 The press could make sure that the audience can see. And I'm John Lipsky, and I'm very honored and pleased to be able to welcome you to this very important and interesting session in the opening day of Davos 2013. As we all know, the formation and development of the Russian Federation has been one of the most notable and intriguing and important developments of the last few decades. And it's interesting to think about how far the Federation has come in this short span. However, the focus of Davos, as we know, is to look forward and to think about what's to come and what should come. And in that context, as you found on your chair, the work that the World Economic Forum Group on the World Scenario Series has done on examining the options for the Russian economy. Today, we're going to have a very interesting and useful session that will be divided in two parts. As you're aware, we are honored with the presence of Prime Minister Medvedev. His chair is here, but he is seated in the audience for the moment. For the first part of this session, we will review for you with an expert panel here with this that I will introduce appropriately to review the work that is contained within this scenario's publication. Please pay close attention to this because you are going to be asked to express some opinions, your opinions, on what's contained within and on the outlook. So after that, we will bring to the stage the Prime Minister who will present his views on the subject matter. And then we will follow with a brief discussion. So without further ado, I believe we have a short introductory video that will introduce for you the work of the scenarios group. Please. Russian is at a crossroads. Its economy has grown rapidly, but is also vulnerable to global changes. Over the past year, the World Economic Forum and its partners have explored different ways forward for the Russian economy. Three dominant factors emerge. How will she guess new world supplies or future demand shots affect Russia's energy revenues? Will Russia be able to improve its institutions to support investment and innovation? How can Russia ensure that the needs of all its citizens are met? Different answers to these questions form the basis for three challenging future scenarios for Russia. Institutional reforms come from local actors in Russia's regions. There are very few changes at the center, but well-governed regions improve their business environment. Abundant natural resources are an asset for growth in an increasingly resource-constrained world. But how will the growing capital in rich and poor regions play out? Falling oil prices hit Russia hard. In reaction to this, the government nationalizes parts of the economy by tightening its grip. It tries to maintain jobs and creates a sense of stability with much of the population. But can it make this new form of state capitalism work? The proceeds of an oil price balance are postponed in Russia's demands for institutional reforms. They're satisfied with the increase in prosperity and consumption. In the long term, however, these large windfalls cannot prevent Russians wanting greater social returns on their increasing wealth. Can a divided elite respond to these demands? Each of these scenarios presents challenges and opportunities that could be seized if Russia and the world are ready to embrace them. Now, let's turn to our panel. The work that you find in this publication was carried out by the Global Agenda Council on Russia of the Forum. We have three distinguished members of that council to describe in more detail the scenarios. First, Alex Savinsky, who is a professor of economics at Yale University. Alexei Kudrun, who is now the dean of the Faculty of Liberal Arts and Sciences at St. Petersburg State University, but I think is known to all of us as a very talented and dedicated finance minister of the Russian Federation. And Sergey Garev, who is the director of New Economic School in the Russian Federation. So, please, Professor Tsvinsky, if you'll start. Well, thank you, John. All of those scenarios show the underlying need for significant structural reforms for Russia. And the structural reforms, I mean the significant improvement in the institutional and business climate in Russia. Despite strong growth in Russia, despite new prosperity of Russia, it's still lagging on a number of objective indicators of doing business and other important institutional characteristics. The first scenario is the scenario of regional rebalancing. It's set at the backdrop of possible gradual decline in oil and commodity prices. To me, this scenario has three key elements. The first is that the gradual decline of oil and gas prices will breed complacency on the side of the central government. The gradual decline will not give sufficient incentives to pursue the fundamental reforms, which are quite often quite difficult. The system will ossify and stay at the same level of the poor institutional and business development, which is so much needed, the improvement of which is so much needed for Russian economic growth. So in other words, headwinds rather than the storm will lead to complacency. The second point is that the bottom-up reform rather than the top-down reform has larger chances to succeed. The top-down reform, which was so fashionable as an idea in Russia, at the level of development that Russia has. So one has to remember that Russia is already quite developed and quite rich country, is less likely to succeed just because the catch-up phase of economic growth is already passed. The simple reforms, the favorable external environment that Russia faced over the last few years is already probably gone. What is needed is a set of comprehensive institutional reforms that are much easier to come up from the bottom-up rather than to have from the decree. And thirdly, the successful regions of Russia, which have already achieved serious progress in terms of improving institutions, in terms of improving business environment, can act as internal anchors of reform to show that the rest of the country can also improve from its rather poor performance in terms of the institution. One has to remember that Russia is a very diverse country in terms of economic performance of different regions. Some of the regions are way ahead in terms of how attractive they are for doing business in terms of the institutional environment. So let me just summarize the three points which I would like to make about this scenario. The first one is a greater decline of oil prices will breed complacency. Second, bottom-up rather than top-down reforms are more likely to succeed. And finally, the successful regions can be the beacon of the reform for the rest of the country. Thanks, Alex. Now, Alexei is going to speak in Russian. So if you don't speak Russian, please put on your translation. We're going to share these three scenarios with our members of the Council. I would like to make a statement first. These three scenarios are collective work. It's a matter of 350 businessmen and experts. Thus, we represent a vision of experts and businesses in the development of Russia. All these three scenarios can be called negative. Therefore, the reason most likely is that there are not enough signals that allow us to roll out positive scenarios. And I think this is a serious lesson and a serious signal for the Russian authorities, for the business and for the experts that are involved in the development of the reform in Russia. The scenario that I have to introduce is, as it were, a fragile stability. It's probably the most negative one, and I think that this role is ungrateful. But I think that in some circumstances it can be, unfortunately, real. This scenario contains low growth rates in the world in the next decade. This is the reduction of demand for oil, the reduction of price for oil, in relation to the development of other sources, and the reduction of the cost of production. Among the conditions of this scenario, there are low growth rates in Russia and the lack of institutional reforms. The price for oil can be reduced to $60, which makes our Russian budget in a difficult position in relation to the high level of expenses. And here the experts note that in the conditions of such reduction of income and the need to reduce the expenses of the budget, we will most likely support the social programs in Russia. The salaries are saved, the pension is saved, the support is unemployed. Thus, the resources for infrastructure and development will be reduced. It is possible that taxes will be raised in order to compensate for the reduction of income for the most necessary needs of social development. The drop in revenues and the need to ensure social welfare, which means that it won't undertake very painful measures, which are perhaps not going to be possible and that therefore reforms would be minimal under those conditions. Experts also identify another risk, which is the state involvement in oil extraction above all. They talk about the danger of a sole oil enterprise which would bring under its control all old and new operations. I don't think that that's a realistic risk, but we have seen signals moving towards that recently. So I think representatives of business and investors do have that fear and they have expressed that in their answers to the questions which we put to them. I think that that would be a negative scenario. The failure to take reform would mean that there would be a burden on business in terms of taxes. There would be a drop in the growth of smaller medium-sized enterprises and the middle classes who require these reforms, who require a favorable environment and therefore would result in the stagnation of the Russian economy, which means that this would be an unsatisfying scenario for the Russian authorities. I think we have to see this scenario as an example, an option, which we need to avoid and take in good time the steps towards the necessary reform. Thank you. Thank you very much, John. I will talk about the third scenario and again, like Oleg and Alexei, I would like to mention that these three scenarios are the product of a long and deep conversation between hundreds of people in Russia, outside of Russia, in business and government, in academia. The third scenario is called Beyond Complacency, and this is a scenario where the external conditions initially are benevolent to Russia. All prices stay high, yet even if you have resources for reform, it doesn't mean that you have incentives for reform. The word complacency, which is in the title of the scenario, summarizes what is happening in the beginning of the period that we discuss. Basically, the experts agree that if oil prices stay high, it is more likely that Russia is not conducting the reform even though it has resources simply because the country is complacent with the status quo. However, this scenario is not sustainable in the long term. This process is not sustainable in the long term in the Russian middle class. Together with the GDP, with the economic growth, with the growth of prosperity, the Russian middle class will grow and demand the reform simply because the modern middle class is just too educated, too urban and requires not just income but quality of life, transparency and accountability from the government. It is a huge difference from the previous 10 years that economic growth delivered material benefits to the whole population, the population was happy. Now, more income doesn't make people happy because people ask for more than just income. And this is what experts agree on. They agree that the new middle class will grow so large it will be a major political constituency to demand change and somehow the change will come. How the change will happen, how the experts were talking about different splits in the elite, different processes for social and political change. I think we don't know how the change will happen because no country was undergoing similar transition. Russia is unprecedentedly educated and rich for a country with such outdated political and social institutions. So the change will be happening in an unpredictable way but it will happen simply because middle class will be so rich, so educated, so large that it will demand the government to be less corrupt, more transparent, more accountable, more modern. And this is what will have to happen. And this is where the third force that we talked about after the institutional reforms and oil prices, the third force is social cohesion. So to preserve the social cohesion the government will have to change, the government will have to reform even though as the title of the scenario hints at first it will be complacency and then the reform will come when the country is just too rich for the quality of the institutions it has now and then the beyond complacency will come. So I'll stop here. Thank you very much. One of the great sources of encouragement and support for this work has come from one of the members of the World Economic Foundation Board the World Economic Forum Foundation Board and that's Hermann Greff who is also the chairman of the board and the CEO of Spurbank, the largest Russian bank. Hermann, would you give us your impression of the work of the scenarios group? Thank you very much. I will speak in Russian language and I have five points. I studied the three scenarios in great detail. I'd like to say initially that there is something that links them all. These are scenarios that will happen if nothing is done. If the situation continues to develop unchecked then these three scenarios are possible. In the first scenario, the regions will take reform upon themselves and there is the possibility of reconsidering the state's monopolies. The second scenario is when things remain the same nobody does anything. Third scenario, oil prices falls, nobody does anything and there is the reaction of the federal powers in order to meet their obligations. Now all of these scenarios are negative to at least some extent. I think the description of the risks in these scenarios is very valuable. We don't have all of the risks outlined but I do think there has been a very professional approach to identifying the risks and what might happen if nothing is done. My impression with regard to these three scenarios and the possible negative development in Russia is that this could happen. Now there are many references to Russians' ratings. This is the second thing I'd like to say. I spent a lot of time yesterday and last night looking at the Russian ratings in, for example, the financial sphere. Russia's financial sector is the 134th place in the rankings globally. The soundness of banks. The soundness of banks, that's at 132nd. I've looked at these ratings in details and I've looked at what indicators they've used. So with regard to the soundness of banks and it's at 132nd Armenia, Botswana is 50th, Peru is 20th. Spelbank is an international corporation. We have offices in more than 20 countries throughout the world and I have an idea of the development of financial sector in various countries. I can say that these ratings do not reflect what is actually happening. If that were the case, others would be buying Spelbank. But in a difficult financial situation, our bank moved into many countries around the world. So what's clear is that these ratings don't reflect the truth. They open, they draw attention to the cooperation between the government and business. But what we need is to improve our image because we are better than we look. I think we should be at least in 60th place in these rankings. Our investment climate, our attractiveness to investment depends very much on this image. Now we need to be critical towards ourselves. We are extremely critical towards ourselves. But these three pessimistic scenarios show that we are being critical. Russia has potential beyond these risks, it has huge potential for growth. With the huge human resources, the natural resources, we have the seventh largest market in the world. That's a huge precondition for growth. And Russia's low competitiveness is often highlighted as a drawback, but for business that's attractive because countries with a highly competitive market are difficult to get into. In Russia there is a huge opportunity in a vast market with all of its resources to really get very high returns. A third thing, I'd like to say, sorry, the fourth thing is the question of which of these scenarios is the most likely. I would say none of them. I hope very much that there is a fourth scenario that can be built as a result of the activities, the actions of the government, because nobody feels inspired by any of these scenarios. What's important for inspiration is leadership, a clear strategy, clear objectives, and good people leading these efforts. And fourthly, inspiration. Russia needs to provide inspiration for business to believe that success is possible. It's necessary to have a clear strategy which can leave behind these three scenarios we're talking about. And today this work is very important. The work we've done is very important. Thank you very much to everybody, to the hundreds of people in Russia and beyond and the World Economic Forum who've done this job to give us a possibility so that we can recognize our problems. But once we have recognized these problems we can move to a fourth scenario, an inspiring scenario where we can say that the three scenarios that have been outlined have nothing to do with the future of Russia. Thank you. Thank you very much. In a few minutes we'll hear from someone who's going to have an important role in shaping which is the actual development. But first we're going to turn now to you in the audience. You should have a little voting, I'll call it voting machine or console with numbers. And here is the question we'd like to your opinion about. What should be the top priority for Russian reform policies going forward? Here as you can see on the screen are the five choices. Good government, good governance, macroeconomic stability second, increased and improved market competition third, fourth enhanced social cohesion, fifth regional development. Now I'm sure all of you will say the answer is yes. All are good. But we'd like you to express your opinion as to which you think should be the top priority. So if you'll take your voting element and vote now following the instructions on the screen. Please. Yes, the equipment is going. So register your vote please. Your time is running out. And in a second we should see the results. Wow. Well we've got the right speaker coming up. Very interesting. Now in fact we're going to ask three members of our audience for their comments on what they've heard so far. First, Kirill Dmitriev, who is the CEO of RDIF management company in Russia. Please. Thank you very much. We had a great discussion of those scenarios this morning. And basically we had a very optimistic group. We had some of the largest investors in Russia, some Russian companies such as Yandex, Berbank and Neshekin on Bank. And we actually believe that the fourth scenario is a green scenario of growth. Because Russia has really demonstrated tremendous growth over the last 12 years. And I'll just give you four figures. Monthly wages in Russia have increased by 14 times in the last 12 years. Assets of banks increased by 26 times. Market cap of Russian market increased by 20 times. And foreign reserves of Russia increased by 44 times. So very few countries have produced this trajectory of growth. And we believe that the fourth scenario is a scenario of growth that needs to be delivered focused on productivity, focused on really clear goal setting and some institutional changes. So my question later on will be, how do we make this fourth scenario, green scenario of growth? Because if you look at the colors of other scenarios, they're not very pretty, more realistic. And how do we make it happen? Thank you. Thank you very much. Next, James Trilley, the chairman and CEO of Ernst & Young. I was also in the discussion with Carol this morning and we too had a very, very engaged discussion, very, very optimistic. And we embraced Carol's green scenario. But we thought that it was really important that the government of the Russian Federation take today's high energy prices and use it as a springboard to begin to delink the Russian economy from an over dependence on energy. And of course that will include some of the institutional reforms talked about earlier. It's going to include geographic diversity. It's going to include investments in housing and healthcare and strengthening the already quite good education systems. We thought to really capitalize though it was important to really encourage and build an entrepreneurial spirit in Russia. That when you look at the number of jobs created by entrepreneurial men and women, it probably is something on the order of 15%, 15% of the job growth. And that compares to 50, 60, 70% of jobs coming from entrepreneurial men and women in many, many other countries around the globe. And so the question that we would ask to the panel and to the prime minister is what actions could be taken and will be taken to better encourage entrepreneurs in this great country. Thank you, Trilley. And last but not least, Oleg Deripaska, who's the president of IAN Plus Group in Russia. It was very important discussions. And one item which already mentioned by Mr. Nogrev is the development of financial sector. And the reality is very simple. We have two great banks, Bear Bank and WTB. It's not enough to keep even stability. We need to grow an interest rate which on an enormous high level will prevent from us from the growth. It's not just for industrial sector. It's not just for export industry. It's more important for small medium-sized enterprise and access to financing. And the cost of financing is the key priority for development. Thank you very much. Well, this concludes the first half. And thank you very much for the panel and for your remarks. And now it is my pleasure to welcome to the stage a man who needs no introduction, who is here to introduce someone who needs no introduction. Professor Klaus Schwab, founder and executive chairman of the World Economic Forum. Thank you, John. It's a great pleasure and honor to welcome back you, Mr. Prime Minister. We all remember your statesman speech just before you assumed the presidency of the Russian Federation. And of course, we also remember that you came to visit Davos and to speak to us just one day after a dramatic terrorist action had hit your country. Now you are back, and I have to say when you were last time here, you mentioned Prime Ministers at the G20 should focus more and become more focused. And now you are in charge. And I have to say what has been prepared until now shows that you want to make out of your presidency a successful, a successful year for the world community by revitalizing, if I may say so, the G20. It was a great pleasure and honor to be a catalyst for this process, and I want to thank particularly you, Hermann Graf, for the support we had, the panelists, but I want to thank also the 300 experts who had been engaged into this fantastic interaction exercise. I'm a big believer into the future of Russia and to the potential of Russia. We will continue to be of help, to be a partner in the future. I have only one hope as a very good European. I hope that in the future scenario we can also integrate the future relationship between Russia and the European Union. I have now the pleasure to welcome here you, Mr. Prime Minister Medvedev. Please welcome the Prime Minister of the Russian Federation. Mr. Schvabtier, President of the World Economic Forum, ladies and gentlemen, my goal is probably to use the 20 minutes I have at my disposal to explain why all the three scenarios are never going to happen and talk about what we are going to do to make sure they don't. But allow me to start by thanking you for the invitation to take part in the work of the World Economic Forum. As always, it has gathered together captains of businesses, leaders of politics, representatives of international organizations, academic circles. It's my third time in Davos and every time is different because in my memory my every visit is linked with different milestones of the development of our country. It's the first time I'm present here in the capacity of Prime Minister of the Russian Federation and it's a special significance for me this occasion. Since this year Russia will be hosting G20, as was mentioned by colleagues. Let me start by thanking Russian and foreign experts alike for drafting possible scenarios for Russia. Let me tell you straight away I don't think any of those is realistic not just for reasons Mr. Krafgat, because all those scenarios are realistic and for other reasons. Welcome to provided authorities failed to act. But those scenarios are non-realistic nonetheless approaches you used when drafting those are definitely useful. Every approach is useful though relative of course you never forecast specific figures because it's easy to make a mistake when you forecast figures what you did is rather analyze potential developments of various emerging trends what they might eventuate in those trends and steps taken by authorities as was said by colleagues all the three scenarios are rather pessimistic which is a good thing. It would be worse if we were looking at three optimistic scenarios because might get any government carried away and feel that it could rest on the laurels. It's good that your scenarios are pessimistic. Those scenarios are also very important since they would help to analyze the general situation. Let me remind you that similar even more dire scenarios were drafted back in 2008 early 2009 back when I was president at the peak of the financial crisis the situation was much worse than now happily none of those scenarios could occur. So I believe that the research it was very useful to help to understand the current situation and global version of the economy and to see clearly trends that will shape its development in the years to come that would help us to draft a new policy that would help transform threats into challenges and opportunities and sources of stable growth and going back to the voting you did just now well I'll be frank with you I was certain and the overwhelming majority that was clear to me from the outset why? well because at the moment that reflects the current vision that exists in the world the vision of Russia and its problems I'm not saying that the vision is correct but this is something we need to take into account. I'll be frank with you I voted for a different option since our economy remains dependent on commodity export the threat of worsening of the world market situation remains one of the most important still concerned with the stagnation and the banking crisis in Europe that problems of the United States structural risks that exist in China those topics will undoubtedly be in the center of attention of the G20 in the year another thing which I believe is very important when we talk about Russia we're not interested in excessively high commodity prices because they hinder the development of global economy and the development of Russian economy alike but should prices be too low that would lead us to another extreme lack of resources to sustain economic growth that the current oil prices are more or less optimal are close to that both for consumers and producers by the way they ask us all the time what are we going to do should the torrent of petro dollars run dry would Russian economy collapse would Russia collapse of course not, it won't our economy is greatly dependent on commodity export but it is overstated we can say that even today the bulk of growth over the past few years has been achieved not by oil and gas revenues but rather by the increase of production of consumer goods and services in the future our policy should result in substantial increase of food since Russia is the major agricultural country in the world and intellectual services since we are an educated country and confident in the future there will be great demand for them no less demand than for oil and gas today if we look at the general macroeconomic situation Russia it's got a stable last year economic growth amount at 3.5% inflation was at 6.6% all of that despite drought and failure of agricultural crops so this is good figure unemployment is a little over 5% that's the best indicators of the past few years and lowest amount of other countries what's important is that the growth was generated not only by domestic consumption by investment almost 8% that is the minimum rate for Russia but if we want to achieve our economic benchmarks which is 5% although many say it's unrealistic but we believe we need to be ambitious in our goals so to achieve at least 5% per annum we need to see investment growing for at least a few years in a row by 10% annually therefore we're interested in attracting large-scale foreign investment we enter into partnerships for organization with the overwhelming majority of European countries we'll launch our own public programs that provide for drawing more private investment the foreign debt of Russia is extremely low it stands at about 3% GDP last fiscal year we did not have any budget deficit we still have substantial foreign currency preserves that a safety net, the reserve fund and the national well-being fund that amount to over 500 billion dollars in total an important decision difficult as it was was to introduce tight fiscal rules that means that additional oil and gas revenues that we will be achieving due to higher prices will be saved and only used should commodity prices go down that wasn't easy to adopt this rule and I want to thank all of those that supported us by the way, figures I just gave not reasons for complacency we've just had three pessimistic scenarios the growth is slowing down global economic instability remains it looks like that the hopes to find solutions way out of the crisis accumulated financial and regional debalances those proved to be wrong despite all affidavit crisis recovery is unstable recurrences of crisis are possible global recession is possible so the growing integration of the global process in light of our session to the WHO would require substantial improvement in the level of competitiveness of Russian companies through increased productivity that is indeed so but it's not the outside risks that are the most important our domestic limiting factors as was correctly mentioned in these three scenarios are at the forefront and the major threat is the slow progress we achieve in dealing with those goals it will be wrong to say that we are standing still I believe we have already achieved much of what we planned much of what we plan and spoke about here in Davos from that same stage the main achievement of the past few years which inspires optimism and all citizens of our country is the fact that the population of our country has stabilized currently we have about 142 million citizens pessimists forecast that the population would shrink by 1 to 2 million every year so far they haven't proven wrong as a result of measures taken by government both rate increased and most very importantly mortality rate goes down every year because the quality of healthcare services is improving last year but in the last few decades the population level of our country started to grow and birth rate exceeded birth rate but in the years to come we will have to increase the population not through greater birth rate but through lower mortality rate second important result is full integration in global markets political negotiations Russia has finally become full member of the WTO I'll be frank I'm very happy that we managed to achieve that a breakthrough happened over the past few years and I would like to use the occasion to once again thank all the friends of Russia that helped us make it reality the fact that we managed to complete negotiations with long positive message for Russian and foreign investors recognition of our achievements and development of market institutions improvement of legislation enhancing efficiency of state public management next goal would be to the OECD by the way WTO OECD are not perfect structures that would offer advantages as some might think there are no such structures in the world but they make our companies play by general rules in the global competitive world illusion of comfort when you play on a closed market might be very dangerous we've learned that lesson from our own experience because in the mid and long run that would mean that you're going to lose so we exited to the WTO to use the rules of the organization to create competitive environment for Russian businesses to make sure that our companies would be able to use new opportunities to be successfully playing at global markets so that was our ultimate goal once again let me repeat that Russia is an open country whatever they might think we're a part of the global economy and global political processes we're facing largely the same problems as other countries risk of disbalance in the pension system we've been debating the issue we've been taking certain decisions like the fact that our production facilities are not environmental enough we're seeking greater energy efficiency we need to create new jobs we are seeking innovative sources of growth to do so we're ready to cooperate exchange best practices we should help each other and seek compromise instead of trying and trying to create difficulties for partners so we would like to invite all of you that are ready to partner with us to come to Russia and work with us third important outcome of our efforts over the past few years is creating new institutions that would ensure economic growth driven by investment and innovation Development Bank has become a strong institute that is funding long-term investment project a special export insurance agency launched two years ago from the same stage spoke for the first time about the need to work closely with the strategic foreign investors today a special structure was set up Russian direct investment fund and it attracts funds from foreign co-investors and changes introduced in stock exchange legislation already allowed to increase demand for Russian denominated assets which has turned into an important regional currency we have very ambitious goals in the investment field to increase the volume of investment from 20 to 25% of GDP increase investment in transportation energy infrastructure substituting outdated inefficient production lines with new state of the art and we hope that foreign direct investment would be instrumental in achieving this goal yesterday we took a decision and it was a matter of principle to start using part of the accumulated pension preserves to fund long-term investment projects that will be paying back firstly in the infrastructure of course provided those savings are safe so we shall create a mechanism of guarantee the safety net in the near future back in 2011 I spoke a lot about innovation I spoke about the need to support innovative businesses venture businesses transfer technologies to modernize Russian industry to create conditions for mobility to engage in very actively in research we are trying to create a system to help find commercial application for R&D results and create technological alliances with foreign partners that would help advance products on foreign markets and it's not just about selling our products but to find a niche in the global added value chain this is far from an extensive list of what has been declared and what has been done but now let me go back to the priorities of the current government colleagues, ladies and gentlemen top priority for Russian government my top priority is Prime Minister would be enhancing efficiency of all public bodies which is consonant with the outcomes of the vote that just plays in the room I'm sure that unless we would not be able to successfully conduct institutional reform stability or advance in social development efficiency of management public governance is an important not only for Russia but for the entire world for government and public private companies alike we have seen examples that demonstrate that great they could help find solutions to various problems, be that fiscal problems in the United States or the Eurozone crisis so this issue is relevant to us all and it's not a new humanity has been facing similar problems throughout centuries if not millennia I like to quote Laos two who once said and restrictions there are the poor people become the sharper the men's weapons the more trouble in the land the more laws and orders the more thieves and robbers in that sense well little has changed over two and a half thousand years so good governance remains a priority today in the globalized economy countries compete not only for traditional resources such as labor force or capital governments are competing among themselves competitive national economy is more and more dependent on whether economic policy is adequate and meets the requirements of the modern days what should one do to win probably we need to create competitive environment both domestically and globally what I mean is the following first we need to create political competition competition between different political powers as a result of which the best program for the development of society should be selected secondly I'm referring to competition between different regions as a result of which regional development strategies will be drafted and efficient teams of regional management will be put together it's also important and that has been said already today that our regions differ greatly in terms of attractiveness or investment appeal some of the regions can compete with world leaders while others remain so the government must try and balance the development of various regions one of the ways to achieve that would be create new points of growth in the south and the east of the country we started implementing the national entrepreneurial initiative we're implementing road maps we have set force very ambitious goals by the year 2020 to be one of the top 20 countries in terms of ease of doing business it is ambitious but goals should be ambitious it is vital for us because unless investments grow dramatically we would not be able to achieve desirable rate of economic growth third of course we're talking about competition between companies in all sectors of our economy the goal of government is to create equal playing field for all businesses reducing excessive presence of country in the economy is a matter of ideology and this is a very important trend of our policy shortly came with the initiative to launch new program of privatization of public property to improve efficiency of management of public assets we are seeing first result already first packages of shares of major public companies have been privatized the budget got about 7 billion revenues and if we look at all the companies that are even indirectly controlled by the state that would amount to 10 billion we should be continuing the process in the future most directors that make up both of those companies are professional and independent so we shall continue this exercise since we are seeing it yielding positive fruit both were creating competitive environment in education healthcare as a social sectors near the state no market players should have the monopoly only competitive educational establishment would be able to bring up competitive experts that our country needs housing market should also become competitive only if it is we would be able to provide all those that need new housing with what they need 5th competition of jurisdiction we understand that the trend exists that was the reason behind our decision to create the customs union and the single economic space with our immediate neighbors all partners of course try to create more favorable business environment as compared to neighbors but there are no losers in this game because due to reduction of administrative and other barriers the overall investment climate is improving new jobs are being created so we are creating a new common market of goods services by the way often times we hear at least from political leaders that the customs union and the single economic space is an attempt to recreate the Soviet Union this is nonsense there is no in the past look around look at yourself look at us we have all changed and we are all looking into the future we have a clear plan we want to strengthen integration and we want it to be mutually beneficial by the way we have learned both the positive and the negative lessons of our European partners and we are confident we shall succeed there are many difficulties but benefits that the process offers are immense thus we offer to the European Union to engage in closer the closest possible if I may cooperation to introduce physical regime finally create single economic space that could become basis for the single market stretching from the Atlantic to the Pacific I would like to use the occasion to well criticize not myself but European partners rather because they listen but not always hear us the visit dialogue has been lingering for a long long time if we look at various markets those of critical importance like energy markets were seeing new barriers erected for efficient work and it's very sad because they are retroactively changing rules of the game they are seizing assets and they are not honoring previous arrangements but they should be favorable for all parties who are interested in change or want change but unilateral actions might have dire implications which is unacceptable for Russia thus we shall continue dialogue with our European friends and partners in all areas by the way we believe that development of partnership in other formats is of great importance in particular we are building our cooperation strengthening our interaction in all fields and G20 in my view is becoming more and more efficient and that brings together all the major economies of the world I remember how this format was set up I remember how everyone was skeptical because of the difficult economic crisis but the G20 was put in place it has played its part and managed to consolidate positions of very different countries and we took timely action otherwise the crisis would have had even more dire outcome so we are ready to work in all areas that could be beneficial to all so to sum up let me reiterate that efficiency of public of authority development of competition in all areas of economic and public life remain top priorities for me prime minister for the president of our country this is something we are going to do now a few words about what is to be done we need to engage in systematic and active dialogue with the civil society a dialogue that would have feedback that would help achieve continuity in actions of government we have certain mechanisms for such dialogue they are not perfect they were created just recently some six months ago major innovation for me and my colleagues in government would probably be the open government of this new format major bills are now being debated with representatives of various public groups people of different background different professions enhancing efficiency of public management should be then using new management technologies as it happens everywhere in the world project management present management lean technologies is something we borrowed from the business life they have proven to be successful and we could use them in public management and public governance we need to move forward develop other interactive formats of cooperation between authorities and the society that would ensure constant link not from one election to another we need to use modern technologies telecom technologies crowdsourcing for instance would help to use potential of all people that care IT technologies help to monitor the implementation of major projects and timely respond to problems that reduces the distance between authorities and the people and helps adopt good decisions those technologies change the status and enhance legitimacy of decisions taken by government and that's very important in the 21st century they can no longer be treated as something imposed by authorities or lobbied decisions that helps society to control the authorities and make sure that general public is going to be satisfied and happy with decisions taken by government and what's even more important it helps identify the best and the bravest and help them advance in their careers their colleagues in just a week from now at the meeting of the government of the Russian Federation I will talk about main areas of work of government for the midterm so here in Davos it's a testing trial for me in some ways those goals were formulated by the president, the government of the Russian Federation they were formulated by the way we understand global challenges and ways forward this would be the main program document for the government team and this team has already taken shape and started to work efficiently in the years to come we are determined to make Russia truly open and attractive not necessarily but this will not shake our confidence for high-tech investment in different production areas and social factors for young people high quality education possibility to tap their potential for professionals from all countries who are ready to offer all possible opportunities that is only by doing so that we would be able to achieve social progress and achieve high living standards for our people therefore despite all the pessimistic scenarios we heard I would rather agree with the optimistic quote of Winston Churchill that believe that the difficulties that remain to be overcome are greater than those that already lie behind thank you thank you very much Mr. Prime Minister for sharing that with us now before we conclude the Prime Minister is graciously accepted to answer take some questions and we had consulted the social media and by the way the instructions were not to ask sanitize questions but frank questions and we consulted the social media and received some very lively suggestions we've boiled it down to two you may already feel you've addressed these so feel free to respond as you wish and make any further concluding remarks you'd like the two questions that we've received were one why don't Russians invest more in their economy and what will be done to improve that outlook and second what is being done in Russia to raise the sense of civic responsibility among its citizens all right well about the investments I think that despite the fact that those questions were put in the social media they do not reflect the whole situation quite accurately Russian business people invest in their country much more than into some other countries and it is enough to look at the statistics of what is going on the main volume of the capital investment which was the last year that's about 400 billion dollars was done by Russian investors and with all the corrections and difficulties with all the drawbacks of governance and management which exist with all the problems that are really present in our economy despite all this our investors do invest their money into the Russian economy I think that does not need any special proof today so this is some ordinary life understanding or the understanding of the 90s when yes a lot of our entrepreneurs bought assets including personal assets on the territories of other countries today it is not the thing it is not so the volume of credit loans that our entrepreneurs receive in Russia and in foreign banks are directed to our country and I believe that the information and question was not quite accurate now the second question the civic activity, the civic responsibility I believe that we have managed in the recent years to take decisions which contributed to that to civic responsibility and activity but that is a philosophical question what comes first, political decisions or civic activities or vice versa but in any case I'd like to say this openly that today our civic society is a lot different from the civic society five or seven years ago whether it is good or bad whether it is good because our civic society is now more mature and our civic society gives the demands to the authorities sometimes it does it in a very strong way but it is important so that it comes in the legal form that it does not violate the existing legislation but last year in the last but one was to help the civic society to develop for example let's take a decision that I took as the president of Russia and that was supported by our parliament that is changing the system of forming political parties we have a lot of political parties now that does not mean that they all have significant influence on the situation in our country but now there is a better choice and I believe that some parties which do not now act as the serious engines of political life will or might become such engines or will create some alliances or blocks that will influence political situation directly and form the civic society so I would like to say that our civic society has become as I said more mature and so the state and the government should become wiser as far as the civic society is concerned only bearing this in mind we can solve the tasks I mentioned thank you very much for those answers are there any other concluding remarks you would like to make before we close the session well I believe that I have said a lot already it is difficult to add anything to the presentation that has been done and I thank all of the present here for listening to my speech I thank all of you for expressing your opinions on what is the most important for improving life in our country and creating an effective and efficient economy I would like to thank all the experts for their efforts in preparing those three scenarios and I would like to reiterate that those three scenarios are important for us because they are negative this is a great warning a powerful warning to us and again I would like to say that I am completely confident that none of those scenarios will get real I think there will be a fourth scenario but how successful it will be depends on all of us it depends on the Russian business circles on the Russian civic society and in the end on the Russian nation and on our friends who have gathered here in this hall today and who help us create an effective and efficient state and build the modern economy thank you thank you very much well let me end first by thanking the audience thanking our three panel members from our global agenda council and the experts they worked with thanking Hermann Greff for inspiring and promoting this effort and above all I think Mr. Prime Minister we were all very heartened by your words very encouraged by the agenda that you have laid out we know that your success will be successful will be beneficial for everyone and if I can add a final note the principal institutional innovation in the wake of the global financial crisis was the formation of the group of 20 leaders process that process needs nurturing I know that you and President Putin are taking the responsibility very seriously so we all wish you the best of luck and success both for Russia and your stewardship of Russia and for 2013 in your guidance of the G20 thank you for joining us today