Ilham Aliyev chaired a meeting of the Cabinet of Ministers

President Ilham Aliyev has chaired a meeting of the Cabinet of Ministers on the results of socioeconomic development in the first six months of 2012 and future objectives.

The President made opening remarks at the meeting.

Opening remarks by President of the Republic of Azerbaijan Ilham Aliyev

- This meeting of the Cabinet of Ministers is to discuss the socioeconomic results of the first six months of 2012. Such meetings are traditional. It was indicated at the previous meeting on the results of the first quarter of the year that 2012 would be a very successful year for our economy. The first months of the year were very positive economically, giving us the opportunity to assess 2012 in general as yet another successful year for the Azerbaijani economy.

The results of the first six months confirm this yet again. Because our economy has successfully developed and all our goals have been met in the six months. The GDP has increased by 1.5 per cent. It is not particularly high in comparison with previous periods, but as our economy grows, each per cent has a great value for us. I can also say that each per cent of economic growth is equal to about $700 million. So the 1.5-per cent economic growth suggests that we have produced $1 billion worth of more goods than in the same period of last year.

But we are particularly pleased with the development of our non-oil economy. We can say that this is the main direction of our economic policies. Our non-oil economy has grown by 11.3 per cent in six months. I believe this is the highest indicator worldwide. The overall economic growth of 1.5 per cent is explained by a certain decline in oil production. If we consider that the oil sector accounts for a major share of our economy, this decline inevitably affects overall indicators. But we will keep the focus on non-oil sector development in the years ahead. The first six months of the year are the logical result of the reform ongoing in Azerbaijan. Total industrial output has dropped 3 per cent, which is also due to the decline in oil production. But the development of the non-oil industry is at the level of 8.3 per cent. And this is the result of the industrialization program implemented in recent years. Various large and small enterprises are commissioned in different parts of Azerbaijan and in Baku, new jobs are created. So the industrialization program is well under way. This issue will always be in the spotlight in the coming years. The launch of new industrial facilities this year and in the years ahead will further bolster the non-oil sector.

In the first three months the investment was $4.3 billion. Investment figures for six months are still being calculated, which is a positive sign. As compared to last year, investment in our economy has increased by 30 per cent. If we keep working at this pace until the end of the year, and I think we should work even faster, we will reach the level of investment of $18-19 billion. This is a large figure for Azerbaijan, a country with a relatively small population. Considering the fact that at least $10 billion is invested every year, all infrastructure and social issues on our agenda will be resolved in the coming years.

The macroeconomic situation is very positive and stable. Inflation is only 2.2 per cent. Attention is permanently paid to the consumer market and prices. People’s incomes have increased by 14.2 per cent. So there is a difference of 12 per cent between the inflation and people’s incomes, which shows how fast real incomes are growing.

Agriculture has developed by 10.4 per cent in six months. I believe this is also a record figure in recent years. We had expected this figure, were aware of it. Because the attention paid to agriculture in the recent period, the investment and reforms have increased productivity. The new areas under crop that have been commissioned and will be commissioned in the coming years will certainly boost agricultural development.

So these are our key economic indicators. Of course, we will discuss this in more detail today, information will be provided. But six months of the year suggest that 2012 will also be quite successful for the national economy.

Unfortunately, we experienced another natural disaster in the past quarter. There has been a powerful earthquake in the north-western region, thousands of homes became uninhabitable, schools, medical institutions, social infrastructure were destroyed. But as a result of the prompt action taken, the consequences of this powerful earthquake are being eliminated. Additional funds were allocated from the contingency fund and the state budget. I told residents during a visit to the affected region that even better homes would be built for them in a short time, the entire social infrastructure would be replaced and rebuilt, and their living conditions would actually improve.

This is not the first time we have encountered a natural disaster. Two years ago there were major mudslides. We passed that ordeal with dignity. Thousands of homes were built, compensations paid, and this process is still ongoing. We also approve of the allocation of extra funds. A similar approach was applied to the earthquake-affected region. Because we primarily need to create normal and comfortable living conditions for Azerbaijani citizens and all the houses will be built at government’s expense.

I expressed my view on this issue in the aftermath of the mudslide and want to repeat now: governments of developed countries don’t take on this responsibility because all private properties there are insured. Every citizen buys an insurance policy and, in the event of a calamity, receives compensation from the insurance company. Our situation is different, of course. But we should try to speed up the transition to the insurance system. So far this is impossible. The government has taken on this responsibility.

I can also note that it is a very rare occasion worldwide for a government to assume the financial and technical burden in full, i.e. by 100 per cent. But this is a key element of our policy. Citizens of Azerbaijan are at the heart of our policies. I am sure that the new homes, schools and social infrastructure will be of much better quality and more comfortable than before.

The first year of the State Program on the socioeconomic development of Baku and its suburban settlements ended in the past quarter. A broad conference was held. The work done in the first year was analyzed and future goals identified. In general, extensive creative and landscaping work was carried out in Baku and its suburban settlements in one year. We will see the logical and real results of this work in the near future. Dozens of schools are built and renovated, kindergartens, medical facilities are built, roads are laid, the process of gasification is under way. Water and sanitation projects are implemented. There had never been a sewage system in the suburban settlements of Baku. Roads within settlements are rebuilt. In other words, we have a comprehensive approach to the issue. At the same time, the issue of job creation in the suburban settlements is being addressed. The National Fund on Entrepreneurship Support has started giving loans to the business people working in suburban settlements. So I am sure that the Second State Program on the development of Baku and its suburban settlements will be successfully implemented by the end of next year.

At the same time, the program on the development of our districts in ongoing. A total of 46,000 jobs were created in the past period, i.e. in six months of the year, including 37,000 permanent. This process is ongoing, which is natural.

Because new enterprises, factories and plants are put into operation in Azerbaijan almost every week, the employment rate is growing. There should also be more rigorous control over the labor market. Relevant instructions have been given in this regard. Unfortunately, Azerbaijan has yet to apply a precise system to this sphere. There are cases of unofficial employment, of foreign migrants coming to our country and working illegally, and these trends are increasing. And this is also natural. Because Europe has been stricken by an economic and financial downturn for the past four years, while Azerbaijan is registering unprecedented growth. Of course, the number of those coming here to work is increasing. The State Migration Service is taking all the measures necessary. These measures should be even more effective. We first need to provide citizens of Azerbaijan with jobs, to fully resolve these issues. True, the level of unemployment in Azerbaijan is low – according to last year’s results it was 5.4 per cent. But it is still there and in some cases these figures don’t reflect the reality. It is no secret that there are people working in certain jobs, in construction without registration but receiving salaries. Such cases are not registered anywhere. So they do exist, relevant instructions have been handed out so that we could create complete transparency, ensure greater revenue to the budget, including the retirement fund. Therefore, there should be law and order in this sphere, once and for all.

The creative and landscaping work ongoing in the districts has already become traditional. I regularly visit the districts and am very delighted to see change. I can say that districts have entered a sound competition with each other. District authorities, the public and, of course, all residents want to see their district beautiful, developed and landscaped. We are strengthening these trends as the bulk of the funds allocated from the President’s Contingency Fund is channeled into the development of districts.

Social issues have always been in the spotlight and they still are. One of the most memorable events this year has been the compensations paid for lost Soviet deposits. I want to reiterate that the government of Azerbaijan does not bear any legal or moral responsibility for those deposits. Azerbaijan is an independent state. As an independent state Azerbaijan is fulfilling all of its commitments.

Considering the fact that there were 2,400,000 depositors in the Soviet time and that these people were waiting for compensation, this decision was made in order to further reinforce the social nature of our policy and the principles of social justice. I can say that the most effective, fair and beneficial mechanism among all post-Soviet countries has been used in Azerbaijan. Both in terms of the timing – all compensations will be paid in the course of two years – and in terms of the amount to be paid. If we compare the Soviet ruble not to the manat but to the dollar, the compensations are paid in a one-to-five or one-to-six ratio, which is the highest indicator for all post-Soviet republics. The process has now started. Thousands, tens of thousands of people have already applied. Thousands have received their deposits and this process will last until the end of 2013.

So this initiative shows our intent again. Social issues should always be in the spotlight. Market economy principles are certainly fundamental for us. But they don’t always overlap with social justice. But both these factors are in the focus in Azerbaijan and the measures taken are a logical result of that. The program of targeted social assistance is ongoing, the amount paid to each family is at the level of 109 manats and 143,000 families are receiving social assistance. This factor also strengthens our social policies.

Our international standing has also strengthened in the past six months. Our activities both in the bilateral format and in international organizations have been very successful. Our bilateral relations and contacts have strengthened, the number of our partners is growing, the scope of our diplomacy is expanding. We are going beyond traditional regional partnerships to access new regions and continents, are forging close cooperation with African and Latin American countries. This corresponds to the new status of our country, reflects our political image and is an indicator of our foreign political agenda. We must diversify our diplomacy. Our relations with traditional partners are certainly maintained and stepped up. We are making new friends. We have joined the Non-Aligned Movement. This was also a judicious and correct step.

Shortly after joining the Non-Aligned Movement we began to work hard and soon earned great respect. Our relations with Latin American countries are strengthening, which is confirmed by reciprocal visits. There are excellent conditions for promoting our political and economic interests in Latin America. Azerbaijani investments are in demand there and we are carefully examining this issue. We have started work with the African continent. So our foreign political agenda is enhancing and I want to repeat that this is a requirement of the day. Also, the foreign policy of a developing Azerbaijan should be even more diverse.

In May this year, Azerbaijan presided over the UN Security Council for the first time in its history. This is a historic event. Azerbaijan presided over the world’s top organization for one month and this period will go down in our history.

Azerbaijan’s growing authority, image, opportunities and power have brought about this reality. As a new member of the Security Council, Azerbaijan displays a principled stance on all issues and, as I stated shortly after we became a member of this authoritative organization, Azerbaijan defends justice and international law in the Security Council. It is no coincidence that Azerbaijan is engaged in an active and extensive debate on issues of global importance, we are in permanent contact with the world’s leading countries and our principled stance is duly appreciated.

There is a large number of countries that are friends with Azerbaijan. There is a large number of countries supporting and approving our policies. The fact that 155 countries supported us in the election to the UN Security Council is clear evidence of that. But it is naturally impossible to please everyone. Nor has such a task ever been set. There are forces and circles that don’t like us. But even they treat Azerbaijan with respect. We have earned this respect with our principled stance. Our words and deeds have always been the same.

So there is more work in store for us in the coming months and years relating to our foreign policies, our relations will further expand. I reiterate that our principled stance on the Armenian-Azerbaijani conflict over Nagorno-Karabakh is based on justice and international law. Azerbaijan’s territorial integrity has never been and never will be negotiable.

Azerbaijan will restore its territorial integrity. I have no doubt about that. There is a certain standstill in the process of talks now although the presidents of the Minsk Group co-chair countries have made a statement confirming that the status quo was unacceptable. No specific and real steps have been taken so far to change the status quo. The status quo must be changed. The unacceptability of the status quo has been repeatedly confirmed by the presidents of the Minsk Group co-chair countries, the President of the European Council during a visit to Baku, representatives of the OSCE, other international organizations and politicians. These are very valuable statements. The change of the status quo means removal of the Armenian forces from our occupied lands. Of course, when these forces abandon the occupied lands, the positive trends in the talks will be intensified and the issue will soon be resolved.

But along with all the political and diplomatic efforts, we are certainly building up and strengthening our military capacity. We have built and are still building a strong army. A strong army is an important factor in the talks. Azerbaijan’s economic opportunities are expanding. Azerbaijan is turning into a strong country not only in the region but also in the world. Of course, our economic, financial and political resources will lead to a fair solution of the issue in accordance with Azerbaijan’s territorial integrity. Our economy, foreign exchange reserves and population are growing. According to the latest information, Azerbaijan has a population of 9.3 million people. As to Armenia, their latest statistics suggests that 80,000 people have left the country for good in the first five months of this year. By the end of the year this figure will reach 170,000-200,000. So in a few years’ time the demographic situation will become a crucial factor. It is no coincidence that I have been highlighting this issue in my speeches. The demographic situation in Azerbaijan is good and positive, there is a natural increase. But I think this increase should be even higher. I believe that further measures should be taken to stimulate growth and ensure a further population increase.

Our economy, industrial capacity, financial opportunities will enable us to provide jobs to twice as many people and create all the necessary conditions for them.

This will definitely happen. We are 9.3 million people now and will be 15 million, 20 million in several years. So this process is ongoing and will be continued. We need to further stimulate it by taking certain additional measures now.
As regards Armenia, its leaders are probably pleased that their population is shrinking. Because there are no jobs, no money, no economy, no industry and no prospects there. The smaller the population, the lesser the burden on the government. This is an approach.

Our approach is totally different. Our economy, industrial capacity and political will require the population of Azerbaijan to grow further. This is necessary not only to resolve the Armenian-Azerbaijani conflict over Nagorno-Karabakh – we will resolve it anyway and hoist the Azerbaijani flag in Khankandi. This is necessary for our future in general. Unfortunately, international law doesn’t work in a number of cases today. International law is flouted. The factor of strength comes to the fore. This, in fact, was more typical of earlier centuries. But after World War II, when a new world order set in, international legal norms were taken as basis, which is still the case now. But when we look at current trends, at the developments unfolding in different parts around the world, we see that steps that run counter to international law are often taken and strength often prevails. Might is right. This is not our choice, but unfortunately the events occurring in the world show this. To be strong, we need to have a strong economy, a military and industrial potential, and a large population. So we should address this issue seriously. So far this process has been flowing naturally. Simply put, as the economy grew, the natural increase was fast, so to speak. We can see that in statistics. The number of births in Azerbaijan in recent years has been higher than 10-15 years ago. This is an issue directly linked to economic and social factors. But let me repeat that we need to approach this issue from a new angle now. Azerbaijan’s population should grow even faster.

As to the Armenian-Azerbaijani conflict over Nagorno-Karabakh, I would like to note that we – the state, the government, diplomacy, public and Diaspora organizations – have done a lot in the past period to have the Khojaly genocide recognized as an act of genocide. This is a very important and significant issue. Three countries – Columbia, Mexico and Pakistan – have officially recognized the Khojaly genocide as an act of genocide. I am sure that this process should and will be continued. Our embassies, government agencies and public organizations will certainly keep applying effort to this end. The number of countries recognizing the Khojaly genocide as an act of genocide will gradually increase.

I can say again that whilst discussing the results of the first six months of the year, we can confirm that 2012 will be another successful year for the Azerbaijani economy. Because we are implementing major infrastructure projects this year. Azerbaijan’s political clout has significantly increased. Our election to the UN Security Council is a truly historic event. The fact that it coincided with the 20th anniversary of our independence is quite symbolic. Of course, we will discuss the work to be done before the end of this year, relevant instructions will be given. We already need to think about 2013, and we are doing that. I think that the positive dynamics will be maintained for the rest of the year and our economy will continue to develop.

Now let’s move on to discussions. The floor is given to Finance Minister Samir Sharifov.

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Closing remarks by President Ilham Aliyev

- I am sure the positive trends in the economy will be further stepped up by the end of the year. A lot still remains to do before the end of the year. We need to complete infrastructure projects. I am also sure that the macroeconomic situation will remain stable for the rest of the year. This expectation is based on a level of inflation of 2.2 per cent in six months. Of course, it is a very good indicator. As I said, population incomes exceed inflation by over 10 per cent. Of course, this dynamics and these indicators should translate into people’s lives, their prosperity.

The rate of the manat is stable. We maintained it even in the most difficult years of crisis. While some countries experienced depreciation of 20, 30, 40 per cent, we kept the manat rate stable so that our citizens could come out of the crisis with minimum losses. The rate and strength of the manat show the economic power of our country and bolster the confidence in Azerbaijan abroad.

When we started the monetary reform and introduced the new manat, it was equal to the dollar. Now one manat is equal to the euro, it is actually more valuable. I think it is the right approach. Our economic potential and industrial strength enable us to maintain the manat at this high level. In some countries the depreciation of the national currency expands export opportunities. But our export opportunities are growing anyway because the enterprises emerging in Azerbaijan are also export-oriented. Our main goal is to preserve macroeconomic stability. Our investments, budget and social payments are growing, the payment of compensations for Soviet deposits is an additional burden. All this can inevitably trigger inflation. Despite this, inflation is at a very low level.

At the same time, there should always be rigorous control over consumer prices. There are positive changes in this area. I believe the extra measures will create a permanently good situation in this sphere. We must bolster sound competition. We must step up the fight against monopolist trends. This fight is paying off. But a lot still remains to do. So this economic sector is always in the spotlight and the reforms and steps taken serve to improve the overall economic climate.

Although the drastic reform ongoing in Azerbaijan reflects the current realities, we must further speed it up. By conducting drastic political and economic reform for 20 years, we have taken our country to a new plane. Azerbaijan is already a medium-income country. The task of becoming a high-income country, a developed country has been set. To do that, economic reforms must be continued. Most of the reforms have been completed and are now part of our laws. We can see that in the decisions made and in our daily life. International organizations, the most authoritative financial organizations recognize our success. The world’s three leading rating agencies – Standard & Poor's, Fitch and Moody's – have raised Azerbaijan’s credit rating. Whilst the ratings of European countries and banks are lowered, Azerbaijan’s credit rating has been raised.

So this is a logical result of the work being done, of the reform. By conducting reform, we have significantly reduced our economic dependence on the oil and gas factor. In the future, by diversifying our economy, strengthening local production and sound competition, and attracting investment, I am sure we will achieve even greater successes.

There are major changes for the better in improving the business environment. Azerbaijan has made great strides in this year’s business program. But I think it is possible to achieve even more. I am sure that the steps to be taken to remove bureaucratic obstacles and improve the business environment will take Azerbaijan’s business to an even higher level this year. So our rating being very high is a priority, although it is also important. Most importantly, we need to do specific work to improve the business climate and take steps to develop the private sector.

I should say that great attention is paid to the private sector. Every year we hold an extensive conference joined by local business people and local executive authorities. Every year business people get both political and economic support, hundreds of millions in loans are allocated by the National Fund on Entrepreneurship Support, and these loans are working.

So this is our attitude to the private sector. I repeat that I personally see no difference between Azerbaijan’s state-owned and private companies. Both are Azerbaijani companies, both employ Azerbaijani citizens and we need to support both. So the business climate should always be improved. By applying the new approach, we can achieve great results in this area.
An end must be put to the unfounded interference of state bodies in private businesses. There is progress in this area. But such interferences do occur. Of course, this doesn’t mean that this area should be uncontrolled. There should be rigorous control within legal frames. But such control should not hamper the business or create unfounded obstacles.

In general, the transition to electronic services should be accelerated. Some government bodies are progressing fast, others are lagging behind. I stated my views on the issue at the previous meeting. The transition to electronic services is inevitable. It is necessary and we must do it. The global economy is moving in this direction. It will also bring us transparency, many issues will be organized more precisely and the fight against unpleasant phenomena will be stepped up.

The fight against corruption and bribery is producing good results. The public is regularly updated and informed of the measures taken. This fight will be continued. I want to repeat that the fight against bribery and corruption is not just a campaign. It is our conscious choice. We must rid Azerbaijan of this disaster, put an end to it. This work must be sped up. Of course, punitive measures should be applied. Unfortunately, it is still impossible to do without them. Also, by conducting institutional reforms, switching to the electronic system and applying all “e-governance” elements, we can achieve even better results. There are many opportunities for excellence. I am sure there will be even better results in the coming months.
Specific steps are taken to boost local production. The process of establishing new industrial parks is ongoing. A chemical park is already being set up.

Relevant instructions have been given to establish a high-tech park. The Sumgayit technology park is expanding. Specific steps are taken to establish the Balakhani technology park. New industrial sites are launched in the Garadagh district, which, in general, is turning into an industrial center. All the instructions have been given, there is consistent progress. I am always very strict in this respect, I urge civil servants to speech things up, so that we could complete this work in a short time. The excellent results of this work are confirmed by this statistic. Our non-oil sector has grown by about 10 per cent. I am sure that this dynamics will be maintained by means of the new enterprises.

When attending the opening of a “Holcim” cement plant in the Garadagh district yesterday, I noted that such projects strengthen our economy. Azerbaijan has an operable mechanism to carry out such projects.

I said this yesterday and I want to repeat that it is gratifying that foreign investors are showing interest not only in Azerbaijan’s oil and gas sector but also in the non-oil economy. A foreign company, i.e. “Holcim”, has invested 300 million Euros in the project. The Azerbaijan State Investment Company we once established is also involved. This participation encourages foreign investors too. It shows that the establishment of the Azerbaijan State Investment Company was the right step. The funds provided to the Company are working. We have reached our goal.

The establishment of the Azerbaijan State Investment Company wasn’t meant to enhance the share of the public sector in the economy or industry. It is no coincidence that the share of the Azerbaijan State Investment Company in the cement plant is only 10 per cent. But this 10 per cent entitles us to participation in the management process, makes us an investor and strengthens investor confidence. If necessary, the Azerbaijan State Investment Company may sell its share through an auction or bidding in the future. Because our main goal is to establish industrial enterprises. Why do I talk about this in detail? Not only because the plant was opened yesterday. In general, the opening of the plant shows that investors have confidence in us. In the years of crisis, in 2009, European banks were practically going broke. It was the most difficult year. Large-scale investment at that time was a reflection of great confidence in the Azerbaijani economy and future. We have achieved this by creating a favorable investment climate and providing foreign investors with wonderful conditions. The new, modern and environmentally friendly plant has been in operation since yesterday.

Several years ago cement production in Azerbaijan was at a level of 1 million tons, while the demand was growing by the year due to extensive construction and the creation of industrial enterprises. At present, the demand is 3.3 million tons. Production is less than that, we provide ourselves by about 70 per cent. But ongoing projects will increase cement production to 5 million tons. This will happen approximately in 2014-2015. Thus, we will meet the domestic demand for this product. In general, these trends should be observed in every area. Both in agriculture – we will talk about that – and in the production of building materials.

We attended the opening of a steel plant yesterday. This project has also been implemented with government support. The National Fund on Entrepreneurship Support provided loans, local businessmen invested their own money, and the enterprise emerged. So the number of such sites should be increased. The creation of small, medium-sized and large enterprises is a reality now.

The measures on agricultural development are yielding fruit. Agriculture has grown by over 10 per cent. I am sure we need to maintain this dynamics in the years ahead. I have repeatedly spoken about that. Agriculture is crucial to diversifying the Azerbaijani economy. It is perhaps a key sector in terms of employment because about half of our population lives in the districts, in rural areas. Both new initiatives and rapid modernization will produce even better results.

The establishment of large farms has finally started. I spoke about this a year ago. Unfortunately, this issue did not receive sufficient attention. My harsh words at the previous meeting with business people prompted our civil servants to take action. Areas have now been identified. The first 5,000-hectare area is being prepared for the creation of large farms. I am sure this experience will prove positive. We need to significantly expand the area under crop. Places have been identified. Agro-technical and amelioration work needs to be done there, so that a further impetus is given to private enterprise development.

Also, the issue of increasing productivity, especially in the process of picking grains, requires more serious attention. There is certain experience and productivity is expected to increase this year. But we all know that it is possible to increase productivity even with the current area under crop, thus ensuring complete food security. In general, we are applying the principle of complete self-sufficiency in agricultural production. We will become fully self-sufficient on staple foods in the coming years. In parallel, the land reclamation process is ongoing. We are implementing two major projects in this sphere.

The Samur-Absheron canal – the Takhtakorpu water reservoir and the Shamkirchay reservoir are under construction. Both are global projects. In terms of investment in one project these may be the biggest projects. They are very important to agricultural development. The execution of these projects will make tens of thousands, perhaps even hundreds of thousands of hectares of new arable land available, new jobs and production sites will emerge. In other words, it will lead to a revival in this region.
Work is progressing on schedule, it may actually be a little ahead of it. So we need to see. True, our budget is already closed, there are no extra funds. But if an opportunity presents itself, I think these projects could be accelerated and extra funds provided so that no time is wasted.

Other infrastructure projects were also continued in the six months. Several new projects started to be financed from the President’s contingency fund and the state budget, especially the construction of rural roads. We need to resolve most of the issues relating to rural roads by the end of next year. According to the program – if we do maintain this pace, new village roads will be commissioned in 85 per cent of rural settlements by the end of 2013.

Water and sanitation projects are ongoing in the districts and in Baku. The commissioning of the Oguz-Gabala-Baku water pipeline has brought about major change. Other projects are ongoing.

According to the latest information, there is continuous water supply in Hovsan now. This is great. We know only too well that Hovsan and other settlements of that region had always experienced water problems. I remember going there with Hajibala Abutalibov a few times and meeting with local residents. Upper floors had no water supply at all. Water was provided for only an hour or two during the day and it was always our most painful area. But as a result of the measures taken there is a round-the-clock supply of quality water now. This shows that anything can be done if there is a will, a desire and the right approach.

This example shows that these projects will be implemented in all suburban settlements of Baku. These projects are ongoing throughout the country. They are implemented to the maximum extent possible in Baku, in the settlements, in every city, in every district center, in the villages that are close to the district center and in the villages located on the water lines to be built. A sewage project is ongoing in parallel with that.

I have recently been shown some new projects that were not envisaged earlier. By directing the Kura river water to the districts, we can significantly improve water supply in seven districts. According to a new project, drinking water will be supplied to 111 villages of Hajigabul, Shirvan, Niftchala, Bilasuvar, Salyan, Sabirabad and Saatli Districts by the end of next year. This major project will soon be launched. As to other infrastructure projects, the vast majority of gas and electricity projects have been completed. The rest must also be done on time in order to ensure a complete supply.

We are now working on renewable energy. Specific steps have been taken in this regard, relevant bodies established. There are already solar panel factories in Baku and Sumgayit. I think all relevant organizations – state bodies and private companies – should use the products of these plants. For instance, we should extensively use solar panels in the new houses built at the expense of the state, in earthquake-affected areas or for IDPs. This will provide great economic benefit. It is also clean energy. True, Azerbaijan is not using any unclean energy types. We use natural gas and water – both are clean. But solar energy is cleaner than gas. It will also have great economic benefit and help us save on gas. Considering our growing export opportunities, the more gas is saved, the more of it can be exported.

Besides, the use of renewable energy technologies reflects our country’s modernization. It shows our responsibility. The development of renewable energy in an oil and gas rich country shows its responsibility and intent. It also means jobs, modern technologies, personnel training. I think even more should be done in this area. We have got off to a good start. I believe that our experience can also be studied in other countries.

Of course, the creation and development of renewable energy is not of urgent nature for us because we have ample reserves of oil and gas. New fields have been discovered. Shah Deniz, Absheron, Umid and other fields have 2.6 trillion cubic meters of gas, which will be enough for us and our partners for 100 years. But we must also develop renewable energy.
As regards energy security, I can say that we are meeting all our goals in this respect. There are no outstanding energy security issues in Azerbaijan. All the issues have been resolved. We simply need to work out the right strategy at the current stage in the oil and gas sector. We have identified it and need to take specific steps to reach these strategic goals. The public is aware of the work being done in this area.

We have a diverse transit infrastructure. Production is at the right level. Last month we launched the TANAP project. It is a historic project for a number of reasons. First, as you know, various discussions, talks, conferences and summits on the transit of Azerbaijani and Caspian gas to Europe had been held for years. Discussions on the issue have been under way for at least seven years, but there is no result. Under such circumstances we decided that Azerbaijan should take on leadership.

Just like we did in 1990 assuming leadership, responsibility and obligations on the Baku-Tbilisi-Ceyhan project. We saw that if we didn’t take on leadership in the issue, the talks could last for another decade without any result. We held discussions and talks with our Turkish partners in a short time. A name was given to the project – TANAP, the Trans-Anatolian Gas Pipeline. After all the technicalities had been cleared, we attended a beautiful ceremony in Istanbul and signed all the documents last month. So the TANAP project was launched. I want to emphasize that this is a purely Azerbaijani-Turkish project.

Azerbaijan’s interest stake is 80 and Turkey’s 20 per cent. This is how stakes have been divided. So we are prepared to finance 80 per cent of the project. Besides, as I stated earlier, this project is open to partners, to companies that are our friends and have worked in Azerbaijan for years. If a company wants to join the project as a shareholder or investor, we will approve of that. Of course, we will decide what companies can participate.

I repeat that this is a project for Azerbaijan and Turkey. I am absolutely certain that this project will be successful. Not a single project initiated by Azerbaijan has failed so far. Each of them has produced excellent results. The Baku-Tbilisi-Ceyhan, Baku-Tbilisi-Erzurum, Baku-Supsa and Baku-Novorossiysk pipelines, etc. have been implemented successfully by Azerbaijan.

With regard to the development of oil and gas fields, we have not had any problems in this area in the past years. We have achieved all our goals. I want to repeat that Azerbaijan has provided for its energy security, is and will be involved in the energy security of other countries. I repeat that this project is of great value, it is not less important than Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum. It will enable us to transport large volumes of gas to Turkey and Europe. Thus, we will completely resolve the issue of diversification, a major factor in our energy policy.

We do not have any problems in this area today. The oil and gas produced in Azerbaijan are consumed domestically and exported. We are pleased with the current level of production. Actually, if this level is maintained for many years, our economy will only grow. We must remember that we will keep reducing our dependence on oil and gas, i.e. even if things remain at the current level, we will still develop, there are no factors that may impede our development. But if this project is implemented, our development, of course, will be even more rapid, the scope of our influence will further expand because the energy sector, along with economic, secures other interests. This is no secret for anyone. Azerbaijan’s regional and international standing will certainly grow and strengthen.

I want to touch upon another issue related to our industrial development. The process of removing large industrial enterprises from the city center is ongoing as it should. The people of Baku are seeing the positive results of that. We are removing and relocating outdated and environmentally hazardous industrial facilities from the city center. There is no need for obsolete enterprises. We are creating a powerful industrial potential. We must strive to apply the most advanced technology. In the city center we should set up public places in lieu of the obsolete plants. We should build parks, parking lots, gardens, create better conditions for people. We should build green areas, plant trees. More than 2 million trees were planted this year. Even more were planted previously because this process was widespread everywhere as part of the Year of Ecology. But when the Year of Ecology ended, I said that we should consider that it still continues and will continue tomorrow. Every year should be a Year of Ecology because this is our life, health and future. So this process continues and gives positive results. A good example of that is the road to the Flag Square and the new boulevard. This area was surrounded by outdated Soviet-era plants that were of no value at all. It wasn’t very easy to remove them. There was even some resistance. But when there is political will, any resistance is futile.

But the people of Baku and Azerbaijani citizens can see how much work has been done. This area was handed over to public use, the boulevard extended, beautiful green areas created. People can rest comfortably now. There are many other such places in the center of Baku and we must try to remove them, relocate the working enterprises and remove dormant facilities.
Also, there are too many polluted lakes in Baku and suburban settlements. There are about 30 such lakes. We know how these lakes emerged. They accumulate produced water and sewage. This, of course, doesn’t meet the modern appearance of Baku. An instruction has been given and the Ministry of Economic Development and “Azersu” are now preparing proposals.

We must clean up and landscape these lakes, create sewage and drainage systems for the people of Baku to use these lakes. These lakes create a very miserable picture, they must become beautiful and transparent. I believe we can achieve this although it is a big and difficult job.

This is technically a very difficult job that requires funding. But I think we have to do it. It will be of great importance for the future of our country. Imagine: if these contaminated lakes worsening the environmental situation become clear in the future, how many new recreation areas, parks and forest belts will be created there. For example, Lake Boyukshor is in a very poor condition and is located right in the heart of the city. If a project to clean Lake Boyukshor, create new sewer systems, remove produced water and establish green areas is completed successfully, then a beautiful and clean lake will appear in the city center.

Lakes Khojasan, Khirdalan, Ganligel, Zikh – there are many such lakes. When you look at these lakes from a helicopter, the view is appalling. We need to clean up these lakes. Instructions have been given, additional funds are to be provided this year. But the investment program for 2013 should incorporate this issue. We must try to do whatever is possible this year. Most of the work should be done with utmost attention early next year.

The program on the development of Baku and its suburban settlements is ongoing. I said this in my opening remarks. It states all the tasks. I am sure that all of the issues stated in the program will be resolved by 2013. The program has also been amended. Although we received a lot of information from the field when drawing up the program and we designed it on the basis of this information and applications, now, of course, new issues arise. For example, the renovation of schools that are in poor condition. What schools are considered to be in poor condition? Those that are destroyed or are in poor condition? So it is not so easy to determine schools that are in disrepair. But if we knock down, rebuilt or restore schools that are in the worst condition, the schools that are not in very good condition are left on the sidelines. But they must also be renovated. So they are also incorporated in the program. All the kindergartens will be renovated. There will be no kindergartens in poor condition in the city.

But we can’t be content with the number and capacity of our kindergartens. We must build new kindergartens, so the program was amended and funds allocated. I am sure it will be implemented by the end of next year.

We are already thinking about next year's budget. Today, this issue is dealt with by the Finance Ministry. Next year’s budget, as always, should be focused on investment. Of course, it should also be socially oriented. Next year we must complete the development program of Baku and its suburban settlements and major infrastructure projects. We must implement environmental activities related to the lakes. So next year we will probably have a lot of expenses. In fact, we definitely will.

We need to plan this work now and I have given the necessary instructions. I want to repeat that we must approve the investment program for next year at the end of this year. Usually our investment program is approved early in the year, around January. Then accounts are opened and investment projects await implementation until February. But in order not to waste time, the investment program must be approved late this year so it could start in January.

In general, our financial situation is good. From the start of the year our strategic currency reserves have increased. Azerbaijan's foreign exchange reserves stand at $44 billion now. This figure should increase by the end of the year. Our external public debt is at a very low level. It accounts for 7 per cent of the GDP. This is one of the most positive indicators globally. Despite this, I have instructed that we should be cautious in taking additional loans. Today we provide loans ourselves, which is positive from both political and economic standpoints. We place this money through various instruments.

Loans can be taken as a matter of exception because most of the work is financed from the state budget or previously obtained loans. I do not think it is necessary to take new loans. It could be done as an exception, but each loan must be justified. It must be justified by the company or ministry taking it, so that we don’t increase our foreign debt. True, 7 per cent of the GDP is a very low indicator. For comparison, in developed countries it is 80, 100, 150 per cent, but this is a path leading to bankruptcy. In Azerbaijan it is 7 per cent. It might grow to a certain extent, because the loans taken in previous years are still coming. It may grow, but should not under any circumstances exceed 10 per cent. We must try to reduce the arrears on these loans in the next few years. But we can repay this debt in one day because our foreign exchange reserves are up to 10 times greater than our debt.

But we must ensure that we stay on the path of development tomorrow and after 10, 20, 50 years. By borrowing, some countries got themselves in this situation. They borrowed money, spent it on social programs and campaign promises in order to justify populist speeches.

The political forces succeeding them borrowed again, thus they created a pyramid which was supposed to come down and it did. There is no such threat here and never can be. But in any case, I always say that in politics, economics and in life one must “cut the coat according to the cloth”.

I want to raise another issue. The Eurovision song contest held in Azerbaijan enabled us to present our country to the world for what it is. But to be honest, when our talented young singers won the competition in Germany last year, we could not imagine how strongly politicized this competition would be. Until now it was just a song contest which did not and could not have a political aspect to it. Unfortunately, in the case of Azerbaijan, there were forces that wanted to politicize the contest, and I can say that a major anti-Azerbaijani campaign was launched. I should note that we had never initiated to host Eurovision in Azerbaijan, which is actually impossible. The rules of the competition are such that a winning country most host this event next year, which we took as a great responsibility. In nine months, which is probably a record indicator on a global scale, we built such a great sport and concert palace as Crystal Hall. The Flag Square was expanding anyway and we just sped up the work and created all the conditions.

From an organizational point of view, it was the best competition. The thousands of foreign visitors praised the organization and were generally impressed with our city. Because Baku is so beautiful one can’t help falling in love with it. We met all the guests with traditional hospitality, tried to create a beautiful environment, make the song contest memorable in all respects and different from previous ones. I see and know that we have achieved this.

I believe that the Eurovision song contest in Baku can serve as a model for other cities. At the same time, we faced an unexpected campaign. It was unexpected for us because, I repeat, there had never been political aspects in the history of Eurovision. Anti-Azerbaijani forces unfolded a campaign against us. First of all, the Armenian lobby. I said this before and want to repeat what Eurovision has further confirmed: number one enemy for us, for the people of Azerbaijan and for the Azerbaijani state is the Armenian lobby. In their daily activities they try to tarnish and sully Azerbaijan, spread rumors and slander, mobilize their financial and political power to deal a blow to Azerbaijan. The Armenian lobby, other structures and circles, some circles suffering from Islamophobia in Europe also contributed to the campaign. I regret to say this. It was suggested that a European competition cannot be held in a Muslim country. These, of course, are very disappointing statements. The weight of such forces in the western world, at a political level is very low. But regrettably there are forces, parties and politicians who hold this view.

If we make a classification, I can say that a third force is those who can’t come to terms with Azerbaijan’s successful development or stomach our development in the crisis years, they are just jealous of our success. They are annoyed by the fact there is crisis, problems, protests, clashes between police and the population everywhere – these have now become a tradition in some cities, while in Azerbaijan there is peace, comfort, development and good mood.

There are forces, people, politicians who don’t perceive our development and we know them. They have been joined by local anti-national forces that call themselves opposition. In fact, they have held an anti-Azerbaijani position for years and led a campaign against Azerbaijan. I would not call them a force. It would be more accurate if I call them elements. So this symbiosis unfolded a dirty campaign built on lies and slander against Azerbaijan. They organized a deliberate provocation in both foreign and local media. For them, i.e. these elements within the country, there is only one principle in the political life: the worse it is for Azerbaijan, the better for them. That is, to demonize Azerbaijan, spread false information about Azerbaijan together with the Armenian lobby – all this was happening before our eyes. Of course, the people of Azerbaijan clearly saw again who is who. We can say that the people of Azerbaijan lived in an atmosphere of joy that month. So many visitors came to Azerbaijan, everyone wanted to introduce the country, show beautiful places! Meanwhile, anti-national forces were telling foreign guests: don’t be misled by this beauty here, we can take you to the outskirts and you can see how bad things are there. A normal human being can barely imagine how people living with such anti-national feelings can actually find themselves a place here. For them, every day means grief, every day is a tragedy. They suffer when they see something new and feel sad when they see development. These people are really in a bad psychological state. In fact, they have been in it for many years because Azerbaijan’s development is not just a matter of today. Our development has been consistent. Since the mid-1990s to the present day, every year – development, beauty and landscaping. Baku is one of the most beautiful cities in the world. This is not us saying this, this is said by foreign visitors. But for them it is a constant stress and their illogical actions are probably the result of years of stress. It is impossible to explain these actions otherwise.

Prior to Eurovision, three rallies were conducted at the 20th Section. I want to say again that the most appropriate place for them is the 20th Section, they quietly held their rallies there. No-one touched them. But on seeing that every time – such gatherings have been held three times – the number of people attending was reducing, they resorted to a new tactic. They attempted to attract foreign media attention by conducting an illegal rally or demonstration in the center. This was pure provocation. But all right, Eurovision is now over. Where are the pickets, where are the rallies? Let Hajibala Abutalibov address them and invite them to the 20th Section. We don’t know when Eurovision will be held in Azerbaijan again. We can’t wait so long.

It would be funny if it were not so sad. Because people who have such a negative attitude to their own nation and state can’t be called anything other than national traitors and anti-national forces. But despite all these attempts and this smear campaign against us, we have won again. The state of Azerbaijan and the Azerbaijani people have won. Because we are strong. Our strength lies in the support of the people, we are right. When the right cause wins, then justice triumphs, and I am confident that we will continue to win!