www.Kremlin.ru
March 13, 2009
[Medvedev] Speech at Session of the Council of Legislators
The Kremlin, Moscow
PRESIDENT OF RUSSIA DMITRY MEDVEDEV: Good afternoon, colleagues,
I want to begin my opening remarks with an assessment of the recent regional and municipal elections. What I want to note in particular is that these elections have demonstrated that the public has quite a high level of confidence in the policies currently being implemented in the country. This is always important, but it is especially so at this time of economic crisis.
The anti-crisis measures that have been taken have done a lot to soften the global financial and economic crisis’ negative effects. But our task, at federal and regional level, is above all to assess the situation accurately and respond swiftly to the financial, economic and social changes taking place. The entire world faces these same tasks today. This is a time for swift and decisive action.
It is extremely important today to develop mechanisms for coordinating the work of the authorities at every level. This is not to say that we do not already have coordination mechanisms in place, but all mechanisms are geared to this or that kind of situation, and the existing mechanisms, it must be said, were geared to a tranquil state of affairs.
But times have changed, and this has dramatically increased the responsibilities for the authorities at every level. It is not enough now to just know and respond to the local situation. We also need to develop new standards of conduct in this situation, take the initiative, get public organisations, experts, young graduates involved in work, and make use of all the creative potential out there.
You know better than anyone that the effects of the financial and economic crisis vary greatly from region to region. There are objective reasons for these differences, reasons linked to the regions’ particular social and economic situations and geographical locations. And there are also obvious subjective reasons responsible conduct by the authorities, and a professional approach on their part to analysing the problems and the measures to be taken in response.
Most of the country’s regions are indeed working actively on carrying out the programmes proposed by the federal authorities for stimulating employment and stabilising the situation in the construction sector. Most of them have also carried out our proposals regarding regional budget adjustments. This is not the case everywhere, however. You are aware of your own problems. As legislators, it is your job to respond to them, and I will also take the appropriate action.
The regions are also implementing their own measures, adapted to local conditions. In particular, they are clarifying regional laws, optimising state spending, cutting administrative personnel costs, and, I hope, are practically all making additional efforts to support small business development.
Particular attention is going to labour relations and developing a mechanism for rapid coordination on problem enterprises between employers’ representatives and trade unions. As legislators, you, of course, are following all of these developments and making decisions. I hope that the legislative assemblies, the regional lawmaking bodies, will continue to monitor constantly all of these processes, so as to keep your colleagues in the executive branch on their toes.
I think it is particularly important today to study the regions’ experience in dealing with the economic downturn and its consequences. This is an unprecedented crisis, and so we want to make sure that new ideas that have been discussed and already tried and tested in one region can be put into practice in other regions too.
I think the Council of Legislators could organise this work to monitor, collect and summarise information about the anti-crisis measures implemented in the different regions. There are several reasons why the regional parliaments and deputies can play an effective part.
First, you are directly involved in the lawmaking process. The deputies have the power to request any necessary information from the state and municipal bodies, and work together with the executive authorities to set the region’s social and economic policies.
Second, and perhaps even more important, the deputies are in constant contact with their voters. It is their duty to know the public mood and know which decisions, at federal and regional level, are producing results, and which turned out to be ineffective and require adjustment.
Third, the makeup of the legislative assemblies reflects to a large degree the social composition of the regions themselves. It is not only professional politicians who are elected to the legislative assemblies, but also entrepreneurs, workers, doctors, journalists, teachers, agricultural workers, people of different ages and ethnic backgrounds, who know the situation not by hearsay but through personal experience.
Finally, all of the country’s political parties work in the regional legislative assemblies: United Russia, and other parties too, the Communist Party, A Just Russia, LDPR [Liberal Democratic Party of Russia], Yabloko, Patriots of Russia, Right Cause. The regional legislative assemblies thus represent the entire spectrum of modern Russia’s political life. Clearly, there should be and indeed has to be discussion about the issues that are part of your responsibilities, and today, this means above all overcoming the crisis. These discussions can take various directions. There is nothing surprising, either, in criticism of the policies being implemented. Of course, those who support the policies should also set out the arguments in their favour.
I think the Council of Legislators could organise exchange of anti-crisis experience between the regions on a horizontal basis. A system for vertical exchange of information with the federal authorities should also be put in place. The Council of Legislators could summarise the comments and requests from the regions and present their proposals to the Federation Council, the Government, and the President.
(Addressing Chairman of the Federation Council and Chairman of the Council of Legislators Sergey Mironov) Sergey Mikhailovich, I think that you and your colleagues could think this over and issue the appropriate instructions. I imagine you will probably say a few more words about this subject.
The crisis is a real test for leaders (I have spoken about this at meetings and during television interviews). It shows up irresponsible, weak and incompetent leaders for what they are. We cannot afford to keep such people. But everyone who is ready to work and give the best of themselves should have all the opportunities for professional growth.
As you know, the federal authorities have made it a priority to build up a reserve of management personnel. The federal personnel reserve has already been established and a number of specialists have already received new appointments. This work will continue at federal level, and, I hope, in all the regions too. We need this kind of personnel reserve at every level of government.
I am sure that you are following as closely as possible the proposals for reform of the country’s political system and the resulting changes they entail, but I wanted to draw your attention to the matter nonetheless. Many of these proposals have already been given legislative form, including those I spoke about in my Address to the Federal Assembly. Some of these proposals are well known and aim at giving the regional parliaments a more active part in the political process. This concerns the amendments to the law on the Federation Council, in accordance with which only deputies of regional and municipal legislative assemblies will be able to enter the Federation Council, and amendments to the law on political parties, giving the parties that have won in regional elections the exclusive right to nominate candidates for the post of regional governor. You are also familiar with the amendments to the electoral laws. Draft laws have now been submitted on supervision of the executive authorities’ activities at municipal level. By this, I mean the work of mayors, and the power to remove them from office if they violate the laws, in accordance with the set procedures, including at the regional governor’s initiative. All of these changes aim to enhance and reinforce our political system, including by strengthening the legislative branch and the local government system.
Colleagues, I want to stress once more today, how important it is to maintain contact with various public groups. I want you to remember that we are all living in a new situation now, and it obliges us to be exceptionally attentive, consider our actions very carefully, and pay special attention to people’s needs and problems and to the issues they face. What we need in this situation is effective action, not populism and demagogy.
Even more unacceptable is for the regional legislative assemblies, and any other government bodies, to get involved in lobbying selfish interests of any kind. All of us have new responsibilities, particular obligations today, while at the time, the strategic foundation of our work, our country’s strategic policy, remain unchanged.
Thank you for your attention.
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Colleagues, I will try to summarise briefly the results of today’s meeting.
First, we need to remember that all countries face an uncertain situation today, our country included. No one knows exactly what direction the crisis will take. The worst case predictions have not come true so far, but at the same time, hopes for a swift recovery have not been fulfilled either. There are various approaches and various assessments. Our colleagues from the Government have talked about this. In any case, this is the kind of situation where we should avoid sudden stops and starts. We need to do what we have agreed to do. At the same time, we need to have an integral anti-crisis policy, as Sergei Mikhailovich [Mironov] said in his speech. It was for precisely this reason that I instructed the Government to draft an anti-crisis action plan, because if some aspects of this work are not clearly understood even at the very highest level, then what can we say of the general public, who are not immersed in all the economic nuances. This plan will soon be ready, and together with amendments to the state budget, will go through the procedures to become part of our legislation.
Turning to a number of the questions raised and requests made today, Sergei Mikhailovich and other colleagues spoke of the need to make changes to the tax system. This is a very complicated issue and the subject of endless debate. Of course, it is impossible in this debate to decide who is right and who is wrong, because there are arguments for and against, arguments for who has more or less foresight.
But there are also the statistics. Unfortunately, this year will see a considerable drop in revenue, and you know this full well from the example of the regional budgets. Our tax services are collecting fewer taxes, and this is something we also have to take into account. When making decisions on changes to the tax system, especially during a crisis period, we need to look at what will happen to tax collection. As you know, there have been numerous proposals to change the VAT rates. It was and still is my view that at some point soon, once the crisis is over, we will have to come back to this question. But when making decisions today, we have to be sure that the drop in tax collection will not speed up, because this has an impact on the lives and work of many people, above all those in the public sector.
But this does not mean that the tax system should be completely frozen. Other countries, even during the crisis, are making changes to a number of their tax provisions. We are also making some decisions in this area, including regarding differentiation of rates and so on, and this work will continue, including on specific taxation provisions, such as our colleagues from Yakutia and other regions spoke about.
Of course, we are all worried about the reduction in lending and the situation with interest rates. This is creating a real problem, and the situation is worse here than in other countries hit by the crisis. Why are things worse here? Because we have worse conditions for lending to the most vulnerable enterprises, industrial and agricultural businesses. This stems from the fact that we have been unable to rein in inflation. You know the situation with inflation here, and it is inflation that determines the refinancing rate, which our colleague from Tula Region asked about. The refinancing rate is directly linked to the rouble’s real exchange rate, and to the inflation rate. If we have inflation running at around 15 percent, it is unfortunately not possible to ensure any broad-scale reduction in interest rates in the main areas. We can organise subsidies and put in place special legal conditions for individual enterprises, but if inflation remains this high, the refinancing rate will also stay high. There is nothing we can do about this. We need to work on bringing down inflation. Ultimately, this same credit crunch that Igor Ivanovich Shuvalov [First Deputy Prime Minister] spoke about could also have an impact on inflation. Various scenarios are possible, and the situation will also depend on what happens with oil prices.
Regarding the issue of oil products for the rural areas, I met yesterday with one of the Cabinet members responsible for this area, and we agreed to introduce new selling prices for oil products. These new prices will be applied to the prices at the oil refineries. Of course, there will be some mark-ups, but this is something we need to monitor very closely, because for the first time in the last three years, the prices for 72 petrol, diesel oil and several other components are lower than they have previously been.
Regarding the steps the Government is taking, as I said, the action plan will be completed soon. But we all realise that ultimately, many of our possibilities are limited by the current macroeconomic situation, including the global macroeconomic situation. If the crisis leads to a drastic fall in the oil prices that were used to calculate our country’s development outlooks and programmes, we will have to introduce additional restrictive measures, and the question of the size of the budget deficit will arise once more, and this is something we need to be prepared for. But if prices rise and as you know, our calculations were made on the basis of oil at $41 for the barrel we could potentially receive some additional revenue, which we will then be able to spend.
The problem today is that the situation is uncertain. The world economy has never been in such an uncertain situation, not during the last 50-70 years at any rate, and neither has there been such uncertainty surrounding forecasts regarding the recession. Just yesterday, I saw yet another analysis comparable only to 1931 and the World War II period. There has been nothing like this situation in the entire post-war period.
The Government has managed to keep the situation under control in the banking sector. This is a major achievement, I think, because you know what an important part the banking sector plays in our country, as in any other country. As the economy’s blood supply system, if it stops working, the entire economy comes to a standstill. But the Government and the regional authorities need to monitor the situation closely in order to ensure that the banking system does not begin to atrophy. You in the regions have many regional banks, and a large number of them play a very important part. We cannot just count on the five state-owned banks to resolve all the country’s problems.
Another important issue that Igor Ivanovich Shuvalov raised was that of work on amending the budgets. Amendments to the regional budgets are one of your direct responsibilities, colleagues. I understand that this is a difficult and not the most pleasant task. We have grown used to seeing growth, each new budget with new figures and new possibilities, and suddenly we are having to trim things and make cutbacks that are painful, all the more painful as even when everything was growing, there was still always never enough. Social spending is the clear priority. I think there is no need for me to persuade you that this is what needs to be maintained. And where the cutbacks should be made is also clear. Unfortunately, investment will have to be cut. Not all investment, but investment that can wait palaces, reception halls, some entertainment facilities. Of course we would like to go ahead with all of these projects, but some of them will have to wait. Other kinds of investment should be maintained insofar as possible, above all investment in infrastructure and housing, which has a multiplier effect at every level.
I heard that many legislative assemblies have set up anti-crisis groups working in various areas. I think this is a very good practice that should be supported and developed.
Municipal elections have just taken place. Those working at the municipal level are our colleagues too, our junior colleagues in a sense, because in terms of preparation, financing and professional situation, they face a very difficult situation. I met just recently in Tula with newly elected municipal deputies. To be honest, they made a very good impression on me. I did not even imagine that the ordinary people elected, people who in their usual working lives are doctors, teachers, directors of small businesses, would be so well prepared. We gave them only very short notice of this meeting, and so they did not have the time to study up for it. Their knowledge and energy pleased me, because it means that the quality of those elected, even at municipal level, is improving. But there are also other examples. You are aware that people who emerged from the criminal revolution of the 1990s often make their way into power at municipal level. We need to closely monitor the situation to ensure that these kinds of people do not manage to establish their domination over municipalities, especially during the crisis period. In this respect, you know the local situation best. I will not name now the regions or specific cases I have heard about from the regional governors. Everything is already well known.
Concerning the laws on youth and the events taking place as part of the Year of Youth this year, I agree with the idea of bringing together a State Council on this subject to look at a corresponding concept, and hold other events too. But I just want to say that we should all reflect on the substance and content of this State Council and of the relevant legislation, because we do not have the right to pass empty laws on youth. I already saw enough such documents during the 1980s-90s. All kinds of draft laws were drawn up on this subject. But if we do something, it needs to be a document of substance, and it needs to address the problems of concern to young people and create new opportunities, even taking the current difficult situation into account. In other words, if we do bring together this kind of State Council and draw up a draft law, it has to have substance.
Dear friends, I will not instruct you any further. You are all adults. You run the legislative assemblies in the different regions, and you do this work competently and professionally. We have had almost no problems of a political nature of late, and this is probably for the best, because when a country has to face not only the crisis but deal with political complications too, it runs the risk of default. Just take a look at what is happening with some of our neighbours. As if there were not enough difficulties as it is, they seem to have not a political hot season, but an endless escalation of struggle between the various political clans. I think, therefore, that in this situation we all realize the responsibilities that fall to each of us, and I am sure that through coordinated work we will come through this difficult period in our country’s life at as little cost as possible.
I wish you all success in this work. All the best!