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President of Russia Vladimir Putin: Mr Belousov, you are aware of the situation that has emerged in several aluminium sector companies. I met with the companies owners, and I asked you to get personally involved in sorting out these rather serious economic and social issues. I know that some progress has been made since then.
Economic Development Minister Andrei Belousov: Yes, we are responsible for the aluminium industry, of course, though the social issues are above all matters for the company owners and their workforces. The owners are to settle these matters. But the aluminium industry is a strategic sector, and we are in the process of building new production facilities, including through loans from Vnesheconombank.
It is understandable that the companies’ owners have problems right now because they have to fill new production capacities, the Boguchansk Aluminium Smelter and Taishet Aluminium Smelter, which we are currently building. They need people for this, and at the same time, they have to take the old production facilities out of operation. Several smelters have been affected, but the biggest problems were at the Bogoslovsky Aluminium Smelter. I say ‘were’ because I think the situation has been defused for the most part. This smelter has unique status owing to its place as one of the Soviet Union’s first aluminium smelters. It was built during the Great Patriotic War years and began producing aluminium in 1945.
At the same time, it is the most technologically obsolete smelter. It uses electrolysis units that cannot be upgraded and are not profitable to run now. Naturally, the owner’s first reaction was to lay off 1,200 smelter workers. The owner had no plans to close the plant down altogether, because there is also a fairly modern clay production facility there, but that is not the issue.
The negotiations were quite tough. We acted as mediator between the smelter’s labour collective, the smelter’s home region – Sverdlovsk Region – and the company owners. We should give the owner – Rusal – its due, because they made energetic efforts to settle all the problems.
I can now report that the situation was settled as follows: the owners and the labour collective, represented by the trade union and the governor, signed an agreement (the governor signed too), under which no one will be made redundant. Some of the employees will be moved to other facilities at the same smelter, and some of them will be offered packages for voluntary transfer to new production facilities at other locations. I stress that this will be voluntary. No one will be laid off by order. This is one of the agreement’s key points. Of course, Vnesheconombank’s assistance will be required here in terms of providing the loans needed to modernise the production facilities as rapidly as possible. We spent a long time discussing this and are working on it.
Vladimir Putin: This is very important so that the smelter has a future. People need help, and they should be clear too about exactly what kind of help this will be and what form it will take.
Andrei Belousov: The trade union head and I agreed that he will monitor the agreement’s implementation, and I will also keep my finger on the pulse.
Vladimir Putin: Good. What other developments do we have?
Andrei Belousov: In the aluminium sector, there are two other smelters that have been hard-hit, but the situation there is not as serious. I am sure that we will be able to settle the problems here too.
Vladimir Putin: We had other issues on the agenda too.
Andrei Belousov: Yes, I wanted to report that we have analysed the situation concerning forecasts for 2013–2015. The situation is quite complicated because we will need to maintain a growth rate of at least 4–5 percent, otherwise we will not be able to balance the budget, given the simultaneous defence spending and social spending commitments we have taken on so as to resolve the big issues that you set out in your executive orders. These are tasks that must be carried out.
But this sets the minimum growth level. At the same time, there are several new factors that will come into play over this time. Probably the most complex among them – we do not have full understanding yet of all of its possible implications, and I think the public does not fully understand the situation yet – is that we are for the first time entering a period when our oil exports and oil production will not be growing. This will be quite a lengthy period. In other words, before the crisis in 2007, from the mid-2000s, exports of energy resources and other commodities drove around half of our economy’s growth, but now this growth driver will all but stop working. The other factor that we must also take into account…
Vladimir Putin: There is the drop in consumption to consider too then.
Andrei Belousov: Yes, this includes the drop in consumption too of course.
The other factor that we must take into account is our economy’s adaptation to the WTO. Tariff protection will be substantially lower. Tariffs are coming down selectively, not across the board, but in specific areas, but we will nonetheless need to take protective measures in some sectors.
We have already drafted and are implementing a programme for the different sectors’ adaptation. I reported to the State Duma on this programme, and we agreed to set up a special working group made up of Duma deputies, entrepreneurs, and government officials, to monitor the programme’s implementation. The working group will be established very soon, and I should be able to report on the progress in October, when some of the measures will already be fully carried out.
One big issue that worries us today — analysis shows that it will be a key issue — is the need to increase investment and build up the share of reserves. I would not say that we are lacking the financial resources we need for this task. Russia, after all, has a gross national savings ratio of around 30 percent – one of the highest in the world. This is a lot. We have a lot of savings. These are not even so much household savings as those of companies. But we make poor use of this potential. A lot of capital goes abroad, and this is not always justified. It is understandable when companies are making investments, buying assets abroad, say. This is normal, something that big companies all around the world do. But it is not good when capital cannot find effective use at home.
The key plan now in this area is the national business initiative that you instructed to start developing last December at the Delovaya Russia [Business Russia] forum. Quite detailed roadmaps were drafted, mostly through the business community’s own efforts. A large number of such roadmaps were drafted because the problem is a complex one and involves many different aspects. The first four roadmaps have already taken effect. They deal with the most sensitive areas: improving customs administration, construction regulations, connection to the electricity grid, and support for exports.
Now we have to put in place a system to monitor their implementation. In this respect, given that we are working together with the business community, the main innovation is something we cannot avoid, namely, that we cannot limit ourselves to bureaucratic oversight alone. In other words, simply drafting or even adopting a law or regulation will not suffice. For everything to work, the end consumers of these legislative efforts must see tangible results — feel for themselves that things are improving and the problems are being solved.
We are establishing a three-tier oversight system. The first tier is the standard bureaucratic monitoring procedure, which we already know well. The second tier is exercised through the working groups that drafted the roadmaps. One of the main requirements to those groups was that each should be headed by a businessperson. The third tier will be carried out through the leaders’ club which is being established with the help of the Agency for Strategic Initiatives, as its CEO Mr Andrei Nikitin reported to you. This club will bring together businesspeople from all around the country, from all the different regions, and we want to get them involved too, so as to monitor the changes taking place in their businesses, at the local level, and in the regions.
We have already begun working with them and will meet once a month to hear their reports and get feedback.
Vladimir Putin: Plan my meetings with them as before.
As for the oil industry, your Ministry and the Energy Ministry, together with the CEOs of our main companies, need to ensure the conditions for developing new fields. Many old fields are depleted now, and we are to develop new ones, including the ones that are difficult to access. We have already discussed this issue many times.
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