OREANDA-NEWS. April 26, 2011. “We hope that the building materials industry and the construction sector as a whole will promote the growth and modernisation of Russia’s entire economy.”
Vladimir Putin’s opening address:

Good afternoon, esteemed colleagues,

During today’s meeting, we will discuss a very important issue: the Strategy for Developing the Building Materials Industry until 2020. Obviously, our plans for modernising national infrastructure and housing construction largely depend on the efficiency and effectiveness of this basic industry. You are the experts, and you know better than me that without it, we won’t be able to proceed with housing construction or the development of our infrastructure.

At the meeting in Kirov in February, we discussed a package of measures to implement the federal targeted programme Housing over the next five years. By 2016, we must be building 100 million square metres of housing per year (just to remind you, after a small decline in 2010, this figure was 58 million square metres, and before the crisis, it was around 63 million, which we have now matched). I proceed from the assumption that by 2020, we will be able to build around 140 million square metres of housing every year.

In addition, we have major projects planned for industrial and transport facilities. We have large-scale plans for the fuel-and-energy sector, and we must complete a great deal of work in the Far East related to the preparations for the APEC (Asia-Pacific Economic Cooperation) summit. We must also complete our plans in Kazan. Much has been done there, but we must complete our preparations for the World Student Games. Now, we have another major project directed at 13 Russian cities: the preparations for the FIFA World Cup.

All these projects will push our construction industry forward, but this is far from being our main goal. Our priority is to develop infrastructure across the country and fulfil our housing programme. We hope that the building materials industry and the construction sector as a whole will promote the growth and modernisation of Russia’s entire economy. Needless to say, we must set more rigorous technological requirements and standards on housing construction and the production of building materials – they are the basic elements that influence the quality and final cost of construction, which is particularly important in housing.

The plant we are currently inside is one of the oldest in the construction industry – it has been in operation since 1955. You have just seen the upgraded production lines. The quality has changed dramatically. These may seem to be prefabricated concrete buildings, but overall they look different, and not just this – you can also feel the difference when you live in them. I’ve just recalled how I also lived in a prefab building in St Petersburg, in what was called a ‘ship’. Now the technology is completely different. Everything is seamless, and people do not have to seal anything up to prevent the wind blowing freely through their flats. Everything has been done properly, effectively, and with the use of modern technology. Regrettably, we don’t have many materials like that. For the time being, we also manufacture cement the old-fashioned way – a little over 14% is produced using the dry method.

I’d like to emphasise that this industry is also important for us socially. Not only does it resolve major economic and social issues, such as housing, but it is a focus of social issues in its own right. Suffice it to say that the industry employs 5.5 million people.

So, we are holding our meeting at one of the oldest plants. By and large, they provide a good example of how to organise production. My colleagues told me that they have invested 340-360 million roubles into reconstruction over a relatively short period of time and have achieved serious results.

The majority of cement and brick manufacturing facilities were built 30 or more years ago. For the most part, their technology reflects the level of the 1970s. Clearly, we cannot accept this situation and must drastically change our approach to affordable housing. It should be built with the use of the most modern construction and architectural methods available, meet all standards of quality and energy efficiency, be eco-friendly, and, at the same time, remain affordable.

You know as well as anyone that building materials account for 30%-40% of housing costs. We must look for an adequate price-to-quality ratio and reduce costs by increasing the scale of production and simultaneously converting to energy-efficient and high-tech products. In order to achieve this, we must carry out the industry’s holistic retooling and develop new, modern production lines.

I believe that in this context, we must draw up comprehensive plans for the industry’s development in every region and every federal district. I want the governors to listen: every region must have a comprehensive plan for the development of its construction industry.

These plans should take all elements of that development into account – the targets of the regional housing construction programmes, programmes to build socio-cultural facilities and   develop industrial enterprises and transport infrastructure. Managers in the building materials industry and the construction sector should understand how the market is to develop. Obviously, it is impossible to predict everything, but we need to set forth some reference points and targets for the years ahead. It goes without saying that the potential for inter-regional cooperation should be taken into account in designing new plants to produce building materials.

I think that the Ministry of Regional Development should coordinate this effort with active participation from the Ministry of Economic Development and the Ministry of Industry and Trade. I’d like to ask the ministers to concentrate on this work together with the governors.

It is essential to create favourable conditions for modernising existing production plants, commissioning new ones, and purchasing high-tech equipment and machines for the production of materials for the affordable housing segment that I’ve mentioned.

There are successful, good examples of this work in many regions: Moscow, the Moscow Region, St Petersburg, the Leningrad Region, Rostov-on-Don, and Samara.

This experience should be disseminated, all the more so since we envisage additional incentives for the regions that are actively involved in construction. We will grant funds to these regions, and they will use them to subsidise interest rates on loans for the retooling of construction facilities. About 40 regions will receive support this year – before the end of its second quarter, to be exact. All in all, we have allocated 21.6 billion roubles for this purpose, including 3.5 billion this year.

When we speak about retooling, the question of foreign equipment arises. A common principle should apply here, as it does in other industries: we will reduce or even remove import duties on unique equipment that is not produced in this country for the time being. In any case, I would like you to emphasise to your foreign partners that we are currently buying a lot of equipment, and we plan to buy even more. There are companies that have worked with us – with you – for a long time. At a government level, we will try to create favourable conditions and provide economic incentives for the transfer of production into Russia and a gradual increase in its localisation. The companies that will join us in this effort will stand to gain from it.

We have good relations with our partners in Germany, France, Finland, and many other countries. I think it makes sense to use this experience in organising the production of equipment for the construction industry in Russia – I’ve already said on what terms. I’d like to ask the Ministry of Regional Development and the Ministry of Industry and Trade to submit these proposals to the government – as we do in other industries. I don’t need to repeat all of this – you know it very well.

The regions must build the facilities necessary to increase production capacities. I’d like to draw the attention of the Ministry of Regional Development and the Housing Construction Development Facilitation Fund to the necessity of expediting the commitment and registration of land for the placement of new enterprises in the construction industry. These plots must be provided with the required infrastructure by all means. This will require a major effort. It is large-scale and expensive, but it’s worth it.

I’d like to remind you that regional housing construction programmes must be tailored to the plans to develop engineering, communications, and utilities networks, including gas, electricity and heat. Obviously, we must continue improving our legislation and reducing administrative barriers. I’d like you to complete your work on updating national standards in construction and the production of building materials.

It is necessary to invest resources in the future of the construction sector, develop designs and experimental facilities, attract business capital for innovation, and promote its early application. In this context, construction industry enterprises and research institutes must be integrated into a single chain for the purpose of innovation and production.

Let’s discuss all these problems. Mr. Basargin, please take the floor. Go ahead.

Viktor Basargin: I’d like to say a few words about our construction industry. Mr Putin, as you’ve already noted, this industry is very important – it accounts for 6% of the GDP and employs 8% of the country’s population. It consumes 25% of Russia’s steel, 14% of its aluminium, and more than 20% of its polymers.

You have already mentioned our priorities for the development of the construction sector. First of all, we must reduce administrative barriers…