Russia pledges commitment to resolve global security issues
“We are a member of the G8 and take on responsibility for resolving
global security problems and helping the world’s poorer countries in
their development,” said President of Russia Dmitry Medveder at the St.
Petersburg Economic Forum on June 17.
Following is the full text of the speech:
“I want to welcome you all to the St Petersburg Economic Forum. In
particular, I want to thank my colleagues, the leaders of other
countries, who have come to our beautiful city.
For obvious reasons, I am going to talk mostly about Russia today,
about the positive changes Russia has already made, the kind of economy
our people need, my vision of what our country will look like in a few
years’ time, and what we need to do to achieve this. I will talk about
the project for developing Russia, a project that will come to fruition
only if the whole of Russian society joins forces in its implementation.
Projects only achieve results when society as a whole feels a need for
and is involved in their implementation. This project will go ahead no
matter who holds office in this country over the coming years.
I guarantee this personally as president of this country, as do the
colleagues with whom I am working on this modernisation programme.
Let me start with a rundown of what Russia has achieved in the two
decades of its new statehood, and over the recent period.
Development since SU collapse
This year marks 20 years since the new Russia was formed. The country
has undergone tremendous development since the collapse of the Soviet
Union and its planned economy. The private sector was practically
non-existent back then, but now accounts for more than 60 percent of the
economy. The sovereign debt back then exceeded the country’s GDP, but
now comes to around 10 percent of GDP. The hyperinflation that surged to
record levels at that time has been reined in considerably, with prices
undergoing only a moderate increase now.
Russian families’ real consumption levels have doubled. Russia has
carried out reforms on a scale few can match over these last 20 years.
We have gone from prices fixed by the state to market pricing, and from
strict currency controls to one of the most liberal currency regulation
models in the world. We have gone from being a country closed to foreign
capital to having more $300 billion in accumulated foreign investment.
We have built a tax system from scratch. I remind you that Russia has
one of the lowest corporate and income tax rates in the world. Starting
this year, we have introduced capital gains tax exemptions in order to
encourage long-term investment.
I can list many accomplishments. It is always a pleasure to look at
the results achieved. The most important thing, I think, is that we have
made consistent and systemic efforts in so far as possible over this
time to keep moving forward.
We realise that there are many problems and obstacles on the way. We
know that we can overcome our dependence on exports of raw materials and
achieve a higher quality of life only if we vanquish corruption, develop
effective public administration, and build a quality financial system.
Modernisation is the only way to address the many issues before us,
and this is why we have set the course of modernising our national
economy, outlined our technology development priorities for the coming
years, and set the goal of turning Moscow into one of the world’s major
financial centres. Of course this is not an easy process, and we knew
from the start that we would encounter difficulties on the way, but we
could not simply wait for the right time to come along, and decided to
seize the initiative and take action. In any case, our modernisation
policy is already starting to bear fruit.
They are small fruits, but they are there. Over these last few months
alone, projects worth hundreds of millions of dollars have got underway
in our priority areas. Almost all of the big pharmaceuticals and energy
companies have come to Russia as strategic investors. The number of
families with broadband internet access has doubled over the last three
years. Russian internet companies have carried out successful IPOs, and
their total capitalization now comes to tens of billions of dollars.
Russia has maintained and even consolidated the lead it gained with
the launch of the first satellite and Yury Gagarin’s space flight 50
years ago. Russia today launches more spacecraft every year than any
other country. We are completing work on the national GLONASS navigation
system, which other countries are also starting to use too now.
Finally, Russia is building nuclear power plants using technology
that meets the very latest, post-Fukushima, standards, that is, the
highest safety standards possible. This is one of the technology
priorities we have set in which our economic modernisation efforts
should be reflected.
Use of advanced technology
Our plans go beyond building the innovation centre in Skolkovo and
replacing outdated technology with advanced technology in the different
priority sectors.
This message needs to be clear. These projects are just the spark,
the catalyst that will trigger change on a broader scale and accelerate
the pace of transformation. These pilot projects are there to set
examples of how we need to work today.
We have begun introducing advanced technology and procedures
throughout the country. These efforts range from universal introduction
of the best technology and instruments to promoting research and
innovation, new technical regulation standards, customs clearance
procedures, immigration rules, and much more, including a higher quality
of management at the regional level.
There have been personnel changes too, so as to speed up the pace of
change. I have brought in many new, and I hope ambitious, leaders to
head the different Russian regions over these last years. This has had a
positive effect on the business climate. To give just one example, that
of Moscow, the new team appointed not so long ago has already halved the
number of procedures needed to obtain a construction permit, which was
one of the big problems hampering our capital’s development. I stress
the point that these are just the first results our modernisation policy
has achieved, and I know that achieving our goals is a complicated task
that will take time, but I have absolutely no doubt that we can succeed.
Minimizing external risks
Let me say a few words now about how we plan to minimise external
risks. The global financial crisis created big financial imbalances in a
number of countries, including in Europe and the USA. New ‘bubbles’ can
form in almost any market, as we have seen clearly, and with the global
financial system the way it is, when they break, the whole world feels
the effects. The need to reduce budget deficits could slow down economic
growth, and thus also lower demand for Russian goods. Investors will
look for means to diversify their investments, and whether they choose
our country or not depends a lot on us. Russia needs to offer new
opportunities, from growing consumer demand to dozens of infrastructure
projects, and we need to demonstrate the new possibilities created by
the common economic space we are building with our neighbours.
Let me stress that this is something that will make us one of the
world’s biggest and most attractive markets.
The excessive volatility of raw materials markets is also one of the
factors hampering the global economy’s smooth development today, as we
know all too clearly from our own experience. We cannot always count on
high oil prices and expect them to keep going up.
Yes, the boom in Asia that our Economic Development Minister spoke
about just before, the conflicts in the Middle East and North Africa,
and the consequences of the disaster in Japan have all pushed up raw
materials prices. But counting on prices staying favourable is not
consistent with our long-term goals. To state the obvious, we need to
live within our means and save at least part of the windfall profits we
make from high oil prices. Making excessive use of these windfall
profits now, with global inflation on the rise, is a very risky policy
that makes it impossible to bring down interest rates and give a real
boost to investment activity. (I see the Finance Minister busy nodding).
There can be no doubt either as to Russia’s continued integration
into the global economy. We have no choice here. Business people like to
say that markets are like parachutes; they work only when open. Without
an open economy we would fall very badly and do ourselves a lot of
damage. We are therefore lowing the barriers for foreign investment and
hope to complete soon Russia’s accession to the WTO, and then to the
OECD too.
As far as the WTO goes, I think we can realistically complete the
process by the end of the year, if, of course, political games do not
start up again. We are long since ready to join the WTO, readier than
many other countries, big and small. You all know this. But we are being
asked to make an awful lot of concessions, and this is an unacceptable
situation. Russia is not ready to agree to frankly disadvantageous
conditions. If our partners are not ready to let Russia join
international organisations on fair terms, this would be a sad turn of
events indeed and something we must try to avoid. Whatever the case,
particular political and economic interests must not get in the way of
our successful development.
Russia will do its utmost to put its positions in the international
organisations to good use. We are a member of the G8 and take on
responsibility for resolving global security problems and helping the
world’s poorer countries in their development. At the same time, as one
of the BRICS group members, Russia is a fast-growing economy with an
interest in building a more stable global financial system, promoting
the use of modern management technology, and democratising the
international economic system. More active use of the ruble, yuan, and
other developing currencies on the global markets would clearly make the
global currency system more flexible and give investors more comfortable
conditions.
Furthermore, Russia’s membership in both groups gives it the
possibility of serving as a bridge to help harmonise the different
positions and contribute to more effective work within what is currently
the world’s most influential economic forum “the G20. Russia’s
initiatives have already been widely discussed at various influential
international forums, and we are pleased to see this. Our initiatives
include proposals on nuclear security, and safety in offshore oil
production. We have also drafted proposals on new rules for regulating
trade in intellectual property, necessitated by the internet’s
development. The main idea is to give authors and artists a new role in
choosing the means through which they will protect the works they
create. These are just a few examples of the joint work we are involved
in. I think that the world’s main economies need to reach new agreements
today on the general principles for developing economic policy, and
modernise the multilateral conventions.
Russia will play the part of one of the key moderators in this work.
Relations with China
I want to say a few words separately on the positive role that our
big neighbour “the People’s Republic of China” is playing in global
stability and security.
The strategic partnership between Russia and China makes the world at
once a more stable and also a faster-growing place.
Colleagues, I come now to our development strategy and its goals,
which have been discussed on plenty of occasions. I want to concentrate
on our actions, which are more important. One of the great innovators of
our times, Steve Jobs, once said that the important decisions are not
the ones we take, but the ones we decide not to take. I want to state
loud and clear here that we are not building state capitalism. Yes,
there was a point in our development when we increased the state’s share
in the economy, but this was an unavoidable step and in many ways
necessary in order to stabilise the situation after the chaos of the
1990s, and re-establish basic order.
That avenue has exhausted its potential now, however, and has only
relative effectiveness in any case, for it is an economic model that
depends very much on the situation at the given moment and often leads
to hasty action aimed at addressing the sole objective of maintaining
what already exists, with little regard to whether these inherited
assets have any actual effectiveness or not.
The state still owns numerous economic assets, from enterprises to
land, but other assets too feel the effects of excessive state
regulation in the areas under state control, above all in the natural
monopolies. But any vagueness in the law is a risk for the entrepreneur,
not for the state. The principle that the state is always right leads to
corruption, or to preference always going to one’s own companies,
regardless of their ownership form.
This creates an environment not of functioning market institutions,
but of manual management. Such a system’s effectiveness is not just very
limited, but is also very selective. The quality of economy management
and bureaucracy in such a system is reminiscent of the well-known joke
about how computer systems develop: ‘Yes, we’ve removed the old bugs,
but added new ones.’ The result is state-controlled companies dominating
many sectors, low levels of entrepreneurial and investment activity in
these sectors, and ultimately, the threat that Russia’s economy will
become less competitive in general, and no amount of soothing words from
experts in putting together five-year plans can stave off this danger.
This economic model jeopardises the country’s future. It is not my
choice.
My choice is different. Private business and private investment
should dominate in the Russian economy.
The state must protect the choice and assets of those who consciously
decide to risk their money and reputation. We need to give them the
right to make mistakes, and opportunities for drive and development.
Moreover, we need to use our state companies to guarantee a modern
and stable infrastructure for the economy’s development in general.
The state also needs to establish social protection and public
services of the kind that would encourage Russian families to have more
children, lead a healthier lifestyle, pursue ongoing education, and
engage in long and productive labour. We still have much work to do in
this area too in order to resolve the problems inherited from the old
system, which included special distribution mechanisms and minimal risk
for the select few, as well as various guaranteed bonuses, while leaving
everyone else in a state of equal poverty and lack of rights.
A In other words, my choice is a policy that gives millions of people
maximum opportunities for economic activeness, and protects them with
laws backed by the full weight of state power. My choice is a Russia
that, over the next decade, will build an economy offering a high
standard of life and an economy that makes life comfortable and
interesting and produces what will make Russia one of the world’s
leaders. In my view, this is above all our people, healthy people, clean
energy, smart networks, electronic services, convenient transport,
affordable housing, high quality education, and a good environment for
everyone, above all for our children, our people with disabilities, and
our senior citizens.
Today, we do not have to try to catch up with anyone, but can step to
a new technological level and move towards an economy built on the most
advanced technology, based on big companies that are competitive on the
global markets, and on a broad section of small and medium-sized
businesses, including innovative business.
Aim to become global trendsetters
If we can become global trendsetters in these crucial areas, and
maintain and develop our immense human and intellectual capital, I am
sure that Russia will be among the leaders in global economic growth.
My choice is to thoroughly overhaul not just outdated parts of our
economy, but all of our public institutions. Isolated adjustments here
and there are not enough; we need systemic decisions. We should not
delay doing away with numerous bad habits. It would be the wrong course
of action to set our sights on calm and moderate growth only. This would
be a mistake. Much touted stability, after all, can mask stagnation, and
so we need to act swiftly and decisively to change whatever is in the
way of rapid development.
All of these things form the foundation of the strategy that I have
outlined over my three years in office, and which has become known as
the Russian modernisation programme. I am certain that this is the most
modern and worthy policy for Russia. It is within our power to
dramatically change the situation over the next few years. For this to
happen, we need to concentrate our main action on the following tasks:
real improvement of the investment and business climate in order to
create highly productive jobs in all parts of the country; real progress
in fighting corruption; establishment of a modern police force and other
law enforcement agencies; efforts to make the judicial system more
effective; and modernisation of the state management system itself,
introduction of modern new project and planning approaches, and
decentralisation of powers.
I gave a number of instructions in Magnitogorsk at the end of March
aimed at improving our market institutions’ performance, reducing costs
to business, and attracting investment into the Russian economy. It is
important in politics to make sure that decisions are actually carried
out, and the Magnitogorsk initiatives are being carried out now. We
decided, for example, after lengthy discussion, to lower the maximum
rate for compulsory insurance fund payments from 34 to 30 percent
starting next year, and bring them down to 20 percent for small business
in the production and social sectors. Of course, this is not such a
radical reduction, but it will nonetheless make a real difference for a
huge number of small and medium-sized businesses. I think that this
decision is fair and balanced in the transition period.
We have also drafted decisions that reduce controls on strategic
foreign investment and give minority shareholders access to information
on public companies’ activities. We have introduced the post of
insurance ombudsman in the federal districts, and the mobile
presidential reception office has also started work. We have drafted a
federal law setting out a special procedure for examining reports
containing accusations of corruption. The replacement of senior
officials with independent directors in key state-owned companies is
almost complete now. This process will be completed in all of the
companies controlled by the state by autumn this year.
We have established the Russian Direct Investment Fund managing
company, and the federal budget has earmarked around $2 billion for its
initial capital. Talks have been held with key potential partners, who
show a lot of interest, and concrete projects are due to be examined
over the coming months.
Discussion of the Magnitogorsk initiatives showed there is great
demand for objective and speedy decisions. This is only natural.
Modernisation cannot be achieved through one-off measures, even big
decisions, but only through constant and uninterrupted change and, of
course, the political will needed to keep this process moving
predictably ahead, one step at a time, but steadily moving forward.
Modernisation
I think that in this context the following new steps are needed.
First, the state does not need so many assets. The Government has
drafted proposals on a timetable for privatising big companies. These
plans must be carried out of course. But they need to go further. I
think we need to give up not just controlling stakes but, in a number of
cases, also blocking stakes in many big companies that are currently
still state-owned today.
Of course, we need to take a more cautious approach with regard to
infrastructure monopolies and companies that are essential for our
country’s military security. The Government has until August 1 to adjust
the privatisation timetable accordingly, so as to carry out this task. I
am sure that we can organise a transparent and modern privatisation
process that will attract effective private investors and help to bring
considerable funds into the Russian budget.
Second, our federal system needs to be an engine for our vast and
diverse country’s development and give us a competitive advantage. It is
not possible in the modern world to run a country from one single place,
all the more so when we’re talking about a country like Russia. In fact,
we have already gone through the kind of system when everything operates
only on the Kremlin’s signal, and I know from my own experience that
this kind of system is not viable and is always been adjusted to suit
the particular individual. We therefore need to change it.
I will soon set up a special high-level working group to draft
proposals on decentralising powers between the different levels of
power, above all in favour of the municipal authorities.
This will include proposed adjustments to the tax system and
principles for relations between the budgets at the different levels
too. I am certain that these decisions will be more in keeping with the
Russian economy’s future demands and organisation.
Third, we need to take further steps to improve the work of our
judicial system.
Much has been written about the problems in this area. We are well
aware of these problems and we can resolve them on our own, without help
from outside. I am sure that the judges themselves will do this.
I receive proposals from people suggesting that we establish a
separate court, essentially a separate legal system, for foreign
investors. I do not think this is the right decision. Everyone needs a
unbiased, fair and effective court system. Our citizens need it, and so
does every organisation and individual.
This is the goal to work towards. We will encourage judges to
specialise in the arbitration court, separate the arbitration court and
mediation, and improve judges’ training. I think we need to bring new
people into the judges’ corps, people with experience and specialised in
different areas of law. We will take the necessary decisions soon so as
to give this process the impetus it needs.
I am also giving the instruction to draft amendments to the
procedures for selecting judges and for their disciplinary liability. At
the moment, these functions come under the qualification commissions at
the different levels. I think a more balanced approach would be to
divide these functions between the qualification commissions and the
regional disciplinary commissions. This is a specific matter, but it is
important too.
Eradicating corruption
Fourth, we hear constantly that corruption is strangling Russia. We
need to reply in kind and put a relentless stranglehold on those guilty
of corruption.
The whole of Russian society without exception shares this view.
Corruption is difficult to detect, however, and the current criminal
prosecution procedures in these cases are very slow and complex.
We should maintain these procedures in place if only to ensure
reliable guarantees in the case of unfounded accusations, of which there
are a fair few, regrettably.
But at the same time, the state bodies need to clean themselves of
corrupt employees faster and more decisively, and to do this we should
broaden the grounds for firing people suspected of corruption from the
civil service. Grounds for firing people in such cases could include
evidence revealed by investigations, but which is not presented in a way
that can be used to launch criminal prosecution. Such dismissals would
essentially amount to dismissal on the grounds of loss of confidence. Of
course, we would need to keep legal procedures in place giving people
the right to appeal against such dismissals.
I think we could also look at making civil servants and state
officials bear full material liability to the state treasury, which in
the past always compensated the losses caused to private individuals by
civil servants’ unlawful action or inaction. We need to squeeze out
everyone who holds the law, order, and their honest colleagues in
contempt, and sadly, there are many such people, including in the law
enforcement system. In particular, I am referring to investigators who
turn unfounded criminal charges and investigations into a corporate
raiding tool and essentially a business. We need to use the institution
of mandatory checks by the prosecutor’s office of all criminal cases
that were opened and then closed without being sent before the courts.
If prosecutors find evidence of abuse, they can make the investigators
liable, including criminal liability. I will send these amendments to
our legislation to the parliament very soon.
Fifth, we need not just fine plans but also real progress in
establishing the financial centre in Moscow. Many important amendments
to legislation have already been made this year. The Moscow city
government is also working fast to put together the package of main
measures that will change the city’s life. We will also take decisions
on a number of issues, such as abolishing many of the restrictions on
placement and circulation of Russian securities abroad, very soon.
Finally, we seek to introduce visa-free travel with the European
Union and other countries, but much here depends on our partners.
We are ready to demonstrate our good will on this matter by taking
concrete steps. We are therefore offering the chance for all investors
and entrepreneurs with substantial business in Russia to obtain
long-term visas, and this includes people taking part in the Skolkovo
innovation centre projects and the Moscow international financial
centre.
And finally, in order to improve greater Moscow’s development, boost
the financial centre’s development, and quite simply make life easier
for many people, we will also examine the question of expanding Moscow’s
borders.
This would involve creating a capital federal district that goes
beyond the current Moscow city limits, and consequently expands beyond
these limits a substantial share of federal lever administrative
functions and state organisations.
I have named a number of measures, and I am sure they will be carried
out.
The list does not end here. It can be expanded and improved. I am
sure that we will reach all of the strategic goals we have set. I have
no doubt of this because I know that we all aspire to development, a
better quality of life, and victory over injustice and corruption. These
aspirations unite our society, and we will work together to reach them.
Reaching these goals that unite us will require changes to the
Government’s organisation, and changes to the state bodies at various
levels. We need to make them more open and offer broader opportunities
for private business, give modernisation our maximum support at the
local level, and support too public initiatives and groups of people who
are not indifferent and want to improve life in their towns, villages,
and regions.
The great Russian historian Nikolai Karamzin said that, ‘If we
cherish our own welfare, we will love our homeland too, and if we love
ourselves, we fill pride in our people, which is the cornerstone of
patriotism.’ I think these words reflect very well the national
development tasks before Russia today.
I have no illusions. I know that we cannot totally transform the
Russian economy in just a few years, but we have only a relatively short
time to get beyond the point of no return to the models that would only
lead our country backwards. We will carry out everything that we have
planned, step-by step, but steadily and consistently.
Corruption, closure to investment, excessive state presence in the
economy, and over-centralisation are the taxes on our future that we
must abolish, and abolish them we will. Our citizens will do the rest
themselves, do it for themselves, and thus for our country, for Russia.
They will build their own success, and thus our entire country’s
success.
Thank you for your attention. I wish you success at the forum.” |