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President of Russia Dmitry Medvedev: Good afternoon,

Colleagues, this is the second meeting in the last two days devoted to developing the Far East regions. Yesterday we looked at development in Chukotka, and today we are in Magadan Region and will discuss in detail this region’s social and economic situation, development outlook, and also its problems and difficulties of course.

Magadan Region clearly faces difficulties in terms of its remote geographical location and the limited capacity of the local markets for goods and services. The need to bring in supplies for the winter also creates a number of difficulties. Finally, the outflow of working-age people that took place at a certain time period has also created serious problems.

All of these difficulties can be overcome. What’s more, we believe that the region has all the possibilities for stable growth and a sustainable rise in its economic and, therefore, social potential.

The region is known for its large deposits of minerals and rare and precious metals. It is home to around half of all the proven silver deposits in Russia and its coastal waters contain around a fifth of Russia’s national fish stocks.

Economic growth indicators in the region have started showing positive results overall over these last years. The per capita Gross Regional Product (GRP) increased by 20 percent last year. Consolidated budget revenue for the January-June period of this year was up by more than 40 percent compared to the same period last year.

The regional authorities’ efforts and targeted support from the federal authorities have contributed much to these results. Magadan Region has received 8.3 billion roubles this year from the federal budget. This is 1.5 times more than the total budget allocations in 2007. A total of 33.5 billion roubles have been allocated as part of the targeted social and economic development programme for the Far East and Trans-Baikal regions, including 31 billion from the federal budget.

At the same time, as I said at the start, the region still has a considerable number of problems to resolve. The average monthly wage in the region rose by a third last year and now comes to 23,300 roubles, which is higher than the national average, but according to our data, one in six residents of the region lives below the poverty line. Clearly we must address this situation and we need to begin this work by setting clear priorities for the region’s development.

As Nikolai Nikolayevich [Governor of Magadan Region Dudov] discussed yesterday and today, one of the main priorities is to develop the mineral resource base. This involves exploring new deposits of gold, silver, copper, molybdenum, tin and tungsten. Mining and processing of these elements is Magadan Region’s biggest economic activity and contributes a fifth of the GRP. Developing new deposits requires investment, both Russian and foreign. I think we need to do this and we need to make use of the different possibilities on offer, including the potential for promising joint projects with foreign partners.

We also need to make a thorough study of the region’s offshore oil and gas deposits. Specialists say there are high estimated reserves of oil and gas here and development of these deposits could ultimately become one of the engines for growth and strengthen the region’s export potential, all the more so as Magadan Region has an advantage in that it is close to the markets of our main partners in the Asia-Pacific Region.

The second main priority is to develop the energy sector, both for local needs and for export deliveries. The federal programme for economic and social development of the Far East and Trans-Baikal regions allocates almost 18 billion roubles to developing the fuel and energy sector, including more than 5 billion roubles for construction of the Ust-Srednekansk Hydropower Station, and around 12 billion roubles for the construction of aerial electricity transmission lines.

We hope the regional authorities will take an active part in this work as much as their possibilities allow. I would like Nikolai Nikolayevich to pay attention to this point in his remarks too.

Developing the transport infrastructure is another priority task. The transport infrastructure plays a key part in the region’s economic development and in giving the local population greater mobility. We realize that big projects to develop the region’s natural resources and bring new deposits into production will only be possible if we develop the transport infrastructure, including the railways infrastructure. This is a big issue for the entire country but the problem is particularly acute in the Far East.

The state has put considerable sums of money into this area and will continue to do so. Of course, we also must start work without delay on modernising airports, sea and river ports and increasing passenger and freight traffic volumes.

Overall, a comprehensive development programme is needed, especially for the northern part of Magadan Region. Business efforts to develop natural resource deposits should be backed up by state investment in building transport infrastructure, all the more so as the Government has already discussed these kinds of projects. I am thinking in particular of the comprehensive development project for the territory along the Angara River.

Another important subject we must not overlook is the environment. Toxic waste produced by various types of industry creates a serious environmental and public health threat. We need of course to discuss together ways to improve the environmental situation in the region.

The second big priority area is the social sector – social programmes, improving the quality of healthcare and education. There is a clear need to continue building up educational and healthcare establishments’ technical and material base, all the more so when they are located in remote areas. Distance learning programmes making use of the Internet and the use of telemedicine can play a big part and are particularly relevant in this respect.

As far as wage payment systems go the situation is not very good in the region at the moment. The new sector-based system for wage payment has not been introduced yet. Only six percent of general educational establishments are using the new system. True, Nikolai Nikolayevich said just before that you plan to make a full transition to the new system over this year and next year. In the healthcare sector nothing has been done yet to introduce the new system. Taking into account all we have agreed on, this is something that must be done soon.

Medical centres should be transferred to a system of single-channel financing through compulsory medical insurance, and in the general education system, as we said, modern management methods will be introduced.

Another sensitive and complex issue that still remains to be resolved is that of the aging housing stock and the situation with housing construction in general. The share of dilapidated housing and housing unfit for residence in the region is three times higher than the national average. There are a large number of loss-making companies in the housing and communal services sector. More than a third of these enterprises have a negative financial result. Worn-out equipment and electricity networks in the region account for around 70 percent of the total, and this is something we also need to examine and discuss. I would like to hear about the measures being taken here and what you plan to do.