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President Vladimir Putin:

Good afternoon, dear friends,

Respected chairmen of the chambers of the Federal Assembly,

Respected deputies of the State Duma, members of the Federation Council,

We have gathered in this hall once more to sum up the results of the past year, and set tasks for the period ahead. Our goals are unchanged: the democratic development of Russia, the establishment of a civilized market and state of law. And most importantly, to raise the living standard of our people.

There are achievements here, albeit small ones. Last year, economic growth continued. We were able to create new jobs. The number of unemployed dropped by 700,000. Citizens’ real income increased by almost 6%.

A year ago, we set a modest but extremely important task – to ensure that the average pension in the country finally exceeded the minimum subsistence level for pensioners. Today we can say that this task has been solved.

People look to the future with more confidence – many are beginning to make long-term personal plans, to receive education and new professions. And evidently, it is no coincidence that last year saw a record number of students in Russia.

After a whole epoch of deficit budgets – when we spent more than we earned – the budget has made a profit for the second year in a row.

There is progress in the development of market infrastructure, in consolidating guarantees of private property. This is mainly thanks to improvements in the legislative base. I note the passing of the Land and Labour codes, packages on pension and legal reform, the debureaucratisation of the economy, and the improvement of the tax system. New sections, and that of real importance for people, have appeared in the Civil code, such as the section on inheritance.

And today, I want to thank the Federal Assembly and the Government of Russia, which cooperated constructively throughout this intensive period, and were often effective partners.

As political stability increases, the business climate in the country is gradually improving. Horizons for state and corporate planning have moved. Entrepreneurs make their plans for years in advance, rather than months.

We are paying off foreign debt in time, and sometimes even in advance. The summary capitalization of Russian companies has more than doubled. Export of non-raw materials has begun to increase. Supply of machines and equipment abroad has increased by a quarter over the last year. After a ten-year break, we have returned to the second place in the world in volumes of oil production, and to first place in the world in trade of energy resources. And we must intelligently make use of the country’s new position in the international economic community.

All this is gradually changing the international attitude towards us. The improvement in the economic situation is noted by international ratings agencies, which raise Russia’s credit rating. Foreign banks increase the Russian share in their investment portfolios. Our country is gradually becoming a solid and predictable business partner.

However, another thing should also be admitted: political stability and a favourable economic situation are not fully made use of to improve the standard of living for the citizens of our country, and to gain Russia a worthy place in the international economic system.

Are we satisfied with what has been achieved?

Our answer is no, of course not, not at all. There are no grounds to be “dizzy with success”. Russia’s economic problems, which built up over previous decades, decades of stagnation and crises, have not gone away. Poverty has dropped – only slightly – but continues to affect 40 million of our citizens. In the recent years of economic growth, we have only been able to avoid increasing the lag behind other countries.

On this matter, I should say that for quite some time, many politicians and citizens in the country were certain, or lived under the illusion, that the end of the period of military and political confrontation in the world would almost automatically open Russia’s path to the international economic system, and that the world would “economically embrace us”. The reality proved to be much more complicated.

Yes, the period of confrontation has ended. We are building constructive, normal relations with all the world’s nations – I want to emphasise, with all the world’s nations. However, I want to note something else: the norm in the international community, in the world today, is also harsh competition – for markets, for investment, for political and economic influence. And in this fight, Russia needs to be strong and competitive.

Today, the countries of the world compete with each other in all economic and political parameters: in the size of the tax burden, in the security level of the country and its citizens, in guarantees for protecting property rights. They compete in the attractiveness of the business climate, in the development of economic freedoms, in the quality of state institutions and the effectiveness of the legal system.

Competition has indeed become global. In the period of weakness – of our weakness – we had to give up many niches on the international market. And they were immediately occupied by others. No one wants to give them up just like that, and no one is going to, which is shown by the situation on the markets for oil, steel, air transport and other goods and services.

The conclusion is obvious: in the world today, no one intends to be hostile towards us – no one wants this or needs it. But no one is particularly waiting for us either. No one is going to help us especially. We need to fight for a place in the “economic sun” ourselves.

As I said before, Russia today needs more ambitious goals. It needs higher growth rates. And our economic policies, the daily work of our state institutions should be directed towards solving the according tasks. Furthermore, these actions, these policies should be understandable – understood and supported by the people.

I am certain that to ensure a worthy living standard for our citizens, to ensure that Russia remains an important and full member of the international community, a strong competitor, our economy should grow at much faster rates. Otherwise we will keep losing out, and our capabilities in international politics and the world economy will be reduced.

Is Russia ready for this competitive fight? Can it ensure the necessary growth rates for this? The government has predicted rates of 3.5% to 4.6% for the next few years. What does this show?

First, this is essentially an admission that a favourable state of the foreign economy no longer ensures the necessary rates for the development of the economy and its competitiveness.

And second, the Cabinet does not expect higher growth rates.

Such a low assessment of Russia’s capabilities does not help much. What’s more, it does not lend itself to active policies. It does not envisage measures designed to make use of the capabilities of the Russian economy. This primarily concerns the potential possessed by enterprise, the scientific and technical sphere, and in modern administration technology.

I believe that the main thing now is to create conditions under which citizens of Russia can earn money. To earn money and with benefit for themselves to invest in the economy of their own country.

But to achieve this, it is necessary to remove the obstacles that still hinder people from living and working. And primarily, the actual work system of state institutions needs to be changed significantly.

Today, the country’s colossal capabilities are blocked by an unwieldy, clumsy and ineffective mechanism of state. Incidentally, of the almost 500,000 appeals during the television interview, almost three quarters were complaints about various forms of administrative abuse.

Dear Assembly,

We are used to complaining about Russian bureaucracy, which is large and clumsy. And the complaints about it are fully justified. We repeat this very often. At the same time, strangely enough, there are not more bureaucratic structures in Russia than in other countries, and sometimes there are even less. What is the problem then?

The main problem is not in the number of these structures, but that their work is badly organized. The current functions of the state mechanism are not adapted to solving strategic tasks. And it is still very rare for officials to know the modern science of administration.

I have already spoken of the necessity for administrative reform. It should result in a state that is adequate to the time and the goal that our country faces. And the state mechanism should be effective, compact and efficient.

What do we need to do to achieve this?

First, we need to modernize the system of executive power as a whole. Today, divisions of executive power exist as if they were still headquarters for branches of a centralized economy. Enterprises have been privatized to a significant degree, but the old habits of management have remained. Ministries continue to direct their efforts to make enterprises and organizations subordinate to them, financially and administratively. As a result of these administrative problems, it is extremely difficult to do civilized business in this country.

Meanwhile, the state’s direct responsibility is to create conditions for the development of economic freedoms, to set strategic guidelines, to provide high-quality public services for the people, and effectively manage state property.

To achieve this, the structure of executive power should be logically and rationally organized, and the mechanism of state should become an effective tool for implementing state policies. Reforms of state service should be conducted in close coordination with updated principles of work and construction of executive power.

Second, we need an effective and precise technology for developing, passing and implementing decisions. The system that currently exists is directed more towards form than contents.

Third, we need to analyse the current functions of the state, and only keep the necessary ones.

In last year’s Address, I already gave the according instructions to the Government, and asked to prepare for the launch of the administrative reform.

It is clear that revising the functions of the state is a complex and long-term task. There can be no campaigning here. Campaigning which usually ends with officials moving from one structure to another.

But we have been talking about reducing the excessive functions of the state mechanism for two years now. For quite understandable reasons, departments continue to “cling” to these functions. But this, of course, is no excuse to delay reforms.

The Prime Minister should present valid proposals for restructuring the system of executive power.

To conclude this topic, I would like to note that the current organization of the state mechanism’s work, unfortunately, enables corruption. Corruption is not the result of a lack of repression – I want to emphasise this – but the direct results of limiting economic freedoms. Any administrative barriers are overcome with bribes. The higher the barrier, the more bribes there are, and the more officials who take them.

And we should not wait for the stability that has been achieved to turn into administrative stagnation due to the lack of transparency in the state mechanism’s work. For citizens, this remains a “black box”.

We must determine a precise list of information which state bodies are obliged to make publicly accessible. And this list should be ratified by law. This is needed for both the development of civil society, and for forming a civilized entrepreneurial environment.

Dear colleagues,

We have made an important step towards modernizing the legal system. Most of the necessary decrees, documents and laws have already been passed. Means for their implementation have been allocated. Now we need to precisely implement the decisions that have been passed.

I believe it important that the changes have not just affected the organisation and work conditions of courts, but above all the procedures ensuring the protection of individual rights and accessibility of justice.

We need a court system that is respected in the country and outside it. And this is not just a political task, but also an economic task. An effective court system – I talked about this from the beginning – is needed so that Russian and foreign companies do not doubt the authority and effectiveness of this system.

In July this year, the new Criminal procedure code comes into effect. In connection with this, legal and law-enforcement bodies should decide many organizational issues, so that beginning 1st of July this law works to the full. I appeal to the Federal Assembly to examine the necessary changes in the code and in the law on bringing it into effect, including the norms which concern transferring authority for arrests to courts.

The civil and procedural, arbitration codes, and the law on arbitration courts, which are very important for the country’s people and economy, are also in line.

I think that the structure of arbitration courts also needs to be optimized. Today disputes are settled and complaints are examined in the same court. I would ask you to pay attention to this issue.

It is also necessary to clearly share the jurisdiction between arbitration courts and courts of general jurisdiction. The court system is simply discredited – many people know this – by the fact that the same dispute is often examined in different courts, which also often make contradictory decisions. This puts entrepreneurs and citizens at a loss, overburdens courts, and does not help to develop a healthy business climate.

The statutes of the law “On the prosecutor’s office of the Russian Federation” also need to be brought into line with new legislative documents.

And finally, it is very important for us to humanize the criminal legislation and the punishment system. Currently, the same sanctions are basically applied to crimes of minor and medium seriousness as to grave crimes. Crime does not go down because of this, and it only embitters people.

At the same time, according to the existing legislation, courts have the right to apply fines and other more humane measures of punishment instead of imprisonment. However, they use this right rarely. I believe that applying punishments that do not involve imprisonment – where this is justified, where there are grounds for this – should become wide legal practice.

Our main goal – and we have talked about this a great deal, everyone knows about this – is to achieve inevitability of punishment, not its extreme harshness.

One of the factors that ensures the competitiveness of the Russian market is a stable legislative base.

Yes, the national legal system is at the stage of formation. And today we have to pass many laws, to more quickly adapt to the changing economic and social conditions. At the same time, even this cannot justify the fact that laws passed often contradict each other. When they are passed, they are not enforced. They are constantly changed, sometimes even before they come into effect.

Now the Government has prepared a new set of amendments to the Tax code. And many of the proposed changes deserve support. But I want to point out that even the “best intentions” of the authors should not become an excuse for legal carelessness and underestimating the consequences of decisions passed.

Especially as our tax legislation already has examples of norms that have been worked out well. Firstly, let us remember the 13% income tax. By taking this step, we significantly stimulated business activity, replenished the treasury and simplified the tax system. And today I would like to say once more that this rule will not be revised.

One of the factors that makes our country uncomfortable, unfortunately, for our citizens, and inhospitable for foreigners, is crime. The law-enforcement bodies should direct their efforts to protecting citizens’ rights, to fighting rackets, administrative abuse and corruption. They should protect the rights of owners and manufacturers.

The growth of extremism is a serious threat to stability and public safety in this country. This primarily concerns those who adopt fascist and nationalist slogans and symbols, and carry out pogroms, beating and killing people.

At the same time, the police and prosecutor’s office often do not have sufficiently effective tools for charging the organizers and inspirers of these crimes. In many cases only those immediately responsible go to court. In fact, bands of extremists act like organized criminal groups and should be prosecuted in a similar way. A draft law will soon be submitted to the State Duma concerning the war on extremism.

Dear State Duma deputies, members of the Federation Council!

Last year, the process of establishing the federal districts was completed. Federal power has truly become closer to the regions.

I believe that the time has come to bring the implementation of several federal functions to district level, to bring them closer to the territories. Above all, in inspection and personnel work. To be precise, in the spheres of financial control and staffing positions in regional divisions of federal departments, whose number is also subject to reflection..

Our key task is work on delineation of powers between federal, regional and local levels of authority. A year ago I spoke from this tribune of the necessity to establish order here. So far, proposals from the power bodies of Federation subjects and local self-administration have been gathered and summarized. A commission created for this purpose will analyse these proposals scrupulously.

It is clear that the commission’s task is not easy. But we expect results from its work. They are needed to increase the effectiveness of state policies, stabilize international relations, and bring more clarity to the organization of Russian power bodies as a whole.

Now, a few words on the practice of signing agreements on delimitation of authority between the federal centre and Federation subjects. The possibility of signing these agreements is stipulated by the Russian Constitution and is legitimate. At a well-known moment in our history, they were required, and I think they were essential. However, in practice the actual existence of these agreements often leads to virtual inequality in relations between subjects of the Russian Federation. And in the end, this means between citizens who live in different territories of Russia.

And in most cases, the delineation of powers only took place “on paper”. It is no coincidence that of the 42 subjects that had concluded these agreements, 28 have already annulled them.

Of course, in a country like Russia, regional specifics need to be taken into account. And the need for agreements with individual regions may of course arise. But to sign these agreements “behind the backs” of other Federation subjects, without preliminary discussion, without reaching a public consensus, is in my opinion not right.

I think that all agreements on delineation of powers should go through a compulsory procedure of ratification by federal law, by you, dear colleagues. So that everyone knows who has what preferences and why. The Federal Assembly should take this decision.

Now on the situation in Chechnya. The military stage of the conflict can be considered to be completed. It has been completed thanks to the courage and heroism of Russian army and special forces. Just a year ago, we counted how many people opposed us there. How many bandits and terrorists: two thousand, three, five or ten thousand. Now it is not important for us how many there are. We need to know where they are.

There are still many social and economic problems in the republic, and peaceful life is disrupted by attacks by bandits who remain there. However, an entire people should not have their rights taken away because of this. We cannot allow this. All inhabitants or natives of Chechnya should feel themselves to be full citizens of the Russian Federation.

And so the main task of the current stage is to return Chechnya to the political and legal space of Russia. It is to create functioning legal institutions and law-enforcement structures in Chechnya. And in the future, to hold free elections, a free system of republic power and an economically organized life of the Chechen people.

Dear Assembly,

For a long period of time, federal power has given virtually no attention to problems of local self-administration. As a result, this directly affects the living standard of the population in Russian towns and villages.

One of the sources of the situation is the low quality of the legislative base of local self-administration. The Federal law on local self-administration and the according acts of Federation system are only coordinated to a small degree with the real situation in local self-administration, and between themselves.

One of the reasons is lack of clarity in the delimitation of authority with regional bodies of power, and also the uncertainty as to what the state bodies should answer for, and what the bodies of local self-administration should answer for.

In connection with this, the concept and list of issues of “local significance” need to be specified legislatively. Some of them coincide with tasks carried out by federal and regional bodies of state power. Others require tremendous material support, and can only be successfully realized with the cooperation of subjects, and sometimes with the direct support of the Federation.

Furthermore, a major problem for local self-administration remains the inadequacy of its own revenue base. But it is to local bodies that the population turns concerning the implementation of federal laws (such as the law on veterans), the work of housing and communal services, and many other things.

I think that federal legislators must determine the structure of local self-administration. Above all, by enforcing by law the forms which have shown their viability in practice. It is also worth remembering our own, pre-revolutionary historical experience.

All these issues should be reflected in the new version of the Federal law “On general principles of local self-administration”, and in regional legislation.

And finally, it is very important for local self-administration to have the capability to create its own sources for forming the budget. By developing small business, effective use of land, and other property. At the same time, state power – taking into account the expenditure powers of municipalities – could ensure long-term norms of deductions of regulatory taxes.

I would like to stress once more: without effective local self-administration, I believe effective organization of power is generally impossible. Furthermore, it is here, at the local level, where enormous resource of public control of power is. And at this level, we must establish order. The order which citizens of the country complain is lacking.

Dear colleagues,

I would like to discuss the problems of small business separately. I just mentioned this in the context of local self-administration. It is important for the country as a whole. As you know, the Government prepared amendments to legislation on taxation of small business. And in the process of working with them in the State Duma, I would ask you to listen to the opinion of entrepreneurial associations attentively, so as not to repeat the case when after a single social tax was introduced, the tax burden on small business unfortunately only increased.

This is not the first case when hidden revision of initial projects takes place “on the way” to the Duma. Revision which leads to a distortion of the original idea.

We often say that it is very important for starting businesses to “find their feet”. At the same time, badly thought out or incomplete projects often turn our entrepreneurs upside down rather than putting them on their feet.

We must stop pointless rivalry between the people and the authorities – when the authorities create laws, and the people find ways to get around them. People’s creative activity should not be directed towards “optimizing” tax schemes, but developing their own business on the basis of using norms which we provide them with.

I would also like to add: changing taxes is important, but only part of the problem. Business in general – and small business in particular – has an enormous amount of complaints about unjustified administrative pressure. And this primarily comes from supervisory bodies and inspections.

The problems from this inspection are very extensive, and sometimes completely pointless. They are often a formality. But the material loss from accidents, collapses and fires etc. does not diminish. You pay for a certificate and “burn as much as you want”.

Hhundreds of thousands of people oversee this order. Thousands of commercial organisations – this is no exaggeration – are accredited at these bodies to “feed” off inspections. Their dictates and fines, just like extortion and bribes, are an excessive burden and oppress enterprise.

We need changes in laws and by-laws which define and regulate the powers of inspection bodies. And where possible, they need to be replaced with more effective measures of responsibility of the economic subjects. We must of course act very carefully in this matter.

I believe that we need to expand the practice of comprehensive insurance of responsibility. For order in one sphere or another, an insurance company will “answer with money” – unlike officials who at the worst risk being fined.

I am certain: the development of a system of insuring risks will not only lead to an inevitable reduction in the number of inspectors, but also to greater effectiveness of the actual system of control and inspection in the country. It will have a favourable effect on the state of the treasury, on entrepreneurial activity of citizens.

Furthermore, the Government should ensure that these inspections are reduced to a minimum – in some regions this practice exists, and functions quite well. We need to declare a moratorium on checks for small enterprises – for example, at least for the first three years of their work. If necessary, changes to legislation need to be made. Several solutions to this problem are already outlined in documents on debureaucratisation that were passed previously.

In connection with this, I would also like to appeal to the regional authorities. Your support of small business today is absolutely essential. The decisions of the federal authorities only truly work when there are real actions in the territories of Russia.

Dear colleagues,

There is another very important topic. One of the serious tasks directly connected with economic growth rates is continuing reform of major Russia companies, the so-called natural monopolies. And here there are enormous reserves for developing competition.

Last year, after long discussions, programmes for reforming a series of monopolies were approved. I would like to point out that the state’s “business-like” treatment of these monopolies is unfortunately already being used by them to raise tariffs. And the monopolists’ claims that expenses have increased are not always valid, and are in fact usually invalid.

I would like to remind you: reforms to the monopoly sector of the economy should be made in the country’s interests. Consumers of products and services – citizens, municipalities, the state – should not suffer during the modernization process of these giants. Reforms of monopolies are designed to lead to a decrease in expenses, removal of wasteful expenditure, and the appearance of well-thought out investment programmes.

To achieve this, it is necessary for the Government to ratify the budgets of infrastructure monopolies as early as this year. So far, no one even knows what goes on there.

There is another important question – management of state property. State enterprises still exist in almost all sectors of the economy. But, for example, of the almost 10,000 unitary enterprises, only a handful truly work effectively. And in 2001, around 400 state unitary enterprises were filing for bankruptcy.

I should also remind you: we still do not know the real volumes of the state sector. Stock-taking of state property, which has been discussed several times, has not been completed. The ineffective state sector does not give our economy anything but additional expenses and problems. This does not mean that it should not exist – I am only talking about the ineffective sector. I suggest that we should precisely and as quickly as possible deal with property that should be kept in state and municipal ownership.

As for bankruptcy, order in this sphere needs to be established– and above all I appeal to you once more – in legislation. Mass bankruptcy of factories has already become a profitable business. We must make the mechanism for carrying out the bankruptcy procedure and factory recovery transparent, market-oriented, and therefore immune to corruption. And I would ask the Federal Assembly not to drag out examination of the corresponding draft laws.

An important condition of dynamic economic development is an effective banking system. It is designed to accumulate financial resources and turn them into investment. It is necessary to catch up with the lag in banking reform, to increase banking inspection, to ensure transparency of banks’ activity, and take measures to increase their capitalization.

Dear colleagues,

One of the most serious issues caused by the lack of competition and monopolization of manufacture and the service sphere is reform of housing and communal services. And this issue, to one degree or another, affects absolutely everyone.

On the one hand, the population pays more and more, and on the other hand the quality does not increase. The state spends enormous funds on subsidizing housing and communal services, but the return is still low. In certain regions, the Emergency Ministry has had to solve crises involving communal problems. And the vast majority of those present know this not just by hearsay or from the television.

It is clear that the entire system of the housing and communal services requires cardinal changes. And in the initial concept of housing and communal services reforms, money was spent on maintaining technically outdated and extremely worn-out communal systems, on all the leakages and losses in supply, and simply on the expenses of the bad work of housing and communal service enterprises.

However, the main goal of reform is to improve the quality of services while reducing supply costs. Only this approach can assuage people’s fears that all housing and communal services reforms will simply involve raising rates.

The main thing that remains to be done is to give citizens the rights to control budget subsidies. Otherwise, the population will be forced to become consumers of the services of an irrational and wasteful system.

Monopoly in the housing and communal services sphere does not give citizens the chance to choose the required selection of services on the market. I would like to remind the Government and regional leaders that payment can only raised at the same time as developing competition, holding an audit of expenses of commercial enterprises and providing residents with the right to a certain selection and scope of housing and communal services.

Only in this case will the consumer be stimulated to economise light and heat, and the producer to use energy-efficient equipment, and install devices for recording consumption of resources.

The housing and communal policy is above all to provide accessible accommodation for citizens. But many of our citizens still have bad living conditions. At the same time, there have long been institutions in the world that make it much easier for citizens to solve the problem of buying and keeping a home. Above all, there is the institution of mortgage lending. Of course, this system depends on the general level of development of the country’s economy.

The low incomes of the population and high interest rates on financial markets, the undeveloped housing market and enormous prices of construction – this is far from a complete list of the problems which can and should be decided with the help of the mortgage system.

In some regions, there has been the first successful experience of housing loans on mortgage. Around 40,000 loans have been provided, and in individual Federation subjects, regional agencies for providing housing loans on mortgage have begun work.

I expect that the development of the mortgage system should become a sphere of priority attention for both the federal Government and the regional authorities.

Dear colleagues,

We need to learn to use the advantages of the new state of the world economy. It is clear that for Russia, the problem of choosing whether to integrate into the world economy or not no longer exists. The world market is already here, and our market has become a part of the world system.

At the same time, there are intense discussions in the country about joining the WTO. I can’t avoid discussing this topic either. Sometimes these discussions are so heated that they end with burning effigies of the opponents on the bonfire. I think that we don’t need to go this far, but the issue requires serious examination.

The WTO – I want to draw attention to this – is not an absolute evil and not an absolute good. And it is not an award for good behaviour. The WTO is a tool. Those who know how to use it become stronger. Those who cannot or do not want to use it, those who prefer to sit behind protectionist quotas and tariffs are doomed. They are completely doomed strategically.

Our country is still “excluded” from the process of forming the rules of world trade. We have not yet been allowed to take part in forming the rules in world trade. This causes the Russian economy to stand still, and its competitiveness to drop.

Membership in the WTO should become a tool to protect Russia’s national interests on world market. And it should become a powerful external stimulus to solve the tasks which we need to solve so much.

I am certain: the development of the Russian economy is only possible if we are guided by the harsh requirements of the world market, and occupy new niches in it.

Thus, the “architecture” of our participation in the WTO should consist of several elements.

First, discussions within the WTO are not enough. We need to increase state structures which should help national manufacturers to adapt to new work conditions. We need to revise the existing measures of state support of enterprise. We need to discover programmes that are debatable from the point of view of antidumping investigations, and bring them into line with WTO requirements.

And what is fundamentally important, we need to train staff with appropriate qualifications. In each WTO member country, thousands of people work on trade cooperation and disputes. But only a few dozen officials work on this problem in the Russian state mechanism. Where we need specialists, we don’t have enough of them, and where we don’t need them there are plenty of them.

We need a constantly functioning discussion platform to bring the interests of Russian business to bodies of state power – the interests of both the supporters and opponents of our participation in the WTO.

We still need to seriously analyse federal and regional economic regimes. In the legislation of the regions there are documents which make Russia very vulnerable to the complaints of our competitors.

Enormous work rests on our parliament for bringing our legislation and our legal base into line with WTO norms. The new edition of the Customs code, and laws on technical regulation, protection, antidumping and compensation measures, and intellectual property rights are very important. We cannot sit around twiddling our thumbs, we need to get a move on.

And of course, the authorities need to continue consultation with industrialists and with trade unions. Everyone should take part in this process. Everyone’s opinion should be taken into account.

Dear colleagues,

Our economy is not yet receptive enough to the achievements of scientific and technical progress. A significant number of enterprises essentially do not invest any funds in creating new technology or in modernizing old technology.

At the same time, there is a huge demand for Russian scientists abroad, for their scientific results and high technology. They are fully competitive, which is shown by the many foreign venture foundations that work in our country. Entire scientific areas and schools are supported by grants from international research centres and international concerns.

But we ourselves do not make proper use of the rich scientific and technical potential that Russia possesses. There are very few worthy and long-term projects for this potential in the economy.

Thus, the Government should determine forms of state support of new technology. It should find approaches that correspond to our resources, to the modern geography of markets, and types of economic links.

It is understandable that the model of scientific and technical progress of former years – a model at once pompous and archaic – should not be reinstated. Decisions are needed that are attached to specific projects, and not individual industries.

We need to help Russian developers join the world venture market of capital, ensuring an effective turnover of scientific products and services. And we need to begin this work in the segments of the world market which national manufacturers really can occupy.

And finally, we need to create conditions for the healthy commercialization of applied science. This can be done by creating joint enterprises both in Russia and abroad.

I make particular mention of public health, as it directly concerns us all. This is mainly the case only when we have problems with our own health.

You all know the health figures for the population of Russia – they are not comforting. A great deal has been said about public health services requiring modernization.

In the last Address, I set the task of preparing a legislative base for completing the move to an insurance principle for paying medical services and medical aid. We have the habit of putting off the most difficult things, unfortunately. This task has not been fulfilled.

One of the undoubted priorities is continuing military reform and moving to a professional army while reducing the term of service by conscription. The reform is requested by society, but above all by the army itself.

A new system of recruiting, and reducing terms of service for conscripts, cannot be introduced in one year. Therefore, this year the Defence Ministry is starting an experiment on the basis of individual military formations, which should develop the entire mechanism of moving recruitment of the army and navy to a voluntary principle. According to the results of the experiment, it will be understandable and clear how soon we can move to reduced terms of service by conscription. I stress: significantly reduced terms. This reform cannot be delayed, but there should also not be any fuss in this matter.

We will conduct this work gradually – taking into account the financial capabilities of the country, and the national security interests of the state.

In moving to a new type of army – an army that is mobile and compact – we must create worthy social conditions for the military and their families. The people who gave years of their life to serve Russia and have left the service should not be ignored by the state. They must be helped to find their place in the economic life of the country.

I would also remind you that in October this year, the first state census will be held in the 11 year of the Russian Federation existence.

The most general results of this large-scale undertaking will be known at the end of the year. They will give us well-founded statistical information, and clarify the situation on the population size, national make-up, employment, the number of forced migrants and immigrants and so on.

It is very important for the country that this census be held thoroughly and competently. It is impossible to make valid administrative decisions without a real understanding of the situation, and information about the make-up of the population. Holding a census is impossible without the effective cooperation and coordination of efforts of the federal and regional authorities, bodies of local self-administration, and the staff of the Presidential plenipotentiaries in the regions.

I consider the organization of the census to be a top priority task, and I ask all levels of power to take active participation in preparing for it. And I ask citizens of the country to treat the census with an understanding of the state significance of this undertaking.

Dear Assembly,

Today, Russia is one of the most reliable guarantors of international stability. It is Russia’s principled position that has made it possible to form a strong anti-terrorist coalition. In the context of allied relations, we have made according decisions along with the leaders of a number of CIS countries.

For our country, which has faced terrorism for a long time, there was no choice whether or not to support efforts to destroy the “den” of terrorism. Especially as these measures have indeed helped to increase security on the southern borders of our country, and to a significant degree have helped to improve the situation in this matter in many countries of the Commonwealth of Independent States.

By joint efforts, we have been able to solve a very important strategic task – to liquidate the most dangerous centre of international terrorism in Afghanistan. To stop its negative effect on the situation in other countries, and to remove the threat to us that came from there.

After 11 September last year, many, many people in the world realized that the “cold war” was over. They realized that now there are different threats, that a different war is on – the war with international terrorism. The danger of this is obvious; it does not require any new proof. I want to make it clear: this also fully applies to Russia.

I want to stress that Russian foreign policy will in the future be organized in a strictly pragmatic way, based on our capabilities and national interests: military and strategic, economic and political. And also taking into account the interests of our partners, above all in the CIS.

The Commonwealth of Independent States is a real factor of stability in a large part of the world, an influential association of nations with a wide range of tasks and interests.

Working with CIS countries is Russia’s main priority in foreign policy. A priority that is also connected to receiving specific advantages on world markets. CIS countries have many opportunities for carrying out large-scale joint projects on infrastructure, transport and energy. I am certain that realizing these projects will increase the durability of our integration, and will provide new possibilities to the Russian economy – and not only the Russian economy.

There are large reserves of integration in humanitarian projects, including projects on science and education. Russia has already raised the number of students from CIS countries. And the Government should examine the possibility of further increasing the number of students – at least to 1% of the total number for whom the Russian state currently pays.

I believe it necessary to once more clearly state our priorities in Europe. Here our consistent position and numerous steps towards integration with Europe are clear. We will continue active work with the European Union to form a single economic space.

Our major goal in foreign policy is to ensure strategic stability in the world. To do this, we are participating in the creation of a new system of security, we maintain constant dialogue with the United States, and work on changing the quality of our relations with NATO.

On the whole I would like to note: Russia is being actively integrated into the international community. And despite the harsh competition that I have already discussed, it is particularly important for our country to find allies and itself to be a reliable ally for others.

Dear deputies of the State Duma and members of the Federation Council,

The principle feature of the modern world is the internationalization of economy and society. And in these conditions, the best world standards become the most important criteria of success. Standards in everything: in business, in science, in sport. In economic growth rates. In the quality of how the state mechanism works, and the professionalism of the decisions we pass.

And only when we not only meet the best standards in the world, but when we create these standards ourselves – only then will we really have the chance to become rich and strong.

We must make Russia a flourishing and affluent country, so that life here is comfortable and safe. So that people can work freely, and earn money for themselves and their children without restrictions and fear.

And so that they strive to come to Russia, and not to leave it. So that they bring up their children here, and build their houses here.

Thank you for your attention.