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Vladimir Putin: Good afternoon, friends and colleagues.

Allow me first of all to thank you for the invitation. And of course, I want from the very start to congratulate the Congress on its fifth anniversary, on its first round figure of activity.

Your congress has high and responsible powers: to represent the interests of municipal formations. And this means defending the interests of people where they live and work, where real self-administration is formed and self-organisation of society takes place.

I imagine that today is a good chance to analyse what has been done over the past few years, and outline plans for the future. Especially as the new version of the law on local government sets clearer requirements for the activity of the Congress.

I do not doubt that here, at the forum, there will be a competent and fruitful discussion. First of all, on how to create decent and comfortable living conditions in the regions. And most importantly, how to attract the people themselves to tackling these tasks, how to stimulate their initiative and support their undertakings, their own undertakings and their own initiatives.

The local level of power is the shortest and most direct path to solving urgent problems that are of vital importance for citizens. And it is here that we are obliged to realise the constitutional principle of people’s sovereignty as effectively as possible.

I suggest that time has come for us to remember this word and fill it with real practical content. And, undoubtedly, the role of local government will become of key importance here. It is self-administration in towns and village, and democracy in the regions that has long been considered the foundation of public spirit and people’s sovereignty. And so one of the priority tasks of local power is to establish constant and multi-faceted interaction with citizens. Only with this approach can we talk of the effectiveness of other components of local government: legislative, financial and administrative.

As you know, in a month we will celebrate the 10th anniversary of the Fundamental Law – the Constitution of the Russian Federation. The Constitution clearly determined the guarantees and foundations of local government as an independent institution of power.

Our strategic guideline both then, a decade ago, and today, remains strong and competent local power. However, it has proved much more difficult to achieve this goal in practice than to announce it. We had to learn to work in fundamentally different conditions, to form new effective mechanisms, to analyse and quickly transform our own experience. And for this we all needed agreement in society, a consolidation of power and political will. And a great deal of things were only understood after we began practical work.

As you know, over the past two years, much work has been done. We have begun to deal with legislative obstacles. We have sorted out the rights and obligations of municipalities. We have reached a solution of the issues of their ownership and financial prosperity. Thus, we have outlined paths to solve the long opposition between local and regional power. I said we have outlined the paths – we have not yet solved these problems.

The updated law on common principles of local government, which the people present in this hall have also worked on – for which I am very grateful to them – puts a great deal of things in their places. It is designed to decentralise power where necessary, and to specify its responsibility before the people. On the whole, it is designed to make life more predictable and prosperous. Today it is essentially clear what obligations local authorities have to citizens, and which resources they possess to fulfil them.

Soon, a decree will be signed, and an order will be given to the Government of the Russian Federation to implement the updated principles of federal relations and local government in 2005–2006. Amendments will be made to federal laws which eliminate financial obligations of regional and local budgets that are not provided for. And measures will also be taken connected with the restriction of state and municipal property. This restriction will be appropriate to the distribution of authority between levels of power.

At the same time, considerable efforts are required to regulate the remaining contradictions once and for all. Implementing the law is always a task that is at least as difficult, and perhaps more difficult than preparing and passing it. I can list a series of obvious priorities in connection with this.

Firstly, for the law to operate actively, it is necessary to bring federal and regional legislation, regulations and other normative documents of municipal formations fully into accordance with this law in as short a time as possible. I suggest that your Congress could take on a part of these functions for informational and expert support of this complex and very multi-faceted work.

Secondly, it remains to solve issues on the boundaries and status of municipal formations, and the structures of bodies of municipal administration.

The envoys to the federal districts should take the implementation of the law in their territories under their personal control. Undoubtedly, their thorough assistance will be required for the newly formed regional municipal associations. I just talked with the envoys in all seven districts today. In some of them this work has already begun, for example, in the Urals Federal District.

Thirdly, on resources for replenishing local budgets. This issue is complex and painful for us. The time of so-called “heightened” obligations has gone on for too long, when municipal obligations had almost no money. And most importantly, it was impossible to get this money independently. But here steps have also been taken which should change the situation.

The Government has submitted amendments to the Tax and Budget codes to the Duma. I know that you were particularly concerned about whether this would be done, and if so in what form. The main idea of the amendments is to give municipalities a stimulus to expand their own tax base. I think that a great deal more can be discussed here, and the appropriate changes can be made.

I repeat once more what I said at the very beginning: I very much hope that your Congress will make a contribution to this work.

There are many possibilities for the development of your own base here. They are small and medium-sized businesses, the sphere of innovations and services. It is these segments of the economy that can become decisive for the development of the internal market and economic growth in the country as a whole.

I stress once more: financial stability and effectiveness of work of municipalities is directly linked with an increase in economic life in the regions. And here, a great deal depends on the ability of local heads to manage competently and diligently, on their readiness to remove administrative barriers. They must be prepared not just to open the market for entrepreneurs in their region, but for everyone who wants to realise their own business initiatives.

And finally, it is important to increase the role and significance of representative bodies, and develop principles of collective leadership and control mechanisms with the involvement of citizens. Without this feedback from the electorate, there will be no truly strong, independent and effective local government.

In conclusion, I would like to say: the scale of challenges currently facing local governments demands a cardinal increase in the qualification of municipal employees. And so it is necessary to create a system of training and re-training personnel of this level that is adequate to the requirements.

Only qualified and responsible local power that has resources and is transparent can properly address citizens’ problems. It must not be forgotten that this power exists at the tax-payers’ expense, and it should be under the control of citizens.

I wish you success in your work, and thank you for attention.