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Wrap 3: Putin pushes for convertible ruble, innovation economy

Russian President Vladimir Putin called Wednesday for work on making the national currency convertible to be completed, oil and gas to be traded in rubles on a domestic exchange, and an innovation-based economy.

MOSCOW, May 10 (RIA Novosti) - Russian President Vladimir Putin called Wednesday for work on making the national currency convertible to be completed, oil and gas to be traded in rubles on a domestic exchange, and an innovation-based economy.

In his annual state of the nation address before both houses of parliament, ministers and reporters, the president also said human rights and freedoms had to be upheld to ensure economic growth and corruption had to be eradicated for the good of the nation.

Putin said work on making the national currency fully convertible should be completed by July 1, almost six months ahead of the original January 1, 2007 deadline.

"In my address of 2003, I set the goal of making the ruble convertible," Putin said. "I must say the [outlined] plans are being implemented."

In an effort to promote the national currency, the president called for the establishment of a ruble-denominated oil and natural gas stock exchange in Russia.

"The ruble must become a more widespread means of international transactions. To this end, we need to open a stock exchange in Russia to trade in oil, gas, and other goods to be paid for in rubles," he said.

"Our goods are traded on global markets. Why are not they traded in Russia?" Putin said.

Putin also cited stronger property rights, human rights and freedoms in the country as the key to doubling gross domestic product, an objective he first set to be accomplished within a decade in his 2003 address.

Putin said this would be impossible without economic growth of over 7%, which, he said had been achieved in the past three years.

However, he warned that growth could slow if macroeconomic indicators were attained without economic freedoms, equal competition, and consolidated property rights.

"I am convinced that no important goal can be achieved in a country without ensuring human rights and freedoms, effective state organization, democracy and civil society," said Putin, who some rights activists have criticized for his approach to democracy.

Putin praised the government for seeking to provide an innovation basis for the economy, reorienting it from the current commodity bias that has led to billions of petrodollars flowing into the country.

"We have already started altering the structure of the economy and making it oriented to innovations," Putin said. "I think the government's policy in this area is correct."

However, the president called for government investment and efficient spending as part of a responsible economic policy that had been selected five years ago.

With the country embarking projects to set up technoparks and special industrial zones, the president also said investment in production infrastructure and innovations had to be encouraged.

"We have to work hard to stimulate investment in production infrastructure and innovation," Putin said, adding that one way to encourage investment in innovative research was through the introduction of tax breaks.

But Putin continued that most equipment used by Russian industry was dramatically inferior to modern levels as it dated back to the Soviet era.

"Yes, we know that our industry, our economy was built back in Soviet times, but it is no good," he said. "We must change the situation, encourage investment in production infrastructure and innovation, while preserving financial stability."

The president said Russia had to make substantial progress in such high-tech areas as modern energy, communications, space, aircraft building, and become a leading exporter of intellectual services.

In this context, Putin ordered the government to intensify work to create aircraft- and shipbuilding holdings in Russia in a bid to improve their competitiveness.

"The restructuring of such crucial industries like aircraft- and shipbuilding has been under consideration for an unjustifiably long time," he said. "The government must intensify work and at last accomplish the objective of establishing the holdings."

He also urged the government and financial institutions to support purchases of technological equipment abroad, and defend intellectual property rights.

But Putin said corruption remained a major problem that stood in the way of Russia's economic prosperity.

"We have still not managed to eradicate corruption, which is the most serious obstacle to the country's development," he said.

He said the government must fight all attempts by state bodies and business to profit personally at the expense of common good.

"We will continue trying to raise the prestige of civil service and support private business," he said. "But the government will not sit by and watch how they jointly benefit using special [friendly] relations with each other."

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