UPDATE: PM: Russia’s producing economy sees high costs, low investment

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MOSCOW, Apr 24 (PRIME) -- A significant reduction in investment in Russia’s producing economy amid a critically high level of costs is a matter of concern, Prime Minister Dmitry Medvedev said at a meeting with the Economic Development Ministry Friday.

“It is important we create adequate conditions for the real sector so that not only state money went there, although it is crucial in this period, but private money continued to arrive as well,” Medvedev said.

“The problem that is typical of almost all sectors of the Russian economy is an unjustifiably high, I should say, critical level of costs. Including due to salary growth, which has not been supported by sufficiently high labor productivity growth,” the prime minister said.

The economy will start to recover in 2016 thanks to investments, Economic Development Minister Alexei Ulyukayev said.

He said that he is against plans to cut state investment in infrastructure to 9% from the current 15% and proposed to protect the level of state investments into the economy by law.

The criticism that the government will waste the Reserve Fund by investing in infrastructural development is wrong, Ulyukayev said. “We have heard the doubting, “Stop eating away the Reserve Fund!” they say, and I think that the development of infrastructure is a way to protect the national assets rather than wasting them.”

The government must be cautious in giving preferences to companies in state purchases, Medvedev said. “We’ve prepared an imports replacement program together with other ministries to support our producers, including preferences to state and municipal companies’ participation in purchases. But we must do that carefully in order not to squeeze the competitive environment.”

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