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Expanded meeting of the Government

January 31, 2013, The Kremlin, Moscow

Vladimir Putin chaired an expanded meeting of the Government of the Russian Federation.

The meeting discussed the policy priorities of the Russian Government through 2018.

* * *

President of Russia Vladimir Putin: Good afternoon, colleagues,

Last year we outlined a strategy for our activities in the long term. We identified our priorities and targets in the documents and executive orders you are familiar with, as well as the pre-election articles and some Government documents. The work is already under way. I spoke of this in the Address to the Federal Assembly and the Budget Address.

Based on these policy priorities, the Government’s task was to develop a detailed plan of actions, taking into account all economic and foreign policy factors, new challenges and new opportunities, and linking together the state programmes and sectoral and regional strategies.

The draft policy priorities for the Government’s activities through 2018 have been prepared. Mr Medvedev and I discussed them yesterday and we will review them together today. We will be implementing our plans in difficult conditions. It is clear that there can be no return to the pre-crisis development model, the pre-crisis growth model. This is true for Russia and the rest of the world. Unfortunately, and I want to draw your attention to this, although we understand this and often talk about it, yet we continue to rely on the old criteria.

A steady increase in consumer demand in the developed economies – the United States and the European Union – generated growth for the global economy over a long period of time. Now these mechanisms are failing. To spur demand, the developed economies, burdened with debt, have been trying to use methods that they themselves criticised in the past – I wanted to say “non-standard” methods but basically these are fairly common approaches: they are resorting to emissions, printing money. It is not clear what consequences this may have for the future of these countries and for the global economy in terms of the economic health of the Eurozone and the North American continent.

We must also bear in mind other factors that are changing the global economic landscape. They include rapid growth of the regional markets and significant technological changes taking place all over the world, including in countries that are now faced with the difficulties that I have mentioned. This also includes the re-industrialisation policy and job creation, which are being launched in many developed economies. The goal is to restore production, which was earlier relocated to Latin America and Asia. All of this directly affects the future of our development.

Naturally, we must not just go with the flow, passively waiting for the situation in the global economy to unfold. We must be proactive and look for new approaches. Again, if we want to be competitive and successful in addressing social issues and challenges, Russia’s economy should grow at a faster rate than the world economy.

However, the national economy has slowed down in the last half a year. The growth rate of industrial production in recent months fell below 2% year on year, and there has been a simultaneous decrease in investment in fixed assets.

The main factors that stimulate the economy today are income growth and consumer spending. Retail sales in 2012 rose by 5.9% and real disposable incomes by 4.2%. This is good but not enough to generate economic growth.

Interest rates also give cause for concern as they have risen to a level significantly above the inflation rate, which inevitably affects lending to businesses and individuals.

We must also bear in mind the grave long-term challenges, especially demographic issues. It is forecast that in the coming years the working age population will decrease by up to 1 million people per year and, conversely, there will be an increase in the number of unemployed, children and pensioners per worker.

The situation is further aggravated by the lack of qualified personnel, a problem that employers say is becoming increasingly acute in our country.

Colleagues, today the quality and efficiency of economic development are coming to the fore, and the goals identified in presidential executive orders are gaining particular relevance. This concerns, above all, increasing productivity by 50% to 100%, as we have said. This is a very difficult task, one that may even seem unachievable at first glance, but we must move forward and resolve this issue. We talked about creating and updating 25 million jobs, which may also appear unattainable, but I believe that we can do it, and, in fact, businesspeople have confirmed it – this figure was not plucked from thin air but was reached in dialogue with the business community.

The Government must have a clear idea of which methods it will use to achieve these indicators in the current situation, how it will build up cooperation with investors, which sources of the so-called long money it can use, how it will overcome infrastructure limitations, and how it will tackle the training and retraining of the labour force and increase its mobility. Finally, how will this be tied in with investment strategies and social infrastructure? In this regard, I would like to dwell very briefly on several important points.

I will start with the investment climate, which we have been talking about a great deal recently. Our country has a number of fundamental advantages for attracting investment. Russia has one of the biggest markets in Europe and in the world. Add to this the opportunities created by the Customs Union and the Common Economic Space. We have natural resources, the basic infrastructure and a highly educated population.

According to experts, Russia has the potential to become one of the top five countries in terms of investment attractiveness. Our task is to turn this potential into a real flow of investment and creation of new businesses and jobs.

The key priorities on the economic agenda today are to improve the business climate and competitiveness in all aspects of doing business. Together with the regional authorities we must do everything in our power to remove the barriers created by corruption. Our crucial joint task, including the Government’s, is to increase transparency of government procedures and conduct an anti-corruption evaluation of the regulatory framework.

I ask you to pay special attention to the implementation of anti-corruption measures, which we have identified with our G20 partners. The business community has formulated a plan of action for the Government and the regional authorities as part of the national business initiative. The work on the roadmaps and the regional standards for improving the investment climate has shown its effectiveness. We must continue to use this format and maintain an ongoing dialogue with business associations. It is not enough to create the conditions for investment; we must learn to take advantage of these conditions, to sell our projects to investors so that they put their money in the Russian economy.

We must intensify work with potential investors, particularly in our core industries, and take advantage of the benefits created by Russia’s accession to the World Trade Organisation, including the placement in Russia of production facilities oriented towards export to Asia-Pacific countries, for example.

Just a couple of words about the state of the labour market. The unemployment in Russia is at an unprecedented low level of 5.4%. This is good, but it also means that we have practically no reserve workforce. We can develop only by improving the quality. Therefore, investing in people and their qualifications, in improving productivity and modernising production is the main source of economic growth. Our challenge is not just to increase the number of jobs, but to create efficient and therefore highly paid jobs to replace the old ones.

At the same time, it is necessary to build such a system of continuing education which becomes a resource base for 25 million modern jobs.

Close cooperation between employers, investors and educational institutions is an essential pre-requisite, as well as ensuring that lifelong learning becomes accessible for all. I propose to hold a detailed discussion with business associations and the Agency for Strategic Initiatives regarding the steps required to achieve this goal.

One more point. The mobility of the labour market has increasing importance in the present-day conditions. People should have the opportunity to relocate to a region that has good jobs. All of us know that we have traditionally had problems in this respect. The people are not to blame because there is no infrastructure to move from one place to another.

We must think about which public-private partnership instruments could be used for a comprehensive development of new centres of economic growth, including the creation of new social infrastructure and the formation of a civilised market of affordable rental housing. We have discussed this many times in the past but let us come back to this topic again. All this is essential to achieve balanced territorial development.

The Prime Minister and I have agreed to meet here in the Kremlin to review the document you had prepared, bearing in mind the importance of the issue we are discussing today and the prospects of economic development.


Vladimir Putin: Colleagues,

In conclusion of our work today I would like to say that in order to solve all the problems faced by the country, to fulfil all the promises that we made in political campaigns, primarily during the election campaigns, we must do even more than is set out in the Guidelines for the Government’s Performance through 2018.

We must develop democratic institutions in the country, support and strengthen civil society, improve the regulatory framework in all areas, fight corruption, strengthen and further develop law enforcement and the judicial system.

I consider the document we have reviewed today to be extremely important, because it is only by mobilising all the resources at our disposal, both administrative and financial, that we will be able to get results. In this connection I would like to thank the Prime Minister and all of you for the work that has been carried out on the preparation of this document.

There is great scope for effective collaboration on the preparation of conceptual documents and their implementation, and I very much hope that this potential is realised.

A few more points I would like to address. We heard the argument today about the need for a more efficient use of domestic resources. This can be expressed in terms that are clear and understandable to any expert. We’re talking about attracting investment, both domestic and foreign. This is beyond doubt our development choice. There is no question about that. We must involve our domestic resources, and we know this and have the right to do it. What are they? We know this too. We should plan ahead to make sure that they appear, grow and are utilised. Crucially, it is not only our reserve fund that is to grow, but also the assets of businesses and savings of individuals; our insurance companies must develop so that they have free resources and so that we can make efficient use of pension accruals.

With regard to the pension component, it is necessary first of all to ensure decent retirement incomes for our citizens. However, as I said, this is also an economic factor. This is one of the sources of long-term money that is most effectively used by developed economies.


Most importantly, we must organise ongoing work for the implementation of policies set out in the Guidelines. At the same time, I ask you not to forget about your regular responsibilities. As you know, Russia, along with the global economy, is facing a number of complex problems, some of which are unique to our country. Last year’s harvest was below target, and this is not through the farmers’ fault; on the contrary, we got a good harvest thanks to them, but still agricultural production was down 4.7%. We must monitor this very carefully and provide an effective response when required. I believe the Government took prompt decisions on interventions. We must watch the grain market carefully in the near future, both domestic and international.

There is also the problem of rising petrol prices in the country. I ask you to watch this carefully and respond, especially with the approach of the spring fieldwork, the agricultural season. This does not mean that we should always use the old methods, they should be more timely, perhaps, but they must always be effective; they must support the farmers and provide us with the necessary conditions for the harvest that the country and the farmers need.

I ask you to bear all of these factors in mind. Thank you once again for your work today.

Thank you.

January 31, 2013, The Kremlin, Moscow