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Vladimir Putin: Good afternoon, colleagues,

Welcome to this regular meeting. Today we must have a serious discussion of ways to reform the housing and utilities sector in the country. You know how complicated this issue is and how long it has been put off – the issue has come to a head and it affects the state of affairs in the economy and in the social sphere in the country as a whole.

The events of the past winter add to the urgency of discussing the problems of housing and utilities sector. I think you know about it better than anyone. I suggest that today we determine not only the basic approach but also how we will go about tackling the concrete tasks that we will face.

First of all, it has to be admitted that the numerous accidents in the utilities sector did not occur due to some kind of emergencies. Crises break out all the time in one region or another. And unfortunately they have been built into the system and they were the results not only of mismanagement, but above all of our habit of postponing decisions. And this despite the fact that on paper the concept of reforming the housing and utilities sector has existed for more than three years.

I think it is important that the State Council has pitched in. At a meeting of the Presidium yesterday, we discussed all the aspects of the matter in some detail. The working groups of the State Council and the Government reviewed the situation together and they will present their approaches to us today. I know that there is already a large list of speakers. We keep it open-ended, because we don’t want this meeting to be formal as everyone understands how important it is.

But before starting the discussion, I would like to mention what I consider to be key points. First and most importantly, the tasks must be clearly formulated and they must be feasible. We should be clear about the goals and the costs and the possible concrete outcome of the transformations in the housing and utilities sector. Besides, the people of Russia themselves should take part in these reforms. We should be convincing, we should make sure that the citizens of Russia fully understand what we are doing.

Today the overwhelming majority of people see the future changes as another threat of higher utilities rates, and as nothing else. In this connection, I would like to stress that we have no right to solve the problems of the housing and utilities sector at the expense of the people. It is economically impossible. Today utilities rates claim a large part of most households’ budgets in the Russian Federation. So we must approach the issue with great responsibility. The reforms will only be successful if the authorities proceed openly and clearly explain to the people their moves and involve them in the process of reform.

This opens up new prospects for the development of local self-government. Up until now the people and local authorities have not had a common cause or a common interest in this field. The reforms of the housing and utilities sector must drastically change the situation.

Another point I would like to dwell on is the delimitation of the duties and responsibilities of all the branches of power. Officially housing and utilities are within the jurisdiction of the local governments. But we all know very well that the federal and regional governments have for the most part left the local governments to deal with these extremely difficult problems on their own.

Outdated equipment and the technical backwardness of the housing and utilities sector, the prices dictated by monopolies, lack of essential resources – all these have for a long time been problems with which the local governments have had to wrestle themselves. Today it is obvious that the reform of housing and utilities has ceased to be a local and sectoral issue and has become an issue of government and social economic policy. So, everyone should join the effort: the constituent members of the Federation, the Government and the Federal Assembly.

We must delimit the powers and responsibilities between the levels of Government in a very clear and concrete manner. The State Council Commission on delimitation of powers continues its work, and I think all this should be fitted into the overall scheme of things.

Above all, we are looking at budget financing of these powers. So, we should give this issue thorough consideration. It is necessary to ensure that the housing and utilities reforms are harmonised with the programme of budget federalism, which is being developed by the Government. The meeting of the Presidium of the State Council yesterday discussed the agenda of its work for the near term, and we agreed that this issue should be our next topic of discussion, so that we discuss it before drafting the 2002 budget. Next time the Presidium of the State Council will have to make the discussion of the budget powers and all the problems related to this complicated issue the main item on its agenda.

Besides, the legal framework for the future reforms must be created at the federal and regional levels. That work must be effectively coordinated. An adequate legal framework is a guarantee of a working economy. At the federal level it is necessary above all to put in place the mechanisms of fixing reasonable tariffs: they must accord with the social and economic policy of the government.

The third point I would like to discuss is the need to jolt the housing and utilities sector itself out of its slumber. At present, it is one of the most stagnant, backward and non-market sectors. The restructuring of the whole sector is one of the main challenges. The market of services in this sphere must be opened to private business if we are to see a competitive environment in it.

Clearly, as we were saying yesterday, if there is no money in the sector, if no one pays, there can be no question about raising any resources. Of course, that sphere cannot attract private business. But people must have a chance to choose the quality and cost of services. The housing and utilities sector is inherently attractive for investments, but huge debts and lack of financial transparency practically bring its attractiveness down to zero.

What is needed is resolute measures. And I include resource saving among these measures. Gas, water and heating consumption is still not subject to any control or accounting. The President of Bashkortostan was very articulate on this matter yesterday, and I absolutely agree with him. If there is order, financial transparency and a commitment to modern forms of management, investors and talented managers will come to the sector.

And the last thing. The tasks we set ourselves in reforming the housing and utilities sector should be feasible, as I said at the very beginning. The phases, the timeframe must be clearly determined and the reforms must be matched by the resources at the disposal of the country. We have had many reforms that have remained on paper.

I would like to pay special attention to the issue of phasing. I know that the draft programme, which is being prepared by the Government, focuses on the principle of organisation of the work, but at the meeting of the State Council Presidium yesterday we heard the heads of regions say that the programme must also identify certain phases, and I agree with them. For example, there is no reason why the programme should not set deadlines for the creation of the legal framework.

A great deal depends on correct organisation of the work. Without exaggeration, the effectiveness of our actions in the housing and utilities sector goes a long way to ensure the well-being of our citizens and social stability in some regions. I am absolutely convinced that a successful reform of the housing and utilities sector will improve the health of our economy as a whole, so today we must take decisions that will yield concrete positive results and help the Government to finalise the programme of reforming the Russian housing and utilities sector.