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Meeting with Government members

October 31, 2017, The Kremlin, Moscow

The President chaired a regular meeting with Government members.

The participants discussed measures to enhance labour efficiency and other current issues.

* * *

President of Russia Vladimir Putin: Good afternoon, colleagues.

We recently met at various venues to discuss regional finance, including at meetings with governors and at the Government level. Agreements have been reached and are being discussed in the regions, and timetables are being plotted. We have agreed to launch a programme to restructure accumulated budget loans against the regions’ commitments this year. This will allow them to invest the released funds in the development of industry, infrastructure and social services, as well as to enhance the quality of life and to increase people’s incomes.

At the same time, we know that a number of regions – we discussed this many times – are making very high payments on so-called market loans, that is, on government securities and expensive commercial bank loans. These market loans amount to nearly 50 percent of the regions’ sovereign debt, or over 1 trillion rubles. Moreover, it is larger than some regions’ annual revenue and more than half of 11 regions’ revenue. These are Kostroma Region (121 percent), Astrakhan Region (95 percent), Volgograd Region (77 percent), Kabardino-Balkaria (75 percent) and Orel Region (66), to mention just a few.

Today we will discuss the reasons for this situation. We know what they are, and we have discussed them several times already. Today I would like to point out the following: we must find solutions for the regions that need to repay not only budget loans but also substantial market loans. Considering their debt burdens, they cannot tackle development goals effectively, or ensure the necessary quality of life for their people. Taken together, this is creating serious territorial imbalances.

I think we need to take proper measures to reduce the commercial debt of all the constituent entities to no more than half of their revenue.

The regions that have exceeded this number, as of October 1, should be entitled to a targeted loan from the federal budget to repay some of their commercial debt. We discussed this with the Government and the Ministry of Finance. I will say a few more words, and then will ask the Finance Minister to comment. However, I would like to emphasise that this is an exception. In the future, we will adhere to the earlier adopted parameters and, within the next three-year period, we will not provide long-term budget loans to the regions that participate in the restructuring programme.

We are expecting all Russian regions to act responsibly and strictly comply with budgetary discipline.

I would like the Government to look very carefully at the regions that must pay off their federally funded loans this quarter. They are not all in the same position and some might need specific support. However, I want to emphasise, and I want the regions to hear me: you must make good on your obligations and work to make it happen.

I would also like to ask the governors to ensure the planned salary increases and their timely disbursement to your region’s employees.

In this regard, I have a question for Mr Siluanov. When, do you think the regions can obtain targeted loans to repay some of their market debt and what amount will need to be allocated from the federal budget?

Minister of Finance Anton Siluanov: Mr President,

We believe this year is the best time to support the regions in order to create equal starting positions in terms of commercial debt. We believe it is imperative to come up with legal amendments as a follow-up to your decision. According to our estimates, the amount needed to implement your instructions to reduce commercial debt to or below 50 percent of revenue will total about 60 billion rubles. We will come up with proposals and work with our parliamentarians in order to have them implemented quickly.

Vladimir Putin: How do you plan to work with the regions I just mentioned, which must repay their budget loans in the fourth quarter?

Anton Siluanov: Mr President, in order to support the regions in the fourth quarter, we have a balance of undistributed financial assistance to the Russian regions and budget loans. When allocating these funds, the Government will take your instructions into account.

Vladimir Putin: But each case should be considered individually, assessing the quality of their work and the work of their teams engaged in the economy and finance.

Anton Siluanov: Yes, sir.

Vladimir Putin: We have already spoken about this and noted the rise in business activity in the country. This is a very positive trend, a positive tendency. Over the three quarters of this year, the volume of investment in fixed assets increased by 4.2 percent, which is twice as high as the GDP growth rate for the same period last year. In many respects, this is the result of the work done to improve the business environment. But of course, we need to move forward and must not stop in any case.

I would like the Economic Development Minister to also comment on this, to say a few words.

Economic Development Minister Maxim Oreshkin: Thank you very much, Mr President.

Today, the World Bank will publish its Doing Business rating. Russia has risen five positions compared to last year and now occupies the 35th place. The assessment of the World Bank is based on a distance to the best practices. If last year we had negative dynamics, then this year the trend has been reversed, and the indicator for Russia has grown significantly.

In general, the progress that we see has been going on for a number of years. Six years ago, we started the movement from the 124th position and achieved the greatest progress during this period among all the 190 participating countries.

However, it is important to realise that making headway is getting more difficult as time goes by. When we were at the bottom of the list, moving up was quite easy. The countries that are closer to the top are constantly trying to improve their business environment, and never cease to implement reforms that make it easier for entrepreneurs to do business.

We are ahead of all BRICS countries for the third straight year. This year, we became the EAEU’s top country. Countries such as France, Holland, Switzerland, and Japan are our neighbours and direct competitors. Belgium and Italy are behind us.

Over the past year, we have managed to make good progress in implementing a number of reforms. We have moved up dozens of spots on individual indicators. Russia is part of the world’s top ten countries in terms of grid connections and top 30 in terms of property registration, contract execution, business incorporation, and lending.

However, there are areas where we still fare pretty badly, such as issuing building permits (115th place) and international trade (100th place). Importantly, we are making good progress in international trade, having moved up 40 spots in 2016.

There are a number of areas where we lost ground, such as dropping seven spots in the sphere of taxation. Straightforward rules and low costs of doing business are, of course, the prerequisites for active growth of private investment. Rankings make it possible to find weak spots based on cross-country comparisons. Clearly, rankings are not an end in themselves, with increases in investment activity of small and medium-sized businesses being the main indicators. Indeed, as you have just mentioned, we have achieved fairly good indicators this year. However, our goal is not just to maintain these good indicators next year, but to achieve higher growth rates of investment activity.

As for plans for next year, I believe that there are four key goals.

The first goal is to further implement reforms, including in this area, which means moving forward with all that still remains on the ‘roadmaps’. We need to make sure that reforms that have already been carried out translate into real action. It may also be the right time to consider using or in some cases creating breakthrough solutions, primarily based on digital technology. We have to look for ways to make a huge leap forward in areas where we are falling behind.

The second goal is to reform supervision and oversight functions. The draft law prepared by our ministry has passed preliminary parliamentary review, and is now awaiting Government approval. This draft law is designed to ensure a transition from punitive to preventive action and to introduce smart risk assessment tools.

The third goal is to continue implementing best practices in the regions to improve their investment climate. We are active in this area, working together with the Agency for Strategic Initiatives. There was a lot of progress this year, but it is essential that we keep moving forward. It is important that not only major cities, but the country as a whole and every region benefit from a good investment climate.

The fourth point is that in the long term we need to gradually shift our focus away from streamlining technical procedures, which are important. Fostering personal development should become a key priority, since human capital is the main driver of competitiveness in the economy of the 21st century.

Thank you.

Vladimir Putin: You have just said yourself that we are not doing as well as we would like in all areas. In construction, for instance…

Maxim Oreshkin: 115th place.

Vladimir Putin: …this is nothing to brag about. As regards obtaining a construction permit, we climbed from 179th to 115th place from 2010 to 2016. This is a gain of 64 spots, but now we are stuck there.

Mr Men, what do you have to say?

Minister of Construction, Housing and Utilities Mikhail Men: Mr President,

We are well aware that 115th place is not where our industry should be, so we have taken the following measures. The Government has endorsed six exhaustive lists of procedures required for the issue of construction permits on all aspects, starting from housing construction and ending with the building of heat supply facilities.

The headquarters with the Prosecutor General’s Office and representatives of envoys to federal districts has been created. Together with the Prosecutor General’s Office, we are carefully tracking and overseeing compliance in the regions with these exhaustive lists that have been approved.

In parallel, we are working to reduce the number of procedures included in these exhaustive lists. For example, the unification of rules on connecting to utility grids will reduce our housing construction list by another 38 procedures by the end of the year. There will be 103 procedures. We started with 200, even a bit more. At the same time, we are thoroughly working on every procedure because it is very important to create conditions that work for business, but in the construction industry, it is vital to make buildings and facilities safe for people.

The introduction of modern technology undoubtedly creates opportunities to continue reducing the number of procedures and the timeframe for testing them. Last August we launched an experiment on transferring services related to connecting to utility grids online. We are planning to complete it in 2018 and will disseminate the experience throughout the country. We hope this will produce results.

In addition to improve the business environment, a package of draft laws was drawn up and submitted for consideration by the  State Duma. Among other things, it envisages uniform regulation of the procedure for establishing areas with special land use conditions and establishing a single requirement for maximum parameters and the procedure governing private housing projects. The practice of bringing unauthorised construction projects in line with established requirements is being introduced. We hope that these measures will yield the expected results.

Vladimir Putin: We need to look not only at what is happening globally, but also at the federal and even the regional level. We must go down to lower levels and see what is happening there. Do you know how much of a mess there is?! They create problems for people at every step. You need to go into it. We should not shy away from what may seem like violations of the rights of local or regional authorities. We need to look at what is going on there, at least help them methodically, and adjust things with the help of federal legislation. After all, small and medium-sized businesses that engage in this sphere are still facing enormous problems at every turn. We need to take a hard look at that.

Large companies will reach you or any other ministers. They will get in touch with anyone they may need. They may find their way to the Duma, and have their interests lobbied there. What are small and medium-sized businesses going to do? The lack of regulations regarding these issues is what suppresses business activity. It would be good to have everything in electronic form, but, unfortunately, it is not yet possible.

I strongly hope that this work will continue vigorously.

We are in the middle of autumn, and vaccinations are underway. How is it going? I would like Ms Skvortsova to comment on it.

Minister of Healthcare Veronika Skvortsova: Mr President, colleagues,

We prepare for the flu season every year, including by expanding the coverage of preventive vaccinations. As you may be aware, we have almost doubled the coverage over the past five years, reduced the incidence by 71.5 percent, and the death rate from the flu and similar viral infections by 95 percent. This year, we began our preparations for the current epidemic at a time where the previous epidemic was still running its course, when in March we received current vaccine strains from the WHO. They include three major strains for this season. The two type A flu viruses are H1N1 Michigan, which is similar to the 2009 swine flu, and H3N2 Hong Kong. The B type flu Brisbane is the third.

Vaccine production took five months; we were ready by August. This year we are using two Russian-made high-tech flu vaccines, both effective and safe – Ultrix and Sovigripp. The full production cycle is located in Russia.

The vaccines were supplied to all Russian regions from August to October 15 by the country’s only supplier, the National Immunobiological Company. Procurement grew by 22 percent from 2016, to 58.4 million doses, including 17.8 million for children and 40.6 million for adults. According to recent reports, 57.9 million people have already been immunised, that is, almost 40 percent of the population, including 16.6 million children, more than 60 percent of all children under 18, and 151,000 pregnant women.

It is important to note that in 44 regions vaccination coverage exceeds 40 percent, up to 55 percent. Employers are taking an active part in vaccination this year – they have paid for the vaccination of 3.3 million workers. This expansion of vaccination coverage also has to do with the new organisational vaccination campaign formats. We have deployed vaccination awareness vans in big cities in crowded places, near metro stations and in shopping centres, for advertising and awareness purposes.

On behalf of the Healthcare Ministry, Roszdravnadzor [Federal Service for Surveillance in Healthcare] checked all the regions’ readiness for the seasonal flu epidemic. I would like to note that all regions have built up two-week minimum emergency stock of antiviral drugs and personal protective gear. More than 100,000 beds have been reserved in hospitals especially for patients with viral illnesses, and emergency care departments have prepared 200 beds per one million people. All emergency departments are fitted out with the necessary equipment, including 71 extracorporeal membrane oxygenation machines. This is the only way to cure severe viral pneumonia. By the end of the year, 18 more machines will be purchased.

There is no epidemic at the moment. The incidence rate is 10 percent below the baseline and 5.9 percent below the weekly epidemic threshold. Overall, 19 cases of influenza have been registered since the beginning of September. None of the patients were vaccinated. We are constantly monitoring the situation.

I would like to use this opportunity to also tell you, Mr President, that we are implementing a national calendar of preventive vaccinations against 12 major infections, which includes 23 vaccines. Among them, 18 full-cycle domestic vaccines. They are supplied by our only supplier, which is the National Immunobiological Company. All supplies follow a strict schedule. Based on nine months of results, the vaccination coverage for all infections was 69–90 percent.

The only force majeure situation occurred in late 2016 in the wake of the global crisis when the WHO issued a directive for all countries to switch from live polio vaccine to inactivated vaccine. As a result, for the first time ever, we faced a situation where, without prior announcement, we saw the supply of polio vaccine reduce 13.6 times from 2.5 million to 169,000.

Thanks to our coordinated action with the Ministry of Industry and Trade, in a very limited period of time we managed to increase the output in our country of not only the inactivated polio vaccine, but also the pentavalent vaccine, which contains the polio component. The Government allocated additional funds from its reserves in the amount of 1.2 billion to cover the purchase of the pentavalent vaccine. In the first nine months, we covered 73–74 percent of vaccinations and revaccinations; 880,000 vaccines will be additionally purchased before the end of 2017.

Mr President, this situation once again proved that we need to be absolutely self-sufficient in strategically important areas such as vaccination. Next year, we will be using fully localised vaccines. In addition, clinical trials of an original domestic polio vaccine have started. The vaccine is being produced by the Chumakov Institute of Poliomyelitis and Viral Encephalitis. Registration is scheduled for late 2018. Thus, we will attain self-sufficiency in this regard.

Thank you.

Vladimir Putin: Fine, thank you. I hope you will continue to work with the public.

Let us discuss measures to improve productivity.


October 31, 2017, The Kremlin, Moscow