GREETING BY YEGOR STROYEV, CHAIRMAN OF THE FEDERATION COUNCIL OF THE RF FEDERAL ASSEMBLY

Yegor Stroyev

Chairman of the Federation Council of the Federal Assembly of the Russian Federation

I am greeting the publishers, authors and readers of the Military Parade magazine.

Through years-long efforts, the Military Parade editorial staff have produced a periodical that disseminates, in a professional and competent way, information about achievements of Russia's defense industry. Relying on the high international prestige of Russian engineers, the magazine popularizes unique arms and military equipment produced as the result of long-lasting and versatile research and development efforts. Materials published in the magazine attract a large number of Russian and foreign specialists and evoke interest among potential buyers of the Russian defense industry's products. I would also like to point out the recent tendency to publish more information about the conversion of the defense industry to civilian production.

Military Parade thus makes a great contribution to the revival of the science-intensive industry that has always been the pride of Russia.

would like to avail myself of this opportunity and say a few words about the situation in Russia's defense industry.
It regrets me to say that the grave crisis that has struck this important industry persists. In 1997 alone, 380 Russian enterprises and organizations in the defense industry were declared bankrupt. The industry's debts reached 18 trillion non-denominated rubles.
Highly qualified specialists quit their organizations and companies. Defense industry enterprises are insolvent. They lack current assets, are burdened with heavy fines and unable to pay taxes.

Yegor Stroyev

The privatization of enterprises has failed to bring in enough revenues for implementing investment and conversion projects.

The crisis in the defense industry creates serious problems, above all, for regional government structures and inflicts irreparable damage on the economy, slowing down its development.

At the same time, the defense industry remains a serious, and almost the only, reserve that can ensure the restructuring of all industries.
Today, it is possible to check the production decline and the disruption of the research and technical potential of the defense industry and to liquidate consequences of its uncontrolled conversion to civilian production only if Russian regional structures, above all regional associations of economic cooperation between Russian Federation subjects, take a direct part in defense industry management.

These associations could take the following major measures:
– all-round analysis of lines of business of regional defense industry enterprises and organizations;
– drawing up of a program for restructuring regional defense industries and converting them to civilian production, on the basis of a corresponding draft federal program, projects for supporting regional economies, and joint proposals from enterprises in neighboring regions;
– establishment of procedures for selecting defense industry enterprises to be included in conversion and investment programs, considering recommendations of federal government bodies;
– working out of a mechanism for funding conversion and investment programs.

Introducition of preferences for organizations that are to carry out projects approved for implementation should be considered. These preferences may include reduced electricity and utility rates, reduced local taxes on profits used to update production, cuts in rentals, and the introduction of easy-term crediting of projects under conversion and investment programs, guaranteed by local authorities.

Jointly with the federal government, interregional associations must take measures to coordinate regions' plans and programs, to tighten control over the use of budgetary funds, and improve the system of military-technical cooperation.

In turn, the creation of conditions for converting defense industry enterprises to civilian production and using their potentials to solve regional problems must become a major line of regional activities.

Programs for restructuring and converting the defense industry in each region before 2000 should be worked out as constituent elements of the federal program. These programs must focus on the implementation of conversion and investment projects worked out by defense industry enterprises themselves. These must be hi-tech projects aimed at producing competitive civilian products required for the strategic development of the national economy and the improvement of the living standards in each Russian region.

A regional program for restructuring and converting the defense industry must take into account the continuity of the privatization which, however, must proceed on different principles. Shares in defense industry enterprises must be sold only to investors.

The state of affairs in the defense industry is always in the focus of attention of the Council of the Federation. Last November, the Council discussed it in detail and passed the resolution On the Situation in the Defense Industry, which proposed concrete recommendations and measures to stabilize this sector. This summer, the Russian Federation Government must inform the Council of the Federation of what it has done to repay federal budget debts to enterprises fulfilling state defense orders, to restructure federal budget debts, and write off fines and debts for uncompleted projects resulting from government-ordered reductions of state orders in the past few years.

It is only efficient interaction between federal and regional authorities that will make it possible to formulate and implement an economic and investment policy for converting the defense industry to civilian production. By pooling efforts, all government structures concerned will create the required conditions for the economic and social stabilization of the situation at defense industry enterprises and organizations.