Closing speech by Ilham Aliyev at the Cabinet of Ministers dedicated to results of socio-economic development in first half of 2018 and future objectives

- The indicators of the past six months suggest that we will successfully achieve all the objectives we set ourselves in early 2018. In subsequent years, the economy of Azerbaijan should develop dynamically. Of course, it is necessary to deepen the reforms even more to ensure this.

The reforms carried out in recent years have yielded excellent results. If we had not implemented these reforms, we could not have achieved such great economic success. However, I believe that we must further deepen these reforms. We must make sure the Azerbaijani economy proves to be a long-term and sustainable economy in the future, so that our dependence on oil and gas reduces further and the development of the non-oil sector continues.

In the economic and financial sectors, it is necessary to ensure maximum transparency. This transparency will allow the Azerbaijani economy the opportunity to develop even more confidently and attract even more foreign investment to our non-oil sector. After all, the main reason for the inadequate level of foreign investment in this sector is an opaque environment. At the same time, it is necessary to take additional measures in legislation even though our legislation is already quite favorable for the attraction of foreign investment. Otherwise, investments in the amount of more than 230 billion dollars would not have been made in the country’s economy. However, it is the imperative of time to further deepen the reforms and ensure full transparency.

I can say that the reforms carried out in the tax and customs systems recently are bearing fruit. These spheres are interrelated and, of course, reforms should be and are being conducted in both spheres in parallel. I am sure that, as a result of the work done, we will see even better results in the near future. Tax and customs bodies must rise to the level of relevant bodies of developed countries of the world. In plain language, the task is precisely this.

Of course, personnel changes must be carried out, and they are carried out. I am sure that this will bear fruit. The experience of advanced countries should be applied in Azerbaijan. All state bodies, as well as entrepreneurs, should know that complete transparency is provided in tax and customs systems. Equal conditions have been created and an end has been put to unsound competition. Entrepreneurs should be absolutely clear on the rules of work. And they are quite straightforward: comply with the laws, pay taxes in full, not engage in smuggling and not damage the country’s economy. These are the fundamental conditions.

Entrepreneurs should also display responsibility in these matters. Cases of tax evasion must be stopped. This applies to representatives of both small and large enterprises. Law applies to everyone without discrimination. Such are my instructions to the leaders of tax and customs bodies. No-one can have any privileges. Every entrepreneur must fully pay taxes. There should be no payments other than tax. I am saying this both to government agencies and entrepreneurs. If such facts do occur, it is necessary to immediately inform the Presidential Administration and relevant bodies, because we must continue and complete the policy of full recovery in this area.

Serious reforms are also needed in the field of social security. Such tasks have been set before the new leadership of the Ministry of Labor and Social Protection of the Population. It is necessary to completely eliminate the mistakes and violations committed in this area. It is necessary to fully establish social justice and ensure transparency. The government is paying great attention to this sphere. I have repeatedly said that our policy is centered on the people of Azerbaijan, especially our socially vulnerable citizens. That is why we have moved to the system of targeted social assistance. That is why hundreds of thousands of families are receiving assistance from the state. However, people’s rights are often violated. People are faced with injustice. Those who need help do not receive it, while those who don’t need it get paid and then share this money with government officials. There are many such facts and a serious investigation is currently under way. It is necessary to ensure complete transparency in the field of social security. Social justice must be fully established.

At the same time, transparency of the social sphere and its operation on the basis of international experience will give a great impetus to our economic development. After all, informal employment in Azerbaijan is very large. The government is seriously dealing with this issue. So is the ministry. We must put an end to this. Mechanisms for this are available and are being further elaborated, so I look forward to great progress in the near future. We are taking and will continue to take serious steps to address informal employment. If we manage to come out of this situation, it will be a great support for the country’s economy. I should also note that informal employment exists practically in all countries. It depends on how countries and governments deal with this situation. Azerbaijan should be a country taking serious measures against informal employment. Of course, there are both administrative and institutional tools, and we must use both.

The government will always provide support for the socially disadvantaged. This is what our policy is about. Our citizens should not be worried – the state will always stand by them. The key thing is that this aid should be distributed fairly. It should be given to those really in need. Well-to-do people and those not in need of social assistance should not receive it. First of all, they should give it up themselves. This can be an indicator of a high level of their social conscience.

Of course, we must create new conditions for those living in difficult conditions and those still unemployed. The process of job-creation in Azerbaijan must be permanent. In my opening remarks, I said that 58,000 permanent jobs have been created. At the same time, more than 20,000 jobs were closed. If we look at these figures, we can see that the dynamics is still positive. However, it is necessary to analyze the closed jobs. Why did these jobs close? What jobs have been provided to those laid off, and whether they have at all been provided?

We have high hopes for the self-employment program. This program will give an impetus to our economic development. In particular, it will accelerate the solution of employment issues in the regions and make some of our citizens abandon their welfare mentality. At present, there are sufficient funds for the implementation of the self-employment program. I think that if 6,000-7,000 people are involved in this program every year, there will be no need for social assistance in a few years. People will be able to honestly earn money, support their families and contribute to the country's economy.

It is necessary to fight corruption and bribery even more seriously. This task has been set very categorically before the new government formed in April. An end must be put to these negative phenomena. A lot of work has been done in recent years, and this is acknowledged by international organizations. Azerbaijan always moves forward in the ratings of international organizations dealing with this issue. However, although there is progress, we can’t be complacent with that. This great social evil must be completely eradicated in Azerbaijan. Opportunities for this are available. There is a strong political will. Institutional mechanisms are also in place now. Most importantly, personnel reforms are and will be carried out. Government officials not complying with these criteria will be dismissed, and all government officials should be aware of that.

We will continue to wage a serious fight against corruption and bribery. We must ensure that institutional mechanisms are used to suppress cases of corruption. We are seeing some positive trends. For example, in the sphere of public services, “ASAN xidmət” is an agency completely free of corruption. "ASAN xidmət" has received more than 20 million applications and its approval ratings are close to 100 per cent. In other words, everything is possible. This simply requires a political will, which is available. It is necessary to take serious measures. This includes measures of punishment. These are being taken and will continue to be taken. However, I must also say that administrative penalties sometimes don’t work. Therefore, it is necessary to apply the best international practices. This struggle in Azerbaijan should be conducted in the same way as in leading countries of the world. Of course, it is necessary to step up control over public spending. Relevant ministries have received instructions, reforms are under way, and heads of all state bodies should know this and carry out my instructions.

One of the areas of concern is the construction sector. A lot of work has been done in this area in recent years. It is possible to say that all the cities of Azerbaijan have turned into construction sites. Both public and private sector investments have given a powerful impetus to the development of the construction sector. The production of building materials increases in Azerbaijan every year. I can say that we can provide ourselves with basic building materials today – first of all, because there is demand for that within the country. Also, we sell a very small amount of building materials abroad. The task is to reduce dependence on imports and provide the domestic market with local building materials. In other words, the development of the construction sector gives an impetus to overall economic development and increases employment. For two or three years, there was a certain crisis in the construction sector, which immediately affected the labor market. These issues are closely intertwined. I want to say again that positive work has been done in this area. But at the same time, what else do we see? In many cases, construction does not meet any criteria – neither in terms of town-planning nor construction. Sometimes we see completely ugly buildings from an architectural perspective. It is necessary to take serious measures to put an end to this and to all illegal structures.

Government officials creating favorable conditions for illegal buildings will be severely punished. I am saying this for everyone to know. In many cases, people put this responsibility on others – the executive authority of the city on municipalities and municipalities on the executive branch. In fact, municipalities can’t take such action without the permission of the city's executive authority. Therefore, there has to be a single mechanism of control here. I want to say again that it is necessary to put an end to all illegal buildings, first of all in Baku and other cities. From now on, no building should be built in the country in the absence of feedback and permission from the State Committee on Town-planning and Architecture. If someone decides to do this, I should be informed immediately. These people will be severely punished, because we are making so much effort.

Baku is one of the most beautiful cities of the world today. It is not only us saying this. These are the words of practically all impartial foreign visitors to Baku. Baku is a shining star in the true sense of the word. At the same time, there are places in Baku we are embarrassed for. Buildings are constructed right next to each other, in public places and courtyards, and without any compliance with the rules. Who gives permission for the construction of these buildings? Local executive bodies. Do they give permits free of charge?! Of course not!

We have turned our capital into a city of parks, squares and public areas. Just remember how many inconveniences were caused by the back-to-back buildings illegally constructed in previous years both to the people living in them and to the city population. Now we are creating public areas in places people have been resettled from. Buildings are not constructed there. The boulevard has been extended from 3 to 16 kilometers – it is a large public area. Large parks have been set up. A beautiful park has been created behind the Heydar Aliyev Palace. When people were moved out of there, some said they were being resettled because of plans to construct new buildings. It is a beautiful park. The ugly picture in the area called "Sovetskaya" behind the Azerbaijan Drama Theater is being eliminated. And people are saying again that buildings are being built there. Road junctions are under construction there in order to alleviate the traffic. Parks are being established. There are dozens and hundreds of such cases today. Parks are being set up in places that were once illegally seized by criminals. A vast territory was seized and remained unused at the intersection of Yusif Safarov Street and Babek Avenue. We are now creating large parks there, so that people could go and have rest there. A large public area has been created in front of the Heydar Aliyev Center. There used to be a run-down and non-functioning plant there. In other words, we are doing all this. To construct a building in a public place, in a courtyard or a in place used by people is a crime, and those doing that will be held accountable. I want to say again that no building can be constructed without the permission of the State Committee for Town-planning and Architecture.

A lot has been done in relation to city transport in recent years. New comfortable buses have been brought in and there are plans to deliver more. The Baku Transport Agency has been established. Structural reforms have been carried out to eliminate fragmentation in this area. Today, the Baku Transport Agency is the only agency responsible for the city's transport system. All the other state bodies working in close connection with this agency should help it because numerous violations were committed in this area too.

Car parks have been built at the expense of the state, but they are empty. Cars are illegally parked right next to parking lots, but no-one asks their owners: why did you park the car here, in front of the parking lot? Because it is either inconvenient to park a car in a parking lot or people don’t want to pay. They probably park their cars illegally for a smaller fee. How can we regulate the city transport then?! Buildings are constructed instead of parking lots. I have these photos. I held a meeting, issued strict instructions and made serious comments. Executive authorities of different districts seize a parking lot, fence it, sell this place and practically paralyze the city traffic. The officials responsible for such mistakes have been dismissed. The city transport must be comfortable for all of us. The rules of town-planning should be designed not to obstruct the city transport but, on the contrary, help it.

The population of Azerbaijan is growing, Baku is growing. In contrast to neighboring countries, our population has increased from 7 to 10 million people during the years of independence. How should we deal with this growth in the future? We don’t want to be in the position of large megacities where people spend hours in traffic jams. We are opening new interchanges and roads, but some shameless officials sell land for the sake of money and then a building is illegally constructed there. Then the government has to allocate large funds in compensation for the demolition of this building, so that those who illegally built it leave this place and the road is opened. Therefore, I am giving a very strict instruction: let state bodies draw the right conclusions.

Of course, we expect entrepreneurs to be active in deepening the economic reform. The state provides great support for the development of private enterprise. The National Fund on Support for Entrepreneurship has provided entrepreneurs with concessional loans worth 2.2 billion manats. These loans alone have helped create 163,000 jobs in the country. This year too, there are plans to provide low-interest loans in the amount of 170 million manats. A considerable part of them was issued in the first six months of the year. The rest will be provided as well. At the same time, entrepreneurs are given methodology recommendations and consultations. By opening trading houses abroad, we create conditions for entrepreneurs to expand their export opportunities. I can say that the Azerbaijani state is striving to increase the exports of non-oil products even more than the entrepreneurs themselves. Entrepreneurs are somewhat passive, as if they are not interested in reaching out to foreign markets. Therefore, the state has taken all this work upon itself. Numerous exhibitions and presentations are held on my instructions, trading houses are opened. This process will become very wide. Several trading houses have been opened to date. I believe that it is necessary to open dozens of Azerbaijan's trading houses abroad. Entrepreneurs also need to actively participate in these issues, in particular, by increasing their efforts related to exports.

All the tasks related to infrastructure projects in the state investment program should be completed by the end of the year. I would like to talk a little about the situation related to electricity. As you know, great attention has been paid to this area in recent years. New generation capacity of 2,500 megawatts was created in the past 15 years. Without this generation capacity, we could not have coped with the breakdown that occurred a few days ago so quickly. It would have taken us more time. In 2003, our energy infrastructure was completely obsolete. However, the steps we took to build new power plants and repair the existing stations allowed us the opportunity to eliminate the shortage of energy because we were buying electricity abroad at the time. Major investments were made and numerous modern stations were built. Some repairs were carried out on the existing stations, including the Mingachevir thermal power plant. Despite this, the breakdown that occurred certainly shows that there are big problems and shortcomings in our energy economy. I want to say again that the entire energy system should not fail because of one breakdown. A breakdown may occur and can have various reasons. Breakdowns occur even in the most developed countries and cities, and lead to severe consequences and casualties. We know this from recent history. Dozens of people die in such accidents. But one local failure should not lead to a failure of the entire system. There can be no explanation for this. I do not accept any explanations. The commission working today will provide its conclusion in the near future. At the same time, a team of experts has been sent to Mingachevir. They will also have their say. Of course, we need to know the exact causes for the breakdown. Why did this breakdown bring our energy system to such a state?! We will get an answer to this question. But according to preliminary data – of course, I don’t want to get ahead of the commission's conclusion, which is why I don’t want to express my opinion on this issue – the reason is that even the stations commissioned in recent years do not operate at full capacity. It is necessary to investigate the reason for that. It is likely that mistakes were made during their operation. We must be fair in everything. When punishing or rewarding anyone, we must be fair, have accurate information and analyze. Of course, this breakdown is a very serious signal. At the present time, work associated with structural reforms is under way in our energy system. Such an instruction has been given. The issue of inspecting the entire energy economy is being addressed. This issue will be discussed by the commission and I will receive suggestions. We must manage the country’s energy system using the best practices. We have sufficient generation capacity. Substations have been built and will continue to be built. An instruction has already been given – new substations will be built both in Baku and in the regions this year and in 2019. Additional funds are being allocated for the modernization of energy facilities built in the Soviet era. We allocate funds, but the main goal is to use these funds rationally and create a system capable of ensuring energy sustainability.

As for other infrastructure projects, I can say that at the beginning of the year we set the goal of bringing gasification to 95 per cent by the end of this year, and we will achieve that. The implementation of drinking water projects and construction of highways continues. This year, according to the plan, 2,000 kilometers of new roads should be built and at least 600 villages should be provided with new roads. According to the calculations of the Davos World Economic Forum, Azerbaijan is ranked 36th in the world in terms of the level of road infrastructure. I am saying this for our people to know: major investments are and will continue to be made in this sphere.

I think that the figure we have set for irrigation will be achieved. Water will be supplied to 100,000 hectares of new lands. There are plans to drill 300 sub-artesian wells. It has already been mentioned that 175 of them have already been drilled and commissioned.

All work related to the social infrastructure is progressing according to plan. A total of 137 modular-type schools should be built and commissioned this year. Twelve schools should be renovated in Baku. Six hospitals should be put into operation. One of them has been opened with my participation in the city of Naftalan, while hospitals in five cities – Gazakh, Gobustan, Shamkir, Guba and Goranboy – will be commissioned before the end of this year or early next year at the latest.

Two Olympic sports centers are to be opened this year. Two more are under construction. It is necessary to provide 4,000 IDP families with new homes. In Gobu, the private sector has already opened a large settlement for more than 1,000 families. I participated in the opening of that.

A mechanism for encouraging investments, which is of great importance, has been launched. Just imagine that if we had not applied this system, the private sector would not have invested 2.5 billion manats in the non-oil sector. It is due to the engagement of the investment promotion document that projects worth 2.5 billion manats are currently being implemented. It was a timely step which is producing results. In the future, this system will prove effective.

In connection with industrial development, two major plants will start to operate in the near future. Both are located in Sumgayit – a plant of polymers and a plant of nitrogen fertilizer. These plants will fully provide the domestic market and thus eliminate our dependence on imports. There will be good export opportunities as well. I can say that the launch of these plants will be a very important event in the industrial sphere of our country in the period of independence.

The number of residents of industrial estates is approaching 50. The creation of industrial estates is also proving effective. If we hadn’t created these estates and provided investors with preferential conditions, there wouldn’t be almost 50 residents there now. The total cost of the projects already implemented and to be implemented in these estates in the future is $3.6 billion. The investment promotion document brings investments worth 2.5 billion manats, and there are plans to invest 3.6 billion manats in industrial estates. Of these, 2.6 billion dollars has already been invested. Of course, the production of cars has started in Azerbaijan. A total of 10,000 cars will be produced in Neftchala every year. We have marked the production of the 10,000th tractor by the Ganja Automobile Plant. So I am sure that industrial estates will be successful. Estates are now being established in several cities. It is necessary to submit proposals on what other cities this policy could be continued in next year.

The key challenges we are facing in agriculture are related to the application of the latest standards in this sector. Great attention has been paid to the development of agriculture in recent years. We have almost completely renewed our fleet of machinery. Agricultural machinery will continue to be acquired, but most of it has already been purchased. In fact, it should be noted that the machinery of the world's leading companies operates on our fields today and farmers are very pleased with it. Large funds are envisaged for this purpose. It has been noted here that more than 5,000 units of equipment worth 160 million manats will be purchased this year alone. A total of 10,000 units of equipment were purchased last year. Transparency must be fully ensured in this area from now on. This task has been set before the Ministry of Agriculture. Our fleet should be fully inspected. We need precise proposals related to the acquisition of new equipment. This equipment should meet the overall dynamics of our agricultural development and reflect the priorities.

I want to say again that the main objective of agriculture is to turn this sphere into a high-tech sector. Some believe that agriculture can develop according to traditional rules, so to speak. This is absolutely not true. There are technologies in the world today that can increase the yields several times. We must import the technologies related both to agrotechnical measures and water supply. There are modern irrigation systems enabling the use of every inch of land with maximum efficiency. We should bring these technologies to Azerbaijan and finally introduce the system of electronic agriculture. Despite the fact that I have issued repeated instructions on this issue, the system of electronic agriculture the way we want to see it, in the proper form, does not yet exist in Azerbaijan. The problems are caused precisely by this. Therefore, we must apply the most modern technologies. It is necessary to attract foreign specialists. Work in this direction is already under way. We must rationally use every inch of land. I have repeatedly said that after a certain period, agriculture in Azerbaijan can develop only in an intensive way. At present, we are implementing major reclamation measures to deliver water to more extensive rainfed lands. We will achieve that. But our land, i.e. our territorial opportunities, are not very wide. Therefore, we can achieve this goal only by rational development of agriculture and the use of new technologies.

One of the reports presented here contained information on the establishment of agricultural estates. I should note that the organization of large farms has been a turning point in this area. I have recently been provided with detailed information about the activities of agricultural estates. There are four agricultural estates. I participated in the opening of all four. Fourteen agricultural estates will be commissioned before the end of this year. These agricultural estates deal with crop production and their yields are at the highest level – at least 50 quintals in grain growing. The average figure – harvesting is under way now – is 30 quintals. In comparison with earlier periods, this is an acceptable figure, but the average yields in Azerbaijan should also be at the highest level.

The state provides great support for the creation of agricultural estates. The state has invested more than 200 million manats in infrastructure projects alone, provided low-interest loans to entrepreneurs in the amount of more than 100 million manats. There are plans to establish 45 agricultural estates in the country. Approximately 1-1.5 billion manats will be invested in these agricultural estates.

The Food Safety Agency has recently been set up. The Agency has very serious tasks. Food security is a very important area. The food products imported into Azerbaijan must fully comply with the standards. At the same time, the products made in Azerbaijan must comply with international standards. The products we export must be at a level that would rule out problems with export. For this reason, the activities of the Food Safety Agency should be organized at the highest level. This work is currently under way. Laboratory research, analysis, fertility of lands – all this work should be carried out with high precision, and farmers need to be advised on what crops should be cultivated on what lands in order to get the most benefit.

As you know, the development of tourism is among our top priorities. The State Tourism Agency has been set up on my decision. The goal is that this sector should receive even greater support from the state. The increase in the number of tourists in recent years is a very positive development. I can say that the number of tourists in 2016 increased by 22 per cent, in 2017 by 20 per cent and in six months of this year by a further 10 per cent. I have said this before, but I want to say it again: tourism is an export industry because it brings currency to our country. In six months of this year, foreign citizens spent 513 million manats in Azerbaijan using bank cards alone. This is money spent only by means of bank cards, which is 21 per cent more than last year. This money goes to the service sector, leads to the creation of jobs, reaches public facilities, the country’s economy, and has a positive impact on our macroeconomic stability.

This year, we plan to open three “ASAN xidmət” centers. One of them, the Mingachevir "ASAN xidmət" center, was opened with my participation. Two centers will be put into operation this year – in Imishli and Sheki. Instructions have been issued on the construction of new centers in five districts.

Railway projects are of great importance among the work we are doing. By putting the Baku-Tbilisi-Kars railway into operation last year, we practically launched the East-West corridor. The launch of the Alat port became the last link in this chain. We are currently working on other projects. A project on the modernization of the Baku-Yalama railway is being implemented now. Next year, we must start upgrading the Baku-Astara road. Thus, we will further accelerate the implementation of the North-South transport corridor. There is a railway now and the goods are being transported, but the speed is low. Work will be done to increase the speed.

A project on the construction of the Baku-Gabala railway is being realized. This will be a great support for the development of tourism. There are plans to launch the Baku-Ganja through train before the end of the year. Under such circumstances, I think that people will prefer to travel from Baku to Ganja by comfortable trains. Passenger trains of the most advanced firms are also being acquired. A project on the construction of a suburban railway is also being successfully implemented.

If we take into account the fact that the volume of cargo transportation through the territory of Azerbaijan will increase in the future, I think that wagons and containers should also be produced in Azerbaijan. I am urging entrepreneurs to pay attention to this sphere because it will be very profitable. Its main market will be Azerbaijan because container transportation will increase many times. We do not have enough containers. In order to import goods on our own initiative, we must have a container fleet. Therefore, the production of containers is a very important issue for both entrepreneurs and the state. I think entrepreneurs should pay serious attention to this.

The work done in the oil and gas industry this year is of historic importance. The commissioning of both the Southern Gas Corridor and the TANAP project is a historic event. These are projects that have reverberated all over the world. I can say that the TANAP project proved cheaper in terms of investment. When we started the TANAP project, its funding was envisaged at a level of over 11 billion dollars. The TANAP project cost 8 billion dollars. This shows that Azerbaijan treats this work with great responsibility. We control every dollar and penny to realize this large project with less expenses. Look how much we have saved here.

SOCAR has recently signed new contracts. The signing of other contracts is also envisaged. In other words, interest in our oil and gas sector is not decreasing but growing, because Azerbaijan is a very stable and strong country. Now we have the entire oil infrastructure. In 1994, when we signed the Contract of the Century, we did not have any export pipelines. The Baku-Novorossiysk pipeline had gone out of service. Large funds were invested. Today we have projects such as Baku-Supsa, Baku-Tbilisi-Ceyhan, Baku-Tbilisi-Erzurum, TANAP. The TAP project is being implemented. Of course, we created all this infrastructure ourselves. Of course, foreign companies will be more willing to invest and are investing in this sector in Azerbaijan.

I think that all the work done in the oil and gas sector deserves the highest assessment. I do not have any special instructions related to the development of this sector until the end of the year. Everything is progressing according to plan.

In conclusion, I would like to once again inform the Azerbaijani public about the calculations of the Davos World Economic Forum. According to the latest calculations, Azerbaijan is 35th in the world in terms of competitiveness. In terms of the road infrastructure, we are in 36th place. In terms of inclusive development, we are ranked third among developing countries. In terms of the development of general infrastructure, we are in 26th place on a global scale. In terms of popular support for the government, we are in 20th place in the world. These figures clearly illustrate what success Azerbaijan has achieved. This clearly shows that our policy enjoys the support of our people, and we must make sure that the development of our country is stable and permanent. Thank you.