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In his Address, President Putin outlined the main areas of work, instruments and techniques to achieve Russia’s future development goals.

In the portion devoted to domestic policy, the President touched on the issue of local self-government, stressing that it is necessary to clarify the basic principles of its organisation and provide the relevant legislative support, so that local authorities become strong, independent, and financially sustainable.

Vladimir Putin emphasised that it is necessary to improve political institutions, encourage political competition and broad public debate. Russia’s federal and regional executive authorities must establish public councils, and for this a draft bill On Public Oversight is being prepared. The President referred to interethnic relations as a major theme requiring frank public discussion.

Mr Putin considers that the implementation of the May 2012 presidential executive orders – ones that contain specific measures to ensure Russia’s dynamic development in all spheres – require that the country optimise budgetary spending by eliminating inefficient spending, removing barriers inhibiting the full independence of public institutions, and creating a system for independent assessment of their performance.

The Address also touched on issues concerning the development of healthcare and education systems, and the large-scale construction of affordable housing.

In the economic portion of the Address, Mr Putin stressed the need to resume sustainable economic and labour productivity growth, in which factors such as high-quality education should be fully implicated. A flexible labour market, favourable investment climate, and modern technologies are also necessary. In particular, together with the Russian Academy of Sciences, the Government has been instructed to refine promising fields of science and technology. The President also proposed creating a National Council for Professional Qualifications, which should approve the whole range of professional standards within two years.

The President paid a great deal of attention to the agro-industrial sector, improving living and working conditions in rural areas, and establishing modern, comfortable infrastructure there.

The head of state also addressed problems associated with foreign labour migration, which is connected with social imbalances, ethnic conflicts, and rises in crime. The Address outlines specific proposals to improve the current situation, particularly via changes in the patent system, increasing the responsibility of employers, and strengthening oversight of the reasons why foreign nationals enter the country.

The President also drew attention to improving the business climate in Russia. For this purpose, a national investment climate rating will be launched in the regions in 2014, and incentives will also encourage the regions to develop their economic bases.

The President recalled that in his 2012 Address he talked about limiting the extent to which the Russian economy operates offshore, but as of yet there are few results. The Address contains a number of concrete steps to improve legislation in this area.

The development of Siberia and the Far East was a separate topic in the Address. In this respect, the President proposed, among other things, creating a network of special territories that can offer attractive conditions to non-resource industries (primarily export oriented ones). In turn, this will facilitate economic development.

The foreign policy part of the Address communicated that Russia will strive to be a global leader, defend international law, and ensure respect for the sovereignty, independence and unique identity of each people. Moreover, Russia does not aspire to be called a superpower, understanding that as a claim to world or regional hegemony.

The President described the current situation in Syria, stressing that the Syrian example reaffirmed the UN’s central role in global politics. Vladimir Putin also noted that a serious step towards resolving the Iranian nuclear problem has been taken. He also talked about preparations for the Eurasian Economic Union Treaty and the  Background information Customs Union between Russia, Belarus, and Kazakhstan Customs Union’s expansion.

The last part of the Address was devoted to improving the Armed Forces. In particular, President Putin talked about developing new strategic missile systems for land, sea and air, developing general purpose forces, creating reserve forces, as well as the defence industry’s development.

Members of the Council of Federation, State Duma and Government, presidents of the Constitutional, Supreme and Arbitration courts, heads of the constituent entities, chairpersons of regional legislative assemblies, heads of traditional faiths, public figures, including heads of regional civic chambers, and executives of major media outlets, are in attendance at the ceremony taking place in St George Hall of the Grand Kremlin Palace

This year, the Address is being delivered on the 20^th anniversary of the Russian Constitution, which was adopted by popular vote on December 12, 1993.

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President of Russia Vladimir Putin: Citizens of Russia, members of the Council of Federation and the State Duma,

The President’s state-of-the-nation annual Address to the Federal Assembly is a requirement set forth in the Russian Constitution, that which is exactly 20 years old today. I congratulate you on this important date for our state and our society. And of course, I also congratulate you on the 20^th anniversary of the Federal Assembly, Russia’s parliament, which was created in accordance with the provisions of our country’s basic law.

Our Constitution brings together two fundamental priorities – the supreme value of rights and freedoms of citizens and a strong state, emphasising their mutual obligation to respect and protect each other. I am convinced that the constitutional framework must be stable, above all in what concerns its second chapter, which defines the rights and freedoms of individuals and citizens. These provisions of our fundamental law are inviolable.

But life does not stand still, and no constitutional process can ever be regarded as finally completed or dead. Targeted amendments to other constitutional chapters, deriving from law enforcement practices and from life itself, naturally are possible and sometimes necessary.

You know that we have proposed to amend the Constitution and to unite the Supreme Court and Higher Arbitration Court. Today these courts often differ, sometimes quite substantially, in their interpretation of various laws. Sometimes they take different decisions in similar cases, and sometimes they agree. This results in legal uncertainty, and at times in injustices that affect concrete people.

I believe that unifying these courts will allow us to bring judicial practice onto one track, and therefore strengthen the guarantees protecting a crucial constitutional principle, the equality of all before the law.

Colleagues,

The Constitution contains crucial unifying national ideas.

”I am convinced that the constitutional framework must be stable, above all in what concerns its second chapter, which defines the rights and freedoms of individuals and citizens. These provisions of our fundamental law are inviolable.“

The meaning of its provisions on the welfare state consists in the mutual responsibility linking the state, society, the business community, and every Russian citizen. We must support the growing desire of citizens, representatives of public and professional associations, political parties, and the business class to participate in our country’s life.

Among other things we must support civic activism at the local level, in communities, so that people get a real opportunity to participate in managing their village or town, to deal with everyday issues that actually determine their quality of life.

Today quite a few problems have accumulated within our local self-government system. Unfortunately, and you know it well, the responsibilities incumbent on municipalities and their resources are not evenly balanced. This often leads to confusion regarding their authorities, which are not only blurred, but are constantly thrown from one level of government to another: from districts to regions, from towns to districts and back again. Local self-government authorities are being constantly shaken by corruption scandals.

The powers at the district level have been significantly watered down. Those that existed in education, healthcare, and social welfare have been transferred to the regional level of government.

In addition, local authority – because it is the closest power to the people – should be organised so that any citizen could reach out to it, figuratively speaking. In this connection I am addressing the All-Russian Council for Local Self-Government Development, All-Russian Congress of Municipalities, governors, and members of the Federal Assembly, of the Government of the Russian Federation – let’s comprehensively go over these issues again and finally bring the situation in line with common sense and attune it to the times.

Let me repeat: I think the most important task is to clarify the general principles of local self-government organisation, develop strong, independent, financially sustainable local authorities. And we need to start this work and give it sound legal foundations already next year, 2014, the year of the 150^th anniversary of the famous Zemstvo Reform of 1864.

Incidentally, at the time it was precisely the development of zemstvos, of local self-government that enabled Russia to make a breakthrough and find competent people capable of implementing major progressive reforms, including Pyotr Stolypin’s agrarian reform and the restructuring of industry during the First World War.

I am sure that today as well strong local self-government can become a powerful resource for enhancing and renewing our country’s human resource potential. And of course, we are all interested in ensuring that elections bring to power qualified, motivated, professional people who are ready to perform their duties responsibly. For this reason we shall continue to work on developing the political competition, improving political institutions, and creating conditions for them to be more open and efficient.

Recent elections demonstrated that today there is less officialdom, bureaucracy, and predictable results in our political life. I consider it important that many new parties have made their presence felt. By winning seats in municipal and regional bodies, they have laid a good foundation for participating in upcoming federal election campaigns. I am sure that they will act as worthy competitors to longstanding political actors.

Today’s Russia requires broad public debate that would yield practical results, when public initiatives become part of public policy, while society monitors their execution.

I think that all draft bills, key government decisions, and strategic plans should pass a so-called initial public reading involving NGOs and other civil society institutions.

Both the federal and regional executive authorities must establish public councils. Of course many such councils already exist within various levels of authority, but they are not everywhere. And most importantly, these councils should not be formal or decorative structures. On the contrary, they should act as expert groups, and sometimes as the government’s constructive opponents, and be active participants in anti-corruption efforts.

I would ask the Civic Chamber, the Human Rights Council and other non-governmental and human rights organisations to be actively involved in drafting the bill On Public Oversight that would establish the legal basis for such civic participation.

”Interethnic tensions are not provoked by representatives of particular nationalities, but by people devoid of culture and respect for traditions, both their own and those of others. Together we must rise to the challenge; we must safeguard interethnic peace and thus the unity of our society, the unity and integrity of the Russian state.“

Supporting the human rights movement should be a priority of joint work between the state and society. We expect that such organisations will not act in a way that is politically biased, and that they will engage as closely as possible with the interests and concerns of every citizen, every individual.

In this context, the role of the Civic Chamber is increasing. It must become a platform where various professional and social groups, associations, and unions can express their interests. More professionals should be involved in this work. I believe that members of these unions must compose at least half of the Civic Chamber’s members proposed by the President. Such an approach would balance the interests of different social and professional groups, and enable the Chamber to be more responsive to their concerns.

The most important topic requiring frank discussion in our society today is interethnic relations. This one topic concentrates many of our problems: challenges relating to socio-economic and regional development, corruption, shortcomings in the work of public institutions, and of course failures in educational and cultural policies, which often produce a distorted understanding of the true causes of interethnic tensions.

Such tensions are not provoked by representatives of particular nationalities, but by people devoid of culture and respect for traditions, both their own and those of others. They represent a kind of Amoral International, which comprises rowdy, insolent people from certain southern Russian regions, corrupt law enforcement officials who cover for ethnic mafias, so-called Russian nationalists, various kinds of separatists who are ready to turn any common tragedy into an excuse for vandalism and bloody rampage.

Together we must rise to the challenge; we must safeguard interethnic peace and thus the unity of our society, the unity and integrity of the Russian state.

Colleagues,

The May 2012 executive orders contain specific measures designed to ensure the country’s dynamic development in all fields. In fact, the orders amounted to a unified action programme, reflecting the will of millions of people, the desire of all Russian people for a better life. Sometimes we hear that there are insufficient funds to realise all stated plans and goals, that we need to lower our standards and simplify our tasks.

Colleagues, let me turn to a very important subject with profound implications. I think that it is impossible to elaborate policies following a formal approach. Yes, of course we all know that economic trends may and do change. But that is no reason to talk about revising our goals. We need to do real work, seek solutions, and clearly lay out budgetary and other priorities. I would ask you to update all state programmes accordingly.

Already within the next two years, all budgets should be changed to conform to our budget plan. This does not mean rewriting everything mechanically. It means increasing the personal responsibility of each manager for the achievement of results. What we need to do is to focus resources on achieving substantial changes in specific sectors.

For this reason we are raising salaries in education and healthcare so that the work of teachers, professors, and doctors becomes prestigious once again, and attracts strong university graduates. But as we agreed, decent wages must not only reflect budgetary transfers, but rather reforms designed to improve spending efficiency and, most importantly, the quality of social services. We need people to see how our schools, universities, clinics and hospitals are changing for the better.

Therefore, in addition to increasing salaries, which certainly needs to be done, and we will do it, we must also implement a whole set of other measures to ensure that all our objectives are met. What are those measures? They include transitioning to the use of an effective contract and the certification of specialists, as well as implementing per capita financing, when establishments (both state and private ones, which is very important) providing services of the highest quality receive special benefits. This means developing real competition, opening the public sector to NGOs and socially-oriented businesses. It certainly means optimising the budget institution network by reducing ineffective expenditures and components, and removing barriers that prevent public institutions from working independently.

What is happening with all these measures? A year and a half has passed since the executive orders were issued. You know what I’m seeing? Either things are being done in a way that elicits a negative reaction among the public, or nothing is done at all. Clearly, we will fail to achieve our stated goals with this kind of work.

It is taking us a long time to make these changes – an unacceptably long time. As a result, consumers of these services do not perceive any fundamental changes. We are allocating enormous resources, but if we do not hold reforms, instead of an improved quality, we will only see an increase in inefficient expenditures that inflate the administrative apparatus, which is what often happens in practice. I want to draw the federal and regional authorities’ attention to this.

One very important challenge is to create a system for independently appraising the quality of social institutions. This mechanism will allow their funding to be linked to their performance, which means effectively optimising the budget institution network.

I believe that we need direct application laws that will establish common approaches, standards and criteria, as well as responsibilities at all levels of government, to create a system for independently appraising the performance of organisations in the social sector. I am asking you to adopt a corresponding law in the upcoming spring session. Colleagues, this is an urgent request.

”We need schools that do more than just teach; teaching is very important –most important, in fact – but we also need schools to help our nation’s citizens form their identity, absorbing the nation’s values, history and traditions. We need open-minded individuals with a strong internalised knowledge of culture, capable of thinking creatively and independently.“

In recent years, we have been able to achieve a great deal in the healthcare sector. Life expectancy has gone up. Mortality from cardiovascular and many other types of diseases has gone down. However, we are still far from our target indicators.

The big question that remains is a realistic approach to the insurance principle in healthcare. Today, the function of mandatory health insurance is essentially to “pump money” to the recipient through the extra-budgetary fund rather than the budget. The objective is entirely different. The objective is for the insurance principle to work as an incentive for people to take responsibility for their health, to have financial incentives to live a healthy lifestyle, and for insurance companies to be interested in medical institutions providing high-quality services, so that a patient finally has the opportunity to select the medical institution that, in his or her opinion, works best.

The mandatory health insurance system should fully financially cover state guarantees for providing free medical assistance. This applies equally to the total spending volume and directing funding to a specific hospital or clinic. At the same time, the patient should clearly understand which healthcare services he or she is entitled to receive free of charge, and the doctor should understand the principles upon which his or her work is paid.

Particular emphasis should be placed on developing a preventive treatment system. Beginning in 2015, all children and teenagers must have a yearly mandatory free medical check-up, while adults should undergo such an examination every three years.

Clearly, there will be an increase in disease detection during routine medical examinations, and the need for high-tech medical care will grow. In recent years, we have created a whole network of federal centres, supporting ones that are located in major cities, but also creating a new federal network of centres capable of providing medical assistance at the most advanced level. We need to maintain and develop their potential. At the same time, services at these centres must be accessible not just to the residents of the cities where they are located, but also residents of other regions. We must provide the necessary financial resources for that.

On the whole, over the next three years, we must create the conditions to perform 50% more high-tech operations than today. This is an entirely achievable goal. At the same time, we cannot fall behind the global trends. Leading nations already stand at the threshold of implementing medical technologies built on bio- and genetic engineering, based on the human genome sequence. This will truly revolutionise medicine. I believe that the Healthcare Ministry and the Russian Academy of Sciences should make fundamental and applied medical research a priority.

We must greatly increase the professional community’s role in managing the healthcare system. I am aware that there are some ideas in this area that deserve support. I am asking the Health Ministry to work with leading healthcare worker associations to submit concrete proposals.

We must also revive our traditions of charity. I propose that we organise a nationwide movement for volunteers who want to work within the healthcare system, providing what assistance they can. I believe that volunteers who have spent several years working in healthcare institutions should have priority admission to medical schools.

Colleagues,

The year 2014 has been declared the Year of Culture in Russia. It is intended to be a year of enlightenment, emphasis on our cultural roots, patriotism, values and ethics.

We are aware of the all-encompassing, unifying role of Russian culture, history and language for our multi-ethnic population, and we must build our state policy with this in mind, including in education.

We need schools that do more than just teach; teaching is very important –most important, in fact – but we also need schools to help our nation’s citizens form their identity, absorbing the nation’s values, history and traditions. We need open-minded individuals with a strong internalised knowledge of culture, capable of thinking creatively and independently.

Instructions have already been given that starting from the next academic year, a mandatory essay-based final exam will be introduced for graduating high school students. The results of this exam will be taken into consideration alongside the National Final School Exam when applying to universities and other educational institutions.

Teachers’ professional development will be crucial to the future of Russian schools. Teachers must be ready to use modern technology and know how to work with children that have health-related disabilities. I ask you to prepare an integrated programme for upgrading school staff. I know that the Education Ministry is already working on this, and is developing a system of life-long training and professional development for teachers. We must complete the work on this programme.

There is another problem that requires urgent resolution. Even today, many schools operate with two shifts. This is true for nearly one quarter of Russian schools, and nearly half of schools in cities use this system. Thanks to positive demographic growth, the number of students in Russian schools will grow by a million in the next five to six years.

I ask the Cabinet, the Federal Assembly and regional authorities: we must assess the scale of this problem and provide effective solutions, which should include building preschools in such a way that in the future, they can be used as elementary schools as well.

This should not lead to an increase in the cost of preschool construction projects. We can consider the option of building schools and preschools under one roof, as a single campus.

Of course, let me stipulate that this is not the federal government’s responsibility. This responsibility falls on the regional and even local authorities. Nevertheless, we need to understand the scale of the problem. We cannot brush it aside. If it has enormous significance for our nation and takes on these forms, I do not think we will be able to address it without federal support.

Naturally, we must continue developing a wide array of sports infrastructure for children and teenagers. We must do everything to increase the popularity of active lifestyles. Indeed, that was the main idea behind the Universiade that was successfully held in Kazan and the Olympic Games in Sochi, which will open very soon.

I am confident that we will do an excellent job of organising the Olympics in Sochi, the 2018 FIFA World Cup and the Winter Universiade in Krasnoyarsk.

Colleagues,

The statistics from January through October of this year show that Russia has experienced natural population growth. This is the first time we are seeing such results since 1991, and it is a very positive indicator.

”We need to put order in the procedures for employing foreign nationals who have visa-free entry to Russia, and increase employers’ responsibility for employing foreign workers. Russia must be able to know why people are coming, and how long they plan to stay. ”

The birth rate exceeded mortality in almost half of Russia’s regions, and it surpassed the national average in all regions in the Urals and Siberia, and most Volga and Far Eastern regions.

But we need to understand something else as well. Right now, the generation born in the 1990s is beginning to start families of their own – this is the generation from the time when the decline in birth rates was the greatest, when it was catastrophic. We must make a special effort to ensure that the positive population growth remains irreversible.

I remind you that the birth rate in our country reached one of its highest figures in the late 1980s. Housing construction also peaked at this time. Today, housing construction must once again play a decisive part in encouraging population growth in Russia.

The Government has already drafted the policy measures needed to implement the programme for building affordable housing. This programme will see the construction of at least 25 million square metres of new housing, complete with the corresponding social infrastructure, by 2017, so that middle-income families can improve their housing situation. I propose that we call this programme Housing for Russia’s Families, so as to focus attention on this side of the issue.

Overall, by 2016, we will need to pass the 75-million square-metre mark, which is higher than the record set in 1987, when 72.8 million square metres of housing were built. Modern technology allows us to build a lot of relatively cheap and quality housing, but there are several problems we need to resolve on the way.

Above all, we need to finally make all the legal amendments that will clear the way for making land plots available for housing construction. This must be done within the coming months. This is a subject we are always discussing, and we have come back to this issue many times over these last weeks.

The local government authorities will have the task of organising bids for land plots under clear and transparent procedures. Developers will also have greater responsibility: if they receive the land but do not begin construction according to schedule, they will have to return the land.

Another barrier that is holding back construction is the lack of funds for providing land plots with the necessary engineering infrastructure. We will need to develop specially-designed instruments to resolve this and work out the financing sources and organisational form.

I know that at the tax authorities’ initiative the Government is drafting proposals on bringing order to online trade. This could also become a source of funding for developing engineering infrastructure. I ask you to make proposals on this matter.

Finally, we need to put the situation with permit procedures in order. These procedures are still not standardised. I ask you to draft a single and exhaustive list of all permits required for construction and reduce the time it takes to go through the necessary procedures as much as possible. I would like you to do this by the end of March 2014.

We all know why this work is not making progress and why problems have not been settled to this day. It is because there is a lot of corruption in this sector. This is where the root of the problem lies.

Colleagues,

We all know that renewed, sustained economic growth is the essential condition for achieving our social development goals. This brings me to the heart of our work. 

Of course we are feeling the effects of the global economic crisis, but let’s be frank: the main reasons for the slowdown in our economy are internal rather than external in nature.

In terms of the size of its GDP, Russia is doing well and counts among the world’s five biggest economies. But in key indicators such as labour productivity, there is a two- to three-fold gap between us and the developed economies. We must work hard to close this gap. 

To do this, we must make full use of all new development factors. What are these factors? We all know them well. They include high quality professional education and a flexible labour market, a good investment climate and modern technology.

I ask the Government, together with the Russian Academy of Sciences, to make adjustments to the programme of priority areas for science and technology development. The recently created Russian Scientific Fund will also need to organise its work in line with these priorities. The Fund’s purpose is to finance fundamental research and programmes with a long-term implementation timeframe. I consider this work to be of national importance.

The leaders of the parliamentary parties voiced their proposals on taking part in Russia’s innovative development at recent meetings held in preparation for today’s Address. You all voted for the law that established the Russian Scientific Fund. I propose that all of the parliamentary parties send their representatives to the Russian Scientific Fund’s Board of Trustees.

As for applied research, it should be based around technology platforms. I propose that targeted programmes such as Research and Development in Priority Science and Technology Fields refocus their funding on supporting this kind of applied research. It is also important at the same time to ensure co-financing of projects from state and private sector sources.

At the moment, only one out of every 265 scientific results obtained becomes protected by the law. Added-value contribution to Russia’s GDP from intellectual property turnover comes to less than 1 percent. This is not just a low figure – it is a very paltry figure indeed. In the United States, this figure is 12 percent, in Germany 7–8 percent, and in Finland, our neighbour, it is 20 percent. Technology platforms must therefore focus on concrete results, getting patents and licenses, and getting their developments into actual practical use. 

We must develop internal demand for advanced technology. It is absolutely crucial to have demand for advanced technology from within the country. We must use the public procurement system and state company investment programmes to help encourage this demand. These sources represent a lot of money, trillions of roubles.

We must also carry out a thorough stock-taking of our development institutions. Their activities have become fragmented of late between numerous disparate projects that are not always directly related to innovation. That was not our objective when we established these development institutions. This is not to say that these projects are without merit, but the institutions were set up specifically to support the economy’s innovation development. We must reset their strategic focus back on technology breakthroughs.

In order to rid our economy of outdated, inefficient and harmful technology, we must finally put together a modern technical and environmental regulation system. This is a very complicated and sensitive matter for the economy. I hope that the Government will work energetically together with the business community and with our colleagues in the Customs Union to carry out this work.

I also propose that we establish a statistical evaluation system for the technology situation in the different economic sectors so as to gain an objective picture of our competitiveness. A system of this kind worked during the Soviet period. That old system was scrapped, but nothing was developed in its place. We now need to develop a new system. 

”Russia’s reorientation toward the Pacific Ocean and the dynamic development in all our eastern territories will not only open up new economic opportunities and new horizons, but also provide additional instruments for an active foreign policy.“

The next task is support for the non-raw materials export sectors. This support system has still not begun working in full. Many administrative barriers remain in place. It takes more than 20 days to get an export permit. In comparison, it takes 6 days in the United States, and in Canada or South Korea it takes 8 days. These are all issues that need to be addressed in a new roadmap for supporting exports. I ask the Government, together with the Strategic Initiatives Agency, to draft this roadmap by March 1, 2014. 

Colleagues, new professional standards play a crucial part in quality economic development. These standards must set the qualification demands that professionals in the different sectors should meet. But they will work only if they meet the demands of business itself, and they must therefore be developed with the professional communities’ involvement. I propose establishing a National Professional Qualifications Council. Rather than being attached to a government body, it would be a truly independent organisation. The main business organisations and professional associations should be involved in its work. Over a two-year period, this council will have the task of approving the entire package of new professional standards.

I ask our colleagues from the business community and from the associations I just mentioned not to shirk their part in this work. After all, it is in your own interests to get involved.

The entire professional education system should be reorganised so as to fit with the new standards and their demands. There is much in our own experience that we can draw on here, updating it for today’s needs. I am thinking here of things such as professional and workplace-related training right from school and technical higher education centres set up by big industrial companies. The main principle is to have on-the-job training so that theory is reinforced by practical skills and experience.

A few words separately on the subject of higher education, most young people want to get higher education, and the quality of our universities must measure up to this demand. Only in this way can we really turn our young people’s education drive into a powerful force for our country’s development. But today, both in the capitals and in the regions, there are still many universities that do not meet modern demands.

I think that in order to reinvigorate the entire higher education system, we must make use of our best universities’ potential by delegating to them the power to evaluate education quality and help to ensure that graduates’ knowledge and skills will be needed in the labour market and will bring our economy and society real returns.

In no circumstances must we create barriers for educational mobility. This also concerns the cost of student residences. The prices here should not be excessive in any way, but must be directly linked to the living conditions and services provided. I ask the Ministry of Education and Science and the student organisations to strictly monitor the situation here. It is unacceptable to set exorbitant prices for student accommodation.

A word of warning to university rectors in this respect: the situation will soon reach a point where the Finance Ministry will look at your revenues and will lower the norms accordingly. This is what you will end up with, and education, students and the universities will all suffer as a result.

We must also make a much greater effort to export quality education services and create conditions for having foreign students and our compatriots abroad, especially from the CIS countries, to study in Russian universities. This is something that can play a very big part in strengthening Russia’s cultural and intellectual influence in the world.

Over this coming period we must settle the matter of mutual recognition of school diplomas within the  Background information Commonwealth of Independent States (CIS) CIS and also examine the matter (as a proposal) of setting up centres for sitting the Russian National Final School Exam in accordance with Russia’s standards in the CIS countries, at Russian language centres, for example. These exams would be held at the same time as the National Final School Exam takes place in Russia’s schools. This would give talented young people from the CIS greater opportunities for coming to study at Russia’s universities. 

Finally, we need to speed up the adoption of laws that would enable Russian universities to actively develop distance learning, which would also be aimed above all at our compatriots abroad and at the CIS countries.

As we improve professional education, we must remember that the labour market is becoming more flexible and people need to have possibilities for re-training and getting a new professional start in life. We must provide the right conditions for people who are willing to change jobs or move to a different town or region. Of course, this needs to be coordinated with our regional and local development plans, and working together with business. 

We must give people information support, including by setting up a national job database, so that people everywhere can see in which region they might find a good job. This requires a whole series of decisions. I ask you to draft these measures, including those on rental housing and so forth. You know what sorts of issues I am talking about. The list is long. This work can and must be carried out as soon as possible.

”We do not claim to be any sort of superpower with a claim to global or regional hegemony; we do not encroach on anyone’s interests, impose our patronage onto anyone, or try to teach others how to live their lives. But we will strive to be leaders, defending international law, striving for respect and national sovereignty and peoples’ independence and identity.“

The second task is to make the countryside a more attractive place for life and work. We have already invested considerable money in developing the agriculture sector. The sector is showing a positive dynamic now. In many areas we can now fully cover domestic demand with Russian-produced goods. I want to thank our rural population for their work and the results they have achieved.

The big task now is to encourage people to stay in the countryside and build a modern and comfortable infrastructure in rural areas. I ask you to pay particular attention to this issue when making changes to the state agriculture development programme.

I would like to say a few words about the situation in single-industry towns. They are part of the complicated legacy we inherited from the Soviet economy. These towns are home to more than 15 million people. Many of them are in a difficult situation, but these towns do have an excellent base: social infrastructure, housing and a skilled labour force. We need to identify what is stopping business from coming here, what incentives and conditions we can offer so that investors will come to these towns not under pressure, but because they see real opportunities for themselves there. Believe me, it is better to resolve things this way than to end up pumping tens of billions from the budget later into job creation there, which is what we will end up having to do if we do not properly address the situation now.

I therefore ask you to draft proposals on comprehensive development in the single-industry towns, investment projects that can be carried out there, and proposed financing sources, as well as proposals on reducing labour market tension and targeted support for small and medium business.

In this respect, I want to say to all of the regional heads that we are aware of the constraints that regional budgets face, but we do need to look beyond our immediate problems too. 

The proposal has already been made – and I support it – that all regions could offer two-year tax holidays to new small businesses working in the manufacturing, social or scientific sectors (applause). Probably not all of the governors are applauding, but I want to say that carrying out this kind of idea today would bring dividends tomorrow in the form of additional revenue for the regions and municipalities. These would be new businesses. They do not even exist at present, and so we are not talking about any loss in budget revenue here. On the contrary, if we create the conditions for these new businesses, we will create revenue too. 

We also need to make it possible for small businesses and individual entrepreneurs to pay their taxes and insurance payments using the ‘one window’ system. These are different payments, but we need to make it possible for them to be paid at a single place and time.

Another complicated problem related to the labour market is foreign labour migration. The lack of proper order in this sector creates labour market distortions, causes imbalances in the social sector, provokes ethnic conflicts, and leads to higher crime rates.

We need to put order in the procedures for employing foreign nationals who have visa-free entry to Russia, and increase employers’ responsibility for employing foreign workers. Of course, if these people are living and working in Russia and using our country’s education and healthcare services, they must also take on their share of obligations and pay their taxes and other payments.

The task is not an easy one. We must preserve our special ties with the former Soviet republics, but at the same time we also need to put the situation in order. I think that in this context we should change the current license system. Foreign workers currently need to acquire a license if they are employed by a private individual. I propose that legal entities and individual entrepreneurs should also have the possibility of hiring foreign workers on a license basis. The license’s cost would be set by the particular region depending on the situation on the region’s labour market and the average income there. The license system should be differentiated and encourage above all professionals, educated specialists, who speak Russian and have an affinity for our culture to come to work in Russia. I stress too that licenses would be valid only in the region where they were issued. 

I hope that if we organise this work competently, it will be an economic instrument that can help us regulate the migration flow. I call it an economic instrument because of the differing cost the licenses would have from one region to another in Russia.

Finally, we need to establish tighter scrutiny of the purpose foreign nationals declare when entering Russia. All civilised countries do this. Russia must be able to know why people are coming, and how long they plan to stay. We also need to settle the issue of foreigners who enter Russia under visa-free travel arrangements and without any specific purpose. At least they supposedly have no specific purpose, though in actual fact they probably do have a purpose, but the authorities know nothing about it. Their time in the country should be limited, and entry into Russia should be prohibited for people who have broken the immigration rules. Depending on the seriousness of the violation, entry should be prohibited to enter the country for 3–10 years.

These measures would set an additional barrier for foreign citizens who are working in the shadow economy or are even engaged in criminal activity, or who are working illegally, often in inhuman conditions, and who, sadly, themselves become the victims of criminals. 

Colleagues,

Two years ago, together with the business community, we began systematic work to improve Russia’s investment climate. I can say that we have already achieved some good results. Perhaps not many people believed that we would actually achieve these results, but they are there. Now we must go further. By 2015, we must have completed the main work to put in place the laws and regulatory base that will make it attractive and easy to do business in Russia.

For this reason, starting next year, we will publish a national rating of the investment climate situation in the different regions. This will essentially be an instrument for evaluating the national business initiative’s implementation in each of the country’s regions.

At the same time, we need to create incentives for regions that are developing their economic base and that have made it their mission to support business initiative and create new production facilities and jobs.

Let me announce a piece of good news for the regional governors. Regions that invest in developing industrial and technology parks and business incubators will have the federal taxes paid by their resident companies returned for three years to the regional budgets in the form of inter-budgetary transfers. Let me stress that this will be within the limits of the region’s expenses for building the infrastructure for these sites.

There is nothing to laugh about here! This is a good proposal. It was the result of long and exhausting discussions with the Finance Ministry. I ask the Finance Minister not to water down these agreements, but to give them your full attention and carry them out.

One issue that is still a sensitive matter for businesspeople is excess attention from various inspectors. Inspections and checks are necessary, but the work to change the principles on which the oversight and inspection agencies carry out their work must continue.

”No one should entertain any illusions about achieving military superiority over Russia; we will never allow it. Russia will respond to all these challenges, both political and technological. We have all we need in order to do so.“

This work is still ongoing and it must continue. To make this area more transparent, I propose that we set up a unified federal portal, where every check and inspection will be given an individual number and it will be clear immediately who initiated each investigation, who was inspected, on what grounds the inspectors carried out their investigations, and, most important, what results the investigations produced.

Let me note another problem too, namely, that our mechanisms for settling economic disputes are still a long way behind the best global practices. In this context, we also need to make a serious effort to raise the arbitration courts’ authority.

I ask the Government, together with the Russian Union of Industrialists and Entrepreneurs and the Chamber of Commerce and Industry, to draw up a draft law on fundamental improvements to the arbitration system and submit it to the State Duma as soon as possible.

In last year’s Address, I spoke about the challenges in relieving the economy of offshore activity. This is another topic to which I want to draw your attention and which we must return to today.

Why is that? I will tell you frankly that so far, the results are barely perceptible. Let me remind you about a major transaction that took place this year, worth over $50 billion. The sale of TNK-BP shares occurred outside of Russia’s jurisdiction, although we all know that the sellers were Russian nationals, and the buyer was one of Russia’s largest companies.

Last year, according to expert assessments, $111 billion worth of Russian goods passed through offshores and partial offshores – that’s 20% of our exports. Half of the $50 billion of Russian investments abroad also went to offshores. These figures represent the withdrawal of capital that should be working in Russia and direct losses to the nation’s budget.

Since nothing significant has been achieved in this area this year, I want to make the following suggestions.

The incomes of companies that are registered in offshore jurisdictions and belong to Russian owners or whose ultimate beneficiaries are Russian nationals must follow Russian tax laws, and tax payments must be made to the Russian budget. We must think through a system for how to collect that money.

Such methods exist and there is nothing unusual here. Some countries have already implemented such a system: if you want to use offshores, go ahead, but the money has to come here. It is being implemented in countries with developed market economies, and this approach is working.

Moreover, companies that are registered in a foreign jurisdiction will not be allowed to make use of government support measures, including Vnesheconombank credits and state guarantees. These companies should also lose the right to fulfil government contracts and contracts for agencies with government participation.

In other words, if you want to take advantage of the benefits and support provided by the state and make a profit working in Russia, you must register in the Russian Federation’s jurisdiction.

We must increase the transparency of our economy. It is imperative to introduce criminal liability for executives who knowingly provide false or incomplete information about the true state of banks, insurance companies, pension funds and other financial institutions.

We need to maintain our fundamental, firm position on ridding our credit and financial system of various types of money laundering operations. Meanwhile, the interests of honest clients and depositors in problematic banks should be securely protected.

Today, the fight against the erosion of the tax base and the use of various offshore schemes is a global trend. These issues are widely discussed at the G8 and G20 summits, and Russia will conduct this policy at both an international and national level.

The need for liability fully applies not only to private businesses, but executives at state-controlled companies and development institutions as well. I propose that the Government should radically change the principles of its work; there should not be any executive comfort zones here. They are paid very good money. We will not achieve much economic progress if we undermine them; we will not be able to employ the professionals we need. But we must establish supervision over their work, and we must do it the right way.

All such organisations must develop their own long-term strategies, which should state clear goals and personal responsibility indicators for their leadership. Executives’ employment agreements must stipulate liability for failure to fulfil the set objectives, including financial liability.

Company programmes for corporations included in the strategic enterprise list must be approved by the Government of the Russian Federation, and their implementation should undergo an external audit. I looked at the list yesterday: there are several dozen such companies. We have several lists, but the list of strategic enterprises includes only several dozen. Of course, this means an additional workload, but I am confident that the Government will rise up to this challenge.

I will stress again that government and private sector resources should go toward development and achieving strategic objectives. For example, let’s look at such objectives as developing Siberia and the Far East. This is our national priority for the entire 21^st century. The challenges we will need to tackle are unprecedented in their scale, which means we must take unconventional approaches.

We have already made a decision on a reduced income tax rate and a number of other taxes for new investment projects in the Far East. I feel it would be expedient to expand this regime to all of Eastern Siberia, including Krasnoyarsk Territory and the Republic of Khakassia.

Moreover, I suggest creating a network of special advanced economic development zones in the Far East and Eastern Siberia with special conditions for organising non-extractive production, including that intended for export. New companies located in such zones, in such territories, should be provided with five-year exemptions for income tax, mineral extraction tax (with the exception of oil and gas, which is a profitable sector), land and property taxes, as well as preferential insurance rates, which are very important for high-tech manufacturing.

What’s also important is to create conditions here that will be competitive with key business centres of the Asia-Pacific region. Such conditions should apply to authorisation procedures for construction, connecting to electricity networks, and passing through customs. We will make active use of the Far East Development Fund in order to resolve infrastructure issues in these territories.

We will need to decide on the exact location of these territories by July 1, 2014, and adopt all the legal regulatory acts necessary for them to operate. Given the importance and scale of this endeavour, I am asking the Prime Minister to personally supervise this work. In the future, we will make decisions about their future development based on the experience and practice of working in such zones and the resulting effect.

We will also continue the projects already being implemented at this time. As you know, a new university has been established on Russky Island. It will conduct a sound scientific evaluation with regard to Far East development programmes, and provide for the region’s employment needs, first and foremost in areas such as space, biotechnology, robotic technologies, design, engineering, oceanography and the use of marine resources.

I am confident that Russia’s reorientation toward the Pacific Ocean and the dynamic development in all our eastern territories will not only open up new economic opportunities and new horizons, but also provide additional instruments for an active foreign policy.

Colleagues, global development is becoming increasingly contradictory and dynamic. Russia’s historical responsibility is growing in these conditions, not only because it is one of the key guarantors of global and regional stability, but also a nation that consistently asserts its value-based approaches, including in international relations.

The intensity of military, political, economic, and informational competition throughout the world is not decreasing, but only getting stronger. Other power centres are closely monitoring Russia’s progress as it grows stronger.

We have always been proud of our nation. But we do not claim to be any sort of superpower with a claim to global or regional hegemony; we do not encroach on anyone’s interests, impose our patronage onto anyone, or try to teach others how to live their lives. But we will strive to be leaders, defending international law, striving for respect and national sovereignty and peoples’ independence and identity. This is absolutely objective and understandable for a state like Russia, with its great history and culture, with many centuries of experience, not so-called tolerance, neutered and barren, but the actual common, natural life of different peoples within the framework of a single state.

Today, many nations are revising their moral values and ethical norms, eroding ethnic traditions and differences between peoples and cultures. Society is now required not only to recognise everyone’s right to the freedom of consciousness, political views and privacy, but also to accept without question the equality of good and evil, strange as it seems, concepts that are opposite in meaning. This destruction of traditional values from above not only leads to negative consequences for society, but is also essentially anti-democratic, since it is carried out on the basis of abstract, speculative ideas, contrary to the will of the majority, which does not accept the changes occurring or the proposed revision of values.

We know that there are more and more people in the world who support our position on defending traditional values that have made up the spiritual and moral foundation of civilisation in every nation for thousands of years: the values of traditional families, real human life, including religious life, not just material existence but also spirituality, the values of humanism and global diversity.

Of course, this is a conservative position. But speaking in the words of Nikolai Berdyaev, the point of conservatism is not that it prevents movement forward and upward, but that it prevents movement backward and downward, into chaotic darkness and a return to a primitive state.

In recent years, we have seen how attempts to push supposedly more progressive development models onto other nations actually resulted in regression, barbarity and extensive bloodshed. This happened in many Middle Eastern and North African countries. This dramatic situation unfolded in Syria.

As far as Syria is concerned, the international community had to jointly make a momentous choice: to either descend into further erosion of the world order’s foundations, or collectively make responsible decisions.

I feel it was our common success when the choice was made on the basis of the fundamental principles of international law, common sense and the logic of peace. So far, at least, we have been able to avoid external military intervention in Syria’s affairs and the spread of the conflict far beyond the region.

Russia made significant contributions to this process. We acted firmly, thoughtfully and carefully. We never jeopardised our own interests and security, nor global stability. In my view, that is how a mature and responsible nation must act.

As a result, together with our partners, we managed to steer the course of events away from war and toward establishing a nationwide political process and civil consensus in Syria. Syria’s chemical weapons arsenal is now under international control. Its liquidation is an important step in strengthening non-proliferation regimes for weapons of mass destruction. The Syrian precedent confirmed the UN’s central role in global politics.

The Syrian crisis, and now the situation in Iran as well, clearly demonstrate that any international problem can and should be resolved exclusively through political means, without resorting to forceful actions with little potential that are rejected by most nations in the world.

This year, we saw a breakthrough with the Iranian nuclear programme, but it was only the first step. It is imperative to continue patiently searching for a broader solution that will guarantee Iran’s inalienable right to develop peaceful nuclear energy and – I want to stress this – security for all countries in the region, including Israel.

Incidentally, it was Iran’s nuclear programme that once served as the main argument in favour of deploying a missile defence system. So what is happening now? The Iranian nuclear issue is being resolved, but the missile defence system remains. And it doesn’t just remain, it is being developed further. But I will talk about that a little later.

I want to stress again: Russia is prepared for joint efforts with all partners in the interest of ensuring common, equal, indivisible security.

Russia’s G8 presidency in 2014 will focus on acute global problems: strengthening non-proliferation regimes, combating international terrorism and drug trafficking. We will also act in accordance with these principles when preparing to host the BRICS and Shanghai Cooperation Organisation (SCO) summits in 2015.

We are now entering a crucial stage in preparing the Eurasian Economic Union Treaty. We expect to have agreed on the Treaty’s text by May 1, 2014 and to have submitted it to the Russian, Belarusian and Kazakhstani parliaments by that time. Colleagues, I would ask you to prioritise this document and give it your consideration and support.

Let me add that working groups are currently preparing roadmaps governing the accession of Kyrgyzstan and Armenia to the Customs Union. I am sure that the real achievements of Eurasian integration will only enhance our other neighbours’ interest in it, including that of our Ukrainian partners.

Even before all these protests that we are now witnessing in Kiev – and I very much hope that the country’s political forces will be able to negotiate and resolve Ukraine’s accumulated problems in the interests of its citizens – before all these problems began, starting in May Ukraine has expressed its desire to be present at all meetings between Russia, Belarus and Kazakhstan as an observer. Ukraine participates in discussions and has repeatedly declared its interest in joining some of the Customs Union’s agreements.

We are not imposing anything on anybody. But if our friends want to work together, then we are ready to continue this work at the expert level.

Our integration project is based on equal rights and on real economic interests. We will consistently promote the Eurasian process, without setting it against other integration projects including the more mature European one. We proceed from our complementarity and naturally we will continue to work with our European friends on a new basic agreement.

Colleagues,

A few words about our actions to further strengthen our Armed Forces.

I just mentioned the issue of missile defence, and here’s what I would like to say in this regard. We are all perfectly aware that the missile defence system is defensive in name only. In fact, it is a crucial component of strategic offensive capabilities. The development of new weapons systems, such as low-yield nuclear weapons, strategic non-nuclear missiles and hypersonic high-precision non-nuclear systems for prompt, long-range strikes are also causes for concern.

We are closely following the development of the so-called Prompt Global Strike system, which is being actively developed by some countries. Implementing all of these plans could have extremely negative consequences for regional and global stability.

The ramping up of high-precision strategic non-nuclear systems by other countries, in combination with the build-up of missile defence capabilities, could negate all previous agreements on the limitation and reduction of strategic nuclear weapons, and disrupt the strategic balance of power.

We understand this very well, and in this context we know exactly what we need to do. No one should entertain any illusions about achieving military superiority over Russia; we will never allow it. Russia will respond to all these challenges, both political and technological. We have all we need in order to do so.

Our military doctrine and advanced weapons, weapons that are being and will be deployed, will unconditionally allow us to ensure the security of the Russian state.

We still have a lot to do to develop modern high-precision weapons systems. At the same time, judged by qualitative parameters for modern strategic nuclear deterrent forces, today we are successfully reaching new milestones on schedule, and some of our partners will have to catch up.

We are developing new strategic missile systems for land, sea and air to further strengthen our nuclear forces. We will continue to strengthen our strategic missile forces and continue building a fleet of nuclear submarines. We are also starting work on a promising long-range aviation system.

The establishment of a global intelligence network is the next step on our agenda. The formation of an integrated, real-time global network for reconnaissance and targeting, which will operate in a single informational space in the interests of the Armed Forces of the Russian Federation, is extremely important. This is connected with additions to our satellite group.

We will continue to develop our general purpose forces: aviation, the navy and the land forces. This year in keeping with our plans, the number of privates and sergeants under contract increased to 220,000. At the same time we have to think how to create highly trained reserve forces.

There is another suggestion in this regard: keeping deferrals for students and changing the very system of military training offered by institutions of higher education. This will enable all students to study, receive military training for their next military assignment and a particular area of military specialisation.

This mechanism will allow us to train the right amount of reservists for the most needed, primarily technical military specialisations, while not drafting them into the Armed Forces. I would ask the Government and the Security Council to submit concrete proposals for how such a system could be organised.

Next. As you know, the funds we are allocating for rearming the Army and the Navy, for modernising the defence industry are unprecedented. They total 23 trillion rubles [more than $700 billion].

In the next decade, our defence companies will be fully loaded with orders. They will be able to upgrade their manufacturing base and create high-quality jobs. Let me recall that in Russia about two million people work in the defence industry. Together with their families, the number comes to almost seven million people. And specialists in this sector will have stable, well-paid jobs, and their families will be provided for.

Now we have to think about what the defence industry’s companies will do after having fulfilled the state defence procurement order, after 2020. We cannot allow them to become obsolete.

We need to strengthen our position in global markets. I would ask the Military-Industrial Commission to submit proposals in this regard, to ensure that our businesses can promptly switch to releasing in-demand civilian products onto both our domestic market and foreign ones.

There’s another point I would like to emphasise. We said that all Defence Ministry servicemen who began their service before January 1, 2012 would receive permanent housing by the end of this year. This task should be fully completed in the near future, and it will be. I would draw the Defence Ministry’s attention to this and ask you to deal with the issue on a case-by-case basis, helping people choose the best option for them.

Colleagues,

For the first time in our country’s history, we are turning the page on the issue of permanent housing for servicemen in Russia’s Army and Navy. Now we can concentrate on completing the construction of modern service housing and comfortable military bases.

Colleagues,

A sense of responsibility for the country is the main theme, lifeblood, and core value of the Russian Constitution, and it is also a call to each of us.

The nation’s strategic development agenda is well-known; this Address has outlined main areas of work and ways to achieve specific goals.

Everything that has been stated here must be executed without any reservations, new suggestions or bureaucratic interpretations. This is what the authorities’ most important and most notable task consists in.

It is our duty to increase people’s trust. Only in this way will we be able to increase the activity of our citizens, and people will want to contribute to our country’s development.

Let me repeat that if a decision has been made, then it must be implemented. I consider this approach to be a concise expression of shared responsibility, and would suggest making this the motto of the coming year, a motto for everyone: for the government, for society, for citizens.

I am absolutely convinced that by drawing on the best traditions of our people, by using the latest ideas and most effective development paths, we will meet all the challenges we face and guarantee our success.

Thank you for your attention.