MOSCOW: President Dmitry Medvedev on Thursday delivered his second state-of-the-nation address, with attention focused on modernization of the Russian economy.

Russia's prestige on the world arena cannot be determined by past achievements, Medvedev said in his speech to the Federal Assembly, the Russian parliament.

"All that still helps this country stay afloat, but it is rapidly becoming outdated," he said.

Medvedev said the modernization of the Russian economy was an issue for the country's survival under current circumstances.

"This country needs all-inclusive modernization in the 21st century. That would be our first modernization based on democratic values and institutions," Medvedev said.

Russia would create a smart economy generating unique knowledge and technologies instead of one that heavily depended on raw materials, he said.

"In previous years, we failed to do enough to solve problems inherited from the past," the president said. "We have failed so far to dismiss the economy's primitive structure, the humiliating raw materials dependence and reorient production to peoples' real needs."

However, Russia has now decided to elevate its development to a new technological level. It also would develop new medicinal and space technologies, as well as radically boost energy efficiency, he said.

Medvedev admitted that the global economic crisis had hit Russia harder than other countries.

"The need for change has grown in recent months. The international financial crisis affected everyone, but the economic decline was more profound in Russia than in other countries," he said.

Medvedev said the government would continue to adopt anti-crisis measures although the worst part of the economic downturn had passed.

The Russian president also instructed the government to work out steps to improve the country's financial system to meet the needs of the economy's modernization.

The Russian government has allocated over 1 trillion rubles ($35 billion) to help ailing industrial companies since the financial crisis broke out last year.

Medvedev warned that the government would only support companies that have explicit plans to raise efficiency and implement high-tech projects in the future while ineffective ones have to leave the market.