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Issues discussed included the Federal Programme for Socioeconomic Development of the Far East and the Trans-Baikal Territory, the creation of a favourable investment climate and addressing the existing infrastructure problems in the region.

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President of Russia Vladimir Putin: Good afternoon, colleagues,

Our agenda today contains the key socioeconomic issues of the Trans-Baikal Territory and the Far East. This vast region has played a special role throughout Russia’s history and today our country can move forward successfully only if we ensure this region’s dynamic development.

The Far East has vast forests and enormous sources of clean water, some of the largest in the world; it is rich in natural resources, most of which are undeveloped, as we know. Over 100 ethnic groups populate this region, including indigenous peoples and those who came to expand the empire to the east. This region has become their homeland. They invested their hard work, knowledge and creativity in the region’s development, they built new cities, the Trans-Siberian Railway and the Baikal-Amur Mainline (BAM).

By the way, very soon, in 2014, we will mark the 40^th anniversary of the start of BAM construction. I believe that we should celebrate this event and pay tribute to the people who implemented this ambitious project. Bear in mind that there are still people in the area who have been there since the railway was built, and they are virtually homeless, living in temporary settlements that cannot even be officially classified as housing. They cannot be put on the waiting list [for housing] as residents of dilapidated housing, because technically and legally these settlements are not housing. Last year I looked into the problems faced by one of those settlements, but that is not enough, we need some kind of a nationwide decision on the matter. It is the duty of the federal authorities to address this problem.

In any case, these development projects I have mentioned were on a national scale. I want to emphasise that the modern development plans for the Trans-Baikal Territory and the Far East have the same national importance. Our goal is not only to realise these regions’ rich potential; we must take full advantage of its proximity to the Asia-Pacific region, a major developing region with large countries. We must take advantage of this proximity to promote the development of the Far East and Russia as a whole. We have to make a significant contribution to the integration processes in the Asia-Pacific region. These future prospects were confirmed and the recent APEC summit in Vladivostok.

In recent years we have taken a number of steps to promote the development of the Far East. Investment was increased and a number of major infrastructure projects were launched. These efforts are bearing some results. In the pre-crisis years the GRP growth rate in the Far Eastern Federal District was lower than the national average, but in 2010, the Far Eastern economy was growing faster than the rest of Russia. In addition, there was no decline in the gross regional product during the crisis.

However, I must make it clear that we cannot be satisfied with the pace and, most importantly, the quality of development in the Far East, and the standard of living. The Far East remains behind its neighbours in the Asia-Pacific region and other regions of the Russian Federation.

Our task is to reverse this situation and to transform the Trans-Baikal Territory and the Far East into economic leaders. We must implement large-scale, complex projects that will breathe new life into the region. The State Council working group has proposed a number of initiatives and we should discuss them today. That is the main reason for this meeting.

I want to emphasise that we have no right to view the Far East exclusively as a source of raw materials. We must ensure its modern, sustainable development, and in general we must find new, more effective approaches to the implementation of our programmes, to planning and management. It is essential that we overcome the situation where the rate at which problems are addressed is unacceptably slow, when the considerable financial and material resources allocated disappear, and the approved plans often remain on paper.

I agree with the working group’s proposal to analyse the effectiveness of the measures that have been taken. The Government should carry out such monitoring on a continuous basis. It is already clear that the fragmented, isolated measures are not sufficient. The development of such vast regions requires a long-term strategy and consistency.

All of these approaches must be included in the federal programme for the socioeconomic development of the Far East and the Trans-Baikal Territory until 2025. The Government has been charged with drafting new substantive proposals. However, this order has not been fulfilled yet.

I want to emphasise that it will have to be done. I urge you to do so as quickly as possible, so that we do not argue over this. I don’t want to put pressure on you or resort to sanctions. We must all realise that this is a very important national task.

I ask you today to pay special attention to the projects to be included in the state programme. We must adopt it by the end of the first quarter of 2013. I should add that the 2012 budget provides for additional allocations for the eastern regions of more than 100 billion rubles [over $3.2 billion].

Now, the control system. Of course, it cannot be considered effective. The Ministry for the Development of the Far East has been a disappointment so far. For example, on November 13 the federal programmes for the eastern regions were transferred from the Regional Development Ministry to the Ministry for the Development of the Far East. As a result, we see blurred responsibilities and failures in the work. We must create a monitoring system that would be consistent with the aims of accelerated development of Russia’s eastern regions.

In particular, we discussed the idea of a state corporation. I know that this approach is not widely shared but I am ready to return to this issue. We must propose measures that will be effective. Let’s consider other possible management arrangements that could be introduced. Above all, they must correspond to the complexity of the tasks we will be addressing.

I emphasise that governors will play a special role in achieving the regional development objectives. The responsibility of the governors and regional authorities should increase manifold. Their work will come under the toughest scrutiny during this period of large-scale transformations.

Colleagues, what are the most important aspects of the development of the Trans-Baikal Territory and the Far East? First of all, it is the creation of not just favourable, but unique conditions for business. There are several suggestions in this regard. In particular, I propose to introduce a zero rate for federal profit tax during the first ten years of operation of new production facilities, the so-called greenfields. This will apply to industrial enterprises with investment of over 500 million rubles.

We could also consider (and the Government should analyse) introducing an exemption from the severance tax for solid minerals, subject to the same requirements: investment of over 500 million rubles. As for hydrocarbons, these decisions have already been made.

Another suggestion we could think about (and I ask the Government to look into this) is amending the existing legislation to ensure that regional authorities could provide tax concessions, even introducing a zero rate, and not a reduction of 4.5%, as it is today. But in that case corresponding amendments to the law should be made. I ask you to analyse this in a very short time and submit your proposals. This is with regard to profit tax.

In addition, I suggest we consider the mechanism of incorporating regional tax incentives in the allocation of federal grants to equalise the fiscal capacity of the Far East and the Trans-Baikal Territory. This can be of great help for those regions and become a real financial incentive for ambitious projects. Let us discuss all of these proposals today.

A few words about the Fund for the Development of the Far East and the Baikal Region. It provides support for investment projects through public-private partnerships. We have already made a decision to increase its charter capital by 15 billion rubles. We will analyse its work, and if the Fund proves its effectiveness, we will continue to replenish its capital so that it eventually reaches 100 billion rubles.

I would like to highlight the use of natural resources in the eastern regions. First, we must check compliance with licensing agreements for the fields, and revoke the licenses of those who have violated their obligations.

Second, we must adopt a licensing programme for large undistributed deposits. It must contain an essential condition for the companies to build processing facilities. It should also provide for the creation of mineral resources development and processing clusters as points of accelerated growth.

Third. It is necessary to increase by many times the share of processing and high-tech industries, to create a powerful deep processing industry, and to take advantage of the transit and tourism potential of these regions. An essential condition for the region’s development is the construction of transport infrastructure and power generation capacity. At present, over 100 million tonnes of cargo have been registered for shipment by BAM, for example. Meanwhile, its capacity is only 16 million tonnes, as many of you know. 100 million tonnes registered against the capacity of only 16 million.

I propose that today we discuss the opportunities for increasing the capacity of the Trans-Siberian Railway and BAM, and the main motorways in the Far East and the Trans-Baikal Territory. We must put up additional transmission lines, including along the Trans-Siberian Railways and BAM, build grid facilities for the accelerated implementation of the Eastern Gas Programme, and implement other strategic projects in the energy sector.

At the same time, I stress, we must adopt a balanced approach to the selection of investment programmes. We need infrastructure projects that provide a multiplier effect, closely linked with the development of all regions in the Far East. All of our plans in the economic sphere have one main goal: to create an attractive, comfortable environment in the Trans-Baikal Territory and the Far East, so that people want to settle down here, so that they feel the real benefits of living in this region for themselves and their families, so that they have every opportunity to get quality education and modern healthcare, to buy or rent quality housing.

We must develop mortgage programmes, allocate land free of charge for the construction of low-rise housing. This is one part of the country where we really can give land away. But this is not enough. There must be local infrastructure in place, and the commissioning of new schools, kindergartens, stadiums and other social facilities must proceed according to schedule. These measures will help to reverse the negative demographic situation in the region and to attract qualified young professionals.

Colleagues, I have outlined the most important, fundamental issues that are directly related to the successful development of Russia’s eastern regions. The working group’s report also contains a number of concrete measures. We have a large block of important issues to work through. It is abundantly clear from what I have said that these measures, if they are consistently implemented, could indeed play a significant role in the region’s development. This applies first of all, to economic measures and tax incentives. However, the tax impetus will not be enough.

Let’s talk about the entire complex of measures needed for the development of these areas. Over the centuries Russia sought to develop these territories. As we said recently, in the summer, to get from the European Russia to the Far East, you had to travel by ship across the Indian Ocean, and in the winter snow roads were used. That was not so long ago.

Nevertheless, despite all the problems, Russia realised the region’s strategic importance and managed to retain control over it. Today, we must do everything possible to achieve its development – efficient, fast, tangible for the local residents and the entire Russian economy.

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