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President of Russia Dmitry Medvedev: Good afternoon,

Our today’s discussion will focus on research and development – or, more accurately, what to do with it, because unfortunately, the issue of stepping up R&D at partially state-owned companies – major companies – is certainly among the most pressing. In addition, we will also analyse the development of innovative programmes by such companies.

As you recall, we met a while ago (nearly a year ago), and I gave some instructions. Although I cannot claim that nothing has been done, I can nevertheless say frankly that state-owned companies did a bad job of fulfilling those instructions.

Yes, there are some objective reasons for this, but unfortunately, there are subjective problems as well. The main problem is that the heads of these companies and heads of relevant ministries in the Cabinet still do not see it as a top priority task.

I can give you an example right now. We spent a whole year developing certain innovative programme concepts. Who needs them, and what are they for? Still, even this task, which is far from being a practical one, has been fulfilled by less than one half of state-owned companies. Naturally, all of this looks really bad. Moreover, you and I understand that our nation needs breakthroughs in technological development.

There is another issue I would particularly like to address: almost none of the state-owned companies have people among their top executives specifically responsible for innovation, and I think this, too, is a major negative factor. I won’t name companies that are doing better right now, but I will name the companies whose R&D spending is very low. Please note that this is not a comprehensive list. I’ll just name a few whose situation is far from perfect, to put it lightly. These include Rosneft, IDGC Holding, Sovkomflot, and Aeroflot. I have heard a lot about how the relevant process of negotiating these things went, and colleagues, it’s just unacceptable. So I would like for you to listen to what I have to say, and to do more than just listen.

I am instructing the Presidential Executive Office and the Government of Russia to prepare suggestions on establishing disciplinary responsibility for executives at major state companies, up to and including discharge, for such work. The deadline is two weeks. I have already made a number of decisions regarding government institutions, and they will be announced soon. 

Today, the situation in our nation is as follows. There are investments, and there is money to make those investments; They are not enormous, of course, but they exist. Meanwhile, we have practically no innovations. We have very few high-tech products that can compete in global markets.

We are seeing significantly more development than research. What does this mean? It means that our industry continues to implement products from previous years. We won’t be able to develop further by selling state resources alone – you know this just as well as I do. And it is incorrect to argue that everything is going well for us, that our R&D results and spending are comparable to those of our foreign competitors; this is an invalid comparison, and here is why.

First of all, for a long time, we simply did not provide funding for research and development, while abroad they have been financing it for a long time now. It is clear that we are starting from an entirely different level as compared to major international companies.

Second, foreign companies invest the same amount of money, but the products they get from their universities and research centres are practically ready for launch. We don’t have that.

Third, their so-called ‘innovation lobby’ enjoys a strong support. These are sort of innovation commissioners within corporations: they generate ideas, work on the future product’s profile and development strategies. We don’t have anything like this, either. We are still catastrophically lacking such people; we need to search for such people, train our own, and invite them to work for us, including from abroad. We must spend money on this.

Corporations must dramatically increase R&D spending; moreover, they must work together with research centres, and this should also be an obvious step. Then, the amount of inefficiently-spent money will decrease significantly. In turn, by cooperating with corporations, our researchers will get modern equipment, improve their methods and upgrade their trial facilities.

Indeed, this concerns not only our flagship companies or very large enterprises; it also applies to relatively small companies. Here in Arzamas, we visited the Temp-Avia company. There is essentially nothing uncanny about it; in many ways, the base is the same as before. But nevertheless, this is a good example of how to effectively build a business to develop new equipment using R&D results.

Incidentally, the director told me that their R&D spending includes not only the funds allocated from the federal budget; they also invest their own funds, which looks quite good for a relatively small company (it is a small company by our national standards, but for Arzamas, it is certainly quite big). This, by the way, enables the company to develop new products and keep the salaries at a decent level – decent for this kind of company in the Nizhny Novgorod Region.

There is another topic that the governor and I just discussed. The company implements projects that are supported by the Nizhny Novgorod regional government, including through tax benefits. This is a good example for other governors, and I hope that there is good, constructive cooperation established between the company itself, its parent corporation and the regional authorities.

Another issue: the share of state property in Russia’s economy is currently very high; we know that. Nearly everyone who manages this kind of property is present here at this meeting. If we are unable to change this situation and, in some cases, do not even plan to do that, do not plan to privatise one enterprise or another, — then we must take advantage of state ownership.

After all, it is through representation on the board of directors or other governing bodies that the state must make strategic decisions concerning corporate policy. But we have to admit that we are still unable to force innovative strategy for large businesses, even though we are trying to encourage this. And that is precisely why state-owned companies – because of their number and their position in our national economy – must act as catalysts in our economy, increasing investment in R&D, in design, implementation, and marketing of corresponding high-tech products.

They must patronise our science, while higher competition and the new level of research sector efficiency ought to create a chain reaction that should ultimately bring in private business money, because naturally, the private business will look at the way things are with state financing for such state-owned companies. By the way, this involves not only state-owned companies and Russian private businesses – it involves international business as well.

I would like to once again emphasise that state-owned companies must become a worthy example to the entire innovations market and they must take tomorrow’s prospects seriously. Otherwise, it is useless to increase the innovation component in our expenditures, or to give additional instructions on developing such programmes.

The last thing I would like to say before we begin our discussion is that the relevant ministries must reduce bureaucratic procedures for coordinating and analysing corporate programmes, and carefully look at how these programmes align with departmental R&D.

And another issue. We have a wide variety of indicators. We like introducing these indicators, we often shuffle them, adding new ones each year. All these efficiency indicators and various other positions that are part of our reports must be much more rational and grounded. They need to be closer to actual activities. Otherwise, we have to get rid of them since we don’t need them.

We have been kicking around a number of issues concerning this problem for many years now. We talk about what innovations are. The first discussion I remember on this topic took place about nine or ten years ago, when I was working in the Presidential Executive Office. We were discussing what innovations are, the criteria for innovative products, the criteria for approving innovative programmes; and we are still ‘playing’ with these toys to this day.

Overall, we have this problem: while other nations try to seek out ways to earn money, we are trying to make sense of the essentials. We have this habit: first, we try to understand the essentials, and then we try to make money off them.

We need to first put practical and pragmatic principles forward. At the same time, I am certainly not against drafting new laws where they’re needed; let’s sit down and quickly write them. But it’s time to take a step forward; instead of drafting endless laws, we need to take this all to the practical level. If departmental instructions are not enough, then we’ll pass laws, but again, there should not be too many of them, and they shouldn’t hamper private initiatives.

I suppose this is enough for now. After the other speeches, I will brief you on the instructions I will be signing today.