Closing speech by Ilham Aliyev at meeting of the Cabinet of Ministers, dedicated to the socio-economic results of the first half of 2011

So the discussion we have had today about the work done in the first half of the year shows again that the Azerbaijani economy has successfully developed for six months. All the processes in the country are developing in a positive direction, and this is an indication that we have chosen the right path and our policy ensures successful development. Especially now, when tensions, conflict, war, financial and economic crises in various parts of the world are showing that prudent policies may successfully resolve all social and economic issues. Azerbaijan is a country living at its own expense and not receiving assistance from anyone. Now there is no need for that.

Our policy is very open. Both our foreign and domestic policies, our socioeconomic policies have one goal: to make our country even stronger, to invigorate its regional standing and to enable the citizens of Azerbaijan to live even better. All our economic indicators are clear evidence of the work we are doing.

For many years Azerbaijan was the word leader for the pace of economic development. This enabled us to accumulate financial resources and invest them in the non-oil sector of the economy. According to the World Economic Forum, Azerbaijan is ranked first in the CIS for competitiveness, which I think is one of the important economic indicators. The statements and estimates relating to human development index show that Azerbaijan has achieved the biggest progress. As a result of the solution of social issues, in particular, the pension reform in Azerbaijan, pensions constitute 40 per cent of the average wage. I think this is the best indicator in the CIS, while globally we are approaching the standards of developed countries.

The infrastructure projects being implemented in Azerbaijan are of great importance not only for our country, but also for the region. As an example we can cite the construction of the Baku-Tbilisi-Kars railway, which is well under way. As you know, Azerbaijan allocated Georgia a loan of $200 million at the first stage. At the next phase, an additional loan of $575 million was allocated. So we have these opportunities. If we didn’t, the Baku-Tbilisi-Kars railway would be never built because the project was opposed by world Armenians and the Armenian lobby on the one hand and certain political circles that are under their protection or at their disposal, on the other. The key factor here was, first of all, the attraction of Azerbaijan’s financial resources. Thus a trilateral format emerged. I am sure that this project will be implemented by the end of next year. This is not just a railway project, it is much more valuable. This is a geopolitical step, a geopolitical initiative. This is a project that will turn Azerbaijan into a regional transport hub for years to come, our country will be receiving both political and economic dividends from this railway for many decades. I have cited this project as an example because it shows that the initiatives we are putting forward are always implemented. There has not been an occasion when we started a project and it was left unfinished or we could not implement it. A strong political will, elaborate steps and our strengthening regional standing have created this reality.

It is not only the developments in the Middle East and North Africa that are in the limelight today. There are serious difficulties in European countries, in the European Union member-states, there is a financial crisis, and it is impossible to eliminate it without outside assistance from international financial institutions. There are tensions, events and crises in CIS countries. Several countries have asked foreign states for financial resources, and if these resources are not provided, these countries may face a default, the process of depreciation of national currencies is ongoing. This is the picture of the world today. Not to mention natural disasters. There are floods and fires on every continent. Last year, such calamities also occurred in Azerbaijan, but thanks to the measures taken the consequences of these disasters were eliminated in a short time. Now serious work is under way to ensure that we can fully protect ourselves from such woes in the future. So the first critical issue here is political will. Second is professionalism because we can’t do this work at the appropriate level without it. And the criteria used in Azerbaijan in this direction are in line with world standards. Maybe even higher. In other words, the term “Azerbaijani standards” is now used in various fields.

Against the background of all these tensions, Azerbaijan is asserting itself as an island of stability and development. I have no doubt that all our projects and programs will be successfully implemented by the end of the year. We must try to give preference to macroeconomic stability. Inflation has been at acceptable levels in recent years. I want to repeat that over the six months of this year cash earnings grew by 17 per cent and inflation was 8.8 per cent. So real growth is very large again. However, the changes and adjustments to the budget are increasing budget expenditure, which is channeled into infrastructure projects and social issues. In my opening remarks I noted that the pensions of about 900,000 people will rise by almost 40 per cent. This factor will inevitably trigger inflation. Salaries of some categories of the population have been raised. This will also stimulate inflation. The implementation of major infrastructure projects and the attraction of extra funds will perforce lead to inflation. Especially when you consider that the equipment and materials required for infrastructure projects were imported from abroad earlier, while now the necessary construction materials, equipment and appliances are manufactured in Azerbaijan thanks to a rapid development of the national industry. This is a very positive phenomenon. We want this and I will speak more on that. But at the same time this is also a factor that generates inflation. So we must focus on keeping the inflation in single digits. Then there will be no difficulties if we take into account the fact that economic development, in the non-oil sector in particular, is quite high.

One of the more important issues, i.e. issues to be resolved before the end of the year, is a 100-per-cent execution of the budget expenditure. The time has come and we are thinking about that. There was a time when there was little money in the budget and we were not particularly concerned about how to spend it. But now, thanks to the work done, our financial resources have increased dramatically. In particular, the amendments made in the course of corrections require that all this work be done by the end of the year.

It was mentioned here how many schools will be renovated in Baku alone. More than 40 schools will be renovated and built by September and by the end of the year. How many hospitals and clinics will be built. Additional funds have been allocated for the construction of roads and other infrastructure projects. There is only six months left to the end of the year, and we should try to implement all the projects planned. Therefore, we must try to ensure complete execution of the budget expenditure. According to the data provided to me recently, we are close to this figure.

Work is underway in suburban settlements of Baku and it must be accelerated. This work is handled by the Mayor’s Office of Baku and coordinated by the Ministry of Economic Development. District executive authorities are, of course, also engaged. Relevant structures, the State Oil Company of Azerbaijan, in some cases the Ministry of Transport, the Azersu company are actively involved in it. We should make sure that all the issues we have identified are resolved in a short time.

Our country is implementing a number of important infrastructure projects. I am regularly informed on their progress. But I would like to list them again, so that they are always in the spotlight. The reconstruction of the Heydar Aliyev International Airport is successful under way: construction of new runways, a magnificent and modern airport terminal is being built. Work is progressing on schedule, and we will celebrate the opening of the Heydar Aliyev International Airport in 2013.

Another international airport is to be commissioned in Azerbaijan before the end of this year – in Gabala. Gabala has turned into a major tourist center of the country. Large-scale infrastructure projects are carried out there. Many hotels and recreation centers have been built, additional infrastructure projects are being implemented to attract foreign tourists. So an international airport was required there. Work is under way and the airport will be commissioned before the end of the year. I think we will thus complete the program on the construction of international airports in the country. Some time ago international airports were built in other cities, and they are functioning successfully. In particular, the Nakhchivan, Ganja and Lankaran airports operate international flights and this, of course, is a very positive fact for the convenience of those living in these cities. In particular, the provision of the Lankaran Airport with an international status has become a novelty, and regular flights to different cities around the world are organized from Lankaran now. So we will complete this program with the construction of the Gabala International Airport.

The construction of a commercial sea port has started in the Alat settlement. This is also a very large project. Namely, the commissioning of the Baku-Tbilisi-Kars railway before the end of 2012 is to be agreed with the construction of the commercial port. It will be the largest, the most modern, beautiful and magnificent sea port in the Caspian basin. Its capacity will enable transshipment of any cargo volumes from east to west and vice versa. Work on this project is ongoing and must be accelerated.

The construction of a modern shipyard has commenced and must always be in the spotlight. It will also be in line with international standards. One of the important projects being implemented by the state is the construction of a major fertilizer plant in Azerbaijan. Preparatory work is under way and I hope the foundation of this plant will be laid soon. Thus, Azerbaijan will not only provide itself with fertilizer, we will have a strong export potential. The construction of this plant will surely have a positive impact on agricultural development and yielding capacity.

Among other important infrastructure projects I would like to point to underground construction. In general, a major project is being realized in this sphere. Over the past three years three new stations were commissioned. Another six will be commissioned by 2015. This is a very positive indicator. The underground is, above all, the cheapest and the most convenient form of public transport. We are doing this for the convenience of our people. The world’s lowest underground fares are in Azerbaijan – 15 gapiks. There are no such fares in CIS or other countries. The underground is exclusively a social project. In order for it pay off, the fares should be perhaps five or six times higher. But we will never do that, we should try to keep the fare at this level as long as possible. But I also want to say that the more stations we build, the higher the costs. We had 22 and fewer stations, and our costs were approximately at the same level. Now the number of stations will reach 30 over four years and, of course, operating costs will also rise. Of course, we will consider this issue.

But, again, underground construction in Azerbaijan is ongoing, the fares are stable, and the commissioning of three stations in the past three years shows that we have sufficient opportunities. The new equipment acquired for the construction of tunnels is of international level, it is number one in the world and will enable us to do this work even faster.

As always, the attention we are paying to army building is at a very high level. The military parade held in June this year showed our strength, the power of the Azerbaijani state and its army. The armed forces are strengthening and, as you know, vast resources are allocated for that. In general, our military spending is $3.3 billion. This is 50 per cent more than the total state budget of Armenia, a country living in poverty.

Of course, $3.3 billion is a big amount. But it is both big and small. It is big because it is a lot of money. And it is small because we must pay even more attention to these issues. I think we should try to find the resources before the end of the year to further increase our military spending. Today I will give an instruction to the Cabinet of Ministers regarding that.

As I mentioned earlier, the process of industrialization is successfully under way in Azerbaijan. New companies, factories and plants are opening, and their number is growing. We have plants and factories that manufacture world-class products. We need to make sure that their products are marketed first in the country, so that they could be used by state companies in particular. In some cases, the equipment or other top quality products manufactured in Azerbaijan remain unclaimed, while state companies buy their analogues abroad even though the quality of foreign products may be worse and the price higher. So I think that our controlling bodies should tackle this issue. I have repeatedly instructed the heads of public companies that if certain equipment, products, pipes or any other goods are manufactured in Azerbaijan, they should be purchased in Azerbaijan. Now we have created large, huge enterprises of global scale where anything can be produced. Their products remain unclaimed, they have to export it, while public companies buy the same goods abroad. What is their interest? This issue must be studied. I have repeatedly issued individual instructions on this matter, but unfortunately we have not yet succeeded in that fully. This is my last warning. I think the Ministry of Economic Development should hold a special meeting on the issue, which should be attended by representatives of companies manufacturing competitive world-class products. Another presentation of their products should be held. At the same time, this meeting should be joined by heads of public and private companies. We cannot give orders to private companies, but we can and must give them advice.

It is necessary to use the products made in Azerbaijan in major construction projects. The world-class products manufactured in Azerbaijan and our enterprises that address domestic needs by 100 per cent remain on the sidelines, while similar products are imported from abroad. Why? We must protect our market. Therefore, it is necessary to make a list, a specification of products – I am talking about the products meeting international standards. All our customs authorities must be aware of this and this work should be coordinated. This issue should be closed once and for all. Take these steps and then report to me.

In general, very important steps are being taken in terms of our industrial development. Several large industrial centers are being established in Azerbaijan. I spoke about that in previous meetings too. The establishment of modern industrial complexes is envisaged in Baku, Sumgayit, Ganja and the Garadag district of Baku. Important steps have been taken in this direction, our country is conducting a policy of industrialization. Otherwise, we wouldn’t talk so much about local production. Measures are being taken to develop the chemical industry, enterprises are being modernized, new technologies introduced. While in Sumgayit recently, I gave the instruction on establishing a chemical industry township there. A large industrial part is being set up in Sumgayit now. There are about 10 new and modern enterprises in it. Some sort of a township of private enterprises should also be established around the chemical complex. Such experience is available in developed countries and the CIS. We should use it so that the entire process up until production of finished goods could be arranged in Azerbaijan. First of all, this will lead to the creation of possibly hundreds of small and medium-sized businesses, opening of thousands of vacancies, and the production of finished goods will be arranged in Azerbaijan. Relevant instructions were issued some time ago. According to the information provided to me, an area has been allocated in Sumgayit and the State Oil Company, the Ministry of Economic Development and other relevant agencies should take specific steps in this regard soon.

We have also heard a report on the development of the ICT sector. We are paying great attention to this sector. If we look at the CIS and global proportions, Azerbaijan has taken very big steps along the path of ICT development. The figures show that we are among leading countries of the world. The fact that Azerbaijan will put an artificial telecommunications satellite into orbit will be a historic event. The minister has provided information about that. Now we are trying to go beyond the launch of our first satellite. A project is being developed on launching the second satellite. Overall, we are gaining experience in this area. We have also attracted foreign experts. We are working with leading foreign companies and will succeed in creating a strong space industry in Azerbaijan.

At the same time, mobile communications and Internet services are developing in Azerbaijan. Azerbaijan is a country where the internet is free, there are no restrictions on it. I want to say that such situation exists not in all countries. There are countries where the Internet is not free, there are restrictions imposed. These restrictions, of course, are known to us, international organizations dealing with the issue are aware of them. But somehow this stays out of focus in some cases. The Internet is free in Azerbaijan. This shows that we are paying great attention to press freedom, the freedom of the press is exercised to the full in Azerbaijan. Let the international organizations that are trying to see problems in Azerbaijan in this field give their recommendations to the countries where the Internet is not free. Or let them speak about how free press is oppressed in their own countries – we have recently seen the signs of that.

Major funds will be allocated before the end of this year for the construction of rural roads. These funds are envisaged in the state budget, and we should pay even more attention to the construction of rural roads.

Rural roads have been built in a number of districts using the funds from the Reserve Fund of the President. Earlier, most of these roads were unpaved and were in serious disrepair. Now a major project on rural roads will be implemented before the end of the year. Of course, this project will be implemented next year too – we must try to ensure that there are good roads in all the villages. This is our goal. Such projects will be implemented in several districts before the end of this year.

We have also listened a report on the progress of drinking water and sewage projects. This is a very large project. It is implemented in Baku, suburban settlements, all the districts, the countryside. A very simple goal has been set: the population of Azerbaijan should be provided with water at the level of 100 per cent, around the clock, without interruptions, for 24 hours. It is a very straightforward task, but it will not be easy to fulfill it because, unfortunately, problems with sewage and drinking water have always been very relevant. The commissioning of the Oguz-Gabala-Baku water line and bringing it to its design capacity will partly resolve the issue. But we must ensure that every neighborhood has pure drinking water for 24 hours a day. There are projects. Both in the districts and in Baku. These are large-scale projects, and we must implement them. In the next four to five years, if not earlier, all drinking water and sewage problems in Azerbaijan should be resolved once and for all.

All relevant instructions have been issued regarding agricultural development. Even bigger yield is expected this year. In the past period agricultural growth reached 6 per cent. This is a good indicator. Relevant instructions in the area of crop production have been given and there is no need for repetition. We are developing a special program on viticulture. It should be considered by relevant agencies and we need to take further specific measures to develop viticulture. Overall, we have a specific plan, a program aimed at ensuring food security. We must ensure that all the food consumed in Azerbaijan is produced in Azerbaijan proper. This is a general goal, and in some areas we have achieved it. And where we haven’t, we must ensure that using the loans of the National Fund on the support for private enterprise and possibly other public funds.

This is the Year of Tourism in Azerbaijan. We talked about this at the beginning of the year. New modern hotels are opening both in Baku and in districts. This year alone, six five-star hotel brands will be opened in Baku. One of them, Hotel Kempinski Badamdar, has already opened and will soon start operating fully. Five new five-star hotels will be opened in Baku alone before the end of this year, i.e. over the next six months. The same holds true for the districts. I think that this way tourism will occupy a very important place in the Azerbaijani economy in the future. The share of both tourism and the ICT sectors in the gross domestic product will increase.

It was reported here today that ICT revenues must be equal to those of oil. Ali Abbasov is saying that this will happen in 2025. Perhaps you are talking about it on the basis of old calculations of reduced oil production. But be aware that oil production will not decrease until 2025. So ICT revenues should reach the level of revenues fetched by current oil production. Earlier calculation showed that Azerbaijan’s oil revenues would drop sharply in 2025, but now, as a result of the measures taken, we have ensured that the current level of oil production will remain stable until the indicated time. This is a very large figure, a figure measured in tens of billions. You should try to bring ICT revenues to that level.

In general, our country is doing a great job in implementing reforms and strengthening the transparency of the financial system. A very important place in it is held by the fight against corruption and bribery. Very effective steps have been taken in this direction. Very serious struggle is under way in every sphere. Administrative measures and penalties are applied. At the same time, we should also use institutional practices. This is the goal of some of the orders I have signed.

Our transition to the principles of e-government will also be a very effective factor in the fight against corruption. In general, we must strive to eliminate civil servant-citizen contacts as far as possible. It is now possible to obtain different information and documents through the Internet, electronically. Registration should also be conducted via the Internet. All these issues are listed in the special order I have signed. According to it, every ministry and government agency is to submit suggestions on which of their services should be provided electronically. Let there be no delays with that. This order and its execution are under my direct supervision. Suggestions must be submitted soon. After that even more serious steps will be taken. The fight against corruption and bribery is yielding results, good results.

As always, great measures were taken over the six months of this year to promote private enterprise, to provide loans. We have already provided about 60 per cent of the planned loans. The rest will be provided before the year’s end. So this year too, the private sector will receive low-interest loans in a large amount – a total of 125 million manat, which, in subsequent years, will lead to the opening of new businesses and jobs, development of the non-oil sector.

In conclusion, I should note that work on next year’s state budget has started. Next year's budget should also be both investment- and socially-oriented. The implementation of the programs launched this year will require additional funds. All these issues must be addressed in next year's budget. We must think and are already thinking about plans for the next year. Perhaps all government agencies must submit proposals in the near future. We will consider these proposals. Next year's budget will also enable us to successfully develop our economy.

I want to reiterate that the results of six months of this year are very reassuring. And it couldn’t have been otherwise. We knew that back at the beginning of this year. All the programs adopted facilitate Azerbaijan’s rapid and successful development and our country will soon join the ranks of the world’s developed countries. Thus, we will achieve a long-term sustainable development of our country.

Thank you.