Showing posts with label Economy and Finance. Show all posts
Showing posts with label Economy and Finance. Show all posts

Vladimir Putin. Digital technology in finance.

Vladimir Putin held a meeting on the use of digital technology in finance and the implementation of innovative financial tools.

The meeting was attended by:
  • Presidential Aide Andrei Belousov
  • Finance Minister Anton Siluanov, Central Bank Governor Elvira Nabiullina
  • Central Bank Deputy Governor Olga Skorobogatova
  • QIWI CEO Sergei Solonin

* * *

President of Russia Vladimir Putin:

Good afternoon, colleagues,

Today, I propose addressing a topic that is relevant not only for our country, not only for Russia, but is probably becoming relevant also for the rest of the world.

I am referring to introducing digital technology in the financial, banking sphere, and using innovative financial instruments.

Modern technology in the banking sphere certainly opens up new opportunities for organizations and citizens, making business activity and everyday life more convenient.

As is known, virtual currencies, also known as crypto-currencies, are becoming or have already become very popular; in certain countries they are becoming or have already become legal tender, as well as an investment asset.

I would like to draw your attention to the need to use the advantages that are offered by new technological solutions in the banking sphere.
That said, the use of crypto-currencies also carries serious risks. I know the Central Bank’s position; I have discussed this topic with the Governor on several occasions.

First and foremost, this is an opportunity for laundering illegal gains, tax evasion and even financing of terrorism, not to mention the proliferation scams to which ordinary people can fall victim.

Meeting on using digital technology in finance
Meeting on using digital technology in finance.
Crypto-currencies are issued by an unrestricted circle of anonymous entities. Therefore, buyers of crypto-currencies may be involved in illegal activity.

In addition, there is no security for crypto-currencies. If the system breaks down or, as it is trendy to say today, if there is a bubble, there will be no entity legally responsible for that. This is a serious matter that we should bear in mind when discussing this topic.

As is known, many countries are looking for ways of regulating the circulation of crypto-currencies and are beginning to create the necessary legislative framework, a legislative regulatory system.

We need – based on international experience – to build a regulatory environment that will make it possible to codify relations in this sphere, reliably protect the interests of citizens, businesses and the state and provide legal guarantees for using innovative financial instruments.

I would like once again to draw your attention to the need to use the advantages that are offered by new technological solutions in the banking sphere.

At the same time it is important not to create unnecessary barriers, of course, but rather to provide essential conditions for advancing and upgrading the national financial system.

Bearing all these various aspects of the problem in mind, let us discuss this topic today.


Putin had a meeting with Maxim Oreshkin and Denis Manturov

Vladimir Putin held a meeting with Economic Development Minister Maxim Oreshkin and Industry and Trade Minister Denis Manturov.

Vladimir Putin, Denis Manturov, Maxim Oreshkin.
Meeting of Vladimir Putin with Minister of Economic Development Maxim Oreshkin (right) and Industry and Trade Minister Denis Manturov.
Vladimir Putin discussed the current economic situation and measures to support the Russian economy and industry with Maxim Oreshkin and Denis Manturov.

* * *

Russian President Vladimir Putin: Colleagues,

I had agreed with each of you on separate occasions to meet and talk on the topics that are of interest to you, the issues that you deal with professionally.

We have already stated that the Russian economy has entered the trajectory of fairly sustainable growth. How sustainable is that growth, what are the reasons for us to believe so, and what are the forecasts in this respect? What internal and external risks are there, and the key issue, which additional measures should be taken to preserve the current trend and make the Russian economic growth exceed the average global growth by 2020? We kept talking about this as a task we have set for ourselves. I would like to hear Mr Oreshkin’s assessment.

We are well aware that investment is certainly a crucial growth factor. We state that growth reached 6.3 percent in the second quarter of this year. At the same time, let me remind you that a number of initiatives were unveiled at the St Petersburg Economic Forum that are to boost investment activities. I am talking about the development of public-private partnerships for attracting capital to construction and infrastructure, to the so-called infrastructure mortgage, and also the development of project funding mechanisms.

We also spoke about the possibility for Vnesheconombank to set up a “project factory.” I would like to hear from Mr Oreshkin how this work is progressing, and what has been happening in real terms since we spoke about it.

Russian President Vladimir Putin.
Russian President Vladimir Putin.

I discuss industry development issues with the Minister of Industry on a regular, day-to-day basis. It is well known that we supported a number of industries and programmes, as well as industrial production during the hard times for our economy. And it is very good to know that the anti-crisis fund assets were not wasted and industrial growth has resumed. Quite recently during a meeting with business leaders I noted that it amounted to about two percent in January through August, practically two percent.

Yesterday I visited a very interesting exhibition in Ulyanovsk, an attractive and interesting one. I hope the product line in transport engineering will keep growing, strengthening, and will make our people happy and contribute to economic development, both regional and national.

A number of other industries apart from transport engineering are also posting good results. But since the next budget is being actively discussed now, we have addressed the issue a number of times.

You do not have your opponents here since, as a rule, you work in tandem on these issues. I will discuss it with the Finance Ministry separately, and later we will get together and talk it over. Today I would like to hear from you about the support for the industry as drafted in the budget. It is important not just to get the money, but also to spend it efficiently. That is why I would like to hear how the industry development fund is going to be used.

Recently at a meeting of the Military-Industrial Commission we said that military industrial complex enterprises show remarkable labour productivity growth, which is certainly a positive development. But we also have another task – to diversify that part of our economy. We have to ensure that labour productivity does not grow through military goods output alone, but also during transition to civilian produce. I would like to hear about what is being done in this area.

Overall, as we all know, no qualitative breakthrough in labour productivity growth has occurred, unfortunately. I know that the Government has drafted a programme on labour productivity growth. I would like to hear from Mr Oreshkin how this work will be organised, since it is basically your job, to a considerable degree, at any rate.

President of Russia, Vladimir Putin.
President of Russia, Vladimir Putin.

Next, to boost high technology development, a decision was made to establish investment-technology partnerships. To do that, it was agreed to radically upgrade the special capital investment contract (SPIC). I would like you to report as what specific agreements have been reached.

I hope that both ministries, as you work in close contact, will also keep giving the necessary attention to the support of high-tech exports. We have set up relevant mechanisms but I know that there is occasionally a lack of financial backup, so let us discuss this topic as well today.

Finally, small and medium-sized businesses. I am not going to talk about how important it is. This has been said many times. I have two specific questions in this regard. As you know, I have recently met with head of Opora Rossii Alexander Kalinin. He raised two issues, actually, many issues, but two of them are crucial today. They are putting off the introduction of cash register equipment, and making individual entrepreneurs’ insurance payments independent of the minimum wage. We have practically settled the first issue, and we have to think over the second one. I would like to hear your opinions. As of today, a one-time minimum wage increase within a year impacts their deductions. They want to strip that dependence altogether. Let us discuss this; I would like to hear your views.

We have set the task of passing legislation to define the legal status of self-employed individuals. This was discussed at length as well, yet some issues have still not been resolved. Let us talk about this today.

Let the Economic Development Minister begin. Mr. Oreshkin, please.

Economic Development Minister Maxim Oreshkin:

Thank you very much, Mr. President.

Russian Minister of Economic Development Maxim Oreshkin.
Russian Minister of Economic Development Maxim Oreshkin.
 If we take a look at the latest statistics, in August GDP growth stood at 2.3 percent, it dropped below 2 percent in July, agriculture looked bad, mainly due to the weather, of course. What we see in August, the good weather in August and September will help to compensate for the July drop.

Vladimir Putin: It looks like we will have another record harvest.

Maxim Oreshkin: Yes, because the beginning was not very good, but now we have ideal conditions for harvesting. The yields are at the same level as last year, and the losses have dropped considerably.

Vladimir Putin at a meeting with Minister of Economic Development Maxim Oreshkin and Industry and Trade Minister Denis Manturov.
Vladimir Putin at a meeting with Minister of Economic Development Maxim Oreshkin and Industry and Trade Minister Denis Manturov.
It is significant that inflation has gone down: the latest figure is 3.1 percent. This has allowed the Central Bank to cut the interest rate. Their latest decision was to cut the interest rates by 50 basis points. In general, this opens the way to further increasing lending operations by the banking system. We are already witnessing a record-breaking dynamics in mortgage loans, if we discount seasonal factors. And increased economic activity in the autumn months will lead to an actual, nominal increase in lending volumes. This must provide good support to the construction and construction materials industries during the autumn and up to early next year. The industries that experienced a plunge in the past two or three years are actively recovering now. The mortgage boom we are expecting will help recovery here and will on the whole contribute positively to economic growth.

Vladimir Putin: How much is an average mortgage currently?

Maxim Oreshkin: The latest rate was about 11 percent. But in the past months Sberbank and other top Russian banks have cut the mortgage rate considerably, and their basic rates dipped below 10 percent. This is why I believe it will be in fact offered at under 10 percent by the end of the year.

Vladimir Putin: Now that you have said it, people will wait until the end of the year.

Maxim Oreshkin: Those who will wait will miss out on the best properties.

Regarding the risks. Firstly, there are external risks, of course. Oil price volatility remains, and a trend towards risk in the global markets my decrease, so we must be prepared for that. In this respect the actions taken by the Government in the macro economic policy, namely the February launch of foreign currency purchase by the Finance Ministry, and new budget, which, certainly, fends off the risks considerably, allowing us to feel confident, and the inflation targeting by the Central Bank, – all these mechanisms are designed to minimise the possible negative impact on the situation in the country. Thus there is confidence here that we will be protected from most risks.

Concerning long-term growth, I would stress three very important topics. These are investment process support, labour productivity growth (you have mentioned this) and the third very important element is apparently creating conditions for human development, because the modern economy is primarily about the individual, and the only winners in the global competition are nations where people can realise their potential inside their countries and that become the most comfortable places where global talents want to reside. This is the reason why the three topics and the current programmes, and further movement should head along those directions to ensure long-term growth.

You have asked about the two programmes that we were drafting throughout this year. The first programme is the infrastructure mortgage. The current state of affairs is as follows: we have sent a detailed roadmap to the Government and we are about to get to a thorough discussion of each element inside the government. The deadlines we have set per separate elements are the end of the year or the end of the first quarter. I hope that the programme will be ready by the end of the first quarter, and we will be able to launch it in the middle of next year.

Vladimir Putin: We have to make it earlier. We spoke about it in summer in St Petersburg.

Maxim Oreshkin: At present we are going to look into the details and will try to have it done as soon as possible.

Preparations are moving ahead on the project funding factory. This mechanism has already been completely agreed upon, respective funding and state warrantees are included in the 2018 budget. We are already passing over to the final stage here. There a number of draft laws that have to be passed during the autumn session.

This is primarily about draft law on syndicated lending. This is an important part of the overall mechanism. And, according to our estimates, January and February will be the months when the first loans under the programme will enter the economy and will be used to finance projects.

What is crucial is that the programme does not replace the industry-specific support measures, it is a sort of foundation for project financing. Some very good combinations can result from this. We have agreed on everything both with the Ministry of Industry and other ministries. It works very well with the existing programmes. One supplements the other, and it will allow for increasing project financing proper which is important for investment growth.

There was also a question regarding non-raw material export trends. In general, our non-raw material exports have seen a positive trend of around 7.5 percent on last year. The situation varies in different industries. For example, Mr Manturov will tell you in detail about the auto industry where we have seen 30 percent growth. Some examples are not as good; exports are falling in some areas.

We have to understand that the significant effect of the lower value of the ruble has been largely taken advantage of. And in order to move on, we must increase effectiveness, that is, make more competitive goods. And the second key issue is, certainly, joining global production chains, including those of major companies. For example, this kind of process is underway now in the auto industry where some components are made abroad; the added value takes place in Russia, and then the finished cars are exported.

This is why system-wide measures are so important. For instance, this year we adopted a law on suspending VAT on processing within the customs territory of Russia, which relieves them of the tax burden on those components which will be exported later. Thus, we have these measures, including industry-specific ones; I think, Mr Manturov will talk more about them. In fact, we have very close cooperation here – from system-wide cooperation measures to industry-specific measures which create the contour for companies to develop more efficiently.

And the last issue, the last item you mentioned is small and medium-sized businesses. There is indeed a proposal to shift the mandatory introduction of cash register equipment for one year from July 2018 for those small businesses which are engaged in manufacturing, who do not have any employees, i.e., self-employed businesses. This is necessary to look specifically at each business activity and understand where and in what way the requirement will have to be executed.

Vladimir Putin: They have raised the issue of dropping it for some categories altogether, including the self-employed. It could be added to their permit fees.

Maxim Oreshkin: We will review the issue in detail, because it requires complete understanding so that nobody drops out, and so that all cash flow can be tracked, by the tax service as well. I think a proper balance needs to be found here.

As for insurance premiums, we had a heated discussion in the Government. We have agreed that we will cut the dependence of individual entrepreneurs’ insurance premiums from the minimum wage, and will attach it to one pension score, because it will be more logical since it will be a deduction that would allow individual entrepreneurs to execute their rights on insurance pensions, i.e., to be protected after they retire. This is what we will use as our goal. At present, we are polishing up the draft law.

Vladimir Putin: We must explain to people what exactly this is all about.

Maxim Oreshkin: We will do that, by all means.

Regarding self-employed individuals. To be honest, the issue has been lingering in the Government for too long; we just cannot reach final decisions. But it is evident that people must have a clear and understandable explanation. And it is important that they understand what will happen after the three-year suspension of tax liability that was introduced this year. Because people should not have to worry about this; they should understand how the situation will evolve, and the situation must be transparent to them. This is why I believe we need to finish this discussion within one or two months and come up with understandable proposals.

Vladimir Putin: What is the situation like with household incomes in the country?

Maxim Oreshkin: Household incomes, especially in terms of wages, have started to improve. The latest statistics indicate a 3.4 percent growth in real wages. Nominal wages increased 6 to 7 percent year on year. Real wage growth has been achieved because of lower inflation.

Vladimir Putin: When will people feel it for real?

Maxim Oreshkin: This will be a progressive process because both wages and incomes are below the 2013–14 level. I always say this, but it is important to note that wage growth is now healthier because it is based on labour productivity growth, whereas before it was largely related to high oil prices. This is the reason the situation is more stable. And gradually with each new year, for example, next year we expect real wage growth to accelerate to 4 percent. Higher wages in the public sector will certainly help. In the coming quarters, wages will be adjusted, which will also be positive.

As I mentioned, labour productivity is indeed a very important issue. This is also a joint effort; we are working with the Ministry of Industry and Trade. This year a pilot programme was launched in six regions: Perm, Tula, Samara, Tyumen, the Republic of Bashkortostan, and the Republic of Tatarstan. In the first stage we focus on processing industry enterprises. Here we are using mechanisms that exist already. For instance, the Industry Development Fund will play a part in the programme. What is this about? It is clear that investing in new equipment, provided it is made properly, always includes a hike in labour productivity. But management technologies which are used in industrial organisation are also crucial.

When we visited the Russkaya Kozha Group plant in Ryazan, we saw how they raised labour productivity by several dozen points through a more efficient arrangement of equipment in the shop and streamlining the way their products move around the shop. This is a story that should be promoted, presented as an example of how it can be done, an example of existing modern technologies.

Vladimir Putin: At Yandex they told me how they work with steel manufactures, and how productivity goes up almost immediately.

That is, the use of the latest technology – a machine training technology. Indeed, the project they were implementing by introducing new technologies only, that did not require large-scale investment, cut costs by several percent, which is definitely very significant for metallurgy.

Mr. Manturov, please.

Minister of Industry and Trade Denis Manturov: Thank you, Mr. Putin,

First, I would like to thank you for the support this year. The industrial sector did have strong support in terms of new measures. We had an additional 107 billion rubles allocated to certain industries, primarily the automotive industry, a major driver of the industrial sector in terms of multiplication since it effects the growth and development of other industries. The outcome of all the measures taken is evident: both the market and manufacturing are showing growth, all in double digits, and this includes all sectors, including automotive. We had more modest expectations when we were planning these measures. But we see that the economy is recovering, and that has a positive effect on these industries. For this reason, we presume that average growth in the automotive industry will reach at least 10 percent over last year, I mean manufacturing proper.

Vladimir Putin: Who are the leaders? Which industries are the growth leaders?

Denis Manturov: Growth leaders. Railroad car manufacturing in transport engineering grew 78 percent compared to last year. This is a combination of factors, of course, the timely decision taken back then…

Vladimir Putin: On car fleet renewal.

Denis Manturov: On car fleet renewal, on banning the extension of work service years. Along with the subsidies, this certainly had a positive effect. The freight car fleet is being renewed rapidly.

Industry and Trade Minister of Russia Denis Manturov.
Industry and Trade Minister of Russia Denis Manturov.
Agricultural engineering saw a 30 percent growth. And this has been a trend in the past two and half years. We have retained the support measures for next year, too, 8 billion will allocated to compensate the discounts to our agricultural producers.

Pharmaceuticals sector is growing.

Vladimir Putin: Which channels are used to distribute support?

Denis Manturov: This resolution is being carried out by the Agriculture Ministry, but the Government has been allocating substantial amounts to that measure for over two years. With the additional volume, this has already amounted to 13 billion rubles. And as I said, growth reached 30 percent.

Against the background of the growing market, total production has increased 12 percent. The chemical industry is also developing, showing positive growth too. Road construction equipment manufacturing is growing at over 15 percent. So all industries are enjoying progress.

The only industry that has not recovered since the crisis so far is metallurgy. But taking into account that the mortgage sector and construction industry are steadily recovering, this is the segment that will bring about growth in metallurgy. Because we rely basically on domestic consumption.

As for next year's budget, together with the Ministry of Finance we have found an overall solution to the key industry sectors and all state programmes, including, as I mentioned, the agricultural engineering, automotive industry, road-building machinery, and traditionally, the aircraft and shipbuilding industries. In particular, we have noted that with regard to the Industrial Development Fund, a total of 1,900 requests have been received (just in case, I have provided a folder with the materials), and we get a weekly report from the fund. A total of 62 billion rubles has been provided for financing purposes. This concerns key industrial sectors: equipment engineering, the chemical sector, pharmaceuticals, and the medical industry in general. This concerns light industry as well – you issued separate instructions in Ryazan on supporting this sector. Next year, along with the Ministry of Finance we will provide 2.2 billion rubles, partly for the recovery of expenses for manufacturing school uniforms. This is a social issue. We are the first to have addressed this issue this year.

The Ministry of Education considered our request. We have planned 16 billion for the fund only next year, but the Ministry has adopted a decision to allocate funds ahead of schedule in December to give us the opportunity to continue financing as soon as next year without waiting for the spring budget adjustment.

As regards the diversification of the military-industrial complex, we have envisaged it in all state programmes as one of the key aspects, one of the main areas. There are separate programmes for all sectors under the Industrial Development Fund. Through Vnesheconombank, a separate organisation named Konversiya (Conversion) has been created to continue to promote what is produced. You know that military-industrial complex companies have expertise in medical equipment and medical products. This also applies to oil-and-gas machine building as well.

As regards the indicators you instructed us to implement until 2030 and the overall parameters of 50 percent in the civilian sector of the military-industrial complex, we are slightly ahead of schedule. Regarding the figures you gave us, I believe that we will accomplish 17 or even up to 20 percent by 2020, as we have the necessary tools for this. We expect this to have a significant impact on diversification.

Vladimir Putin with Industry and Trade Minister of Russia Denis Manturov.
Vladimir Putin with Industry and Trade Minister of Russia Denis Manturov.
As regards special capital investment contracts (SPIC), back in May, you set us a goal to improve this mechanism. Together with the Ministry of Finance, we are completing this project and next week upon its completion we will introduce to the Government the coordinated amendments to the law on industrial policy and other accompanying laws concerning the improvement of SPIC, which will allow us, first, to extend the period to 20 years. This will primarily concern those special investment and technological contracts that require developing additional competences in case they are lacking or in case we are planning to further expand the opportunities. We are working on this with the Ministry of Finance and plan to complete work soon.

Regarding exports, as Mr. Oreshkin mentioned, non-resource exports are growing. This year, for the first time we have reached a milestone figure in automotive components, with Russian exports at $1 billion. This is an indicator that has never been seen before. We also expect that the support measures to be taken by the Government through the Ministry of Economic Development – 30 billion rubles in total, which we have allocated with the Ministry of Finance – will go to compensate logistics expenses for industrial enterprises, expenses for certification and homologation of products and exporting them to foreign markets.

The new area of activity we will implement soon is a measure well-proven in the domestic market – subsidised auto loans. We want to implement it in foreign markets as well, that is, to compensate foreign bank loans for those who buy Russian cars. This is a good measure, and given the growing shipments by the automotive industry, we expect it to be an effective addition. And in general, we expect next year to bring further growth in industrial production in a wide range of sectors.

Vladimir Putin: I have two specific questions regarding the Il-114 regional aircraft and the 35-tonne increase in aircraft engine capacity. How are these projects proceeding, are there any difficulties and what has to be done to support these projects?

Denis Manturov: Mr. Putin, as for the projects that you ordered us to implement last year: these include a new version of Il-96–400, the Il-114, the PD-35 engine, the TB7-117 engine for the Il-114 aircraft that will also be used for the cargo version of the Il-112, and for the Mi-38 helicopter. These projects are proceeding on schedule. We have the funding allocated for 2018, and are now working with the Ministry of Finance to seek funding for 2019–2020. This has yet to be resolved. But as regards 2018, the required funding has been provided in full.

Vladimir Putin: As for 2019–2020 funding, these programmes are important and needed, and everyone expects them to be implemented. Let us arrange it this way: we have funded the spending from Rosneftegaz through 2018, while the expenses for 2019–2020 have to be paid for from the budget. I will arrange for this with the Ministry of Finance.

Denis Manturov: Thank you very much. We will definitely build these aircraft and, most importantly, the engine.

Vladimir Putin: These are the things that need to be done methodically and as planned; I understand that for 2019–2020 there are going to be issues that need to be balanced, but you have to choose your priorities, and this is one of them. We have to build our own regional aircraft, otherwise we will always have to buy foreign aircraft in this segment. And we need a powerful engine, we need the PD-35, as you know full well. There are many aviation projects and ideas related to this engine.

Denis Manturov: It will be used both for a wide-bodied long-range aircraft and a heavy transport aircraft. But we are going to use this engine in the small-scale power generation sector as well; we will use it for ground stations as we simply do not have this capacity today.


Putin met with Russian Government members

Vladimir Putin held a meeting with Russian Government members.

Vladimir Putin discussed current economic situation in the country, prospects for banking sector development, ways to increase the minimum wage, and other pressing issues. Particular attention was paid to improving the quality and transparency of housing and utility services rendered to citizens.
Vladimir Putin held a meeting with Russian Government members.
Vladimir Putin held a meeting with Russian Government members.

President of Russia Vladimir Putin:

Good afternoon, colleagues,

Today we have several issues on our agenda, including the current economic situation and forecasts to 2020.

Let us begin by listening to the Economic Development Minister. Go ahead, please.

Economic Development Minister Maxim Oreshkin:

Mr. President, colleagues,

Actually, we had several not very good years economically, which explains a somewhat pessimistic view of our economy. At the beginning of the year, experts did not expect GDP to grow by more than 1 percent. We can say with confidence now that these pessimistic forecasts have not materialized. We believed early this year that the economy would grow by over 2 percent and that inflation would fall below the 4 percent target. The current dynamics show that our assessments were a bit pessimistic as well.

Vladimir Putin with Russian Government Members.
Vladimir Putin with Russian Government Members.
Economic growth accelerated in the second quarter to 2.5 percent, while inflation was 3.2 percent at the beginning of last week.

Investment activity was even higher than we expected: according to available data, it reached 6.3 percent at the end of the second quarter. It is very positive news, because investment projects that are implemented today will boost economic growth tomorrow.

Following a minor technical slowdown in July, we expect a new wave of positive news and accelerated economic growth in the next few months.

What is the reason for this? First and foremost, we are entering a long cycle of lending activity in the banking sector. Inflation has stabilized at a low level, and the debt burden on people and companies has decreased over the past few years. Taken together, this created the grounds for a lending cycle that will last many years. When the inflation rate went down to 3.2 percent, it was a signal for the Bank of Russia to reduce interest rates. The goal is, as you know, to maintain inflation at around 4 percent. The Bank of Russia has announced its plans to reduce the interest rate at its meeting on Friday.

If we look at what happened within the banking system over a period of the past month, we will see that our largest banks dramatically reduced mortgage rates. They have cut the basic rate to less than 10 percent, which has increased housing affordability in Russian cities to the highest level so far. In this situation, we expect a record high volume of mortgage contracts this autumn and winter. This will bolster the construction industry and the production of construction materials in the sectors that have idling capacities.

Retail lending is gathering momentum. The important feature that distinguishes the current cycle from the previous one is that our banks are focusing on low-risk lending products, for example, those that are connected to payroll programs. Therefore, we can expect sustainable dynamics here too.
And lastly, corporate lending. Dynamics in this sector have reached positive figures as well, which is propping up the investment activity.

Secondly, we expect the consumer demand to resurge. In addition to the reviving lending activity, which I have mentioned, salaries have started growing as well. This year alone, real wages can grow by over 3 percent, and next year we expect them to grow by some 4 percent, including due to rising wages in the public sector.

Of course, we will need several years to make up for people’s losses in 2014 and 2015, but the crucial thing is that this nascent income growth is not based on oil prices but on the active growth of labor efficiency. We expect it to grow 2 percent; last year we only reported a symbolic growth of 0.1 percent.

Considering the record low unemployment level, which we expect to drop to 4.7 percent in three years, as well as the unfavorable demography, the growth of labor efficiency will be our key to maintaining economic growth and individual incomes.

The third target is the further growth of investment activity. In this context, we must continue working to make conditions for Russian business more predictable. We are moving towards this goal thanks to changes in the macroeconomic policy, which we introduced in the past few years. These include inflation targeting by the Bank of Russia, which has helped us reduce inflation to a record low, a responsible budget policy and the introduction of a new mechanism for moderating the influence of oil prices on the national economy.

It is important that predictability is also growing at the micro level. We have launched a reform of the regulatory system, which is becoming more predictable and, most importantly, is focused on prevention rather than penalty.

Mr. Putin, the decisions you made public at a recent meeting at the Nizhne-Bureiskaya HPP are a major element for reducing administrative pressure.

Another major component of predictability is tariff regulation. This year we continued our indexation policy that includes adjusting prices to inflation targeting. We will soon prepare proposals for transitioning to long-term price formation, so that infrastructure companies and business in general will know that prices will not change for a maximally long period of time. This issue was also discussed at a meeting in Vladivostok.

An important task in the context of the economic policy is active support of tools for investment financing. We have support programs that are actively developing, primarily investment lending programs. The program Six and a Half is in effect for small and medium-sized businesses. Work is underway to launch the “factory of project financing,” which will support projects worth three billion rubles and up.

I would like to particularly thank the Bank of Russia, which has actively supported this program’s development. Lower reserve and capital requirements will be applied to banks for the loans issued under this program. The first loans are expected to be granted in the first quarter of 2018.
It is very important that we have organized the work under both programs in such a way that allows for adopting a decision on granting a loan without any officials involved.

Of course, an important element for the growth of investment activity is a program for infrastructure mortgages. I will brief you on its preparation soon. As a result of these programs and their outcome, we expect active investment growth at 5–6 percent per year during the forecasted period.

It is clear that economic growth largely depends on the Government’s priority projects. As regards the maximum effect on GDP growth, I would like to note a project for creating conditions for active growth of non-resource exports, as well as a recently approved project for increasing labor efficiency. Under the latter, we aim for active cooperation with our Japanese partners, with a corresponding agreement signed at the Eastern Economic Forum.

Due to the 2.1 percent GDP increase this year, in the next three years we expect sustainable growth of the national economy of at least two percent, a stable inflation rate at four percent, and household income recovery. During this three-year period, real wages should increase by about 10 percent.

An increase in wages is extremely important because it allows us to attract and retain the best talent in the country. In today’s global economy, victory in competition goes to those who can, on the one hand, help their people fulfil their potential, and on the other hand, be the most attractive place to live and work to attract the best talent.

There is still a difference between the basic and the desired scenario. The basic forecast gives us 2.3-percent economic growth while the desired growth is 3.1 percent. Therefore, the Government continues to develop and gradually implement more changes to promote economic growth at a rate higher than the global average. First, in addition to the programs mentioned here today, I am talking about the digital economy program, increasing the competitiveness of Russian cities and a number of other projects. I also want to note that the basic scenario so far includes the conservative effect of the measures that were implemented only recently.

This concludes my report.

Vladimir Putin:

Mr. Oreshkin, everything you said clearly indicates that the Russian economy has overcome the crisis and is gathering momentum. Under these conditions, we must do our best to maintain this dynamic. We have discussed this recently at international forums, including the BRICS summit. This is a dynamic that brings results gradually. Both participants in economic activity and the public will gradually feel the positive effects of the changes in the economy.

Russian President Vladimir Putin.
Russian President Vladimir Putin.
You talked about the public’s restored income. We are aware of the need for increasing wages. At the same time, experts claim that in general, the actual earnings of the public are still being restored rather slowly. This is the first thing.

Second, you mentioned restored consumer demand. But lately, retail trade has experienced growth of only 0.7 percent; you must be aware of this.

Third, considering the exchange rate difference, imports are growing as well. Russian producers are already feeling the effect of this. You can see this from what is on the shelves and how retailers are behaving.

I would like you to comment on all this. What do you think would be a reasonable way to proceed? Or do you think all the necessary measures have been taken? What would you recommend to the Russian Government and the entire economic sector as the leading economic agency? Please.

Maxim Oreshkin:

You are correct that income growth has barely resumed and is so far limited in scale, including this year, when we reported an increase in labor efficiency, which provides the basis for the accelerated growth of real wages. Therefore, the measures the Russian Government is taking, the effect of which we will only see in a year or two, are designed to support investment activity for reviving production. The project aimed at promoting the growth of labor efficiency includes the use of modern management technologies at companies, which will help them increase output and revenue per employee.

Taken together, this will create a situation in which we will be able to increase wages and other individual incomes. Importantly, the growth of labor efficiency must go together with an increase in salaries, and this growth must be balanced and sustainable so that we do not roll back after a while.
As for the exchange rate, the situation is indeed ambiguous. The ruble has strengthened compared to the dollar but the ruble/euro rate has weakened compared to last year. The reason for this is that the dollar has weakened greatly relative to all global currencies this year. The euro/dollar rate has grown from EUR 1.05 early this year to over EUR 1.20.

But it is true that the volume of imports has grown. This is evidence of resurging consumer demand. We see that car sales have increased 16 percent compared to last year. A large share of car parts is imported, which is increasing imports.

Our task is to maintain the competitiveness of Russian companies. However, I believe that we should do this not by reducing individual’s real incomes, but primarily by investing in new equipment, by introducing new technologies, including management technologies, and by digitalizing production. The measures I have mentioned are aimed at this, including such vital elements as reduced administrative pressure and enhanced tariff predictability.

Vladimir Putin:

I see what you mean. Thank you.

Today I would also like to talk about the minimum wage. Mr. Medvedev and I touched on this subject when we talked about the ongoing budget discussions in the Government. I would like to hear what Maxim Topilin has to say on this issue and also on the balance between the minimum wage and the subsistence wage. Mr. Topilin, we discussed this subject behind closed doors a week ago, and I asked you to think about it some more and to formulate your proposals. Go ahead, please.

Minister of Labor and Social Protection Maxim Topilin:

Mr. President, Mr. Prime Minister,

In accordance with the Labor Code, a requirement is envisaged for the future of the minimum wage to be no less than the subsistence level of the working-age population. We have been moving with our social partners (it is a permanent topic for a dialogue between the Russian Government, employers and trade unions) towards solving this matter. You remember that back in 2015 the minimum wage was barely above 50 percent of the subsistence level. In the past two years, 2016 and 2017, the minimum wage was increased three times, and this rise amounted to 31 percent over a period of the past two years.

The largest increase was in July this year when we raised the minimum wage by 21 percent in one go. Thanks to these systemic solutions, the minimum wage as of July is 7,800 rubles, and we have reached its ratio with the subsistence level of over 70 percent, 71 percent to be more precise. We keep an ongoing dialogue on solving this matter with our social partners.

These actions have reduced the number of people earning below the subsistence level from 5.5 million in 2015 to 4 million. The changes here are quite substantial, yet we realize that this is inadmissible in the future, everyone should earn no less than the subsistence level.

Mr. President, we keep working with our social partners, with the State Duma. This year, a working group was set up by the State Duma headed by First Deputy Speaker Alexander Zhukov, negotiations were ongoing, different options were being considered, as were different models in terms of deadlines and schedules.

This subject is becoming crucial since we have reached the stage where we have entered into negotiations with employers as well as trade unions. The General Agreement [between the national trade unions, national employer association and the Government] expires this year, and we have to agree on a new General Agreement and approve all the parameters, including, apparently, the parameters and schedule for increasing the minimum wage and bringing it up to the subsistence level. Taking into account that the federal budget is being prepared at the moment, this topic could be finally settled within the current budget cycle.

Vladimir Putin:

Look, the minimum wage was increased twice in 2016, on January 1 and on July 1. This year, it was increased by 4 percent to 7,800 rubles on July 1.

Maxim Topilin:

7,800 rubles is only 71 percent of the subsistence wage.

Vladimir Putin:

Almost 72 percent.

You were correct when you said that our goal is, fundamentally, to increase the minimum wage to the subsistence level at the least. We must balance the minimum wage and the subsistence level and overcome the situation where one’s wage is not enough to cover the basic necessities.

I am aware of the discussion that is going on in the Government, and I understand my colleagues who are protecting their different views, because the measures we are considering will result in additional spending by the government and also by businesses. However, I believe that it is very important to do this, and that we must do this as soon as possible but in keeping with our budget’s parameters.
I suggest that the minimum wage be increased from the current 71–72 percent to at least 85 percent of the subsistence level on January 1, 2018. Furthermore, the minimum wage must be made equal to the subsistence level by January 1, 2019, or even sooner if the Government decides that we can do it. I ask the Government to submit proposals to this effect to the State Duma together with the draft federal budget for the next three years.

There is one more issue on our agenda. I want to ask the deputy prime minister in charge of social issues about this year’s enrolment at universities and at secondary vocational schools, and also about the beginning of the new academic year.

Deputy Prime Minister Olga Golodets:

Mr. President, Mr. Prime Minister,

This academic year has started for 30.4 million children.

A total of 7.3 million kids started preschools, which is 188,000 more than last year. We implemented the program for providing additional places in preschools just in time. Let me remind you that in the past three years, an additional 1.34 million places were created in kindergartens, which today allows kids aged from three to seven to receive education on a good accessibility basis, with no queues to kindergarten for this age group in most regions of Russia. Such queues remain only in five regions where this program is still underway – Northern Ossetia, Dagestan, Tyva, Crimea, and Ingushetia.

As regards school education, 1.8 million children started school this year, or 100,000 more than in 2016. The total number of pupils is 15.5 million.

A program for creating school infrastructure is being implemented ahead of schedule, and there have been some breakthroughs in quality. We have modern standardized schools that allow for expanding the school education network and creating modern conditions for pupils.

By the start of this academic year, 76 new schools had been opened, and another 94 will be ready by the end of the year.

Educational activities have been expanded through very significant programs for the continued professional education for teachers and for developing new federal state educational standards, and this has steadily produced good results in teaching. Our pupils traditionally have excellent results in such assessment programs as TIMSS, PISA and PIRLS, and show good results on the national final school exam.

This year, we have observed significant qualitative changes, primarily in such subjects as physics and computer science. This has been proved by the entrance exams to higher education institutions.

This year, the highest pass score was for Applied Mathematics and Computer Science at the St. Petersburg National Research University of Information Technologies, Mechanics and Optics [ITMO University]. Applicants had to pass the threshold of 99.7 (out of 100). The same major at the Higher School of Economics also required a very high score of 99.3. The most difficult entrance examinations were at the Moscow Institute of Physics and Technology with an average pass score of 85.3.

Generally, the pass score is higher this year, which indicates a higher admissions quality. The composition of students is significantly different and closely tied to the demands of the current economy. The planned enrolment for such programs as IT, aviation, rocket and space technology has been increased by 5.3 percent; for nuclear energy by 5.5 percent, for shipbuilding by 2.5 percent. The share of places in medical programs is growing. The enrolment in education programs is traditionally high. We can see that the competition in teaching majors remains quite high, around 2.5 applicants per place.

There are some qualitative changes in college admissions as well.

Some 2.8 million people were enrolled in colleges and we can see a higher competition in several programs. For example, there were up to nine applicants per place for chef programs in some colleges. Employers are asking for the targeted enrolment scheme to be extended from universities to vocational schools. We are working on these opportunities.

That concludes my report.

Vladimir Putin:

So, there is a growing interest in skilled jobs.

Olga Golodets:


Vladimir Putin:

As far as I know, the number of vocational students is 50,000 higher than last year.

Olga Golodets:


Vladimir Putin:

The statistics you just cited sound odd then: two and a half applicants per place. You should have said “this number of applicants rounded to this.” But “two and a half people” sounds odd.

Alright. Let us proceed to the main issue.


Putin met with Presidential Executive Office officials.

Vladimir Putin had a working meeting with senior officials of the Presidential Executive Office and economic officials of the Russian Government.

Vladimir Putin, Presidential Executive Office officials, Russian Government economic officials.
Vladimir Putin had a meeting with Presidential Executive Office senior officials and Russian Government economic officials.
The discussion focused on current issues of the socioeconomic agenda.

Council for Strategic Development and Priority Projects.

Vladimir Putin chaired a meeting of the Presidential Council for Strategic Development and Priority Projects at the Novo-Ogaryovo residence.

The Digital Economy program was the main item on the agenda. Taking part in the meeting were Russian Government members, Presidential envoys to federal districts, and heads of business associations, major companies and corporations.

The meeting featured keynote presentations by:
  • Minister of Communications and Mass Media Nikolai Nikiforov
  • Industry and Trade Minister Denis Manturov
  • Moscow Mayor Sergei Sobyanin
  • Director of the Young Professionals direction at the Agency for Strategic Initiatives Dmitry Peskov

* * *

President of Russia Vladimir Putin:

Good afternoon, colleagues.

As you know, pursuant to the Address to the Federal Assembly, the Government was instructed to propose comprehensive approaches to developing Russia’s human resources, as well as intellectual and technological capabilities in the so-called digital economy.

Russian Government worked closely with the business and expert communities and drafted a program to this effect until the mid-2020s. Today, we will discuss its key points.

Let me reiterate that the digital economy should not be regarded as a standalone industry. It is a way of life, a new foundation for the administration of government, the economy, business, social services, and society in general. Of course, the creation of a digital economy is also a matter of national security and Russia’s independence, a way to make Russian companies competitive and enhance Russia’s standing on the international stage for decades to come.

I must say that in the past few years Russia has made tangible progress in many areas of digital development. We are among the world’s leaders in Broad Band WL and Wi-Fi coverage. According to Rosstat [Federal State Statistics Service], from 2010 to 2016, the share of households with access to the internet grew from 48.4 percent to 74.8 percent. The average Internet speed in Russia increased by 29 percent in 2016, which is the same as in France and Italy. By early 2017, the Russian market of commercial storage and processing centers grew to 14.5 billion rubles.

Owing to the high competence level of our IT experts, Russian companies offer unique software solutions. They are being used in the most diverse areas, for instance, in the development of smart cities.

I would like to note that our capital Moscow is among the world’s leaders in using digital technology in a modern city infrastructure and has left behind such metropolitan cities as Toronto, Tokyo, Hong Kong, Barcelona and Sydney.

Incidentally, in some categories Moscow ranks among the top three. Thus, in the use of digital services for communication between the state and its citizens, our capital occupies the first place – the first place in the world. I hope Mr. Sobyanin will tell us about it and share his experience with us.

Moscow ranks second in the world in creating infrastructure for implementing innovations.

It is third in developing business models based on large-scale introduction of advanced technologies and in its educational system that meets the requirements of the future labor market.

Mr. Sobyanin will tell us how he has achieved such results. This means we are competent enough to develop other territories in the same way. Naturally, Moscow occupies a special place and it has many more opportunities than others do. We have the leading companies here. All this is clear but we have competencies, so we can do it.

We must use our entire technological and intellectual potential to implement this complicated umbrella project. It is unprecedented in terms of scale and hence its influence on the life of the country and of every Russian citizen. It has been already compared to the breakthrough projects that helped Russia strengthen its positions in the world in different periods throughout its history, such as the construction of railways in the late 19th century or electrification in the first half of the 20th century. Our top priority now is to create a mechanism for implementing this project.

I will tell you briefly about some elements that I consider being of crucial significance.

Council for Strategic Development and Priority Projects meeting.
Council for Strategic Development and Priority Projects meeting.
Firstly, I outlined the main areas of developing the digital economy in Russia when I spoke at the St Petersburg International Economic Forum. These main areas are the lifting of legal obstacles that hinder the introduction of novel technologies; the creation of a core development infrastructure, such as communication lines and data storage and processing centers; a thorough improvement of the education system, including through total digital literacy; and the creation of a mechanism for supporting Russian companies that are regarded as competence centers in the sphere of digital and other breakthrough technologies.

I believe that we should appoint special people in charge of these areas and determine the target figures and timeframes for achieving them.

Secondly, the digital economy project is a comprehensive project that covers all spheres of life without exception, has a direct impact on the operation of our companies and concerns all Russian citizens. Therefore, we need to create an effective governance system that would correspond to the complexity of goals and would allow us to rally the efforts of all levels of power, businesses and research and academic institutions.

Thirdly, the federal and regional authorities will invest nearly 200 billion rubles in information technologies this year alone. I expect your proposals on enhancing the effectiveness of these investments. Overall, as I have said, we must determine the sources, mechanisms and volumes of allocations for the digital economy project.

Let us proceed to the subject of our discussion.

Our next speaker is Mr. Nikiforov, Minister of Communications and Mass Media.

Minister of Communications and Mass Media Nikolai Nikiforov:

Mr. President, colleagues,

In conjunction with the Presidential Executive Office, on your instructions, the Government has developed the Digital Economy program. What does this mean? A digital economy is an economy where data constitute an independent economic unit.

Rephrased, a digital economy is a data economy. The digital economy is about how we create, transmit, collect, store, protect, and, most importantly, analyze data and how, based on this data, we make decisions that make our economy and management more efficient, and, therefore, improve the quality of life.

What are the existing trends? Over the past five to ten years, we have been experiencing an actual revolution in technology and telecommunications. Tens of millions of Russians have got used to the daily and even hourly use of mobile internet, mobile devices, and online payment so quickly that they do not even realize that they are surrounded by dozens of various automatic sensors that collect and transmit information.

All this is happening so quickly that we even forget that 10 short years ago there was no such thing as smartphone, which people currently use to go online. Five years ago, there was no such thing as mobile high-speed internet access technology, which we refer to as 4G, or LTE. These processes are speeding up, and the technical digital race is gaining momentum.

What do we need to succeed? For such a large-scale undertaking with digital data, which will permeate all spheres of life and all business processes, we need modern cross-cutting technologies, when a digital technology is developed once and then can be re-used in a wide range of industries.

In addition to conventional technologies, such as wireless communication, mobile devices, and microelectronics, these are fundamentally new entities, including technology for handling big data, the distributed registries also known as block chain, machine learning, virtual and augmented reality, artificial intelligence, and quantum technologies, to name a few.

The digital economy is not about the share of people connected to the internet, but about how traditional areas of the economy have changed under the influence of digital transformation, how different they have become. These changes are taking place in all countries without exception and in all sectors, be it transport, finance, healthcare, trade or government administration.

All these sectors are experiencing enormous pressure under the impact of digital changes. If we want our economy to be strong and competitive, and there is no other way, we can only achieve this by leading the digital transformation, among other things.

The focus of the Digital Economy program is to create a critical set of conditions for launching these processes and ensuring their accelerated development.

We can single out a kind of basic foundation that consists of five components. The first one is infrastructure, as you mentioned Mr. Putin. Then there is the regulatory base, the technological groundwork, workforce capacity and information security.

Naturally, we will have to create fundamentally new regulatory documents to support the digital transformation. We need an environment where, far from impeding, we are facilitating and speeding up digital transformation processes to turn Russia into a jurisdiction that is appealing to engineers of promising digital technologies, who would dream of developing and testing it here in Russia and offering these solutions for export later on.

We are continuously talking about the most diverse examples, such as electronic sick leave certificates and electronic work record books. We need regulation so that, when carrying out major repairs, we would equip our buildings with sensors from the very start to collect information about the use of utility services.

State Duma Speaker Vyacheslav Volodin established a special council on developing the digital economy and we are convinced that in cooperation with deputies we can do what is required.

Obviously, digital infrastructure is crucial for interconnecting our country’s vast territory and for data collection and storage. It is what makes it possible for us to ship this new economic entity. We have been actively developing this infrastructure for several years, building fiber optic communication lines to small towns and achieving results in areas that, it seemed, would never have modern communication facilities, bringing fiber optic lines to Magadan, Kamchatka and Yakutia, and now we are about to reach Norilsk. I believe these projects are real communication breakthroughs because not a single country in the world has to build communication lines under such difficult conditions.

Vladimir Putin at the Council for Strategic Development and Priority Projects meeting.
Vladimir Putin at the Council for Strategic Development and Priority Projects meeting.
At the same time, we have the second lowest rates in the world for mobile internet and cellular communication services. This is according to the World Economic Forum. And we are tenth in the world in terms of prices for landline internet access. Considering the level of our spending, I believe this is a very good result, which also demonstrates the level of competition in this sector.

Infrastructure and technology groundwork are of paramount importance. What is technology groundwork? This is teams and companies that create and develop those cross cutting technologies. There are quite a few of them in Russia and we are proud of them. Our programmers really achieve leading positions in various international competitions.

IT exports are growing. They have already reached a threshold of $7 billion. You have set the goal of raising IT exports to the export level in such sectors as the defense industry or agriculture. This is what we aim for, and we are confident that the development of regulations and conditions for the development of the digital economy will help us achieve this goal.

The most important thing, of course, is human capital because the digital economy can develop successfully only when people have essential knowledge and experience. This is competence in the broad sense of the word. This is not only about software developers but involves a review of the entire approach toward highly skilled specialists in many fields.

As for programmers, today we have about 500,000. We believe that the required technology groundwork can be ensured if we increase their number and set the target at 1 million people employed in the IT sector.

The next layer includes the so-called digital platforms, the operators of such platforms, and cross-cutting digital technologies. We have quite a few such companies. They include completely privately owned companies and companies with state interest. We all know Yandex, and we are also aware of what the Russian Post, Rostelecom, and Sberbank are doing.

The key point is that we need Russian cross-cutting digital technologies and Russian digital platforms. We need our own companies, our national champions.

For many years, we have traditionally supported a wide range of traditional sectors, such as agriculture, various industries, the aviation industry, and the automotive industry. Now, the moment has come when we really need to support this area of activity.

At the top level, this is already a matter of specific markets, companies, products, and business models, which in different industries are beginning to work in a new way. Our goal is to create proper conditions for these industries to operate effectively based on the use of data.

The goal is to develop a kind of ecosystem in which, on the one hand, major companies, operators of these digital platforms, can work. On the other hand, there may be a small startup business, which will look for new ideas and test them, and niche companies that can operate in different sectors of the economy.

We can ensure the global competitiveness of the national economy, and achieve leadership positions in some areas. However, to do so, we need our partners to consolidate, including at the international level.

The high-tech ministers of the BRICS countries will meet for the third time in late July. Let me remind you that the first such meeting was held in Moscow, when Russia acted as chair.

Our goal is to create a competitive global information technology market. I stress the word “competitive,” because we can see attempts to monopolize it. Together with our international colleagues, we will defend the position of fair market competition.

International experience is very important. We studied and were guided by the experience of similar programs in many countries. We developed the program with a large team consisting of over 150 people. We had many meetings with officials from the Government, the Prime Minister, and Deputy Prime Ministers and had consultations with the Presidential Executive Office. We believe that we have also managed to maintain meaningful dialogue with the IT industry itself.

We extensively discussed the program with representatives of IT companies and adjusted it based on their proposals in many respects. What instruments do we suggest for continuing to implement it and achieving specific results? We believe it should be primarily applied in healthcare, government administration and the smart city concept.

Why have we chosen these areas? Because the state is playing the biggest role in them and their social significance is very high. However, the program is not at all limited to these areas. Naturally, changes will be taking place in all other industries as well, and gradually we will expand the range of specific industries where priority projects will be implemented.

The Digital Economy program is not an operational document. It states our goals for 2024, towards which we should start moving rapidly without delay. And we will start moving towards them following an operational document, the so-called adjustable three-year plan. We believe this plan should be endorsed by the Government and adjusted every year. The plan determines our goals, tasks and specific milestones, including sources of funding. We have a list of goals, tasks and deadlines for every area.

We will need an entirely new model for managing, implementing and providing financial support for the program. In our estimate, annual expenses within the operational plan that we are to draft and endorse will be around 100 billion rubles.

I would like to emphasize that a considerable part of these funds have already been allocated in the federal budget, but we will have to consolidate them and determine a uniform technical policy and uniform rules of the game.

Russian Government is drafting such proposals. Additional budgetary funds will be required to accomplish this.

Mr. President, colleagues, I would like you to approve the Digital Economy program in general, instruct the Government to approve it and to start developing a specific implementation plan for the next three years.

Vladimir Putin:

Good, thank you. We will do so at the end of our discussion.

Now, I would like to ask the Minister of Industry and Trade, Mr. Manturov, to say a few words on this subject matter.

Minister of Industry and Trade Denis Manturov:

Mr. President, colleagues,

According to our estimates, a system-wide transition to a digital development model can boost labor productivity in manufacturing industries by over 30 percent by 2024 and increase the contribution to the GDP of the sectors based on advanced manufacturing technologies to 15 percent.

The principles of digitalization are already being used in our country in high-tech projects. The MS-21 aircraft, the PD-14 engine, the head icebreaker Arktika, the vehicles based on a single modular platform, and a number of other projects are being implemented using digital design and digital modelling technologies.

To be able to scale such projects to a wide range of industries, Russia has come up with its own ideas in three key areas. The first and most important is the development of modern equipment, materials and supplies. Our enterprises are already making sophisticated machining centers with Russian-made CNC, as well as equipment and raw materials for additive processes. Today, domestic serial manufacturers of 3D printers, primarily for prototyping, are present on the market. However, we are still at the initial stage in terms of developing industrial-scale additive equipment and industrial robots.

The development of the optoelectronic industry is of paramount importance for making digitalization materials. Specialized clusters and engineering photonics centers have been created in Saransk, Perm, Zelenograd and Novosibirsk, in order to combine the capabilities of Russian enterprises.

The development of sophisticated software is the second area where we enjoy strong starting positions for digitalization. In this segment, I would like to note the multifunctional package Logos created by Rosatom in Sarov, which includes engineering analysis and supercomputer modelling.

The third area includes the development of intelligent management systems. In this area, our competence in the sphere of cybersecurity gives us a key competitive edge. The Kaspersky Lab and the Russian company InfoWatch are already implementing information protection projects in the transport and energy infrastructure facilities, and can promptly adapt these solutions to industry digitalization goals.

To stimulate the active application of these solutions in production processes, we believe it is essential to modify the existing incentives. We are working to readjust the mechanism of subsidizing the production of pilot batches of equipment by shifting the focus to digitization. There are also plans to review the list of software products, the procurement of which is subsidized today by the Ministry of Industry and Trade.

Today, this support measure is applied to engineering software. We believe it is advisable, firstly, to extend it to software products that are essential for implementing industrial internet technology, that is to say, production management systems, and second, to include large companies in the high-tech segment among those entitled to discounts.

Since this applies mostly to new technological solutions, it is extremely important to streamline the regulatory basis and standards for emerging markets. To this end, we are already implementing a separate program to develop inter-sectorial standards in areas such as cyber-physical systems, mathematical modelling, the “internet of things” industry, “smart production” and “smart cities.”

Putting in place a technological and regulatory basis will make it possible to move full steam ahead toward creating a network of factories of the future in the country. Rostec plans to put the first such factory into operation before the end of this year. As part this project, ODK Saturn is building a test site to fine-tune technology that can be used, in particular, in manufacturing complex aircraft components.

In all, by 2035, about 40 factories of the future, 25 test sites and 15 experimental digital certification centers should be created in Russia. To ensure the effective fulfillment of this task, in formulating a detailed plan for the implementation of the Digital Economy program, we will spell out all the activities in the industrial sector, synchronizing them with the areas that are overseen by our colleagues at other agencies.

Thank you.

Vladimir Putin:

Mr. Sobyanin.

Moscow Mayor Sergei Sobyanin:

Mr. President, colleagues,

For Moscow, smart city technology is no new phenomenon. It is required for running the city. The city economy directly employs about 600,000 people. It has thousands of offices, one of the world’s largest systems of water, heating and gas supplies, transportation, healthcare, education and social protection. Today it is impossible to take care of the needs and problems of 12 million people without introducing information technologies.

There are several key areas in which we are working together with the Government of the Russian Federation, industry-specific ministries and departments, in particular, the provision of e-services to the population. Today six million Muscovites, or practically every Moscow family, are registered on our government services website.

Every year we receive over 200 million inquiries, or about 50–60 inquiries per family. We have a reliable identification system that does not require a cumbersome and complicated procedure for getting e-signatures. As a result, people save two or three working days when receiving relevant services. For instance, Muscovites can receive allowances for children without an e-signature and without applying at an integrated government service center in person. In 2016 alone, we received 119,000 e-applications and paid out over three billion rubles for the birth of a child, additional allowances to young families and so on.

We have a similar system for granting e-services to businesses. The main services in transport, construction, land and property relations – in all 74 services for businesses – have been transferred to e-format and are being used by thousands of large, medium and small companies. Without leaving the office, one can get a taxi license, conclude, execute or reregister a contract for renting a plot of land, submit design documents for expert assessment, receive a construction permit or a permit for the entry of a lorry into the city center and so on.

Direct contact with city residents is perhaps one of the key areas in implementing the Smart City program to actively engage with millions of people in traditional formats. They are essential but not sufficient. It is impossible to resolve many issues without information technology.

The Our City portal accumulates all complaints from the public on 187 matters – from outpatient hospitals to transport to potholes to trash collection and so on and so forth. In other words, 90 percent of all the issues that people encounter can be resolved through this portal. It has 1 million registered users.

In recent years, we have resolved about 2 million issues. It takes on average four days to resolve a matter. Needless to say, this is a far more effective system than customary complaints on paper that go from one agency to another: They are not structured and people get pro forma replies.

Here, getting a reply does not involve getting the runaround. A person takes a picture of whatever he is reporting and sends the photo via the internet. Importantly, it is an open system. The city as a whole can watch a complaint being processed and evaluate the response. If the response is off the mark, a person can always say so online and state what the actual situation is, posting a photo to confirm that. Therefore, this is also about public oversight over the work of city services. We believe that the 1 million users are 1 million real assistants in the city who help us set things straight and deal with particular matters.

In addition, there is the Active Citizen system involving about 2 million Muscovites. It has helped make 1,500 decisions. Active Citizen and crowdsourcing help deal with everyday matters – from trash disposal to the illegal installation of a summer café. Muscovites participate in running the city, put forward proposals concerning the provision of amenities in courtyards, planting trees and school holiday terms, and are involved in large city projects, in particular deciding on participation or nonparticipation in the housing relocation program, formulate standards for city services, including outpatient clinics, schools, integrated government service centers and so on.

Regarding city management, this is of course an opportunity to get right to the bottom of citizens’ complaints and respond to them not formally but with regard to each block, residential building and district, conduct personalized online voting, make managerial decisions in the interests of the majority of Muscovites and avoid mistakes.

Education is one of a smart city’s key features, as our colleagues have mentioned. A number of solutions have already been implemented in Moscow. Many of these solutions have been implemented in other cities and regions. We provide all-round assistance to them, and learn from them as well.

We have created a registration system for kindergartens, schools and various activity groups to preclude any corruption schemes that existed previously. Getting into schools or kindergartens was a huge problem with long waiting lists. Today, there is nothing of the kind.

A single electronic report card has been created, which is used by almost all students and parents. Of course, this is not good news for the students, because they can no longer hide their bad marks or other issues, but it allows their parents to monitor their performance.

A unified system of access control and catering has been created, so parents know exactly when their child has entered the school building, what he or she had for lunch, etc. Of course, it represents a personalized accounting system for the city, which allows us to save about 5 billion rubles a year, since we have eliminated duplicating processes, misrepresentations, and other negative things.

Currently, we are planning the next stage of education computerization where we will introduce new information technology and a new resource base. However, most importantly, we are busy creating a uniform educational environment in conjunction with the Ministry of Education, so that each teacher can have access to an electronic lesson plan with teaching aids and the best options for conducting a class. A single information base and high quality content must be put in place as well.

This is the critical area. We are lagging behind our colleagues, I mean the best foreign practices, in a major way. We are monitoring this situation. I hope that we will remove these inefficiencies within a year or two, at most three, and that the education process at our schools will be more exciting and more effective.

Naturally, healthcare is a major area for municipal information systems. At one time, in cooperation with the Ministry of Healthcare we established a unique uniform medical information system. At any rate, we have not seen anything similar in other metropolitan areas.

A program of this scale allows people to register for an appointment with a doctor, and monitors patients’ visits to an outpatient clinic and even the time they spend there. This allowed us to drastically reduce the time for making appointments with doctors and waiting for them. Today only 10 percent of patients wait for an appointment for over 20 minutes. Before they had to wait much longer than that.

Of course, it is very important for directors of clinics and the city to manage labor resources and flows of patients, analyze the real situation and prevent false reporting that, regrettably, was very common in the past for various reasons.

Today in cooperation with the Ministry of Healthcare and the Ministry of Communications and Mass Media, we are carrying out our next project, the introduction of medical e-cards, and this is not some flight of fancy. We have already introduced three million such cards and I believe we will complete this work in the next year or two.

The introduction of centralized laboratory services will give a doctor special access to laboratory tests and there will be no need to collect any documents or results of tests. It should also be a centralized and closed system but accessible to specialists.

The same applies to sophisticated tests, such as x-ray, MRI, CT imaging and the like, and the creation of an information and methodological base that is being actively developed today. As a result, a significant amount of information will be collected on patients and methodological support provided for doctors to help them make a diagnosis and prescribe the necessary treatment.

There are also many issues linked with sick leave e-certificates, e-prescriptions and the like. In other words, there is an enormous amount of work that we should certainly conduct with our colleagues from federal ministries, which is what we are doing.

The next system is quite serious and, in our opinion, it is one of the best in the world. It is the intelligent transport system. It was put in place over the past three to four years, borrowing on the world’s best achievements. It includes traffic management, traffic oversight, photo and video recording of traffic violations and oversight over the operation of the public transit system.

As a result, the number of traffic accidents has almost halved and average traffic speed has increased by 13 percent with the number of vehicles growing exponentially. Of course, the situation on Moscow roads these days is rather difficult because of the street renovation program, but I believe it will get back to normal within the next four to six weeks.

At present, a metro security system is being actively introduced in collaboration with the Transport Ministry and federal agencies and I believe it will be finalized within the next several years. Another priority for us is the utilities management system, the Glonass system, data collection technology and so on.

What would I like to ask and propose for inclusion in the draft resolution? In our view, we need to finalize what the Minister said – IT education standards not only in the system of higher education but also in secondary schools. Unfortunately, they leave much to be desired and it is important to get IT companies, domestic developers involved in this process.

Education software and methodology as such should of course be different; it should keep pace with the requirements formulated today by the digital economy development program.
There is another thing that I believe is important. We digitize particular services, but at the same time, the law requires that a document may also be submitted in paper format. If an official has the opportunity to accept a paper document, then all the advantages of IT, of obligatory online services are eliminated.

Oversight and technology transparency deteriorate and so on. Therefore, it is essential to make online services mandatory, without the option of paperwork, at least at the regional level. If a person has no such opportunity, there are always integrated government service centers and other facilities, but without this it is very difficult to move forward, and it will simply impede the dissemination of online services.

Vladimir Putin:

Thank you very much.

Mr. Peskov, the Agency for Strategic Initiatives, please.

Director of the Young Professionals direction at the Agency for Strategic Initiatives Dmitry Peskov:

Mr. President, colleagues,

I would like to say a few words about the ideology of the program, some issues it raises and the gaps we encounter. Of course, the program as such is definitely not a digital state plan. It does not lay claim to being all-inclusive or comprehensive.

Perhaps it is not a very good idea to develop such a digital state plan and hope that we will create a modern digital economy in Russia with a series of projects. The pace of change is so high that it is possible to create the environment and essential prerequisites, but we should not think that we are the smartest and know precisely what the future will be like or what exactly we will create.

In this sense, the program is a foundation. To use an analogy, it is an industrial site on a designated land plot with key technologies, roads in the form of broadband internet services, power supply in the form of the computing capacities of data processing centers and a fence in the form of an information security system.

However, it is up to a person, an entrepreneur, not the state, to decide exactly what will be built on this site, because, to reiterate, everything changes too rapidly. Business does this better not because it is smarter but because it is quicker. Needless to say, we should do our best to keep pace with the competition.

We have a very ambitious program. It is much smaller than what we actually need to do but it is larger than what we can do today. This gap is precisely what the program is directed at. In other words, we will not become a world leader by implementing this program but it will give us our ticket to the first league over these years.

We are facing two critical factors – normative regulations and human resources. Our risk in the former is very simple. The current regulatory system naturally prohibits us from doing everything we are planning to do in the digital economy.

This is a natural function of this regulatory system, but we must establish a ban on the word “ban” with the exception of the Criminal Code, of course.

We must have options: “This is allowed but let’s try it in a sand box,” or “let’s try it out with some restrictions.” We must build such a system by all means or else people are going to be very skillfully avoiding regulation in the digital economy.

If we try to excessively regulate, we will create an advanced nation of crypto-anarchists. They will successfully compete with our bodies in bypassing relevant norms. We will, of course, meet our goal of universal digital literacy but probably this will not be exactly the literacy we need.

People are a key restriction on the program. We see that we need at least three levels of decisions in this context. Universal digital literacy should be at school level and the program sets very ambitious tasks.

To begin with, it is necessary to introduce digital norms. Those who master them will have advantages in entering universities.

It is necessary to separately regulate a modernized technology class. The world’s best practices should be incorporated right into this class.

There is also a proposal to count the results on informatics as part of the Uniform State Exam, but these are minimal measures.

We understand that we do not need a million computer experts for a breakthrough but, according to our estimates, we need 120,000 highly qualified engineers because if we retrain everyone and they are not very literate, we will fall into the same trap as our Indian colleagues.

For ten years, they invested huge funds into large-scale training of low-level engineers and programmers, and now during a new wave of the technological revolution they are easily replaced by artificial intelligence in data and voice processing centers and in many other services.

We must not miss this wave of artificial intelligence under any circumstances. Of course, it will also do some unpleasant things. It will throw a certain number of people onto the labor market and we should be prepared for that, so the program envisions the creation of a system of digital vouchers to obtain the required skills through online education systems, which are essential for the digital economy. It seems that these three steps can address some personnel training tasks.

Naturally, we will come up against an ethical barrier. This barrier is very serious because society will quite often not be prepared to use or accept the results of these technologies. In public perception today, a robot at the steering wheel, at the helm or with a scalpel is something very dangerous.

In 20 years, we will arrive at the opposite, with people saying that a human being at the wheel, at the helm or with a scalpel is dangerous and even criminal because this can lead to heavy loss of life due to the large number of mistakes.

Even with respect to healthcare, the program envisions that we will farm out some decisions, for example in diagnostics, to artificial intelligence and automated systems.

Naturally, it is important for us not only to digitize the old, not only to digitize government services and administration – we also need to make money from that. In this respect, we are synchronizing the Digital Economy program with the National Technological Initiative (NTI). In other words, NTI markets should use the infrastructure that is being created in the digital economy, fuelling its progress, as it were.

Therefore, to reiterate, there should be not only centers of loss but also centers of profit. Of course, for this entire system to move forward, we need an innovative administration system because there are no examples in the world of ministries creating advanced digital economy systems.

What is more, there are no examples of such systems being created by public companies alone. In all cases, this is the role of small companies, of startups. We know that our competitors are launching similar programs; we know about start-up nation and other things.

It is important to create a center of competence within the administration system where the voice of business will carry as much weight as the voice of the state. We did this several years ago within the framework of the National Entrepreneurial Initiative and as you know, we advanced more rapidly than all of our competitors. Even our colleagues were asking, “What is your magic?” It seems to me that this magic, this magic wand should not be broken and we should preserve the mechanism of getting the business community involved in this decision-making process. Then we have a chance. To reiterate, we will not become a world leader but will get our ticket to the first league.

Vladimir Putin:

Thank you.

Colleagues, who would like to say something? Mr. Shmakov please.

Federation of Independent Trade Unions Chairman Mikhail Shmakov:

Thank you, Mr. President.

Mr. Nikiforov has presented a very interesting and substantive report to this meeting and indeed, we should agree with its main conclusions. The ambitious goals that it sets are realistic and indeed have special importance for our country as all these things are moving forward very quickly in the world.

I would like to briefly draw your attention to certain goals that are highlighted in the materials in our possession. Personnel and education: introducing a set of regulations for labor relations with flexible remote employment.

Needless to say, this is a very important issue and goal, but I believe one word should be added here: a set of regulations for labor and social relations with flexible remote employment. Because today it is the most pressing and undeveloped issue, which is being approached but has not been resolved in any country yet, and it is looming large in our country as well.

Mr. Peskov just said that it is important to address ethical and philosophical issues related to the digital economy, and it is one of these ethical, philosophical issues.

In the economy in which we live today and in which we have lived for decades or perhaps even centuries, we define a job as something that generates, first, a product, and second, wages, personal income tax and contributions to social funds. With flexible remote employment, prerequisites for the smooth operation of this paradigm disappear. Indeed, other tasks should be addressed here and everything should be built differently. We recently had a discussion: Should a robot pay income tax? This is a joke of course, but as a matter of fact, it aptly sums up the issue: a workplace is occupied, a product is manufactured, but there are no taxes and no contributions to social funds.

This is not to say that robots should not be used but it is essential to change the entire system, including the social security system, because a remote employee does not have sick leave or a pension since he does not make corresponding deductions and so on.

This is why a number of countries are experimenting with introducing a basic unconditional income, when a person receives a monthly payment (not a minimum wage) from society, from the state. This kind of payment of course does not make him rich but he does not have permanent employment, but rather some odd jobs or remote employment. In other words, we are already facing this issue. Therefore, I would propose adding this to Item 2.9 because we need to address these matters now.

Vladimir Putin:

Thank you. Go ahead, please.

President of the All-Russia Public Organization Business Russia Alexei Repik:

Mr. President, I would like to comment on the statements made by the previous speakers.

The trouble is that our efforts to use modern digital technologies to enhance the quality of the existing services, including government services, is extremely important.

It is important primarily because it is attracting an increasing number of new users, our citizens, into the digital economy. Without attracting people, as Mr. Sobyanin has said, we will certainly lag behind as consumers, which will lower the demand for business.

At the same time, we understand that this is not creating a digital but a digitalized economy. A truly digital economy is an economy of platforms, which can answer the question that has been raised here by the head of our trade union movement.

A platform is a system of relations between the consumers (citizens) who must receive quality services at fixed prices, those who offer these services at a price, and the state and society, which receive tax and social payments.

This is of fundamental significance, because it would help businesses get out of the shadows and would create a normal transparent system without any imbalances in competition.

At the same time, the opinion and positions of businesses must be more than simply taken into account in the regulation of these platforms, as Mr. Peskov has said. By the way, the expert and business communities played a major role in preparing the current draft of this program. Take the principle of dual approval, which was stipulated in the National Business Initiative at the proposal of Business Russia. It not only helped test whether the proposed regulations suited the business community or not, but also supervised their application. This is why we achieved such good results.

Of course, we must not forget about the role of the state in maintaining confidentiality and training personnel, which is of primary importance for creating and maintaining the necessary infrastructure, because the demand for it is growing exponentially. For example, we need a billion of billions (quintillion) bytes to store the sequenced genomes of one million people. This equals tens of zettabytes, the term which we tried to recall before this meeting. To sequence all genomes, we need exabytes of data. In other words, we are living at a completely new stage marked by demand for infrastructure without the government. But business cannot satisfy this demand.

If we keep working together under the same formula of success, including work on developing regulations, and also considering the possibility of pilot implementation at our best facilities (for example, medical initiatives can be implemented at the Moscow medical cluster, and other projects at the facilities that have the equipment for pilot implementation), I am sure that if we do this we will avoid digital anarchy and a situation where consumers will prefer foreign products to Russian ones. We have grounds to believe that our products will be comparable, if not better than foreign ones.

Vladimir Putin:

Thank you. Go ahead, please.

Rostelecom President Mikhail Oseyevsky:

Mr. President, colleagues,

Rostelecom contributed very actively to drafting this program. The work involved dozens of experts. Our main task, as we see it, is to improve the basic infrastructure. Since we have entered the stage of debates today, I will say that I do not think this is a job for the Government. In our opinion, business and such companies as Rostelecom are able to meet the demand for such infrastructure in all economic sectors. We plan to invest up to 130 billion rubles in the next five years to improve data transmission systems and data processing and storage centers.

This will increase our throughput capacity across the country by 40 percent, will help us develop global corridors, such as the Europe-Asia transit corridor, and also improve traffic exchange with our European and Asian partners and create the country’s largest network of data processing centers.

Next year, we will join forces with Rosatom to open Europe’s largest data processing and storage center near the Kalinin Nuclear Power Plant. It will have the capacity to meet the requirements of the majority of federal executive agencies. We have the required potential.

Of course, we must create a new infrastructure – digital platforms – in addition to the existing basic infrastructure, as my colleagues have said here. We are working on a number of such platforms. I believe the industrial internet platform should be the top priority.

We are focused on four basic sectors where these technologies and software will be used: oil and gas production, energy, machine building and agriculture. It may sound surprising but agriculture is a major consumer of these technologies.

Our third priority is to ensure cyber stability of both the infrastructure and the digital economy institutions. Our cyber security center, which operates around the clock, has repelled over 2,000 cyberattacks over the past three months. Therefore, we are considering major investment in the development of technologies and capacities, as we see major interest in such services on the part of our clients, which include both companies and individuals.

Overall, the digital economy program is a strategic document for Rostelecom. We will use it as the basis for preparing a new mid-term corporate development strategy.

Vladimir Putin:

Thank you.

Mr. Gref, please.

Chairman of the Management Board and CEO of Sberbank German Gref:

Mr. President, colleagues,

I believe this is indeed a very important discussion and your speech at the St. Petersburg Forum set a very important trend in the economy as many companies immediately addressed their digital strategies.

Today’s meeting is, in my opinion, a very good indicator itself. I would like to thank the organizers for getting all of us involved. Of course, the document still requires some significant improvements. However, it is very important that the key points have been outlined.

I would like to say a few words and make seven points that are key today. Two of them are technology-related and do not require a high degree of involvement on the part of the state. These two main types of technology today are artificial intelligence and block chain. Artificial intelligence is the latest trend that will affect every industry, as you said in your opening remarks, the social sphere, public services and all kinds of businesses.

What is our current challenge? It is a massive shortage in human resources. This deficit is a big issue right now. We could set a task for major universities. They are currently expanding their capacities, but we monitor students and support them starting from the third year on in order to fully prepare them for a career with us.

Of course, both the country’s and companies’ positions require a significant improvement in artificial intelligence. It is a good thing there are companies like Yandex. Yandex invested a lot of money, including in computer science university programs. Actually, their experts assisted us with establishing our competencies. Today artificial intelligence is becoming a prevailing trend for everybody.

The second technology is block chain. I do not think we need any help here either, except for one aspect. It is necessary to include relevant training in the programs of major universities. This is perhaps the only request from us at this point. We can deal with technology development but what we do need is better workforce and perhaps careful regulation. Most importantly, we do not want any prohibitions.

We said that we would ban virtual currency. I would like to say that a huge amount of the flow generated by the data mining centers and technological startups immediately moved abroad. We should be very cautious when regulating this area, but some regulation will certainly be needed, because it is an explosive technology.

There are two things related to what is known as “hard”, rather than intellectual exercises. One is quantum computing. I do not see how private businesses can cope with this on their own. What we have in hand here is still inadequate and some serious help from the state will be needed, possibly in the form of private-public partnership.

The quantum center is likely to be addressing this. However, honestly speaking, it pursues just a few lines of research, focused primarily on quantum cyber protection. We need our own R&D on the quantum computer.

Once quantum computing is on the market, there will be a huge gap between those who own it and those who do not. We should certainly nationalize this technology. Let me repeat it once again: we do not see how private businesses will cope with this.

Robotics technology is the fourth powerful trend that is developing in all industries. There are many lines of research in robotics technology and the state will need to allocate resources. How is this developing elsewhere? This is being done by joint ventures created by leading R&D centers, universities and specialized companies.

We have actively studied the market during the past year or so and we have a robotics laboratory. However, I would like to say that we are, of course, far behind others in this regard. In this area, we would like to have a joint program with the state.

Item five is cybersecurity. I absolutely agree – and we in the business community are beginning to pool our efforts – that this is emerging as a very grave issue, a very grave threat. Not a single company can protect itself on its own.

There should be joint efforts by all state agencies and major companies, which can eventually establish effective information exchanges and provide an umbrella for the entire economy. We cannot do without that. There is a need for a very active state policy in this area.

Item six – I agree with Dmitry Peskov – is about schools. The world is rethinking the education concept. We must, of course, support this debate as much as we can. It is too late to catch up with the situation at universities; it is the schools that are creating it and changing the model radically.

I believe that this offers room for cooperation between companies and the state or municipalities. A number of such projects are underway in Moscow with active support from Mr. Sobyanin. Moscow can be used as the starting ground and a testing range, but we must do the same around the country as well.

And my last issue concerns government services and managing models. Mr. Nikiforov spoke about managing models, and Mr. Peskov did so as well. We cannot create a digital economy on the basis of the old system of management. Therefore, we must change it.

We know how to do this and how to apply the new model. I believe that the implementation of this program should start with the system of management. This would give a powerful boost to our country’s development.

If we do this, we will be able to surge very far ahead. I believe that we have a wonderful opportunity to achieve this goal. I am very optimistic on this score, though I do not like being overly optimistic.

Now for government services. We have long been working with the Government on this. Indeed, we have the experience of combining the opportunities of business and government agencies and the regions. The Tax Service, the Federal Treasury, the Federal Service for State Registration, Cadaster and Cartography and the Pension Fund are making great strides. The Government is involved as well – thank you for your support, yet I believe that we will not succeed in digitalizing government services if we only use traditional methods.

The online portals we have created are only the tip of the iceberg, because services are still provided manually. We need assistance from business to redesign these processes. I believe that this is also very important, as we can see.

And lastly, about the gaps my colleagues have mentioned. One of the biggest gaps is that digital companies will only survive as global corporations. Of course, we have fewer markets than China, and so this very serious gap concerns the organization of the Russian market to make it competitive. Regrettably, there are serious obstacles to our development on the global market. What can we do to take advantage of all the opportunities and remain competitive on the global market? I regard this as the biggest issue today. We must consider it and all the possible solutions very seriously before taking a decision.

I would like to thank my colleagues again for raising this critically important issue and you, Mr. President, for moving it to the forefront of state policy.

Vladimir Putin:

Thank you.

We have discussed this issue before. I do not think there are such people in this audience, but generally, some of our other colleagues and citizens could ask why we need to do this when we have oil, gas, coal and all kinds of metals – ferrous, non-ferrous, gold, platinum, diamonds and much more. Indeed, our technological development is moving ahead rather well, and we have a solid intellectual basis. But we need a breakthrough, and we must ensure it.

One of my Arab colleagues, a former petroleum minister, once said that the Stone Age ended not because humanity ran out of stones, but because it invented new technologies. Yes, new technologies are invented all the time. Those who lag behind in this competition will immediately or very quickly – I want to stress this – become dependent on the countries that are leading this process.

Russia must not let this happen. The main thing is that we have the chance and the opportunity to use the factors I mentioned above, and we must use these factors in full measure to ensure this breakthrough and this leap into the future.

I suggest that we amend the proposed Government plan, taking into account what our colleagues have said today, adopt it and start working hard to implement it.