Meeting on industry development 2023-08-03 14:00:00 The Kremlin, Moscow Vladimir Putin had a meeting with heads of Russian processing industry enterprises at the Kremlin. Taking part in the meeting were Deputy Prime Minister – Minister of Industry and Trade Denis Manturov; President of the Faradei Company Svetlana Andrianova; General Director of Katyusha Print Maxim Vinogradov; President of POLIPLASTIC Group Lev Gorilovsky; General Director of Transmashholding Kirill Lipa; General Director of Diarsi Centre, Board President of the National Council for Perfumery, Cosmetics and Household Chemistry Association of Commodity Producers Svetlana Matelo; General Director of the Kirov Plant Sergei Serebryakov; General Director of Sredne-Nevsky Shipbuilding Plant Vladimir Seredokho; President of Avtovaz Maxim Sokolov; Board Chair of R-Klimat Mikhail Timoshenko; and General Director of Management Company Metalloinvest Nazim Tofik Ogly Efendiyev. * * * President of Russia Vladimir Putin: Good afternoon, colleagues. We planned to meet with Mr Manturov today and discuss current issues, but I asked him to expand the list of participants in order to speak directly with those who work on the ground. Well, if not quite on the ground, then in any case, closer than he [Denis Manturov] and I, or the big bosses like ministers and heads of holdings. At the beginning, I would like to say a few words about how I see the situation in the Russian processing industry. Overall, the situation is stable. Employment in the processing sector remains at the same level as in 2021. If I am wrong about anything, please correct me, of course, because this is the purpose of today’s meeting, so that I can hear whether our assessments coincide with yours, considering that you work directly with the workers. So, employment remains at the 2021 level, which is about 10 million people, or 14 percent of all employees in the economy. This is quite a level. Salaries are growing: in May, they exceeded last year’s level by more than 20 percent – as I understand, this is in nominal value – 69,200 rubles a month. Two factors – stable employment and increasing salaries – demonstrate that manufacturing in Russia is gaining momentum, receiving new orders and developing new sectors. In the first six months of this year, processing sectors reported an annual growth rate of 6.2%, which is a good result. What do I want to draw your attention to in this case? Mr Manturov's attention, and, of course, yours. Everything is good: wage growth, job preservation, but wage growth, judging by what we see, judging by what is happening, is largely due to a shortage of labour. And you have to attract people, you have to get them interested in higher wages. This is already beginning to have a certain impact on small and medium-sized businesses, and not in the best way, because I understand that you are snatching the most qualified specialists from there. In this regard, what is very important and what am I driving at? I am saying that the Government is now attempting, and not unsuccessfully, to create a system for increasing labour productivity. And in the basic sectors of production – and we are seeing strong growth in industrial production in general – we are still achieving a little over 5 percent growth in labour productivity. The Government is carrying out a whole range of measures. Of course, what the Government is doing at its own level should be translated to the level of real production. It must be implemented at specific enterprises. Digital management and production systems should be introduced, [we need to] improve the production management system, improve logistics. There is a whole set of measures that the Government is implementing. Deputy Prime Minister and Minister of Industry and Trade Denis Manturov: Automation. Vladimir Putin: Yes, it has to do with the informatisation of production. There is a whole set of measures that need to be taken, because if it is simply due to a shortage of labour – it will lead to higher costs, you understand, then, in the long run, it will undermine the entire economy of enterprises. It is a matter of principle in general – increasing labour productivity. What I mean when we talk about this front-loaded growth is this. In the second quarter, the growth of production was steady: in the first quarter we had 1.2 percent approximately, whereas now we have 1 percent – well, close to that figure. In annual terms, it will be 12 percent, if we manage to maintain it, and we should try to do it. What are the sectors reporting the highest, the best performance? Computer, electronics and optical products manufacturing with a 30.4 percent increase. Very good. Manufacturing of metallurgical products increased 29.7 percent, almost reaching 30 percent. Electrical equipment manufacturing grew 22 percent, while the production of transport vehicles, excluding automobiles, was up 22.1 percent. We will discuss cars separately, since this sector is a special case. We have a slight decline in the production of medicine, and timber processing decreased. For timber processing, and Mr Manturov will correct me if this is not the case, it all comes down to logistics. Here, we need to lend a helping hand to those working in this sector. As for the assistance measures, I would like to hear your feedback on the performance of the tools we created to this effect. What am I talking about? There is the Industrial Development Fund offering loans with an annual interest rate of 1 percent and 3 percent for 10 years with amounts ranging from 5 million to 5 billion rubles. There is also the cluster investment platform with bigger and better loans of up to 100 billion rubles, which makes it a substantial amount. As you know, I hope, the interest rates for these loans are pegged to the Central Bank’s interest rate at 30 percent plus three percent. I hope this mechanism works and would like to hear your feedback on its performance. There are also the industrial mortgages of up to 500 million rubles for a seven-year term, which is also a good tool, I believe. I suggest we begin with Mr Manturov’s report so that you can listen to him and call him out if he misrepresents anything. This is what our meeting is all about, after all. On a more serious note, I would like to hear your assessments and suggestions, or to be more precise, recommendations on how to proceed with our efforts in the short and medium term. Mr Manturov, go ahead please. Denis Manturov: Thank you very much, Mr President. Back in January, we cautiously predicted that manufacturing would increase by 2 percent this year. You announced the results for the first six months. If we maintain this momentum, the result will exceed our initial forecast. Understandably, state-owned companies acted as the main growth drivers through government procurement orders. Specifically, you have just outlined the core sectors: radio electronics, metallurgy, railroad rolling stock manufacturing, and importantly, machine tool manufacturing, which are at 35 percent this year, which means that growth for these sectors exceeded 20 percent. Leather products and clothing also reported substantial gains with growth above five percent. At the same time, certain sectors remain in negative territory in annual terms. You mentioned medicine production. Last year produced a high base effect considering the Covid and post-Covid periods. You may remember taking part in launching three manufacturing facilities in late August: in Saransk, Kaliningrad and St Petersburg. They will reach full capacity by the end of the year. This will help increase production, and we can already see that the pharmaceutical and medical sectors are gradually recovering in terms of their manufacturing volumes. Vladimir Putin: But what was the main reason here? Denis Manturov: There was a big surge in 2021 caused by Covid. Vladimir Putin: You say that it comes down to Covid. Denis Manturov: Yes. The sector started to decelerate in the first quarter of last year, while still… Vladimir Putin: These are probably just numbers. Denis Manturov: Yes, these are the aggregate indicators for the sector. Vladimir Putin: I see. Denis Manturov: You also put special emphasis on car manufacturing. Indeed, this is a very important sector with a big multiplier effect for other sectors of the economy. Here we also see some recovery. Since April, monthly indicators compared to the same month of the previous year started to improve. For June, for example, there was a 52 percent increase year-on-year, which means compared to June 2022. We know that this situation was caused by the departure of Western companies from Russia. However, Mr President, we followed the instruction you issued to me to find new operators for every facility. We found Russian beneficiaries, i.e., Russian companies, for almost all facilities, and they selected their industrial partners. Moscow is a case in point here with the Moskvich plant, while St Petersburg now has a new site for AvtoVAZ, and Avtotor is back on its feet in Kaliningrad… Vladimir Putin: But where is Mr Sokolov? AvtoVAZ CEO Maxim Sokolov: This is about the Nissan plant in the north of the city, the Kemenka industrial zone. Denis Manturov: There is also the Sollers plant in Tatarstan. They have not only resumed operation, but are working to achieve even more in the future. The situation regarding wood processing is uneven. You are absolutely right in saying that it is necessary to support this industry and you made all the required decisions in February. We have already produced the necessary regulations for this support, especially concerning wood processing plants in the North-West. Indeed, logistics is the main problem and we are now reorienting all flows from the West to the friendly countries. These include not only countries in the East, but also in Latin America and Africa, especially after the forum – we are getting an additional order from our friends. We have increased our furniture production by 15 percent. This growth is within our plants. Western manufacturers are vacating their niches. Vladimir Putin: Two factors are at work here. Niches are being vacated and occupied by our manufacturers. And the growth of consumer demand is a very important factor. At least one third of our industrial growth is ensured by the increase in consumer demand. About two thirds – let’s put it straight – are produced by the defence industry and related sectors and these sectors also work with a double and triple effect. That said, the growth in consumer demand accounts for at least one third of industrial growth. And this is a good indicator of the domestic growth potential of the country’s economy as a whole. Denis Manturov: I must say a few words about agricultural machine-building, notably, commodity items. Here the dynamics are also uneven. The industry is still affected by grain prices. This year, large trading companies are paying less for grain than they did last year. But we hope the situation will even out. Vladimir Putin: Prices are going up. The growth is 7–10 percent. Denis Manturov: Yes. When we saw a reduction in the purchase of agricultural equipment in March, the Government promptly made a decision to allocate additional funds to a programme to support the demand – Resolution No 1432. With the Ministry of Agriculture, we quickly drafted a plan for the purchase of agricultural equipment. In six months, we have already obtained a result in monetary terms – plus 17 percent. One third of this growth was produced by grain harvesting companies. Mr President, overall we have managed to get through the acute phase of external pressure practically unscathed. You have mentioned the employment figures. Indeed, manufacturing is an enormous economic sector. Probably only trade is bigger – it employs 13 million people. We must, of course, pay due attention to this economic sector. Further development will be accelerated by the implementation of the presidential initiatives in two key areas. You mentioned the cluster platform. We have selected 16 projects worth over 360 billion rubles for this form of support. I would like to mention several interesting projects such as a flat-rolled stainless steel plant in the Volgograd Region, a high purity polysilicon facility in Chuvashia, and the manufacturing of component parts for transport engineering, diesel engines and pharmaceutics. There are another 33 projects worth over 1 trillion rubles that we are considering. Mr President, you instructed us to attract 2 trillion rubles in investment this year. We are moving consistently towards that target. Another measure you proposed, an industrial mortgage programme, has proved to be attractive. As many as 248 enterprises have taken out industrial mortgage loans worth 22 billion rubles, and we are considering applications from about 200 other companies. As you said, Mr President, the Industrial Development Fund provides considerable support for new projects and is showing good results. You recently met with the head of that fund. We have started selling packages of easy-term loans to commercial banks to create liquidity at the fund without changing lending terms for the borrower. Of course, it is not very profitable for the fund, but it is profitable for the Finance Ministry and the budget in general, because they do not need to provide the funding and are only required to cover the interest rate. That is, we have decided with the Finance Ministry for this year, and we will continue in this direction. And second, you supported my idea regarding the outgoing foreign companies: we will use the bulk of the taxes transferred to the budget to increase the capitalisation of the Industrial Development Fund. By combining new and tried and tested methods, we have avoided an investment pause and supported our businesses, which are actively entering the niches that were left in the domestic market. I am not only referring to end products but also to components. In this context, and taking into account the goal you have set to us for building up technological sovereignty in automobile manufacturing, we provided 50 billion rubles in benefits and loans for the manufacture of automobile components and units last year and at the beginning of this year. We will continue to do this this year. It will ensure the stability of our previous decisions. The same applies to other sectors where we will continue this work. At the same time, some of the industrial projects that are being developed are not only aimed at the domestic market. This is an important task for obtaining preferences for domestic markets, but still we have the task of expanding our opportunities and entering foreign markets. Trade missions play a special role in their promotion. You made a decision five years ago to transfer this to the Ministry of Industry and Trade, and over this period we have managed to do a lot to improve this institution. It used to take 30 days to consider a request from a business to a trade mission, whereas now it takes no more than five days, and in total about 2,500 transactions of our exporters are under the patronage of trade missions every year. If we take the yearly total for non-resource, non-energy exports, it is $9 billion, which is under the auspices of our trade missions. Last year alone, we opened five new offices in Latin America, South-East Asia, Africa and the Middle East. In total, we are now represented in 78 countries. At the same time, we are actively conducting business missions. You know, we already have a good tradition at Innoprom. It is held in Yekaterinburg every year, and you have attended several of them. We have started taking it on the road too. In Tashkent every year, this year Innoprom will be held in Astana, next year in Armenia, Belarus is next in line. And in other countries as well. Recently it was held in Saudi Arabia. I would like to say that, on the whole, the preconditions for Russia’s isolation along its external contours do not exist, nor can they. The drop-off from Western markets is being redirected to countries friendly to us, and I can confirm that there is still great interest in Russia, in our exporters, and we will keep the approaches we are taking today. Mr President, I would like to take this opportunity to thank all of our country’s industrialists for their responsible and professional work in these difficult times. Our colleagues are working as they should for the good of our economy and all industries. On your instructions, we promptly invited colleagues from various industries to give them the opportunity to speak today. Everyone has flown in quickly from different cities. Vladimir Putin: I apologise for taking you away from current affairs, it was unexpected. I would like to hear from you. <…> Vladimir Putin: Mr Manturov, do you want to say anything at the conclusion of the meeting? Denis Manturov: Mr President, thank you very much for this opportunity, it has come as a complete surprise to me: I made an appointment to see you, and that is what we got. Vladimir Putin: Yes, indeed, this is the way it was. Mr Manturov asked for a meeting. We made an arrangement and yesterday I said to him: “Let us hold an expanded meeting.” Hopefully, it was not useless for you either. It was also very important for me to hear the assessment of what is going on from people who manage, through their talent, intellect and experience of using all these things, to achieve the results we have today and we do have results. We also see the problems that have to be addressed and thank you for indicating which things need to be concentrated on by adding something without delay or additionally using the tools that we talked about. We will make the necessary adjustments. We are working on this. Thank you very much because it was also very important to me. When we are confined to our offices and discuss things among ourselves, it is important to get a sense – and it is also important to me to get a sense – of how this may be received and what results, what impact it may have in real life, in real practice, in real production. I want to thank you for everything you have done by now in tough circumstances, as they say in such cases, and by extension all your colleagues who are involved in organising production and the employees of your plants, and express my hope that not only will we keep up the pace but increase it. The Government jointly with the organisers of production and your teams of employees will be doing their best to support your efforts. Again, thank you. All the best.