Building an effective state within existing borders
The next most important task in the sphere of state construction is
strengthening the federation. The main goal we are striving to reach is
building an effective state within existing borders.
As you know, we have recently seen a growing desire among certain
constituent parts of the federation to merge. This is a positive trend but
it is important to avoid turning it into another political campaign. We
should remember that constituent parts merge not for the sake of merging,
but for optimizing governance, for making social and economic policy more
effective and, in the end, to improve people's well-being.
Of course, the process of constituent parts' merging is a complicated
matter. However, in certain cases, I want to emphasize this - not always
and everywhere, but in certain cases - we shall not be able to concentrate
state resources to govern a territory which is huge and composed in a
unique fashion.
After all, many of our regions have complex jurisidictions. How powers
should be divided between their state authorities, primarily in matters of
taxation and budgets, is a problem that arises constantly. But all energies
are expended on disputes and coordination, and sometimes on resolving
disputes, including in the Constitutional Court. This is happening at a
time of new opportunities and the need to implement a whole range of major
national projects.
Specific examples of this are well known. The merger of Krasnoyarsk
Territory with the Taymyr and Evenki Autonomous Areas, currently in
progress, should help the development of new deposits and the energy supply
for eastern regions of Siberia. Clear and precise administrative decisions
should unlock the benefits of large-scale investment in the development of
Russian regions.
Statute of limitation, need for government to legislate fast
I regard the third major task as the pursuit of an active policy of
liberalization of enterprise. Here I will highlight above all else measures
for stabilization of the economic process, radical expansion of
opportunities for free enterprise, and areas of investment.
Firstly, we need to act to strengthen this economic process. I have already
said that we should soon reduce to three years the statute of limitations
for the consequences of invalid and detrimental transactions. At the moment
the statute of limitations is 10 years. This proposal is already being
widely debated and I would like to stress once again the motives that
guided us to make this proposal.
The inviolability of the right to private property is the basic requirement
for the conduct of any kind of business. The rules to which the state
adheres in this field should be clear to all. And, importantly, they should
be stable. This allows anyone developing their own enterprise properly to
plan and conduct both their business and their life. It allows citizens
calmly and without anxiety to conclude contracts in such vital areas as,
for example, buying a home, or privatizing it. To a large extent this has
largely already taken place in our country. In general, it motivates people
to acquire property and to increase production.
At the same time we must not treat lightly those who have broken the law in
signing deals. Of course, the state must react to this. But I must note
that three years is a long period too, sufficient for both the interested
parties and the state to sort out their relations in court. I would also
like to stress that the three-year statute of limitation was the longest in
our legislation in the last 100 years [presumably, before the 10-year rule
applied]. Ten years is an infinitely and unjustifiably long period, from
the point of view of common economic and legal consideration. Such a period
breeds a lot of uncertainty, first of all lulling the state into
complacency. It lulls into complacency not only the state but also other
participants in the process.
Incidentally, the relevant proposal for amendments to legislation has
already been sent to the Russian government. Unfortunately, there has been
no reply, although only one word has to be corrected in one article. I am
asking you to speed up the formal agreement. [applause]
Need for clear property, investment law
Second, we must help people legalize in a simplified form the property
which effectively belongs to them, that is garages, houses, allotments in
various co-operatives and agricultural associations, and the corresponding
plots of land. [applause] This legalization must be as simple for people as
possible, and the filling of forms must not create additional problems for
them. Incidentally, this will offer extra opportunities such as legal
inheritance of property and bank loans secured by the property.
Third, we must boost the inflow of capital built up by people into our
economy. We must allow citizens to declare in simplified form the capital
they have accumulated in previous years, in the previous period. This
practice must be accompanied by only two conditions: 13-per-cent income tax
must be paid and the appropriate amounts of money must be paid into
accounts in Russian banks.
This money should work for the benefit of our economy, in our country, and
not hang around in offshore zones. [Applause]
Role of tax authorities not to terrorize business
I will dwell on another task which I think is fundamental to the
development of the state. It concerns the work of the tax and customs
bodies. I believe that checking that tax and customs legislation is being
implemented should become a priority in their work and not fulfilment of
plans for collection of taxes and duties. It is obvious that fiscal bodies
in any country should check whether taxes are being paid correctly, but it
would also be fair to acknowledge that our tax system has been at the
formative state in recent years. Time and the rich practice of applying
legislation and administering justice were needed for clear answers to very
many questions to emerge.
Fiscal bodies should not ignore violation of laws - under no circumstance
should they do that. At the same time, ways of repaying tax debts for past
years should be found so as to ensure the state's interests without
destroying the economy and without driving business into a dead end. Fiscal
bodies have no right to terrorize business by returning to the same old
problems. They should work smoothly and react in timely manner to
violations committed while focusing on checking the current period.
I believe that all the above measures will help stabilize economic
activities for our citizens, create additional guarantees for the long-term
development of business and ultimately ensure greater freedom for business
activity and a fair attitude towards it on the part of the state.
Backs foreign investment, strategic areas to remain in Russian hands
Finally, another important issue. Russia is extremely interested in a large
inflow of private investment, including foreign investment. This is our
strategic choice and strategic approach. However, in practice, investors
are sometimes faced with restrictions which can be explained by all sorts
of notions, including notions of national security.
Moreover, not all of this is legally formulated. Such ambiguity creates
problems for the state as well as for investors. It is time for us clearly
to identify those areas of the economy where the interests of strengthening
the independence and security of Russia dictate the need for primary
control by national and state capital. I mean several infrastructure
establishments, companies which fulfil defence orders and reserves of
mineral resources which have strategic significance for the future of the
country, for future generations of Russians, and also infrastructure
monopolies.
It is necessary to develop and strengthen at the legislative level the
framework of criteria which define the restrictions for foreign capital
participating in such spheres of the economy. And at the same time, it is
necessary absolutely to define a corresponding list of industries or
establishments which will not be subject to enlargement and will not be
broadly interpreted. It is this sort of approach which a number of
countries with developed market economies use today, and we must also use
it. Maintaining this sort of control and restrictions in a whole series of
sectors of the economy, we must on the whole create favourable conditions
for private capital in all attractive industries and I think you will agree
with me, it must be said directly, that for the moment, unfortunately, too
little has been done with regard to this.
I repeat that all these decisions must be established on a legislative
level. The aim of such measures is clear: Investors do not need riddles and
charades. Their money will only go where there is stability, and where the
rules of the game are clear and understandable. And this sort of approach
will be fair, both with regard to society and the state, which is obliged
to protect its future interests, thinking about the development of the
country for the year ahead and for a ten-year-period.
Russia to interpret democracy for itself
Respected colleagues, a necessary condition for the development of
democracy in the country is the creation of an effective legal and
political system. But this must not be at the expense of law and order, of
the stability which has been achieved with such difficulty or of the
steadfast pursuit of economic policy.
In this I see the independent character of the democratic path we have
chosen. And so we are going to move forward, taking into account our
individual domestic situation, but of course operating according to the law
and the safeguards within the constitution. It goes without saying that the
authorities themselves must also not abuse their administrative positions.
They are obliged to find all possible opportunities to strengthen the
country's real democratic institutions. Depriving one's own people of the
ability to live according to democratic law shows a lack of respect for
oneself and one's fellow citizens. It shows a lack of both understanding of
the past and vision for the future.
The great Russian philosopher Ivan Ilyin wrote that the power of state has
its own limits, determined by the very fact that it is a power that suits
the external life of an individual. However, all the [internal] creative
states of the soul and spirit, including love, freedom and goodwill, are
not under the jurisdiction of the state and cannot be dictated by it. The
state cannot demand the trust, blessing, love, goodness and faith of its
citizens. It cannot regulate scientific, religious and artistic works. It
must not meddle in moral, family and everyday life or, unless absolutely
essential, stifle the people's economic initiative and creativity. Let us
not forget this.
Russia is a country that, by the will of its own people, chose democracy
for itself. It set out on this course itself and, observing all generally
accepted political norms, will decide for itself how to ensure that the
principles of freedom and democracy are implemented, taking into account
its historical, geopolitical and other characteristics. As a sovereign
country, Russia can and will independently determine the timing and
conditions of its progress along this path.
People must respect the law
However, the consistent development of democracy in Russia is only possible
by following a legal, legitimate path. The use of any kind of illegal
method to fight for national, religious or other interests contradicts the
very principles of democracy. The state will respond severely, but within
the law.
And we need the type of law-enforcement agencies in whose work the
upstanding citizen can take pride, instead of crossing to the other side of
the street when he sees a man in uniform. Those whose main goal is personal
gain, rather than upholding the law, have no place in the law-enforcement
system. So the motivation of people serving in these bodies should be,
above all else, the quality of the protection of citizens' rights and
freedoms. And finally, if part of Russian society continues to regard the
judicial system as corrupt, then it will be simply impossible to speak of
effective dispensation of justice.
Need to strengthen law to fight crime, terror
On the whole I would say that the organization of the fight against crime
in the country requires radically new approaches. The appropriate decisions
will be prepared. Stronger law and order is indivisible from the removal of
the sources of terrorist aggression in Russia. In past years we have taken
several major steps in the fight against terror. But there can be no
illusions here. The threat is still very strong. We are still taking very
painful blows. Criminals are still committing dreadful acts, with the aim
of intimidating society. And we need to gather our courage to continue this
work to eradicate terror. The moment we display weakness or spinelessness,
our losses will be immeasurably greater. And they could become a national
catastrophe.
I expect to see energetic work to bolster security in southern Russia, to
assert there the values of freedom and justice. The essential conditions
for this are development of the economy, creation of new jobs, construction
of the social and industrial infrastructure. I support the holding, as
early as this year, of parliamentary elections in the Chechen Republic.
They should become the basis for stability and the development of democracy
in this region.
I shall note that even now the North Caucasus region has good conditions in
place for rapid economic growth. It has one of Russia's most developed
transport infrastructures and a quality workforce. And polls show that the
number of people wishing to engage in enterprise here is higher than the
Russian average.
At the same time the share of shadow economy and criminalized business
relations as a whole is much larger here. In this connection power bodies
must not only strengthen law enforcement and the court system in the
region, but also motivate people's business activities.
We should pay no less attention to other strategically important regions of
the Russian Federation. I mean the Far East, Kaliningrad Region and other
border territories. Here we need to concentrate state resources to enlarge
transport, telecommunications and energy infrastructures, building
transcontinental corridors among other things. These regions must become
key points in Russia's cooperation with neighbouring states.
