‘Crisis is a strength test’ - Medvedev

The crisis that developed at a rapid pace is a period of purification for Russian business. Those who endure it will come out stronger and more efficient, according to Russian president Dmitry Medvedev

He was interviewed by correspondent Kirill Kleymyonov on Russian TV station Channel One.

Q: Mr. Medvedev, thank you for your invitation. Last time we met in this new format, you spoke quite a lot about the general situation in Russia during the crisis. Obviously, we will continue with that subject today, but let’s start with something different, something you have repeatedly mentioned during the first year of your presidency and even during the presidential race – namely, fighting corruption. This week, there was a meeting of the Anti-Corruption Council. Do you think you’ve managed to get things moving?

A: Hello, Kirill. Of course, I’d say, even if we were able to make some progress, it was very, very little. But I think we made a step forward—namely, for the first time in our country’s modern history we created a new legislative foundation for fighting corruption.

I remember how those discussions dragged on in the 1990s and this decade. People used to say, “Let’s adopt this bill,” or, “Let’s adopt that bill;” “Let’s see how this will work,” “Let’s comply with international conventions.”  And now, I believe, we have created a normal legal foundation. I don’t say it’s perfect but it’s up-to-date. I repeat, this is the first time in our recent history.

In fact, this is the first time in our entire history, because during the Soviet period corruption was fundamentally different and the response on the part of the law was different too. This means we have made some progress.

Now we move on to the most difficult part: we need to apply these laws. Here, I think, we are going to face various difficulties, including those that have to do with our not being ready to use the authority these laws give us, our not being ready to unveil certain things we have been concealing traditionally.

For example, at the meeting of the Anti-Corruption Council you referred to, we discussed the issue of government officials reporting their income and their property. It seems to be very simple: almost all government employees report their income annually.  Yet there is an important change here: now they will be required to report some other kinds of property as well, and not only for themselves but for their family members too, which means a lot.

Of course, some may say that those who want to hide their income will do so by using somebody else’s name or will hide it in an offshore company.  Of course, this may be true. But still, this new requirement gives us many more ways to monitor the situation. Now every official will have to make a decision whether he wants to report his income and property honestly, or whether he is going to hide it. In other words, he’ll face an ethical dilemma.

By the way, I think that with such decisions you ought to start with yourself. That’s why I made a decision that the president will also report his income annually. The existing laws do not require that he do so. Usually, such reports were submitted during the presidential race only. I will add a special provision in a presidential decree that the president should do this every year, just like all other government employees.

Q: So, are you going to start doing it this year?

A: I will do it this year. I hope other government officials will follow suit. I’ll give them a hint that they should.

Q: It is no secret that many people enter government in order to pursue their own goals. Sometimes, frankly speaking, their goals are criminal. In early March, elections at various levels took place in Russia. In other words, there are many new faces in government. An election is always an opportunity to get rid of some inefficient and dishonest people. So, in this context of fighting corruption, do you see any progress made in this matter, especially considering the extraordinary problems the government is facing at this time of crisis?

A: Fighting corruption is always a difficult, system-defined task. Fighting corruption in our country is a particularly difficult task which will require tremendous effort and endurance. This plan, of course, is for the future.

But even today I can say there is some progress. For example, according to the statistics I have, last year there were 40,000 criminal cases against those who violated the laws on government and municipal employment. And my point is not that the number is large, even though this is more than what we had in 2007 – 12,000 of these cases involved bribery.

These are very difficult cases because bribery is very difficult to prove. Still, I hope many of these cases will be fully investigated and will result in sentences – that is, of course, if investigators can provide evidence for the charges.

As for specific cases, you know, life consists of specific situations. I believe some steps we took recently indicate that we are earnest. We had a number of major, high-profile cases that involved high-ranking officials in the Oryol Region, in the Perm Region, and in the Primorsky Region.

They indicate that we are determined to pursue these matters to the end, because the fight against corruption consists of two parts: first, punishing those who have already violated the law; and second, creating a motivating system for those who are currently deciding what to do.

So, I think the municipal elections we recently had brought some new managers into government. I hope these are modern people who know how to manage the economy at the local level, which is, by the way, the most difficult level.

I had a meeting with representatives from municipal governing bodies in Tula this week. To tell you the truth, I enjoyed that meeting very much.  These are modern people, full of life. They were elected just recently, on March 1. They labour in their regions. They are doctors, teachers, managers of small businesses—down-to-earth people who know about the problems people are facing in villages and small towns.

My conversations with them convinced me that they were very competent; these are not just people who entered government by accident. I hope most of the people in local governing bodies are like this. By the way, I think I’m going to have such meetings in various regions on a regular basis.

Of course, there are examples of a different nature as well, and I did talk to the chairman of the Central Electoral Commission about them.  Unfortunately, some of those elected are people from the “first wave” of organized crime, those who made a fortune in the ‘90s and who are now eager to make it into government.

We should say that in the last few years we managed to purge our administrative staff quite well, and today there are practically no such people at the federal and regional levels.

But it still happens at the municipal level. We should pay very close attention to where these people got their money from, to what they are doing after being elected and to what they were doing prior to that. The more thoroughly we deal with these problems, the better our local assemblies will be and the more efficient our government workers will be. I am going to monitor these things very closely.

Q: When you met with the representative from municipalities in Tula, did you register a response on their part to this subject of fighting corruption? How strong was their response?

A: You know, Kirill, to them this problem is extremely urgent. They are just fed up with all sorts of inspections and extortion. They’ve had enough of those local bosses who drop in from time to time and ask for a share of their money.

So, these people don’t need to be encouraged to rise up against corruption. They are ready to tell you absolutely everything frankly.  When you talk to people at a higher level, it is more difficult to have a frank conversation with them. But at this level, it is very easy.

They tell you, “In this case, the police came and said we had to do this and that; otherwise, they would give us a hard time.

So, we had to pay them. In this case, fire inspectors came, and the same thing happened again. In this situation, the local mafia boss came, and we had to share our money with him.” With this kind of thing, you need to respond immediately.

Corruption starts at the bottom level and goes all the way to the top. We need to get to the root. Otherwise, when people see such things happening everywhere around them, they are discouraged.

Q: Now, let’s go on to the crisis. By supporting the economy, the government actually helps hundreds of thousands, if not millions, of people who work for strategically important companies. But, probably, it’s too much for the government to bear this burden alone. Thus, I’d like to ask about business. What should its role be in providing support for people?

A: You know, I believe that the role of business at the time of crisis should go beyond what it is traditionally—developing business, developing production.

Q: Making profits.

A: Exactly, making profits. Business should also bear a moral responsibility. Our businesses have been developing very quickly and have thus accumulated substantial resources. Perhaps, nowhere in the world has business ever in modern history developed so rapidly as in our country.

Some people became very rich in a very short period of time. Now the time has come to pay off debts, moral debts, because this crisis is a maturity test. If someone is a true entrepreneur, he values his employees. He’ll try to put aside some of his proposals, ideas or personal needs to be able to keep his team, to pay salaries, to preserve what he’s been doing in recent years.

On the other hand, if a person gets nervous, sells his business and runs away, it means he’s not a real entrepreneur. He’s just created a business and then decided to get rid of it.

From this point of view, it’s a purification period. In other words, those who endure the crisis will become efficient businessmen, efficient managers. And I reckon this is very important.

How can we monitor these things? You and I just recently talked about this. Some time ago, somebody proposed having special representatives in commercial banks. I’ve been promoting exactly this idea, and now this law has been adopted.  Soon we’ll have such representatives in major commercial banks.

In my view, it’s of paramount importance, because they will monitor the way the banking business is developing today.

It will be up to them to approve this or that deal and see to it that loans are issued on acceptable market terms, without a need for donations or similar unthinkable things, which, unfortunately, regularly happens in our banks.  Loans should be given on regular market terms, not in exchange for kickbacks or some promises.  Thus, I believe it is necessary to have such monitors at present.

Q:There will be authorized representatives from the Central Bank?

A:They’re authorized representatives from the Central Bank at commercial banks.
 
Q: When should this institution start working?
 
A:They’re already present at commercial banks. In fact, they’re already working.

Q: In our country, the elder generation has gone through a lot of trials and tribulations – the war, postwar famine and monetary reforms, when overnight their savings could be lost. Fortunately, middle-aged people didn’t face such hardships, but they also have much to remember, if we speak about the devastation of the 1990s, for example. But one way or another, representatives from these generations were tempered. Our younger generation, however, may be facing such problems caused by the financial crisis, for the first time. Are you afraid that young people may be frustrated somehow?

A: You know, I don’t think there is such a problem at all, for several reasons. First, young people still make the most energetic and motivated part of society, and are not that easily broken.

And secondly, the starting level we are now at is substantially different from what we had in the 90s. All of us remember quite well the plight our country and its economy, and what actually transpired on one day in 1998, when practically every citizen in the country felt robbed. In this respect, this starting level builds up a sufficient margin of safety.

Therefore, I am not that worried regarding our young citizens. No doubt it’s a test of strength, which is absolutely evident. At the same time, I can say that both our elderly and middle-aged people shouldn’t feel trapped again.

True, the crisis doesn’t make anyone happy. It creates tension and discomfort for everybody. But we’ll certainly never allow things to happen like they did in the late ‘80s and in the 90s.

We have a fundamentally different economy and most importantly, we have a fundamentally different attitude to the social duties of the state. What happened then will not happen again.

Q: Still, coming back to supporting young people – let me ask you a question that concerns not only young people but their parents, too. Graduation examinations and diplomas are due to be held in Russia’s universities, involving, if I’m not mistaken, about 1 point 3 million students.

A: It could even be one and a half million.

Q:One and a half million graduates. And this year will probably be the first when it’ll be very hard to find a job. There are estimates that about half of graduates from day-time faculties will fail to find jobs immediately. What can the state do to ease the problem?

A: It’s a really vital issue. Taking into account that the job situation is rather uneasy, the government has drafted a special plan in this field. The Ministry of Education has prepared a plan to provide jobs for young specialists.

Besides those students, who have studied on contracts with enterprises and consequently have good chances to get jobs, there’s also a chance to retrain some graduates in professions which are in higher demand.

It’s possible to arrange post graduate education for some students – I do hope a considerable majority of the graduates will opt to continue their studies. It’s a very serious thing we are going to tackle.

Finally, there is one more idea I find worth noting.  It’s about setting up special small enterprises at universities and affiliated vocational schools. A bill on this has been already submitted to the State Duma.

Q: Speaking of the employment situation in general, what is your forecast?

A: As you know, the employment situation is not easy but generally remains under control so far, despite a considerable recent growth of unemployment.

In the past five months we received another 200 thousand officially registered jobless citizens which amounts to about two million in the country. Speaking of factual unemployment, I mean of people who are actively looking for jobs…

Q: But have not yet registered as unemployed at job centres…

A:Yes, but along with the registered ones, we have, according to estimates made using the International Labour Organisation methods, about six million people jobless. This is the scale of this calamity in the country.

Q: Is this the first time the figure has been announced today.

A: Yes, it may be the first time it’s announced, although it is not a deep dark secret. It is the current figure of unemployment. Let me stress it is an estimate by experts.

And it is another reason for implementing various programmes in our country, which is actually being done. I mean federal support programmes of 43 billion roubles in allowances, as well as joint programmes with regions comprising nearly the same amount of slightly more than 43 billion roubles.

Q: I would like you to return to education and say a few words about paid education, for the crisis has largely affected those people who pay for their education on their own. Incidentally, we have many such instances among our staff. Not long ago you met with the education minister and instructed him on what to do. When can we expect results?

A: Such instructions should be fulfilled as quickly as possible. Let tell you in a few words about the current situation. Indeed I gave him those instructions and set certain deadlines.

And this is what I would like to share with all our people concerned – for those individuals who study at commercial departments and who would like to get transferred to budget-sponsored studies – a letter from the Education Ministry with recommendations valid for all the educational institutions has been signed following my instruction, which means that the necessary documents have been adopted.

The same can be said about another idea– about proceeding to studies using money borrowed for educational purposes.

In the next ten days or so, a governmental decree will be prepared which is due to be passed alongside the state budget. Consequently, my instructions to the Education Ministry concerning students who pay for their studies will be fulfilled.

Q: It’s important information.Dmitriy Anatolyevich, the prices for food and medicine are rising. Whereas it can be explained in relation to imported medications, it’s outrageous when it comes to domestic products.

A: It’s a huge problem.Indeed, it is more or less explicable when imported drugs get more expensive – it does not make anyone happy, but still – it’s at least understandable. And it’s absolutely unacceptable when medications manufactured from domestically available raw materials by domestic enterprises become more expensive.

Incidentally, one should have a very close look at the situation with imported drugs, too, because it is one thing when the price changes proportionally to the fluctuation of the rouble-to-foreign-currency exchange rate, inflation – it can be somehow explained from the economic point of view, but it’s another thing when it’s about manifold increase. It’s nothing but an attempt to gain profits at the cost of the people during a hard period.

Taking into account that in our regions all this is being tackled by regional authorities, I would like to draw particular attention to the fact that all kinds of agents who work in the regions should be honest. The task of regional governors is to see to it that all the extra charges imposed by agents both for imported and domestic medications should remain within reasonable limits. Otherwise it will be up to the law-enforcement agencies to deal with it. I promise.

Another thing I believe should be there. We must do our best to be able to manufacture our domestic medications based on our own precursors, on our production facilities in our domestic companies. What’s to be done to that end? It’s crucial to consider the whole range of medications that are imported and manufactured domestically and try and proceed to domestic manufacturing.

Earlier we exercised nearly no control over prices, it was up to the manufacturers. Now, however, I think we could decide on the mandatory declaration of selling prices for the most important medications supplied to commercial chemists, in which case, based on price declarations on drugs imported or domestically manufactured we will get a more or less clear picture about the actual price for this or that medication. Such decisions should be properly prepared so that this would become another way to address the problems about the price of medical drugs.

And finally, the state will be sure to monitor the situation as all the free medical supplies will be financed in full, for all the major groups eligible for federal financing. I mean the seven basic diseases listed in the so-called nosology, as well as free medications financed from regional budgets.

You know, I think it’s a huge topic worthy of a separate discussion, I mean the situation in our country with medicine and as a whole in this period of crisis – about everything, including the ways medical services are provided, problems and medical supplies. I am going to discuss this during one of our further meetings.

Q: One can draw a definite conclusion from what you are saying that the state will not allow an uncontrolled rise in medicines prices.

A: The state has no right to give up this control, since it is a matter of life for many people.

Q: Dmitriy Anatolyevich, one can draw a conclusion even from this conversation that the current situation is perhaps a very serious and lengthy test of strength for the whole system of state governance. How would you assess the first results of this test?

A: You know, I can only agree with you it is a test of strength. And it will continue for more than one day or a month.

As for the current state of affairs, I believe we have been reacting to the crisis quite adequately, which does not mean though we should relax and say ‘Now that we have organised support for a number of major enterprises, have allocated subsidies, and are dealing with unemployment, all is okay.’ We can’t let ourselves say such things.

First of all, because we don’t know – and no one else in the world does – how long this crisis will last. And we are not insured against any kinds of changes, including unfavourable. Secondly, we have very many problems, so no one can relax, chiefly the authorities – federal, regional and local. Our task is to work on a daily basis, addressing the problems this crisis has generated – only this way can we cope with it.

Q: Thank you very much for this conversation.

A:Thank you.

For the Russian version of the interview, follow the link