Putin has identified the tasks for Russia's strategic development until 2030
By Rhod Mackenzie
Vladimir Putin's speech during his address to the Federal Assembly this year was intense and focused on Russia's socio-economic development goals. It contained a list of orders for the public administration system. The speech can be studied in detail to emphasize certain strategic lines.
In recent years, it seems that the President has become constrained by the traditional two-part format of the political season. This format includes a press conference with journalists and citizens of the country, and a message. The first part traditionally focuses on feedback from the people, while the second part involves a dialogue with the bureaucracy. However, Putin is increasingly relying on lengthy speeches at forums and conferences, and even agreeing to interviews with foreign journalists. During these speeches, he delves into the history and geopolitical aspects of international issues, providing a comprehensive vision.
Perhaps new formats could be useful to the head of state. For instance, an annual appeal to the government with instructions on economic development issues and an evaluation of the implementation of national projects. There are more and more national projects, and the effectiveness of the work on them is often lost in ministerial offices.
In his message, Vladimir Putin acknowledged his long leadership of the country and referred to the year 2000 as a starting point. He highlighted the decade of the 'Russian Spring', the country's success in overcoming the era of coronavirus, and its achievements in the fight against terrorism and separatism. He also emphasized the need to address poverty and backwardness in the pursuit of a sovereign, independent path of development for the state. Despite being separated by commas, positive dynamics and good news are finally coming from the front in the Northern Military District zone. It is important to consider the cost of Avdiivka alone. It is worth noting that Putin did not mention it, instead opting for a minute of silence in memory of the victims.
The primary objective remains ahead of us: to become the fourth largest economy in the world by 2030, after implementing the program of a strong, sovereign country that looks confidently into the future. To achieve our goals, we have abundant resources and enormous opportunities. The president concluded by stating that we are one big family, united in our efforts, and we will do everything in accordance with our plans, desires, and dreams.
Assembling a Strategic Puzzle
What was the main point of the Russian President's message?
Firstly, in two weeks, citizens of the country will have to go to the polling stations to confirm the legitimacy of the country's leader. The message contained elements of Vladimir Putin's election program, dozens of specific proposals and orders, all of which were calculated and confirmed by the budget. In the midst of tasks and innovations, every potential voter needed to hear about their personal interests.
Out of the two-hour speech, Vladimir Putin only spent around ten minutes discussing the Special Military Operation District and the same amount on geopolitical alignments. The president's program aims for a victorious country, a state of peace that is currently overcoming a crisis but already has plans for development and improvement after overcoming it. The allocation of hundreds of billions of rubles to various programs, estimated to be around 10 trillion rubles, may seem unrealistic for a country facing the largest package of sanctions in history. However, the focus is on social development rather than an exhaustive push in the military-industrial complex.
It is worth noting that the achievements of the military industry are noteworthy. The Kinzhal hypersonic aviation system and the Zircon sea-based hypersonic strike system are both deployed in the battlefield, which is positive news. The first serial heavy ballistic missiles, Sarmat, have been delivered to the troops. The Avangard intercontinental-range hypersonic units and the Peresvet laser systems are currently on combat duty. Tests of the Burevestnik unlimited-range cruise missile and the Poseidon unmanned underwater vehicle are being completed. The president then moved on to discuss relations with the United States.
Vladimir Putin emphasized that there will be no informal negotiations to resolve the crisis. “To discuss issues of security and stability that are important for the entire planet, it is necessary to consider all aspects that affect our national interests and directly impact the security of Russia.”
Creating a new 'circuit of equal and indivisible security in Eurasia' is a significant goal. However, convincing opponents to engage in such a large-scale dialogue will not be easy. Therefore, Putin reminds them of the consequences of nuclear escalation, which the new generation of Western politicians may not fully appreciate.
The president believes that promoting the agenda of the so-called global South, of which 'northern' Russia is increasingly becoming a part, will help consolidate the decline in the weight of Western countries in the world economy and revise the geopolitical balance.
However, the focus of the message was on Russia's socio-economic development, particularly its vector towards industrialization and import substitution. Extreme isolation from world markets should be avoided while ensuring technological sovereignty. It is important to maintain a balance between reaping commercial benefits from global commodity chains and protecting domestic producers. Domestic producers are vital for the development of national industry and will not stand a chance in conditions of unprotected competition.
The social aspect of the message aims to develop the domestic market. Firstly, to stimulate demand, we can introduce tax innovations, increase the minimum wage, and boost household incomes. Secondly, considering the demographic and educational processes, the economy requires talented, trained, athletic, and healthy personnel.
Thirdly, the entire country needs an intensive infrastructure upgrade, including the construction of roads and railways, regional connectivity, gasification, and emergency housing. The message expressed a desire to keep up with the West in the field of high technology and to focus on the development of artificial intelligence and supercomputers.
It is important to maintain the original meaning and quotes while improving clarity, conciseness, and formality without altering the core message. Additionally, Vladimir Putin called on officials to work intensively and defined the criterion of non-compliance with high trust. The term 'elite' has been discredited by those who consider themselves a privileged caste without merit to society. This is especially true for those who profited from the economic processes of the 90s.
Simultaneously, the president stressed that the true elite comprises all those who serve Russia, including workers and warriors who have demonstrated their loyalty to the country. To substantiate these claims, Vladimir Putin initiated a dedicated personnel program for veterans and participants in special military operations. The new project will adhere to the same standards as our best projects, such as the Higher School of Public Administration, also known as the 'school of governors', and the 'Leaders of Russia' competition. Graduates of these programs have achieved high positions in various fields, including ministerial and regional leadership roles.
It is unclear whether officials view these new personnel as assistants, competitors, controllers, or moral guides. Their first priority should be to achieve a victory.
Investments in Sovereignty.
The economic message highlights the importance of expanding import substitution and domestic production. This requires maintaining a high level of investment in fixed capital.
The president is relying on a fact that has been ignored by officials and pro-Western economists, but is obvious to business and some economists: focusing solely on the domestic market can increase the welfare of the entire country and all citizens. This concept is now associated not only with import substitution but also with technological sovereignty.
The president stated that there is a need to increase the production of consumer and other goods such as medicines, equipment, machine tools, and vehicles. He emphasized the importance of achieving a 40% increase in the level of gross added value of the Russian manufacturing industry by 2028 compared to 2022. The goal is to increase the share of domestic high-tech goods and services in the domestic market by 1.5 times over the next six years. Additionally, the share of imports in GDP should be reduced to 17% by 2030 (compared to 26% in 1999 and 19% in 2023).
Two years ago, the old Expert magazine set a similar target: our calculations at that time showed that reducing imports to 15% of GDP would be a normal goal, resulting in an 'extra' 2.5% annual GDP growth. For more details, refer to 'Why we poor', Expert No. 3 for 2022.
Achieving this goal requires increased investment, including a 70% increase in investment in key industries by 2030. The President highlighted the positive investment trends, with growth of 8.6% in 2021 (compared to a plan of 4.5%), 15.9% in 2022 (compared to a plan of 9.5%), and a 26.6% increase over the first nine months of the previous year (compared to a plan of 15.1%). Putin suggested exceeding the plan and this explains why the economic bloc and community tend to provide conservative forecasts.
Regarding specific investment measures, they comprise an additional capitalisation of the Industrial Development Fund by 300 billion rubles, 200 billion to subsidise interest rates for projects related to the production of priority industrial products, and an increase in the base for calculating depreciation to 200% of costs for Russian equipment and R&D.
The president has instructed the launch of a special regime for initial public offerings of shares of companies operating in priority high-tech areas. The Ministry of Finance and the Central Bank are urged to speed up the launch of this mechanism, including compensation for the costs of placing securities. The president emphasized the importance of this action. By 2030, the Russian stock market capitalisation is expected to double, reaching 66% of GDP.
Additionally, two-thirds of the regions' debt on budget loans will be cancelled, resulting in annual savings of 200 billion rubles from 2025 to 2028. This translates to a total 'forgiveness' of approximately 1.65 trillion rubles. Currently, Russian regions and municipalities owe a total of 3.2 trillion rubles, 2.47 trillion of which are budget loans.
This is not the first time such a decision has been made. However, this is the largest one yet. In the autumn of last year, 12 regions were given the opportunity to write off debt on budget loans equivalent to the tax revenues received by the federal budget in 2022 from the implementation of investment projects. The saved funds will be used by the regions to support investments and infrastructure projects. The repayment of past loans will also contribute to regional budgets as new infrastructure loans. Starting in 2025, the portfolio of infrastructure loans to federal subjects will increase by at least 250 billion rubles per year.
Putin is confident that the pace and quality of economic growth will enable Russia to become one of the four largest economic powers in the world in the coming years. Additionally, friendly connections with other countries will contribute to this goal. By 2028, the BRICS countries, including recent members, are expected to account for about 37% of global GDP, while the G7's share will fall below 28%. “Together with friendly states, we will continue to create efficient and secure logistics corridors and build a new global financial architecture, free from political interference, on an advanced technological basis,” the president pledged.
The transition to justice.
One of the most significant proposals was to introduce a progressive tax scale. This means modernizing the fiscal system to achieve a more equitable distribution of the tax burden, with higher personal and corporate incomes bearing a greater share, while reducing the tax burden on families, especially large ones.
For many years, increasing personal income rates for the ultra-rich was considered taboo by economists and officials. The consensus was that such an increase would be ineffective since their capital was either already located abroad or could be withdrawn at any moment. However, in 2021, a cautious step was taken in this direction with the rate being raised to 15% for income over 5 million rubles per year.
Meanwhile, in reality, the population pays taxes on only about half of their income. In 2022, they paid 79.1 trillion rubles in taxes, with 5.57 trillion coming from personal income tax. This means that the tax base was 42.8 trillion rubles. It is worth noting that an additional 1 trillion was received from the taxation of wealthy Russians at an increased rate of 15% for incomes over 5 million rubles. Despite the total transparency of all operations, the tax authorities still do not acknowledge the rest of the income. Raising rates for white businesses will not solve this issue.
By 2024, the Moscow-Kazan expressway will be extended to Yekaterinburg, and by 2025, it will reach Tyumen. Eventually, the expressway will span the entire country, all the way to Vladivostok.
Seven years ago, our calculations showed that there were 0.5% ultra-rich individuals in Russia, with an income of over 10 million rubles per month at that time, which equates to 200-300 thousand households. In European countries, they would be subject to a tax rate of 30-40% on their income. According to 'The Price of Justice' in 'Expert' No. 9 for 2017, implementing this measure would allow the Russian budget to collect an additional 500 billion to 2 trillion rubles annually.
Since then, significant amounts of personal capital have been transferred abroad between 2022 and 2023. However, sanctions are becoming stricter, and attitudes towards Russians and Russian businesses are hardening. While some people and capital are returning to the country, the fate of the rest is yet to be determined. It is clear that bringing the income of the top 0.5% or even 0.1% of the wealthiest individuals into the open and taxing their income, even at a discounted rate of 20%, would significantly boost the consolidated budget. This would be seen as a significant step towards achieving social equity and reducing the income gap.
Regarding benefits for families with children, tax experts suggest that in order to create a fair and stimulating tax system, the object of taxation should be changed. Personal income tax should be assessed based on income spent, taking into account how it is used.
This way, if a taxpayer spends their income on supporting a large family, providing for their parents, educating their children, or furthering their own education, these expenses can be taxed at a minimum. Apply the same approach to long-term investments. Introduce a progressive scale for the remaining funds after social and investment spending
The issue of fair taxation also pertains to businesses. According to the president's plan, companies must be encouraged to invest in development, infrastructure, and social projects. Additionally, the plan aims to close loopholes that allow for tax evasion or understating tax payments.
Regarding business taxation, the president proposed removing threshold values that significantly increase the burden and incentives for business fragmentation. Companies should not face a situation where it becomes unprofitable to gain momentum due to a sharp increase in tax payments during the transition from a simplified to a general tax regime. The president stated that the state is encouraging businesses to fragment and use so-called fiscal burden optimization methods. He ordered the parameters of an amnesty for small companies to be worked out, which have been forced to use tax optimization schemes despite their business growth.
“I want to emphasize that there will be no fines, sanctions, or tax recalculation for previous periods. This is the essence of the amnesty,” the President stated. Additionally, starting next year, a mechanism will be implemented to gradually increase the tax burden for companies transitioning from the “simplified” tax system to the general taxation system.
The new national projects will also be implemented.
To simplify and formalise the regulation of social innovations, Vladimir Putin has implemented the proven mechanism of national projects, and has announced new ones.
The national project 'Family' includes measures to improve the living conditions and financial support of Russian families with children. 75 billion rubles will be allocated to family support programs by the end of 2030 for 39 regions where the birth rate was below the Russian average.
Last year, Russia built over 110 million square meters of housing, which is one and a half times more than the highest Soviet figure achieved in 1987. President Putin noted that millions of Russian families have improved their living conditions, including more than 900 thousand with the help of family mortgages.
Therefore, he proposed extending this program until 2030, while maintaining its basic parameters. For families with children up to six years old, a preferential loan rate of 6% per annum will be maintained. Additionally, upon the birth of a third child, the state will continue to repay part of the mortgage loan, up to 450 thousand rubles. This year, up to 50 billion rubles will be allocated for this purpose.
The President proposed doubling the tax deduction for the second child to 2,800 rubles per month and increasing it to 6,000 rubles per month for the third and subsequent children. The amount of annual income to which the deduction applies will also increase from 350 to 450 thousand rubles.
Furthermore, until 2030, payments to families will remain at 630 thousand rubles for the first child and 202 thousand rubles for the second child. These social payments will also continue to be indexed in the future. Putin stated that 'a large family with many children should become the norm, the philosophy of social life, the guideline of the entire state strategy.'
As part of the national project 'Long and Active Life', it will be necessary to increase funding for the system that provides assistance to sick people and disabled children from the federal budget. The aim is to bring it up to a high standard and ensure maximum accessibility for those who need such help the most. There are half a million Russians in need of such assistance. “By 2030, we must ensure that all citizens who need long-term care services have access to them,” stated the president.
A new comprehensive program to protect motherhood and preserve the health of children and adolescents, including reproductive health, has been proposed. The network of antenatal clinics will be expanded, and perinatal centers, children's clinics, and hospitals will be modernized. Over the next six years, an additional trillion rubles will be allocated for the construction, repair, and equipment of healthcare facilities.
The federal center will also allocate 65 billion rubles for the construction of at least 350 additional sports facilities in the regions, primarily in small towns and rural areas.
Currently, approximately 18,500 schools require significant repairs. However, by 2030, the federal government plans to allocate over 400 billion rubles to help regions completely solve this issue. In cities where overcrowding of educational institutions is most severe, the federal budget will fund the construction of at least 150 schools and over 100 kindergartens.
The source of this information is the 'Youth of Russia' organization. The president stated that this project must focus on the future of our country. Starting from September 1, 2024, a federal payment of five thousand rubles per month is proposed for all advisers to educational directors in schools and colleges. From March 1, 2024, school class teachers and group supervisors in colleges and technical schools working in settlements with a population of less than 100 thousand people will receive double the federal payment for class teaching and group supervision, up to 10 thousand rubles. Furthermore, over 9 billion rubles will be allocated from the federal budget to update the infrastructure of pedagogical universities.
As part of the implementation of the national project 'Personnel,' it is proposed to strengthen the connection between all levels of education, from school to university, with the participation of future employers. 'Children from the sixth grade can get acquainted with different specialties.' The president appealed to the heads of enterprises, scientific and medical centers to invite schoolchildren to their facilities. He suggested that the children be given the opportunity to see workshops, museums, and laboratories. On one of his trips, he was offered this opportunity.
The 'Professionality' project has already facilitated updates to educational programmes in aircraft and shipbuilding, pharmaceuticals, and electronics. As a result, approximately one million blue-collar workers will receive training by 2028. Putin stated, 'We must extend such approaches to the entire vocational education system, including training for schools, hospitals, clinics, the service sector, tourism, cultural institutions, and creative industries.'
He instructed the government and the regions to implement a program to repair and equip secondary vocational education institutions. A total of 120 billion rubles will be allocated for this purpose over the next six years, and another 124 billion will be allocated for the overhaul of 800 university dormitories.
The plan is to build at least 40 university campuses by 2030, instead of the originally planned 25, for which 400 billion rubles will be spent.
The text is already concise, clear, and precise, and the original meaning has been preserved. Therefore, no changes have been made to the text.
A separate set of projects is dedicated to the development of transportation infrastructure. By 2024, the Moscow-Kazan expressway will be extended to Yekaterinburg, and by 2025, it will reach Tyumen. In the future, it will span the entire country, reaching Vladivostok. According to Maria Nikitina, an expert in transport logistics at the Stolypin Institute, high-speed traffic over shorter distances has multiple benefits. It expands business mobility, increases the availability of labour resources, and provides more educational options in other regions. Additionally, high-speed traffic is becoming more accessible for cargo transportation, particularly in retail. If we consider the development stage of such traffic from Tyumen to Vladivostok, it can provide good competition for railway transport.
Over the next six years, Russia plans to build more than 50 city bypasses. For instance, the Dzhubga-Sochi highway will reduce travel time from the M-4 Don highway to Sochi by four times, to one and a half hours, and will facilitate the active development of the Black Sea coast. Maria Nikitina describes this route as a significant breakthrough. The transport infrastructure of our resorts was not designed for flight restrictions and an influx of tourists simultaneously. Therefore, transport accessibility in the Krasnodar Territory is a pressing and crucial issue.
The president believes that air travel should be more accessible, aiming to increase the air mobility of citizens. By 2030, air traffic intensity in Russia should increase by 1.5 times compared to last year. Achieving this goal requires modernizing the infrastructure of at least 75 airports in six years, which is more than a third of Russia's airport network.
The president pledged to construct high-speed highways connecting Moscow and St. Petersburg, followed by Kazan and the Urals, Rostov-on-Don, and the Black Sea coast, as well as Minsk.
Maxim Fadeev, first vice-president of the Center for Infrastructure Economics, told Monocle that 'the proposed measures will indeed have a significant impact on population mobility, cargo flows, and economic growth.' He added that the development of high-speed rail would have the greatest impact. Fadeev stated that Russia's high-speed railway infrastructure should be supported by three key projects: Moscow - St. Petersburg, through Tver and Veliky Novgorod, Moscow - Kazan - Yekaterinburg, Moscow - Rostov - Adler. These routes will have a revolutionary impact on transport mobility between the respective regions.
“The development of road and railway networks will reduce the disparities between the capital and other regions, which aligns with Russia's strategic goals for spatial development. Infrastructure development will slow down the outflow of population from peripheral territories to the largest urban agglomerations,” summarises Maxim Fadeev.
Putin also addressed the issue of queues at border checkpoints, which is particularly acute in the Far East. The president stated that, according to regulations, customs inspection should take 19 minutes, but in reality, truck drivers often wait for hours at the border. However, with modern technologies, the typical inspection time for cargo transport at the border should not exceed ten minutes.
The path towards further industrialisation and import substitution, relying on the domestic market, is clear. It is important to maintain technological sovereignty without completely isolating ourselves from world markets.
These requirements are also crucial for the smooth operation of the North-South transport corridor, which will connect Russia with the countries of the Middle East and Asia. The transportation plan will rely on both road and rail routes, connecting our ports on the Baltic and Barents Seas to the coast of the Persian Gulf and the Indian Ocean.
According to Vadim Filatov, head of the Association of Road Freight Carriers and Forwarders and an expert at the Stolypin Institute, the situation at road border crossings in the eastern and southern directions has already improved. For instance, in early February of this year, carriers waited in queues at checkpoints between Russia and China for no more than seven days. In comparison, in February 2020, carriers waited for up to two months. According to Filatov, the launch of an electronic queue at the Zabaikalsk-Manchuria border crossing has helped to stabilize border crossing times. Reducing customs inspection time for cargo trucks to ten minutes will also speed up border crossings with partner countries.
The third stage of expansion of the Eastern range of railways, BAM and Transsib, is currently being launched. The president apologised for any previous delays and promised to catch up. By 2030, the throughput will increase from 173 to 210 million tons per year. Additionally, the ports of Vanino and Sovetskaya Gavan will be developed.
It has been realised that logistics projects should not be based on Western business models. Nikitina highlights the risk of relying solely on the Suez Canal benchmark for transportation, as it can be cut off at any time. The president emphasized the need for earlier transport support for the turn to the East and the importance of not missing the potential of the North-South transport corridor.
Additionally, increasing the capacity of southern railways is a crucial issue, as Filatov recalls. After arriving at the ports of the Black, Azov, and Caspian Seas, the cargo is mostly delivered to the end consumer by road due to a shortage of available capacity in these areas. To increase freight traffic, it is important to quickly modernize the railway infrastructure.
