- I believe that the successes achieved in the previous years will play a very important role in 2013. The programs adopted and projects implemented in previous years should facilitate our successful development this year.
If we consider that the budget for 2013 is the biggest in recent years and, in general, in the history of independent Azerbaijan, I think we will successfully meet all our objectives. Our state budget expenditure is at the level of almost 20 billion manats. Of course, this is a large amount. These funds will enable us to complete the outstanding major infrastructure projects. Our sound policies and prudent steps are calculated specifically to complete all the infrastructure projects by the end of this year.
Some of these projects were launched in previous years, others started last year. But as a result of these projects, we will upgrade our entire infrastructure. The establishment of our infrastructure began in the Soviet times. One part of it is outdated, another is not usable. Life goes on, there are new technologies and discoveries. We have to make sure that starting from this year there are no shortcomings with infrastructure. I think that the volume and directions of the public investment program will enable us to achieve this goal. Considering the fact that the public investment program was adopted not at the beginning of this year, but at the end of last year for the first time, we should waste no time to get started. In fact, we have already started. Of course, there are priority infrastructure projects. These priorities have been reflected in the public investment program for several years. Public investment certainly serves to improve the infrastructure. But at the same time, we see that public investment contributes to a revitalization of the private sector. Major private investment is also expected. In my opening remarks I noted that the biggest investment in our history was made in Azerbaijan last year - more than $22 billion. We can say that this level will be maintained in the current year.
Thus, the investment made by public, local and foreign private companies will further strengthen our country.
As for priorities, I repeat that we have been implementing our infrastructure projects consistently. First of all, we wanted to create an energy potential of our country. Over the last few years we have launched new power stations with a capacity of 1,500 megawatts. Today, we provide ourselves and also export electricity to other countries. Azerbaijan exports its electricity to neighboring countries. This has been a priority because there can be no development without that. We have made great strides in this area and significantly increased our generation capacity. The commissioning of the "Janub" power plant this year, a station with a capacity of nearly 800 megawatts, will further improve our standing in this area because we are increasing output and reducing losses. In comparison with previous years, the losses have significantly reduced. Today the losses are practically at acceptable levels. Nevertheless, we will continue our work in this area. The construction of the "Shimal-2" power plant is ongoing. It will generate an additional capacity of about 400 megawatts.
We should also be noted that consumption is growing every year. Whereas in previous years there was a difference between winter and summer – more electricity was consumed in winter than in summer – this difference is no longer there. The main reason is that the standard of living is rising. Air conditioners are used more in summer now. This was not the case before. The needs, our population and the economy are growing. We must make sure that our generating capacities always exceed the needs.
We are seriously engaged in developing renewable energy. Major steps were taken in this area last year. A factory manufacturing solar panels has been launched. Our water resources are heavily involved in this work. The commissioning last year of the Fizuli hydro power plant has been a major step in this area. This station has a capacity of 25 megawatts. The construction of power stations with a capacity of 1, 2, 3 and 5 megawatts on small rivers is ongoing. We need to make the best use of our water resources in order to increase the share of renewable energy in our overall energy mix. Of course, among other infrastructure projects, those on gas-supply were second most important to electricity. The work done in this area in recent years is worthy of approval. The investment program for this year also includes funds for this purpose. I believe that by the end of this year, the overall level of gasification in our country can be increased to 90 per cent. In any case, we are committed to achieve that.
The work ongoing in the regions suggests that we can achieve this goal. This is a very good indicator if we consider that part of our country consists of mountainous terrain. It is not economically viable and technically challenging to build gas lines there. We will provide most of our population with gas. New pipes are laid, new measuring and metering devices are of an altogether different level. We will completely renovate the infrastructure in this area.
Several years ago we consistently embarked on the implementation of water and sanitation projects. These are very large projects which are of great importance to our country because the problem of drinking water has always haunted Azerbaijan, Baku and other regions. There were no sewage lines in the districts at all. The sewage system of Baku has become obsolete. Immense creative work is ongoing in this area. Again, we have set the maximum goal of completely upgrading the infrastructure in this field. Water and sanitation projects are now under way both in Baku and in the regions. I do hope that water-supply projects, at least most of them, will be completed by the end of this year. In parallel, the construction of sewage lines is ongoing. This too will be a historic achievement. The provision of our people with clean drinking water is a great thing. It will play an indispensable part in people’s comfort and health. So these are the main infrastructure projects envisaged in the investment program. All relevant bodies are fulfilling their duties. These projects must be implemented in a quality and timely manner.
The public investment program also provides for a continuation of the construction of trunk roads and construction of new roads. We have done a lot in this area in recent years, largely restored our highways and built new roads. Work is currently under way on all trunk roads, and it is already nearing completion. Along with this, we are building intercity roads. This year we will invest in this area too. We have been seriously engaged in the construction of rural roads for several years. These projects are being implemented in all our districts.
These projects are implemented on applications from the rural population. First of all, we have tried to build roads in our most populated villages. The construction of roads between villages has assumed a wide scope. Funds in excess of one hundred million manats were allocated for this purpose from the state budget and the Contingency Fund of the President last year. This year this amount should be no less. We must try to build all rural roads in the coming years. most of them were unpaved, and as soon as it rained or snowed, the roads became impassable. Now all the roads are being asphalted. But, of course, we must coordinate this work with other infrastructure projects. In particular, the construction of underground utilities, water and gas lines, should be in the foreground. After that roads should be built. This is the required sequence. Among infrastructure projects I also want to highlight land reclamation projects.
We have also allocated major resources for this area – both from the State Oil Fund and the state budget. Two grand projects – the Takhtakorpu reservoir / the Samur-Absheron canal and the Shamkirchay reservoir – are being implemented in Azerbaijan. The implementation of these projects will result in the inclusion of tens of thousands of hectares of land in the turnover, which will benefit thousands of farmers. These projects require huge financial resources, and we are allocating them because it is necessary for the economy, for doing business and for food security. The Takhtakorpu reservoir should be commissioned this year. The Shamkirchay reservoir will probably be put into operation next year. In any case, the public investment program and the investment projects of the State Oil Fund envisage large allocations to this sphere. This work must be done with high quality and on time. I can say that these are our key infrastructure projects. I want to repeat that most of these projects should be completed by the end of this year. When adopting the first regional program at the beginning of 2004, we planned that two five-year programs will enable us to implement all the social and infrastructure projects.
At the same time, a fairly large amount is envisaged for the social sphere in this year's budget. As I said, the process of repayment of compensations for Soviet deposits must be completed. There is no doubt that it will be completed successfully. The construction of a social infrastructure is envisaged - schools, hospitals, cultural institutions, sports facilities. Over 70 medical institutions will be built and renovated. Around 2,500 schools have been built in the last 10 years, and this process is still ongoing.
We have a total of more than 4,500 schools, most of which were in disrepair. This number has significantly decreased now. We will try to renovate all the schools that are in poor condition this year. The schools in need of repairs will be gradually renovated. As for the schools in Baku, the construction and renovation work in all schools must be completed this year. This issue is always in the spotlight and under control. Not a single school that is in poor condition or without renovation will be left in Baku this year and in all our regions in the coming years.
This year we also plan to increase wages and pensions. It is an ongoing process. It has been noted here that the average wage and the average pension in Azerbaijan are increasing. If we compare them to other CIS countries, they are at a high level in Azerbaijan. The average wage exceeds $500, while the average pension is about $200. The replacement rate is also at the level of developed countries. The pension constitutes 40 per cent of the wage. But, of course, we shouldn’t be complacent. Although the salaries and pensions have been raised several times in recent years, we should try to achieve even greater growth.
As we implement our plans on improving the business environment, commission new facilities and conduct industrialization, the living standards of people, i.e. those working in the private sector, will also improve of course. The wages of civil servants should and will be raised. This is included in this year's budget.
One of the tasks we are facing this year is to maintain macroeconomic stability. I don’t think we will face any problem here. As I said in my opening remarks, although major investment was made and we began to repay compensations last year, the inflation was only 1.1 per cent. Of course, we should try, and I’m sure we will succeed, to keep inflation in single digits this year. Single-digit inflation ensures a successful development of our country and increases personal incomes. Macroeconomic stability is always under control. I think there will be no problems in this area either.
The fight against corruption and bribery should be further stepped up. We have made great strides in this area in recent years. This policy will be persistently continued. We are using a variety of tools. Of course, penalties and administrative measures are important, and our relentless struggle in this area will be continued. I am telling all relevant government agencies again: the fight against corruption and bribery should be waged even more vigorously. We have to eliminate this evil. Along with this, we should and we do take institutional measures, measures of systemic nature.
An important place among these measures is occupied by the transition to electronic services. As it was noted here, Azerbaijan has made great strides in the field of ICT in recent years. This includes business and the intellectual sphere. At the same time, it is an area that gives an impetus, serves innovation and transparency. We have to make even broader use of these opportunities. The number of electronic services should grow and work in this area will be continued. Even stronger public control must be exercised. Transparency should be ensured to the maximum extent. Let me repeat that penalties, administrative measures, institutional measures, measures of systemic nature will help us in the fight against corruption, I am sure. At the end of last year, we established a new entity in this sphere. It covers all of these important areas. “ASAN xidmət” is already starting to operate. This service is a concentration of the factors I have mentioned – innovation, service to people, fight against corruption, transparency, innovation, modernization. Our country must develop in this direction. In order to achieve this, we, of course, must continue to pay very serious attention to the training of human resources.
I am very pleased that young and contemporary professionals are beginning to work in various parts of Azerbaijan. They have been raised in the spirit of patriotism, they are educated and intelligent youth. They are our future. In order to successfully run our country in the future, we must develop young human resources today. To achieve this goal, we are using different opportunities. As you know, our young people study abroad, we send them to leading universities of developed countries at public expense. This, of course, has been a positive initiative, and it is continuing. But I think that we must, above all, create a system in the country that would have all the opportunities to receive knowledge. Measures are and will be taken in this area. We need to attract more young people to the areas that require new technologies and a modern approach.
I also want to highlight the issue of finances. Although I have repeatedly expressed my views and comments on this issue and some work has been done, the situation is still not satisfactory. Non-cash payments are at a very low level in Azerbaijan. This is a big problem. On the one hand, it doesn’t enable us to ensure complete transparency in the system and, at the same time, causes negative phenomena. I think that even more drastic measures should be taken this year. I am waiting for proposals on how to increase non-cash payments and settlements. A lot was done in this area in 2012, and I appreciate that. But I think that we also have to pay serious attention to that this year and in future years. Here, as they say, we do not have to invent anything new, just look at the experience of developed countries.
Of course, Azerbaijan is a developing country and our situation in this area is not the same as in developed countries. But we must strive to do that because we have set the goal of reaching the level of the developed countries in all areas and applying their positive experience to Azerbaijan. This area is also very important. It will allow us the opportunity to increase financial and economic transparency and improve the quality of public services.
I think that all the work on regional development will be carried out at a high level this year. Regional development is an integral part of the public investment program. Most of the investment is channeled into the regions. I am sure that the second regional development program will be completed successfully. I also appreciate the work of the National Fund on Entrepreneurship Support in the area of regional development, in particular business. To this day, the fund has provided business people with low-interest loans to the tune of about 1 billion mantas. I am very pleased that these funds are being repaid. Entrepreneurs treat these loans very responsibly. At the same time, the National Fund on Entrepreneurship Support under the Ministry of Economic Development gives guidelines on business development and doing business. So we approach the development of the private sector and businesses not only through a financial perspective, but also provide recommendations and advice.
This year, entrepreneurs will receive soft loans amounting to 250 million manats, and 83 per cent of these funds will be provided in the regions. I think that by doing this work we have rendered great service to the development of the regions and reduced the gap between the regions and the capital. It is very difficult to do because the capital is also growing very fast. Baku is one of the most beautiful cities in the world now. But I am glad that residents of the districts, executive authorities and activists seek to develop their cities, towns and villages. The provision of loans has justified itself. The amount is growing every year, and we provide these 250 million more on the account of loans issued and repaid in previous years.
The issues of food security, which are directly related to that, are also constantly in the spotlight. I am very pleased that we are nearing our objective. In our latest meeting with entrepreneurs I noted that we provide ourselves with staple foods now. But, of course, I would like to achieve complete self-sufficiency. By doing this work, in particular by establishing large farms, implementing land reclamation activities, providing loans, improving the infrastructure, roads, etc., we will make Azerbaijan completely self-sufficient in basic foodstuffs. That will be a historic achievement. It will be a step calculated for the future. Of course, we are part of the global economy and import the goods that are not sufficient in Azerbaijan, i.e. their production is not up to par. But I think that each country should provide itself with basic food commodities. This is important from a security standpoint. At the same time, it strengthens local production. It is safe to say that we are doing everything to achieve this goal. Infrastructure projects are financed by the government, billions are invested in rural infrastructure. The government provides entrepreneurs with soft loans to do business. The machinery imported by "Agroleasing" is let out on lease. We even buy and provide farmers with livestock so that they could do business. Farmers are exempt from all taxes except for the land tax.
Fertilizer and fuel are provided on preferential terms. There is no other country where farmers are provided with such conditions, benefits and so much funds. We do this for people to live better, to improve the business environment and agriculture. I repeat: we can become and are already becoming a major exporter in this field. This issue requires special attention this year. We should take all necessary steps. This includes incorporation of this in the investment program.
As I said, the program on the development of Baku and its suburban settlements should be completed this year. This is also a fairly serious, large, short-term, but at the same time very effective program. And we will complete it this year.
I think that very serious steps associated with industrial production will be taken in 2013. All the preparatory work has been done. In fact, not only preparatory work has been done. As noted here, large industrial enterprises have been commissioned. Some of this work was done by the state, but most of it was done by the private sector. As I noted, several industrial centers are being put in place in Azerbaijan. Major industrial facilities are under construction in Ganja, Sumgayit, the Garadagh district of Baku, etc. Even more will be done in this area in 2013. In particular, new rules promoting industrial production will be introduced, additional measures taken, benefits provided to step up industrial parks.
It only remains for entrepreneurs, local and foreign companies, small and large companies to use these opportunities. Overall, the investment landscape in Azerbaijan is very good. We have been the CIS leader for the volume of direct foreign investment for many years. There are opportunities to do business, there are no restrictions. On the contrary, as I said, the government provides every support.
Again, this year’s investment program provides a fairly large amount for industrial parks, so that these areas are cleared, the entire infrastructure created, communications built, railway lines laid. Such places have already been identified. I repeat that entrepreneurs and investors simply need to come and set up companies. Thus we will produce large volumes of industrial products our country needs. The industrialization policy will enable us to achieve economic development in the years to come.
As I mentioned in my opening remarks, our non-oil economy grew by 9.7 per cent last year. In essence, this is economic growth because, as I said, the oil sector registered a decline. We have achieved this through industrialization and improvement of the business environment. We have to try to preserve this pace of development. I believe that development of the non-oil sector should be at the level of 10 per cent. If we can achieve this, our country will have a very strong industrial potential in the long term. Today, this potential is already being created. We are accessing foreign markets, discovering new markets. In this area, of course, our relations with different countries are very important. We need to expand our business opportunities by accessing foreign markets - both in relation to food and in relation to industrial goods. I think that we need to create a strong industrial capacity, so that our products could be competitive and, of course, focused on foreign markets. The domestic market is not too wide, while our plans are very large and wide. I believe that very serious steps will be taken in this area in 2013.
In my opening speech I expressed my views on energy security, there is no need for repetition. I want to emphasize that this issue is constantly in the spotlight. Azerbaijan has asserted itself as a country that plays a significant role in the global energy market. Azerbaijani energy resources account for 30-35 per cent of the energy mix of some European countries. So from this point of view, we are directly involved in the energy security of some European countries. If we add to this our ample reserves of natural gas and, as I noted earlier, the successful and timely implementation of projects, Azerbaijan will play an indispensable role in the energy security of the region, Europe and the world over the next decades. Of course, this will enhance our economic and political clout. I am aspiring to that. I believe that we have succeeded in making Azerbaijan a serious international player in any field.
As of this year we should start preparations for the European Olympic Games. At the end of last year, the General Assembly of the European Olympic Committee decided to hold the inaugural European Olympic Games in Baku. In this regard I congratulated the Azerbaijani people in a nationwide address because I think it is a very serious event. At the same time, it is a manifestation of the work done in Azerbaijan in recent years, an indicator of high international image of our country. It is a result of the fact that Azerbaijan is recognized as an economically and politically stable country. It is a great responsibility, a great honor and a great trust. I have no doubt that we have a deep realization of this responsibility, will take all necessary steps to conduct the European Olympic Games at the highest level, i.e. at the level of international Olympic Games.
In the coming days the decision will be made on the establishment of the organizing committee, and work should begin immediately. Of course, government agencies should be actively involved in this process. This should cover the infrastructure, transport, security, tourism – i.e. all areas. We will show the world again that Azerbaijan has great potential for entertaining guests. Azerbaijan, we can say, is a symbol of hospitality in the region. We have all the opportunities and we will show Azerbaijan as a strong and modern state.
Finally, I want to emphasize one more issue. It has been said here that our first telecommunications satellite will be launched into orbit next month. This is also a historic event. Azerbaijan is becoming a space-faring nation, we are developing a space industry. A few years ago it was hard to imagine that there would come a time when Azerbaijan would become a space-faring nation. But that time is coming, and in the next few days we will celebrate this historic event. This, in itself, is a great achievement in every sense – for the prestige of the country, for its modernization and for the development of new technologies. It is also beneficial for business, because it is an economically viable project. But most importantly, it demonstrates the development and intentions of our country. It demonstrates our overall outlook and policy because we are building a modern and strong state. We have long gone beyond regional boundaries. We have long left in the past the notion of a post-Soviet country. We are not a post-Soviet country. Sometimes in meetings with foreign partners the phrase "post-Soviet country" is used. I say to them, "Wait. Azerbaijan is not a post-Soviet country. Perhaps some countries are post-Soviet, but we are not. We are the independent state of Azerbaijan."
In the years of independence we have made such great progress that every citizen of Azerbaijan can feel proud. And the launch of the satellite holds a special place. It has a great value and a great symbolic meaning. I am sure that this event will accelerate our steps towards modernization and development in the future. Taking into consideration this development, in general, the attention being paid to the ICT sector and the progress made in this field, I declare 2013 the "Year of the information and communication technologies”. I believe that in 2013 we have to achieve even more in this area.
The year is beginning, all public and government agencies are aware of their responsibilities. I am sure that during this year every civil servant will faithfully serve his country and people and we will successfully complete 2013. Thank you.
