Making the keynote address to the annual St Petersburg Economic Forum, Russia's top business event, Medvedev said he was taking real action to steer the country away from its dependency on oil and toward a future based on innovation.

"Since our last meeting, a year has passed, but not just that. There was something more. We have changed," a confident and relaxed Medvedev said. "... We are really modernizing Russia"

Now halfway through his presidency, Medvedev has made modernization his priority, launching a project to build a Silicon Valley-style technology hub near Moscow and promoting diversification of the economy into new areas.

Critics say Medvedev, a protege of longtime leader Vladimir Putin, will not succeed in modernizing the economy unless he opens up Russia's closed political system, curbs corruption, allows free media and promotes open debate.

As in previous years of Medvedev's rule, Putin did not attend the forum.

Underlining his determination to project a fresh image in front of an audience of 2,000 senior global executives, the Kremlin leader appeared on stage without the traditional anthem written to Soviet music and kept formality to a minimum.

Medvedev said the global crisis offered Russia a unique opportunity to build a modern, prosperous country based on a knowledge economy encompassing space, medical science, nuclear and information technology.

"Creating a comfortable environment for investors, in essence, is our greatest challenge," Medvedev said. "But today we put this task at the centre of our actions."

Medvedev said capital gains tax on long-term direct investment would be abolished from next year and held out the prospect of more tax cuts for business as the economy recovered.

The tone of the speech was more upbeat than last year, when Russia was in the depths of the crisis. Medvedev remained cautious about the recovery, saying the pace of growth was "not as inspirational as we would like".

Russia's economy is expected to grow by about 4 percent this year, clawing back about half of last year's contraction.

Addressing a commonly heard criticism of the Kremlin's modernization plans, Medvedev said his government understood that a modern economy could not be built on orders from above.

"The state should not tear the apples from the tree of economics. What the government should do is help to grow our apple orchard, develop our economic environment."

Medvedev ordered the government to create a new investment fund financed jointly by the state and the private sector which would work along market principles.

"No matter how many state-owned corporations we have, modernization will happen above all through private businesses," he said. "And only if there is competition."

On Thursday, the president implemented a previously announced move, signing a decree cutting the number of companies that must be state-owned because they are considered strategic from 208 to 41.

A fan of technology, Medvedev said Russia had set a target of giving Internet access to 90 percent of the population and broadband access to 60 percent by 2015. He said technology could help develop democracy in Russia.

"Information technology is one of the key directions for the development of democracy," the Kremlin leader said. "... Technological expansion guarantees freedom of speech".

Medvedev vowed to press on with government plans to promote Moscow as a regional financial hub.

"The development of a Moscow financial centre, I hope, will allow a significant strengthening of the position of the ruble as one of the possible reserve currencies," Medvedev said.