Vladimir Putin: Ms Halonen, Mr Chairman,
Ladies and gentlemen,
I am happy to have a chance to speak before such a representative audience. You have firsthand knowledge of Russia, its advantages, weaknesses and problems. You are active in the Russian market. Finland is to us a partner out of the ordinary. You owe your progress to hard and persistent work. All citizens of your country now enjoy every benefit of the market economy, democracy and supremacy of the law.
As everyone knows, special relations with the Soviet Union did much to spur on Finland’s development, and we must preserved the scope of contacts we achieved in the previous decade.
We are glad to be Finland’s neighbour and we cherish our confidential partnership with it. This partnership emerged long ago and took years of patient work. It is our duty now to strengthen and develop our positive teamwork.
I want to say a few words about the situation in Russia before getting over to our economic cooperation.
I think you are all well aware of the changes in Russia, of its new stability. Contacts between legislative and executive bodies became closer and smoother after the latest parliamentary and presidential elections, which has made it possible to pass laws whose absence had badly impeded the nation’s progress.
We are further streamlining state administration and developing federal relations.
All this has a beneficial impact on the economy. I don’t want to quote too many figures, but still I will give you some statistics. Last year Russia’s gross domestic product was up 8.3% and total industrial output was up 11.9%, which are the biggest growth rates for the last 30 years or more. We attach great importance to close compliance with the federal budget. Last year’s was a surplus budget for the first time ever. Russia pays its debts on schedule, complies with all its obligations, and has not needed foreign refinancing for several years.
A tax reform is underway. Its main goal is to reduce the fiscal burden. We have Europe’s lowest private income taxation rate, 13%, since this year.
Despite its radical reduction, income tax revenues have skyrocketed. The increase was 54% for the first seven months of this year.
Gross fiscal revenues grew by more than 30%. We also want to make our fiscal system just and transparent.
We will go on with this job. A recently adopted law reduces corporate profit taxation rates from 35% to 24%, also one of Europe’s lowest. This is crucially important, and I want you to take note of it. All kinds of privileges and non-transparent schemes have become obsolete with the tax rate reduction.
We are streamlining taxes on the use of natural resources. A single tax has replaced the previous three. What matters most, it is convenient and rules out arbitrary bureaucratic action in levying taxes.
We know how important it is to put an end to situations that breed corruption. A package of laws we call “de-bureaucratising” has been designed with that goal in mind. It implies economic liberalisation.
Here are two examples. It used to take three months to register a new company and now it takes just several days. Two thousand types of business activities required a licence before, but now it is only a hundred. I don’t think we will stop at that.
The Russian domestic market is getting more dynamic. Industrial companies are working, and the real public income is growing. True, our living standards remain rather low, but ordinary people are regaining optimism. That is what’s most important. The public expects not more hardships and crises but lasting progress and improvements.
Now, for bilateral trade and economic partnership. Despite certain problems and misunderstandings, its scope exceeds even what Russia has with certain CIS countries.
Last year’s Russian-Finnish trade turnover amounted to $5.2 billion, and this year promises to raise it to $5.8 billion. I agree with Mr Chairman, who evaluates the potential trade turnover at 7 billion euros. All this cannot but make us enthusiastic, but we do not rest on our laurels. It would be wrong to think we have found the Sampo, the magical artefact you Finns are so fond of. We partly owe our success to a beneficial situation in the international finance and energy markets. I must say, however, that the latest energy revenues were smaller than what engineering and some other industries brought.
Be all that as it may, fuel and raw materials account for the greater part of Russian exports to Finland. Some people even allege Finland’s energy and raw material dependence on Russia. That is not true. Dependence comes from unequal partnerships. I don’t think this will ever be the case with Russian and Finnish companies. We understand that geographic proximity to Russian resources gives Finnish industries major advantages over their European competitors.
Nevertheless, Russia intends to restructure its exports to Europe, Finland being no exception. I don’t mean we will reduce energy and raw material exports. No doubt, Russia is interested in ever-closer energy partnership with Finland and the entire European Union. We look forward to the closest possible partnership on such projects as opening up the Shtokman gas condensate deposit and the Timan-Pechora oil province, and laying the North European Gas Pipeline.
We have another strategic priority in foreign trade, however. We want to improve the export structure, and supply not only raw materials but also finished products. In this, we have stored positive experience of partnership with Finland.
Russian-Finnish trade and economic partnership is rooted deep in history. Politics occasionally determined its development. Much has changed since then, and both countries prefer a pragmatic approach now. That is why no commodities can have a preferential status in our markets merely because they are tagged “Made in Finland” or “Made in Russia”.
Russia is sure about its economic partnership priorities. It is willing to advance projects that have good prospects for joint ventures. But it is wishful thinking to expect any kind of preferential terms for such projects. Our privileges and preferences are in our mutual proximity and good understanding of each other, which give us major benefits. Then, there are joint infrastructure projects, which enjoy both Governments’ support and personal support from the Finnish President.
Today, we concentrate on elaborating lasting and explicit economic rules, which would make the Russian market comfortable and lucrative to all investors.
An essential part of our cooperation is to promote investment. Russia is especially interested in Finnish investments. Finland is firmly established among countries that are well aware of the benefits offered by the Russian market. But we think we need to do much more, as the prospects are vast. The scope of our partnership allows us to expect a major increase in Finnish investments. That is why we are willing to discuss what Russia and Finland should do in that field. An agreement on the protection of mutual capital investment is among our basic instruments, which will promote new investment contracts. That reminds me – Interros and Outokumpu, the two countries’ leading metal producers, are signing a partnership agreement today to build an ore-dressing factory in Norilsk.
We share many goals. The Russian-Finnish border is a generally recognised gate for Russian-EU commodity transportation. We must maintain and develop it together, improve checkpoints, and smooth the cooperation of customs and frontier services.
Much has been done in this respect, but we should even now weigh the prospects for commercial transport corridors, such as the Northern Railway project. Stretching from Perm to Oulu, this route will link the Urals with Finnish ports in the Gulf of Bothnia.
The construction of the Northwest thermal power plant, and a ferry and speed railway to link St Petersburg with Helsinki, and a number of environmental ventures belong to projects of vital importance for both countries.
As we know, large timber companies intend to make major investments in Russian timber processing. We promise such companies all-round support.
Russian economic development promotes our partnership and gives grounds for optimism. We expect 4% economic growth this year – but, I daresay, it will most probably make 6%. This and last year’s achievements promote Russia’s international cooperation – in particular, with Finland, our close partner.
I would like to say by way of conclusion that Finnish businessmen are among the best in Europe for their knowledge of the Russian market. We, too, know you well. This is why it is easy for us to work together.
We have so many reasons for fruitful partnership that it is simpler to work than enumerate them. I wish you every success and look forward to regular meetings not only in Helsinki but also in Moscow.
Thank you.