Closing remarks by Ilham Aliyev at a meeting of the Cabinet of Ministers on the results of socioeconomic development of 2010

The tasks for 2011 are clear. We must ensure economic development this year as well. I am sure that our economy will expand further. Macroeconomic stability must be maintained. I am convinced that inflation will not exceed single-digit levels. In particular, we should step up control over the consumer market. A lot has been done in this area, and this work must be continued. We must prevent artificial price hikes, encourage free competition and thwart monopolistic trends. There should be no unnecessary inspections. In particular, we must put an end to unwarranted inspections by law-enforcement bodies, so that we could develop private enterprise in the country and give it a powerful impulse.

It is no secret that one of the distinctive features of developed countries is that small and medium-sized enterprise contributes a lot to the gross domestic product. Azerbaijan should take this path as well. True, we do have a strong energy sector, and it would be naïve to compare it to the non-oil economy. But we must try to develop small and medium-sized enterprise even more rapidly. The state supports this. I believe that the recommendations, ideas and political support I have expressed during numerous meetings with businessmen play a role in the development of private enterprise. In addition, state loans and the work carried out by the National Fund on Support for Entrepreneurship provide great support for private enterprise development.

We must ensure that additional funds are allocated to this sphere in 2011. A key role in diversifying our economy is played by the development of the non-oil sector. If we hadn’t decided to pursue this policy, our country's economy would be lop-sided today. I remember a number of international organizations suggesting several years ago that Azerbaijan would be affected by the Dutch disease, that our economy would be developing in a one-sided manner because it relies only on oil and other industries don’t have a future. But our policies show that Azerbaijani economy is diverse, and the talk of the Dutch disease has ended.

We need to continue this positive momentum, take additional measures in 2011 to facilitate the development of private enterprise and the non-oil sector. I want to reiterate that the state, the President are and will be providing political support. Government agencies, both central and local, should encourage private enterprise development, not create obstacles and remove all artificial barriers out of the way.

At the same time, I think that we must broaden the tax base in 2011. There are good opportunities for doing that. Tax reforms have been successful. We are already applying the "one window" principle in Azerbaijan. Other progressive reforms are ongoing. In general, work in this area is progressing. However, it should also be acknowledged that quite a few people are evading taxes. There are still numerous cases of tax evasion. We are aware of that and should be more serious and persistent in combating such facts. 

We must ensure that payments in cash at commercial and catering facilities are minimized. There are credit cards and a significant proportion of our population already has them. Every retail outlet and restaurant should accept credit cards. In this case, the tax base will be expanding without any effort. In other words, there is still a lot to do in this area. I have recently issued certain instructions to the tax minister. I would like to express my views on this subject here too, because the situation in this field should not differ from that of developed countries. I expect drastic and comprehensive measures to be taken in this sphere in 2011. 

We have a strong economic potential. This was confirmed in the speeches made here today. According to the World Economic Forum, we are the most competitive economy in the CIS. The data regarding the human development index also show that our economy and the ongoing socioeconomic reforms are successful. Leading international agencies upgraded our rating in the years of crisis, which shows that we are moving in the right direction. If we consider that we have vast reserves of oil and gas and our currency reserves are approaching $30 billion – and I am sure that they will increase by several more billion in 2011 – this is great support for us, a great asset. But this does not mean that everything is good in the country. Of course not. We must try, especially in 2011, to heed more attention to that. We must eliminate all the shortcomings. In areas where our work falls short of international standards, we should bring it closer to international and European standards. I believe that if we succeed, our budget spending will increase, while accounting and reporting issues will be solved with greater accuracy. I want to reiterate that there are all the opportunities for more effective work in this area.

Last year, the National Fund on Support for Entrepreneurship provided loans amounting to AZN 115 million. Over 99 per cent of the loans related to districts. I think we should arrange for the provision of loans at about the same level this year. These loans are paying off. Thanks to them, hundreds of enterprises have been set up. It is important that these loans are promptly repaid and involved in lending again.

There is a positive business and investment environment in Azerbaijan. Azerbaijan, as always, is a CIS leader for direct foreign investment per capita. At the same time, we need to take extra steps to improve the business environment, get rid of red-tape, bribery and corruption, and strengthen public oversight. These are all very important issues. If we achieve this goal, our economy will develop more rapidly, our gross domestic product will further increase, tax revenue will rise. This will result in reduced transfers from the State Oil Fund into the state budget.

We must ensure, as I had set instructed earlier, that the funds collected by the Ministry of Taxation and other bodies are sufficient to cover the current expenditure and that transfers from the Oil Fund are spent only on investment projects.

In 2011, we must take further measures to bolster the development of agriculture and continue to provide subsidies. The work done in previous years is paying off, the construction of cold-storage and grain warehouses has had a positive impact on the development of agriculture. In the future, these positive trends should be strengthened. At the same time, we need to develop seed farming, which is very important for agricultural development. Major private enterprises have already been established in this field. I have visited them and think that we should support such initiatives. It is necessary to create new opportunities for entrepreneurs, to provide loans. Local executive authorities should support them, so that issues related to seed production could be solved soon. 

In the field of cattle-breeding, we are in the process of importing purebred cattle. This work should be continued in 2011 and additional funds will be allocated. There are excellent results. In general, we have repeatedly talked about this, raised the issue of establishing food production in Azerbaijan as far as possible in order to minimize our dependence on imports. On some products we have achieved that, but we should strengthen the sectors in which we still rely on imports. Appropriate instructions have already been issued. To a certain extent, this can be done within the investment program. Besides, it is necessary to channel loans into these sectors: first of all, poultry production – we are providing for ourselves at the level of 70-75 per cent, but there is a potential for complete self-sufficiency. I think we must resolve this issue in 2011-2012. 

Agro-leasing and agricultural services are of great support to agriculture. Of course, state intervention and policies are also crucial. If Azerbaijan did not now produce tractors, the money would have to be spent outside. The Azerbaijani state has allocated these funds and is procuring hardware. Some of the agricultural machinery is already produced in Azerbaijan. We should work even faster in this and other sectors.

It is necessary to take additional measures to increase grain production. Last year there was a decline in grain production. There were natural causes for that. But in 2011 we must try to reach the level of 2009 or higher. There has been an exchange of views on that. Certain steps may be taken to establish large farms because we have completed the land reform. I believe that Azerbaijan holds a leading position in the CIS in this area as it has conducted very progressive reforms. At the same time, we should take extra measures to cultivate previously unused lands. To set up large farms, the state has to resolve all infrastructure and equipment problems. Perhaps business people should submit proposals on the basis of a competition, and they should be considered. Afterwards, the state will again use its financial capabilities to support the establishment of grain production farms. We have to do it because entrepreneurs may not have enough funds to do that. The state should envisage long-and low-interest loans for that. 

Therefore, we first need to identify the areas to be used for these purposes in 2011. We know some of them, but this process should be clarified. There should be a mechanism to ensure that we can push this process forward within the year. Besides, given the fact that we are currently not only providing ourselves with many products, but are also exporting them and expect to further increase exports in the future, we should also explore new markets. We need to find and access new markets. To address these issues, the Ministries of Economic Development and of Foreign Affairs should work together. I have repeatedly expressed my thoughts on the matter. We should actively access foreign markets both with investment and finished products. There are opportunities for that, a significant proportion of the products made in Azerbaijan already meets international standards. These are quality, clean and natural products. This goal can be achieved with the aid of national exhibitions. As already mentioned, our first national show was a success. In 2011, we plan on conducting national exhibitions in several countries.

In 2011, all the infrastructure projects planned and being implemented will be continued. Our budget expenditure for 2011 amounts to $16 billion, while the consolidated budget is $19 billion. This means there are sufficient funds to use in infrastructure projects. I am sure that I will soon receive the investment program for 2011 which should reflect all the instructions. We need to continue our investment policies. We have carried out substantial work on upgrading the infrastructure. But much still remains to be done: road construction, drinking water, restoration and reconstruction of sewage systems, irrigation, drainage, establishment of the social infrastructure, gasification, construction of electricity lines. But we know what we are doing and when. All our work is based on specific programs. 2011 should be no exception either. We should approve the investment program as soon as possible so that not to waste time. It is already mid-January. We must approve the program before the end of the month and allocate resources.

As I said in my opening remarks, environmental measures will be continued. Environmental activities are important for all. In 2010, we controlled this area very strictly, paid enormous attention and allocated significant funds to it. As I said, this has really become a nationwide initiative. Although the “Year of the Environment” is officially over, its spirit should be continued. We should continue tree-planting at the same rate. In addition, we must commission treatment plants and implement drinking water projects. 

I think that in 2011 we need to implement our first project on the desalination of water from the Caspian Sea. I put forward this initiative several months ago. As you know, drinking water supply should always be in the spotlight. The Oguz-Gabala-Baku water pipeline is a historic achievement. In 2012, we should complete the construction of the Samur-Absheron canal and the Takhtakorpu water reservoir. This will also create additional opportunities for us. But we also have such a major source of water as the Caspian Sea, and its water is not very salty. We have studied the experience of Middle Eastern countries and know how they desalinate the water to use it for irrigation and drinking. In other words, we need to tackle these projects. In 2011, we must implement our first pilot project, i.e. a specific project on using the Caspian water primarily for irrigation. If this project is successful, and I have no doubt it will be, large-scale measures will be taken afterwards as part of a specific program. 

In 2011, additional measures will be taken to create renewable energy sources. In fact, first steps in this area have already been taken. Small hydro power plants are under construction on mountain rivers. A map of all our water sources has been approved. Last year, I personally took part in laying the foundations for a number of stations. This work must be continued this year. At the same time, we need to take even more serious measures to use other renewable energy sources. I put forth this task early last year. A year on, we still have neither solar nor wind energy facilities. What we have is far not enough. I believe we could have done something in this area and regret that we could not achieve that. In 2011, Azerbaijan should begin work on installing solar panels. I know that Azerbaijan will build plants manufacturing solar panels, the private sector is also showing an interest. Until these enterprises are built, we have to import solar panels. A year ago, I gave the instruction that places should be identified. We need to install these facilities in places not fit for agriculture. The lands near power lines do not require huge expenditure. Unfortunately, we did not achieve anything in this area in 2010. This is unacceptable. If the President issues an instruction, it must be fulfilled. I think that the bodies dealing with these issues faced problems with the division of responsibilities. An end must be put to that. It is our common cause. If an instruction is given, it must be carried out. It is necessary to develop a mechanism. The large funds stipulated in the state budget for this purpose have remained unused. Why? We have no economic or financial problems, there are sufficient funds. After the mudslides and floods, we made adjustments to the budget and an additional $300 million was engaged. A considerable part was spent on building houses, while the rest on the construction of dams. Why aren’t these resources used? Therefore, I think that from the beginning of 2011 we should give this matter serious consideration. I expect specific results. These are steps towards the future.

We have oil and gas reserves enough for at least 100 years. We will now have additional power generation capacities, we are exporting electricity. That is, we have fully ensured our energy security. But the sector of renewable energy means environment, economy, modernization, technological progress and development. Therefore, we need to start this work as soon as possible. 

In 2011, additional measures will be taken to develop information and communication technologies. Azerbaijan is about to become a country with its own space industry. In 2012, our first satellite will be put on the orbit. I think that even after that we should work on this area. We should put other satellites on the orbit. Azerbaijan will thus turn into a country with a developed space industry. This is also a step into the future. We can see that the balance of powers in the present-day world is determined by technological progress. This has always been the case, but today it manifests itself most clearly. The development and power of a country are measured by its technological progress and achievements, especially in information technology, telecoms, electronics, space industry. We should not lag behind others in this area. Although this sphere has never developed in Azerbaijan, we have to do it. We never had a defense industry either, but over five years we have built such a powerful industry that we can now provide for ourselves, export our products and participate in exhibitions. A similar approach should be applied to the space industry. Azerbaijan should create a powerful space industry over a short time. This is necessary for us in all respects.

In 2011, extensive work will be done in the area of army construction. Overall, our defense expenditure exceeds $3 billion. This is 30 per cent more than Armenia’s total budget, which is in the range of $2 billion. I repeat, our military spending alone constitutes $3 billion. Of course, Azerbaijan cannot be compared to Armenia, we are a developing, modern, strong and rich country, while Armenia is in recession, a poor country dependent on foreign aid. The difference between our countries is incomparable, and it will gradually grow further. We can allocate any amount to the military, while Armenia can only provide for itself at the expense of foreign aid. This dependence, of course, manifests itself politically too. I can say that, unlike Armenia, Azerbaijan is completely independent. We have economic, political power and a strong will to conduct an independent policy. As I said earlier, in 2011 we expect to commission new defense industry enterprises. We must try to ensure that the enterprises providing for the needs of our army and military entities are of priority importance. We must try, and we are already succeeding in that, to import the latest military equipment to Azerbaijan.

This year we must also continue the construction of the social infrastructure – schools, hospitals, sports complexes, culture centers. All this will be reflected in the investment program. In 2010, we took additional steps to improve the plight of IDPs and raise their employment. A total of 6,600 IDPs moved into new homes last year. Three large settlements were built for them. This year we will continue this work. Improvement and creation work is under way in Baku and other cities and districts, our cities are becoming prettier and more modern. We must try to pay attention to this sphere in 2011 as well, so that landscaping work is carried out in all our cities, district centers and villages. 

In 2011, we expect to finish landscaping work around the State Flag Square. Last year we marked the opening of the Square. Currently, the area around it, covering about 60-70 hectares, is being landscaped and improved, new parks and a new boulevard are being established. We must try to landscape the whole area around the State Flag Square in 2011. In parallel with that, we must complete the building of a new road from the Flag Square to the boulevard and establish a new seaside boulevard. We have already begun this work. The industrial facilities located in this area are being moved elsewhere. Unused facilities are either being moved or knocked down. We have started the construction of a new boulevard, stretching from where it currently ends, i.e. the Sports Palace, to the State Flag Square. This is a major project requiring immense resources, but we must do it. As a result, our people will have great places to walk in.

A lot was done to establish new parks in Baku last year. Today, we can say that all parks located in the heart of the city are meeting the latest standards, and we are creating new ones. There are plans to transfer the Baku port to Alat. As you know, a large and beautiful park was established on an unused area of 4 hectares around the port late last year. We need to take industrial enterprises outside the city center. In particular, we need to relocate the industrial facilities situated on the seaside. Instead, we must build facilities that would only be used by the population. On the seaside, both in the direction of Zykh and Bayil, we must establish parks, alleys and boulevards where people can go for walks. In other words, in 2011 we should pay more attention to this area. These instructions must be envisaged in the investment program. 

Last year our country marked a very significant event – a nine-millionth citizen was born. It is encouraging that our population is growing. As of today, Azerbaijan has a population of 9,111,000 people. I am very glad that there is rapid growth. In 2010, a total of 166,000 babies were born in Azerbaijan. This is the highest indicator in the past 16 years, it demonstrates our development. I want Azerbaijani population to grow further, and I am sure that the processes ongoing in the country are creating conditions for achieving this goal.

This year we will mark the 20th anniversary of the restoration of our independence. Azerbaijan has been an independent country for 20 years now. Restoration of our independence, of course, was the result of the break-up of the Soviet Union. Azerbaijan and other Soviet republics became independent. However, Azerbaijan only regained its independence because the history of our independence started in 1918, not in 1991. This is why this date, 28 May, is particularly solemn for Azerbaijan. The main date of our independence is 28 May 1918. In 1991, following the collapse of the Soviet Union, Azerbaijan, along with other republics, gained independence, or to be more exact, as I said, regained it. We must extensively celebrate this anniversary in Azerbaijan.

Twenty years is a long and, at the same time, not very long time. One can achieve a lot in 20 years, but one can also achieve nothing. Over the past 17 years, without counting the first two years of our independence, Azerbaijan has indeed achieved historic successes. All the successes described here today are the result of this independence. Independence is the biggest treasure, the greatest asset for us. There is nothing more precious than independence. During this year, we must celebrate the restoration of our independence both in and outside Azerbaijan. In the coming days, I will sign an appropriate order in that regard.

The year 2011 has begun. Last year was declared the “Year of the Environment”. As I have said, good progress was made. I suggest that 2011 be declared the “Year of Tourism”. This year, 5 five-star hotels will be opened in Baku. I actually think that this is probably unique for the whole world. Over the course of one year, 5 five-star hotels will be opened in one city, in Baku. At the same time, three- and four- star hotels are under construction in Baku. A lot is being done in the region to develop the hotel business, tourism development in Azerbaijan is already a reality. To create this infrastructure, of course, the state requires significant resources. They are channeled into infrastructure issues. Hotels are being built by the private sector. This means that the level of confidence in Azerbaijan’s development is so high that people can invest millions, hundreds of millions here. Investors are sure that these funds will pay off. Meanwhile, our city is improving and modernizing. Creation of good conditions for those coming to Baku is, of course, an important issue.

At the same time, as already mentioned here, a winter and summer skiing resort, a whole skiing infrastructure “Shahdag” is being established. This project was developed exclusively by the state. I have repeatedly visited these districts. When I first went there, there was nothing there, only mountains and no settlements. Mountains are a few kilometers from settlements. Today, roads, electricity, gas, water lines are being built there, the state is building the first hotel. I am sure that from now on the private sector will also join this initiative because there should be a lot of hotels there. There will be a skiing center, elevators, medical centers, restaurants, places for entertainment there. In other words, “Shahdag” will be a recreation center meeting international standards. It should not and will not be any worse than the world's most advanced and popular resorts. This will fetch new investments and create additional conditions for the northern population. Thousands and maybe tens of thousands of new jobs will be created. The number of tourists coming to Azerbaijan will further increase, and Azerbaijan will become a very attractive travel destination.

We have a beautiful nature. The Caspian sea, beautiful mountains, rivers and forests are our greatest assets. We must try to bolster the development of tourism in 2011. Therefore, I think it would be fair to announce 2011 the “Year of Tourism”. We must do everything we can to achieve great results in this area.

2011 has begun. I am very optimistic of the future. I am absolutely convinced that 2011 will also be successful for the comprehensive development of our country. To achieve this, we must all work hard to further augment the power of our country and confidently take Azerbaijan forward. I wish you success in these matters. Thank you!