one billion rubles. This is a relatively small sum for Moscow, and is still subject to verification, to see whether everything has been fully investigated – I’m sure it hasn’t. But even based on what has been revealed, after the court decisions were made, businesses were supposed to pay one billion rubles. How much, do you think, has been repaid? Four million – in other words, nothing. This means the articles of the Criminal Code have simply stopped working.

In all the cases that have been investigated, only three people have been apprehended as a result, and two of them received suspended sentences. Clearly, we must make some improvements; we must think things through together with everyone, together with the entrepreneurial community, and make tough decisions: measured decisions that serve the interests of the public and the business community.

Now, concerning officials. We have a long-standing practice to discuss all issues together, either within the Government or the Presidential Executive Office, doing this jointly and fairly democratically. Naturally, all of us want to seem warm and fuzzy, as they say, and liberal. But that is not our objective. It is not our aim to placate anyone; when making such decisions, we must make balanced choices that would ensure the interests of all groups in society: the business community and the rest of the public. This is highly important in order for everyone to understand that these decisions are balanced and fair.

I have just come back from Korea and Vietnam, so I am only now looking at who said what on this topic; I will talk with my colleagues and we will figure things out, but this issue can be resolved very simply. I will be obligated to remind them that there are certain practices in resolving such matters before going to the media. As we know, if somebody does not agree with something… As Mr Kudrin did – he crossed over into the expert community and will now work with us, basically, in the Presidential Expert Council, which is also good, and I very much count on him to bring a lot of useful contributions to our discussions and to preparing our decisions.

I do not see any serious problems here – I mean, they exist, but I do not think that this will be so difficult or lead to any sort of horrible consequences. On the contrary, I feel we are now on the threshold of adopting such a decision on this matter, this problem, that everyone – entrepreneurs and people who are not involved in business – will realise that this decision might be more strict, but also more fair.

Yes, go ahead, please.

Editor-in-Chief of Expert magazine Valery Fadeyev: Mr President, I would like to ask a question on another topical issue.

Vladimir Putin: Yes?

Valery Fadeev: It concerns the arrest of Astrakhan Mayor Mikhail Stolyarov, who is suspected of accepting a large bribe. Mr President, did you know about the arrest beforehand, or was this just a strong-arm tactic by the law enforcement agencies?

Vladimir Putin: You know, we cannot talk about strong-arm tactics by the law enforcement agencies if they are working within the framework of the law. They are fulfilling their duties. As for the high-profile cases (and this can certainly be considered a high-profile case), naturally, I get preliminary reports from the law enforcement agencies through federal-level officials and regional or municipal leaders, including during preparations for an operation or preliminary investigations. And naturally, I was briefed in due time about that case as well.

I knew what was happening there. But I want to point out that I just recently met with municipal leaders and they (very fairly, I must support them in this) are justly saying that in general, there is a sense among the public that there are only thieves working in municipal offices. I assure you: this is not the case. The overwhelming majority of officials there are honest and competent professionals who are devoted to their work. But this does not mean we should let the wrongdoers slip by. I have already talked about this many times. Incidentally, we will be fighting bribery and corruption regardless of the individuals’ rank, position or party affiliation.

Many such cases are already known. In Yaroslavl, if I recall correctly, it was a member of the Democratic Platform; in Novosibirsk Region, a member of the Communist Party, in Yakutia, a member of A Just Russia, and so on. Based on FSB materials alone, 7,500 cases have been initiated. That is based on FSB materials, and we also have materials form the Investigative Committee, the Interior Ministry, and materials submitted to the Investigative Committee from the Prosecutor General’s Office. There are many cases brought to the courts, with the courts delivering a guilty verdict. For example, there was the well-known case of the former Tula Region governor. He was sentenced to over nine years behind bars. And there are many such cases, I want to emphasise this. We will continue to this work very seriously, I want to reiterate this, regardless of rank and party affiliation, eradicating this disease. Let everyone be aware of this.