Closing speech by Ilham Aliyev at the republican conference on development of sericulture, tobacco and hazelnut production

Today's meeting shows again that great support and attention are being paid to the development of tobacco growing, silkworm breeding and hazelnut farming. I am sure that after this meeting work in these sectors will be carried out even faster. The proposals made today will be analyzed and reflected in the decisions taken.

And now I want to express my thoughts on some of the tasks facing these traditional branches of agriculture. First, we must return to history and analyze the results achieved in this area in previous years. As I noted in my opening remarks, due to the activities of great leader Heydar Aliyev in the Soviet period, there was rapid development in these sectors. True, in the period of independence we are building our economy on the basis of the principles of a market economy. Agriculture also develops on the basis of these principles. Unlike the Soviet period, there are no planned commitments now. Farmers grow the produce that is advantageous for them and supply it to markets. At the same time, recent history shows that farmers experience difficulties without serious support from the state. In Azerbaijan, special attention is being paid to the development of agriculture. I can say that unique conditions have been created. I think that the practice of tax exemptions is applied only in Azerbaijan. There are other benefits, subsidies, loans, etc. Despite this, the state should and will support the development of strategic agricultural branches. We should also know – as I also said in my opening remarks – that in Soviet times we were part of a single all-Union agricultural complex. Distribution was carried out by the State Planning Committee of the Soviet Union at the time: which republics should grow which agricultural products. Thus, these branches developed on a planned basis in Azerbaijan. Today, of course, as I noted, food security issues are coming to the fore. Therefore, the successes we once achieved in tobacco growing and silkworm breeding are now measured with large numbers. However, other products are cultivated on these lands now – mostly grain, corn, etc. Consequently, the figures I am going to cite are some sort of a digression into history for us. At the same time, it will be impossible to reach these figures, of course. But we must try to approach them.

Thus, the peak period of tobacco growing was in 1978. Whereas in 1970 tobacco was grown only on 14,000 hectares, this figure reached 18,000 hectares in 1978 – thanks to Heydar Aliyev's activity. In 1990 it dropped to 14,000. Then the decline rate accelerated. In 2014, tobacco was sown on just 1,000 hectares. Gradually, we managed to increase the area under cultivation. In particular, in 2016 tobacco was sown on 2,400 hectares and in 2017 on 3,200 hectares. Of course, I will tell you what our plans for the next years are.

As for the production of tobacco, we produced 24,000 tons in 1970 and 57,000 tons in 1980. In other words, tobacco production has more than doubled. In 2015, as I noted in my opening remarks, we practically lost tobacco growing. In 2015, tobacco was sown only in three districts – Sheki, Zagatala and Gakh. Today, tobacco is sown in 13 districts. Whereas in 2015 tobacco was sown on 600 hectares in Sheki, now this area has been brought up to 843 hectares. In Zagatala, sown areas were increased from 468 to 744 hectares and in Gakh from 300 to 600 hectares. At present, tobacco is sown on 3,200 hectares.

In the coming years, it is necessary to expand cultivated areas. To this end, the land plots in state and municipal ownership which are permanently provided with water should be allocated. Producers of tobacco should be able to receive loans on preferential terms. This is not being done at the proper level. Therefore, this area should be given special attention.

The National Fund on Support for Entrepreneurship should prepare a special plan for the development of tobacco growing. A suggestion has been made here that our reception points and drying chambers are not up to par. Probably, the reason is, as I have already mentioned, that two years ago tobacco was produced only in three districts and now in 13. In these districts, production will grow. Therefore, each district should have a reception point and a drying chamber. The state is ready to provide support. I will instruct the Ministry of Economy, the Ministry of Agriculture and the Presidential Administration to address these issues, so that such chambers could soon be bought.

When I visited a reception point yesterday, I was informed that we can produce such chambers in Azerbaijan. I think that it is possible – it is not too difficult. If it is possible, it probably has certain technological features. These production sites should be created as soon as possible. According to information provided to me yesterday, the peculiarity of tobacco is that it is difficult to transport it for long distances because the quality is lost. Therefore, each district engaged in tobacco growing should have reception points and drying chambers soon.

When getting acquainted with the work of the tobacco factory yesterday, I saw that there was new equipment installed there. This factory covers a full production cycle now. This being the case, our export opportunities will also increase. We export both raw tobacco and ready-made tobacco, and we must expand the geography of our exports.

During meetings with several of my colleagues, the heads of countries importing tobacco from abroad, I raised the question of these countries buying tobacco from Azerbaijan. And this is already producing results. The geography of our exports is expanding. Our tobacco is of high quality. Therefore, I believe that given the growth of production expected in the coming years, we must already plan which markets to export to.

Of course, one of the main tasks is to increase the production of cigarettes in Azerbaijan. I said this before and will say it again today – we should make sure that the people of Azerbaijan smoke less. It is a bad habit which creates serious dangers and problems for people’s health. Therefore, appropriate measures will be taken to ensure that the people of Azerbaijan gradually give up this habit. However, there is a consumption of cigarettes in Azerbaijan today. According to the information provided to me, 10 billion cigarettes are consumed in Azerbaijan. Of these, only 1.6 billion are produced in Azerbaijan, i.e. 9 billion cigarettes are imported and currency of about $150 million annually leaves the country for this purpose. Therefore, to supply the domestic market and, more importantly, obtain access to foreign markets, we must soon achieve the development of cigarette production in Azerbaijan. First of all, the domestic market should not depend on imports, so that the currency does not leave the country. After that we will also deal with exports.

It is necessary to increase the capacity of the existing cigarette factories. We do not have too many cigarette factories. I think we should also establish cigarette factories equipped with the latest technologies. There are countries where tobacco is not produced. Their climatic conditions are not suitable for this. However, there are several cigarette factories there. They buy raw tobacco from us, produce cigarettes and then sell them to us. This shows that it is a very profitable industry. We always knew that this is a profitable industry. If we consider that we have our own tobacco, the profitability of this industry will increase even more. Therefore, the state provides support. This industry is being given a very serious impetus and everything will be provided – the necessary equipment, reception points and technologies. We should make sure that the full cycle of production is available in Azerbaijan.

Before 2021, the acreage for the production of tobacco should be doubled. It should be brought from the current 3,200 to about 6,000 hectares. There are opportunities to do that, and relevant bodies should tackle this work. Under such circumstances, if we take the average yield of 2 tons, then 12,000 tons of dry tobacco will be produced in Azerbaijan every year. This will bring great benefits to our country and our currency will not go abroad. In fact, we may have export opportunities.

A state program on the development of tobacco growing will be adopted. The program is practically ready. It will soon be adopted in the light of the opinions expressed today and my observations during this trip. The adoption of this program once again demonstrates that the state is paying very serious attention to this sector.

Let’s move on to silkworm breeding. This also requires a digression into history. In 1970, the production of cocoons in Azerbaijan was at the level of 3,700 tons. In a matter of 10 years, under the leadership of Heydar Aliyev, this figure reached 5,000 tons. The head of the "Sheki Ipek" joint-stock company spoke here. I can see that he is an experienced man and has worked during the Soviet era. He knows perfectly well that thousands of people used to work at “Sheki Ipek”. Subsequently, the factory was practically closed. We have restored it and 600 people are said to be working there now. But the potential, of course, is much greater. Unfortunately, the production of cocoons plummeted after 1991. In 2015, a little more than 200 kilograms of cocoons were harvested. As a result of prompt measures, we brought this figure to 244 tons in two years, and this is only a beginning.

Silkworm cocoons are produced in 30 districts of Azerbaijan. I want to name the first 10 districts so that the public also knows where cocoons are harvested. Zardab District is in first place – 27 tons. It is followed by Fizuli – 24, Zagatala – 21, Sheki – 18, Agjabadi – about 17, Agdam – 13, Barda – 12.5, Gakh – 12.5, Kurdamir – 11.5, Balakan – 11 tons. Of course, there is rapid growth here, but the potential is even greater. Cocoons can be grown in 30 districts. The state has taken everything upon itself. Silkworm breeders are provided with materials and subsidies, "Sheki Ipek" accepts all the cocoons. Therefore, I am sure that there will be a very serious growth in the development of sericulture. At present, 3,000 families are engaged in silkworm breeding.

As for our future plans, the real growth rates suggest that it is possible to procure 500 tons of cocoons next year. If we take into account the trees that have already been planted and will still be planted, we can reach the level of at least 1,000 tons in 2019. If all our plans are implemented, we will be able to produce 6,000 tons of cocoons in 2025. Thus, we can reach the highest level of the Soviet time and even surpass it. There are real opportunities to do that. Trees are being planted extensively. Two years ago, we had a little more than 300,000 mulberry trees. Over the past year or two, their number has reached 2.2 million. All seedlings are purchased by the state abroad, currency is paid, silkworm seeds are delivered, and the process of planting trees has become widespread. The state takes upon itself the main burden again. The instruction has been issued to plant another 8 million mulberry seedlings in the next four years. Now we have 2.2 million trees and 8 million will be planted additionally. Thus, we will have 10 million mulberry trees. This work will be carried out by the Ministry of Ecology and Natural Resources. Let all relevant bodies also join this work. At the same time, I would recommend that peasants and farmers individually plant mulberry trees to increase production. Thus, sericulture will gain momentum in Azerbaijan. The fact that sericulture is practiced in more than 700 villages shows that there is great interest in it. This is very gratifying.

Additional measures have been taken this year to develop sericulture. There used to be a breeding station here in Gakh District. The Minister of Agriculture has shown me its pictures – it is in poor condition. Therefore, instructions have been given and funds allocated. A total of 4.5 million manats have been allocated from the Contingency Fund of the President so that the Gakh breeding station could soon be reconstructed and fitted with cutting-edge equipment. We have already reduced and eliminated our dependence on foreign markets. All the materials we need will now be grown in Azerbaijan and we will have good opportunities for the independent development of this sector.

The issue about reception points was raised here. As is the case in tobacco growing, we need to create reception points for silkworm breeding in a short time. Please send your proposals – the state is ready to take it upon itself. Let them calculate how much money and investment is required and what other work should be done. I believe that reception points should be created in all regions this year and in 2018.

The activities of “Sheki Ipek” should be further expanded. According to the information available to me, the current production capacity of "Sheki Ipek" is 135 tons of raw silk per year. If we reach our goal and procure 6,000 tons of cocoons, then more than 600 tons of raw silk will be produced from 6,000 tons of raw cocoon. Now the production capacity is 135 tons. This suggests that as a first step we should enhance the capacity of "Sheki Ipek". We need to look – if public funds are needed, we are ready to allocate them so that the production capacity of the plant could grow soon and it could process about 3,000 tons of raw cocoons. According to the information we have, we will reach this figure fairly quickly. At present, “Sheki Ipek” can process 1,300 tons of raw cocoons in a three-shift cycle. Thus, the operation of "Sheki Ipek" was been restored, it must be restored in full, expanded and be able to process 3,000 tons of raw cocoons. Along with this, we must not only think about the establishment of a new silk factory, but also take specific steps. The creation of a new factory with processing capacity of 3,000 tons is necessary. Let the relevant state bodies, the Presidential Administration, ministries and local authorities consider this and put forward proposals. I think that the state should provide support in this area. Of course, it would be very good if private investors joined this work. If foreign and local investors show interest, the state is also ready to support them because it is also a very profitable sector. Investors should rest assured that there will be no problems with the development of this sector. Many trees are being planted now. This represents a resource base of the silk factory to be created. So there will be no problem, and it is only necessary to invest and then produce finished products. Relevant state bodies should work on investment proposals and report to me soon as to where it would be more expedient to locate and operate such a factory.

Of course, we are already accessing world markets with our silk, but we should do so even more broadly. We should inspect and analyze export markets. I should also note that there is also a lot of competition here. The markets are already captured, and additional effort should be made to access export markets. Therefore, the creation of such a production site would only be a first part of the work. We should access foreign markets with our finished products – both with silk threads and finished products, especially if we consider that silkworm breeding has an ancient history in Azerbaijan. Kelaghai is our national art and treasure. Therefore, these issues should also be widely studied.

Sericulture, in turn, will give a powerful impetus to carpet weaving. We are seriously engaged in the development of carpet weaving. "AzerKhalcha" has set up factories in 13 districts and the first of them was opened in the city of Horadiz with my participation last year. This year and in 2018, new carpet factories will be opened in 12 more districts, and we should organize this work on the basis of local raw materials and to produce silk carpets. Therefore, the development of the cocoon industry will give a serious impetus to many production branches. As is the case in tobacco growing, a state program should be adopted to facilitate development of this sector.

Unlike silkworm breeding and tobacco growing, hazelnut-farming has been developing in Azerbaijan in recent years. It did not develop at a proper level, but if we look at the statistics, we will see that the area of hazelnut orchards in Azerbaijan in 2000 was 18,000 hectares and reached 30,000 hectares in 2013 and 32,700 hectares in 2015. Now hazelnut orchards cover 55,000 hectares. This is the result of the fact that the state has taken upon itself the development of this sector as well. All necessary technical measures were carried out at the expense of the state: seedlings were brought abroad and grown in Azerbaijan, and a huge amount of work was done in a short period of time. The acreage has increased from 32,000 to 55,000 hectares, i.e. new hazelnut orchards have been established on 23,000 hectares. Of course, this is not the ultimate goal. I will say what our plans are a little later. A total of 14,800 tons of hazelnuts were exported. The main countries where we export hazelnuts are Italy – $40 million, Russia – $30 million and Germany – $24 million. In general, hazelnuts are exported to 25 countries. This shows that there is demand in these countries, but hazelnuts are exported to these countries in very small quantities. The statistics shows that there will be no problem with the export of hazelnuts in the future. We should simply expand the cultivated area in the near future and help the farmers.

The goal is to bring the area of hazelnut gardens to 80,000 hectares. This is a realistic figure prepared on the basis of analysis. If we have risen from 32,000 to 55,000 hectares in just a year or two, then 80,000 hectares is quite a realistic figure. We must achieve this within the next few years.

Let’s move on to prices. Last year, the biggest profit of all agricultural products was fetched by hazelnuts. I must say that, in my opinion, hazelnuts can’t maintain this leadership because many greenhouses are being created in Azerbaijan now and the production of tomatoes is growing rapidly. Tomatoes are in first place among agricultural products that generate income. Therefore, hazelnut farmers should try not to give up their lead.

Last year, the sale of hazelnuts brought the country $105 million in currency. The selling price was low. The note I have here says that the price of one kilogram was 4.8 manats last year. In April 2017, a kilogram of hazelnuts was sold for 6.2 manats. The current price in the world is 10 manats. Therefore, I think that due to the increase in the selling price of hazelnuts, there are growth opportunities here. At present, 9,000 people are engaged in hazelnut farming. After the new orchards are set up, their number will reach about 20,000. On our recommendation, the Association of Hazelnut Producers and Exporters was set up to ensure that these things are managed in a centralized manner, farmers are provided with help and their products are centrally purchased and exported.

The main buyers of hazelnuts are chocolate factories. We sell hazelnuts mainly to them. But we should try to sign direct contracts, i.e. for intermediaries to play a small role. We should try to increase the assortment of hazelnuts because we sell it abroad in vacuum packing. Abroad, it is either used in factories or packaged. We should do package and sorting in Azerbaijan. Therefore, new equipment should be brought so that we could export finished products to world markets. Our hazelnuts are of very high quality and are highly valued in foreign markets.

Our trading houses are emerging in foreign countries now. The first trading house has been set up. Trade missions are being set up in foreign countries. Such missions are also being sent to many countries, and hazelnut exports are always indicated. Countries are ready to accept these products. We simply need to increase production and export finished products. Hazelnut farmers are well aware that Azerbaijan holds one of the leading places in the world for hazelnut production. As a result of the measures to be taken now, we can reach the third place in the world.

At today's meeting, we are extensively discussing these data because these sectors have great prospects. I should also say that such meetings are very useful and meaningful. The first meeting on cotton growing led to a revolutionary turn in this sphere. Sown areas increased from 17,000 to 136,000 hectares. If the average yield this year is 20 quintals, then the production of about 260,000 tons of cotton is expected. Our goal is to bring this figure to 500,000 tons. As a result of all-round measures, we managed to achieve this in a short time. Therefore, experience shows that we can achieve the desired effect in tobacco growing, silkworm breeding and hazelnut farming in the near future. This meeting will give a serious push to these sectors. New jobs will be created and the living standards of farmers will increase. The non-oil sector will develop, our export opportunities will expand and the dependence on imports will decrease. These are the main objectives.

As for the overall development of agriculture, the Azerbaijani state regularly allocates large funds for this sphere. Investments are made. The infrastructure projects being implemented now and to be implemented in the coming years also serve the development of agriculture. We are seriously engaged in the construction of roads. The “40 roads project” initiated this year actually covers more than 200 villages. It serves, among other things, the development of agriculture. This not only brings comfort to people, but also creates conditions for farmers and peasants to export their produce to markets. Therefore, I have issued the instruction that large funds should be allocated to this sphere starting from next year. This includes prioritization in terms of the number of settlements, their population and proximity to sown areas. Road construction should play a role in the development of agriculture.

Other infrastructure projects also serve the development of agriculture. If there is no electricity or water supply, no-one will invest anywhere. Therefore, extensive work is being done for the development of agriculture. As I noted, farmers are exempt from all taxes. In recent years, state-of-the-art equipment has been purchased and imported into the country. This year, 10,000 units of equipment will be delivered to our country. Of these, 7,000 have already been delivered – in a matter of one year. The Azerbaijani state allocates hundreds of millions of dollars for this, and then leases the equipment to farmers on preferential terms, so that they could use it. Recently, the Minister of Agriculture told me that we have practically provided ourselves with agricultural machinery. Of course, new machinery will be acquired in the coming years. But we have managed to eliminate the biggest difficulty. Subsidies are provided, including those for the development of the sectors we discussed today. This is also very important. Fertilizer and fuel are provided on favorable terms. Entrepreneurs are provided with preferential loans at the level of 2 billion manats, and most of this goes to villages to facilitate the work of farmers. Business people are provided with guidance so that they could organize their work better. I do not know of any other country that would do so much for the development of agriculture and private enterprise as Azerbaijan does. Maybe there is, but I haven’t heard of any. The best conditions are in Azerbaijan, and we have managed to achieve the social and economic development of the regions because of this.

I am sure that the results of today's meeting will be very positive. I am sure that all the instructions I have given will be implemented. The private sector, farmers and villagers will certainly play an active role in this. State bodies – the Ministry of Economy, the Ministry of Agriculture, the Ministry of Ecology and Natural Resources and the Open Joint-Stock Company "Melioration and Water Management" will manage all these issues. Overall management of all this work will be carried out by the Presidential Administration.

I wish you continued success. I am sure that these sectors will have very good results. Thank you.