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23 Oct, 2008 13:01

Russia should help create new rules of world economy

In his recent video blog post Russia's President, Dmitry Medvedev, has addressed the global economic crisis and its impact on Russia.


I would like to talk about the global financial crisis that is affecting the entire world. Most countries are faced with the fact that the gross errors committed by several states (especially America) have created serious problems. The U.S. financial market and its impact on the world economy are both very large. Therefore, the crisis that occurred in the U.S. has had a knock-on economic effect on virtually every country.

If this had happened five or seven years ago, perhaps the crisis would have had less of an effect on Russia. Today the situation is different: we are a country with an open economy. On the one hand, this is a great advantage for us; on the other, it compels us to react and deal with the problems faced by other leading nations. Now everyone is working on a single issue: how to extricate the world from the financial crisis and limit the damage it is causing.

What is happening in the world? The sharp decline in the availability of credit has led to a decline in demand, markets themselves have tightened up, there is less use of production capacity, workers are being laid off, which in turn leads to more reduction in demand. Investment programmes and plans for expanding production have been put on hold.

I can say in all honesty that Russia is not yet caught up in this difficult cycle. We can avoid it and we must avoid it.

Governments and central banks of major countries around the world are now doing a great deal to improve the economic situation by providing the necessary resources. We have also taken several measures that should restore confidence in the nearest future in the financial sector and normal lending. In addition, we have set in place measures aimed at sustaining retail trade, agriculture, construction, engineering and the defence industry. We are trying to help small business. Due to the drop in global demand and the difficulties involved in obtaining credit, these are the areas that require our priority support. By and large, our actions should offset these negative factors.

Gold and currency reserves and the Stabilisation Fund were set up for precisely such difficult periods. And we have an opportunity to avoid the foreign exchange, banking and debt crisis. We can meet today's challenges without losing all the potential for development that we have created.

But now it is important not only to protect ourselves from these problems, but also to make the maximum use of the opportunities created by them. And there are a lot of such opportunities.

First, inevitably, new competitive companies will emerge, also by consolidating assets in various sectors of the economy (including banking, retailing and construction). We will be ready to take the necessary measures and to provide additional funding for this purpose. Sustainability of development in these areas will contribute to the creation of new jobs.

Second, financial institutions should become more efficient and pay more attention to reliability indicators. This will improve the stability of our banking sector, making it more attractive to investors and depositors.

Third, in response to falling demand, Russian companies will have to  reduce the costs of production. And to do this it is important to modernise production, technology and management as quickly as possible. This way energy efficiency and productivity can rise to the level that will compete with the most successful foreign companies. The state will support the establishment of real jobs and provide tax incentives for innovation and retraining personnel.

Fourth, we should use the current situation for modernisation in those areas where we have previously acted too slowly. This applies to education and health, judicial reform, technical regulations and the transition to digital technology.

And, finally, we must actively participate in formulating new rules of the game in the global economy, in order to maximise benefits for ourselves and to promote a new ideology that will ensure the democracy and stability of the global financial architecture. There should be more financial centres, more reserve currencies and more mechanisms for collective decision-making (I mentioned it quite a few times). This would be beneficial for everyone – for us and for our partners.

On November 15 the heads of the world's leading states will meet in Washington to discuss these issues. Russia intends to actively promote its ideas.

Let me conclude by explaining how I plan to develop my video blog. Of course I looked at your responses to the first entry from October 7. Many of you would like to post your comments. I think that this is the best kind of response. Thank you for your interest, for your interested and responsible approach to discussing topics that are important for our entire society.

It is really great and we are definitely going to develop this interactive dialogue. But please understand that it is difficult to process large amounts of incoming information. Since we take this seriously, at least no less seriously than you do, we must be prepared. By the way, you can already write to me now, including through this site.

Thank you. All the best.