Page last updated at 17:23 GMT, Thursday, 12 November 2009

Medvedev calls for economy reform

Russian President Dmitry Medvedev sets out economic reform

Russian President Dmitry Medvedev has called for profound reform of the economy in his annual state of the nation address.

The Soviet model no longer worked, he said, and Russia's survival depended on rapid modernisation based on democratic institutions.

An oil and gas-based economy had to be reworked with hi-tech investments.

Inefficient state giants should be overhauled and issues of accountability and transparency addressed, he said.

"Instead of a primitive economy based on raw materials, we shall create a smart economy, producing unique knowledge, new goods and technologies, goods and technologies useful for people," Mr Medvedev said.

GDP went from less than $1tn (£600bn)in 1998 to $2.1tn (£1.26tn) in 2007 but has since dropped sharply (IMF)
Exports as a portion of GDP soared from 20% in 1990 to more than 60% in 1992, but had fallen back to 33% by 2008 (World Bank)
Mineral products accounted for 70% of exports in 2008, machinery - 5% (Russian government statistics)
State corporations believed to be under particular scrutiny include VEB bank and Russian Technologies (Reuters)

"Instead of an archaic society, in which leaders think and decide for everybody, we shall become a society of intelligent, free and responsible people."

Russia's industrial and technological base declined rapidly with the collapse of the USSR in 1991 and the relative recovery it has seen this century owes much to its oil and natural gas exports

A year ago, in his first such address, Mr Medvedev made a surprise announcement about deploying missiles close to Poland.

This time the focus was on transforming Russia into a more modern and open country, by introducing sweeping reforms.

More than one million Russians were at risk of losing their jobs, he said, and pressing social issues needed to be addressed.

'No future'

"We can't wait any longer," Mr Medvedev said.

"We need to launch modernisation of the entire industrial base. Our nation's survival in the modern world will depend on that."

Richard Galpin
Richard Galpin, BBC News, Moscow

It is highly unusual to hear the Russian president launch such a scathing attack on governments past and present. It must have made uncomfortable listening for the hundreds of top officials gathered in the Kremlin.

Some sections of Mr Medvedev's speech seemed particularly critical of Prime Minister Vladimir Putin's legacy as president between 2000 and 2008, for example when he encouraged the rapid growth of state corporations.

Mr Medvedev is certainly establishing more of a political identity by focusing on the modernisation theme. But there is still deep scepticism about his ability to deliver on any of the reforms he has called for because his power base is extremely limited and there will be many vested interests to overcome to bring about real change.

Government had to become more transparent, he said, and corruption should be punished. The giant state companies created by his predecessor, Vladimir Putin, had "no future", he said.

"Inefficient enterprises must go through bankruptcy proceedings or leave the market," he said. "We won't be protecting them forever."

Mr Medvedev promised to strengthen democratic institutions but warned that any attempts to disrupt national stability with "democratic slogans" would be stopped.

"Freedom means responsibility and I hope everyone understands that," he said.

And he promised a pragmatic foreign policy that would focus on improving Russians' living standards.

In other comments, Mr Medvedev

• Called for a "joint reliable platform" to strengthen Europe's security, saying such a body would have prevented the war with Georgia

• Described the situation in the North Caucasus as Russia's most serious internal problem and pledged to fight "terrorist crimes" there

• Suggested that the number of time zones in Russia - currently 11 - should be reduced

The Russian president gave a bleak assessment of the current situation and there was much in the speech that implied deep criticism of Mr Putin, reports the BBC's Richard Galpin in Moscow.

Mr Medvedev is keen to prove he is his own man but the question is whether he can deliver on his pledges and bring about significant reform, our correspondent says.


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