Excerpts from the Transcript of the Meeting with Representatives of Russian and Foreign Companies at the VI International Investment Forum 2007-09-21 10:14:13 Sochi Opening Remarks President Vladimir Putin: Good afternoon, Ladies and Gentlemen, I am very pleased to welcome the representatives of Russian and foreign companies here to Sochi. As last year, the Sochi Forum has once again brought together a very prominent business audience, and this means that interest in this region and confidence in the Russian economy as a whole continues to grow. A number of major investment projects have already been discussed today at the forum and I have had the chance to take a look at some of them. Most of them, a good number of them, in any case, are related to infrastructure development. Infrastructure development is a key factor for economic growth and for boosting living standards in Russia today. We hope that large-scale projects in the housing and utilities and electricity sectors and in communications and transport will make wide use not only of state resources but also of private investment in a partnership that will benefit both sides. Our work is directed at establishing clear and understandable rules of the game in this area in order to encourage private initiative as much as possible. I note that many of the conditions are already in place and I very much hope that the new cabinet under the leadership of the new prime minister will continue this policy. I have no doubt that this will be the case and that there will be no dragging things out. The newly appointed prime minister has already presented to me his proposals for the government’s structure and this administrative issue – the formation of the cabinet – will be definitively settled soon. Coming back to our subject today, I would like to say that we are talking about not just macroeconomic factors, the conditions needed to develop private initiative, factors such as the economic growth rate, a consistent decrease in inflation, a balanced approach to the strength of the national currency and a balance between this and development itself and the creation of incentives for development. In our view, all of these things are important as long-term conditions that will encourage long-term investment, investment that will come, as I said, both from the state and from private investors. As for the role of the state, as you know, we have created the necessary institutions to encourage not just state investment but also private investment. I am referring here to investment institutions such as the Investment Fund and the Development Bank. I want to note that 300 billion roubles have been allocated to these institutions this year alone. Moreover, we have put in place a mechanism that ensures that these funds will increase each year, but only so long as they are used effectively. Long-term and comprehensive development programmes are underway in the Far East and Trans-Baikal regions and in southern Russia, including in the region we are in right now. Finally, we have approved standard concession agreements and investors can now make active use of this important instrument for public-private partnerships. The first big concession project is already underway – the construction of the Western High-Speed Diameter in St Petersburg. This project will be followed by others. Projects have already been selected and work on them has long since begun. We have also established special economic zones. I had the opportunity to see this for myself today and see that the mechanism is practically all in place and working now. By the end of this year we will pass the law on special zones in ports and airports, and here too we hope to see private investors. The Government has approved a programme for developing the electricity sector. As you know, the reform of RAO Unified Energy Systems (UES) is in the process of completion now. We have been implementing the programme as a gradual process, making adjustments on the way. You have followed all these different stages, no doubt, but I want to stress that I think these adjustments were necessary and justified. Most important is that the main direction of our economic policy will remain in place and continue in the future. We have already said that the kind of objective we have set in the electricity sector alone is akin to a second electrification of the country in scale. Many of you working in different regions of the country know that electricity shortages are slowing down development, including here in the south of Russia. But the sector has already received billions of roubles in private investment this year. Demand is still much higher, of course. The steps the state has taken send a direct signal to investors for the start of long-term infrastructure investment projects. As I said, we hope that it is precisely private investors who will play an ever greater role and take ever more initiative in the extensive modernisation of our economy. I would like to hear your views today on how work is going and on what kind of practical assistance the federal, regional and local authorities can provide. Many of you were here for the meeting last year, at which we discussed in detail the plans for developing southern Russia. A considerable amount has been accomplished since that time and some good results have been achieved in some areas. Investment in the Southern Federal District has increased by 15 percent. Industrial output growth is higher than the Russian average for the second year in a row. These are very pleasing results and a positive trend. Overall, the south is becoming more attractive to investors. A number of projects, in the North Caucasus in particular, are still only on the drawing board, but the positive investment trend has continued this year, including in the North Caucasus. At the same time, however, there are still factors holding back economic growth. Most importantly, there are not enough ready-to-use investment sites for business to expand its development. There is not enough land available, not enough sites with engineering and transport infrastructure in place and with the necessary energy supplies, as I mentioned before. This is a serious matter and it should be addressed not only through the federal and regional programmes currently being implemented. There is clearly a need for a long-term strategy for growth in southern Russia, a strategy that would be linked together with regional and urban development plans and that would clearly define the sectors and areas that would receive priority support in the coming years. It is also important to decide exactly where production and social sector facilities will be built and which inter-regional and international projects should get first priority. Raising the transport infrastructure’s effectiveness is a key condition for the development of southern Russia. As you know, southern Russia traditionally serves as the gates for significant flows of freight between Europe and Asia. It is therefore particularly important now to invest in technical modernisation of our ports and airports and to build new roads and railways and upgrade existing ones. The preparations for the 2014 Winter Olympics and Paralympics also create many new opportunities for joint projects. We want this project – a truly global project – to be used to the fullest in order to create here in Sochi the most modern sports, health and tourism infrastructure, and to improve the region’s infrastructure in general. The very fact that we will be hosting these games makes a number of projects essential, and the results of this work will be used by millions of people for many years afterwards and will contribute to overall economic development. We are ready to work closely with private investors, including foreign investors. I want to stress that as far as the Russian Government and the bodies that will select the subcontractors are concerned, there should be no divisions along ‘national’ lines. Only two things matter: price and quality. I think there is no need to remind you that effective implementation of these plans depends on coordinated efforts by the state and business, and, of course, support from the local authorities. In conclusion, I would like to say once again that the state will continue to invest in southern Russia and in other Russian regions, using the most modern and market-oriented development instruments and financial mechanisms. But we also hope to see just as much interest from private investors, both from Russia and abroad. Thank you for your attention. <…> Concluding Remarks President Vladimir Putin: Colleagues, First of all, I would like to thank you for taking part in today’s discussions and for your interest in this economic forum here in southern Russia and in the Russian economy as a whole. I would like to thank you for our work together, not only over these last two days but over the last years and in the long term. Many of you have been working with our economy for many years now. Mr Conti spoke about the large investments his company has made: six billion already invested and another three billion planned. But representatives of other companies here today (and I would like to apologise for the fact that not all of you were able to speak) have also invested considerable sums. We see this as a sign of great trust in Russia and I would like to assure you that you can count on the most direct support from the Russian Government and the regional authorities. Our discussion has gone beyond the limits of regional interests. We discussed today the outlook for developing the energy sector in general. We also spoke about the impact this could have on the real sector of the economy, particularly on the metallurgy industry. We have heard a range of different views, but I hope that the explanations given by members of our Government have also served to provide substance and make the situation clearer. In any case, the development trend is clear. The Finance Minister’s statement regarding support for Russian banks’ liquidity is just as important. I would like to say from the outset that under no circumstances will we allow the emergence of so-called bubbles in the economy. We will not let this happen but will react swiftly to events taking place on world markets. The Russian economy, financial and banking system have reached a level of development that enable us to respond rapidly and effectively to events and guarantee that the Russian economy continues to develop normally. There should be no doubts in this respect. As for the question of regional development, what I would like to stress in this respect is that southern Russia is an area of strategic interest for us. We will continue to give its development our attention. Above all, of course, we will concentrate on infrastructure development. This concerns communications, telecommunications, railways, developing a network of highways and building new bridges, tunnels and ports (we did not talk about sea ports today), all of which is extremely important for the implementation of large-scale projects. In this context, the 2014 Winter Olympics provide a pretext for developing the south of the country. The games can give development a good boost that will mobilise the entire executive and administrative system and the financial authorities to address the region’s biggest development objectives. I hope very much that our work together, the cooperation between the state and business, will bring rapid and positive results. Thank you for your attention and I wish you all the very best.