Introductory Remarks at Meeting with Leading German Entrepreneurs 2005-06-26 19:02:00 Constantine Palace, St Petersburg President Vladimir Putin: Good day, dear colleagues and friends! I am glad to welcome you to St. Petersburg. I see our meeting and talks today as a continuation of the intensive and very useful dialogue that has become established with the German business community. I saw many colleagues quite recently at the Hannover fair. I met several of them recently in Moscow when the decision was made to hold an event by Daimler Chrysler in the capital of Russia. And, perhaps, the main impression of all these meetings is the growing mutual interest in expanding cooperation in the economic sphere between the Federal Republic of Germany and the Russian Federation. You know the figures of growing trade turnover. Last year it reached a record figure — $23 billion. And for the first four months of this year trade turnover grew by almost another 50%. These are respectable figures. There are already 3,500 companies working on the territory of Russia with either 100% German or mixed Russian-German capital. German investment in the Russian economy comes to $9.3 billion. I believe that an important factor of cooperation was the interested participation of German partners and German business in programmes of training management personnel for the Russian economy. And today former participants of these programmes are reliable, qualified partners, or work in Russian firms. Recently we have reached a new level in our cooperation and partnership. It consists of the interpenetration of the Russian and German economies. I mean such unprecedented projects as the agreement between Gazprom and BASF of construction of a North European pipeline and exchange of assets. At the same time I know that Gazprom does not forget its traditional partners. As far as I know, the issue of involving Ruhrgas in this major project is also being worked on. Partners told me that the decision will significantly increase capacity in this pipeline system. It is planned to bring the volume up to 50 billion cubic metres of gas and build two pipelines. By 2010, it is planned to deliver gas to Europe by one of these pipelines in a volume of 27 billion cubic metres. Economic specialists understand what this means for the energy sector of the continent. I also believe the agreements between Russian Railways and Siemens on high-speed trains is a very important project. I hope that there will also be a positive conclusion to talks on assembly production between automobile companies of Germany and the Russian Federation. It would be wrong to let other partners of Russia go in front. It is very sad that our colleagues are delaying. You can’t fight over every comma for years. We understand German thoroughness, but it should not stop us from moving ahead. I think that here we have very good prospects. And in a sphere that is very important for us – the machine building sphere. But all these projects, and also other projects which I did not mention just now, essentially encompass the mineral resources sphere, machine building, metallurgy, chemistry and light industry. Major resources for investment cooperation still lie in the area of high technology. We expect serious results from cooperation in the aerospace industry. We welcome the decision of our European partners, including German partners, to expand our cooperation in the Kourou project. This is an interesting mutually beneficial project, which will ensure specific advantages of Russian and European manufacturers in an important area – space. An agreement has already been signed between Irkut and the company Airbus for manufacture of components at Russian factories. New possibilities are opening up for joint work with the EADC concern, and these also take into account our plans to create a United Aviation Corporation in Russia, which in the foreseeable future may well become one of the major participants of the world aviation technology market. I mean that it has several component parts – both civil and military. And, of course, we intend to continue developing the topic with which I began – our energy dialogue both at a bilateral level and in a multilateral format, the format of the European Union. I remember how difficult our talks were with the European Union in developing common decisions on Russia joining the WTO. But this was a very beneficial exchange of opinions, and very beneficial mutual work, because essentially we have developed common approaches and principles of these tasks which are very important for us. I expect that interested exchange of opinions on this topic will take place at the Russian-German Energy Forum planned for the second half of this year. I think that we can also expect more results from the Work group on strategic cooperation in economy and finances. I expect that this group should concentrate on long-term issues of Russian-German business partnership, think about removing the administrative and legislative barriers which unfortunately still exist; and consider joint work on markets of third-party countries. I know that everyone present here is well aware of the situation in Russia both in the political sphere and in the economic situation. And these are conditions which fully provide for the expansion of our business partnership. Both political stability and the growing economy – I would like to remind you that over the last five years we have achieved about 7% of growth in gross domestic profit – create conditions for developing our cooperation. I think that we would be right to count on greater volumes of investments. Starting from 2000, on average investment here has grown by about 10.7%. We treat the macro-economic situation and macro-economic figures very carefully. We live in conditions of a dual surplus – both in the trade balance and budget. As you know, gold and currency reserves are growing stably – they are now approaching the level of $150 billion. We have reduced our state debt by a third since 1999, and its share of the GDP from 60% to 18%. We are satisfied that we have reached an agreement with the Paris club and above all with out German partners on pre-schedule payment of part of this debt to the Paris club. We are truly interested in this work, of course, if it is profitable for both sides, and we will continue to hold talks on these issues in future. I expect that by 2007 Russia will be ready for full currency liberalisation – the removal of all restrictions on capital operations. The growth rates of the economy this year, as in many other countries in Europe, are lower than we would like, but they still remain at a very high level. And the growth dynamic is being maintained, it is now 5.5%. The growth in prices on world energy resource markets has both positive and negative sides, we also understand this: it is good for the budget, but for some macroeconomic figures, such as inflation, it is not so good. I hope that the Government will be able to cope with the plans announced this year on inflation, although it is somewhat higher than we expected in the first half of the year. We are currently preparing additional steps, which are very important in my opinion, on advancing institutional reforms, creating more convenient conditions for entrepreneurial activity, improving anti-monopoly policy, strengthening guarantees of owners’ rights, and more precise regulation of the activity of tax bodies. It remains to regulate land use and mining regimes, and improve customs administration. In customs policy, we will focus on stimulating the import of high technology equipment into Russia which is not manufactured on the national territory and does not have national equivalents. I hope that a certain stimulus to development of activity in high-technology spheres will be provided by the project for special economic zones of the innovative technology and industrial production type. Mr. Gref will tell you about this in more detail. As you know, we have signed a document with the European Union on joining the World Trade Organisation. We plan to begin talks on joining the OECD. And we count on support – including from the German business community – above all in Russia’s move to the third category of risk in the classification of this organisation. Dear colleagues! Together we have laid a firm foundation for business cooperation between our countries and economies. And we have every opportunity to broaden this cooperation, to move it to a larger scale. My colleagues and I – the Head of the Presidential Executive Office, the Minister for trade and economic development, the Minister for industry and energy and my aid on international ties are present here – we all wish you a warm welcome to Russia once more. We are at your disposal, and prepared to answer any of your questions. We thank you for your interest in work with Russia, and for finding the time to come to St. Petersburg today.