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Implementation of recently adopted legislation on the small businesses development was also discussed.

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President of Russia Dmitry Medvedev: I would like us to discuss several issues.

First of all I would like to hear your report on the current macroeconomic situation. We regularly discuss the state of the economy, but recently we have been seeing different trends. What does it look like today?

This is particularly pertinent since I am going to attend a G20 summit in a few days, and I am sure we will be discussing the state of the global economy and the processes taking place in different countries.

The second issue I would like us to focus on is connected with the series of documents I signed some time ago, amending legislation on small business. Could you please comment on these changes? I hope you believe they have been positive.

Minister of Economic Development Elvira Nabiullina: Let me begin with the economy. On the whole, the economy is continuing to recover and the main indicators are positive.

First of all, I would like to report on the inflation, which is a sensitive issue for us. Last week inflation stood at 0.1 percent, which is very low.

Dmitry Medvedev: What about cumulative inflation?

Elvira Nabiullina: It is 4.2 percent since the beginning of the year, whereas last year it was 7.1 percent. So we have a significant reduction.

Dmitry Medvedev: That is not bad at all. What is your forecast for the year end? In your opinion, what can we expect?

Elvira Nabiullina: Our forecast is around 6 percent, because certain factors may come into play at the end of the year. It may be even less than 6 percent, but we are very careful in our forecasts.

Dmitry Medvedev: If the figure is 6 percent, it will be the lowest inflation in the entire Russian history.

Elvira Nabiullina: Of course, low inflation is very important for social stability, as well as for other economic indicators. Interest rates, lending – all of this depends on inflation.

Other indicators for May are also good: industry is beginning to recover; investments are up 5.5 percent against May last year; retail turnover, which is boosted by consumer demand, is also positive with 5.1 percent up. In general, we have relatively good indicators across the board.

Dmitry Medvedev: What is the GDP growth?

Elvira Nabiullina: We don’t have the figure for May yet.

Dmitry Medvedev: What about the previous period?

Elvira Nabiullina: It was about 3.9 percent.

Dmitry Medvedev: On the whole this is good compared to last year, when we had an absolute decline and a wide range of related problems, as well as a drop in industry output and so on.

On the other hand, I just had a look at figures, and the other Background information BRICS BRIC countries, Brazil, India and China, have stronger growth than Russia. This is no reason to feel envious; it is a reason for us to think about ways to accelerate our growth.

Elvira Nabiullina: From this perspective we are particularly concerned about investment figures because they have fallen far behind. Investments guarantee our future; they influence the growth rate and the investment climate.

In February we held a meeting on the investment climate. You issued instructions to develop a complex of measures, including migration policy, customs practices and taxes application. We are promoting these measures at the moment and some of the laws have already been passed and you have signed them.

What is important here is the way these laws are enforced in practice. The Government is preparing some orders and bylaws. However, it is not just the documents and the bylaws themselves that are important but also the way they are implemented in the regions.

Together with the business community we have started a study in the regions, for example, of the conditions that exist for investors, what the procedures for obtaining permits are like, how much time does a company need to complete the paperwork on a land plot or to get connected to the power grid and utilities, etc. The situation differs sharply from region to region even with the present improved legislation. But if there is a wish, the mechanisms we have in place now can create an attractive investment climate.

Our proposal, which we would like to discuss, is to cut federal funding for the worst offenders among the regions, where we see no steps for the improvement of the investment climate.

Dmitry Medvedev: Which regions are you talking about? Do you mean Moscow and St Petersburg?

Elvira Nabiullina: Different regions. When the study we are conducting together with the business community is completed, we will report to you on the state of affairs in the regions.

Dmitry Medvedev: All right. I am glad you have reminded me about the instructions; they are indeed very important. We must monitor which laws have already been adopted and which we still have to work on.

I have recently signed a law that will simplify relocation to Russia for highly qualified professionals from other countries, but we still have a great deal of work to do. I hope we will talk about that in St Petersburg, when we meet with foreign investors and Russian business leaders.

Elvira Nabiullina: Now about small business. I would like to say the following: last year we adopted a series of important measures aimed at improving the situation with businesses; some of these measures are very effective but others have fallen behind a bit. We are monitoring this.

Certainly, the situation with small business is far from perfect. For example, a problem is the access for small businesses to renting premises, to office and production space. What could have a positive effect here is one of the latest laws you have signed, which makes amendments to the law on privatisation. We believe that some of these changes will have a positive impact on granting small business access to real estate.

First of all, it will become possible to bid online, including in privatisation cases. This used to be impossible.

Dmitry Medvedev: This will limit the opportunities for officials to make decisions based on personal considerations, which means they will not be able to put pressure on business and demand bribes.

Elvira Nabiullina: Absolutely.

The second innovation is that we are going to attract private vendors of real estate. This area will no longer be monopolised by the government; private vendors, mostly banks, will be able to take part.

This is very important because apart from large properties, the privatisation programme has many small sites. In order to privatise them on a mass scale we need to attract many vendors, because the government system will not be able to manage the whole process.

This year we have included public property in the privatisation programme. Apart from state owned companies and shares of limited companies, we will also have real estate, primarily industrial facilities and warehouses, which will all be of interest to small businesses.

Dmitry Medvedev: Will there be demand for them?

Elvira Nabiullina: We hope the demand will increase, although last year privatisation was not very successful.

Certainly, demand for new assets was quite low during the crisis, which is why we would like to make the privatisation programme more balanced this year by including large properties, which will be of interest to major investors, and more modest ones for small business.

Dmitry Medvedev: So we still have small publicly owned properties. What kind of sites are they?

Elvira Nabiullina: Mostly warehouses and manufacturing facilities.

Dmitry Medvedev: They tend to be derelict and disused, and there is every reason to transfer them into private ownership.

Elvira Nabiullina: They usually have all the infrastructure.

Dmitry Medvedev: That is convenient.

Elvira Nabiullina: That’s right. The amount of information to be supplied will increase and it will have to be more transparent. We have also introduced a new practice, similar to Dutch auction, to boost sales. We hope to see a positive effect. We are drafting legislative acts now.

Dmitry Medvedev: What is the lowest limit at Dutch auctions? Is it one ruble?

Elvira Nabiullina: Yes, it is, but with Dutch auctions it is possible to go up at different bid increments.

Dmitry Medvedev: Try different ways; we need to make use of the derelict premises that can help small business.