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    PRESIDENT VLADIMIR PUTIN'S ADDRESS TO HIS AUTHORISED REPRESENTATIVES

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    Moscow, February 12, 2004.

    Moscow Lomonosov State University

    Dear friends,

    To begin with, I would like to thank all those who have come here and are ready to work together, as well as everyone who is ready to support me at the forthcoming presidential elections.

    I am frequently asked if I will conduct an election campaign and, if so, how.

    I believe that the incumbent head of state should not advertise himself, hold meetings and tell stories that have little to do with reality. It should have been done in the past four years.

    On the other hand, I think I am duty bound to report to my electorate and the country as a whole about what has been done in the preceding four years. I must tell the people what I intend to do in the next four years if the citizens of Russia put their trust in me on March 14.

    This is what I intend to speak about today: the results of my work and my plans for the future.

    The authorities practically always had to clear up backlogs

    However, before speaking about what has been done, let us recall the situation in the country in late 1999 and early 2000, and the reasons and factors that influenced it.

    The transition to democracy and the market economy in the early 1990s was most actively and firmly supported by the citizens of Russia, who made the final and, I want to stress this, irreversible choice in favour of freedom. It was a giant and palpable achievement for the Russian people, one of the largest in the country's 20th century history.

    But what price did we have to pay? The destructive degeneration of statehood that accompanied the disintegration of the Soviet Union spread to the Russian Federation, which could and should have been foreseen.

    Political exploitation of the people's natural striving for democracy and serious miscalculations during the economic and social reforms had extremely grave consequences. A third of the population was pushed below the poverty line. Wage, allowances and pension arrears lasting months became a fact of life for millions. The people were thrown into panic by the 1998 default, the overnight loss of all their deposits and savings; they no longer believed that the state would honour even minimal social obligations.

    The country was shaken by strikes held by miners, teachers and other public sector workers. Tax rates kept rising and the fiscal policy as a whole was directed at nothing more than mere survival.

    The majority of large banks went bankrupt and the credit system was nearly paralysed by the 1998 crisis.

    Moreover, the country became dependent on international fiscal organisations and all manner of international financial speculators, which was humiliating. Just think: Russia's foreign debt equalled nearly 90% of GDP in late 1999.

    Taken together with the recent default, this was a constant reminder of the possibility of new economic shocks.

    The situation was complicated by the fact that Russia had lost much of its independence on the world scene by that time. And the forces that continued to live according to Cold War stereotypes and, despite their fine words, still viewed Russia as a political rival, supported everything that could keep Russia in that deplorable state.

    The internal political situation was no less dramatic.

    The Russian Constitution and federal laws had lost the power of supreme law in many regions. Regional parliaments adopted laws that contradicted constitutional principles and federal norms. Federal laws were applied selectively, at one's discretion. The inevitable consequence of this "competition" was arbitrariness, from which people suffered.

    The fight for "special" financial and economic regimes was a constant subject of bargaining between the regions and the federal centre. Things went so far that individual regions in effect found themselves outside the common legal, financial and fiscal system of the state, stopped contributing taxes to the federal budget, and were demanding creation of their own gold and hard currency reserves, their own energy and customs systems, and regional monetary units.

    The result was economic inequality between the regions and, as a consequence, economic inequality between citizens started to become the norm. The emerging common market of goods and services began to fall apart.

    Separatist processes that had developed in Russia over several years failed to be adequately addressed by the authorities, but were actively backed by international extremist organisations and, in the final analysis, degenerated in the North Caucasus into the most dangerous form - terrorism. The reference here is, of course, to Chechnya above all.

    After the Khasavyurt agreements were signed, with the result that Chechnya itself and the entire Chechen people were abandoned to the mercy of fate, some may have thought that the nightmare of civil war was over. But nothing of the sort was true.

    Sensing our weakness, understanding the authorities' lack of stability and the depressed moral state of society, in the summer of 1999, numerous bands of international terrorists went, as could be expected, further. They had become so insolent that they made an open attack on Dagestan. They launched an act of aggression with a view to tearing additional territories from Russia and including them in the zone of their criminal influence.

    I do not think it needs to be explained how dangerous it was not only for the Caucasus but also for Russia as a whole - especially in view of the traditionally dense settlement of the people of southern Russia and some other south-adjoining regions of this country. It would be enough to look at the tragedy of Yugoslavia's disintegration to draw all the necessary conclusions.

    I should point out that Russia has always been a very complex state, calling for a careful, I would say professional, attitude. But, unfortunately, by the late 90s, it, under the influence of all the above-mentioned negative factors - it must be admitted - began to lose the main characteristics of a single state.

    This was what we came up against. And in these conditions we had simultaneously to solve acute daily problems and work towards establishing new - long-term - growth tendencies.

    The authorities practically always had to clear up backlogs, defend the integrity of the country in the fight against separatism and international terrorism and at the same time lay down the foundations for our future.

    And today, I am simply obliged to say words of gratitude to all those who in this difficult situation upheld the people's democratic gains, those who did not break down in hard living conditions but helped the country with their own labour to regain its feet.

    We are also obliged to remember and never forget those who in the conditions of the state's practical inability to ensure the security of its citizens and defend its territorial integrity discharged their duty to the Motherland to the end.

    Discharged, as has, unfortunately, often been the case in the history of this country, at the cost of their own lives.

    For years of intensive and far from simple work

    Four years have passed since then. Four years of intensive and far from simple work. Of course, we would like to have achieved more than we have today. But still quite a lot has been done.

    Above all, constitutional law and order has been restored in the country, and the vertical of federal executive power has been strengthened, or actually built again. The Russian parliament has become a professionally working lawmaking body. The country's single legal territory has been restored.

    An end has been put to dangerous processes of the degradation of state authority, of the army's weakening and the destruction of law enforcement bodies and other security-related agencies. Essentially fundamental changes are being made to the judicial system.

    The economic situation has altered radically. Since 1999, GDP has grown almost by 30%-29.9%. The inflation rate has fallen by two-thirds. There is no longer any need to raise tax rates beyond sensible limits to meet the state's minimum requirements. And, as a result, medium-sized companies have increased their production for the second straight year. Thousands of enterprises efficiently work in the country. The market is beginning to be dominated by those who work more effectively, and not by those who prosper thanks to economically unjustified privileges and preferences.

    This means that even if with difficulty, and slowly, structural changes have begun after all. They can be seen in increased investments in fixed capital and, most important of all, in the development of the domestic market, in the growth of internal consumption.

    I consider the financial independence achieved by Russia and the stable exchange rate of the rouble, its national currency, as some of Russia's fundamental achievements in recent years.

    The problem of foreign debt payments has been virtually resolved. Last year, as in the previous years, we fulfilled all our financial obligations. In 2003 alone, we paid back $17 billion and the country did not even feel it. In total, over all these years, Russia has paid $50 billion in debt repayments including interest.

    At the same time, the gold and foreign currency reserves of the Central Bank have reached the record high level of over $84 billion for the first time in the country's entire history, including the Soviet period.

    We have greatly increased the country's investment attractiveness and the investment-grade rating awarded to Russia is direct proof of this.

    These, so far modest, but nevertheless obvious and positive changes in the economy have enabled us to take the first steps towards solving social problems and improving the living standards of our citizens.

    In some sectors of production and in some regions we are still confronted with wage arrears. However, this is no longer a nationwide problem, as was the case in previous years. There are no longer chronic delays in paying pensions and benefits. The minimum wage has been increased four times in three years. Mass strikes are no longer staged in the country.

    Since 2000, all the main social indices have attained positive dynamics. It is true that the Government does not always succeed in its efforts to prevent economically unjustified price growth. But still citizens' incomes grow faster than prices. This is confirmed by figures that are known, but I shall now repeat once again. Moreover, these figures take into account price growth, exchange fluctuations and other factors.

    Accordingly, the average level of pensions in real terms has increased by almost 90% since 1999. The population's real disposable incomes have risen over that period by 50%. Real wages have also been rising constantly: since 1999 they have nearly doubled. Let me repeat again: I am speaking about the growth of real incomes. Nominal, i.e. absolute indices are much higher.

    The unemployment rate has dropped considerably, almost by one third. There are still a lot of people with incomes below the subsistence level, but this number has also fallen by one third.

    The main thing I would like to single out today is that uncertain prospects are receding into the past. A lack of clarity and the impossibility to make any plans for the future are also fading away. Society has finally overcome the fear of the painful consequences of reforms.

    At the same time, we should not forget that along with this process, people's just demands with regard to the efficiency of state work also grow. Their requirements for the level and the quality of life also increase.

    I would like to stress that, despite the scope of changes, we have only created a basis for a decisive breakthrough in the country's economic development towards a quality of life comparable with that in developed countries. Through that Russia will be able to bring its reputation and influence to a level that will be worthy of its thousands of years of history, its intellectual resources, and its opportunities for full-fledged participation in the international division of labour.

    Better quality of life for our people is the driving force behind all our actions

    Dear colleagues,

    I have mentioned our achievements. But have we achieved everything we could? Of course, not. Can we be satisfied with the results of our work? Of course, we cannot.

    The main goal of any of our actions is to improve living standards. However, we shall be able to achieve radical improvements only when our economy becomes so strong that it will no longer heavily depend on foreign economic factors or the results of regular elections to parliament or the presidency.

    Today, the Russian economy's growth rates are high, but still insufficient. The state apparatus both in terms of its functions and its personnel's qualifications is not very efficient. The structure of the economy is still not balanced. Social obligations are not yet orientated to specific groups of population.

    We have to admit that some of Russia's closest neighbours and Eastern European countries have carried out reforms faster and more decisively. Moreover, rather than discussing, other countries were able to introduce in practice many of the ideas developed by Russian experts with respect to the reform of the pension system and the housing and utilities sector, healthcare, housing construction and other spheres.

    Our economy still has an obvious raw material orientation. Of course, natural riches are a natural competitive advantage of Russia. We should not feel any ashamed about this. However, the nation's great intellectual potential is our much greater advantage. This potential should be used to advance the Russian economy in the hi-tech and highly profitable spheres.

    The services market in our country is developing slowly and with difficulty. However, this market makes the main contribution to GDP growth in developed countries. In our country, on the contrary, the state still has a monopoly on the provision of services in such socially important spheres as housing and public utilities, as well as a number of others. As a result, the quality of services is low, the charges for them are growing and so is citizens' dissatisfaction. In fact, people pay twice and even three times: first with taxes, then for services and, on top of that, bribes.

    The superfluous presence of the state in the economy results in a number of other negative factors. First of all, in the name of the state, officials continue to fulfil many functions that taxpayers do not need - providing permits, licences and supervision. This leads to enterprise being stifled, bribe taking, and abuse of office. I want to repeat that so far, the efficiency of the state apparatus leaves much to be desired. Many sensible proposals become bogged down in empty talk, the bureaucratic quagmire of formalism and incompetence.

    A particular issue is the administrative arbitrariness of the law enforcement system. The basis for so-called extra-procedural, that is, illegal actions of staff in various bodies and services is also being maintained in this sphere.

    Meanwhile, citizens are not "an object of influence" of the punitive machine. The state, including its law enforcement agencies, must, above all, work for citizens, upholding their rights, interests and property, not to mention protecting their security and lives.

    Today, it would be appropriate to recall that only two or three years ago, the militants operating in the North Caucus did not expect such a fast growth in the combat capabilities of our armed forces and special counter-terrorist task forces. They did not expect society to consolidate in such a manner to uphold the underlying principles of our state. Despite numerous conceited statements, they suffered an utter fiasco and defeat in open confrontation. They are trying to sow panic, fear and mistrust of the authorities through terrorist acts against peaceful civilians and thereby break the will of the Russian people in their effort to strengthen democracy, freedom and the territorial integrity of our country.

    The Federal Security Service, the Interior Ministry and the other law enforcement agencies must continue conducting systematic work to eliminate the terrorist network. Particular attention must be paid to ensuring that operational work is effective, and to elaborating tactics that can prevent the threat of terrorist attacks.

    Returning to other, current problems, I must say that reforms in the social sphere are going extremely slowly. Delays in implementing the healthcare and education reforms are preventing us from ensuring the proper quality of these services in full measure. A considerable part of the financial flows of these industries remains in the shadow. We still do not have a developed medical insurance system or competition on the market of medical services.

    As for education, it now requires the largest budget expenditures. The quality of Russian education is traditionally high, but it is falling. And this should also be acknowledged. There are many reasons for this, including the increasing number of higher educational establishments that do not meet educational standards and where entrants are enrolled even despite their poor performance in entrance exams. The overwhelming majority of university graduates find jobs that have nothing in common with their degrees. This means that the state is not paying efficient attention to this issue, and that a considerable part of the budget is being spent in vain.

    The housing problem needs particular attention. The lack of housing or its poor quality leads to a whole series of negative consequences, such as lower labour productivity, a low birth rate and other negative factors.

    All these issues need additional efforts that should be taken urgently, without delay.

    Where and how can we find new sources of growth?

    Naturally the question arises: Where and how can we find new sources of growth?

    Above all, the solution is new approaches to the country's development, to the consolidation of society and the authorities, to increasing their mutual trust and joint efforts to find solutions to major national tasks.

    The Russian economy should have a decent and firm position on world markets. To this end, we must actively develop our national market first.

    Outdated plants should be quickly modernised and transformed into ones that can improve the country's competitiveness.

    We should put an end to squandering the country's natural resources and ensure that they are used better. This should be done on a systematised legal basis with the help of upgraded water and forest legislation and acts on the use of natural resources.

    We need transparent conditions for access to natural resources and just payments for their use. The present pseudo-competitions, where only businessmen close to bodies of power stand a chance of winning, must be replaced with auctions. The permissive administrative system should be replaced with full-fledged civil and legal contracts clearly outlining the rights and duties of both the state and business.

    We should complete the modernisation of the railways and the electric power and the housing sectors.

    We should finally complete the tax reform, and above all reduce the single social tax and simplify tax administration. We should also establish order in issues of property tax and taxing super-profits of raw material exporters, given high global prices for raw materials.

    Once we have reduced the overall tax burden, long-awaited stability will come to our tax system. It will have to be tied to inter-budgetary relations as soon as possible and the on-going redistribution of powers between branches of the authorities.

    We should make the rouble fully convertible, especially in view of the growing trust in the national currency.

    Our task is to develop the country's financial system so that both companies and individuals can at last benefit from the advantages of a developed financial services market.

    A policy stimulating people to accumulate pension savings should be an important element of the financial system's development and consolidation. People are gradually beginning to understand that the size of their pensions will depend on their own contributions, and that every citizen has the possibility to manage his or her personal pension contributions.

    The state, in turn, will have to not only guarantee these savings, but also help people increase them. Therefore, our task is to develop some financial encouragement tools for pensions. I would like to emphasise: this is a serious issue and we shall work it out thoroughly and in minute detail.

    As I have already mentioned, one of our most important tasks is to solve the housing problem. Global practice suggests several solutions. One is the mortgage system, which is a very promising model; another is long-term renting. We should also not neglect the needs of those individuals who use social housing. The authorities are responsible for its maintenance.

    I would like to pay particular attention to the mortgage system. Even in the most developed countries it is rarely possible to buy housing immediately at its full value. It is usually bought using a loan that has to be repaid over 10 or 20 years. This is possible in Russia now, too, but the cost of such a loan, and its terms and conditions still make such schemes unaffordable for the majority of citizens. What we need is a legislative package that could "launch" an affordable housing market.

    These problems have to be addressed without delay. The Government must submit the package for consideration as early as the spring parliamentary session.

    Only a free man can ensure the state's prosperity

    Dear friends,

    We must also carry the political reform programme through to the end. In this connection, I would like to stress that we shall work as consistently in this effort, as we have done in the past few years to stabilise the situation in this country.

    Above all, we are consistently reforming federative relations. Those key reforms that are being implemented at the level of local self-government bodies will be accomplished within the next few years. Every citizen will not merely know about, but will really demand the level and quality of service that specific branches of power should provide. Moreover, citizens will have directly influence local decision-making. The legislative package has been adopted and is being adopted to this end. The relevant legal basis must be completed and the legal principles of inter-budgetary relations must be adopted to this end in the near future.

    We shall work to consolidate the political system at the federal and regional levels. I am certain that civilised political competition is absolutely essential for the gradual development of the state and society. Major, influential political parties, which have authority among people and enjoy their trust, must help us in this effort.

    We shall also continue work to build a full-fledged, real civil society in Russia. I would like to point out that this is unthinkable without a genuinely free and responsible media. However, this freedom and responsibility must rest on an adequate legal and economic basis, which must be established by the state.

    I am convinced that a developed civil society alone can ensure the inviolability of democratic freedoms, human and civil rights. Similarly free people alone can ensure economic growth and the country's prosperity. These are the Alfa and Omega of economic growth.

    I would like to stress once more the freedoms and rights of citizens are the supreme value that defines the essence and substance of the state's work.

    And finally, we shall complete the reform of the judicial system and law enforcement agencies. I consider these spheres to be of principle importance, as they will establish genuine democracy in Russia, and ensure the constitutional guarantees and rights of Russian citizens.

    I would like to say in conclusion that the events of the early 1990s gave rise to people's hopes and expectations. Their thirst for change led to the dramatic collapse of the structure of life. There were times when people did not believe that the shocks would ever stop. Today, we can feel that the time of uncertainty and anxiety is gone.

    A new period has started. This is a period of hard work to ensure a transition to a fundamentally better quality of life. This is no easy task. It will take strong political will, honest dialogue between the authorities and society and constant joint efforts.

    Will we cope with this job?

    The achievements of recent years allow us to say: "Yes, we can do this."

    And we certainly will.

    Thank you.

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