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President Vladimir Putin: Dear Mr Chairman,

Ladies and Gentlemen,

I am pleased to have this opportunity to address such a representative forum. First of all, I would like to thank the organisers – the Russian Union of Industrialists and Entrepreneurs and the Japanese Federation of Economic Organisations.

Not only is this meeting interesting and useful, but the dialogue that we will engage in will unquestionably increase the openness and confidence between the business communities in our two countries and will enable us to exchange views and information on business cooperation between Russia and Japan.

Our bilateral cooperation has been developing positively and at a good pace over recent years. I would say that this period has been the most positive in the history of relations between our countries. Business cooperation is particularly significant in this respect.

We are not just talking here about direct commercial benefits. I am sure that by developing stable, pragmatic and long-term economic ties we reinforce the politicians’ efforts to build a constructive partnership.

Business cooperation between Russia and Japan represents an important resource for the successful development of the Asia-Pacific region, which is increasing its economic power with every passing year and is becoming the most dynamic region in the world.

I think it is in the interests of all the Asia-Pacific region countries to maintain this leading position and do everything possible to ensure that the region continues to grow in a climate of stability and security. This was precisely the strategic goal affirmed by the APEC summit that just took place in Busan.

Ladies and Gentlemen,

There has been much positive change in Russia, including in the economy, since my last visit to Tokyo in September 2000.

Our country has seen a high rate of sustained economic growth for the last seven years now – a growth rate of around 7 percent a year on average. Inflation is coming down all the time. We still have high inflation, but if you look at what we began with, a clear downward trend is being maintained. We have been paying off our foreign debt ahead of schedule, settling our debt with the Paris Club, and we have fully reimbursed our debt to the IMF.

We are making improvements to our tax system. The overall tax burden on the economy is coming down. The consolidated social tax was reduced this year from 35.6 percent to 26 percent and, as you probably know, the personal income tax rate is just 13 percent – the lowest personal income tax in the world.

These factors all help to create a positive investment climate. We are constantly working on improving the investment climate in Russia and we have already had some notable achievements. It is enough to say that the three leading international ratings agencies have all given Russia an investment-grade rating.

The implementation of new currency and customs regulation laws are also giving our economy a boost. I want to emphasise that these laws are completely in conformity with international standards and with the norms established by the World Trade Organisation.

We have made access to Russian companies and mineral resources more transparent, including for foreign investors. Work is intensifying on implementing the targeted programmes for developing the Far East, a region that has traditionally drawn the attention of our Japanese partners. A group of Russian government ministers visited the Far East on my instructions just recently and, based on the results of their visit, we are drawing up additional measures to support this region and accelerate its development.

Russia is becoming ever more closely integrated into the world economy. At the same time, the flow of direct foreign investment into the Russian economy is increasing. Direct foreign investment rose by a third in 2004 and came to $10 billion. We hope that this year’s result will be considerably higher again.

Our financial and banking systems are growing stronger and capitalisation of the corporate securities market is increasing and indeed reached a record level this year. I stress that international experts view the Russian stock market as one of the most promising and fast-developing markets in the world.

We place great importance on developing cooperation through working together in the multilateral economic organisations. In this respect, I would like to note the successful conclusion of Russian-Japanese talks on our country’s accession to the World Trade Organisation. I am absolutely convinced that Russia’s accession to this influential organisation will also help to strengthen our business ties with Japan, making them more stable and predictable.

Your country is one of Russia’s major trading partners. It is pleasing to see that our two countries have made serious progress in developing business cooperation over recent years. The Russian-Japanese Joint Action Plan, adopted in 2003, has played an important part in making this progress possible.

Above all, I want to note the considerable increase in our bilateral trade. In 2004, for the first time in the last decade, our trade reached a figure of just over $7.5 billion, and I think that this year we should reach a figure of more than $10 billion. This is still not a big figure for countries like Russia and Japan, but it shows a positive growth trend.

The start of construction of the Toyota assembly plant near St Petersburg marks a big step forward in industrial cooperation. Major decisions are also under preparation in the banking sector. I am referring here to the plans for agreements between Vneshtorgbank and Tokyo-Mitsubishi Bank, and between the Japanese Bank for International Cooperation with Vnesheconombank, Roseximbank, and also with Sberbank.

At the same time, however, raw materials and low value-added goods continue to dominate in Russia’s exports to Japan. Investment cooperation is also not progressing as well as we would like. Japanese direct investment in the Russian economy has increased over recent years, but as a share of total accumulated investment it barely exceeds 1 percent. This situation clearly does not reflect the considerable economic potential of both Japan and the Russian Federation.

Compared to our other foreign partners, Japanese industrialists have taken only quite timid steps so far to establish production facilities, especially high-tech production, in Russia.

In this regard I want to note that a law on special economic zones will take effect in January 2006. The purpose of these special economic zones is to give priority to developing precisely the high-technology sectors, and we hope that they will be further reason for Japanese electronics and information technology producers to examine the new opportunities for working on the Russian market.

Russia is ready to expand our partnership in the priority area that is the fuel and energy sector. We are interested in having Japanese entrepreneurs become more actively involved in programmes to develop the natural resources of Siberia and the Far East.

The construction of the Eastern Siberia-Pacific Ocean oil pipeline will open up great new opportunities. We plan to build this pipeline to the Pacific coast in order to enable energy resources to then be transported to the Asia-Pacific region countries, including Japan of course. I am sure that the implementation of this project will contribute greatly to the development of the energy infrastructure in this region and will give the national economies of the region’s countries new competitive advantages.

There are also other very promising energy sector projects. Among them are the investment projects to develop the Elginskoye and Denisovskoye coal deposits in Yakutia. We also hope for new initiatives in the oil and gas sector, in the electricity sector, in energy saving technology and in developing renewable energy sources.

Russia is also ready to expand cooperation in implementing the Kyoto Protocol. Work on putting in place the necessary legal framework for this in Russia is now coming to a close. We hope that businesspeople in both Russia and Japan will find many areas in this respect in which to apply their efforts and energy.

Another important issue on the agenda is that of improving the transport network in the Far East and actively integrating it into international transport routes. Essentially, what we are talking about is forming an integrated transport system in the Asia-Pacific region, developing combined transport routes and simplifying border crossing formalities. Particularly significant in this respect is the potential offered by the Trans-Siberian Railway – one of the shortest routes from Asia to Europe.

We have plenty of reserves to draw on in other areas, too, including telecommunications, space exploration, nuclear energy, urban infrastructure modernisation, construction and, of course, tourism. I want to stress that all promising projects will receive the necessary support at government level.

We are also seeing positive developments in cooperation between the regions. As well as developing its ties with the Russian Far East, Japan is also building up its relations with regions in the Urals and Volga Federal Districts, the Republic of Yakutia, Moscow and St Petersburg.

A number of Russian regions, including Omsk and Tomsk Regions, organised presentations at the World Expo-2005 in Nagoya this year. Expanding economic ties with the regions will undoubtedly contribute to strengthening the cooperation between our countries.

Ladies and Gentlemen,

During this forum you will discuss the general trends and specific areas for cooperation, and perhaps you will also outline new joint projects.

It is important today to make more effective use of the resources we have already built up in the area of business contacts, and also to look for new and promising forms of cooperation. I very much hope that our constructive proposals, both by Russia and by Japan, will help us to achieve these strategic objectives.

I wish you pleasant and fruitful discussions and thank you for your attention.

Thank you very much.