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Vladimir Putin: Good afternoon dear colleagues!

In opening our meeting today I would first of all like to touch on the preliminary results of military technological cooperation in 2005.

Already now it is obvious that it has been possible to maintain a steady positive dynamic. For the third year in a row the volume of Russian military exports has been more than five billion dollars.

When we began in 2001 this figure was three billion seven hundred million. Today in 2005 we are at five billion three hundred million dollars. It is a little bit less than last year's figure, but basically at an acceptable level.

This is a consequence of consistent and systematic work by the manufacturers and federal agencies. I would like to thank all participants in military technological cooperation for their conscientious attitude to business. I would like to express the hope that in the future we will attain results that are no less significant.

The issues on today's agenda are directly connected with the activity of our military complex, the Russian defence industry, and further strengthening our export potential.

The value and volume of the world's arms trade are comparable to the share of the global economy devoted to energy or food. Competition in this sector is extremely fierce and we all know of recent examples of this competition. What is happening with our potential contracts concerning the delivery of aviation technology to certain countries of Southeast Asia oversteps the limits of normal natural market competition. However, this is the reality of today. Hence there are difficult tasks concerning strengthening our position and occupying promising new niches in this market. Therefore the necessity of constantly updating state policy in the sphere of military technological cooperation and adapting it to changing conditions is obvious. In connection with this today we shall discuss systematic measures to provide state support to the domestic exporters of military technical equipment.

Today by no means all manufacturers are capable of independently solving tasks with respect to improving the quality of production and rigidly observing the terms for executing their contracts. In addition, often our customers insist on state guarantees for implementing large projects. Here, first of all you must define effective instruments for financial support. I believe that the Government could think about providing credit to enterprises in the context of the contract obligations they have.

Our defence industry also actively raises the question of using budgetary resources to partly cover interest rates on export credits. I am not saying that the Government must resolve this issue but I would ask you to think about this, and especially with reference to concrete transactions and contracts whose volume has a national value. The Government should determine how much this enables us to lower the cost of production and therefore strengthen competitiveness, as long as the final results are profitable for the Russian economy.

Moreover, I do not exclude the fact that when promising high-tech projects are implemented, or when financial means are allocated for investment, it is possible to think about the various forms of supporting these or other projects. Now I am not even talking about specific preferences, I simply ask that you think of forms of support.

But it is necessary to understand one thing clearly: the planned measures do not constitute a return to the preceding ineffective system of supporting the defence industry. We should help those who are strengthening the potential of defence industries by developing fundamental and applied research and introducing new technologies. In such cases we, of course, can help our colleagues. The overall goal remains as before: Russia must strengthen its reputation as a reliable and responsible partner.

The second question on the agenda is the prospects for creating joint ventures to produce military products. Analysing the tendencies in world arms trade shows that today no one country possesses the whole range of advanced technology necessary for creating complex high-tech weapons. And financial resources sometimes are far from sufficient for creating major installations. This is done with relevant and required development of interstate cooperation.

I wish to emphasize that the creation of joint ventures does not simply reduce expenses for the development and release of new military technical equipment. A combination of financial, scientific, technical and production possibilities of different countries enables the interstate relations to become long-term partner relations. And I am not saying anything about the foreign policy component—it increases trust between countries, between us and our partners. It makes us a full participant in the processes of integration in the world.

Russia already has experience of successful cooperation in this area. A brilliant example is that of the work of the Russian-Indian company BrahMos. In ten years this company has gone from designing experimental models to organizing commercial production and arms supplies.

Another area in which joint ventures could develop is servicing military technological equipment after it has been sold. I would like to point out that today joint service centres in Malaysia and India have been created and are functioning successfully. There are a number of similar structures still in the preparation stage, including those with partner members of the CIS.

Certainly the approach to creating each such enterprise should be differentiated and well-founded. Here industrial, military and political issues as well as those concerning national security must be studied.

I would like to hear your propositions concerning this matter and first and foremost on developing a normative legal base in this sphere.

Thank you for your attention.