President of Russia Dmitry Medvedev: In the Cabinet, you are dealing with issues of regional development, which include evaluating what is currently being done and monitoring the situation. It’s been some time now since we passed the package of anti-crisis measures, and so we have become more proficient in applying it; we’ve also had a chance to monitor what is working, particularly for creating new jobs, boosting employment, and implementing comprehensive programs for territory development. I would like you to brief me on your assessment of the situation.
That is my first question.
My second question is the following: you and I are working on planning the Olympic Games. This is a major challenge for the government and for our society. But I would like to look at this issue from a slightly different angle. There is unrest in the Caucasus. Unfortunately, there have been multiple terrorist attacks. Of course, this is a separate problem that we will be addressing through law enforcement. But at the same time, it is clear that we cannot address this problem through law enforcement alone. We must create new jobs, improve social services, work on the economy, and develop businesses. You have served as a plenipotentiary envoy to the Southern Federal District of Russia. I would like to know how we can best combine our efforts to create a major resort in Sochi for holding the 2014 Olympic Games with our overall policies on creating a socio-economic renaissance in the Caucasus. This is the second matter that I would like to discuss with you.
Deputy Prime Minister Dmitry Kozak: As far as regional development is concerned, one of the Cabinet’s priorities during this period of crisis is naturally to provide assistance to regions in overcoming the effects of the global financial crisis.
We have been working since November on monitoring Government-approved socio-economic indicators in the regions, and we are also monitoring how the anti-crisis measures developed by the Government will affect regional policies and regional economies. Today, based on the results of this monitoring, we can say that we have observed a positive trend in recent months and the situation improved in June and July, with a slowdown in economic decline. We are analysing the situation in detail every month. Today, many regions are even seeing growth in areas such as electric energy consumption. Some regions have already surpassed their figures for the same period last year. This is a positive factor.
Dmitry Medvedev: Let’s put it this way, this is in fact an important cumulative indicator of economic activity.
Dmitry Kozak: The pace of shipping industrial products produced in the regions is also an indicator that the situation in many regions has begun to improve significantly. Registered unemployment is going down. In July, registered unemployment was 2.1 percent, or 2.1 million of the active working population; 1.8 million of these individuals receive unemployment benefits.
At the same time, we cannot say that the situation has fully returned to normal. We can judge the development of the economy, first and foremost by looking at regional and municipal budget revenues; they show evidence of business activity in the regions. Currently, revenues in Russian federal territories are at a level equal to 90 percent of the revenues during the same period last year.
Dmitry Medvedev: Where are we seeing the main drops in income – what types of taxes are currently bringing in lower revenues?
Dmitry Kozak: The biggest drop we are seeing is in corporate profit taxes. Individual income taxes are in second place. These are the main sources of revenues in the regions, and that is why, in 2009, we are allocating significant funding from the federal budget toward regional and municipal budgets.
Dmitry Medvedev: How effectively is this funding being spent, in your opinion?
Dmitry Kozak: In our view, the regions’ main concern today is to focus on making effective use of every penny during this deficit. The Government of the Russian Federation is also taking this matter very seriously. Our aim is to continue the programme of improving the efficiency of financial management in the regions. This programme will be continued.
Dmitry Medvedev: This is a very important area to work in. I would like you to work on this matter as firmly as possible with other Cabinet members, because in spite of the crisis and in spite of budget deficits, Russia’s governors are always coming to me with written requests for additional funding. In these cases, I generally try to pass these requests on to the Cabinet. Still, I would like to say that the amount of ineffective spending is nevertheless very significant. Many of the governors are still making entirely unnecessary purchases or buying things that they could do without.
This means that we need to be observant, to ensure that purchases are based on bids, but in a lot of cases, we also need to simply tame our appetites, at least in regard to non-priority purchases, purchases that do not serve our citizens’ immediate needs.
Dmitry Kozak: The Cabinet is currently working on this matter. When forming the 2010 budget, the Prime Minister and all the Deputy Prime Ministers held a series of meetings in all the federal districts, where we formulated federal priorities within regional budgets. This, too, is important. These priorities include, first and foremost, fulfilling social obligations, paying out unemployment benefits, and monetary support for programmes encouraging employment.
As for major construction projects, our priority is to complete the construction projects that have already been started. At the same time, we need to formulate criteria for 2010 (which we will work on), indicators for evaluating the efficiency of using subsidies for major construction projects. Without them, we frankly shouldn’t give out money. The money we give must be accounted for, since it is national money, and we are not helping every region.
Dmitry Medvedev: This challenge is particularly relevant for southern Russia. You know how things stand there, and not just from rumours – you know about the problems existing there and the corruption that occurs in doling out state finances. In this regard, we still have a lot of work to do in bringing about order, and I hope that the governors in the Southern Federal District and the Caucasus republics will fully realise this. I recently met with them and discussed this matter.
Now, let’s talk about the Olympic Games and improving the situation in the Caucasus overall.
Dmitry Kozak: As far as the Olympic Games are concerned, this project should, without a doubt, become a catalyst for economic development in the region. We are making all possible efforts to involve as many regional construction contractors as possible; this way, they can earn money and provide jobs for our citizens. Currently, there are sixteen contractors working on Olympic facilities in the North Caucasus. Overall, eleven thousand workers and two thousand units of equipment are currently being employed. In 2010, construction will pique, and in accordance with the construction schedule, we foresee the employment of 75 thousand workers and ten thousand units of equipment.
Dmitry Medvedev: And as I understand it, most of these will be people who live in southern Russia, in the Caucasus.
Dmitry Kozak: That’s right, of the sixteen contractors I mentioned, most come from the Southern Federal District. I already reported on this at the beginning of the year, and the Cabinet gave instructions to the governors of every region throughout the country to conduct work to allow leading regional companies to participate in tendering for Olympic construction contracts. Today, there are construction companies from 20 Russian regions working on Olympic projects.
Dmitry Medvedev: That’s certainly a lot of construction, especially since it helps to create even more jobs that are not directly related to construction but have to do with infrastructure and other things; this provides more employment opportunities throughout the North Caucasus.
Dmitry Kozak: That’s right, and in two weeks, we will open the envelopes. We have invited applicants to bid for wholesale trade of construction materials. North Caucasus republics such as Karachayevo-Circassia and Ingushetia are particularly rich with exactly the kinds of materials that will be in high demand for Olympic construction – over 60 million tonnes. Extracting and processing those materials will also create jobs for people who will not need to leave their republics – this is another way that the Olympic Games affect this process. I would like to use this as another opportunity to call on all regional governors to give this matter some serious attention. The Cabinet will give them corresponding instructions, and I would like to ask you, Mr President, to support us in this call to action.
Dmitry Medvedev: This is clearly an important area of work. There is another issue that I would like to note. Mr Kozak, all of the processes that will occur (which are of interest to the Cabinet, the governors, and most importantly, our citizens) must be transparent, to ensure that there are no reproaches, so that no one can claim they are shrouded in secrecy or are being conducted in some sort of hidden manner. You must open the envelopes, as you correctly said. And those envelopes must be opened at the very moment when the competitive tender is wrapped up, and not any earlier. Thus, I would like for you to be very careful in ensuring transparency in all the procedures related to construction and overall preparations for the Olympic Games.
Dmitry Kozak: As far as I understand, these procedures have been worked out fairly well and are providing the necessary level of transparency. In fact, certain contractors who cannot provide a competitive advantage through price and quality are complaining that the procedures are too transparent, that there is no way for them to get in, and that’s a problem. I do not think that we are going to back away from our principles. There is a very high level of competition. Indeed, the number of contenders is so high that we have companies from 12 different countries bidding for these contracts.
Dmitry Medvedev: That’s true, and indeed, there are cases when we must attract specialists from abroad, to keep these projects competitive. Very well.