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President of Russia Dmitry Medvedev: I bring greetings to all of you from the students who are living and pursuing their studies in Tomsk. They need our private business to immediately invest in innovation. They put this in the form of an ultimatum. This is what I’d like to talk about today.

Today, we will continue to discuss modernisation and the technological development of our economy. In December last year, I discussed this issue with state-owned companies, and of course discussing such issues with these companies is sometimes easier, sometimes more complicated. But in any case, the government has leverage there, namely its holdings in these companies, which enables us to make the necessary decisions at the corporate level in order to in effect compel our state-owned companies to be more receptive to innovative development.

With private business we have a different sort of relation. It’s not acceptable to rebuke them, although sometimes we have tried that. But at the very least it's not very effective. And that is why we need to discuss such a complicated subject here in this format. But private business does have its share of responsibility to society – I have just talked about this with the students – because making large sums of money means assuming large responsibilities.

Together we must make every effort in order to expand our economy by modernising it. You people are all trained and well-educated. You understand perfectly well that there are no prospects in the foreseeable future for the development of our economy if we restrict ourselves to providing commodities. So we have to get on with modernising, we have to work on technological development. We must reduce our humiliating dependence on commodity exports and, perhaps more importantly, stop squeezing the last drops of scientific and industrial potential from the Soviet period, because this sort of thing is of no fundamental use to us anymore.

An equally important issue is to overcome paternalism and selfish attitudes within the country. All this requires a demand for new technological developments and significant increases in the innovation component in corporate investment programmes. The same formula also implies redefining the corporate social responsibility. This should not be defined in the same ways that we have defined it in recent years. It is not just charity, and certainly not anything related to the payment of taxes, which of course should be paid by everyone, both public and private companies. This is a practical focus on innovation and, ultimately, the effectiveness of those companies that you are heading.

I believe that all large private companies that have been established in our country in recent years have to make a major contribution to the modernisation of Russia's economy and promote its growth. And that is why we are meeting here today. All the companies here have in effect received government aid at various stages of their development. This holds for the 1990s and the recent crisis during which the government provided guarantees to the companies represented here, along with jointly implemented social programmes and an increase in public procurement. All this helped these companies, both public and private, to maintain their competitive edge.

We have to acknowledge that private business often complains about government intervention. Many of these claims are justified. But it is very important to remind ourselves that the government has shown itself to be a reliable partner during the crisis; it has not abandoned private companies to their fate. And today when we talk about the challenges of the innovative development of our economy, I hope that we can understand each other and formulate a plan of specific measures and long-term policy outlines.

Over the years, all those present have taken several useful and appropriate steps, and for several years virtually every major company represented here has been engaged in the modernisation of its production and acquired the necessary technology. In this way they have of course contributed to innovative development. This means that we are not starting from scratch.

But it is no secret that in most cases this involved the purchase and adaptation of foreign equipment and technology in almost every area. The growth of imports as an investment priority for large domestic companies has been inevitable in recent years, and for obvious reasons. Because of the absolute lack of infrastructure to ensure effective generation of ideas and their subsequent commercialisation, that is to put them on the market, any other approach would simply have led to the complete technological and industrial insulation of both our country and your companies. And the result would have been the natural degradation of the economy. But today we must create a fundamentally new sort of innovation by remembering the obvious: innovative procedures cannot be dictated by fiat. We must create conditions that are appropriate for them, and this Commission has been responsible for making such decisions.

I would like to talk with you today about how we can create the innovative mechanisms that we need in the private sector. I expect that within the next two months private companies will come up with breakthrough technology projects for their core business. They should be aimed at creating radically new products, not so-called niche products but essential technologies.

Research on this subject and this sort of development must be carried out by Russia's scientific institutions. But not just them: we know that in many areas for maybe 100 or 200 or 300 years we have seriously lagged behind. We need to say this straight out and not be shy about it. For this reason we need to attract foreign partners – this is nothing to be ashamed of – in existing or established research centres and laboratories. All the higher education institutions and universities have to be involved in these endeavours (hence the appropriateness of our meeting here today) along with the country's development institutions.

We also need to develop a system of patents and venture capital. Venture capital does not exist in Russia — there’s no such thing. It is critical that in a timely and effective manner we come up with arrangements that will facilitate co-financing with the state. This mechanism for innovation is also very difficult to create. Special tax regimes have been introduced with this in mind.

In a second stage, projects and proposed measures for their government support must undergo evaluation and we must think about how this can be done. This must be some kind of rapid and minimally-bureaucratic procedure. And by the end of May we need to complete and submit ready and agreed-on projects to the Commission, so that our meeting does not become a talking shop about the benefits of investment and subsequent shuffling of papers between private companies, the Government Cabinet and Presidential Executive Office. This risk exists.

All these decisions must be incorporated into the budget as budgetary amendments or the companies themselves must set aside certain amounts for these purposes.

I would like to separately emphasise that government measures of support can of course be different, in a good way, but individual, target measures are extremely important for supporting specific projects. And not just spreading a thin layer of additional benefits for the entire sector. We will not create anything new if we do this. But we see that measures to create an innovative economy have been adopted and benefits are being used. Then, why can’t we see those innovations?

The Commission has made an impressive list of projects of the Academy of Sciences, ones that our academics believe will supply market demand, ones that they believe represent breakthrough technologies. With all due respect to the Academy of Sciences these projects must be evaluated, and it would be nice if businesses were to carry out this project evaluation. Because business has a different point of view.

In connection with the implementation of these projects, we need to pay a great deal of attention to developing a network of innovative clusters in the country. These clusters are not just a conglomerate of suppliers of components or the organization of related industries. We need production lines for the entire production chain. In this case we use not only the connections and contacts within particular sectors, but also the ‘innovative lift’ principles. The system should also include academic and research organisations.

Another issue that is absolutely natural within a university is training, and especially in engineering. I just talked with students and one asked me, which occupations, in my opinion, our country lacks and what should be a priority. The student was studying in the Economics Faculty. I was forced to say that it's neither economists nor lawyers – we have more than enough of those. Engineers, technical experts, scientists in exact and natural sciences: these are the people we need.

In my Address [to the Federal Assembly] I also talked about the need to create a powerful centre for research and development in Russia and signed a relevant order on the subject. I would like the representatives of businesses present here to get involved in this work. A new innovation centre is not, of course, a Silicon Valley, but it is still a prototype city of the future and should become a major testing ground for new economic policy. I would like us to discuss now and later on during our personal contacts, during your interaction with the Government Cabinet and the Executive Office, where such a city could be established, which principles could govern its financing, and which tax regimes could be applied so that it generates income and does not simply turn into something that exists merely on paper.

I understand that today we will inevitably discuss the possible forms of government support. Everything that we are discussing refers back to the question of corporate social responsibility as well as that of government support. Our Minister of Finance has specific proposals on this subject, which probably is surprising to many of you. But this is the case: Mr Kudrin sees the modernisation and transition to an innovative economy as close to his interests and affecting him personally. And this gives me some hope.

I would like Mr Kudrin to mention these suggestions during his speech. Yesterday we discussed them on the plane and we have discussed them before. In general, there are a number of interesting ideas, but this is clearly not an exhaustive list. In any case, this kind of research and development should receive special government attention. And what we understand by this notion of special treatment is a separate issue. Clearly, this cannot be a situation in which some inefficient policies are allowed to remain; some modes of support will work, but in all likelihood some will not be fully effective. And we need precisely efficient and effective incentives to innovate.