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President Vladimir Putin: Good afternoon, dear colleagues,

Today’s State Council session is devoted to a very important issue, that of strategic planning for the social and economic development of the Russian Federation’s territories. This is the first big meeting since the G8 summit and I would just like to say a few words about the summit’s main results.

Russia’s presidency at the summit was successful and productive. The G8 leaders not only noted the relevance of the agenda we proposed but also agreed with the majority of the decisions Russia had prepared. As you know, the main items we proposed for the agenda were energy security, access to education and the fight against infectious diseases.

I would like to note the very positive approach to our work and say that if it were not for the genuinely friendly support we received throughout the year from our partners, from the G8 leaders and from our colleagues at expert level, I do not think we could have achieved such results. What we achieved is the result of our common effort.

I want to emphasise that practically all the issues we examined at the G8 summit are extremely important for our own country’s development. A number of the summit’s decisions are directly linked to Russia’s national priorities as set out in the Presidential Address to the Federal Assembly. We must now work on reaching the objectives set by the summit in the interests of our country’s development in general and in the interests of developing the regions, which is what we have gathered to discuss today.

The regions now have greater opportunities for attracting investors, and in a number of respects they are becoming the connecting link in international economic, trade and financial and humanitarian contacts. But making full use of these opportunities requires us to work systematically to develop infrastructure, create a favourable business environment and improve the mechanisms for attracting investors.

I stress that our country should not have any backward provinces, backwaters not living in step with the country’s plans in general and the development trends of the modern world. This is why consolidating our work in strategic, breakthrough areas must aim at making it the nucleus of renewed regional development policy for our country.

It is with all of this in mind that I propose that we examine the question of elaborating comprehensive regional social and economic programmes. We also must address the issue of improving cooperation mechanisms between the executive authorities at different levels. I will repeat: we do this in order to be able to carry out daily work successfully in the regions and to accurately formulate future goals at national level.

Dear colleagues,

Strategic development plans are always a complex and very important subject. Even the text of the working report proposed confirms that there are, as yet, more questions than answers. Also evident is the wide range of views on this issue.

What I want to stress is that in a market economy, copying the work model of the Soviet-era state planning bodies is not feasible, not possible and quite simply harmful.

But at the same time, drawing up plans and programmes is perfectly compatible with a market economy. You all know that practically all developed economies and big business corporations draw up market-based development strategies.

I am sure that we will come back to this subject. I think we will also make use of the Security Council’s analytical capabilities and I propose, as we have done in the past, holding a joint session of the State Council Presidium and the Security Council.

Today I would like to say a few words about the main principles in approaches to strategic planning.

First of all, I think that social and economic development planning in the regions is above all the task of the regional authorities themselves and that there is no need for excessive regulation from the ministries.

At the same time, the state authorities need to be pursuing common final goals at regional and federal level. The Constitution states that the state authorities of the Russian Federation, no matter at what level, constitute a unified system. Moreover, the results of the Russian Government’s work should be the consolidated result of work carried out in the regions, from results achieved in education development to issues of infrastructure modernisation. At the same time, each level of power has its own possibilities and powers.

Most of the country’s regions have already adopted social and economic development programmes, but their depth and practical applicability are not always up to the nature of the strategic objectives as yet. They have also proved of little help in implementing an effective social and demographic policy in the country.

I think that the criteria of a regional programme’s effectiveness should be, above all, growth in industrial output and in regional consolidated budget revenue, and also efficient use of existing financial, material and human resources. We need to make it our constant aim to increase investment. And then there is also, of course, the level of economic and business freedom in the regions.

Dear colleagues and friends,

We have already spoken about this point on many occasions, and I must say that progress is still very slow in this respect. The level of business freedom in the Russian regions remains very low, but business freedom is one of the main components of development in the modern world. I draw your attention to this point and ask you to treat it very seriously and give your personal attention to all the problems involved.

Second, we need to continue to improve the system of inter-budgetary relations in such a way as to encourage the regions to develop their own revenue base and smooth out the differences in the budget revenue situation from one region to another.

The next issue is that of comprehensive planning of inter-regional and inter-sector investment projects. This is what we will be looking at today, and it is also something that has not been greatly developed yet and in some cases has not been developed at all. Not only should the Government be giving this issue its full attention, but it must also carry out this work together with the regions and with strategic investors. The prime minister pointed this matter out two years ago and said that this should be the main area of the Government’s work. We need this to become a part of the Government’s working practice.

Taking these kinds of projects into account in regional planning will improve their quality, see them complemented by the local authorities’ work and facilitate harmonious development in the regions.

To give just one example, we have begun construction of the biggest oil pipeline in post-Soviet history in Eastern Siberia. Just laying the pipeline alone will not bring much result, however. There needs to be exploration work carried out in the regions concerned, additional prospecting and exploration of oil deposits, and this in turn will spur the development of transport infrastructure, roads, electricity, the construction sector, the social infrastructure. It will also require well-trained specialists, who should be local people.

All of this could also be a boost for other sectors in the region such as the petrochemicals industry, the timber processing industry, the production of construction materials and other sectors.

You know yourselves that if there were only a road built in this or that region, dozens of different businesses might spring up.

You know too that in its time, the entire country took part in developing the industries and infrastructure of Western Siberia. Today, we are beginning the implementation of a similar project, a project of similar magnitude.

This situation calls on the Government to undertake large-scale organisational work to ensure that the project is successfully completed and contributes to the development of a whole number of the country’s regions.

Implementing this kind of strategy creates an urgent need to coordinate the development programmes of the regions where these projects are being carried out.

There are many more examples of this kind, of course. They include creating an Olympic centre in Sochi — not an industrial project at first glance, but a genuine comprehensive national programme – developing the Timano-Pechora province, the coal basin in Yakutia and exploring deposits in Taimyr. This also includes the creation of technology parks, free economic zones and major infrastructure projects.

For all of these projects it is not enough to carry out planning within the framework of sector-based programmes alone. There must be comprehensive regional development planning. This work is interesting, difficult, and also very much needed by all of us, and the Government must step up its activities in this area.

Finally, sector-based strategies should be clearly linked to particular territories and should take into account regional development in general.

To give you another example, we recently examined electricity development. Looking at this issue overall, we see that the balance is out of kilter. We produce enough electricity to satisfy the country’s current needs, it would seem, but if we look at the situation at regional level, and also from the point of view of different economic sectors, we see that entire important regions of our country face energy shortages.

More than 75 percent of requests for new energy capacity are not being met. This means that our GDP growth is losing pace. According to the Industry and Energy Ministry, these lost opportunities came to five percent of GDP in 2005.

I am sure that other sectors face similar problems. I met with people from the oil industry before the G8 summit and they said the same thing: that if they had the capacity in some production areas, they would be able to produce more oil. They are forced to bring electricity capacity on line on their own, but they have not found any way of reaching an agreement with their colleagues on organising this work.

Overall, it is right that we are working on macroeconomic issues. This is the foundation of our economy, but we must also take into account the development of specific territories and sectors.

Aside from this, in order to achieve efficient regional development planning, I think that we will soon need to analyse the situation with state statistics and bring it into line with today’s demands.

In conclusion, I would like to stress that our principle goals are to ensure the necessary level of economic freedom in the regions and create a level playing field for competition. In a situation where we have monopoly holds on local markets and corruption, we will not be able to achieve any economic development.

Of course, we will not be able to take all the necessary decisions today regarding all the issues and problems I have mentioned. But we do have the chance to discuss all these problems frankly and honestly and identify the specific reasons that prevent us from developing at a faster pace. We can then use the results of this analysis to set objectives for work in these areas.

I now give the floor to Alexander Khloponin, Governor of Krasnoyarsk Region.