“The Government of the Russian Federation <…> shall submit to the State Duma annual reports on the Government’s performance, including on issues formulated by the State Duma.” (Constitution of the Russian Federation, Article 114, Clause 1, Subclause “a”).
Excerpts from the transcript:
Dmitry Medvedev: This year, the head of the country’s executive authority is addressing parliament for the tenth time. I think the tradition of presenting a report at the State Duma, which began in 2008, helps the Government to more accurately assess its results, better plan its next steps and, of course, clarifies the Government’s view on many aspects of life in the country.
This report increases the effectiveness of our cooperation. I have every reason to say this, as the Prime Minister of the longest serving Government in the history of modern Russia. The Government and members of the State Duma’s sixth and seventh convocations have handled the most complicated tasks concerning the country’s development, and have found the best possible solutions to the most challenging situations. And there have been so many challenges. Over the past six years, more than 1,500 Government initiatives have come into force as laws.
The Government report is usually a summary of the previous year’s activity. But since this is a special report, I think it would be insufficient to speak only about the last year. Russia has elected the President. After the inauguration on May 7, the Government will be dissolved as stipulated by the Constitution. Therefore, it is the last report of the Government in its current composition. I think it is important to review the entire six years and the results of our performance, as they were.
These six years have been an endurance test for the Russian economy. Never before has it been hit by so many hard blows, all at once and over such a short period of time. These include a global financial crisis, a collapse in the commodity market, sanctions and the closure of the financial and technology markets. No economy, even the healthiest, is immune to such shocks. For our economy, with its structural problems, it could have been a disaster. But not only did we survive; we began to grow despite the external obstacles.
These six years have also been a time of parting with illusions, let’s face it, illusions about our partners. Cooperation is always more beneficial than confrontation – in the economy, culture and in the struggle against common threats. This partnership logic seems obvious to everybody. But, unfortunately, it was not valid. Contrary to common sense, America and Europe started to persistently impose the role of an enemy on our country. They have been trying to force us out of global politics and global economic relations. Speaking of which, the latest decisions by the US administration in this area are an attempt to fight us through unfair competition. The goal is to limit our development and create tension in the economy, the currency and the stock market. There is no doubt that we can handle this pressure. We have already learned how to do it. Eventually, we will be able to turn these measures in favour of our own economy and our own economic development. But we will not forget those who continue with an anti-Russian policy and cause damage to our country.
It is good that these forces are not the only authors of the script of global development. Asian and Pacific countries and the Eurasian community are successfully integrating and cooperating with Russia. The EAEU alone contains 180 million people. It is a different reality and a reality everybody must accept.
These six years have also been years of discovering ourselves and finding new opportunities. We have realised that we must be much more self-sufficient. More industrial products now say ‘made in Russia.’ And, most importantly, they are well made. We have reclaimed our status as a leading agricultural producer. Our grain is sold all over the world, just like Russian software that is building the foundation for a digital economy in Russia. We have protected our home from terrorists by preventing the transformation of the Middle East into a global terrorist camp.
Therefore, we have learned to turn our challenges into stimuli for our development.
These have been six years of conquering new heights. The events we organised were a great success, including the Summer Universiade, the Confederations Cup and, most importantly, the Winter Olympic and Paralympic Games.
During these years, our Doing Business rating has grown faster than that of other countries. Young people from Russia joined the WorldSkills competitions quite recently and have already won first place. Our school and university students lead in many disciplines in world academic competitions.
Dmitry Medvedev: "Many indicators describe the pace of national development and the current economic status. But here is the most important, synthetic, indicator describing the entire situation in our country. This indicator is called the average life expectancy. We have jumped the 70-year barrier which, as demographers believe, separates developing countries from more developed ones. This quantum leap has allowed the President to set a new goal: Average life expectancy should exceed 80 years by the end of the next decade."
The Arctic has been explored. And, of course, Crimea and Sevastopol have come back home during these six years. There is absolutely no doubt that this event has changed our country and the world, opening a new chapter in the history of modern Russia. This chapter began with the restoration of justice and with great and strenuous work. Our country has been writing this chapter with much pride and dignity. In the course of only one year, Crimea became a Russian region not only on the political map but also within our country’s economic, infrastructural and social system.
These six years were a period of major construction projects. Never before did we build so much housing, so many kindergartens and schools. Courtyards and parks are being overhauled in cities. The Olympic Sochi has been practically rebuilt. World Cup host cities are being put in order. Vladivostok and Russky Island have been given a new look. The first stage of Vostochny Space Centre has been completed. Our newly-designed MS-21 aircraft has performed its first test flight. The Kerch Bridge has been almost built. The Baikal-Amur Railway and the Trans-Siberian Railway are being modernised. The Central Ring Road is in the process of construction. The Western Speed Diameter in St Petersburg and the Moscow Central Circle have been launched. Seaports and airports are being modernised all over the country.
During these six years, we have covered as much ground as many other countries do only in decades, and under conditions where no one pressurises them, where they are in a free and calm state, and where nobody attempts to slow down their development. All of this was not easy. We have coped. No one among us doubted that we would. It is in this mood that our country is entering a new period in its development. As the elections to the State Duma in 2016 and particularly the presidential election in 2018 have shown, people support this course, the course for Russia’s development, which all of us have implemented during these six years.
Many indicators describe the pace of national development and the current economic status. But here is the most important, synthetic, indicator describing the entire situation in our country, including medical treatment, people’s diet, living conditions, the air people breathe and their salaries. This indicator is called the average life expectancy that has soared by 2.5 years over the past six years. The nationwide average life expectancy now stands at 73 years, an all-time high, throughout the entire recorded history.
We have jumped the 70-year barrier which, as demographers believe, separates developing countries from more developed ones. This quantum leap has allowed the President to set a new goal: Average life expectancy should exceed 80 years by the end of the next decade.
Of course, the healthcare system makes a decisive contribution to life expectancy.
First of all, we have managed to reduce the overall mortality rates by 6.8 percent over a period of six years, and this mostly concerns cardiovascular diseases and tuberculosis. We focused on these health disorders while implementing the May 2012 presidential executive orders.
We overhauled the emergency treatment system and established a chain of regional vascular centres as well as wards boasting the most advanced equipment. Stroke and cardiac-arrest mortality rates therefore plunged by 20 and 17 percent, respectively, over the past six years.
The ambulance fleet has been renewed. Last year alone, Russian regions received almost 1,500 new vehicles.
Second, maternal and infant mortality rates have plunged by 36.5 and 35 percent over the past six years, hitting an all-time low in national history.
Everyone realises the substantial contribution of perinatal centres to this process. They have everything it takes to help mothers and newborns in the most difficult and gravest cases.
We have built 49 such clinics under the perinatal centre construction programme. And we continue building them.
We have drafted a programme for child health centres and child polyclinic departments at hospitals.
Dmitry Medvedev: "A veritable breakthrough has taken place in high-technology medicine. During these past six years, the amount of high-technology medical aid has increased by over 100 percent. While 450,000 people received this aid in 2012, the figure grew to over 1 million in 2017."
Over the next three years, we will allocate 10 billion roubles a year from the federal budget to each region.
Third, a veritable breakthrough has taken place in high-technology medicine. Earlier, few people could be given high-technology operations in the regions. Patients had to travel to Moscow, to other big cities, or even go abroad. Today, almost every regional centre can perform operations of this kind. During these past six years, the amount of high-technology medical aid has increased by over 100 percent. While 450,000 people received this aid in 2012, the figure grew to over 1 million in 2017.
In 2006 and 2007, when we were just launching the national healthcare project, we performed less than 100,000 such operations a year on a national scale. These 10 years have seen 900-percent growth in this regard. The number of medical organisations providing this kind of aid has increased threefold to over 1,000 during this time.
Fourth, we are working to enable residents living in far-off regions to receive medical aid without problems either. We are running a separate priority sanitary aviation project, which will certainly be continued because this country’s scale dictates the need to promote this kind of medical aid as well.
Digital technology, patients’ online medical records, online doctor’s appointments, and telemedicine are also helping to make medicine mobile and more accessible.
Fifth, we have changed the pharmacological market situation during these six years. We have expanded the list of vitally needed, crucial medication. Over 100 different kinds of medicine have been added to it during the last three years. Its share of Russian-produced medication has grown from 63 percent in 2012 to 84 percent. We feel the need to bring this share to nearly 90 percent and then we will be able to consider ourselves absolutely independent in this field. Thanks to state regulation, prices for these drugs have been maintained and even reduced in a number of cases. All the medication will be labeled by late 2020 to help chemist shops get rid of counterfeit drugs.
Sixth, we are creating an innovative system of social services. Social services are available at both state and non-state organisations, the number of which has grown from 67 in 2013 to 239 now. The system of volunteer assistance is expanding. There are some 20,000 volunteer organisations, which unite over 5 million people. 2018 is the Year of Volunteers.
The number of people who exercise regularly has increased by over 50 percent and reached 50 million. Some 17 million children regularly work out and play sports. Physical recreation is developing alongside high performance sports. Sone 43,000 sports facilities have been built or renovated over the past six years. At the moment there are over 300,000 sports facilities in Russia.
We want to see more children born in the country. We want the country to become younger. This is why we have taken measures to boost the birth rate, which has prevented the country from sliding into yet another demographic hole. More than 11.3 million children have been born over the past six years, or 2.6 million or nearly one third more than in the preceding six years. The Russian population has increased by 3.8 million people. Those who were born in the 1990s have reached parental age. There are few of them, for understandable reasons. This is why a new demographic programme to keep up the birth rate has been adopted at the President’s initiative. We have also extended the maternity capital programme until 2021 and have approved new forms of using this money. Those who have a second or third child can apply for 6 percent mortgages, with the rest to be subsidised by the government. Low income families will also receive monthly allocations for the first child, whether their own or adopted. Our people are adopting more orphans. The number of orphans who have not been adopted has more than halved over the past six years, from nearly 120,000 to 51,000 children. These are very good results.
We know that poverty remains a problem, possibly the biggest problem in the country. The measures we took in the past three years are not enough to resolve this problem. We will continue to work towards this goal. We have done a great deal in this sphere. We have increased the minimum wage to the subsistence wage for the first time in our modern history. It has almost doubled since 2013 and will reach 11,163 roubles on 1 May. Over 3 million people, half of whom are employed in the public sector, will feel the effects of this decision.
The increased minimum wage means that the gap between salaries in various regions will decrease. This will boost demand, especially since the inflation rate is very low, in fact, at a record low. However, some people cannot provide for their needs. We must support them. Those whose income is below the subsistence level, such as pensioners, people with disabilities, veterans and multi-child families, will receive various allocations and payments. We hope that these extras will be increasingly targeted and tangible.
Increasing the salaries in the public sector has been a key task for us and objectively one of the most difficult problems during these years. Different regions achieved pay rises at different rates. But the salaries of teachers, medical workers, university teachers and cultural workers, kindergarten teachers and social workers have reached the levels indicated in the May executive orders.
Dmitry Medvedev: "Our goal six years ago was for at least five Russian universities to join the group of top 100 global universities. We have invested over 50 billion roubles in this programme, including 10.5 billion last year. As a result, 11 Russian universities are in the top 100 group of various international rankings, and another 17 are among the top 200. But we must continue working."
This year, we continue raising salaries in the public sector. This is influencing the living standards of millions of people, including doctors, teachers, people looking after children and the elderly, university teachers, cultural workers and scientists. The Government is increasingly focusing on the quality of medical and social aid as well as education.
Our task is to encourage all generations to be open to changes and to take up skills, including by making education itself a continuous project. We should start at an early age. For this, we need modern educational establishments, where the content of the educational process and everything it involves will motivate students to advance.
We had a lot of problems with kindergartens. In 2012, there was one situation. Since then, we have opened more than 5,700 new kindergartens and created over 1.5 million additional openings. Preschool waiting lists for children from three to seven years of age have been practically phased out. It was a large-scale effort, for which over 130 billion roubles in budget allocations alone were needed.
Today, we are addressing the same task for the benefit of children who are under three years of age. We are doing our best to enable parents to sign up their children for day nurseries before 2021. We are co-financing the expenses incurred by the regions concerned. The case in point is almost 50 billion roubles in subsidies for this and the next years. Last year, we created over 100,000 additional openings at kindergartens, including for the youngest children.
The effort to upgrade curricula takes into account the latest scientific advances in education. Children live in a world of digital technologies. For several years now, we have been designing and building new kinds of schools. Between 2016 and 2017, over 50 billion roubles were allocated for these purposes, with 146 new schools opening, of which 83 opened last year.
We have been promoting additional education in all areas, including the humanities, technologies and natural sciences. The Quantorium technoparks have sprung up almost in half of Russian regions. Children operate advanced equipment and go in for robotics, industrial design, nano- and biotechnologies, and much else.
Even holidays at summer camps are increasingly more interesting because they make it possible for children to advance. The camps like Artek, Orlyonok and Sirius are a good model of recreation for children. We regularly hold a number of forums for young people, including Territory of Meanings on the Klyazma, Taurida, Baltic Artek, and The Arctic: Made in Russia. Over 370,000 people attended various forums last year.
Dmitry Medvedev: "We are developing tourism infrastructure. We are implementing investment projects worth over 100 billion roubles under a federal targeted programme to build 45 tourist clusters in 35 regions. Every rouble invested in tourism brings up to 5 roubles in returns. According to preliminary results, the number of trips reached 56.5 million in 2017."
Digital forms of education are expanding. A special digital platform has been created for all levels of education, including professional training. This year, over 1.5 million people will enrol in online courses.
Our goal six years ago was for at least five Russian universities to join the group of top 100 global universities. We have invested over 50 billion roubles in this programme, including 10.5 billion last year. As a result, 11 Russian universities are in the top 100 group of various international rankings, and another 17 are among the top 200. But we must continue working.
We have joined the WorldSkills movement to promote vocational training in Russia.
We provide assistance to large cultural programmes and festivals such as the Golden Mask Festival of the most significant performances from all over Russia, the Chekhov, Easter and other festivals. The number of tour performances has increased; the number of exhibitions has increased by nearly 50 percent since 2012 and the number of museum visitors has grown by more than 30 percent.
Cultural centres have reopened in villages and towns, municipal theatres are resurging, and cinemas are opening. We are reviving children’s theatres, which were neglected for a long time.
New Russian films are made. Last year Russian films for the first time grossed over 13 billion roubles, or nearly a quarter of total box office receipts.
We are developing tourism infrastructure. We are implementing investment projects worth over 100 billion roubles under a federal targeted programme to build 45 tourist clusters in 35 regions. Every rouble invested in tourism brings up to 5 roubles in returns. According to preliminary results, the number of trips reached 56.5 million in 2017. Domestic flights nearly doubled in 2017 compared to 2011, which is certainly the result of our efforts to develop the tourism industry.
Of course, housing construction is the focus of the Government’s attention. It is a vital sector. A record high result was reported in 2015, when more than 85 million square metres of housing were built. The record in Russia during the Soviet period was 72.8 million square metres built in1987.
Dmitry Medvedev: "We have to resolve difficult tasks, such as relocating people from dilapidated housing that was designated as such before 1 January 2012. This unprecedented large-scale programme will be completed in the next few months. Seventy-one regions have moved all residents of structurally unsafe buildings to new homes, and 12 more are in the process of completing this process. As of 1 March, 678,000 people moved to new flats vacating 10.5 million square metres of structurally deficient housing. In fact, a city the size of Izhevsk or Barnaul has been built from the ground up."
At the beginning of the economic crisis, some experts warned that the housing market would collapse. Many projects came to a standstill, and developers were wary of launching new projects in 2014 and 2015. As a result, the volume of new housing completed last year decreased, but it is still considerable at 78.6 million square metres.
Mortgage rates have never been so low in our country. Now they amount to less than 10 percent. Last year, over one million families took out about two trillion roubles for the purchase of housing. Today, approximately every third family can afford to take out a mortgage. New mortgage lending in January and February almost doubled. This became possible owing to the launch of the programme to subsidise mortgage interest rates in March 2015. As a result, almost 40 percent of loans were granted under this state programme. This made it possible to complete the construction of buildings that began in the period of high demand and to start new projects.
In general, the construction industry is gradually getting rid of unscrupulous companies. In effect, we have carried out a reform of the self-regulating institute. Commercialised construction permits have been replaced by a much more transparent principle. To work as a general contractor on the construction market, it is necessary to be a member of a self-regulating organisation, meet certain requirements and make a contribution to the damage compensation fund. We are carrying out in practice the principle of financial responsibility of self-regulating organisations for their members.
We have also analysed in detail the situation with defrauded equity holders. The state compensation fund began working in October 2017. Now we are implementing the roadmap on new forms of funding housing construction. The aim is to transfer construction risks from future dwellers to professional players – real estate developers and banks.
Dmitry Medvedev: "Thanks to the pinpoint anti-crisis measures, not only did we manage to stabilise the situation but we adapted the real sector and the financial system to the new conditions. Most importantly, we supported people and the most vulnerable territories, industries and enterprises. As a result of this support, last year the unemployment rate was 5.2 percent and this February it was 5 percent."
Along with construction we have to resolve other difficult tasks, such as relocating people from dilapidated housing that was designated as such before 1 January 2012. This unprecedented large-scale programme will be completed in the next few months.
Seventy-one regions have moved all residents of structurally unsafe buildings to new homes, and 12 more are in the process of completing this process. As of 1 March, 678,000 people moved to new flats vacating 10.5 million square metres of structurally deficient housing. In fact, a city the size of Izhevsk or Barnaul has been built from the ground up.
In order to prevent the emergence of more dilapidated housing, we started a no less ambitious programme of major repairs. Over four years, more than 400 million square metres have been renovated meaning that every sixth block of flats included in the major repairs programme was brought up to standard.
To put this in perspective, in 2014, only 65% of utilities bills were paid in full whereas last year this figure went to over 92%. This means the owners have become more responsible for their property. We created a system where residents rather than managing companies run blocks of flats.
We managed to reduce the heat supply accident rate by 60% and to almost halve the number of accidents in water supply networks, including due to private investment in housing and utilities. The investment commitments assumed by the concessionaires in this sphere exceed 250 billion roubles.
Dmitry Medvedev: "Russia is no longer suffering from brain drain. In 2014, the total number of researchers increased for the first time, reversing a downward trend. More talented young people are choosing a career in research. The Government always seeks to allocate additional funds to civilian research, within the limits of the budget constraints we are facing. In 2017, this segment received 336 billion roubles, up 20 percent compared to 2016."
We see the development of housing construction and utilities as puzzles making up the overall picture of the urban environment. Now, 77% of the housing stock in Russia is represented by nondescript housing communities (they were built as such) that are fairly densely developed and not always outfitted with proper urban infrastructure. Our goal is to improve public spaces and create new places for people to spend their free time and pursue their interests.
Last year, we launched nationwide programmes for improving courtyards, streets, squares, embankments and parks. In total, over 20,000 courtyards and 200 parks were brought up to standard during the past year.
We pay special attention to removing administrative barriers in construction and the provision of land plots for roads, engineering networks and other infrastructure. We are creating transparent mechanisms for regulating and overseeing development. Today, the State Duma is considering a package of government draft laws which address these critical issues.
Clearly, no improvement is possible without good roads. We started with major cities by launching a corresponding priority project. As a result, using the latest technologies we have repaired more than half of federal roads totaling 26,000 km. Last year, we managed to reduce the number of accident-prone road sections as compared with 2016, which saved thousands of lives.
Everything that has been done in construction, the social sphere, and a number of other areas in six years is our joint achievement. Allow me to recap.
In 2012, the world continued to ride out the severe 2008–2009 financial and economic crisis. All countries were jointly looking for effective solutions and reached agreements in a bid to make the global system more sustainable and fair.
Russia managed to prop up its economy and social sector and started to confidently move forward. GDP growth was decent in 2012.
In 2014, oil prices halved and the drop in budget revenues was equally sharp. A difficult situation had developed on stock exchanges. There was double-digit growth in prices. By the end of 2014, inflation was running at about 11 percent. In addition, the world’s leading international capital and technology markets had closed simultaneously. Western analysts came out with the gloomiest scenarios: the Russian economy was to collapse any minute, with the majority of enterprises and banks going bankrupt.
Thanks to the pinpoint anti-crisis measures, not only did we manage to stabilise the situation but we adapted the real sector and the financial system to the new conditions. Most importantly, we supported people and the most vulnerable territories, industries and enterprises. As a result of this support, last year the unemployment rate was 5.2 percent and this February it was 5 percent. Let me remind you that back in 2009 it topped 8 percent.
We provided banks with additional capital so that people did not lose money during the crisis; the financial system remained stable. We trod carefully lest we trigger inflation.
It is very important that last year prices edged up 2.5 percent and so far, this year – from January through March – the inflation rate only slightly exceeds 2 percent.
Dmitry Medvedev: "We have 24 industry-specific and 78 regional import substitution plans. We are fine-tuning the government procurement system in order to achieve this goal. The Industrial Development Fund is operating effectively as well. In 2014-2017, the share of Russian output in the total volume of procurements by state-owned companies in the fuel and energy sector increased from 50-something percent to 85 percent and even 95 percent."
Generally, I believe that we performed decently while we were coming through this difficult and critical period, which was a veritable stress test for the entire country – not just the banks and enterprises but the entire country. We have created a stable macroeconomic environment as we promised – without changing the tax burden, rather by quickly adapting the budget system to the new conditions, improving administration and optimising public spending.
We have also revised the budget process to complement the project-based approach. In mid-2016, we started work in 11 strategic development areas. We have set clear and explicit objectives, such as housing development, building schools and roads, encouraging mortgage lending and renting, and expanding exports other than raw materials.
Overall, over the past six years GDP has increased by 5 percent and even in the two hardest years of the crisis the aggregate losses of GDP did not exceed 3 percent. This is much less than the losses we had during the previous crisis when our economy shrank by almost 8 percent. This means that we have learnt to work under crisis conditions.
The economy is currently on the rise. In 2017, it grew by 1.5 percent. Of course being in the green is a good thing, but these are modest figures. Still, they are indicative of the qualitative changes that we have been able to achieve. Today, the Russian economy depends much less on external conditions, and has become much more modern and competitive with the ability to show steady progress even when the price of oil is relatively low. This growth is primarily driven by internal factors. Today, economic development is driven not only by the upstream sector, but by other industries as well, including the chemical industry, agriculture, transport and agricultural engineering, housing construction as I mentioned, pharmaceuticals, and IT.
The Russian economy is gearing up to respond to global technological challenges. We are creating IT infrastructure for almost all sectors to ensure the transition to digital technology. It is also our goal to facilitate the emergence of new high-technology companies and products. All these initiatives are factored in the Digital Economy programme adopted last year. At the same time, we are putting infrastructure in place to promote innovation. Working through various institutions, the Government supported almost 6,000 startups in all areas. These efforts are undertaken on all platforms. Startups in Skolkovo alone generated more than 150 billion roubles in total revenue. The National Technology Initiative is underway. It was designed to facilitate market access for innovation products. More than 500 projects benefited from various support mechanisms.
In 2016, the President approved the Scientific and Technological Development Strategy. The Academy of Sciences is increasingly engaged in implementing national development goals and resolving so-called major challenges, including in the areas of artificial intelligence, digitalisation, medicine, biotechnology, energy, new materials and a number of other areas.
Russia is no longer suffering from brain drain. In 2014, the total number of researchers increased for the first time, reversing a downward trend. More talented young people are choosing a career in research. The Government always seeks to allocate additional funds to civilian research, within the limits of the budget constraints we are facing. In 2017, this segment received 336 billion roubles, up 20 percent compared to 2016. It is very important that over the period of these six years businesses started to believe in new technology. We now have a class of vibrant private companies that make proactive use of innovative approaches and are showing above-market growth rates.
Dmitry Medvedev: "The state defence procurement system is now more clear-cut and efficient. This was improved considerably over the past six years. In the past it was fulfilled by about 80 percent, whereas now it is consistently 97 percent complete. During these years troops received over 58,000 units of various systems, which made it possible to upgrade 800 military units."
Of course, it is not enough for the Russian manufacturing sector to have persevered at the height of the crisis in 2014−2015. We have put this behind us and have gradually moved from crisis mitigation to long-term initiatives, from targeted and centralised support to devising sectoral development strategies.
Today, our goal is to create a new competitive manufacturing sector. For this reason, one of our long-term goals is to efficiently replace industrial imports with competitive Russian products.
Importantly, the issue is not about squeezing out all imports (which would be a strange thing to do), but only about the items and sectors where dependence has become critical.
In total, we have 24 industry-specific and 78 regional import substitution plans. We are fine-tuning the government procurement system in order to achieve this goal. The Industrial Development Fund is operating effectively as well.
In most industries, the targets which we set in our import substitution plans have been achieved, but this does not mean that absolutely everything has been accomplished. There are industries where we see the greatest effect, such as the pharmaceutical industry, transport and oil and gas engineering. In these industries, the share of domestic output increased by more than 10 percent (in some cases 20 percent or even more). The medical industry, the forest and timber industry, the automotive industry and radio electronics are also operating above planned targets.
In 2014-2017, the share of Russian output in the total volume of procurements by state-owned companies in the fuel and energy sector increased from 50-something percent to 85 percent and even 95 percent. Our major companies often used to buy foreign products, whereas now they are almost completely focused on domestic products.
Dmitry Medvedev: "We take pride in our agro-industrial complex. In 2017, agricultural output grew by more than 20% at the farms of all categories as compared with 2012. We succeeded in reducing the dependence of our market on imports and are harvesting record crops. This year, over 135 million tonnes of grain were produced. This rapid growth is the result of unprecedented state support for the agro-industrial complex and our focus on it. Over 1.2 trillion roubles from the federal budget went there over the past six years."
We also work to promote our industrial products on international markets. A separate area of strategic development – international cooperation and exports – has been created to coordinate this work. The Russian Export Centre is operating as well. Export-oriented strategies have been approved for four pilot sectors, including agricultural machinery manufacturing, the automotive industry, railway engineering and civil aircraft construction.
These measures have brought their first results. The overall growth of non-oil and non-energy exports is estimated at 22-plus percent in 2017, meaning that our non-primary exports have already grown by more than a fifth.
We want our state support system and technical regulations to encourage enterprises to gradually switch to the latest technology.
To encourage businesses to step up their enterprise reconstruction efforts, a law was passed on transitioning to the principle of the best available technology, and this law is now being implemented.
Cleaning up environmental damage should also become an independent industry which generates demand for advanced technologies and equipment. There’s a host of problems here, including cleaning up dump sites, which have become one of the most important and serious topics for discussion.
Starting in 2012, we have actively engaged in cleaning up environmentally hazardous sites left over from Soviet times, including abandoned enterprises and industrial waste sites. Thirty projects to clean up environmental damage have been implemented.
A renewable energy development programme was initiated. Twenty-two facilities were built and high-tech production of basic equipment for solar power plants was established.
Dmitry Medvedev: "The Russian Direct Investment Fund was created six years ago. In conjunction with its partners, it is working to develop our economy. This fund and its co-investors have invested over 1.2 trillion roubles in Russian companies, focusing in particular on the infrastructure and technology projects."
Now some statistics on a number of key industries.
The auto industry. Last year, the manufacturing of all types of vehicles increased by almost 20 percent, while exports, including parts, were up by 30 percent. The share of domestically made automobiles, including by global brands, accounted for 85 percent of the domestic market.
The manufacturing of agricultural machines increased three-fold in money terms over six years and was up by almost 20 percent last year. The share of domestically made products was equal to 56 percent while exports were up 16 percent. Measures to support farmers, who are offered to buy Russian-made machines at a discount, have worked. In 2016, the commercial production of 75 new machine models was launched, whereas last year the figure doubled and reached 150 new models.
In the last three years, the manufacturing of freight carriages almost doubled. This result was achieved through a combination of measures to encourage transport companies to upgrade their freight carriages and measures to support exporters. In 2017, the export of freight carriages was up by almost 60 percent.
In the chemical industry, production has increased by almost 30 percent over six years.
In the pharmaceutical industry, production has increased by 70.5 percent over the past six years. We have supported the production of vital and essential drugs.
The IT sector has seen robust growth. Last year, the digital economy accounted for 5 percent of GDP, while e-commerce expanded by 21 percent. The digital economy infrastructure, including software, expanded by 32 percent.
Today, over 87 million Russians are internet users, with internet coverage reaching 72.5 percent. Russia is ranked second in the world in terms of the affordability of mobile phone services and tenth in the world in terms of the affordability of broadband access. We have enhanced our cyber security. The Mir national payment system was created from scratch.
Dmitry Medvedev: "A real breakthrough occurred in the sphere of government services. I’m referring to integrated government service centres that changed the way clients interact with the state. Now almost every citizen of our country can use the one-stop shop arrangement to obtain about 30 types of government services and about 150 municipal services with one request. By March 1, 2018, we had almost 3,000 such centres. As many as 96% of our citizens can now use their services."
Of course, not all industries have been growing at a similar rate. For example, metal manufacturers have to deal with politically motivated decisions to shut them out of product markets. Nonetheless, the industry has significantly upgraded its assets and launched new products.
We have managed to retain our leading positions in the energy sector. Last year, Russia continued to be the world’s number one natural gas exporter and the world’s second largest oil exporter and third largest coal exporter.
Over the past six years, the export of gas, including liquefied natural gas, was up 20 percent while oil refining efficiency has increased by 10 percent.
We have been completing several goals in the defence industry. The key goal was to enhance the combat capability of the Armed Forces. In this area we focused on manufacturing high-technology products and fundamentally new models of strategic arms.
At the same time we have been developing the production of conventional weapons. The state defence procurement system is now more clear-cut and efficient. This was improved considerably over the past six years. In the past it was fulfilled by about 80 percent, whereas now it is consistently 97 percent complete. During these years troops received over 58,000 units of various systems, which made it possible to upgrade 800 military units.
We are maintaining our leading position in the international arms market. In 2012 our exports were worth about $14 billion, and stayed at about $15 billion per year since then. Even with the sanctions, the orders didn’t drop below $45 billion. The geography of our military-technical cooperation is continuously growing. Today, Russia partners with over 100 countries.
We have carried out a huge modernisation programme for defence enterprises and are now using this potential to increase the share of civilian products. One of our priorities is civil aviation. We are designing and building aircraft and helicopters, including the engines.
We have given Russia independent access to outer space. The first stage of the Vostochny Space Launch Centre has been completed. The first, historical launch of a rocket-carrier with three satellites was made in April 2016.
The construction of a second launch pad is in its early stages. It hasn’t been smooth sailing all along. We are analysing problems as they come up. The reasons must be identified, and we must do our best to remedy the situation.
Despite a variety of issues, the Vostochny Space Launch Centre has reaffirmed that Russia will always be part of the elite group of countries which engage in space exploration.
We take pride in our agro-industrial complex. In 2017, agricultural output grew by more than 20% at the farms of all categories as compared with 2012. We succeeded in reducing the dependence of our market on imports and are harvesting record crops. This year, over 135 million tonnes of grain were produced. This rapid growth is the result of unprecedented state support for the agro-industrial complex and our focus on it. Over 1.2 trillion roubles from the federal budget went there over the past six years. We provided agricultural workers with access to easy loans at an APR of up to 5%. The regions can now use the single subsidy to identify priority areas of support for the agriculture. On top of it, we increased the size of the farmers’ grants.
Farmers needed land. With your help, we have amended legislation, and last year the sown area exceeded 80 million hectares for the first time in 15 years.
To increase yield, farmers need high-quality seeds. Last year, we picked 13 investment projects to create seed selection centres eligible for state support.
In autumn, the grain harvest was so large that we ran into problems carrying it by rail, so we reduced grain transport tariffs. We are also building new terminals at the ports and creating a wholesale distribution centre network.
The geographical reach of our exports is expanding as we are accessing new markets, including in Asia, the Middle East, and Latin America. Last year, exports of agricultural produce and food amounted to over $20 billion.
Fostering a more attractive business environment was one of the key tasks during the period under review. We started from a low level. In 2012, Russia ranked 120th in the Doing Business ranking, and it was a fairly uneventful and prosperous year. Back then, our closest neighbours in the ranking included countries such as Cape Verde and Costa Rica. I can’t say we achieved perfect conditions in a matter of six years. That would be an exaggeration. We still have problems. However, we climbed 85 spots to 35th place. No other country ever managed to achieve such a quick rise. Now we are next to Japan on this list, and we can clearly do even better.
We also saw investor interest as we looked at the dynamics of foreign direct investment, even despite the sanctions. We actively supported this interest during these six years as we were developing the financial market and creating key infrastructure. We now have a single mega regulator at the Bank of Russia − the central depository. Also, special tax mechanisms were created to support interest in new projects in Russia. There are special agreements and contracts that investors could conclude both with the federal and regional authorities. Special conditions were created in individual territories. Taxes for new industrial sites were reduced or cancelled altogether. More recently, we introduced the possibility of granting investors the right to an investment tax deduction, which makes it possible to reduce investor's tax liability by 90% of the costs involved in acquiring or retrofitting fixed assets. Currently, investors' money is used to install new equipment, introduce modern technology, and draw in and create proprietary know-how.
The Russian Direct Investment Fund was created six years ago. In conjunction with its partners, it is working to develop our economy. This fund and its co-investors have invested over 1.2 trillion roubles in Russian companies, focusing in particular on the infrastructure and technology projects.
Business representatives actively helped improve the business climate. Together with the Agency for Strategic Initiatives, road maps have been drafted since 2012, and many procedures, which are important at the beginning and during the life of a new project, have been simplified or accelerated.
We focused particularly on small and medium-sized businesses as we worked to improve the investment climate. We adopted a large package of decisions from creating an industry-specific SME Corporation and infrastructure solutions to tax benefits and special lending terms. Statistics show that these solutions have brought good results, and in six years the number of small and medium-sized enterprises increased by approximately one-third to over 6 million as of the beginning of this year. The contribution of this sector also increased to 22.3%.
Small and medium-sized businesses’ access to money is expanding. Interest rates on loans are declining not only because of low inflation, but also due to National Guarantee System and subsidising SME loans. Now, small businesses can take out loans at a rate of under 6.5% APR.
The overall level of financial support for small and medium-sized enterprises in 2017 amounted to almost 234 billion roubles, which is a whole new level. Purchases by major customers constitute a guaranteed market for small and medium-sized enterprises.
Improving openness in the work of the Government and building a feedback system was an important element of work to improve the investment climate. To this end, we have created a system for preliminary discussion of projects and solutions. Efficient public councils have been created in the ministries. The Expert Council under the Government has become an integral part of the Cabinet of Ministers’ work in the reporting period.
The transparency of the budget increased radically. Today, our country is part of the top 15 countries for this indicator. Consumer councils have been created at major natural monopolies. Not a single important tariff or investment decisions is adopted without consulting them. Major investment projects of the state-owned companies are subject to public, technological and price audits.
The reform of control and supervisory activities has begun. A draft law has been prepared, which passed the first reading in the State Duma. In fact, this is a new state oversight system.
The goal of the programme is to dramatically improve safety, reduce the number of deaths, diseases, and poisonings, as well as reduce the material damage.
The use of checklists was approved legislatively, and a single register of inspections was created.
Business should also be fully aware and accountable in safety-related matters so that the tragedy of Kemerovo, which became a nationwide tragedy, never happens again.
A real breakthrough occurred in the sphere of government services. I’m referring to integrated government service centres that changed the way clients interact with the state. Now almost every citizen of our country can use the one-stop shop arrangement to obtain about 30 types of government services and about 150 municipal services with one request.
By March 1, 2018, we had almost 3,000 such centres. As many as 96% of our citizens can now use their services.
When we talk about our achievements and problems, of course, we need to talk not only about Moscow, St Petersburg and a few other big cities, but our entire country from Kaliningrad to the Far East and the Far North.
In recent years, we have revised our approach to spatial development. The point is not to ensure equal opportunities in our vast country for every town, which is unrealistic, but to see to it that opportunities are being created. For several years, we have been conducting an analysis. Its results will form the basis of the Spatial Development Strategy.
Dmitry Medvedev: "A month ago we celebrated four years since Crimea’s reunification with Russia. We launched major structural repairs on the peninsula. An energy bridge from mainland Russia was completed very quickly. Major renovations were done on airports and sea ports, and roads are being improved. Dozens of engineering facilities and a new gas supply network have been built. The Kerch Bridge will open to traffic in the next few months. The motorway from Kerch to Sevastopol will be completed by the end of the year. Over the past four years, federal allocations to Crimea within the framework of inter-budget transfers reached almost 415 billion roubles, including over 360 billion allocated under the federal targeted programme."
We understand that many regions are having a hard time. They are faced with the need to raise salaries and pensions, and to create jobs. In a significant number of the regions, these problems have been resolved, but the reverse side of it is that regional budgets have been imbalanced in the process. So, our goal is to maintain the regional budgets’ stability and to increase self-sufficiency of the regions.
Federal support to the regions has been growing over the past few years. It will exceed 1.7 trillion roubles this year, an increase of some 2.5 percent from 2017. Does the Government plan to provide additional support to the regions so that they increase salaries in the public sector? Yes, it does. Additional allocations will exceed 136 billion roubles this year.
In 2016, the regional budgets were executed with the smallest deficit in a decade. It went down from 170 billion roubles to 12 billion.
The situation with regional debts reached a turning point. The regions’ sovereign debt decreased by 1.6 percent in 2017, for the first time in years. We must definitely maintain this trend.
Much is being done to restructure the regions’ debts. A considerable share of commercial loans has been replaced with public funded loans with a lower interest, an increased payback period and additional incentives.
We have reviewed the spending powers of the regional and local governments. From now on, financial assistance from the federal budget must be distributed based on the regions’ genuine needs and their financial standing. Grants will be issued to incentivise the most rapidly developing regions. Corporate income tax will be reintroduced in the regions that have increased the collection of taxes.
A month ago we celebrated four years since Crimea’s reunification with Russia. All of us were responsible for normalising the situation on the peninsula, which was far below the accepted Russian standards. Of course, we have not yet resolved all the problems. Crimea faced an economic blockade and supply chain and transportation disruptions. Hospitals and schools were left without electricity and heat.
We launched major structural repairs on the peninsula. An energy bridge from mainland Russia was completed very quickly. Major renovations were done on airports and sea ports, and roads are being improved. Dozens of engineering facilities and a new gas supply network have been built. The Kerch Bridge will open to traffic in the next few months. The motorway from Kerch to Sevastopol will be completed by the end of the year. Over the past four years, federal allocations to Crimea within the framework of inter-budget transfers reached almost 415 billion roubles, including over 360 billion allocated under the federal targeted programme.
Never before in modern Russian history have we paid so much attention to Eastern Siberia and the Far East. Last year, investment in fixed assets there grew almost four times faster than across Russia, for the first time in four years. About 25 percent of foreign direct investment is channelled into the Far East. Industry, agriculture and construction indexes in the Far East are higher than the average across the country. This is the effect of the priority development areas, the Vladivostok Free Port, the Far Eastern Hectare programme and cuts in the cost of electricity for companies in the Far East.
The new Government will carry on the large-scale projects we have been working on for the past six years. Our key priority is simple: to ensure high living standards for each and every citizen of Russia and the country as a whole.
Poet Konstantin Simonov wrote that Russians are a stubborn people. If they hit upon a good idea, they will implement it eventually and on a scale that is only associated with Russians. And this is exactly what we will do.