Vladimir Putin focused largely on domestic economic policy in his annual state of the nation address, which was carried live by Russia TV, Russian Channel One TV, Centre TV, Radio Russia and Mayak radio. His main themes were the need to raise the standard of living for all, to improve access to quality housing, reform the health care system and improve the job prospects for graduates in their own field of study while retaining Russia's leading status in education. Noting that the country is on schedule to meet last year's state-of-the nation target of doubling GDP, Putin spoke in some detail about the need to refine the tax system to reduce the burden on business and attract investment. He said inflation should continue to fall and looked ahead to the possibility of complete convertibility of the rouble in two years. He spoke frankly about the need to upgrade Russia's transport infrastructure, allowing that private investment has a role to play here. He outlined the modernization under way in the military, saying this should make the army a more attractive career. Putin made it very clear that Russia's stance on international terrorism is unchanged, referring briefly to the "political murder" of Chechen President Akhmat Kadyrov. He looked forward to working with regional organizations to enhance stability and to the prospect of joining the World Trade Organization. The president highlighted the role of the individual in Russian society throughout the speech, closing by saying that the most important task is the creation of a free society of free people. The following is the text of the speech as broadcast by Russia TV on 26 May. Sub-headings have been inserted editorially: [Putin] Good day, esteemed members of the Federation Council, deputies of the State Duma, esteemed citizens of Russia. I think that in this auditorium, as in previous years, there is no need to talk about the results that have been achieved in recent times. Together, we have indeed done much work to achieve them. I will note only that in the last four years we have crossed a complicated but very important boundary, and for the first time in a long period Russia has become a politically and economically stable country, an independent country, both in the financial sense and in international affairs, which in itself is not bad. Russia better placed to achieve greater prosperity Our aims are absolutely clear: They are a high standard of living in the country and a secure, free and comfortable life. They are a mature democracy and a developed civic society. They are to strengthen Russia's standing in the world. And the main thing is, I repeat, a significant increase in the prosperity of our citizens. Today, we have a better awareness of our own potential. We know what resources we have. We understand what can hinder us in achieving our stated aims and we are modernizing the state actively, striving for its functions to correspond to the modern stage of Russia's development, a stage that ensures a substantially higher standard of living. I will recall that in the last decades of the last century, with a wrecked economy and lost positions on world markets, Russia was forced simultaneously to restore its statehood and to create a market economy, which was new for us, to defend the country's [territorial] integrity in the fight against international terrorism and to defend the people's democratic achievements. Since the beginning of the 1990s, Russia has gone through several stages in its development. The first stage was linked to the dismantling of the previous economic system. It was accompanied by disruption of our usual way of life and acute political and social conflicts, and was difficult for our society to live through. The second stage was a time of clearing the rubble resulting from the collapse of the old building. But we managed to halt the most dangerous trends in the economy and in the political arena. Not all the decisions that had to be made in those years were of a long-term nature. And the actions of the federal authorities often were rather in response to major threats to us. In fact, it is only recently that we have come to the third stage of development of the modern Russian state, to the possibility of high-speed development, the possibility of resolving large-scale nationwide tasks. And now we have both sufficient experience and the necessary tools to set ourselves truly long-term aims. In the last four years, our economy developed at quite a reasonable speed on the whole. People's standards of living rose somewhat. Over that period the real incomes of the population increased by 50 per cent - the real incomes, I stress. The number of people with incomes below subsistence level fell by one-third. Last year, the rate of growth of our economy was 7.3 per cent, while in the first four months of this year it was 8 per cent. Nevertheless, we must ask ourselves the question - have we done everything? Have we made use of all the possibilities for economic growth and social development? And does the way things stand at present suit us? No, above all people's standards of living do not suit us. May I remind you that at the time of the prolonged economic crisis Russia lost almost half of its economic potential. Over the last four years we managed to make up about 40 per cent of the loss. In spite of this we have not yet managed to catch up even with where we were in 1989. Only preserving high rates of development of the kind Russia has achieved today will prevent our being cast into the backwoods of the world economy. Up to Russians to achieve fitting place in the world Now, in order to occupy leading positions in today's complex conditions of world competition, we have to grow more rapidly than the rest of the world. We have to outstrip other countries in terms of rates of growth, quality of goods and services and standards of education, science and culture. This is a matter of our economic survival and of a fitting place for Russia in altered international conditions. I understand that this is an extremely difficult task, but we can do it and no-one else can do it for us. Today whether or not the country, whether we, can become a society of truly free people, free both economically and politically, depends on us alone. Whether the priority tasks of the entire nation are tackled successfully, tasks that are familiar to everyone: doubling GDP over 10 years; reducing poverty; increasing people's prosperity and modernizing the military, this depends on us alone. I will note once again that for the first time in a long time we can now predict what our lives will be like not for months or even a year ahead but for decades. The achievements of recent years give us the foundation for at long last beginning to tackle problems that we can actually surmount but only given certain economic possibilities, political stability and an active civil society. Each individual matters in a strong democratic state Far from everyone in the world wants to be dealing with an independent, strong and self-confident Russia. The global war of competition is currently making active use of political, economic and information pressure. The strengthening of our statehood is sometimes deliberately interpreted as authoritarianism. In this connection I would like to state that there will be no revision of the fundamental principles of our policy. [applause] Fidelity to democratic values is dictated by the will of our people and by the strategic interests of the Russian Federation itself. The main competitive capital and the main source of the country's development is its citizens. In order for the country to become strong and rich, everything possible must be done to ensure a normal life for each individual: for the individual who is creating high-quality goods and services, creating the cultural achievements of our state and creating the new country. For this potential to develop, we must join our efforts to create secure conditions to live in and cut the crime rate in the country. We must improve the state of health of the Russian nation, halt the growth of drug abuse and eradicate child neglect. We must reduce the mortality rate, increase longevity and overcome the demographic decline. Even in the very near future we may come up against a shortage of manpower and an increase in the social burden upon the young generation of workers. As you are aware, in previous addresses attention was as a rule focused on major social and economic tasks in a generalized way. I think that today we need to diverge from that tradition - and we can do so - and to concentrate on tasks affecting virtually every citizen and every family in the Russian Federation. Today we must together resolve the most vital problems for the country's citizens: These are, first and foremost, the quality and accessibility of housing, education and health care. We have come to the point at which we can deal with these tasks effectively. I shall dwell on this in more detail. Provision of accessible housing for all Esteemed colleagues, I think one of the most pressing tasks is that of providing citizens with accessible housing. This remains very much a burning issue for the majority of people in Russia. Good housing is important for rest, for work and for creating a normal family. However, even the current growth in incomes doesn't always allow people to buy housing and carry out improvements. This is why we have such low population mobility, which prevents people from moving around the country to seek suitable work. We have to admit that very many people still live in decrepit and dangerous buildings and flats. Little construction is going on, and what is being built often still doesn't conform to modern standards of safety and quality. Also, only people with high incomes can afford to buy new housing. The fact that young people don't have that opportunity influences their plans to have children. Several generations are still often forced to live in one flat. The conclusion is obvious: the old methods and approaches to resolving this issue haven't achieved much in the past, and today are simply not working. We have to stop deceiving people, forcing them to wait in line for years and decades to get housing, and we have to provide the majority of Russia's working people with the opportunity to buy on the market. At the same time, we have to guarantee social housing to the poor. The government and regional and local authorities have to set themselves the goal of ensuring that at least one third of Russian citizens could - could - buy a flat that meets modern requirements, and not one tenth, as we have today. They should be able to buy it using their own savings and with the help of housing loans. For this to happen, housing lending has to become long-term and accessible to ordinary people. So that growth in housing demand does not simply lead to a hike in prices, we have to ensure competitive conditions for housing construction. What action do we have to take? On the whole we know. I'll just set it out in general terms. First, we need financial mechanisms that allow people to improve their living conditions not just using current income and savings, but on the basis of their future incomes. We need clear legal conditions for developing long-term housing lending for both domestic and business construction. Mortgages have to become an accessible method of resolving issues for people on average incomes. It goes without saying that we also need other forms of finance, such as people taking shares in construction projects and joining housing savings associations. And in order to resolve all of these tasks, a state system of registration of real estate property rights, a credit history office and a developed mortgage securities market must operate efficiently. All of this needs to be done. Secondly, the monopoly of construction markets must be broken up. Russia's citizens are not obliged to pay for the cost of administrative barriers put up in construction or the super-profits of land development monopolies. The municipalities must adopt clear regulations for land use and development, procedures for permission and consent for construction must be simplified, and the necessary technical and utilities infrastructure must be prepared. All of these measures must be aimed at reducing the time and money spent on construction. Thirdly, one fundamental issue is guarantees of the ownership rights of the honest buyer. Deals on the housing market should go through only via transparent and comprehensible procedures, and, no less importantly, inexpensive ones. And the final point. We have to bring order to the granting of social housing. Those who really need it must be able to gain access to housing under social rent agreements. We also need to provide additional measures of targeted support for certain categories of citizens, especially young families. We have begun to do something in this respect, but it is completely insufficient thus far. We have to increase these efforts. Reform of health care system essential And now to the modernization of health care, another very complex and very painful issue. We have been talking about it for several years now, but reforms are proceeding sluggishly and slowly, and have not produced any significant results so far. Russia lags behind many countries on the most important indicators of health. Life expectancy here is 12 years lower than in the USA, eight years lower than in Poland, five years lower than in China. Above all, this is linked to the high mortality rate of the working population. Although child mortality is falling, it is still 50-100 per cent higher than in developed countries. One of the main reasons for this state of affairs remains the inefficiency of Russian health care. And even now quality and accessibility across the whole system of medical services continue to fall, while expenditure just keeps rising. Guarantees of free assistance are frequently of a declamatory nature, while as it is, people do not understand what they can obtain for free and what they need to pay for. Moreover, it is the least well-off who find themselves in the most difficult situation. They are forced to spend a disproportionately high slice of their already small incomes on medical assistance, or even to go without elementary medicines, which we consider simply impermissible. The main aim of modernizing health care is to increase access to and the quality of medical assistance for broad sections of the population. From this first and foremost it follows that guarantees of free medical assistance should be known to all and understandable, and standards of medical services should be worked out and confirmed for every illness with an obligatory list of treatment and diagnostic procedures and medicines, and also with minimum requirements for the conditions under which medical assistance is given. Moreover, such standards should be functioning in every settlement in the Russian Federation and only additional medical assistance and an increased level of comfort in obtaining it should be paid for by patients. Working out details on standards gives the opportunity to calculate the real cost of these services and to move from the principle of budgetary maintenance of medical establishments to payment for volume and quality of the medical assistance that is given. Moreover, such payment should take place in accordance with the principles of compulsory insurance. At the same time it is necessary to create incentives for the development of voluntary medical insurance. The government and parliament should ensure that there is a legal base for compulsory medical insurance, state guarantees of medical assistance, private medical practices and offering services requiring payment. Vital for Russia to remain world leader in education The next important task is the development of the Russian education system. I wish to stress that, Russian education, in its very fundamentals, occupied and occupies one of the leading places in the world. The loss of this supremacy is absolutely impermissible. Conditions of global competition demand that we strengthen the practical direction of education and this means first and foremost raising demands on professional - I wish to stress, in the broadest sense of this word - professional education. Vocational education nowadays has no strong link to the labour market. More than half those who leave further educational establishments are unable to find work in their field. Unfortunately, mass further education is accompanied by a decline in teaching standards at a time when further education admissions have almost trebled since Soviet days - just think about that figure - and the number of admissions is almost the same as the numbers leaving secondary school. Who needs this? And, with so many qualified specialists, we still have a shortage of the qualified staff the country needs so badly. One of the most serious problems is the lack of access to quality education for the less-well off. Tuition is accompanied by additional payments that not everyone can afford. A reduction in student accommodation and low grants prevent children from less-well-off families, particular from remote towns and villages, obtaining a quality education. The success of reform in this area should now be measured in terms of the quality of education, its accessibility and how it meets the needs of the labour market. In this connection, I'll give the following target guidelines. Firstly, school leavers, irrespective of their parents' wealth, must have the chance to enter further education appropriate to their level of knowledge. This requires an absolutely transparent and objective system of assessment on entering an educational establishment, the large-scale restoration of foundation courses at further educational establishments and means-tested grants. Young people who live a long way from prestigious universities must be given the chance to sit entrance exams. Secondly, we should be striving to ensure that the majority of further education graduates work in their field of qualification. Of course, I don't mean a return to telling people where to work. I mean predicting what qualified employees the state will need. At the same time, I am suggesting the possibility of signing a contract with students who, once they have received a free education, must either work in their chosen field for a set period of time or return the money the state has spent on their education. [Applause] And we must clearly start with professions which are now in short supply. I also believe that it is in the interests of Russian business to take part in training the specialists the economy needs, using education loans for this purpose. This is already practised but must be used more often. Thirdly, we must introduce educational standards appropriate for our time. Moreover, the content of education must meet the highest world standards. At the same time we must not forget our own advantages and we must increase to the maximum our capabilities in the areas in which Russian education is at the level of world standards, or even higher. There are areas like this. We must also further integrate education in scientific activities. The development of science at higher education establishments and major scientific and educational centres must become a priority. Economy on target to double GDP Esteemed colleagues; access to education and health care services and the ability to buy houses will help us alleviate the problem of poverty. Currently, the incomes of about 30 million of our citizens are below subsistence level. This is a huge figure. Moreover, most of the country's poor are able-bodied people. It is obvious that the state and business must direct their efforts towards further increasing employment, especially in regions with persistent unemployment, at developing small and medium-size business in those regions and applying efficiently measures of targeted social support. However, only economic growth can provide a truly reliable basis for the long-term solution of social problems, including the struggle against poverty. We are quite capable of doubling our economic potential in 10 years, as we said last year. We are capable of doing this even if we only maintain the average annual rates of growth at the level of the first quarter of this year. Furthermore, if we maintain these rates, we could double per capita GDP not in 10 years, but by 2010. [applause] Members of the government are also applauding. That means they agree with this. At the same time, the completion of reforms which are now under way in many sectors of the economy and the social sphere remains a necessary condition for achieving high rates of development. Budget to focus on results not expenditure A few words about the budget reform. Its main principle is to switch from managing budget expenditure to managing the results. The government as a whole needs to form a system of evaluating the plans and indices of the work of all executive bodies, and on this basis alone it should sum up results, draw conclusions and adjust policy in specific directions. In this respect, the basis for forming the budget should be the clearly-set goals of the policy which is being pursued, and the results expected. Budget planning itself should look to the long term. And at the same time, the independence that recipients of budget funds have in disposing of the funds must be accompanied by accountability for the results of the work. I should point out that achieving the optimum level of state expenditure - I particularly stress this - achieving the optimum level of state expenditure must be a fundamental principle of economic policy. There is not much money as it is. What we frequently come across is that funds are dissipated on secondary tasks. The government must first and foremost carry out a restructuring of the vast network of budget institutions, which are mushrooming over the country. It must change the method of financing and the actual status of a considerable number of these institutions. I would like to touch upon another important issue here. There are currently over 35,000 federal state institutions in the country, many of which have been given monitoring and supervisory functions. And they not infrequently simply impose upon citizens and business their services - in inverted commas - in carrying out studies, consultations and so on and so forth. This year, the government must remove all executive powers from the competence of state institutions which are not administrative bodies. Further, those state functions which have already been recognized as being unnecessary must not be revived at the level of component parts of the federation and municipalities. We must also put things to rights where state and municipal property is concerned. I have already said that every level of authority must have only the property it needs in order to fulfil the public powers it is endowed with. And no more than that. This must be borne in mind, too, when further cuts are made in the functions of ministries and government departments. We must also prepare for the introduction of a new demarcation in the revenue powers and expenditure obligations between the levels of the budget system in the country. Both the constituent parts of the federation and the municipalities should know what functions and the provision of what public services they are responsible for. They should also know what the sources of funding are for all this. And finally, the responsibilities of the various levels of power for the social support of the public must clearly be set out and demarcated. The problems of providing accessible housing, the questions of education and health care directly concern all the constituent parts of the Russian Federation. And it will be correct to involve them actively in drawing up the normative and legal acts and the system of measures for the practical implementation of the package of social programmes, taking into account the demarcation of powers between the various levels of state power. As a result of these measures, there should be a new system of inter-budgetary relationships, and the self-sufficiency and answerability of the regions and municipalities should increase. I am aware of all the concerns of the regions and municipalities in the course of the resolution of these issues. I hope that the government and the deputies of both chambers of the Russian parliament will pay attention to these concerns, weigh up the pros and cons and take decisions appropriate for our times and the requirements of the economy. Fair and regulated tax system evolving Carrying out budgetary reforms will in return allow us to continue with tax reform. Over the past four years serious steps have been taken in this regard, and they have already started to bring results. Tax collection has increased, while the scale of tax evasion has gone down. The tax burden on the economy has also decreased. But, of course, we are long way from having done everything. And in order to move to an effective tax system a number of additional measures have to be approved and implemented in the next two years. What sort of tax system should we have once the reforms are completed? In the first place, of course, it should not be onerous for business, and not just in terms of tax rates but in terms of the procedures for the settlement and payment of taxes. In addition, tax inspections and tax accounts should be properly regulated. Secondly, it should be fair for all involved in the economy. The conditions of taxation should be equal for enterprises operating in the same sector. The tax system should not allow tax evasion. Thirdly, our tax system is, as in the past, excessively geared to fiscal functions, to the detriment of other functions, especially those which stimulate the growth of competitiveness. In view of this, Russia's tax system should be more favourable for investment and business development - more favourable than in competitor countries. It should itself be more competitive. Moving on now: The government has repeatedly raised the issue of the need to reduce the single social tax. We should bring a significant part of wages out of the shadows, protect workers' social rights and create incentives for people to take care of their pension provisions by easing the burden on businesses. Another sensitive issue is value-added tax. In addition to changing the procedure for levying VAT, we need to reduce the tax rate even further, resolve the issue of timely repayment of VAT on export transactions and capital investment, and finally rule out the taxing of advance payments. Finally, it is important to distinguish between the lawful practice of tax optimization and criminal tax evasion. Let me stress that the stability of budget and tax policy is a most important factor in economic development. This stability, however, cannot remove every uncertainty in running businesses. Low inflation and fully convertible rouble in two years What is needed is a well thought-out macroeconomic policy. We have to carry on with what has developed in our economy in recent years. The policy of consistent reduction of inflation should be continued, and I believe the government is capable of reaching an annual rate of three per cent, and creating within the next two years the necessary conditions for ensuring complete convertibility of the rouble. [Applause] We know about the laws adopted in this area. We know that both the government and the Central Bank are setting themselves this task, but they leave themselves more room for manoeuvre, aiming to reach this goal some time around 2007. It is now possible - quite possible - to do it sooner. We also need to create an efficient system of using natural resources. We need transparent terms of access to them, which would not generate corruption, for instance through auctions. We need to move from administrative authorisations to fully-fledged contracts with a clear definition of the rights and duties of both the state and businessmen. We need to ensure predictability and stability in these relations. The system of payments within each sector of the extraction industry must also be changed. It should produce equal conditions of competition both within the extraction and mining industry and also among the extraction and processing and refining industries. Rational use of natural resources must also be ensured. I believe that the new forestry code and the law on mineral resources ought to address all these issues. Economic and other benefits from upgrading transport infrastructure Esteemed assembly, I would particularly like to single out another task from among the most important tasks the country is facing. I think that you will agree with me, it is the development of our country's transport infrastructure. Taking account of Russia's size and the sheer geographical distance of its individual territories from the country's political and economic centres, I would say that the development of infrastructure is more than an economic task. Its resolution has a direct influence not just on the state of affairs in the economy, but also on ensuring the country's unity as a whole and on whether people feel that they are citizens of a unified and great state, able to make use of the advantages this brings. At present, the road network, the oil pipeline system, the gas transport system and the electricity infrastructure are worn out and thinly distributed. This places serious constraints on the development of the whole of Russian economy. Enterprises are unable to function normally if it is impossible to deliver goods fast and cheaply. The undeveloped road and port infrastructure is already now a brake on exports, since it is unable to cope with the increasing volume of goods. It is perfectly clear that given our climatic conditions and our extended territory, the infrastructure costs account for a significant proportion of the cost of many kinds of goods and services. At the same time, a modern, well-developed transport infrastructure is capable of turning Russia's geographical peculiarities into advantages where commercial competition is concerned. What needs to be done with that aim in mind? Above all, the country's economic centres must be linked. Businesses must be ensured unhampered access to regional and international markets and the same time world-class infrastructure services should be provided. The government must find efficient quality control and cost control mechanisms during construction of new facilities. The situation can only be changed drastically through the creation of a competitive environment. Room for private investment in infrastructure projects The state will have to control the development of the country's infrastructure for a long time yet - for a long time, I draw your attention to this, I am convinced of this. At the same time, private investments can make a weighty contribution to the establishment of a developed network of transport infrastructure of high quality and reliability. However, certainty in the state's plans is extremely important to private capital. With this in mind, the government will have to announce its plans, projects and details of the conditions for their implementation. We have such projects. They need to be finalized more quickly. Let me recall just a few of them. In the oil sector, for example, they include the diversification of deliveries of our oil. These plans are well known. They include the expansion of the carrying capacity of the Baltic pipeline system, the commissioning of oil pipelines from West Siberia to the Barents Sea, determination of routes from deposits in East Siberia, a route bypassing the Bosporus and Dardanelles straits, and the integration of the Druzhba [Friendship] and Adria oil pipelines. However, for several years now the government has been unable to determine its priorities. A solution to this question is now overdue, to put it bluntly. Let me draw your attention to the fact that the guideline for the adoption of the necessary decisions should be the implementation of nationwide objectives and not the interests of individual companies. As for the gas transport system, here we must develop, first and foremost, the gas distribution network within our own country, including the expansion of the system in eastern Russia. As far as exports are concerned, the most important project is the construction of the North European gas pipeline. This will make it possible to diversify export flows, directly linking Russian networks and the countries of the Baltic region with the pan-European gas network. The modernization of roads is also important to Russia, not only the ones which connect the country's main economic centres but ones which have a transit role. The basic road network must be consistently geared to integration with the pan-European road network, and be connected through the Trans-Siberian corridor to the road network of the Far East region. Another project is the construction and modernization of roads in the North-South corridor. Some work is already being done here. This must be continued. Projects of this kind will facilitate interregional and transit flows to the main destinations for international goods transportation and, importantly, develop the territories adjoining these highways. And lastly: We have been talking about toll roads for a long time now. I believe we now have to start putting projects into practice on the most important roads. Alongside, of course, the existing free roads. The government should determine the list of these in the immediate future. This is a national priority. Army modernization to make military careers attractive The modernization of the army is also undoubtedly a national priority. We need combat-ready, technically well-equipped and modern armed forces for the secure defence of the state. We need to safeguard our country against any kind of military or political pressure and against any potential outside aggression in order calmly to achieve our domestic socio-economic objectives. In this respect, the modernization of our armed forces remains a most important task. This includes the equipping of strategic and nuclear forces with the most up-to-date strategic weapon systems. We have everything required for this. [Applause] As well as equipping other branches of the armed forces with appropriate tactical and operational weapons. I would like to say once again that having weaponry of the appropriate quality is a direct determinant of the degree of combat-readiness of a modern army. We are also embarking upon reform of social guarantees for service personnel. A savings and mortgage system is being created for them: In three years, once it has come into force, service personnel will be able to buy housing on a mortgage. I also believe that military education, training experts in the unique professions essential for the army today, can be delivered through civilian higher-education establishments. I would like to emphasize that for the modernisation of the entire military organisation of the state to be successful, we have to be precisely aware of how these considerable sums of money are being spent, including on providing service personnel with housing, on military medicine and on education. Moreover, vast assets have been built up in the army and the other "power" departments. These need to be assessed and must be managed efficiently. A transparent military economy is essential for reform. All these steps should enhance the prestige and attractiveness of serving in the forces. I would ask the Ministry of Defence and the government as a whole to bear in mind that the amount of money they spend, the interests of the country's defence capability and also the vital social parameters of reform make it incumbent on them to ensure civilian oversight of the effectiveness of the reforms under way in the army. Work in regional and world organizations to enhance stability Esteemed colleagues, the growth of the economy, political stability and the strengthening of the state have had a beneficial influence on Russia's international standing. We have managed, to a significant degree, to impart both dynamism and pragmatism to our foreign policy. It is obvious that the scale of the tasks facing the country has changed substantially today, and we must make our foreign policy match up to both the aims and the opportunities of the new stage of development. In other words, we must use the tools of foreign policy for more tangible practical returns in the economy and in the implementation of our most important nationwide tasks. Work to intensify integration in the sphere of the Commonwealth of Independent States remains our priority, including work in the framework of the Single Economic Space and the Eurasian Economic Community. It is no exaggeration to say that this is a precondition for regional and international stability. I am convinced that the CIS should work effectively for the good of the citizens of our states, by ensuring the maximum openness of our economies and by eliminating barriers in the way of trade and information streams, of business and public initiatives and of direct human contacts. We have an interest in the further integration of the Russian economy into the world economy, including joining the World Trade Organization on conditions that are advantageous to us. Developed countries are having to increase support for domestic producers and exporters owing to fiercer commercial competition in the world. The Russian Ministry of Foreign Affairs and the government as a whole must look for more efficient ways to increase Russian exports and reliably protect Russian companies' interests abroad. Such an approach is of particular importance now that Russia and the European Union are direct neighbours. The expansion of the European Union must not only bring us closer geographically, but also economically and spiritually. I am convinced that this is a guarantee of success for not only Russian, but also the whole of European business. This means new markets and new investments and, all in all, new opportunities for the future of Europe as a whole. We will continue to develop political and economic dialogue with the United States of America and with such major partners such as China, India and Japan, and we will also work with other countries. Russian stance on terror unchanged There is great potential for trade, economic, cultural and humanitarian links in border cooperation and in regions working together across borders. It's clear that the conditions necessary for us to carry out these tasks are reliable security for Russia, inviolable borders and a commensurate response to the most dangerous threats of the 21st century: international terrorism, the spread of weapons of mass destruction and regional conflicts. The world community working together in solidarity is the only way to respond to all these challenges, on the basis of UN instruments and international law. Terrorism poses a threat to life and human rights. It destabilizes states and entire regions of the world. It stands in the way of economic and social progress. Today international terrorists continue to commit acts of violence and to murder peaceful citizens. They are attempting to provoke chaos and to destabilize the situation in various regions. Unfortunately, Russia is no exception here. In spite of provocations of this kind, including the recent political murder of the leader of the Chechen Republic and the attempt to disorganize the work of the lawfully elected bodies in the republic, our line in the struggle against terror remains unchanged and consistent. Nobody and nothing will stop Russia on the road to strengthening democracy and ensuring human rights and freedoms. [Applause] We will continue to work on the development of internationally-recognized legal instruments and collective mechanisms for the neutralization of global threats. I regard the task of strengthening the antiterrorist coalition as one of the most important ones. In this respect, I would like to point out that no references to the need to fight terror can be an argument for restricting human rights or, in the international arena, for the creation of unjustified difficulties for contacts between people. To wrap up the theme of foreign policy, I'd like to emphasize that Russian society has to see practical results from our work in international relations. This means ensuring personal security, expanding opportunities for business and effective protection of the rights of our citizens abroad. I'm sure that, in conjunction with the federal assembly, we can work even more productively on the issues I've mentioned. Power means responsibility in maturing Russian democracy Esteemed deputies of the State Duma and members of the Federation Council, continuing the strategic line and maintaining the transformations already tried and tested in practice over the past four years is the basis of our further stable development. Moreover, the only source and bearer of power in the Russian Federation is its multi-ethnic people and only the people, via the institutions of a democratic state and civic society, are entitled to and able to guarantee that the moral and political foundations of the country's development for many years to come cannot be shaken. At the same time, we are obliged to give a critical appraisal of the state of our democracy as well. Is the political system in its current form an instrument of real people power? How fruitful is the dialogue between the authorities and society? It's obvious that the young Russian democracy achieved significant success as it was being established and anyone who insists on not seeing this or who doesn't want to see it is not being entirely sincere. Even so, our social structure is far from perfect and it has to be acknowledged that we are only just setting out. Without a mature civic society, there can be no effective solution to people's pressing problems. The quality of their daily lives is directly dependent on the quality of the social and political system. Here, too, we have a good many issues. I'd like to bring to mind the fact that all power means great responsibility above all else. It is inadmissible that civilized political competition should be replaced by a mercenary struggle for the status to levy tribute, that the financial side of political associations' activities should remain hidden from the public or that the market of electoral technology and lobby services should be primarily geared to the shadow sector and all this against a background of the depressing sameness of most party programmes. A few words about non-political public organizations. There are thousands of citizens' associations and unions working constructively in our country but far from all of them are geared towards defending people's real interests. For some of these organizations, the priority is rather different - obtaining funding from influential foreign or domestic foundations. For others it is servicing dubious group and commercial interests. Moreover, the most acute problems of the country and its citizens remain unnoticed. I must say that when violations of fundamental and basic human rights and the encroachment of people's real interests are at stake, the voice of such organizations is, at times, not even audible at all. Actually, there is nothing surprising in that. They can not bite the hand that feeds them. Naturally, such examples can not serve as a reason for us to blame civic associations as a whole. I think that such negative phenomena are unavoidable and temporary. In order to curtail such phenomena and to invigorate a further growth of the institutions of civic society, one does not need to invent anything. Our own experience and experience gathered elsewhere throughout the world has already proven that a whole number of approaches are productive here. It is, thus, necessary gradually to transfer to the non-state sector the functions which the state should not carry out, or is incapable of carrying out efficiently. It also makes sense to make use of the experience of the work of public chambers, gathered in a number of Russia's regions. Such standing non-state organizations can ensure independent scrutiny of the most important regulatory instruments which directly affect the interests of the country's citizens. Parties need to learn to come to power and to part with it Political parties, too, ought to cooperate more closely with citizens' structures. Direct ties with people, with society, will help improve the quality of popular representation at all levels. Parties ought to be interested in swelling their ranks, strengthening their material base, their intellectual and personnel potential, in actively setting up factions in regional parliaments, taking part in the work of local government. Parties should increase the level of political culture, mastering the habits of dialogue with other parties and coalition activities. They should learn how to come to power and how to part with it, according to the will of the people. Let me stress again that a radical revision of economic policies, any restrictions on civic rights and liberties, cardinal changes in foreign policy guidelines, any deviations from Russia's historical path which it has chosen and, I would put it more strongly, which it has achieved through suffering may lead to irreversible consequences and they must be absolutely ruled out. [Applause] Creating a free society of free people is top priority Esteemed friends, today I have talked about the most important nationwide tasks. I consider that the creation of a free society of free people in Russia is our most important task, as well as the most complex one. It is the most important because an individual who is not free and not independent is incapable of taking care of himself, his family or his motherland. It is complex because freedom is not always valued, and even rarer is the ability to use it. Creative energy, enterprise, a sense of proportion and the will to win cannot be introduced by decree, cannot be imported and cannot be borrowed. While striving to increase citizens' prosperity, we will continue to preserve and defend the democratic achievements of the Russian people. We will strengthen the security of the state and strive for the civilized resolution of key problems of world politics on the basis of international law. I expect constructive cooperation from all branches and all levels of authority. I am counting on the support and solidarity of all citizens of Russia, as well as their belief in themselves, their own strength and the success of our country. Thank you.