Opening speech by Ilham Aliyev at the meeting of the Cabinet of Ministers dedicated to the results of socioeconomic development in the first half of 2014 and objectives for the future

- At today's meeting of the Cabinet of Ministers we will discuss the socioeconomic results of the first six months of this year. I can say that the successful development of our country was provided in the first half of the year. All the objectives on our agenda were successfully achieved. There are no outstanding issues. Of course, this gives grounds to say that all our tasks will be fulfilled by the end of the year and the dynamic and successful development of our country will be continued.

Underlying our success is a sound policy and stability. The reforms ongoing in the economic sphere also occupy an important place. It is thanks to these reforms that the sustainable development of Azerbaijan was made possible. You too will remember that some people linked our success solely to the oil factor at one time. It was speculated that Azerbaijan has oil, which is why the economy develops. Of course, this factor has played a role in recent years. But it is thanks to our successful policy that our dependence on oil has significantly reduced and most of the gross domestic product is now generated in the non-oil sector.

This is the result of judicious policies. Our reforms are also recognized by influential international financial institutions. While developing their forecasts, influential international financial institutions note that Azerbaijan will continue to develop successfully for many more years. At the same time, our reforms are also evident in the ratings of various organizations.

The world's leading rating agencies have been upgrading our credit ratings. Today we have no problem attracting credit resources from external financial markets. On the contrary, we are somewhat cautious about this issue, as we believe that we should use internal capabilities more. The Davos World Economic Forum, the world’s economic forum number one, has praised the competitiveness of the Azerbaijani economy and ranked us 39th in the world. I think this is a very high indicator for a young independent country.

In other words, the successful development of our country was made possible by various factors. There is a wonderful investment environment in our country,. Domestic and foreign investors treat Azerbaijan with confidence. The internal stability, the unity among the people and the government and the general optimism in society about the future of our country certainly give an impetus to our dynamic economic development.

In the first half of the year our economic indicators are also very positive – the economy has grown by 2.1 per cent. Perhaps this is not such a high figure as compared to previous periods. But against the backdrop of the economic hardship experienced in the world, the region and Europe today, I think this is a very good indicator. The most gratifying thing is – and I mention this with a sense of joy – that our non-oil sector has been growing in recent years, and the growth here has been at a rate of 7 per cent. Of course, this is also a result of the factors I mentioned, because if we hadn’t channelled the oil capital into human capital and infrastructure projects, our non-oil sector could not grow so much. Perhaps it would be experiencing a the recession and then we would depend only on the oil factor. The funds being allocated and the reforms to be implemented in the coming years will lead to the fact that the non-oil sector will have even greater strength.

The inflation in Azerbaijan is not only in single digits, it is at 1.6 per cent. This is a great indicator, especially if we consider that both domestic and foreign investment is made in our country, salaries and pensions are raised every year, Soviet-era deposits have been returned to the public in the form of compensation, with the highest interest rate in the CIS and in the shortest time. Despite all these factors, the inflation is only at 1.6 per cent. Population incomes have increased by 4.7 per cent, i.e. they exceed inflation three times. This is the most desired balance for any country.

Therefore, these factors, the main indicators of our economy give us hope that we will maintain the current rate until the end of the year. I do hope that this will be the case and the gross domestic product will increase even more.

Development is observed in agriculture. Growth in agriculture has amounted to almost 6 per cent. I do hope that as a result of the ongoing reforms in the coming years we will achieve even greater growth. The financial situation in our country is very stable. I have repeatedly said that our economic and financial situation is one of the main contributors to our independence.

Azerbaijan has ample financial resources. We have created these resources ourselves, no-one has ever helped us. We have achieved this thanks to the talent of the Azerbaijani people and thought-out policies. I believe that in terms of foreign exchange reserves per capita, Azerbaijan is in one of the leading places in the world. Our foreign exchange reserves exceed 54 billion. And this gives us confidence and allows us the opportunity to continue the implementation of large-scale infrastructure and social projects.

I also want to emphasize that we are spending these funds very sparingly and investing them in the most important areas. At the same time, we should not allow a growth of investment by the state, as it may cause undesired phenomena and accelerate inflation. In fact, there is no need for that. I think that if we continue to develop at this pace in the coming years, that should be enough.

Over the course of the year our foreign exchange reserves have increased. In other words, we are increasing our foreign exchange reserves with every year and every month. I know that we are using them very sparingly. We are very far from making populist promises and have never done that before. We have conducted only pragmatic and sound policies which enabled us to overcome all the difficulties with honor and dignity.

The economic and financial crisis which engulfed the world has not affected the population and economy of Azerbaijan. Scientists will probably explore and analyze this to understand the reasons. We simply do not have time for that – we are working and the results of our work are obvious. We are a country with major financial resources. I want to say again that we are increasing our financial resources every year and will continue to increase them. The rational use of these resources, of course, brings us additional revenue, and today we are diversifying our portfolio – both in terms of industries and the geography of investments being made abroad.

This year we adopted the third regional development program. As a result of this program, 65,000 jobs were created in the first six months of the year, including 52,000 permanent ones.

From 2003 to the present time, i.e. from the start of these programs, 1.3 million jobs have been created, of which about 1 million are permanent. Unemployment has largely been eliminated and is at a very low level. Also, we should note that as a result of our successful economic and political steps the population of Azerbaijan is growing fast, which is also gratifying.

The steady growth of the population every year, of course, should urge the government to be more active. At the same time, it suggests that the creation of new jobs should be an ongoing process. We can’t just say that we have already created a million permanent jobs, so let's stop paying attention to this issue. No, this should be an ongoing process. Industrialization, agriculture, high technology and other industries need to develop rapidly, so that we could continue providing our citizens with jobs in the future too.

Therefore, I believe that this is time to prepare an elaborate concept in this regard. So far this has been happening rather spontaneously. But our population will continue to grow. The higher the population growth, the higher this percentage will be in subsequent years. It is one thing when a population of 8 million people increases by one or two per cent, and it is quite another when this occurs to a population of 10 million.

So these figures are also set to increase. So we need to start discussing a long-term employment concept. Some work has already been done and we need to further elaborate that: how many jobs should be created in which industries, what should be undertaken to do that, what institutional reforms should be carried out and how much investment should be attracted?

I think that this should be the key factor in determining public investment spending because in previous years and even now we have been channelling funds into the areas in need of development the most. Infrastructure, social projects and defense spending are, of course, necessary, and this is part of a thought-out policy. But now we need to pay more attention to employment issues. As a result of the third regional development program, all of our basic infrastructure and social issues should be resolved by 2018. I am sure that it will be the case.

The program on the development of Baku and its suburban settlements is under way. This program is designed for a shorter period and should be completed by 2016. I believe that everything in this area is proceeding according to schedule and there are no problems. Social issues were the focus of attention in the first six months. The average salary has been raised and now constitutes 440 manats or 560 dollars. I am sure that it will be even higher. Social infrastructure projects are being implemented. More than 80 schools and over 40 medical institutions are being renovated or built. So this issue is also being addressed with the funds allocated to the social sphere.

At the same time, major reforms are carried out in the area of social protection. Transparency in this area is ensured. This goes down well with the public. I am confident that the reforms will become even more profound. The reforms should be deeper in terms of transparency. The leading countries of the world have accumulated a lot of experience in this field. We, of course, are studying and applying this experience. The situation in the social sphere in Azerbaijan should not lag behind leading countries of the world. I believe that we have all the possibilities to achieve that.

In the first six months, we have, of course, paid special attention to military matters. The process of army building is well under way, the reforms in the army are deepening and the discipline enhancing. Combat capability of our army is at a high level and increases with every day. The exercises conducted on the frontline on Army Day and recently are issues of great importance both in practical terms and in terms of demonstrating our strength. In a recent meeting with the ambassadors I talked in detail about this and about foreign policy in general. I do not want to repeat that. I just want to say again that the territorial integrity is the basic norm and principle of international law. The Nagorno-Karabakh conflict can be settled only on the basis of this principle.

Over the course of these six months serious steps have been taken in the oil and gas sector, in particular in connection with the Southern Gas Corridor. Preliminary tenders have been announced. It is possible to say that the implementation of the TANAP project has already begun. Preparations for the construction are well under way. I believe that we will implement this major project on time. The initiator of the Southern Gas Corridor is Azerbaijan. This project will hugely benefit Azerbaijan, its neighbors and European countries. Azerbaijan has demonstrated leadership qualities in this issue too. These three projects – "Shah Deniz-2", TANAP and TAP – will redraw the energy map of Europe, turn Azerbaijan into a very important economic and energy partner and, most importantly, secure the well-being of the Azerbaijani people in economic and financial terms. As a result of this project, we will be receiving great benefits from gas exports for at least a hundred years to come and Azerbaijan's role in the world will increase further.

Today we are playing a very important role in the world. With each passing day our credibility, importance and influence are increasing. We have achieved all this ourselves. Today, energy policy is an integral part of our overall policy, an issue of national security not only for us but also for all countries. Some tension observed in the region and Europe in recent months shows again that no country can feel comfortable or pursue an independent policy without energy security.

We have long provided for our energy security and are now playing a role in the energy security of other countries. This is a positive role. Our partners appreciate that. Azerbaijan has never used its energy resources for other purposes. Our philosophy and approach to this issue lie in the fact that energy resources should expand cooperation and strengthen unity. By pursuing this policy, we certainly provide for our national interests. Today, our interests are provided for both in the region and in the world.

In the coming years, due to the implementation of the TANAP project, tens of thousands of new jobs will be created in Azerbaijan. Azerbaijani companies will participate in these projects. Azerbaijani companies won the bidding on the contracts signed recently – both directly and together with foreign companies. Azerbaijani companies have been entrusted to implement contracts worth several billion dollars. This is the attention and concern of the state about the private sector.

As a result of the first major projects, our companies were practically able to stand up and accumulate capital and experience. Then they started to invest in Azerbaijan. I also recommended that to them. At the same time, we created an environment in Azerbaijan whereby investment was the most comfortable way. Of course, it is necessary to invest in other countries too, and we as a state are doing that. But the local companies working here would be better off investing in Azerbaijan. The return on investment is higher and the investments are also protected by the state. Therefore, as a result of the implementation of TANAP and “Shah Deniz-2” projects, our companies engaged in construction, services, other areas and, of course, the energy sector should be prepared. They should participate in the bidding and make good proposals to win. Thus, they will pay more taxes and create more jobs. In short, our energy policy should serve the development of the economy in this way, not only by channelling the revenue into infrastructure projects. This will be the case, of course. As a result of these projects, we will obtain large revenues which will be spent on the development of the economy and social issues. As a result of the contracts, the creation of jobs will be sped up through the activities of local companies and the creation of new industries.

We as a state are ready for that. With this aim, a policy of industrialization has been under way for many years, industrial parks are being created. There are and will be other initiatives. I will speak about that later. In short, our industry must be ready for this. To a certain extent it is ready, but I think that in the next year or two industrial issues should be given more attention both by the state and private entities.

In other words, the work we have done in the first six months is commendable. There is a great atmosphere in the country and a perfect public and political situation. Stability is fully guaranteed. The Azerbaijani people and the work we doing are the guarantors of stability.

The well-being of the Azerbaijani people, the justice that has set in, including the social justice and the fight against negative phenomena, further reinforce these positive trends.