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Opening remarks at meeting on developing civilian shipbuilding

President of Russia Vladimir Putin: Good afternoon colleagues.

Many of you here have been busy over these last few days with the flooding in Amur Region, Khabarovsk Territory and the Jewish Autonomous Region. But along with the problems caused by natural disasters, we also have routine matters to deal with, among them issues of great importance for the entire Russian economy.

Developing the civilian shipbuilding sector is one of these issues. Today we will examine the United Shipbuilding Corporation’s development outlook and discuss the problems involved.

Shipbuilding is a complex high-tech sector and its development is of crucial importance. It creates a base for resolving defence and socio-economic tasks, boosting demand for specialised personnel and scientific developments, generates new orders for Russia’s metals sector, machine-building and other industries, and is a powerful instrument for developing whole regions of the country, including Primorye Territory, where we are meeting today.

With defence procurement orders on the increase our military shipbuilders are looking fairly confident now and their industrial capacity is in active use. But the civilian shipbuilding sector is still having trouble picking up the pace and, to be honest, is losing to the competition.

Our shipyards fail to give potential customers who approach them clear guarantees on deadlines, costs and quality. Not surprisingly, companies do not want to take on the risks and choose to place their orders abroad instead, buy ships made in China, Korea and other countries.

Those shipbuilders offer contracts with clear fixed terms, carry them out, and no one cites objective difficulties and circumstances as an excuse, don’t change the costs, don’t fiddle with the tariffs, and don’t complain about problems with supplies of steel or spare parts.

There is no question that our companies also need to make use of this practice and follow strict contractual and technical discipline. We need to make it so that customers will find it convenient and to their advantage to work with Russian shipyards. Our domestic market also has big potential. I will say a few words on this now.

Big Russian companies such as Rosneft, Gazprom, and Sovkomflot are in the process today of putting together a solid portfolio of orders through to 2030. These are orders for ships needed to develop offshore oil and gas fields and make active use of the Northern Sea Route.

Preliminary estimates show that we could need 512 ships worth a total value of 6.5 trillion roubles [more than $195 billion] over the period to 2030. Our shipbuilders will need to make their best possible efforts to fight for these orders and turn them into real contracts. Above all, the United Shipbuilding Corporation must set out its general development strategy and the range of civilian ships into which it can put its experience and effective developments and make use of its competitive advantages.

Russian shipbuilders have well-established positions in the icebreaker and river-sea segments. Our companies compete with success against foreign shipyards in niche segments such as drilling platforms, geological exploration vessels, and supply ships. This is recognised by customers and foreign competitors alike.

But at the same time, we need to expand the product range and move into building other types of ships too, above all container ships and gas carriers – ships for which there will soon be demand. We need to make use of foreign experience and establish technology alliances with the world’s leading producers. 

The modern large-tonnage Zvezda Shipyard, which will be completed here in the Far East by 2018, can serve as an example of this kind of cooperation. I hope to hear from you today how this project is going and what problems and difficulties have been encountered.

I stress that we need to set new quality standards in all of our civilian shipbuilding work, in the whole of the United Shipbuilding Corporation’s civilian segment. The corporation’s basic key objectives should be to lower costs, raise effectiveness, and close the gap between Russian and foreign shipyards in labour costs, which, are sometimes three or four times higher here than at the leading companies.

We need to place higher demands on corporate management and introduce a modern system of corporate and project management. One of the core issues for carrying out all of these tasks is to resolve the serious shortage of highly qualified personnel needed in the sector.

The shipbuilding sector must offer attractive and competitive working conditions, ensure decent wages and opportunities for further training and re-training, and carry out housing programmes with support from the state authorities and the companies themselves.

As I already said, our biggest companies are currently putting together long-term plans for ship purchases. People who are still only in the process of choosing their future profession will be among those who will actually build these ships. It is therefore particularly important to ensure a constant flow of new personnel into the shipbuilding sector, put future specialists on a track from the university lecture rooms into the shipyards and plants.

These efforts must encompass the whole range of personnel, from lower and mid-level specialists to training for engineers and technical specialists and managers. Only a comprehensive personnel approach will bring any visible progress here.

We also need to set the business processes in civilian shipbuilding on a new model. This is extremely important. Relations with suppliers and related sectors need a strict and predictable framework, and we need to actively draw in design centres to develop modern ships with fixed costs.

We need to make large-scale use of series production of ships because this will bring down both deadlines and production costs. Of course, we also need to raise the quality of aftersales service, and commission properly equipped repair docks that can carry out repairs fast and to a high standard and carry out servicing and maintenance of complex equipment. I want to hear what the USC’s directors have to say on these matters.

Finally, there is also the question of support for sales of Russian-made civilian ships, including exports. In this area we need genuinely effective instruments that could stimulate sales, and convenient leasing schemes.

Let’s discuss all of these issues in detail now. I want to say right at the start that I can see that not everything we agreed on earlier is actually being carried out. I want to hear your explanations and have a frank and open discussion of this situation.

One final point, I said that our shipbuilding sector needs to offer quality competitive goods, but Russian customers should also keep in mind that, all other conditions being equal, they should place their orders with Russian shipyards rather than keeping people in work and generating tax revenue abroad. Don’t forget where you work.

Let’s begin.

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