Opening speech by Ilham Aliyev at the meeting of Cabinet of Ministers on results of socio-economic development in first half of 2016 and future objectives

- Six months of the year are now in the past. Today we will discuss the results of six months and talk about the work to be done in the future. I can say that military clashes and wars are still observed in various regions around the world in 2016, new pockets of conflicts are emerging and threats are increasing. At the same time, the economic crisis has deepened further since the beginning of the year and earlier, and we can say that all countries are affected by this crisis in one way or another.

The successful development of Azerbaijan is being ensured. Our country has maintained security at a high level and strengthened the public and political stability. All the objectives facing the country are being successfully met. Azerbaijan has developed steadily in 2016 as well, even though oil prices are still at a very low level. This development is underpinned by our carefully thought-out policies, the reforms and programs related to the future of our country. Azerbaijan is developing successfully. I am confident that we will successfully finish this year too.

In 2016, the yet another Armenian provocation led to very serious consequences for the settlement of Armenian-Azerbaijani Nagorno-Karabakh conflict. Armenia’s intentions are well known. They are trying to disrupt the negotiations in different ways, and when they see that the pressure on them from international mediators is mounting, they resort to further provocations. One of them was the armed provocation committed at the beginning of April, when an armed attack against our positions was carried out. But the Azerbaijani army gave a fitting rebuff to the enemy and, after a counteroffensive operation, liberated part of the occupied territories – 2,000 hectares of land, to be more exact. Now we have complete control of a much larger area.

This conflict should be resolved soon. Otherwise, no-one can guarantee that provocations will not be repeated. After all, Armenia's intention is to maintain the conflict in a frozen state. They thought that a provocation against us would end in their victory. But they suffered a bitter defeat. The Azerbaijani state won a major military victory.

The April fighting showed once again the need for a speediest change of the status quo. This has repeatedly been stated by mediators dealing with the matter. Changing the status quo would mean liberation of the occupied lands. I am confident that the results of the April fighting will serve as a lesson for Armenia, that it will draw proper conclusions and act constructively in the negotiations. There are such hopes, because, I want to say once again, the negotiations have been very active in the last few months.

The settlement of the Armenian-Azerbaijani Nagorno-Karabakh conflict is a priority for us. The soonest resolution of this issue on the basis of norms and principles of international law and within the territorial integrity of Azerbaijan is our main goal. There is no other option to resolve the conflict. The territorial integrity of Azerbaijan must be restored, the status quo must be changed and the occupation must end. Our position is supported not only by the UN, but also by all other organizations. The final document adopted by the NATO summit yesterday also reflects some very serious aspects related to the sovereignty and territorial integrity of Azerbaijan. The sovereignty, independence and territorial integrity of Azerbaijan are recognized, and the conflict must be resolved on the basis of these principles.

In 2016, our foreign policy was very active. In the first half of the year, more than 10 heads of state and government visited Azerbaijan. My numerous foreign visits have further strengthened our international relations. Since the beginning of this year, I have attended several international events. The Davos World Economic Forum is the world’s top international event. Both economic and political issues are on the agenda there. Then, the Munich Security Conference, which is also a global international event of the same proportions as the Davos Forum. There, too, we voiced the position of Azerbaijan, in particular regarding the Armenian-Azerbaijani Nagorno-Karabakh conflict. My participation in the London conference on Syria demonstrated the position and opportunities of Azerbaijan once again. Azerbaijan took an active part in the nuclear summit in Washington. The fact that we were invited to this summit is evidence of the authority of our country because Azerbaijan is not a nuclear state and it is possible to say that no nuclear research is conducted in Azerbaijan. Despite this, Azerbaijan was among the countries invited to the summit. At the same time, within the framework of the summit, I had very fruitful meetings with senior US leaders – President and Secretary of State.

The settlement of the Armenian-Azerbaijani Nagorno-Karabakh conflict is a priority for us. The soonest resolution of this issue on the basis of norms and principles of international law and within the territorial integrity of Azerbaijan is our main goal. There is no other option to resolve the conflict. The territorial integrity of Azerbaijan must be restored, the status quo must be changed and the occupation must end. Our position is supported not only by the UN, but also by all other organizations. The final document adopted by the NATO summit yesterday also reflects some very serious aspects related to the sovereignty and territorial integrity of Azerbaijan. The sovereignty, independence and territorial integrity of Azerbaijan are recognized, and the conflict must be resolved on the basis of these principles.

In 2016, our foreign policy was very active. In the first half of the year, more than 10 heads of state and government visited Azerbaijan. My numerous foreign visits have further strengthened our international relations. Since the beginning of this year, I have attended several international events. The Davos World Economic Forum is the world’s top international event. Both economic and political issues are on the agenda there. Then, the Munich Security Conference, which is also a global international event of the same proportions as the Davos Forum. There, too, we voiced the position of Azerbaijan, in particular regarding the Armenian-Azerbaijani Nagorno-Karabakh conflict. My participation in the London conference on Syria demonstrated the position and opportunities of Azerbaijan once again. Azerbaijan took an active part in the nuclear summit in Washington. The fact that we were invited to this summit is evidence of the authority of our country because Azerbaijan is not a nuclear state and it is possible to say that no nuclear research is conducted in Azerbaijan. Despite this, Azerbaijan was among the countries invited to the summit. At the same time, within the framework of the summit, I had very fruitful meetings with senior US leaders – President and Secretary of State.

I have also attended two international events in Turkey. A summit of the Organization of Islamic Cooperation was held there. It fully supported the position of Azerbaijan in connection with the April fighting. The final declaration reflected issues of the territorial integrity of Azerbaijan and pointed to the settlement of the conflict based on these principles. In addition, a contact group was set up within the framework of the Organization of Islamic Cooperation in connection with the conflict. It is also a huge diplomatic success for us.

Azerbaijan took an active part in another prestigious international event held in Turkey – the World Humanitarian Summit. In addition to these visits, there have been a number of visits on a bilateral basis – to the United Arab Emirates, the Islamic Republic of Iran, Turkey and Germany. There have been two meetings related to the Armenian-Azerbaijani Nagorno-Karabakh conflict: in Vienna in May and in St. Petersburg in June.

In other words, all these international events and Azerbaijan's active participation in them both show the importance of our country and usher new opportunities for us. At every international event we express the position of Azerbaijan, in particular regarding the Armenian-Azerbaijani Nagorno-Karabakh conflict. I dedicated almost half of my speech at the NATO Summit in Warsaw yesterday to this topic, and the attending heads of state and government heard the truth once again. Armenian lies do not impress anyone any longer. Using the capabilities of their Diaspora and the fact that we did not have much access to the international world, they spread false information about the conflict. Today, those days are over. The truth is that Azerbaijan is right, and the norms of international law must fully apply in connection with the conflict.

Touching upon the settlement of the conflict, I want to note that the negotiations are experiencing the so far unprecedented activity this year, especially in the last three to four months. After the April events, in May, on the initiative of the United States, a meeting was held in Vienna. The Armenian side put forward several conditions for the meeting to take place. By putting forward these conditions, they put themselves in a ridiculous situation once again, because they knew that Azerbaijan would not agree to any conditions. The negotiations are necessary for both parties. The April events showed that once again. If the negotiations are disrupted and Armenia continues its provocative activities, the situation may change.

Thus, Azerbaijan participated in the meeting held in May without accepting any conditions, and set out its own position. At the May meeting, Azerbaijan did not sign documents and did not make any statements. Co-chair countries issued a statement, but it is their internal affair. In June, at the initiative of the Russian side and at the invitation of President Putin, a meeting was held in St. Petersburg. This meeting was also very positive and reassuring. This is why a joint statement was made after the meeting. It was published in the media. I think that Azerbaijan's position is sufficiently reflected in this statement.

I met with the President of France Mr. Hollande yesterday. France as a co-chair country is also making effort to resolve the conflict. We do observe activity of the Minsk Group lately. America, Russia and now the French president are very seriously engaged in this issue. The talks should enter an active phase and Armenia should demonstrate a constructive position now. A phased solution of the issue is already accepted by all co-chair states and the OSCE. We have always said and are saying again that there is no other option. The issue must be resolved in stages. The territorial integrity of Azerbaijan must be ensured. A second Armenian state can’t be created. Nagorno-Karabakh can never be granted independence. The international community is already accepting that. In the old days, we used to hear other opinions. Unfortunately, international law and UN resolutions were sometimes ignored in the past and various untrue proposals related to the future of Nagorno-Karabakh, including those contradicting the historical truth, were made. All this is now in the past. A phased solution of the conflict is the only option. If this option is implemented, our lands will be freed from occupiers. At the same time, the Armenian population of Nagorno-Karabakh and the Azerbaijanis who will definitely return there will live in peace and security. There is no other way to resolve this issue.

I should note that the talks have been very active in the last three to four months. Of course, Armenia will bend over backwards to undermine the negotiating process again. It will try to gain time again. It is not ruled out that by resorting to yet another provocation on the contact line, it will try to disrupt the talks – as it did in 2014. Less than a week after very positive talks were held at the initiative of President Hollande in Paris, they staged large-scale military exercises in Agdam District. It was pure provocation, and everyone knows it now. This is also clear to the international community. They know it, even though they are not openly declaring that. During that provocation, they deliberately attacked our positions, provoking us to shoot down their helicopter in order to accuse us of aggression and disruption of negotiations afterwards. And disrupted they were! 2015 was a lost year for the negotiations. The Minsk Group held a formal meeting in Switzerland in December. After that meeting, the Armenian side apparently saw that the process can get active and resorted to another provocation in April. Therefore, the large states involved in the matter should be aware of all these realities. In fact, they know this. At the bilateral level, I have explained the position of Azerbaijan, the actual history of the problem and the causes of the conflict. Therefore, I believe that there are good opportunities at this stage. I do hope that this process will lead to positive results.

Along with this, of course, we are strengthening and enhancing our military capability. The April fighting showed once again that we have carried out correct policies. Today, everyone can see that the Azerbaijani army is among the strongest armies of the world in terms of technical equipment and combat capability. The Azerbaijani army today can complete any military task. We simply hope that the conflict can still be resolved peacefully, and our expectations have slightly grown of late. The main task now is as follows: co-chair countries of the OSCE should exert serious pressure on Armenia to give a positive answer in relation to the proposed issue.

Strengthening our military capability will remain a priority. Further measures were taken after the April events. Our combat capability has greatly increased and will increase even more. We are purchasing the most sophisticated hardware, weaponry and ammunition. Of course, this multiplies our strength and strengthens our positions in the negotiations. Therefore, the policy we have pursued for many years has proved efficient. From now on, the strengthening of our military potential and the process of army building should go even faster. We should and will further increase local production. Azerbaijan already has a powerful military industry. At the same time, we are purchasing and will continue to purchase the most technologically advanced weaponry.

Of course, we should have strong economic potential to address all these issues. Despite the fact that the price of oil has fallen three- to fourfold over the course of the year, Azerbaijan is still developing. The gross domestic product has slightly decreased. It has different reasons. But it is gratifying that the main sectors of the economy, the industry and agriculture, have grown further. In other words, the real sector has increased. Industrial production has increased by 0.6 per cent. This is not a huge increase, but I think that for a crisis year it is a positive fact. The country’s non-oil industry has increased by 2.4 per cent. This is a very serious growth, and I think that it is very encouraging. In the future, it will increase even more, because I will tell you about the future plans later, including those related to the development of industrial potential. Of course, Azerbaijan will create a powerful industrial complex.

Agriculture has increased by more than 3 per cent. This is also a positive fact, but the potential is much greater. As a result of the word carried out this year, as well as the work to be done in the rest of the year and next year, a great progress will be achieved in agriculture. Information about that will be provided here.

The country's economy has received investments in the amount of $6.3 billion. This is also a very positive fact. Azerbaijan is an attractive country for investment. More foreign investment has been made this year. I view this as a positive development too, because domestic investment is reducing due to the reduction of our investment program. And this is also natural. But for foreign investors Azerbaijan is still a very attractive country, and I am sure that this process will be continued in the future.

A total of 78,000 permanent jobs have been created in the first six months of the year. In general, about 90,000 jobs have been created, but 78,000 of them are permanent. This is a very positive fact, because at the beginning of the year there was some concern about the fact that some jobs were being closed. Indeed, 26,000 jobs were closed, but 78,000 ones were opened. Therefore, as a result of the measures taken, including the jobs opened through state-owned companies – in fact, this work is also under way in the private sector – we are seeing a positive trend here. State bodies strongly recommended that the private sector should not cut jobs, perhaps slightly reduce people’s pay, but not sack people. Therefore, it should be acknowledged that the private sector also acted very responsibly. This is natural, because the private sector has for many years received great support from the government – both political and financial. The volume of loans granted on preferential terms exceeds $1 billion. Therefore, of course, the private sector must also bear social responsibility. Please note that 78,000 jobs have been created and 26,000 jobs have been closed. This means that more than 50,000 jobs have been created, and this is a very positive fact.

Serious steps have been taken in addressing social issues. In general, over the course of 2016 some countries have cut salaries and pensions. In Azerbaijan, salaries and pensions have been increased by 10 per cent, which is a very serious social initiative.

This year, we intend to proceed with the construction of social housing. The State Housing Agency, SHA, has been set up. Its main goal is to provide low-income families with housing on very favorable terms. At the same time, after this process adopts a massive scale, it will have a positive impact on the sectors of construction and production of building materials, eventually contributing to our overall industrial potential. At present, preparations are under way. I do hope that practical steps are taken this year, and this new social initiative gains momentum.

2016 will be remembered as a year of deep economic reforms. It is true that we have been conducting these reforms for many years. But the situation was different earlier. Oil production was growing. The price of oil exceeded $100. So our main objective was to implement infrastructure projects - both social and other infrastructure projects. We allocated tremendous funds. In a short time, we implemented major infrastructure projects related to electricity, gasification and construction of rural roads. Work in this direction is still under way, but the vast majority of infrastructure projects are over.

Now the situation is completely different. I have repeatedly said that we live in a post-oil period. After several years, Azerbaijan will be exporting large volumes of natural gas to world markets, and the inflow of foreign currency will increase again. But we have to live as if in a post-oil period. Under such circumstances, of course, it was necessary to carry out serious and profound economic reforms. And they are being carried out. We are conducting serious reforms both in the financial and banking sector, and in connection with the development of agriculture and industrial potential. We are applying major incentives to boost exports and attract investment. At the same time, major reforms are carried out in the sphere of taxation, particularly in the customs sector. This year, proceeds from customs authorities exceed the target level by 17 per cent. This is a very positive result. Tax authorities have achieve a collection rate exceeding the plan by 2 per cent. But there are still great resources there. I believe that the ongoing reforms in the tax system will lead to transparency of this whole situation before the end of the year. Just as in customs bodies, all issues are resolved transparently. Of course, this is seen by everyone, including business people. At the same time, the budget receives more money. In other words, we should deepen reforms in all areas, ensure transparency and public oversight. The financial discipline should be further invigorated. Under such circumstances, we will completely eliminate dependence on oil. This is exactly what our goal is. Within a few years, our state budget should be made up largely of the non-oil sector. After this, the fluctuations of the oil price will not of any value.

As I have already noted, in the social sphere we have increased salaries and pensions. Other reforms are also carried out. We need to create more opportunities for people to ensure their self-employment. To this end, funds have been allocated from the Contingency Fund of the President. In the near future, we will probably see the results of the first experiment. I think that the self-employment approach should prevail.

For many years, we have been providing people with targeted social assistance. This is also a very serious social initiative. More than 100,000 families are provided with targeted social assistance by the state. We do this because the material support of these people is not up to standard. But we should gradually create conditions for these low-income families to earn money themselves and to do business. In some cases, people are not particularly interested in the jobs created to the public sector. Some people say: I am getting aid from the state, why should I work? This is not good. This creates dependency. Dependency may grow into a very big problem in the future. Therefore, people should be more responsible. Government institutions should create conditions for the people receiving targeted social assistance to gradually establish their business. The government will help. Initially, 6 million manats has been allocated from the Contingency Fund of the President for this purpose. If necessary, even more will be allocated. People in every district will be provided with jobs. They will not be dependent on the state. They will earn honest money and support their families.

In other words, we have really done a great job in the first half of 2016. In the coming years, we will see the results of this work. Along with this, there are good results on two strategically important areas for our country. The implementation of both the Southern Gas Corridor and the international transport corridor North-South will significantly enhance the importance of our country. These projects are of great strategic importance for Azerbaijan and our partners. After all, our geographic location dictates: Azerbaijan should become one of the transport hubs not only of regional, but also of global proportions. The necessary measures are being taken to achieve that. Both the port and the North-South and East-West corridors are under construction. Serious negotiations are currently ongoing with all partner countries and potential partners. We need to try to attract cargo to order to increase the volume of transit through the territory of Azerbaijan. This will meet the political interests of our country and bring great profits.

Of course, a lot of work has been done so far in 2016. It is impossible to mention all of it, as it would take several hours. I have only pointed out to some key issues. More information will be provided during the discussions. I will share my views related to further instructions in my closing remarks.