President of Russia Dmitry Medvedev: Good afternoon!
Let me take this opportunity to congratulate you with the New Year, and with the start of work.
I hope that at least some of you have had the chance to have a break, although the first ten days of the new year were overshadowed by the now famous difficulties with Ukraine. We now need to start work on all other areas, although, to be fair, it didn't actually stop. That's why today we will talk about the way things stand in the real economy, as we said we would. I remind you, that as early as October, I gave a series of instructions to Government, which were directed towards the systematic support for the sector during the global financial crisis. The Government is working, those instructions are being fulfilled, although, I must admit that at the moment we are not in a position to say that we have done all that is necessary. The implementation of these measures is happening more slowly than we expected, and what is more important, more slowly than the current circumstances require. I have just looked at the data: only 30% of what had been envisaged has been carried out, and parts of the instructions have extended the time by which they need to be completed. We must get to grips with al of this, and take the necessary measures to energise our work.
Let me say a few words as we start our meeting. Firstly, let me say that this is by no means a simple situation, the volume of industrial production in the period October-December last year, on average, fell by more than 6% per month, compared with the same period in 2007. Of course, this was the result of the decrease not only in domestic demand, but also in the significant fall in export prices which fell significantly in several different production areas. In metallurgy there was a fall in prices from 30 to 70%, in the machine building sector the global market price fell from 20 to 60%. All this, of course, does nothing to make the situation more straightforward.
Secondly, what makes the situation even more difficult, and what creates problems, is the fact that most businesses have quite serious deficits in their cash reserves. The interest rates on credit taken have increased, and additional demands are made on companies to secure their credit against assets, and other guarantees supporting the credit application. And all this, of course, has led to the decreased profitability of industry, and in many cases has led simply to businesses operating at a loss.
Thirdly, all these factors have made the situation regarding the budget more difficult, and of course, particularly in the regions. Practically everywhere is forecast a decreased budgetary income. The situation is most keenly felt in those industrial towns, where there are what we used to call town forming industries, that is, those businesses around which people's lives are focused.
To sum it up — it's a complex situation. I should say that we did foresee this. This is wholly difficult time. The main thing, that I wanted to speak about, is the fact that we must be swifter both in our actions, and in the answers we find to these problems. We have set to work on passing the regulations and subordinate legislation, but even here, many things are simply taking an unforgiveable length of time.
Still, this situation has both specific advantages, and general advantages that characterise all such periods. What advantages? They are obvious: a lowered price on raw materials and on components, which in the long run are sure to give industry the ability to run a more flexible pricing policy.
Here, in the grounds of the “Salut” industrial complex, we will consider the question linked to metals prices. Of course that is a serious part of what has made life more difficult, what has made work more difficult, what has made investment projects more difficult, such as those at “Salut” which we have seen slow down since the middle of 2005.
Today, (and of course this is bad for our metallurgists, but nonetheless for companies such as “Salut” it does have also a positive effect) the price of metals is falling. But here we simply need to look at the price offered to our consumers for the products. Of course it should be accompanied by a fall in production costs, which would be no bad thing. And, in the end, even on the background of a falling growth rate, we could see an increase in labour efficiency in industry this year, irrespective of the very difficult context.
A commission on increasing sustainable growth in the economy has been created as part of Government, comprising key industries and organisations, and it has taken several most important decisions. Exceptional decisions, introducing changes to the legislature, have been made by building on those decisions. By the end of the year I had signed dozens of anti-crisis laws. I would like the Government now to be active in its implementation of this legislation. If subordinate laws are needed, then they must be quickly, prepared and issued as fast as possible. If they are direct application laws, then they must come into force right from the moment of publication in the media.
Additions to regional budgets, job retention, and – in the long run – the growth of the national economy and the wellbeing of our citizens – all this depends on the stability of work in the real economy. Our economy survived the crisis of the 1990s and went on to develop successfully enough, and Salut, where we are right now, is particular example of that. The oldest aeroplane engine production business has diversified its work, diversified its production, and now half of what it produces is for civilian use. Whatever happens, such a profitable business will surely continue work, irrespective of negative external influences.
Incidentally, in the current conditions, we need to think about what decisions we make on reorganisation and modernisation, and in any case – the task before us is to protect the sector’s potential, preserve our own production, and not to reform for the sake of it. Of course, I am not making any decisions now; I am just drawing attention to the fact that our main task is the protection of our production base, not reform.
Another directional priority remains the stabilisation of the current financial situation for businesses. In several days’ time we will hold separate talks about this, but nonetheless the question of ensuring businesses’ credit resources remains particularly difficult and important. In the current year, thanks to the decisions made which were accepted, more than 300 billion roubles (around $10 billion) have been made available in credit guarantees for businesses in the defence industry complex and other businesses. Alexey Leonidovich (Kudrin, Deputy Prime Minister, Finance Minister), is that 200 for military industries and 100 for the rest? The opposite – 100 and 200. But we take a flexible view of these figures, and perhaps some internal room for exchange between these positions will be possible.
That’s good, but I have to quote what I always hear from those who work in production, and in general from all those who work on the land, that all these credit procedures are very bureaucratic, including in the banks themselves, where the time it takes to make the agreement is simply endless. And if in usual circumstances there might be possible to cope with this, because one can run from bank to bank and receive several different loans, even against the same collateral security, then today it is simply unforgivable for the documents to take so long to complete. Regional banks, unfortunately, are still limited in their access to financial resources from the centre.
And there is one more question which we must discuss – it concerns the question of the prepayment for work on national defence orders, and on federal programmes. Work on this is going extremely slowly, everyone is complaining. Another theme that we ought to consider – is what additional measures, and mechanisms are needed in order to raise the overall efficiency of the all steps we have taken both in the budgetary-financial sphere and in the support of the real economy.
But beyond the current difficulties, we must continue work on the major investment projects, as we have agreed with you. The programme that was approved by the Government, “Strategy for the socio economic development of Russia in the period to 2020” in fact binds us to this. I am thinking of the question of technological breakthroughs in areas that are crucial for our country: the space, plane and shipbuilding sectors, automobile industry, and the advanced processing of raw materials.
After the New Year’s holiday we have started to discuss very definite matters together, very difficult things, without which we will have no chance of emerging from these problems in which we now find ourselves.
I would like once again to say that, in my view, we have made definite progress; the Government has adopted a special working procedure. And I, at least, have no grounds to think that we are neglecting any vital area of work. At the same time, it’s clear that we are working slowly, using the usual technologies of bureaucracy: we write to each other, multiply paperwork and it takes a long time to agree. We now have special coordinating structures to deal with this, and I suggest they should take it under control, naturally Igor Ivanovich (Sechin, Deputy Prime Minister), I also include the commission that you head, so that a different administrative technology is used. Administrative technology which is adequate to the current tasks before us, and which is fully focused on the serious financial crisis.
Now regarding the decisions. We have agreed that a special instruction will be issued according to the results of this meeting. Specifically, I would like to draw your attention to several matters, which our colleagues have already mentioned. I think that it really is correct to return to the question of support for demand for housing, as the minister for economic development mentioned, and support for infrastructure development. All these suggestions must be prepared as soon as possible.
I would like us to return, simultaneously, to the discussion of the current situation regarding the credit market. Today you and I have discussed two of the most difficult problems. One of them is the problem of the value of money, the refinancing rate and the real credit rate, at which our companies can receive money. It’s a problem of many parts. This problem is linked to difficult questions such as credit performance, of ensuring that all debts are discharged. In connection with this, I suggest that the issue of broadening the scale of means of support, including a more active use of state contracts in production supply, a more active use of bonds, offered by companies, and the question of collateral sale proceeds from the relevant production. These are, if we can use them effectively, the means of allowing us to divest ourselves of some of these questions.
Regarding the whole topic, in connection with the refinancing rate, with the value of money, and the credit rate, I suggest that we work on this theme, and that in the near future we will return to it, within the framework of the meeting on economic questions which will take place in a few days time.
It is clear that, offering money at the current rates, is simply economically unworkable for a significant section of business. We need to talk about this openly and use all tools at our disposal. Yes, there may not be a single recipe for a solution, but all the same we must keep an eye on how other countries are dealing with these problems. Personally I think that, there can be no general approach, and that we must return to the discussion of the various options and questions relating to the resources for subsidising lending rates, in those cases where it would be effective, and possibly, tailor our approach to the individual. Especially when we are talking about businesses in the key sectors, which have crucial significance for the development of our economy. We will continue to discuss all these questions.
Thank you for your work. Till next time.