Question: What specific economic cooperation projects with Japan in the Far East, notably in the Kuril Islands, would be possible and most effective, in your opinion? Are any documents going to be signed on this matter during your forthcoming visit to Japan?
Vladimir Putin: The geographical proximity of Russia and Japan, mutually complementary economies and a long tradition of business cooperation create a solid basis for closer trade and economic ties. The question is how effectively we have used these prerequisites.
We witness a steady process of economic recovery in Russia, measures are being taken to implement structural reform, streamline the taxation system, improve the investment climate and transform the governance mechanism. In other words, additional opportunities are emerging for more active bilateral cooperation in the economic field. All this, I hope, will make Russia a more attractive and reliable business partner within the next few years.
Speaking about the most promising areas of cooperation, I would first of all like to mention interaction in providing the Asia-Pacific countries with energy, and building long-distance gas and oil pipelines and power transmission lines.
We are looking at continued cooperation in the development of Sakhalin oil and gas fields, of other energy resources on Russian territory, including the Kovykta gas condensate and Yakutsk gas fields as well as the building of long-distance gas pipelines from Russia to Japan.
I think the idea of creating an energy bridge between Russia and Japan is interesting and promising.
Also relevant is Russian-Japanese interaction in addressing the problem of global warming by implementing some energy-saving projects at certain Russian fuel and energy facilities.
Along with energy, our cooperation in the transport sphere is highly promising. I mean first of all the effective joint use of the Trans-Siberian Railway.
I would like to mention some interesting projects in the Russian Far East in the processing of ores and minerals, the building of gas pipelines and hydroelectric plants, and modernisation of ports, including Zarubino.
Cooperation in the area of the South Kuril islands is making good headway. The agreement on Japanese fishing in the South Kuril waters is being put into effect. In this context, the launching of joint economic activities on the islands is to play a major role.
For my visit to Tokyo the parties are preparing a number of agreements and documents, including some on trade and economic cooperation. I hope these agreements will mark a big step forward in the development of mutually advantageous economic ties, which, in turn, will contribute to more active Russian-Japanese relations as a whole.
Question: Against the background of the favourable economic situation in Russia the need for structural reform is becoming more evident than ever. What is your forecast for the development of the domestic economic situation?
Vladimir Putin: The policy pursued by the Japanese Government in recent years is geared to provide an adequate response to the “five challenges”, which include a renewal of the Japanese economy. Structural economic reform is also a challenge and a priority task for Russia.
What have we managed to do already?
First, we have solved some chronic budgetary problems, in particular, we have paid off the wage and pension arrears, and achieved a deficit-free budget. By the way, the draft federal budget for 2001 will also be deficit-free.
Second, a strategically sound monetary and credit policy is being implemented. It made the exchange rate of the Russian rouble more realistic, Russian producers more competitive, and indeed in some niches domestic goods are replacing the imports. As a result our industry has grown (10% in the first 7 months of 2000 compared with the same period last year). The country’s gold and currency reserves have increased by 11 billion dollars since the start of the year. The population’s real incomes have started growing, up 8.7% in 7 months of 2000.
Third, the world prices for the main Russian export commodities are good, which has enabled Russian exporters to accumulate investments more actively (an increase by 15% since the beginning of the year).
In short, cardinal changes have taken place in the Russian economy.
A growing number of companies are operating on market principles. Most importantly, people’s mentality has changed. Company executives have gained vast experience in operating in a market environment. Well-educated and energetic people have joined the body of company executives. People no longer look to the state to do everything for them.
The Government is following the course of reform with due account of the social sentiments and the feelings of people.
Let me give you just a few examples. The main aim of reform in the transport and production infrastructure is to cut the cost of delivery of goods and cargoes, and to improve the quality of services provided to companies and households. Japan and other Asia-Pacific countries may be interested, in particular, in the programme of creating Russian transport corridors integrated into the Eurasian network, including the Trans-Siberian Railway and the Northern Sea Route.
In the fuel and energy sphere the Government’s policy will be aimed at fully meeting the domestic demand, further expanding the export potential (especially gas), replenishing the budget, and sustained and environmentally friendly development. These goals cannot be achieved without attracting massive investments, including under Production Sharing Agreements. We have set the target and think it is a realistic proposition to attract at least $150–200 billion in investments before 2010.
Such are the main outlines and areas of the structural reform of the Russian economy. It is impossible to dwell on all the aspects of the problem within an interview, but I probably don’t need to because life itself will introduce certain adjustments. The main thing is that the restructuring programme will take Russia to a qualitatively new level of development marked by sustained economic growth, the existence of an independent middle class, social and political stability.