#8 - JRL 2007-30 - JRL Home
Kremlin.ru
www.Kremlin.ru
February 6, 2007
[Putin] Opening Address at the Meeting with Representatives from the Russian Union of Industrialists and Entrepreneurs
The Kremlin, Moscow

PRESIDENT VLADIMIR PUTIN: Good afternoon!

Before passing to the themes on today’s agenda, I would like to congratulate the Russian Union of Industrialists and Entrepreneurs (RUIE) on its 15th anniversary. Over these years your organisation has become an important and necessary part of cooperation between the public and private sectors. And during that dialogue a large range of practical decisions that assisted the development of the national economy were initiated and implemented. I very much expect that a responsible and constructive approach will continue to distinguish RUIE as it engages in resolving other national problems.

With respect to the current conditions for economic development, I should note that Russian business has a serious resource base for growth. Along with this, the government aspires to ensure a stable legislative and a favourable investment climate. And for its part, I hope that business sees the benefits of strictly observing the rules that have been introduced and the tax regime.

The capacities to engage in coordinated actions to ensure a more judicious use of Russia’s natural riches and to reorient the economy to put the accent on innovative development exist today. In other words, we must take qualitative steps to change from simply exploiting natural resources to fully processing these resources and, in turn, this must act as the basis for the development of an innovation economy.

I would suggest that we discuss precisely these issues today. Such a discussion will include increasing the processing of raw materials and developing high-value added industries. This first and foremost concerns petrochemistry, metallurgy, the mining sector, wood processing and the electric power industry.

You know that this is not the first year that the amount of natural resources extracted and electricity produced increases in Russia. Therefore in 2006 the index for producing mineral and mineral fuel resources grew by approximately 2,5 percent. As such, Russia is the world’s biggest extractor of gas and can potentially become the world’s largest extractor of oil. Truth to tell, I am not sure whether we need this but Russia and our companies certainly have this opportunity.

In addition, we are the fourth largest energy producers. At the same time, our national economy developed with an obvious bias towards raw materials. Our industry mainly produces goods that require low amounts of processing. In past years this share of the economy was too big and now it has increased even more. And first and foremost this concerns exports: from 80 percent in 2000 to 85 percent in 2005. This tendency should worry the business community as much as it worries the state. Russian industry’s accent on raw materials increases its dependence on foreign markets and on the fluctuations of world prices. And Russia has already seen more than once how destructive, and sometimes how devastating, for the national economy this dependence can be. We certainly assume a unified and consolidated position with you on this issue. And one of our important and common economic priorities is to diversify Russian industry.

What measures should be taken in this respect? First and foremost we need to develop our system for processing raw materials. To do so we need to significantly increase the share of high value-added processing industries. We need to learn not only how to profitably export crude oil, gas, ore minerals and wood, we also need to process natural resources within Russia and to produce full-value high-tech products for foreign markets. In other words, to maximise profits from each tonne of ore, coal, other hydrocarbons, wood, and other raw materials extracted in Russia. Russia must receive significantly greater profits from developing its truly enormous mineral reserves. And one extremely important aspect is that more jobs will be created in Russia, including jobs in promising professions.

Concrete preconditions for developing processing industries exist in Russia today and we must not miss out on these unique opportunities. I am not only referring to the favourable environment on world markets; but no less important is that we have accumulated large social and economic potential, have created good macroeconomic conditions, and are energetically working on the liberalisation of business activities. And we already have positive experience from partnership between the authorities and business, experience stemming from joint project-oriented work.

I repeat: Russian business has gotten stronger. It has healthy ambitions for large-scale investments both within Russia and abroad. In connection with this, the time for expanding our companies’ participation in international cooperation and implementing important commercial initiatives abroad has come.

To continue the discussion on the modernisation of industry, I consider it necessary to mention the following areas.

First. We need new processing companies in petrochemistry, the wood industry, and in the coal and mining industries. I think that our extracting companies are directly interested in this. As such they can make their business more stable even if at a given time it simply seems more favourable to sell raw materials in view of today’s market conditions.

Second. The government and business community must start implementing infrastructure projects together, first and foremost in the energy sector. As such, a plan for electric power installations will be adopted in the next few months and I have no doubt that business should also be involved in developing this plan. Industrial companies’ investment projects and promising energy projects should be closely coordinated.

Third. You know that the government has already offered business a whole range of development institutions, including the financial resources of the Investment Fund and the recently established Venture Fund. However, all these instruments are still being insufficiently and inefficiently employed. I suggest that we think together about how to increase their effectiveness. I suggest that we exchange opinions on possible ways to improve tax and customs policy. I know how concerned you are about what is being done in this sphere. This represents the most important, fundamental conditions for effectively using natural resources. And in many respects it is precisely these issues that are holding back the concrete implementation of business projects in the processing sector.

In addition, the government supported the RUIE’s proposal whereby business would participate in improving the quality of vocational training. And now society is waiting for clear signals from us, from you, from both of us, about which skills will be in demand on the labour market. We need to see more significant results in the process of organising corporate and other forms of vocational training.

And as I conclude the opening address I would emphasise that only together can we achieve high rates of development in the processing industries, diversify the Russian economy generally, and witness serious industrial growth.

Thank you for your attention.