During the Forum representatives of the Russian internet business community and investment funds discussed the sector’s development as well as cooperation between the authorities, funds and entrepreneurs aimed at establishing the internet industry as a separate significant branch of the national economy.
Before his meeting with Forum participants, the President viewed the City of Startups exposition, which presents achievements in the implementation of projects selected for further support by the Internet Initiatives Development Fund in 2013.
Excerpts from transcript of the meeting with participants of the Internet Entrepreneurship in Russia Forum
President of Russia Vladimir Putin: Good afternoon,
I would prefer to hear you speak about your work and the progress you are making so that my colleagues and I could respond to your proposals as quickly as possible.
”Over the years, the internet in Russia has turned from a means of communication into a very profitable business.“
About a year ago, we set up the Fund, which was supposed to support internet start-up projects. I have to say that we began this work ahead of the 20th anniversary of the Russian internet – I believe it turned 20 in April. Over the years, the internet in this country has turned from a means of communication into a very profitable business. I am sure you know this, but I would like to remind you nevertheless that it accounts for 8.5 percent of GDP. The markets that are in one way or another involved in internet business account for over 5 trillion rubles, 5.2 trillion to be exact [$150 billion]. This is a large and very interesting business environment.
Moreover, government bodies are increasingly using the internet in the process of governance. Only recently part of the Civic Chamber members were elected on of the internet. To a large extent the Presidential Human Rights Council was formed using the internet. This is a very serious and interesting development.
We would very much like the Russian state to support those who can, want and intend to work on the internet. This is exactly why we set up this Fund, which today manages significant resources – around 6 billion rubles. I would like this money to be used efficiently, so that it multiplies as the project develops to benefit the economy and both society in general and the people who are actively working on the internet.
This is all I wanted to say to open this discussion. I would very much like to hear about your wishes, opinions and plans.
Vladimir Putin: As for computer engineers, quite recently (I am sure you have heard a lot about this) we had a discussion dealing with the fact that we do not train good engineers in general, not to mention computer engineers. This is undoubtedly a very pragmatic task, and I agree that we have a good study base, and wonderful human resources, which all make it possible to work and to achieve success.
”Government bodies are increasingly using the internet in the process of governance. Only recently part of the Civic Chamber members were elected on of the internet. To a large extent the Presidential Human Rights Council was formed using the internet. This is a very serious and interesting development.“
You spoke of a certain mission; you said only three or four countries have their own search engines, and the countries that do have them have a special mission. I hope you will agree with me that the experiment will work only if each one of these missionaries has pure sovereignty. As you see, if there is one owner behind all four, this is not a mission any more, but a monopoly, and a monopoly is good only if you have it, while generally it is not a good thing.““
Thus, our mission is to help you, help our national segment and the people who work in this very promising sphere to become independent, if not from the viewpoint of the state and society, then at least in terms of their ability to express their views and to formulate them in the way they find necessary. Whenever this happens on a national basis, this always benefits the state.
Vladimir Putin: (about internet regulations) You cannot do without any regulation at all. That is why we have laws: to regulate relations within society.
A legal norm is not just a piece of paper with some text. The idea of any legal norm is in regulating public relations. These public relations take shape on the internet on a very large scale.
In one way or another, about a third of our citizens go online every day. This definitely needs to be regulated somehow.
We have had extensive discussions of the limitations that were introduced on propaganda of paedophilia, drugs, terrorism or suicide. Look, we are all adults, what do we need this for? Let us spare our children. The other thing is that we should not use this as a cover for any other limitations that have to do with human rights, the rights of citizens that come first in our Constitution, and we cannot introduce anything that would run counter to the interests of a free market, I mean the large volumes of business.
However, we should also listen to your competitors, to those who work in the electronic media and know the cost of advertising in the country. Laws exist to balance these interests. I would simply like to assure you that the state, from which you seem to be trying to hide, is not interested in any way in acting in the interests of one part of society against the other. On the contrary, we would like to bring harmony into our relations. This is the only way we can develop. This is exactly what we are interested in and we will undoubtedly make every effort to assist you in your businesses, so you make progress at home and win over new markets – in a good sense of this word. We will provide you with every assistance in this.
”The idea of any legal norm is in regulating public relations. These public relations take shape on the internet on a very large scale. In one way or another, about a third of our citizens go online every day. This definitely needs to be regulated somehow.“
As for programmers, I fully agree with you that we have the best. Our people are best at everything, I am certain, and especially at programming. I often meet with foreign businessmen – though not as often as I would like – including those working in this sector, and I have heard them say this on numerous occasions. For instance, in India they have good programmers too. However, my friends tell me this: when we have to solve some grand, massive, large-scale task, we take programmers from India, but when we are facing some unique, very specific task, we look for Russian programmers. This is what I hear from people who are absolutely independent, who have large businesses in this sphere. I am always happy to hear such things.
Our task is to maintain this high level. This means we have to maintain a high level of teaching at school, especially mathematics. Here we still have things we need to work on.
Vladimir Putin: I see nothing bad about favouritism for national companies. Indeed, as you know, we have it. In accordance with the decisions made, if Russian companies offer products within the state purchase framework that are 15% more expensive than foreign ones, we will buy products from Russian companies. But it is extremely important for us to develop a system where our major corporations would more broadly and actively make use of our small and medium-sized businesses (SMEs) – and it is one of our main joint objectives today.
Chief Information officer At Interrao Ues Dmitry Altukhov: Certainly, because our major corporations do not even know that they can get any kind of Internet or IT solutions this way.
Vladimir Putin: Yes, you see, it is easier for them to work with foreign companies. They already know their credit history and know these companies on the market. It is more reliable, easier, and maybe – it’s uncomfortable to talk about this here – even more advantageous, because it is possible to shave a few percent off the top. Go and try to check that. It is easier to do it here.
We understand all this. But we also need to set up information support. We need our companies to know the potential of small and medium-sized businesses, including those working online. After all, they simply don’t know anything.
Dmitry Altukhov: That’s right, because there are world-class solutions that people simply know nothing about.
Vladimir Putin: There is really no secret, I am personally trying to organise this kind of work for our major companies on the domestic market, so that they ultimately give more attention to possible cooperation with Russian SMEs, particularly innovation oriented ones. A year ago, I gave instructions to nearly all the heads of companies to develop such a system of working on our domestic market. I don’t know how much progress has been made, but I have returned to this topic many times. Indeed, that is why we created this fund for online start-ups.
Based on your company’s example, it would be interesting to show your short-term needs. And, based on those needs, representatives of small and medium-sized businesses – particularly innovation-based businesses – could build their own development plans to fit your needs. I think that the online audience knows this very well. After all, our purchases are not for the government (the government is another, separate topic), but for Russian companies with state participation – this involves tens of trillions of rubles, tens of billions of dollars. This is an enormous amount of money. It is truly a goldmine for good business. And you don’t even need to go anywhere abroad and try to sell something. Here in Russia, we have enormous resources, and our companies invest huge amounts of money into their own development. But we need our SMEs to know about the potential needs of major Russian companies with state participation.
”We have had extensive discussions of the limitations that were introduced on propaganda of paedophilia, drugs, terrorism or suicide. Let us spare our children. The other thing is that we should not use this as a cover for any other limitations that have to do with human rights, the rights of citizens that come first in our Constitution, and we cannot introduce anything that would run counter to the interests of a free market.“
Vladimir Putin: The problem of offshoring does not just apply to Russia; it is an epidemic in the global economy today. Everyone is discussing this right now; everyone is saying openly that we need to fight it, especially in continental Europe. Because these zones are abused in the United States and the United Kingdom, but as we fully understand, it is continental Europe that suffers. However, today, everyone has agreed that we need to fight this. And the main reason for that is not just that the budgets incur losses but that they also fail to receive significant profits and income. The product is created in one country while the profits are generated in a totally different place, and that country never sees them. This, of course, should be changed.
I think that first of all, we can draw conclusions of a financial nature – tax evasion, tax optimisation. But, of course, we also have an obvious problem: the inadequate or untimely creation of a legal framework and, accordingly, a total lack in law enforcement practice; there is no regulatory framework. And naturally, we must do more than scare our companies, dragging them away from the offshores through some sort of administrative measures; we must first and foremost develop – and this is most important – economic and legal measures to protect the interests of the owner, the investor, and all participants in this process.
And already today, I can promise you that all the necessary instructions on developing these suggestions will be formulated and given to the Government and Presidential State-Legal Directorate.
CEO OF OZON.RU MAELLE GAVET: I want to say that today [at the Forum] we spoke about how Russia is unique, how Russia was able to create its own Google (i.e., Yandex), its own Facebook (VKontakte) and its own Amazon (Ozon). Overall, there are not many countries that have been able to create and develop an ecosystem in this way, the way Russia did it.
We also talked about the industry being gradually whitewashed, that this is happening for the sake of the participants themselves, who are self-regulating gradually and independently and also with the help of the association that is spending a great deal of energy on this, as well as the government, which has recently taken more time to talk with us. This is fairly important. We talked about the fact that innovations are growing and that there are many new technologies in our domain that are developing in Russia specifically – in other words, the things we can be proud of here when we see all these technologies.
”The problem of offshoring is an epidemic in the global economy today. Everyone has agreed that we need to fight this. And the main reason for that is not just that the budgets incur losses but that they also fail to receive significant profits and income. The product is created in one country while the profits are generated in a totally different place, and that country never sees them. This, of course, should be changed.“
Next, we discussed one issue. We discussed how all these trends, all this development, will depend very much on the way the cross-border issue is developing. Right now, Russian stores, “tax-paying” Russian stores, like us, are paying Russian taxes and duties. But foreign stores, those that send shipments to Russia from abroad, are not paying them. And it turns out that we, the tax-paying stores, are having an increasingly hard time competing pricewise. We are still competing, and we are not afraid of competition but, it is true, this issue – how to make the conditions equal for everyone – is very important for us. Your Executive Office has done a great deal of work, very effective work, in this direction, and a law was drafted. But at the same time, the Government, unfortunately, still has not made a decision on bringing duties in line with global standards. And to this day, the amount that is not taxable in Russia, is around 1,000 euro, while for the rest of the world it is either zero or less than 200 euro. In this regard, Russia’s budget fails to receive an extra 98 billion rubles a year, or 8 billion rubles per month. And I would like to ask you, if it is possible, to speed up this process somewhat. (Applause.)
Vladimir Putin: I think everything needs to be done quickly and on time; this is entirely obvious. I think there is also an explanation as to why the government is still thinking this over, because all participants in the process of moving goods across state borders and into Russian customs territory must be subject to the same conditions. And if unjustified benefits are provided in some segment, it means other participants in the market are being infringed upon. That is the issue, not because somebody wants to harm e-commerce but because there are reasons to believe that others would suffer. And just like you, they want their voices to be heard and they ask the Government to protect their interests. So a balance must certainly be found, and I hope that decisions will be made accordingly.
I am familiar with this problem; I know and understand what you are talking about. But, I repeat, we need a balanced decision here, so that financial interests are observed and most importantly, so that all participants in this whole process are in the same conditions.
Maelle Gavet: Yes, the balance is very important, including for customers; indeed, this is important so that they can buy things in Russia as well as abroad – from Europe, from France for example.
Vladimir Putin: You come from France?
Maelle Gavet: Yes.
Vladimir Putin: I want to point out that the President of France has held major, useful and important events, and the French welcomed all the participants of this event in Normandy very warmly. My sense of gratitude toward the French people has grown. I am serious. It was all done with thoughtfulness: the French government approached this matter with thoughtfulness, and the people welcomed us very warmly.
Maelle Gavet: Thank you.
Vladimir Putin: Thank you.
Vladimir Putin: Thank you all very much. I need to go and talk with former King Juan Carlos of Spain, to thank him for our joint work and for what he has done to develop Russian-Spanish relations. And if you share my point of view, I would like you to comment on it online and thank King Juan Carlos for everything he has done to develop Russian-Spanish ties. Okay?
Thank you very much. I want to wish you all the very best. I am very pleased that the initiative we created a year ago is being continued this way. And I am confident that if we want to jump into the next technological phase in developing the global economy, we cannot do it without your work. Maybe this is even one of the rare chances to jump ahead and not fall behind, as was said here, and not try to catch up to somebody, but on the contrary, to surpass them, because we have the element that matters most for this – intellectual potential. And this seems to be the main resource for this type of work.
Thank you very much. Allow me to wish you every success.