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President of Russia Vladimir Putin: Good afternoon, colleagues,

Today, we are holding a regular meeting of the Military-Industrial Commission but, importantly, we are doing this on the eve of Gunsmith Day. Therefore, I would like to begin by congratulating everyone who work in the military-industrial complex on this forthcoming holiday and convey the warmest words of gratitude to the veterans, who consolidated and continued the legendary traditions of the world-famous gun-making schools and developed weapons and equipment. Without any exaggeration they have come to embody the power and might of our army and navy, and ensured the military-technological parity with the leading states for decades ahead.

The current generation of gunsmiths befittingly continues the cause of their predecessors. They produce unique arms that are better than their foreign counterparts. In some cases they do not have any counterparts, which their characteristics make perfectly obvious.

I would like to wish all workers of the industry new successes for the benefit of the Motherland because the work, competencies and the talent of employees, engineers and other specialists is the foundation for the development of Russia’s defence industry.

We will continue strengthening the personnel potential of the defence industry, creating conditions that will allow our talented managers, scientists and designers – those who are 30–40 years today – to fully reveal their abilities, use the accumulated experience, implement their bold ideas and eventually occupy key positions in the companies of the industry and assume responsibility for their future, and, hence, for the reliable supply of Russia’s army and navy with modern equipment in the decades to come.

In this connection, we will discuss the federal personnel reserve in the defence industry under the first item on the agenda of the Commission's meeting.

Notably, such formats – the presidential and the federal management personnel reserve, the Leaders of Russia open competition and a number of others – are doing well and have an excellent track record. The experts who have passed this rigorous selection are already working at different levels of government.

Since May, such work began at the defence industry enterprises. I am aware that work is underway in four areas, and 55 promising professionals have already been selected. They are genuine leaders who are studying strategic planning for defence industry enterprises, organisation of the work of major labour and research teams, and management of order portfolios and finances.

It is important to train new-generation leaders, who will tackle major unconventional tasks facing the industry, such as the effective and timely implementation of the state defence order, the accelerated introduction of scientific and technical achievements into serial production, and, of course, the development of promising weapons and equipment. We need hundreds of such specialists, without any exaggeration. We are talking about many hundreds of top-level specialists.

I would like Deputy Prime Minister Yury Borisov to report in detail on the results of creating a federal personnel reserve in the defence industry complex and plans in this field.

The next item on our agenda is to stimulate the diversification processes in the defence industry. We outlined specific tasks and guidelines for this sphere several years ago.

Colleagues, you are aware that this matter is critical for the sustainable and balanced operation of the defence industry in the long run when we are past the peak of the army and navy rearmament programmes.

Notably, the share of civilian products in the total defence industry output is growing from year to year. In 2018, it was 20.9 percent, and in 2019 it was already 24.1 percent. These numbers are even higher in several defence industry segments. I believe it is already over 31 percent in the aircraft-building industry. Even in the field of ammunition 26 percent of the output is civilian goods. Positive numbers, but there is still much to be done.

A boost in production of quality high-tech civilian items will bring defence organisations an additional income in the future, help create modern jobs, introduce important dual-use technologies and acquire new competencies.

That is why I spoke about this before, as you know, and I am saying this again today: we must follow through on all our plans made. Let me remind you that by 2025, high-tech civilian products should account for 30 percent of the total defence industry output, and by 2030, their share should reach 50 percent.

We have repeatedly said that defence industry enterprises should make broader use of the opportunities offered by national projects and federal programmes. Joining them will enable such companies to increase the output of civilian products and introduce advanced technologies, expand to new markets, and launch investment cycles focused on medium and long-term planning periods thereby strengthening Russia’s technological sovereignty and making a significant contribution to its economic development.

The domestic industry – both civilian and defence segments – already supplies more than half of the machinery and equipment required for national projects. This is clearly seen on our monitoring of the procurement of products for national projects and the comprehensive plan for the modernisation and expansion of backbone infrastructure. As of September 1, total procurement of goods, works and services amounted to 2.1 trillion rubles, where Russian-made products accounted for 1.1 trillion, or 51 percent. However, I have to note that Russian high-tech equipment so far accounts for just 29 percent, if I remember correctly.

As you know, on July 31, several laws were adopted at my initiative to support domestic producers. In fact, the law changing the contract system was your proposal, a draft law submitted by the Government. Now the Government is authorised to establish the minimum share of domestic goods and services in state procurement and procurement by companies co-owned by the state. In simpler terms, of the total volume of purchases, a certain percentage should be supplied by domestic products. And this requirement cannot be violated or circumvented.

We have talked about this many times. I perfectly understand what is happening here. All the pros and cons, the upside and downside are well known. But I still think it is the right step towards supporting Russian industrialists and high-tech companies.

It is necessary to continue making system-wide decisions that will increase the demand for civilian products of the country's defence industry and ensure the priority of domestic producers on the Russian market, which is extremely important.

Of course, there clearly must be competition. But it must be observed both between Russian producers and between Russian and foreign producers. But foreign producers should not have special advantages, and unfortunately, this still happens on our market.

Improving the law on state defence procurement remains topical. This work has been actively carried out in recent years, and the main emphasis was made on developing a single mechanism of state price regulation in this sphere as well as implementing an information and analysis system that would gather data on prices as part of the implementation of state defence procurement and compare them with prices in non-defence industries.

Let me note that through introducing such amendments to legislation and other measures we have achieved positive results in placing the state defence procurement order.

I am aware of the ongoing discussion between the Defence Ministry as the customer and producers. I will not go into detail now but only note that, as of early September, there already were contracts for 95 percent of tasks against 91.5 percent last year.

At the same time, the law enforcement practice in the state regulation of prices on products supplied as part of the state defence procurement has shown that a number of issues undoubtedly still require revision and adjustment.

For example, we have to address the question whether defence industry enterprises can leave profits, at least a part, a significant part of the profits they make from executing the state defence procurement order. We have discussed this with my colleagues. I believe this would be right: they would acquire some reserve at least. I would like to hear what proposals you have on this.

This is what I wanted to say at the beginning. Let’s get down to work.

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