• Russian President Vladimir Putin’s address to the Federal Assembly


    (Third installment of a series)
    We have all the resources to promptly implement 5G and Internet of Things technologies.

    We need to build our own digital platforms. It goes without saying that they should be compatible with the global information space. This would pave the way to reorganizing manufacturing processes, financial services and logistics, including using block chain technology, which is very important when it comes to financial transactions, property rights, etc. These initiatives have real-world application.

    We need to start making or localizing key technologies and solutions, including those used in developing the Arctic and the sea shelf, and building new energy, transport and urban infrastructure systems. This is also important in areas related to improving the quality of life, such as cutting-edge rehabilitation tools for people with disabilities.

    It is our duty to support high-technology companies, offer start-ups a favorable environment and introduce new industrial solutions. I am talking about a user-friendly infrastructure, taxation systems, technical regulations and venture financing.

    Technological development should be firmly rooted in fundamental research. Over the recent years, we have been able to expand research, and are now leading in a number of areas. The Russian Academy of Sciences and Russia’s leading research institutions made a major contribution to achieving this.

    Building on the advances made in the preceding years, including in developing the research infrastructure, we need to take our research to a new level. Projects to build cutting-edge mega science research facilities are already underway in Gatchina and Dubna. The Council for Science and Education has adopted a decision recently to build a powerful synchrotron collider at the Novosibirsk Akademgorodok and a new generation collider in Protvino, Moscow Region.

    With these facilities, Russia will become one of the world’s leading countries in terms of the capability and performance of its research infrastructure. These units will give a serious competitive edge to Russian research teams and high-technology companies, for example for developing new medications, materials and microelectronics.

    Of course, this infrastructure and ambitious research projects will not fail to attract our compatriots and researchers from abroad. In this regard, we need to create a legal framework that would enable international research teams to operate in Russia.

    Large research and education centers should begin working to full capacity. They will integrate the possibilities of universities, academic institutions, and high-tech companies. Such centers are already being set up in Kazan and Samara, Tomsk and Novosibirsk, Yekaterinburg and Tyumen, Vladivostok and Kaliningrad, and other cities.

    It is important to focus them on the implementation of major interdisciplinary projects, including in such a promising field as genome research. A cardinal breakthrough in this area will pave the way to developing new methods for diagnosing, preventing and treating many diseases, and will expand the selection possibilities in agriculture.

    We need to reinforce the superiority of the national mathematics school. It gives Russia a strong competitive edge in the age of digital economy. International mathematics centers will also provide platforms for such work. These are already operating in Kazan and Novosibirsk. Following the adopted decisions, we will open more in St Petersburg, Moscow and Sochi.

    Young Russians are already proving their leadership in science and in other areas. Last year, Russian schoolchildren won 38 medals at international academic competitions. Our teams triumphantly won the Olympiad in natural sciences and robotics, the WorldSkills competition, and our students showed the best results in programming for the twelfth time.

    Based on the best practices and experience, we need to quickly modernize the vocational education system, achieve qualitative changes in the training of students, especially in the advanced areas of technological development, to establish the ‘applied bachelor’ level in those vocational professions that actually require an engineering degree, and also to organize centers for advanced professional retraining and professional growth.

    I also propose creating the most convenient and attractive conditions for talented young people from other countries to enroll at our universities. They already come to study here. But we also need to create conditions for the best foreign graduates of our universities to work in Russia. This fully applies to foreign scientists and qualified specialists.

    I think we need to seriously improve the procedure for granting Russian citizenship. The focus should be on the foreign nationals Russia needs: on young, healthy and well-educated people. For them, we need to create a simplified system for obtaining Russian citizenship.

    To ensure breakthrough development and upgrade education, healthcare and the quality of the urban environment and infrastructure, it will be necessary to allocate considerable additional funds in the next six years for these purposes.

    Question: at what expense? Where do we get these funds? First of all, it is essential to clearly prioritize these tasks and enhance the efficiency of government spending. It is necessary to involve private companies more actively in funding major projects. The future Government will have to establish new taxation rules as soon as possible. They should be stable and fixed for the next few years.

    Let me emphasize that we need such fiscal solutions that would ensure budget revenues at all levels and guarantee the implementation of all social commitments. Importantly, they should encourage rather than impede economic growth. It is the build-up of economic potential of the country and each of its regions that is the main source of additional resources. To achieve this, our economic growth rates should exceed those of the world’s. This is a difficult task but not instance case of wishful thinking. This is a fundamental condition for a breakthrough in resolving social, infrastructure, defence and other tasks. The new Government should set itself the goal of reaching such growth rates as its key guideline.

    In the last few years, we have enhanced the sustainability of our economy. The dependence of the economy on hydrocarbon prices has been substantially reduced. We have increased our gold and currency reserves. Inflation has dropped to a record low level—just over two percent. Of course, we all understand that the growth of prices for many basic necessities is much higher. This should be strictly monitored by different agencies, including the Anti-Monopoly Service. But on the whole, this low inflation level creates additional opportunities for development. Let me remind you that quite recently, in 2015, inflation was almost 13 percent—12.9 percent to be exact.

    In effect, Russia has formed a new macroeconomic reality with low inflation and general economic sustainability. For the people this is a condition for real income growth and cheaper mortgage loans. For entrepreneurs it means predictability in business and cheaper loans. Business should also adapt to these new macroeconomic conditions. Finally, it makes it possible to attract long-term loans and private investment into large-scale infrastructure projects.

    Now we have an opportunity, without speeding up inflation, and maintaining a careful and responsible approach, to gradually cut interest rates and make loans more affordable. I count on the support of the Bank of Russia in that, while making its decisions, implementing monetary policy measures and developing financial markets, it will work in contact with the Government in the interests of the common goal of creating a proper environment for increasing the economic growth rates.

    In order to further change the national economy structure and improve its competitiveness, it is imperative to use the sources of growth at a fundamentally different level. Where are they? First of all, it is important to increase labor productivity on a new technological, managerial and personnel basis. We are still lagging noticeably behind in terms of this indicator.

    It is necessary to ensure that labor productivity in medium-sized and large enterprises of basic industries, such as manufacturing, construction, transport, agriculture and trade, grows at a rate of at least 5 percent per year, which will allow us to reach the level of the leading world economies by the end of the next decade.

    I want to emphasize that increasing productivity is also about higher wages and, hence, increased consumer demand. In turn, this constitutes an additional driver for economic growth.

    All our actions should push companies to produce technically complex products and to implement more efficient technologies. It is necessary to make an inventory of subsidies and other instruments for direct support of industries, and to target them on making competitive goods.

    Increased investment is the second source of growth. We have already set the task of bringing it up to 25 percent of the GDP, and then to 27 percent. Unfortunately, this goal has not been achieved yet. To ensure sustainable growth, we need to do so at all costs. I hope that the new Government in conjunction with the Bank of Russia will present a concrete plan of action in this area.

    Investment should be primarily used for upgrading and technologically re-equipping the industries and retrofitting the manufacturing industry. We need to ensure the highest dynamics here, to reach a level where, on average, every second enterprise within a year carries out technological changes. That is when the renewal effort in the economy and industry will be noticeable.

    Promoting small businesses is the third large-scale reserve of economic growth. By the middle of the next decade, their contribution to the country’s GDP should approach 40 percent, and the number of employed there should grow from 19 million to 25 million people.

    One of the main problems facing entrepreneurs is access to financial resources. There is a government program in place for small production businesses that offers loans with only 6.5 percent interest. I think this program must continue. Overall, this support mechanism must become widely available.

    Finally, another source of growth is the development of non-resource exports. It is necessary to remove all administrative barriers and create the most favorable conditions for the companies entering foreign markets.

    Within the next six years, we must double the amount of non-resource and non-energy exports to reach $250 billion—specifically, increase machine engineering exports to $50 billion. Exports of services, including education, healthcare, tourism and transport, must reach $100 billion per year.

    In the early 2000s, we were deeply dependent on food imports. The situation has turned around completely. Now we are on the verge of more changes. In just four years from now, we plan to be supplying more food to global markets than we will be importing from abroad. We need to increase exports of meat and high-added value products, as well as to make the country more self-sufficient in beef, milk and vegetable supplies.

    I want to stress that development of the agricultural industry is strongly related to commodity production. However, this development must not be at the expense of small farms and their workers. We must support family businesses and farmers. We will develop cooperative agriculture and create conditions for residents of rural areas to increase their income. Every now and then we hear about problems with people’s interests being affected, I am aware of them. Such cases must be taken very seriously.

    Nevertheless, I want to say thank you to the agricultural industry workers for the record-breaking harvest of 134 million tons. Note that it is more than the record harvest in the Soviet Union. In 1978, the USSR produced 127.4 million tons. Now it is common for Russia to exceed 100 million tons.

    Clearly, such a large harvest has a downside as well. The prices have gone down; there are some storage and transport issues. We have established discount rates on transporting crops by railway until July 1, 2018, to support our producers.

    It is necessary to consider extending this measure to the next harvesting seasons as well as to arrange additional deliveries to the Urals, Siberia and the regions far away from ports. We must help those who want and can process crops locally. Added value needs to be increased. Then we can go into the livestock industry with this product. We will certainly discuss these and other problems reported by agricultural workers at the agricultural producers’ forum in March, and will elaborate on additional measures to support the industry.

    In order for the economy to operate at its full capacity, we need to radically improve the business climate and guarantee entrepreneurial freedom and competition.

    Let me highlight a fundamental point in this regard. The state must gradually reduce its share in the economy. In this connection, it has to be noted that the state has taken over a number of financial assets in an effort to revive the banking sector. These initiatives are headed in the right direction and have my support. That said, these assets should be put on the market and sold without delay.

    We need to get rid of everything that enables corrupt officials and law enforcement officers to pressure businesses. The Criminal Code should not serve as a tool for settling corporate disputes. These should be referred to administrative and arbitration courts.

    I ask the Working Group on Monitoring and Analyzing Law Enforcement Practice in Entrepreneurial Activity, together with the Supreme Court, law enforcement agencies, the Prosecutor’s Office and representatives of the business community to draft specific proposals on this subject. This matter should not be approached in a light-minded manner. All the proposals must undergo careful examination and approval, and this should be done as soon as possible.

    At the same time, criminal law should be strictly enforced in the case of offences infringing upon the interests of citizens or society or violating economic freedoms. I am referring to offences against property and assets held by citizens, illegal takeovers, competition law violations, tax evasion and embezzlement of public funds.

    I would now like to move on to another important subject. While the number of various inspections seems to be declining, during meetings with businesses I often hear that radical change has yet to materialize. The presence of inspectors at enterprises should become the exception, and be limited to high-risk facilities. Otherwise, remote monitoring methods can be used. The entire control and oversight system should move to a risk-oriented approach within two years. Let me remind you that the relevant legislative framework is already in place.

    It is important to support start-up entrepreneurs, to help people take the first step, so that they can open their own businesses with just one click, make the compulsory payments, receive services and loans online.

    Sole proprietors and self-employed individuals who use digital services, generally need to be freed from reporting, and allowed to pay taxes via a simple transaction in automatic mode. As for businesses that use cash register equipment, their tax reporting needs to be simplified. You know, this is just a routine issue, at first glance, but this tedious routine is what prevents us from moving forward vigorously. We need to do everything to clean out this space. I will add that the intensive introduction of digital technologies and platforms will allow us to make consistent progress towards greater transparency and away from shadow economy.

    Now I would like to address all representatives of Russian business, those who run their own small business, a family enterprise or a farm, an innovative company or a large industrial enterprise. I know, I know we still have a lot to do. And I assure you, we will do everything to give our entrepreneurs new opportunities to expand production, to open businesses and to create modern jobs. But at the same time I expect that Russian business will increase its contribution to the country’s breakthrough development, and respect for entrepreneurial work in society will grow. It is very important.

    Colleagues, we need to build modern services for business, but this is not all; the system for interaction between the state and society, between the state and the people should be clear and understandable, convenient and comfortable.

    We have already set up a network of multifunctional centers. A person anywhere in the country can now use public services as a one-stop-shop. Allow me to remind you that it was a special program which we have developed and implemented.

    We need to move forward, to ensure the provision of virtually all public services in real time via remote services within six years. All document circulation between state agencies should be digitized, which is important both for the state agencies and for citizens, so as not to browse the Internet for hours looking for information. It will be possible to get everything in one place. I will add that digitalization of the entire public administration system and its greater transparency is also a powerful factor in fighting corruption.

    Government officials of all levels should be interested in improving their efficiency and be strictly focused on obtaining concrete results. By the way, we are always talking about corruption and officials. I have to say, and I do not have the right to not say this: the vast majority of our public servants are honest, decent and goal-oriented people. However, what I said will help everyone, including government officials and users of government services. This line of thinking should be used to rebuild the public service system, where appropriate, and to introduce project work methods.

    Of course, it is necessary to ensure the advancement of modern professional personnel in the government and municipal service, business, the economy, science and industry, in all spheres.

    As you may be aware, the first Leaders of Russia competition took place, and a number of other projects are being implemented to support young workers, entrepreneurs, innovators, volunteers, schoolchildren and students. They brought together hundreds of thousands of young people from all regions, and became an important step in their lives and professional careers.

    I want to emphasize: for all those who want to work, show themselves, and are ready to honestly serve the Fatherland and the people, and to succeed, Russia will always be a country of opportunity. This is the guarantee of our successful development and confident movement forward.

    All the projects and the priorities that I mentioned today, such as spatial development, investment in infrastructure, education, healthcare, the environment, innovative technologies and research, measures to support the economy, to promote talent, the youth, all of this is designed to work for one strategic task—Russia’s breakthrough development.

    At the same time, we cannot forget about reliably ensuring its security.

    The operation in Syria has proved the increased capabilities of the Russian Armed Forces. In recent years, a great deal has been done to improve the Army and the Navy. The Armed Forces now have 3.7 times more modern weapons. Over 300 new units of equipment were put into service. The strategic missile troops received 80 new intercontinental ballistic missiles, 102 submarine-launched ballistic missiles and three Borei nuclear-powered ballistic missile submarines. Twelve missile regiments have received the new Yars intercontinental ballistic missile. The number of long-range high-precision weapons carriers has increased by 12 times, while the number of guided cruise missiles increased by over 30 times. The Army, the Aerospace Forces and the Navy have grown significant stronger as well.

    Both Russia and the entire world know the names of our newest planes, submarines, anti-aircraft weapons, as well as land-based, airborne and sea-based guided missile systems. All of them are cutting-edge, high-tech weapons. A solid radar field to warn of a missile attack was created along Russia’s perimeter (it is very important). Huge holes appeared after the USSR disintegrated. All of them were repaired.

    A leap forward was made in the development of unmanned aircraft; the National Defense Control Center was established; and the operational command of the far maritime zone was formed. The number of professional service members has increased by 2.4 times, and the availability of equipment in the Armed Forces grew from 70 percent to 95—100 percent. The years-long queue for permanent housing was eliminated, and the waiting period was cut by 83 percent.

    Now, on to the most important defense issue.

    I will speak about the newest systems of Russian strategic weapons that we are creating in response to the unilateral withdrawal of the United States of America from the Anti-Ballistic Missile Treaty and the practical deployment of their missile defense systems both in the US and beyond their national borders.

    I would like to make a short journey into the recent past.

    Back in 2000, the US announced its withdrawal from the Anti-Ballistic Missile Treaty. Russia was categorically against this. We saw the Soviet-US ABM Treaty signed in 1972 as the cornerstone of the international security system. Under this treaty, the parties had the right to deploy ballistic missile defense systems only in one of its regions. Russia deployed these systems around Moscow, and the US around its Grand Forks land-based ICBM base.

    Together with the Strategic Arms Reduction Treaty, the ABM Treaty not only created an atmosphere of trust but also prevented either party from recklessly using nuclear weapons, which would have endangered humankind, because the limited number of ballistic missile defense systems made the potential aggressor vulnerable to a response strike.

    We did our best to dissuade the Americans from withdrawing from the treaty. All in vain. The US pulled out of the treaty in 2002. Even after that we tried to develop constructive dialogue with the Americans. We proposed working together in this area to ease concerns and maintain the atmosphere of trust. At one point, I thought that a compromise was possible, but this was not to be. All our proposals, absolutely all of them, were rejected. And then we said that we would have to improve our modern strike systems to protect our security. In reply, the US said that it is not creating a global BMD system against Russia, which is free to do as it pleases, and that the US will presume that our actions are not spearheaded against the US.

    The reasons behind this position are obvious. After the collapse of the USSR, Russia, which was known as the Soviet Union or Soviet Russia abroad, lost 23.8 percent of its national territory, 48.5 percent of its population, 41 of the GDP, 39.4 percent of its industrial potential (nearly half of our potential, I would underscore), as well as 44.6 percent of its military capability due to the division of the Soviet Armed Forces among the former Soviet republics. The military equipment of the Russian army was becoming obsolete, and the Armed Forces were in a sorry state. A civil war was raging in the Caucasus, and US inspectors oversaw the operation of our leading uranium enrichment plants.

    (To be continued)


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