Opening Address at the Meeting on Developing Railway Transport in Russia 2007-04-10 22:11:16 Novo-Ogaryovo President Vladimir Putin: Good afternoon dear colleagues! Over the past few years we have often returned to the problem of developing infrastructure. General infrastructure, including communications and transport. I am also referring to aviation, and developing and building new ports and airports. We are just finishing work on a shipbuilding corporation. We recently completed work on the project for an aviation corporation. However, let us not forget that one fundamental sector of the Russian economy undoubtedly remains the railway sector. This sector’s efficiency has an impact on the growth rates of almost all other sectors of the Russian economy. The railway network ensures the unity of our territory and it certainly supports intense economic relations within Russia. The network is one factor that determines the volume and destination of our foreign trade. And I have not even mentioned the fact that more than 80 percent of freight traffic (without taking into account pipeline transport) is done precisely by the railway network. I would also emphasise the important social role that Russian Railways — one of the longest railway networks in the world — play. Population density within the territory of the Russian Federation as well as labour mobility all depend on the quality of railway connections. Railways now carry more than 40 percent of all passenger traffic. This transport market has an enormous scope and great strategic significance, and today it is distinguished by quite a good financial and economic situation. In just the past year freight traffic grew by more than five percent and passenger traffic grew by about three and a half percent. These are quite good indicators. Let me recall that Russian Railways was established in 2003 and is now one of the three largest transportation companies in the world. And its profits last year were significantly higher than those of the previous year. I would repeat once again that this is a good indicator. I would like to point out one more positive element. The company has begun to implement major infrastructure projects, in particular in the Kuzbass region. I am referring to the Kuzbass—Northwest line that provides access to the Baltic Sea, the line that connects Kuzbass to the Far East, and the one that links Kuzbass to the Azov and Black Sea region. Let me repeat that, in general, railway transport’s economic situation has significantly improved over the past few years. The necessary preconditions for completing the structural reforms the government began six years ago now exist. Implementing the final stage of these reforms will provide us with a good opportunity to address a whole range of related problems and issues. First and foremost, we have the opportunity to begin modernising the industrial and technical base and to start developing the railway network itself. We need to do more than simply overcome the increasing depreciation of fixed assets — and this problem remains one of the most basic and most important ones since, let me remind you, that depreciation is continuing at a rate of about sixty percent — we also need to create infrastructure for new, high-speed communications in Russia. In addition, we need to ensure that means of transportation exist in new and promising industrial regions — in the regions we have discussed this issue many times; and, indeed, to develop the less populated regions of the country. At present seven Russian regions have no railways and about ten regions only benefit from minimal coverage within the railway network. Of course it is impossible to resolve all these problems in one or two years. And full-scale reconstruction of the railway network in Russia is, of course, a long-term project. At the same time, I would like to draw your attention to the following and, as I see it, priority tasks. First of all, we need to ensure that the sector attracts significant financial resources. I am referring to considerable financial resources. They must be invested in all aspects of railway transport. We need to develop and modernise infrastructure, the rolling stock, traction power, services provide by operators and in stations, maintenance services and other areas. It is also clear that such a reform cannot be carried out with the resources of just one company, namely Russian Railways. Just recently we met with Vladimir Ivanovich [Iakunin] who is here today and discussed this problem. Russian Railways cannot mobilise the required amount of resources even if the present railway tariffs were to be adjusted — something that would have to be done very carefully. We need to attract private capital to this sector and to make better use of the private-public partnership. The government cabinet already has experience in this field. The Economic Development Ministry is already implementing a similar project. We need to make greater use of the Investment Fund and this implies — we discussed this just recently — that we must take additional steps to improve the way this revenue is funded. We also need to increase the capitalisation of Russian Railways and to expand its market opportunities. Including by establishing subsidiary companies and putting these companies’ shares on the stock market. Next. The success of our investment policy will depend on the effectiveness of the future model of the transport services market. And we now need to establish conditions that promote normal competition in the various spheres of the railway business. First and foremost we must do so with respect to transportation activities, traction power, and by providing maintenance repair services in equitable conditions. And of course a great deal depends on the decision the cabinet makes about how to further reform Russian Railways. This is very important. And if we create some kind of monster that smothers competition then we will not create any kind of market here. In addition, the development of the railway network should be linked to other related sectors as well as to the machine-building industry. And finally we must plan this reform so that it does not harm passengers’ interests in any way. I would like you to pay special attention to this point. People should not have to pay out of their own pockets for the restructuring of this sector. This is the government’s affair and it is the government that must ensure that normal reform of the branch proceeds. I would emphasise that the social aspect of developing the railways must be at the very centre of the modernising project that we are going to talk about today. That was all I wanted to say as an introduction.