Ilham Aliyev chaired a meeting of the Cabinet of Ministers on the results of socioeconomic development in 2011

President Ilham Aliyev has chaired a meeting of the Cabinet of Ministers on the results of socioeconomic development in 2011 and objectives for 2012.

The President made opening remarks at the meeting.

Opening remarks of President of the Republic of Azerbaijan Ilham Aliyev

- At this meeting of the Cabinet of Ministers we will discuss the results of 2011 and, of course, exchange views on the work to be done in 2012. In 2011, all the social and economic objectives facing the country were successfully met. There is no objective that would remain unfulfilled. All our plans have been implemented, so the successful development of our country continued in 2011.

However, due to a decline in oil production for reasons beyond our control, overall economic indicators are not very high.

But this should not and does not bother us because most of our economy is formed in the oil and gas sector. So the reducing oil production inevitably affects our statistics. But I want to reiterate that we are not worried about that because other contributors to the successful development of the economy – and we'll talk about that today – are very positive. In general, economic growth constituted 0.1 per cent. But the non-oil sector of the economy grew by 9.4 per cent. This is the result of the work we are doing, because we have been taking practical steps to develop the non-oil sector for several years. We have adopted programs, there is a public policy in this direction. So all the opportunities have been created for diversifying the economy. As a result, our non-oil economy grew by almost 10 per cent. Considering the fact that the non-oil sector plays a crucial role in creating jobs, it certainly has a positive impact on both economic and social development.

Industrial production has declined by 5 per cent, also because of a drop in oil production. But our non-oil industry grew by 11.1 per cent. This is an excellent indicator. It shows that the industrialization initiatives we put forward several years ago are yielding fruit. Considering the fact that the enterprises we laid the foundations of in previous years will be commissioned in the coming years, we will see excellent opportunities for the development of the non-oil industry in the future. Inflation remained at a one-digit level – 7.9 per cent.

This is a positive indicator. If inflation is in single digits, we consider it a positive result. Population incomes grew by 19.6 per cent. This statistic clearly shows that the well-being has improved, so the difference between inflation and incomes is large enough. Population incomes are 2.5 times higher. These are key macroeconomic indicators of our economic development. Also, we achieved a record level of investment in 2011. The amount invested in the economy increases very rapidly every year. In 2010, a total of $17.6 billion was invested. And in 2011 the investment reached $20 billion for the first time. A total of $37 billion was invested in our economy in just two years. If we add to that the investment made in previous years, we can see how much work is done in Azerbaijan. Both local and foreign investors are interested in our economy. Foreign investors believe in the successful development of our country – just as we do. At the same time, of course, a crucial role in the organization of this investment is played by public policy.

Because state investment is quite large. It will stay that way this year. At the same time, the steps taken by the state to encourage investors are bearing fruit. Of the $20 billion of investment $13 billion is domestic investment, while $7 billion is foreign. And I can say that this balance, i.e. this ratio, is positive. Foreign investors carry on investing in Azerbaijan, while local investors, businessmen and the state of Azerbaijan are doing everything for a comprehensive and diversified development of our country.

In 2011, we implemented a major investment program, and most of the figures I have cited were achieved at the expense of the state. Our foreign reserves have increased. For the first time, our total currency reserves have reached $40 billion. According to the latest information, we have $41 billion now. These are our strategic reserves. We are receiving revenue from the management of these reserves. A concept for the next period has been developed and we must manage our foreign exchange reserves in a more diversified way. In this regard, appropriate instructions have been issued.

Our social policy has been successfully continued. In 2011, we raised salaries and pensions. The pensions of about 900,000 people were raised by almost 40 per cent, and this is one of the pillars of our social policy. The well-being of our people is improving, the number of families receiving targeted social aid is now 120,000. This shows that the state pays constant attention to the families that are unable to improve their financial situation. On average, each family receives a monthly allowance of 106 manats.

I have repeatedly said this before and I want to reiterate it now – we are committed to and governed by the principles of a market economy, and the figures I have cited reflect this perfectly well. At the same time, we are taking successful social steps and have achieved great successes in building a socially-oriented state.

Currently, the average pension in Azerbaijan is about $180-190. The average wage is close to $460. I can say that this is a great indicator for the CIS. But we shouldn’t be complacent with that, of course. The measures we will take in the coming years, the funds to be allocated, the jobs to be created and our successful investment policy will help us. Of course, salaries and pensions should and will be further increased.

Thus, the situation in this area is very positive. The process of construction of social facilities is ongoing. There have been no delays in any projects. In some cases, and this is something new, some agencies could not use the funds allocated for certain projects.

Of course, we must consider this factor and address such shortcomings in our investment program for the current year. But the reason for this is that in 2011 we had such ambitious plans that in some cases government agencies and the companies working with them could not master the entire volume. There was a time when we had no money to carry out any work. Now we have the money but, unfortunately, there are certain problems with the correct use of these funds. We are aware of these problems and will take more serious measures to improve the situation this year and in the coming years.

The construction and renovation of health facilities and schools has been continued. We have built and renovated 33 health facilities and 60 schools, four Olympic sports centers and cultural institutions are being built and renovated. We are doing this creative work everywhere, including the districts. The situation in the districts is improving, our cities are getting better. In 2011, we created 94,000 jobs, including 73,000 permanent ones. In general, more than a million jobs have been created since we launched the program against unemployment in 2003. In 2011, the unemployment rate in Azerbaijan further declined to 5.4 per cent. The level of poverty, which always goes in parallel with unemployment, fell to 7.6 per cent. These indicators are both positive and encouraging. We know that 2012 we will be successful too. Today we will talk about the work upcoming in 2012.

In 2011, some memorable and historic events took place in our foreign political life. Azerbaijan was elected a member of the UN Security Council. This is a great political victory. This victory coincided with the 20th anniversary of our independence, which is also quite symbolic. In 20 years, Azerbaijan has not only secured a place on the world map, but has also earned the sympathy, respect and confidence of the absolute majority of members of the world community.

Otherwise, 155 countries would never have supported Azerbaijan. To win the confidence of 155 countries is a very challenging and at the same time highly responsible task. This has been facilitated by Azerbaijan’s successful and independent policy, principled stance, the opportunities to position ourselves as a reliable partner. We have won this victory in competition and in the next two years we will demonstrate our principled position as a member of the most respected organization, the world’s leading organization. I've already talked about this and I want to say again that we will first of all uphold justice in this organization. There is a great need for that. Sometimes justice is violated, there is disrespect for international law, it is flouted. Within our capabilities, we will defend justice and international law in this prestigious organization. Of course, we will always keep our most painful issue, the Armenian-Azerbaijani conflict over Nagorno-Karabakh, on its agenda.

Let me repeat that membership in the UN Security Council is our historic victory. We are legitimately proud of it. At the same time, this victory heightens our responsibility, and we are ready for that.

Unfortunately, there was no progress in the settlement of the Armenian-Azerbaijani conflict over Nagorno-Karabakh in 2011. The only and the main reason for that is Armenia’s unconstructive position and its insincere conduct in the negotiations. In fact, the Armenian side has been trying very hard to disrupt or “freeze” the talks. Of course, any negotiation requires the participation of both sides. If either side tries to evade the negotiations in one way or another, the possibilities of the other side become limited. But I can point to some positive developments in the attitude of international forces to this issue in 2011. We can’t deny that. I can say that the most important of them has been the fact that the three co-chair countries said that the status quo was unacceptable. This is first such statement, i.e. such statements were not made in previous years. It is a fair statement. Of course, the status quo must be changed, this is a reassuring statement. If it is followed by concrete proposals and steps on the part of co-chair countries, the conflict will be resolved soon. If it remains just a statement, then the prospects will not be very reassuring.

There are two ways to resolve this conflict: the path of negotiations and a military option. There is no third option. This is not and will never be a “frozen” conflict. If someone thinks that the main issue in the negotiations is to prevent war, I don’t agree. We don’t want war either. Who does? The state of Azerbaijan, which has achieved such great successes, certainly doesn’t. But that shouldn’t mean that the talks will be put aside and all the efforts will be directed to preventing war. This will not happen! Why am I saying this? Because in 2011, especially in the latter half of it, we saw the co-chairs mostly focus on actions and initiatives aimed at confidence-building measures and strengthening the ceasefire rather than on the essence of the talks. We don’t want war either. But there is a way of doing this. And this way is known to all. We have already stated that in principle we agree with the proposals submitted to both sides at a meeting of the OSCE foreign ministers in late 2009. Those principles were put forward not by us but by the co-chairs. If those principles are still valid, then the conflict can be resolved. I have sufficiently informed the public of the principles. I just want to repeat the main points. Azerbaijan's territorial integrity is not questioned, the citizens of Azerbaijan will return to occupied lands and proposals regarding the status of Nagorno-Karabakh will be put forward at an unspecified time in the future and in an indefinite form. Most importantly, Nagorno-Karabakh cannot be accorded any status without Azerbaijan’s consent. And this is natural – the state and the people of Azerbaijan can never give consent to a status of Nagorno-Karabakh outside Azerbaijan. These are the principles. We are ready to continue the talks on the basis of these principles, and if the opposing party takes similar steps, the issue can be resolved soon. Along with this, and this is no secret, we are and will be building up our military strength. I remember exactly the figures for 2010, I also remember other figures. But these figures stand out particularly vividly – in 2011 we spent $3.413 billion on military issues, in 2012 we will spend a further $3.474 billion. These are similar figures. Look how much money we spend on the army over the course of two years! If we add to that the money we spent in the previous years, we all can see that the Azerbaijani army has a great potential.

We have the strongest army in the region, the logistical support is at a high level, we are purchasing the most modern weaponry, hardware, combat aircraft and helicopters, missiles, artillery units – it is hard to enumerate everything. The geography of countries cooperating with us in the military sphere is also growing. At the same time, the number and the range of military products manufactured in Azerbaijan is increasing. We manufacture about 600 kinds of military products. So today the Azerbaijani army is a great force, we can and will use this force when needed.

The opposite side also knows this. Therefore, according to information available to us, the opposite side - Armenia is in great anxiety and confusion in connection with the military capabilities of Azerbaijan. We obtain this information from various sources, and they have no opportunity to confront our capabilities. Just like the elections to the UN Security Council, they fled from the battlefield. Did you know that in his time, that is, in the previous period, Armenia was there a candidate. They then quietly walked away, because they knew that they could not fight with Azerbaijan. Similarly, we have repeatedly seen how they have escaped from this battle. Let them leave in a kind of land that does not belong to them, and thus can be reconstructed world.

Our military potential to grow even more. We now maintain military spending at a high level. For comparison, I can say that the total cost Armenia $ 2 billion. And our military spending is almost 2 times more. That is, it is a reality. Over the years, this gap will increase even more, the military power of Azerbaijan will grow. As a result of the signed contracts at the present time - now I do not want to talk about it - our combat capability will increase significantly, and we will be able to achieve low losses even greater success in addressing the issue. But, I repeat, Azerbaijan - a peace-loving nation. We try to resolve the issue peacefully. But also know that every month and every year brings us closer to victory. Every month and every year it becomes even harder Azerbaijan, and Armenia - are even weaker.

Our military potential must grow further. We maintain our military spending at a high level. For comparison, I can say that Armenia’s total expenses are $2 billion, while our military spending alone is almost twice as high. So this is a reality.

Over the years, this gap will further increase as our military power will continue to grow. As a result of the contracts signed to this day – I don’t want to talk about that now – our combat readiness will significantly improve and we can achieve even greater successes in addressing the issue with minimal losses. But let me repeat that Azerbaijan is a peace-loving nation. We are trying to resolve the issue peacefully. But we also know that every month and every year bring us closer to victory. With every month and every year Azerbaijan becomes even stronger, while Armenia is getting weaker still.

In 2011, there were also other positive foreign political initiatives. The number of our partners is increasing. My visits to foreign countries and the visits by foreign presidents and prime ministers to Azerbaijan show how successful our foreign policy is. These contacts will be continued in the current year. Let me repeat that Azerbaijan is recognized worldwide as a reliable partner, and this year we will put forward new initiatives.

2011 was declared the Year of Tourism in Azerbaijan. In the course of the year, a lot of attention was paid to this area. We must turn Azerbaijan into a center of modern and elite tourism. This is how I see Azerbaijan on the tourism map of the world. Our links with international institutions are strengthening. Various activities have been held. A growing number of people is coming to Azerbaijan to see our beautiful nature. Last year alone three five-star hotels opened in Baku. This year again at least three more five-star hotels will open in Baku. This process is also ongoing in the districts. Five-star hotels, at least four of them, are now under construction in the countryside. I personally visit the most important tourist centers and examine the situation.

This year we will commission the Shahdag tourist complex. It will be a unique ski resort. I think it will be one of the most beautiful ski resorts in the world because we are using the best practices that exist in the most beautiful parts of the world. So I think that the announcement of 2011 as the Year of Tourism was the right step.

It would take hours to enumerate everything we did in 2011. I want to point only to the key milestones. Another important issue is that we adopted the “Azerbaijani youth” program last year. It is a very specific program. It is not a mere formality.

All provisions of the program will produce specific results. A Youth Fund has been established. It is now undergoing a period of institutional development. Once this process is complete, the state will allocate initial funds so that the Fund could use them rationally and ensure that the maximum number of our young people are involved in various projects.

The Fund will provide grants and allocate resources for different programs. Of course, it would be too early to speak about the Fund’s activities now, but we do know what the main directions should be. Thanks to this Fund and, of course, with the aid of public funds, we must engage many more young people in creative work. Young people have a huge potential, a lot of energy and high sense of patriotism. Just like other citizens, they want to work for the country. Thanks to this Fund and other formats we will actively engage young people in creative work.

It should be mentioned that the experience of the Science Development Fund has also been very positive. Through this Fund, young people, young scientists are actively involved in various programs. The Youth Fund should also build its activities in this spirit, in this direction.

In 2011, we did a good job in the energy sector. This is our leading economic sector. This is the case today, so it will be tomorrow. This field must always be given great attention. The launch of new power plants, the groundbreaking of new stations, the work under way in the oil and gas sector and the development of alternative and renewable energy – all this is obvious.

In 2011 we did this, we carried out this work.

In 2011, very important events took place to deliver Azerbaijan’s rich gas resources to world markets. Transits issues we worked on for several years have been resolved. Now, we can say that doors and transit paths are opening for major Azerbaijani gas. This will attract more investment to our economy, to the oil and gas sector. This investment will be measured in tens of billions of dollars. Of course, new jobs will be created, there will be new scope of work. Now local companies are better prepared for this work than in the 1990s because in the 1990s we did not have such serious companies. Now, thanks to the work done, including the work carried out in the oil and gas sector, Azerbaijani entrepreneurs have become stronger. We have great opportunities in construction, energy, manufacturing, we have industrial parks. Now we produce important oil and gas industry products ourselves – pipes, etc. This means that Azerbaijani companies will be increasingly involved in contracts, will pay more taxes into the state budget, there will be more jobs. Of course, this chain reaction will have a positive impact on every area.

So we achieved this important goal in 2011. Transit issues have been resolved. In 2011, a large gas field was discovered. Successful exploration was carried out at the Absheron gas field. According to preliminary estimates, there are 350 billion cubic meters of gas reserves in Absheron. In 2011, the State Oil Company of Azerbaijan discovered the Umid field. It has approximately the same volume of gas. This has significantly increased our gas potential. In early 2011, exactly one year ago, the European Union and Azerbaijan signed a declaration on strategic cooperation in the gas sphere. Over the course of the year very active and fruitful work was carried out. A working group was set up. It is led by the European Energy Commissioner and our Minister of Industry and Energy. It also involves all interested companies. Meetings are already held in a trilateral format with the participation of other countries. This is a novelty. This novelty is facilitated by our successful energy policy.

2011 will be remembered as the year that turned Azerbaijan into a major gas producer and exporter. Of course, we have to work even harder this year and in subsequent years to convert these arrangements into real projects. We must and I am sure that we will convert these projects into real pipelines, real terminals, real investment.

I want to say again that the work we did in the past year is so big and important that we can talk about it for hours. In my opening remarks I have raised only the basic issues. Now, during the discussion, we will have a more extensive exchange on these issues.

Now the floor is given to Economic Development Minister Shahin Mustafayev.

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Economic Development Minister Shahin Mustafayev said:

- Distinguished Mr. President!

Dear meeting participants!

As a result of President Ilham Aliyev’s flexible economic policy which stems from the strategy of our great leader Heydar Aliyev, rests on a scientific foundation and the principles of a liberal market and relies on the human factor, our country has embarked on a qualitatively different development stage. In 2011, the year when our country marked the 20th anniversary of the restoration of its independence, Azerbaijan demonstrated a high degree of stability and the capacity to withstand global socioeconomic challenges in the complex foreign economic environment. Azerbaijan continued to register economic growth, achieved further successes in speeding up the development of the non-oil sector, diversifying the economy, developing the private enterprise and the districts, and further improving the well-being of the population.

Macroeconomic stability was ensured by keeping the average rate of inflation in single digits and maintaining the stability of the Manat. The foreign debt accounts for 7.3 per cent of the GDP, which is in line with international requirements, while strategic currency reserves are in excess of $40 billion.

State budget revenue has increased by 37.7 per cent to 15.7 billion and expenditure by 30.8 per cent to 15.4 billion manats. The state budget has been executed with a surplus. State budget contributions from the Ministry of Taxes have increased by 27.5 per cent and from the State Customs Committee by 3.6 per cent to the previous year. Tax revenue from the non-state sector has risen by 40,5 per cent and from the non-oil sector by 22 per cent.

The GDP growth rate was 0.1 per cent and its per capita volume has exceeded $7,000, which has further strengthened Azerbaijan’s positions among countries with a high average income.

The structure of economic growth in 2011 was different from previous years. Thus, growth in the non-oil sector has been 9.4 per cent, including 5.8 per cent in agriculture, 11.8 per cent in the ICT sector, 3.6 per cent in cargo transportation, including 9.6 per cent in the non-oil sector, and 7.8 per cent in fee-based services. The GDP growth has been fully accomplished by the non-oil sector. Mr. President, this is a direct result of your policies to diversify the economy and reduce its dependence on the oil sector.

The policy of industrialization has facilitated the dynamic development of the non-oil sector. Thus, manufacturing in the non-oil sector has increased by 11.1 per cent, including 7.1 per cent in the processing industry, 27.1 per cent in the chemical industry. 1.9 times in metallurgy, 4.4 per cent in the production of building materials, 8.4 per cent in electricity generation, 5 per cent in food production, 24.5 per cent in furniture production and 56.5 per cent in the production of clothes.

Heavy engineering and industrial gas production at the Sumgayit Industrial Park, the commissioning of aluminum, condenser, MDF, modern building materials and glucose plants, the reconstruction of the Garadagh cement plant and the continued construction of two new cement plants, a plant for the incineration of solid wastes, a shipyard, factories producing solar panels, piled cotton fabric, fertilizer and other facilities are among the tangible results of industrialization. A total of over 40 industrial facilities were built and commissioned in 2011, while the construction of up to 100 industrial enterprises is ongoing. Important work is under way to develop the energy sector, including the broader use of alternative energy and the establishment of new production facilities in this area. According to your instruction, the Sumgayit Chemical Industry Park and the Balakhani Industrial Park will accelerate economic development, facilitate the formation of an innovative economy and private enterprise development, reduce the dependence on imports, bolster non-oil exports and play an important part in increasing the rate of employment.

In 2011, government support for agriculture was continued, production and processing of agricultural produce based on advanced methods and modern technologies expanded and the agricultural infrastructure substantially improved. Food security was further improved and the supply of staple foods increased. In order to expand the transport and transit potential, the implementation of major infrastructure projects of regional and local significance was continued, including the construction of the Baku-Tbilisi-Kars railway, the Baku International Trade Seaport and the construction of roads within the international corridors TRACECA, North-South and East-West, and new underground stations and an airport commissioned.

The favorable investment environment facilitated the growth of investment in the national economy in 2011. The economy received $20 billion in investment, of which $13 billion was domestic and $7 billion foreign. Of this, $15.7 billion was invested in the non-oil economy and $4.3 billion in the oil sector. The state invested a total of 5.9 billion manats in the transport, ICT, tourism, utilities, irrigation, energy, environment and other spheres last year, including 1.7 billion manats in socially-oriented projects.

A special role in the successes achieved has been played by state programs, especially those on the development of districts which have facilitated Azerbaijan’s strategic development.

Dear Mr. President, your regular visits to the districts, familiarization with over 300 different facilities last year alone, participation in the opening and groundbreaking ceremonies of new enterprises, your instructions and recommendations, 54 orders on specific problems associated with the development of each district have played a crucial role in the development of districts and suburban settlements of Baku. During the year, more than 110 enterprises operating on modern technologies were built and commissioned in the districts. More than 200 enterprises are now under construction. In accordance with the state program on the socioeconomic development of Baku and its suburban settlements, the construction and renovation of 53 schools, 47 kindergartens, six health care facilities were completed last year. Work in this direction is continuing. Necessary work has been carried out both in the suburban settlements of Baku and in the districts to improve electricity, gas and heat supply, communication and information, infrastructure support for agriculture, environmental protection, water and sanitation, road infrastructure and transport, and social infrastructure.

Private enterprise development has been one of the economic policy priorities in the past period. Work has been continued to further expand business activity, increase state support for the private sector, protect the rights of entrepreneurs and eliminate unwarranted interferences. A single information register of inspections has been created.

According to your decree on the expansion of electronic services, as a result of online registration of individual entrepreneurs, the time they spend on registration with tax authorities has been reduced from three days to a few minutes. Additionally, the Internet portal on permits will enable entrepreneurs to obtain information on permitting documents and the procedure for obtaining them, the documents required and the term of permits from a single source.

The changes introduced to the procedure for using soft loans have enhanced the opportunities for financing large-scale and long-term investment projects and small businesses on favorable terms.

Thanks to the 138 million manats in preferential loans the National Fund on the Support for Entrepreneurship allocated to 1,643 entrepreneurs in 2011, about 6,500 jobs will be created. Of these loans, 75 per cent were allocated in districts and 25 in the Baku settlements. Soft loans amounting to 118 million manats have been allocated to 85 major production, processing and infrastructure projects based on modern technologies. These loans were used in commissioning 33 enterprises in 2011, while 96 more are scheduled for commissioning this year.

In order to support the potential of local entrepreneurs, encourage modern forms of business and expand foreign relations, 91 business forums and conferences were organized in Azerbaijan and 99 in foreign countries. A national exhibition was held in Baku. In order to expand the market for non-oil products, national companies have participated in exhibitions in the countries of America, Europe, Middle East, in Russia.

One of the most important components of state support for entrepreneurship has been the education of entrepreneurs, learning from international experience, provision of consulting and innovation services. To this end, 144 events were held last year, including 80 in districts. In order to enhance their knowledge and skills, 52 entrepreneurs and young managers received training at relevant enterprises in Germany.

Mr. President, in accordance with the instruction you issued at a Cabinet meeting dedicated to the results of socioeconomic development in the first half of 2011, meetings were held with producers and buyers of competitive industrial products, a catalogue of industrial products and information about their specifications prepared and distributed to potential buyers. Regular monitoring of consumer prices was held, holiday fairs were organized in Baku to meet the growing demand of the population more effectively, expand the assortment of goods and prevent artificial price increases.

Also, as a result of increasing production, expanding its storage infrastructure and eliminating the artificially inflated prices, consumer prices have stabilized, while prices of some foods have dropped and this trend continues.

2011 was successful also in terms of foreign economic cooperation and integration into the global economy. Meetings of intergovernmental committees and working groups with 22 countries were held, 11 credit agreements worth $1.7 billion in the areas of transport, energy, telecommunications, agriculture, social development, etc. were signed as part of cooperation with international financial institutions.

Azerbaijan has strengthened its economic leadership in the region and turned into a country exporting investment. A total of $6 billion was invested in other countries in recent years.

Mr. President, in accordance with your instruction to explore investment opportunities, visits were paid to Balkan states and the North Caucasus region of the Russian Federation. The relations established during the visits will expand investment opportunities for national companies in foreign countries.

The number of Azerbaijan’s foreign partners has reached 150, our foreign trade rose by 9.2 per cent to $33.2 billion in 11 months, the foreign trade surplus amounted to $16.1 billion dollars, while exports exceeded imports 2.9 times. As a result of the application of modern technologies and aligning production processes with international requirements, imports of machinery and equipment have increased 1.7 times.

Dear Mr. President! The sustainable economic growth has secured social development. The funds allocated from the state budget for social needs increased by 16.5 per cent, including the costs on social protection and social security by 33.2 per cent.

The average monthly salary rose by 8.3 per cent to reach 357 manats in 11 months. In 2011, the wages of employees of state-funded education, health, culture, youth and sports, science and other sectors were raised by an average of 10 per cent, the pensions of 900,000 people were raised by an average of 40 per cent, the well-being of refugees and IDPs was improved. The level of employment increased, as 94,000 jobs were created during the year, while the rate of unemployment fell to 5.4 per cent.

The poverty limit increased three times from 35.8 manats in 2003 to 106.9 manats in 2011. The poverty rate over this period declined from 44.7 per cent to 7.6 per cent in 2011. As is evident, along with the steady annual increase of the poverty limit, the number of the poor has decreased dramatically. The implementation of the Action Plan for the “State program on poverty reduction and sustainable development” covering 2011-2015 will play an important part in reducing poverty further. The successes Azerbaijan achieved in 2011 are praised by influential international organizations.

At a time when the ratings of some developed countries are falling, the rating agency Standard & Poor’s in December last year raised by one level Azerbaijan’s long-term independent credit rating to the investment rating of “BBB-”, while keeping the rating outlook “sustainable”. Also positive were assessments of Azerbaijan’s economy on the part of Fitch Ratings and Moody’s. According to the Global Competitiveness Index, Azerbaijan's economy is ranked 55th among 142 countries and first in the CIS in terms of competitiveness.

Dear Mr. President! It is beyond doubt that the results achieved serve to bolster Azerbaijan’s economic potential and improve the lives of our citizens. Your strong and prudent policies to further increase the power of our country and lead it into an even more prosperous future have created a solid foundation for the comprehensive development of our country in 2012 and beyond.

The “Azerbaijan-2020: A Look into the Future” concept being prepared on your instruction will consolidate the country’s successes in the coming years, secure the planned doubling in the next decade of the GDP on the account of the non-oil sector and the achievement of the goal of continually improving the well-being of the people. As you say, Azerbaijan will continue to develop and enhance its power.

Thank you.

Х Х Х

Addressing the meeting, the chairman of the state committee for refugees and IDPs, Ali Hasanov, said:

- Your Excellency, distinguished Mr. President!

I would like to take this opportunity because this is the first Cabinet meeting this year to wish you further successes in building up the economic strength of our country, strengthening the political stability, improving the well-being of our people and achieving significant progress in resolving the Armenian-Azerbaijani conflict over Nagorno-Karabakh.

I would like to indicate that on the whole 2011 was a year of great successes in all areas for our country. Among the biggest achievements I want to emphasize two events that played a part in promoting our country further and strengthening its international standing. First, our young and independent country beat the oldest European states to win the Eurovision song contest. Second, Azerbaijan received votes from 155 countries to be elected a non-permanent member of the UN Security Council, which sounds even more convincing than election proper.

We believe that the countries brokering the negotiated settlement of the Armenian-Azerbaijani conflict over Nagorno-Karabakh, the countries patronizing Armenia, especially Armenia itself, should draw serious conclusions from this.

Dear Mr. President!

Our country, which has achieved tremendous successes in all areas, has also made great strides in resolving the social problems of refugees and IDPs thanks to your personal special attention.

For your information I want to indicate that during the conflict, over the past 20 years, 3.7 billion manats or $4.6 billion was spent on addressing the social problems of refugees and IDPs. Of these, $2.7 billion are state budget funds, $1 billion are the funds of the State Oil Fund and $900 million were provided by international humanitarian organizations operating in our country.

In particular, $500 million was spent in 2011. Of these, $295 million were allocated from the state budget, $175 million from the State Oil Fund and $30 million by international humanitarian organizations.

Sixty per cent of the funds were used in the last eight years – during your presidency.

To date, 70 modern settlements with the entire socio-technical infrastructure have been set up using the funds allocated from the State Oil Fund and other sources, the living conditions to 22,000 families or about 120,000 refugees and displaced persons have been improved.

Of course, it would be impossible to implement these large-scale projects without the successful oil strategy founded by nationwide leader Heydar Aliyev.

During your presidential activities in this area, one state program and two supplements to it have been adopted and a total of 45 decrees and orders signed. The Cabinet of Ministers has passed 141 resolutions and ordinances and the Milli Mejlis has adopted nine laws. In particular, seven decrees and orders were signed, the Cabinet of Ministers passed 12 resolutions and ordinances, the Milli Majlis adopted one law in 2011.

All the work is carried out successfully, on time and without delays.

The construction of 10 five-storey residential buildings for 560 displaced families in Agjabadi District, a new settlement for 552 displaced families from Lachin District in the Takhtakorpu settlement of this district, nine five-storey apartment blocks for 525 families in Goranboy District, an 80-apartment building for the IDPs living in deplorable conditions in a hostel near the Heydar Aliyev Center in the Ramana settlement of the Sabunchu district was completed in 2011. Also, due to state needs, apartments for 406 IDP families were purchased in the city of Baku through the Ministry of Finance and the resettlement has already been completed.

Due to the execution of your Order “On additional measures to accelerate the social development of Naftalan”, all IDP families have been resettled from Naftalan to 690 apartments in a new settlement in Goranboy District comprised of 12 five-storey apartment buildings.

The restoration of 80 houses in the Harami settlement of Fizuli District, the construction of 24 houses for the IDPs temporarily stationed in a cannery in Gazakh District and 52 unfinished houses belonging to the Meskhetian Turks were completed last year using investment funds. To date, the construction of 324 houses belonging to the Meskhetian Turks has been completed, and this project will be continued.

Thus, the living and housing conditions of 2,120 families, or 10,600 people, were improved during the year.

Your personal involvement and the participation of Azerbaijan's First Lady Mehriban Aliyeva in the opening of three settlements in 2011 is a good example of state attention to the country’s most important problem and care about refugees and IDPs. The trip you and your wife made to the Karabakh region on 24 December to attend the opening of an IDP settlement was a serious message of the world.

You made it clear to the world that the problem of refugees and IDPs is of top priority for the country and for you personally and that there will be no concessions in resolving the conflict.

Dear Mr. President!

Your words at the meeting that “I am with my family today, you are my family” were received very well not only by the IDPs but also by all the people of Azerbaijan. All the IDPs, including those from Lachin, consider that day historic.

Please be informed that 2,171 displaced persons were provided with permanent jobs and 5,000 with seasonal work in 2011. A total of 10,600 families were registered to receive targeted social assistance. Over the last eight years, 83,000 IDPs were provided with work.

In 2004-2011, the National Fund on the Support for Entrepreneurship allocated soft loans amounting to 9.6 million manats to finance investment projects of 660 IDP businesses. This includes 5.9 million manats allocated to 162 IDP entrepreneurs in 2011.

In 2011, according to the loan agreement between the World Bank and the Government of Azerbaijan, the fund for the social development of the IDPs implemented 106 various community-based micro-projects worth $11.5 million. As a result, 55,000 people benefited. Besides, 478 community-based micro-projects totaling $34.5 million were implemented in 2004-2011, benefiting 289,000 people, including 75 per cent IDPs.

Over the past eight years, 9,600 IDPs received microloans worth 4.5 million manats. These programs benefited 44,500 internally displaced persons.

According to your instruction, a new agreement has been signed with the World Bank and its execution will commence next month.

The home page of the World Bank’s web site provides a high assessment of the IDP projects implemented jointly with the Azerbaijan government.

In December 2011, the IDP monthly food allowance was raised by 10 per cent.

In 2011, the committee received 46,000 applications and 72 per cent of them were complied.

Thanks to the close cooperation among relevant services, the IDPs have a continuous supply of energy, gas and water in places of their temporary accommodation, all problems are quickly resolved.

In 2011, the total expenditure per IDP was about 715 manats ($894). This is the highest indicator compared with other zones of conflict in the world.

As a result of your permanent attention and care, the level of poverty among the IDPs has dropped from 74 to 18 per cent in the last eight years.

Mr. President!

From the first day of its activities, the Heydar Aliyev Foundation has been informing the world of the numerous problems of refugees and IDPs and resolving them.

The Internet portal Azerbaijan established at the initiative of the President of the Foundation, the Goodwill Ambassador of UNESCO and ISESCO, MP Mehriban Aliyeva has been extremely important. Besides, on the eve of the Khojali genocide anniversary photographs of the victims of the tragedy are demonstrated around the world and articles published in international media every year. Refugee and IDP kids are regularly invited to New Year celebrations.

The Justice for Khojali campaign launched at the initiative of the Vice-President of the Foundation, Leyla Aliyeva, is now well under way in more than 30 countries.

Mr. President!

Currently, various humanitarian and development projects that are considered a priority for the government are implemented in the country through 45 international and 41 local humanitarian organizations.

Despite the high economic development, humanitarian organizations still operate in Azerbaijan. And there is one reason for that – you have created transparent, free and efficient conditions for their operation. The UN High Commissioner for Refugees, Antonio Guterres, the head of the UN World Food Program, James Morris, a representative of the UN Secretary-General on the Rights of the IDPs, Walter Kalin, said during recent visits to our country: “What the President of Azerbaijan is doing for all the refugees and IDPs and for international humanitarian organizations is an example for many countries faced with similar problems. Our cooperation with the government of Azerbaijan is at a very high level.”

According to your instruction, I led an Azerbaijani delegation which attended an event organized by the UN High Commissioner for Refugees in Geneva on 7-8 December 2011. The event was joined by representatives from 155 countries and marked the 60th anniversary of the 1951 UN Convention “On the status of refugees” and the 50th anniversary the 1961 Convention “On the reduction of statelessness”. Although it was a commemorative event, the meeting participants were informed about the Armenian-Azerbaijani conflict over Nagorno-Karabakh again.

In conclusion, it would be appropriate to provide a quote from great leader Heydar Aliyev’s nationwide address made in 2003: “I am sure that the crucial issues, plans and work I haven’t had time to complete will be completed by Ilham Aliyev.

I trust him like myself and have high hopes in him.”

You have fulfilled all of the great leader’s recommendations ahead of schedule. Only one issue remains unresolved – the Armenian-Azerbaijani conflict over Nagorno-Karabakh. We are sure that you will soon resolve this problem too and wish you success in that.

According to the current state program, the number of families whose living conditions will be improved this year will be doubled as compared to 2011. On your instruction, a new program for 2012 has been prepared and will be discussed in the office of the Prime Minister in the near future.

Mr. President!

In general, your positive assessment of the work done in this area places tremendous responsibility upon us. Let me assure you that we are aware of this responsibility and will continue fulfilling your instructions in a timely manner and with high quality.

Thank you.

XXX

In remarks at the meeting, Minister of Communication and Information Technologies Ali Abbasov said:

- Dear Mr. President!

The successful socioeconomic policies carried out in the country under your leadership, as in any other area, are bearing fruit in the sector of information and communication technologies (ICT) and telecommunications. Thus, in comparison with 2010, the amount of income received by the sector in 2011 increased by about 12 per cent, more than twice the expected global average rate. According to our preliminary estimates, approximately 400 million manats were invested in the sector. The following key results were achieved in the period under review.

For the first time in the CIS, our stable telephone system has been fully put on digital rails and the international numbering standard applied throughout the country. The capacity of the stable telephone network has been increased by about 50,000 numbers and raised to a 18.6-per-cent density per 100 people.

The mobile telephone network has been expanded, all three operators have launched 3G services. As a result, the number of 3G subscribers has reached 2 million. Today, there are 110 mobile phones per 100 people, which is 40 per cent higher than the global average.

In 2011, the density of Internet users exceeded 65 per cent and of broadband Internet users 30 per cent. Our country is more than twice ahead of the global average by both indicators. By expanding competition we have reduced Internet service fees by 35 per cent.

The optic transmission networks built in the country by three companies – one public and two private – have joined district centers and about 35 per cent of villages into a single high-speed network. This is a high indicator for Central and Eastern Europe.

In order to improve the quality of broadcasting and expand the coverage of radio and television programs, 72 radio and TV transmitters of various purposes were commissioned in the country during the period under review. The coverage of digital TV has been raised to 85 per cent of the country. The private sector has also been active in the area of TV and radio broadcasts. About 10 companies are providing paid services using satellite, cable, terrestrial, IP-TV and other technologies. There are over 20 Internet, TV and radio broadcasters. In general, our country is placed between developed and developing countries in terms of the ICT development and is one of 10 countries registering rapid growth in the last seven years.

The revenue in the postal system grew by 23 per cent in the period under review. At the same time, its activity in 2011 was facilitated by state subsidies, namely the telecommunications sector. Together with the Ministry of Finance and the Central Bank, we are thinking about further reforms in the postal system.

As part of the “Electronic Government” project, a National certification center of the electronic signature has been set up, and in September 2011 we started providing electronic signature services to state bodies, citizens and businesses.

Also, we have developed the first version of the “electronic government” portal which will be open to citizens and businesses in the first half of this year. Currently, 15 state agencies are connected to the system and the number of electronic services has been increased to 60.

Work was carried out in the period under review to implement the “State Program on establishing and developing space industry in the Republic of Azerbaijan”. After the first telecommunications satellite is made, it will be transported to the Kuru spaceport in October and taken into orbit in the next three months. Research work related to the second telecommunications satellite is nearing completion and its in-orbit delivery is tentatively scheduled for 2015. The orbiting of a LEO satellite for earth observations and studies is planned for 2013. The rent a foreign satellite over this region should be completed this year. The construction of the main and backup control centers has commenced and control systems will be transferred to satellite companies for installation in August this year. Specialists have been trained to operate the satellite in the USA, France and Malaysia. This process will be continued this year.

The volume of production in the IT sector has increased by 50 per cent to reach approximately 120 million manats in the reporting period. This category of products mainly consists of radio-electronic components, optical media, computers, software modules, etc. In addition, a number of new electronic products was manufactured. As an example I can name new tablet computers AzPAD, laptops Dilmanc with a full Azerbaijani-language and partial English-language sound system which were demonstrated to you at the Bakutel-2011 exhibition, a new type of light emitting diodes made jointly with German scientists and engineers at a nanoscale laboratory.

Another direction of our activities in the region is the provision of regional countries with information services and creation of a transit capacity. The “Eurasian transnational information superhighway” project is carried out on a stage-by-stage basis in line with a special resolution of the 64th UN General Assembly and coordinated by Azerbaijan. Major telecom operators of Russia, Turkey, Azerbaijan, Kazakhstan and China, countries through which the highway will pass, have started talks on setting up an international consortium with the assistance of a consulting company. The first business forum over this project was held in Gabala in 2011.

Another project is the Europe-Middle East (EPEG-Persia Express Gateway) information highway. As part of this project, large-volume channels will be laid from Frankfurt to Oman to the countries of Asia. This is the shortest alternative route to underwater communication channels from Europe to Asia. As a transit country, Azerbaijan has been selected both as a primary and backup route for this project.

As a result of the efforts by Azerbaijan’s international operators, preparatory work was carried out in the period under review to establish two international switching centers of the first degree – Internet Exchange and the International Switching Center Telehauz, as well as a Microsoft regional information and data center. Please note that leading countries of the CIS and Central Asia are interested in managing all three projects.

Dear Mr. President!

In the transition from natural resources to a technological and innovative economy, it became necessary to create a favorable business environment to enhance the participation of innovative entrepreneurship and foreign investors.

During the period under review, as part of the “Regional Innovation Zone” project, foreign and local experts prepared a package of proposals to encourage the production and export of innovative ICT products and services.

Mr. President!

An important part in turning Azerbaijan into a regional ICT center is played by the Bakutel International Exhibition and Conference of Telecommunications and Information Technologies carried out with your participation in recent years and enjoying great respect in the Caspian region. A vivid example of that is the participation of 250 companies from 30 countries at the 2011 exhibition, the fact that 60 per cent of them represented foreign countries and 19 countries were represented with national pavilions.

This year Baku will host the World Internet Governance Forum (IGF) and the Bakutel international exhibition will be dedicated to the prospects of the global network. In this regard, the UN has already approached the government of Azerbaijan.

Dear Mr. President!

I would like to reassure you on behalf of all ICT workers that we will continue mobilizing all our efforts for a sustainable and lasting development of our country.

Thank you.

Х Х Х

The chairman of the State Social Protection Fund, Salim Muslumov, said:

- Dear Mr. President!

Dear meeting participants!

The results of the socially-oriented economic policies and flexible reforms successfully implemented by President of the Republic of Azerbaijan Ilham Aliyev have laid the groundwork for a steady growth of the living standards. On these foundations, the social protection system in our country was revamped in accordance with international standards and every citizen can now feel more prominently that the President of the Republic of Azerbaijan keeps a close watch on the solution of social issues.

Being particular important from this standpoint, 2011 will be remembered as a crucial period in the history of Azerbaijan’s pension-insurance system. Mr. President, one of the biggest social steps taken last year was the execution of your order to eliminate the differences in the amount of pensions of those who retired before and after the introduction of the new pension-insurance system. Although it was physically difficult to carry out calculations on the basis of previous pension papers in order to ensure compliance with legislative changes, it was successfully implemented in a short time. Based on the service years data stored in the Fund’s central archive, recalculation of pensions of the 1,273,000 people who retired before 1 January 2010 was completed in July-August. Cases involving a lack of complete information or other shortcomings were placed under individual control and included into the calculation.

In appointing new pensions we considered re-calculated pensions which exceeded previous ones. As a result, the pensions of 898,952 people were raised by an average of 40 per cent from 1 July. Following the increase, these retirees were paid an additional 200 million manats over six months. Thus, all pensions are calculated on the same principle now, i.e. the insurance part of each person’s pension is formed in accordance with service years. This means that annual increases of the insurance part of pensions conducted by the inflation indicators of 2011 and subsequent years will apply to all retirees.

At a time when even many developed countries which have implemented drastic reforms in the pension system have yet to complete the integration of old system participants into the new conditions, our country has completely resolved this problem.

I would like to highlight some interesting aspects of this process. As a result of this reform, the pensions of 482,000 people who had been receiving 85 manats before 1 July were raised by an average of 44 manats, or 52 per cent. The pensions of 8,550 people were raised by over 100 per cent, of 61,147 people by 80-100 per cent, and of 262,145 people by 50-80 per cent.

As a result of this reform, the amount of additional funds to be paid to pensioners in the current year will be 400 million manats, or 17 per cent of the budget of the State Social Protection Fund for 2012.

In addition, the insurance part of all pensions was raised by 7.5 per cent from 1 January 2011, the pensions of Doctors of Science was increased by 200 manats and of Doctors of Philosophy by 120 manats. This covered about 5,900 scientists.

As a result, the average pension in the country rose by 28.7 percent compared with early 2011 and amounted to 145.2 manats. The average retirement pension grew by 36.4 per cent to 160.4 manats. The ratio of the average pension to the average wage in the country was 40 per cent, while the ratio of the retirement pension was 45 per cent.

Besides, the pensions of 97 per cent of retirees exceeded the poverty line following the reform. Naturally, as a result of the raise the ratio of pension expenditure to the GDP also increased. This figure is projected at 5.34 per cent this year.

For comparison, please note that this indicator in 2003 was 3.9 per cent. Considering that the number of people aged over 60 in 2003-2011 rose by 4 per cent to 810,000, pension costs have risen 7.3 times. In other words, if we consider that the proportion of persons aged 60 years is 8.9 per cent, we can see that for every per cent of this share there is a 0.59-per-cent share of pension expenditure in the GDP. This shows that the principle of allocation of pensions has been ensured at least at 0.5 per cent of the GDP for every per cent of the elderly population.

This reaffirms that the government of Azerbaijan is successfully resolving one of the most important issues on the agenda of world governments and a major challenge of the new century – to preserve the ultimate balance between the growing volume of funds allocated by the state for the older generation whose share in the population is gradually growing and the ever-shrinking economic possibilities.

It should be emphasized that this process has been realized through continued growth achieved as a result of macroeconomic stability and dynamic economic development, including the revenues of the pension-insurance system.
During 2011, when the impact of the global financial recession continued, the indicators of the pension systems of many countries decreased. According to preliminary data, the revenue of the State Social Protection Fund grew by 354 million manats, or 20.1 per cent, in comparison with the previous year to reach 2.120 billion manats.

Last year, the revenue from social insurance contributions increased by 10.8 per cent to 1.230 billion manats, while 58.6 per cent of social insurance contributions were made by extra-budgetary institutions. The amount of their social insurance contributions grew by 12.5 per cent, or by 80 million manats, as compared to 2010. Measures were taken to enhance the involvement of individuals engaged in entrepreneurial activities and land owners: contributions from the former grew by 14 per cent and from the latter by 13 per cent.

During the year, state budget transfers were at the projected volume, i.e. 886 million manats.

The volume of revenue has enabled the Fund to finance its expenditure on time.

In 2011, the Fund’s expenditure amounted to 2.118 billion manats. The financing of pensions and benefits took 2.066 billion manats, or 362 million manats more than the previous year. Of this amount, 2,011 billion manats was spent on pensions and 55 million manats on benefits.

According to preliminary data, by the end of 2011 the number of labor pensioners dropped in comparison with the start of the year by 14,200 to 1.278 million people. The number of pensioners by age fell by 18,300 people, of people receiving benefits for the loss of breadwinner by 3,200, while the number of disability pensioners rose by 7,300 people.

As a result of the measures taken, the coverage of individual accountability in the social insurance system was expanded in 2011. Compared with early 2011, the number of insured persons who have personal accounts rose by 166,300. In respect of employees, this indicator rose by 114,633 people. Thus the number of individually registered persons reached 1,967,000.

Mr. President, the state program on the development of the pension-insurance system for 2009-2015 clearly defines the Fund’s priorities.

Whereas in 2011 the main task was to organize a unified pension system for all retirees, the priority in 2012 will be automation of the process. The main problem in this regard was associated with the evaluation of pension rights acquired before 2006. But recent reforms have enabled, through simple calculation, to adapt these rights to new conditions, i.e. to determine the pension capital as of that period, incorporate it into individual accounts and cover the entire period of their employment. In parallel with the transfer into the individual accounts of social insurance payments of 1,967,000 registered people for 2006-2010, we are also completing the process of establishing, according to service years, the pension capital accumulated by these persons prior to 2006.

With the aim of organizing research on mid- and long-term development of the system based on the analysis of the pension-insurance system, collaborative measures were continued in 2011 with the World Bank and the UN Development Program. These measures, along with the study of indicators of macroeconomic activity, demographics and the system proper, also covered the factors associated with the use of the real accumulation component in the pension-insurance system. The European Commission has approved a twinning project called “Support for the State Social Protection Fund of the Republic of Azerbaijan in the application of the accumulation component to the pension system” which the Fund had submitted as part of the European partnership and cooperation facility to prepare legislation relevant to European standards.

The results of the said studies show that thanks to proper and timely preventive solutions towards regulating retirement age in Azerbaijan, the total number of pensioners will remain stable until 2020, which is one of the key enabling conditions for ensuring the stability of the financial system and continued reform. Many developed countries started to address this problem after the financial crisis of 2008-2010, which has brought about serious difficulties.

In implementing your order dated 23 May 2011 “On certain measures in the field of providing electronic government services”, the State Social Protection Fund improved work to provide the population with interactive electronic services. This activity was highlighted during monitoring and contests conducted by various organizations and experts.

Considering the advantages of Azerbaijan’s pension-insurance system, the International Social Security Association (BSTA) opened the Coordination Center for Eurasia in Baku in June 2011.

The opening of the coordination center of such a prestigious organization as the BSTA in Azerbaijan is a good indicator of the success and international authority which have been achieved thanks to the rapid socioeconomic reforms implemented by President Ilham Aliyev.

Mr. President, the achieved results and a qualified implementation of the measures envisaged under the state program show that the reform of the country’s pension-insurance system will be successfully continued in the current year and all your instructions on the raising and timely financing of pensions will be exactly fulfilled.

Thank you!

Closing remarks by President of Azerbaijan Ilham Aliyev

- I am confident that 2011 will go down in history as a successful year. All our socioeconomic indicators give reason to say so. I want to say again that all socioeconomic issues were resolved successfully and on time in 2011.

Year 2012 has begun. In order to complete 2012 as successfully, we must work hard. All our programs must be implemented on time. All our work is carried out systematically, according to programs. First of all, we have identified strategic directions and identified them correctly. There are specific mechanisms to meet these strategic objectives.

Financial resources, implementation mechanisms and, of course, professionalism – these factors will enable us to solve any problem.

I am sure that all the tasks will be successfully fulfilled in 2012. The state budget for 2012 is bigger than for 2011. Even more funding is envisaged. Of course, these funds will be channeled into the development and diversification of our economy. At the same time, this will enable us to implement all social programs and social infrastructure projects. State budget expenditure for 2012 is approximately $22 billion. This is the highest indicator in our history. A consolidated budget is about $25 billion. Of course, thanks to this budget all our social programs, welfare payments and social infrastructure projects will be successfully implemented. We must ensure execution of the state budget. I want to mention again, as I did in my opening remarks – this is a novelty for us and that main reason for that is our growing economic and financial capacity. I want all our tasks to be fulfilled soon. We are doing all this work fast. My instruction to all members of the cabinet and government agencies is to complete this work promptly and with high quality. We already have a great industrial potential and big companies.

Foreign companies are also involved in our investment projects and show an interest in them. We welcome that. I think we have all the opportunities for executing the investment part of the budget successfully.

We must make sure that the budget is fully executed.

At the same time, fiscal discipline must be at an even higher level. Budget must grow in parallel with responsibility.

There must be complete transparency. The transparency of investment to be made by the state must be provided in full.

The government will submit the investment program for 2012 to me in the near future. The discussion of this program is conducted continuously. I repeat that the state programs on the socioeconomic development of districts we adopted in 2004 and 2009 defined our strategic directions. And the investment program is based on this strategic choice. It is true that life goes on, new questions arise, new projects are launched. Naturally, we constantly make adjustments. But general directions of investment expenditure are clear.

I can say that all areas are of priority importance for us. But our top priority, of course, must be the creation of a socially-oriented infrastructure.

The State Investment Program will be quite extensive. It will have a portfolio of 5.7 billion manats. These funds can do a great job. This is only investment to be made by the state.

The private sector is also actively involved. I think that in 2012 the country's economy must receive at least at much investment as in 2011.

In 2012 we will continue to implement major infrastructure projects. Among them I want to highlight drinking water and sanitation projects. In previous years a lot was done to improve electricity supply, create generating capacities, improve gasification. Of course, this work continues and I'll talk about that. But projects related to drinking water and sanitation have been somewhat overshadowed. We should focus more on this area now as things are going better. In this area we are applying modern management systems and techniques that are widely used in the world. In Baku and other regions we are already starting to implement water and sanitation projects or they are in the pipeline.

Last year I set the task of implementing the main projects until 2013. If we can achieve that, all our district centers and cities will have stable supplies of clean drinking water and the sewer system which never existed before will operate to world standards by the end of 2013. I am pleased with the work done in this area in 2011. The funds are available, they will be envisaged in the State Investment Program. So some of the work will be done in 2012.

At the same time, irrigation projects are very important. They play an important part in developing agriculture and eliminating the unemployment. Large-scale land reclamation projects have been implemented. Some have been ongoing for several years. The Takhtakorpu and Shamkirchay projects require large resources. In 2012, these projects will be partly implemented through the State Oil Fund and partly financed from the state budget. Work is progressing on schedule. I always keep this issue in focus. In 2012, the implementation of these two major projects will be continued.

At the same time, we must allocate funds for other land reclamation projects. These two are large-scale projects. Tens of thousands of hectares of new farmland will be made available. Along with this, we should pay attention to smaller reclamation projects.

In 2012, we will be implementing gasification projects. Much of this work has already been done. But we have set the task of completing all technically and geographically feasible projects, the projects covering all districts by the end of 2013. If we achieve that – and I am sure we will, I simply want this done as soon as possible – then 95 per cent of our residential settlements will be provided with gas.

This work is now under way in cities and district centers. We have already started this work in villages. It must be stressed that we can achieve this goal before the end of 2013.

We have ample reserves of gas. We export gas to world markets and will increase our exports further. Therefore, we must and we will provide it to the fullest extent, i.e. 95 per cent, which is our maximum due to our geography, is possible.

Projects related to electricity hold a special place among investment projects. Last year, we laid the foundation of the Northern-2 power station. This plant is to be commissioned before the end of 2013. Its capacity will be 400 megawatts.

Although we generate more energy than we can consume now, we must always look ahead. Considering the further successful development of our country, the work we are doing and the projects planned, we need to know how much more funds should be allocated for power generation. The Minister of Economic Development has said here that the gross domestic product per capita is $7,000 now. We set the goal of doubling the GDP in the 2013-2023. How can we double it? Of course, by launching new enterprises. Economic growth will be achieved due to the real sector. Under such circumstances, the demand for electricity will further increase. If we add to this our export capacity – we currently export electricity to neighboring countries – then additional funds must and will be invested in power generation.

This year we expect to commission the large Southern power station. It will have a capacity of 780 megawatts and is built using modern technologies. Also this year we will open a 25-megawatt hydro power station in Fizuli District. In parallel with generating capacities, we must invest in distribution lines. In general, there are no problems with electricity in the country now. But outages sometimes occur in districts, and the main reason is the disrepair of power lines. Of course, we have focused on creating generating capacities and have fulfilled this task. Now – especially this year and beyond – we must invest in distribution lines. The entire work should be carried out at the level of modern standards.

In this connection I want to touch upon the following issue. A few years ago, the most serious issue in this area was the default of payment. We could not collect fees for electricity and gas. On the one hand, it happened due to an opaque and corrupt system. On the other, the process of installation of meters was at a low level. In some cases, the installation of meters was deliberately delayed for corruption purposes because it was possible to do anything without the meters.

Now the installation of meters is practically over. Modern smart-card meters are being installed, contacts between supervisors and the public have been eliminated. No-one should knock on the door and take a bribe. This will never be the case.

Thus the losses are also reducing. If we make the necessary investment in distribution networks, especially in the districts, the losses will decline. The collection of payments for electricity in Baku exceeds 90 per cent now. This figure is almost the same throughout the country. Gas payments are also at a high level. Earlier, the rate of collection of payments was 20, 30 and 40 per cent, perhaps even none at all. So this issue has also been resolved and, as I said, we must take this into account in the investment program.

Today, the Minister provided information about the work done in the telecommunications sector. This sector is also developing successfully in Azerbaijan. This year we will launch Azerbaijan’s first telecommunications satellite. It will be a historic event. Azerbaijan is creating its own space industry. Azerbaijan is joining the countries that have a space industry. This is the result of our forward-looking policy. I think that all available progressive and advanced technologies must be brought to Azerbaijan. We bring and introduce them here and train qualified personnel. This will elevate both our political clout and economic strength. The telecom sector is a concentration of various factors that are important for the development of any country. It means innovation, knowledge and expertise. At the same time, it is a major business area. So we will receive additional revenue for the country's economic development. This is an area that facilitates scientific and technical progress. In the future, the ICT sector must and will become a leading sector in the world. Those moving forward in this area will enjoy authority. The present-day world is different from what it was 10, 20 years ago.

Technology, information security, security against cyber attacks have come to the fore, and the future balance of power will be determined in this area. So we must and we do pay a lot of attention to this area. This policy didn’t begin yesterday, it began several years ago. I am very pleased that according to the estimates of international telecommunications institutions, Azerbaijan is a CIS leader. We have free Internet access. I can say that not every country has free Internet access. The number of Internet users is growing, which I think is a very positive development. Our children and youth are working on the computer. This is the future. It is the freedom of information and speech.

Azerbaijan has a democratic society and we must further strengthen the democratic foundations. Where there is free Internet access, there is freedom of speech. This is natural. So this area must be a leader for reasons for security, development, knowledge, business, and for shaping up future generations. This must be the case. Thanks to the situation emerging as a result of economic diversification for the future development of our country, we are in one of the leading places in this regard. Now we must be among developed countries of the region and in the future on a global scale. I am very happy that the traditional Bakutel exhibition conducted in our country annually presents itself as a large and prestigious show. The number of visitors is growing, companies are showing interest. When those interested in making investment see that the Azerbaijani government pays attention to this area, creates a space industry and launches the first satellite, they show great interest. I repeat that this is the first satellite, but not the last one. It will be followed by a second and third. So we will create a powerful industry. We have effective cooperation with international organizations in this field. The world’s leading ICT companies treat Azerbaijan with great interest and respect.

In 2012, we must further strengthen food security measures. The work being done in this field is positive. This year we have achieved major growth in agriculture. Farmland and yielding capacity are expanding. In particular, productivity in grain growing is increasing, which is very positive.

I am confident that as a result of the measures taken, the creation of large farms and their support on the part of the state, land reclamation activities, provision of farmers with fuel and fertilizer on easy terms, agricultural leasing activities, etc., we will secure long-term and sustainable development in this area.

Several years ago I set the task of providing ourselves with staple foods. A lot has been done in this direction. The vast majority of merchandise sold in our points of sale now, i.e. food products, are made in Azerbaijan. If we look back, we see that there were no local products. Now our products are not inferior to foreign ones – in quality, packaging, appearance or taste. Our products, especially fruits and vegetables, are natural. They are “organic” in the world. Everyone coming to Baku and Azerbaijan is amazed with how delicious and natural our fruits and vegetables are.

This is our great wealth. We must take care of it. We must ensure agricultural development, in particular the development of the fruit and vegetable sector, without compromising quality. Now there are modern technologies.

The Minister of Economic Development has recently informed me that they are introduced in Azerbaijan too. In the field of horticulture, greenhouses are built in accordance with modern technologies. These issues are dealt with by the Ministry of Agriculture. Of course, this will increase crop production. But at the same time, we must pay constant attention to quality and, most importantly, to the taste of fruits and vegetables.

So the task set some time ago is being fulfilled. In 2011, major resources were allocated by the state through the National Fund on the Support for Entrepreneurship. In 2012, we will reach a record level: entrepreneurs will receive 200 million manats in concessional loans. I am very pleased that entrepreneurs are provided with financial support and good advice, are offered various business plans depending on their financial possibilities. We treat entrepreneurs with great attention. I don’t know of another country where there is such an approach.

Farmers are receiving fuel and fertilizer on easy terms and hardware on agricultural leasing.

Agricultural service enterprises have been established. Pedigree cattle is brought and provided to farmers. In addition, concessional loans are provided. This year 200 million manats in loans will be granted. Business plans and investment projects are prepared – business plans for 1 hectare, 5 hectares, 25 hectares. So the entrepreneur only needs to do this work. Late last year we laid the foundation of a nitrogen fertilizer plant. We will fully provide ourselves with nitrogen fertilizer and export it. This fertilizer will also be sold at low prices. We have ample reserves of gas. Of course, we will supply gas to this plant on concessional terms in order to increase profitability. So I repeat that a lot has been done to provide for ourselves. This work will be continued this year, next year and in the future. We must think about the future now.

We can provide ourselves with many items or will be able to do so this year or next year.

Our poultry production was at a low level. Now, as a result of the measures taken and the new poultry farms to be built in 2012 and 2013, we will fully provide ourselves with poultry. We are building dairy farms and canneries, developing horticulture and crop production. In crop production we will probably depend on imports for some time. But as far other items are concerned, we can either provide ourselves already or will do so in one to two years. The question arises: what next? Now we are investing heavily in agricultural development, creating large farms, plants and factories. There is a class of entrepreneurs in Azerbaijan. They spend part of their earnings on new enterprises. So in four to five years we will need additional markets. Now we have traditional markets where Azerbaijani products are in demand. But we must look ahead. Our potential is likely to be several times higher than our current exports. So I have given the Ministry of Economic Development relevant instructions because they have broad connections, we arrange business forums with various countries.

So there is a great interest, our external relations are expanding and we should access foreign markets even more assertively. We should help our businesses. This topic should always be on the agenda in talks with our foreign political partners. We will need foreign markets. We should access traditional and new markets even more. Azerbaijan’s processing industry is producing excellent products that are exported to Europe and America. The number of such products will grow and we must see what further steps can be taken to access new markets – I am not talking about finding new markets, it is not too difficult to find them.

At the end of last year, we adopted the state program on the development of viticulture. This also demonstrates our intent. Viticulture has great traditions in Azerbaijan. On the initiative of great leader Heydar Aliyev, large vineyards were established in Azerbaijan in the 1970s and early 1980s. Azerbaijan used to produce two million tons of grapes.

Azerbaijan was the biggest producer in the USSR. But then, as a result of the anti-alcohol campaign, vineyards were destroyed only in Azerbaijan for some reason. Such barbarism didn’t happen in Ukraine, Georgia, Armenia and Moldova. It was a manifestation of the then Soviet leadership’s negative attitude towards Azerbaijan. Both Soviet leaders and their local sycophants sought to destroy vineyards as soon as possible and report: we are carrying out your instructions. Their anti-national actions caused the destruction of our vineyards. Azerbaijan used to give two million tons of grapes. Now we produce 130,000 tons. The same land, the same conditions, the same climate. So this is possible. Therefore, the objective of the state program on the development of viticulture is to pay more attention to this area. However, there are other plants in place of the vineyards now, so we need to consider that. But I think there is a great potential and markets. State support for this area, of course, should be even greater and long-term. We all know that it takes a lot of time to set up vineyards and grow grapes. In any case, we have started this work and it will be continued.

We have resolved most issues regarding storage of products. A sufficient number of refrigerated warehouses have been built. I am told that they will be built this year too. Granaries are also built. We are creating these conditions to store products and maintain prices at a normal level.

I am very pleased that there were no price increases on the eve of the holidays – the New Year and, before that, on Eid al-Adha. In some cases prices even went down. This is also a good result, a good indicator that there is proper control over the market. We are fighting those engaged in speculation, and this struggle must be constant. So these developments, the situation on the eve of the holidays show that this struggle is possible. All relevant agencies should work in good faith, prevent artificial price increases and cases when some people become unjustifiably richer at the expense of others. We are raising salaries, wages and pensions. Our major investment projects perforce lead to higher prices. We can’t invest $20 billion and expect this not to affect inflation! The fact that we keep inflation at 7.9 per cent is already a great achievement. We can’t afford raising salaries and pensions at the expense of the state budget and having someone take advantage of that to immediately raise prices. We must and we will fight against such phenomena.

Those who oppose our policies or wish to receive unsubstantiated earnings will be punished severely. I repeat that the latest developments in this area have been positive. I support that and will keep this matter in focus.

Last year we adopted a program on the development of Baku and its suburban settlements. There was a great need for such a program. A few years ago we adopted a similar program and some work was carried out. This time, the program is more specific and short-term – it covers 2011-2013. Considering that we started the program in mid-2011, it means that we need to address all the issues in the suburban settlements in two and a half years. It is a very challenging task. I know it is difficult. But I think we can solve these issues in two and a half years. If I didn’t think so, I would have said: 2011-2015. No, we can do it. Judging by the way the work has been started, I think we should achieve our goal. The entire infrastructure in the settlements must be and is upgraded. We are now focusing on power lines, gas supply, sanitation, drinking water, roads. The social infrastructure – schools, medical centers, centers of culture – should be completely renovated in all the settlements. I have personally visited many settlements since we started the program – in general, I regularly visit the Baku suburbs to examine the situation and give instructions. After a while I will make another visit to see how things are going. Generally, I review the progress of work in every region. In some cases, it is impossible to visit the districts every day, but the suburban settlements of Baku can be visited every day. I will make visits once a week. I must be pleased with the work done. And not just me, but the people. And if the people are pleased, so am I. We have the resources to achieve these goals. They are available and will be envisaged in the investment program for 2012.

The work should be done with high quality and on schedule.

This work has been entrusted to the Mayor’s Office of Baku and the Ministry of Economic Development. They work together and exercise control. But I can say that along with positive aspects, there are negative facts. A lot has been done over these months. Sometimes, however, the work was done in haste and at the expense of quality.

There must be multistage control. I personally will give final clearance. So let me say this in advance: all the agencies dealing with this issue and the contractors should take responsibility for the work. If a company works poorly, it will remedy the deficiencies at its own expense, if it is a state-owned organization, it will be punished severely. If we complete this program before the end of 2013, then, I want to repeat, we will resolve all the issues of social infrastructure in the settlements. In addition, instructions have been issued to create jobs in suburban settlements. The allocation of funds through the National Fund on the Support for Entrepreneurship started in 2011. Earlier, the resources allocated by the Fund were channeled only into the districts. In 2011, the suburban settlements of Baku received 25 per cent of the funds, while in 2012 the figure will constitute 30-40 per cent.

In 2012, we will continue establishing the social infrastructure both in Baku and the districts – schools, hospitals and Olympic centers will be built. Now we are building 10 Olympic complexes. Preparations are underway to build three more complexes. Kindergartens must be renovated and their number increased. Appropriate instructions have been given. I think we achieved major progress in this regard in 2012 – conditions and provision have improved. The Finance Minister has provided several suggestions regarding provision. I support them. Based on these proposals we should establish a new modern system, in particular for feeding the children. We must use international experience. If we can implement these suggestions, then every child and every parent will see very significant and positive changes in this field.

In my opening remarks I expressed my thoughts on army construction. I want to note that in 2012 we will be addressing logistical issues and the repair of buildings in military units. I have set the task of repairing the buildings in all our military units, perhaps building new ones. We must create new military bases and camps. Those serving in the army must serve in good conditions. Both living and working conditions in the army must be good. They serve in difficult and harsh conditions, often in cold and heat. All the military units, primarily those located at the contact line, should be renovated in 2012-2013, the accommodation and service infrastructure rebuilt. Specific measures are taken to improve the social status of servicemen. First sergeants and officers with a good service record of 20 years will be provided with flats by the state.

A lot is done to improve the living conditions of the IDPs. Deputy Prime Minister Ali Hasanov has also provided substantial information. Indeed, a lot is done. Even more will be done. We celebrated the opening of new settlements last year, we will celebrate more this year. I think we must spend at least twice as much as we plan on these issues in the current year. At least twice, maybe even three times. It is a serious and important issue. Ali Hasanov said here that poverty among the IDPs has dropped from 70 to 18 per cent. This is a great result. But this figure in the country is 7.6 per cent, i.e. the rate of poverty among the IDPs is twice as high.

We are improving the situation, but should improve it even more. Therefore, the number of IDP settlements should be increased. As for the hostels, the program also stipulates that. We need to resettle the IDPs from Finnish homes and hostels to good apartments. This requires money. This is why I am saying that we are allocating major funds. I don’t want to name exact figures now – this issue is under consideration in the government. It should be at least twice as high as we plan.

In 2011, we also took environmental measures and planted seven million trees. I am very glad that this area is in focus even after the Year of the Environment. And that’s the way it should be. Prepare specific proposals for 2012! There probably are such proposals, we will consider them and allocate funds. Environmental measures are important for every citizen.

In 2011, modular water treatment plants were commissioned in 32 villages and 50,000 more people began to drink clean water last year alone. They used to consume untreated water before. This program must be continued in 2012.

The process of cleaning up polluted areas is ongoing. The Balakhani landfill has been turned into a park. This was probably the most deplorable place in our country from the environmental standpoint, it was in a catastrophic plight.

Those who saw the Balakhani landfill were appalled. City residents could see smoke billowing from there and enveloping the entire Baku. Now there is a park there, a landfill has been created on an area of 100 hectares, trees planted and modern systems established. All vehicles delivering waste there are disinfected. This is a modern approach. At the same time, the construction of a waste disposal plant is well under way.

The Azerbaijani government has allocated major funds. I do hope that the plant will be opened this year. This will be our biggest contribution to the environmental situation.

Industrialization is ongoing, industrial parks are established. The Sumgayit Industrial Park is expanding its activities.

Besides, very important decisions were made last year. An industrial park will be set up in Balakhani, a chemical park in Sumgayit, jobs will be created. The goods produced in the chemical complex will be used by private organizations and companies. Areas have been allocated, communications and infrastructure created. Entrepreneurs simply need to come and work there, we will help them.

This year we will also create additional opportunities for industrialization. A new aluminum plant will be commissioned in Ganja. This is a great event. It is a major step for the development of the aluminum industry. But this is the first step. We should pay more attention to metallurgy. This area also has great opportunities. If we consider that we have enough metal, it should be used rationally. Products are delivered from abroad now. We have ore deposits in Dashkasan.

Creation of a powerful steel industry is on our agenda and we will do that.

It was mentioned here that a cement plant based on modern technologies is under construction. It will be commissioned by a Swiss company this year. Another cement plant is also being built. So we must make sure that we can fully provide ourselves with cement in the next three to four years. Of course, our needs are growing, but there are opportunities for that.

We need to encourage private investors, create favorable conditions for them to invest in this area. The state should provide assistance too. We must fully provide ourselves with building materials. Late last year I attended the opening of several plants. Things in this area are going well.

The fight against corruption and bribery must be continued with utmost severity. In 2011 we did a lot in this regard. But we should do even more in 2012. This struggle should never stop, it should be waged permanently. This struggle has good results, but they can be better still. We will apply punishments, administrative and institutional measures. We will conduct system transformation. According to my order, all ministries and government agencies have submitted proposals on the activities of the “Electronic government”, transparency and efficiency of permitting issues in business and e-services.

There is international experience, good practices, the experience of the European Union. We must always learn from good experience.

I am not saying that we should apply all their innovations. It would be impossible. We can never apply the initiatives that sometimes contradict our mentality. But we must apply positive and useful practices, especially in this area.

Finally, I want to address the last question. The Summer Olympic Games will take place in 2012. We are seriously preparing for the games. In 2011 we won a sufficient number of licenses. We have won victories in world and European championships, so we have high hopes. In 2012 we will build 10 Olympic complexes. The construction of the great Olympic stadium will enter into an active phase. A large 65,000-seat Olympic stadium is under construction. The national stadium named after Tofig Bahramov is undergoing repairs now in preparation for the upcoming World Championship among girls due in Baku. Other sports facilities are under construction. We are building a large gymnastics complex, the Baku Sports and Concert Complex “Crystal”. So, as always, this area has received considerable attention. In 2012, there will be events in the country, preparations for the Olympic Games and the Olympic Games proper. I therefore think that we should declare 2012 the Year of Sports. This is my opinion on the matter, so prepare an appropriate order for signing today.

Thus, 2012 is beginning. There is a lot of work in the offing in 2012. I expect everyone to be active, dedicated, conscientious and committed to victories. Thank you.