Opening speech by Ilham Aliyev at the meeting of the Cabinet of Ministers on the results of socioeconomic development in 2011

- At this meeting of the Cabinet of Ministers we will discuss the results of 2011 and, of course, exchange views on the work to be done in 2012. In 2011, all the social and economic objectives facing the country were successfully met. There is no objective that would remain unfulfilled. All our plans have been implemented, so the successful development of our country continued in 2011.

However, due to a decline in oil production for reasons beyond our control, overall economic indicators are not very high.

But this should not and does not bother us because most of our economy is formed in the oil and gas sector. So the reducing oil production inevitably affects our statistics. But I want to reiterate that we are not worried about that because other contributors to the successful development of the economy – and we'll talk about that today – are very positive. In general, economic growth constituted 0.1 per cent. But the non-oil sector of the economy grew by 9.4 per cent. This is the result of the work we are doing, because we have been taking practical steps to develop the non-oil sector for several years. We have adopted programs, there is a public policy in this direction. So all the opportunities have been created for diversifying the economy. As a result, our non-oil economy grew by almost 10 per cent. Considering the fact that the non-oil sector plays a crucial role in creating jobs, it certainly has a positive impact on both economic and social development.

Industrial production has declined by 5 per cent, also because of a drop in oil production. But our non-oil industry grew by 11.1 per cent. This is an excellent indicator. It shows that the industrialization initiatives we put forward several years ago are yielding fruit. Considering the fact that the enterprises we laid the foundations of in previous years will be commissioned in the coming years, we will see excellent opportunities for the development of the non-oil industry in the future. Inflation remained at a one-digit level – 7.9 per cent.

This is a positive indicator. If inflation is in single digits, we consider it a positive result. Population incomes grew by 19.6 per cent. This statistic clearly shows that the well-being has improved, so the difference between inflation and incomes is large enough. Population incomes are 2.5 times higher. These are key macroeconomic indicators of our economic development. Also, we achieved a record level of investment in 2011. The amount invested in the economy increases very rapidly every year. In 2010, a total of $17.6 billion was invested. And in 2011 the investment reached $20 billion for the first time. A total of $37 billion was invested in our economy in just two years. If we add to that the investment made in previous years, we can see how much work is done in Azerbaijan. Both local and foreign investors are interested in our economy. Foreign investors believe in the successful development of our country – just as we do. At the same time, of course, a crucial role in the organization of this investment is played by public policy.

Because state investment is quite large. It will stay that way this year. At the same time, the steps taken by the state to encourage investors are bearing fruit. Of the $20 billion of investment $13 billion is domestic investment, while $7 billion is foreign. And I can say that this balance, i.e. this ratio, is positive. Foreign investors carry on investing in Azerbaijan, while local investors, businessmen and the state of Azerbaijan are doing everything for a comprehensive and diversified development of our country.

In 2011, we implemented a major investment program, and most of the figures I have cited were achieved at the expense of the state. Our foreign reserves have increased. For the first time, our total currency reserves have reached $40 billion. According to the latest information, we have $41 billion now. These are our strategic reserves. We are receiving revenue from the management of these reserves. A concept for the next period has been developed and we must manage our foreign exchange reserves in a more diversified way. In this regard, appropriate instructions have been issued.

Our social policy has been successfully continued. In 2011, we raised salaries and pensions. The pensions of about 900,000 people were raised by almost 40 per cent, and this is one of the pillars of our social policy. The well-being of our people is improving, the number of families receiving targeted social aid is now 120,000. This shows that the state pays constant attention to the families that are unable to improve their financial situation. On average, each family receives a monthly allowance of 106 manats.

I have repeatedly said this before and I want to reiterate it now – we are committed to and governed by the principles of a market economy, and the figures I have cited reflect this perfectly well. At the same time, we are taking successful social steps and have achieved great successes in building a socially-oriented state.

Currently, the average pension in Azerbaijan is about $180-190. The average wage is close to $460. I can say that this is a great indicator for the CIS. But we shouldn’t be complacent with that, of course. The measures we will take in the coming years, the funds to be allocated, the jobs to be created and our successful investment policy will help us. Of course, salaries and pensions should and will be further increased.

Thus, the situation in this area is very positive. The process of construction of social facilities is ongoing. There have been no delays in any projects. In some cases, and this is something new, some agencies could not use the funds allocated for certain projects.

Of course, we must consider this factor and address such shortcomings in our investment program for the current year. But the reason for this is that in 2011 we had such ambitious plans that in some cases government agencies and the companies working with them could not master the entire volume. There was a time when we had no money to carry out any work. Now we have the money but, unfortunately, there are certain problems with the correct use of these funds. We are aware of these problems and will take more serious measures to improve the situation this year and in the coming years.

The construction and renovation of health facilities and schools has been continued. We have built and renovated 33 health facilities and 60 schools, four Olympic sports centers and cultural institutions are being built and renovated. We are doing this creative work everywhere, including the districts. The situation in the districts is improving, our cities are getting better. In 2011, we created 94,000 jobs, including 73,000 permanent ones. In general, more than a million jobs have been created since we launched the program against unemployment in 2003. In 2011, the unemployment rate in Azerbaijan further declined to 5.4 per cent. The level of poverty, which always goes in parallel with unemployment, fell to 7.6 per cent. These indicators are both positive and encouraging. We know that 2012 we will be successful too. Today we will talk about the work upcoming in 2012.

In 2011, some memorable and historic events took place in our foreign political life. Azerbaijan was elected a member of the UN Security Council. This is a great political victory. This victory coincided with the 20th anniversary of our independence, which is also quite symbolic. In 20 years, Azerbaijan has not only secured a place on the world map, but has also earned the sympathy, respect and confidence of the absolute majority of members of the world community.

Otherwise, 155 countries would never have supported Azerbaijan. To win the confidence of 155 countries is a very challenging and at the same time highly responsible task. This has been facilitated by Azerbaijan’s successful and independent policy, principled stance, the opportunities to position ourselves as a reliable partner. We have won this victory in competition and in the next two years we will demonstrate our principled position as a member of the most respected organization, the world’s leading organization. I've already talked about this and I want to say again that we will first of all uphold justice in this organization. There is a great need for that. Sometimes justice is violated, there is disrespect for international law, it is flouted. Within our capabilities, we will defend justice and international law in this prestigious organization. Of course, we will always keep our most painful issue, the Armenian-Azerbaijani conflict over Nagorno-Karabakh, on its agenda.

Let me repeat that membership in the UN Security Council is our historic victory. We are legitimately proud of it. At the same time, this victory heightens our responsibility, and we are ready for that.

Unfortunately, there was no progress in the settlement of the Armenian-Azerbaijani conflict over Nagorno-Karabakh in 2011. The only and the main reason for that is Armenia’s unconstructive position and its insincere conduct in the negotiations. In fact, the Armenian side has been trying very hard to disrupt or “freeze” the talks. Of course, any negotiation requires the participation of both sides. If either side tries to evade the negotiations in one way or another, the possibilities of the other side become limited. But I can point to some positive developments in the attitude of international forces to this issue in 2011. We can’t deny that. I can say that the most important of them has been the fact that the three co-chair countries said that the status quo was unacceptable. This is first such statement, i.e. such statements were not made in previous years. It is a fair statement. Of course, the status quo must be changed, this is a reassuring statement. If it is followed by concrete proposals and steps on the part of co-chair countries, the conflict will be resolved soon. If it remains just a statement, then the prospects will not be very reassuring.

There are two ways to resolve this conflict: the path of negotiations and a military option. There is no third option. This is not and will never be a “frozen” conflict. If someone thinks that the main issue in the negotiations is to prevent war, I don’t agree. We don’t want war either. Who does? The state of Azerbaijan, which has achieved such great successes, certainly doesn’t. But that shouldn’t mean that the talks will be put aside and all the efforts will be directed to preventing war. This will not happen! Why am I saying this? Because in 2011, especially in the latter half of it, we saw the co-chairs mostly focus on actions and initiatives aimed at confidence-building measures and strengthening the ceasefire rather than on the essence of the talks. We don’t want war either. But there is a way of doing this. And this way is known to all. We have already stated that in principle we agree with the proposals submitted to both sides at a meeting of the OSCE foreign ministers in late 2009. Those principles were put forward not by us but by the co-chairs. If those principles are still valid, then the conflict can be resolved. I have sufficiently informed the public of the principles. I just want to repeat the main points. Azerbaijan's territorial integrity is not questioned, the citizens of Azerbaijan will return to occupied lands and proposals regarding the status of Nagorno-Karabakh will be put forward at an unspecified time in the future and in an indefinite form. Most importantly, Nagorno-Karabakh cannot be accorded any status without Azerbaijan’s consent. And this is natural – the state and the people of Azerbaijan can never give consent to a status of Nagorno-Karabakh outside Azerbaijan. These are the principles. We are ready to continue the talks on the basis of these principles, and if the opposing party takes similar steps, the issue can be resolved soon. Along with this, and this is no secret, we are and will be building up our military strength. I remember exactly the figures for 2010, I also remember other figures. But these figures stand out particularly vividly – in 2011 we spent $3.413 billion on military issues, in 2012 we will spend a further $3.474 billion. These are similar figures. Look how much money we spend on the army over the course of two years! If we add to that the money we spent in the previous years, we all can see that the Azerbaijani army has a great potential.

We have the strongest army in the region, the logistical support is at a high level, we are purchasing the most modern weaponry, hardware, combat aircraft and helicopters, missiles, artillery units – it is hard to enumerate everything. The geography of countries cooperating with us in the military sphere is also growing. At the same time, the number and the range of military products manufactured in Azerbaijan is increasing. We manufacture about 600 kinds of military products. So today the Azerbaijani army is a great force, we can and will use this force when needed.

The opposite side also knows this. Therefore, according to information available to us, the opposite side - Armenia is in great anxiety and confusion in connection with the military capabilities of Azerbaijan. We obtain this information from various sources, and they have no opportunity to confront our capabilities. Just like the elections to the UN Security Council, they fled from the battlefield. Did you know that in his time, that is, in the previous period, Armenia was there a candidate. They then quietly walked away, because they knew that they could not fight with Azerbaijan. Similarly, we have repeatedly seen how they have escaped from this battle. Let them leave in a kind of land that does not belong to them, and thus can be reconstructed world.

Our military potential to grow even more. We now maintain military spending at a high level. For comparison, I can say that the total cost Armenia $ 2 billion. And our military spending is almost 2 times more. That is, it is a reality. Over the years, this gap will increase even more, the military power of Azerbaijan will grow. As a result of the signed contracts at the present time - now I do not want to talk about it - our combat capability will increase significantly, and we will be able to achieve low losses even greater success in addressing the issue. But, I repeat, Azerbaijan - a peace-loving nation. We try to resolve the issue peacefully. But also know that every month and every year brings us closer to victory. Every month and every year it becomes even harder Azerbaijan, and Armenia - are even weaker.

Our military potential must grow further. We maintain our military spending at a high level. For comparison, I can say that Armenia’s total expenses are $2 billion, while our military spending alone is almost twice as high. So this is a reality.

Over the years, this gap will further increase as our military power will continue to grow. As a result of the contracts signed to this day – I don’t want to talk about that now – our combat readiness will significantly improve and we can achieve even greater successes in addressing the issue with minimal losses. But let me repeat that Azerbaijan is a peace-loving nation. We are trying to resolve the issue peacefully. But we also know that every month and every year bring us closer to victory. With every month and every year Azerbaijan becomes even stronger, while Armenia is getting weaker still.

In 2011, there were also other positive foreign political initiatives. The number of our partners is increasing. My visits to foreign countries and the visits by foreign presidents and prime ministers to Azerbaijan show how successful our foreign policy is. These contacts will be continued in the current year. Let me repeat that Azerbaijan is recognized worldwide as a reliable partner, and this year we will put forward new initiatives.

2011 was declared the Year of Tourism in Azerbaijan. In the course of the year, a lot of attention was paid to this area. We must turn Azerbaijan into a center of modern and elite tourism. This is how I see Azerbaijan on the tourism map of the world. Our links with international institutions are strengthening. Various activities have been held. A growing number of people is coming to Azerbaijan to see our beautiful nature. Last year alone three five-star hotels opened in Baku. This year again at least three more five-star hotels will open in Baku. This process is also ongoing in the districts. Five-star hotels, at least four of them, are now under construction in the countryside. I personally visit the most important tourist centers and examine the situation.

This year we will commission the Shahdag tourist complex. It will be a unique ski resort. I think it will be one of the most beautiful ski resorts in the world because we are using the best practices that exist in the most beautiful parts of the world. So I think that the announcement of 2011 as the Year of Tourism was the right step.

It would take hours to enumerate everything we did in 2011. I want to point only to the key milestones. Another important issue is that we adopted the “Azerbaijani youth” program last year. It is a very specific program. It is not a mere formality.

All provisions of the program will produce specific results. A Youth Fund has been established. It is now undergoing a period of institutional development. Once this process is complete, the state will allocate initial funds so that the Fund could use them rationally and ensure that the maximum number of our young people are involved in various projects.

The Fund will provide grants and allocate resources for different programs. Of course, it would be too early to speak about the Fund’s activities now, but we do know what the main directions should be. Thanks to this Fund and, of course, with the aid of public funds, we must engage many more young people in creative work. Young people have a huge potential, a lot of energy and high sense of patriotism. Just like other citizens, they want to work for the country. Thanks to this Fund and other formats we will actively engage young people in creative work.

It should be mentioned that the experience of the Science Development Fund has also been very positive. Through this Fund, young people, young scientists are actively involved in various programs. The Youth Fund should also build its activities in this spirit, in this direction.

In 2011, we did a good job in the energy sector. This is our leading economic sector. This is the case today, so it will be tomorrow. This field must always be given great attention. The launch of new power plants, the groundbreaking of new stations, the work under way in the oil and gas sector and the development of alternative and renewable energy – all this is obvious.

In 2011 we did this, we carried out this work.

In 2011, very important events took place to deliver Azerbaijan’s rich gas resources to world markets. Transits issues we worked on for several years have been resolved. Now, we can say that doors and transit paths are opening for major Azerbaijani gas. This will attract more investment to our economy, to the oil and gas sector. This investment will be measured in tens of billions of dollars. Of course, new jobs will be created, there will be new scope of work. Now local companies are better prepared for this work than in the 1990s because in the 1990s we did not have such serious companies. Now, thanks to the work done, including the work carried out in the oil and gas sector, Azerbaijani entrepreneurs have become stronger. We have great opportunities in construction, energy, manufacturing, we have industrial parks. Now we produce important oil and gas industry products ourselves – pipes, etc. This means that Azerbaijani companies will be increasingly involved in contracts, will pay more taxes into the state budget, there will be more jobs. Of course, this chain reaction will have a positive impact on every area.

So we achieved this important goal in 2011. Transit issues have been resolved. In 2011, a large gas field was discovered. Successful exploration was carried out at the Absheron gas field. According to preliminary estimates, there are 350 billion cubic meters of gas reserves in Absheron. In 2011, the State Oil Company of Azerbaijan discovered the Umid field. It has approximately the same volume of gas. This has significantly increased our gas potential. In early 2011, exactly one year ago, the European Union and Azerbaijan signed a declaration on strategic cooperation in the gas sphere. Over the course of the year very active and fruitful work was carried out. A working group was set up. It is led by the European Energy Commissioner and our Minister of Industry and Energy. It also involves all interested companies. Meetings are already held in a trilateral format with the participation of other countries. This is a novelty. This novelty is facilitated by our successful energy policy.

2011 will be remembered as the year that turned Azerbaijan into a major gas producer and exporter. Of course, we have to work even harder this year and in subsequent years to convert these arrangements into real projects. We must and I am sure that we will convert these projects into real pipelines, real terminals, real investment.

I want to say again that the work we did in the past year is so big and important that we can talk about it for hours. In my opening remarks I have raised only the basic issues. Now, during the discussion, we will have a more extensive exchange on these issues.