In his annual address to parliament on Thursday,  President Vladimir Putin summarized Russia's economic achievements and announced a number of large-scale projects to further develop Russia's economy.

"Russia has now not only completely overcome its long period of declining production, but has become one of the ten biggest economies in the world," the president said. Real incomes have more than doubled since 2000, concluding that "the country is gradually, slowly, step by step starting to change for the better."

In this he included the national project on health, which he credited with having reduced the mortality rates of Russians in 2006.
The president didn't limit himself to praising past accomplishments, but announced a number of large scale public investment projects.
Calling investments into the energy sector one of the "unconditional priorities of the next years," Putin announced the construction of an additional 26 nuclear reactors "based on the most modern technologies" over the next twelve years. To illustrate the magnitude of the project, Putin pointed out that during the Soviet era, a total of 30 nuclear reactors had been built. "By 2020 it will be necessary to increase power generation in Russia by 66 percent," and announced a total investment of $467 billion - equating this to a "second large-scale electrification of the country."

The president also addressed the situation of Russia's transportation infrastructure. He called the poor state of Russia's roads a serious brake on Russia's economic development, creating losses equivalent to 3 percent of GDP annually. Moreover, Russians are less than half as mobile as people in other developed countries.

To improve this situation, the president announced to invest $3.9 billion until 2015. Priority will be given to the "building of high-quality federal routes and the repair of routes that form the international transport corridors from the European part of Russia," both on the North-South axis, and between the centre and the Urals, as well as "the directions which ensure the realization of the economic potential of the Far East and Siberia."

But roads are only one aspect of Russia's infrastructure that needs to be improved. Airports are also on the list of problems to be addressed quickly. Over the last 15 years, a third of all Russian airports had been closed, the president said, and he asked the government to adopt measures towards developing the country's air traffic network. However, the president was less specific here, limiting himself to talk about the need to take "immediate measures for improvement," without committing any specific funds. Investors might have taken note of the president's comment that this would require private investment "through the privatization of airport terminals and the concession of airport infrastructure, including runways."
The President also lamented the state of Russia's ports. "For several years, I have indicated the need to develop sea ports," he said, but "the situation has practically not improved. Our cargo traffic continues to go through foreign ports. This is simply not acceptable." He drew particular attention to the need of developing Russia's inland waterways, including the modernization of the Volga-Don and Don-Baltic Sea canals.
"I propose that the government work on the issue of creating an international consortium to build a second line of the Volga-Don Canal. This new transport artery will make it possible to substantially improve shipping between the Caspian and Black Seas," the president said.

Not only would this allow the Caspian states to access the Black and Mediterranean Seas, Putin said, "but qualitatively change their geopolitical position." The President said that this could become one of Russians largest and economically most beneficial infrastructural projects.

The president addressed the still serious housing shortage in Russia. While housing construction has increased by 15 percent last year, he pointed out that "it nevertheless lags behind the swiftly growing needs of the country." The previously set goal of 80 million new square meters annually by 2010 "can no longer satisfy the needs of contemporary Russian society." Instead, he announced that by 2010, between 100 and 130 million square meters of new housing should be constructed annually.

Referring to the financial reserves Russia has accumulated, the president said that the government's insufficient attention to the problem is "amoral," and asked how it could be justified that "millions of [Russian] citizens live in slums."

To address this problem, Putin announced the creation of a $9.5 billon special fund, which would possibly include monies obtained from the sale of Yukos. He also announced an additional $3.9 billion to assist citizens who currently live in emergency shelters - 20 times more then in previous years, the president stressed.

The President also addressed the issue of improving timber processing capacities in Russia. He stressed that "we must nevertheless think about the development of our own processing base." This would include the reduction of import duties on processing equipment and "assisting in the creation of necessary infrastructure."

Putin stressed the importance of developing Russia's scientific-technological capacity and said that in 2008, $1.9 billion will be committed to funding basic research. In addition, the president announced that Russia will commit an additional $5 billion towards research into nanotechnology.
The president also discussed the question of investing the funds accumulated from taxing energy exports. While the policy of creating the Stabilization Fund was correct and justified, he said that the nature of today's economic challenges "requires corrections to the functions and structures of the stabilization fund," while "unconditionally retaining a conservative financial policy." The funds should be used for the "improvement of people's lives and for economic development."

He announced an increase of state pension by 65 percent until 2009 and promised that windfall earnings from energy exports would be used to top up private pension fund contributions. He also announced $11.68 billion investments from the newly created National Heritage Fund into the Russian Development Bank, the Investment Fund, and the Russian Venture Capital Company. 
By Dietwald Claus