The Russian leader also said an organization should be created within the Education and Science Ministry to support innovation activity in the country.

Earlier Tuesday, Putin proposed granting tax benefits for research and development work.

As the Russian economy develops and benefits from rising world oil prices, the government is seeking measures to reduce the country's dependence on raw material exports and stimulate high value-added production.

"The tax system still fails to stimulate the production of high value-added products. There are virtually no benefits for research and development," Putin said.

earlier related report
Science spending too low in Russia - top academic
Government spending on science in Russia is seven times lower than in Japan and 17.5 times less than in the United States, a senior Russian academician said Tuesday.

"In 2005, spending on research and development was just under 231 billion rubles [$8.6 billion], which is 50% less than in 1990, when the level was over 2% of GDP," Alexander Nekipelov, vice president of the Russian Academy of Sciences, said at a session of the president's council on science, technology and education.

Nekipelov said the Russian economy would never become a world leader without harnessing the country's scientific potential.

Since that the economy lacks incentives for investment in high-tech sectors, conditions must be created for efficient loaning and importing of modern equipment and technologies to modernize production, he said.

Nekipelov proposed that the assets of the Stabilization Fund, which was set up to accrue windfall profits from high world oil prices, should be funneled to the relevant structures to meet these goals.

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