Opening speech by Ilham Aliyev at the meeting of the Cabinet of Ministers of the Republic of Azerbaijan dedicated to the results of the socioeconomic development in the first quarter of 2012 and future goals.

- This meeting will discuss the socioeconomic results of the first quarter. Year 2012 started well. I can say that all our goals for the first quarter have been met. Our key economic indicators are also very positive.

While the overall economic development is not particularly rapid, our non-oil economy is growing fast. In the first quarter our gross domestic product grew by 0.5 per cent, but in non-oil sector the GDP grew by 7.7 per cent. This is an excellent indicator, the indicator of recent months and years.

Our efforts to diversify the economy are bearing fruit. If you look at the manufacturing sector, we can see that overall industrial production dropped by 0.3 per cent, but the non-oil industry grew by 16.5 per cent. If I am not mistaken, this is the highest, a record figure in the years of independence, which is also the logical result of the reforms carried out in recent years. I have repeatedly issued appropriate instructions regarding the development of the non-oil industry, so specific steps were taken. These issues are also part of the state investment program. The support for the private sector, both political and material, the loans help us develop the non-oil industries. I am pleased that this sector is developing very fast.

These realities are made possible by the new small, medium-sized and large businesses created in our country. Thus, we can say that the industrialization policy is already yielding great results. When they become operational, the large industrial enterprises under construction now will contribute even more to the development of our non-oil sector in the future.

The macroeconomic indicators are positive. Inflation is only at 3.1 per cent. Personal incomes have risen by about 14 per cent. This balance, in general, has been traditional in recent years – it is wrong to calculate inflation separately from personal incomes. The latter exceed the inflation by 10 per cent or more. Overall, this suggests that our budget grows every year. The state budget for this year is in excess of $20 billion dollars, while the consolidated budget is nearly $25 billion. Social programs are well under way. In particular, we are starting the repayment of the deposits left over from Soviet times. Keeping inflation so low is a great result. Thus, we are taking further important steps to improve the well-being of our people.

Our strategic foreign exchange reserves are growing. This is also our strategic course. We must constantly increase our strategic reserves – every year, every quarter. Although a fairly large transfer was made from the State Oil Fund into the state budget this year, this process continues. Our revenue exceeds expenditure. And this is a very positive indicator. We are using our material resources to the possible extent.

The ongoing global financial and economic recession shows that the countries living at the expense of others are implementing social programs through borrowing. As a result, they will encounter serious difficulties. Sooner or later, this borrowing will reach a limit.

We are implementing our investment and social programs at our own expense. Thus, in the first quarter of this year our strategic foreign exchange reserves increased further to exceed $43 billion. This is an excellent indicator not only for our country but also globally, among sovereign countries that have strategic reserves. We will be increasing these reserves every year, every quarter. The effective use of these funds and the additional revenue to be derived from it in the future will, of course, improve our financial standing and create conditions for the implementation of more investment projects in the country.

A new strategy of the State Oil Fund has been defined. This strategy meets the requirements of our time. We must always look ahead. Of course, when creating the State Oil Fund we primarily considered a conservative storage of the accumulated revenue there. This is still relevant today. Our primary goal is to save this money. But at the same time, due to the fact that the global recession has led to a significant decline in the interest rates, we are turning to new forms.

Today, the investment and placement portfolios of the State Oil Fund are also expanding. This is natural. Just as we diversify the economy and give preference to new industries, so our strategic foreign exchange reserves should be safely and effectively invested in required fields.

Generally, we should pursue a more flexible policy in managing our major foreign exchange reserves in the future, so that they serve the interests of the country. I have some ideas on this. They will be disclosed in the near future. I think it is time for Azerbaijan to assert itself in the world, in global financial and economic markets.

Azerbaijan is already contributing to the solution of global issues as a political force. Given our financial resources, we should also be a financial force. First initiatives have already been made. Previously, in the early years of independence, we carried out most of the reforms using foreign loans, aid and grants. Now Azerbaijan is becoming a donor country, and this is a new phase. We are ready for it. So we are entering this period and this is our initiative. This initiative gives us both economic and political dividends, and it will bring us even more in the future.

All work in our country progresses in accordance with plans and programs. The state investment program is ongoing, and we must try to complete it by the end of the year. Sometimes we have been unable to fully implement the state investment program in recent years because in some cases our resources exceed our technical capabilities. Or, in some cases, the orders of relevant ministries and government agencies are so large that they can’t complete them within one year. We must pay attention to that. We should place realistic orders. Every ministry and state agency must calculate its possibilities accurately, not make unrealistic proposals. I understand that every agency and ministry wants things in their industry to develop faster and, therefore, make more proposals for the State Investment Program. But these proposals should be based on reality.

Of course, the government conducts the necessary analyses. But each state agency and civil servant should be more responsible, so that the State Investment Program can be implemented in full, on time and, most importantly, with high quality. Our current successful development is already a reality. Our key infrastructure projects have been completed, are drawing to a close or have been started.

Thus, some time ago we set the goal of completing the major infrastructure projects within the next two years, after which we will approach the State Investment Program from a new angle. At present, major infrastructure projects are ongoing throughout the country. The vast majority of them are financed by the government. Roads, water and sewer projects, gasification, power lines, rural roads. This is another issue requiring the greatest attention in the past few years. Every time I travel to districts now I take part in the opening of a new rural road. These are the realities of modern Azerbaijan. Of course, when we started to invest in roads, our focus was on trunk roads. But the time has come to improve rural roads.

The roads built in Azerbaijani villages now are very good and comfortable. These roads bring people comfort and provide a more rapid development of our districts.

In short, the State Investment Program is the main driving force of our development. The state is investing billions. Of course, the private sector, seeing this development, invests in the economy more readily and with greater interest. I am very pleased Azerbaijan’s investment portfolio is dominated by domestic investment. This is natural because the vast majority of domestic investment is public, which is also natural. But the time will come when there will be more private investment. We must strive for this. We must bear in mind that the amount invested by the state will reduce in the future because, I repeat, we need to complete our major infrastructure projects in 2014. And the private sector will invest even more.

Our development is comprehensive and diversified. Azerbaijan is expanding its export potential. We are interested in enhancing this potential, and the state of Azerbaijan, in turn, plays a very active role in this. We have always wanted Azerbaijani companies, including private ones, to access foreign markets.

Currently, there are no serious problems associated with the development of entrepreneurship. A class of entrepreneurs is emerging and strengthening. The National Fund on Support for Entrepreneurship is to provide concessional loans worth 200 million manats this year. These loans work well, are repaid and contribute to the creation of new jobs. As for new jobs, 24,000 jobs were created in the first quarter, including 20,000 permanent ones. My regular visits to districts have always led to the creation of new jobs. Every time I attend the opening of a plant and factory, I enquire how many jobs have been or will be opened. My latest trip to the western region has also revealed the overall dynamics of Azerbaijan’s economic development. Small businesses, medium-sized processing companies and large enterprises are opened and built.

These are our plans associated with economic policies. We have pursued this policy for many years, continuing economic reforms. These reforms have yet to be continued. In particular, there is a great need for system reforms.

Azerbaijan is always ranked highly in international economic development ratings. The World Economic Forum, the Davos Economic Forum, has placed Azerbaijan in first place in the CIS for economic competitiveness. The international rating agency Standard & Poor's has raised Azerbaijan’s credit rating, while the credit ratings of developed European nations have been lowered.

Also evaluated quite highly are our steps to simplify business procedures and expand business opportunities. This year, Azerbaijan is in one of the highest places in terms of the business program. I have issued instructions on further measures to be taken so that we could secure an even higher place. In short, the infrastructure projects, the development of districts and overall economic initiatives are further strengthening our economy. Our economy is growing every year, and I am very glad that we can also talk about great successes of the non-oil sector. We can see this progress. This progress should be even more significant.

In the first quarter we took important steps to address social issues. This area is always in the spotlight. Our policies are centered, above all, on people. We will continue to make every effort to address social issues in the future too.

In the first quarter we put forward the initiative of repaying the deposits left over from Soviet times. This is a very fair and positive initiative. I believe that the independent state of Azerbaijan is not responsible for Soviet deposits. Despite this, considering the strong social policy of our state and, I repeat, the fact that our focus is on people, the decision was made and I signed a decree on the payment of compensations for the lost deposits. I can say that this is a very substantial compensation. Only a few formerly Soviet republics have put forward similar initiatives. But I can say that Azerbaijan is the only republic which proposes to repay the money over just two years. We have provided almost 1 billion manats for compensation payments, and the process must be completed within two years.

I should also note that I usually don’t like to make comparisons with other countries because I think this is not entirely correct. You may have noticed that although Azerbaijan is ahead of many countries in all respects, I never focus on someone else's problems for the sake of comparison or for a more graphic demonstration of our success. I think it is unethical.

But in general terms I can say that such a high coefficient is not applied elsewhere. I can say that sufficient information about this has been provided, it was also available in the media. I want to recall that back in 1992, during the transition to the national currency, 10 Soviet rubles were equal to 1 Azerbaijani manat – in a 10 to 1 proportion. On 1 January 2006, the manat was redenominated. Thus, 5,000 old Azerbaijani manats were equal to 1 new manat. Despite this, people who have 1,000 rubles will be paid a compensation of 150 manats or almost $180. Those who have 2,000 rubles will get 300 manats or $400. This table can go on. This in itself shows that the highest coefficient and the shortest period are in Azerbaijan. It is another indication of how sensitive the Azerbaijani government is to the matter. I know that the citizens of Azerbaijan have welcomed this initiative. Of course, this will have a positive effect on people's lives. In addition, in a way we are restoring justice. In total, there were 2.4 million private deposits in Soviet times. Now we will have to do a lot of technical work to ensure that these funds are repaid in a timely manner and with absolute precision.

In the first quarter, the international standing of our country strengthened further. Azerbaijan is a country enjoying great respect in the world. As of this year we are members of the UN Security Council and treat this obligation with great responsibility. When we were elected to this authoritative body, I said and I want to repeat that we will first of all defend international law and justice in the Security Council. Our position is fair, it is based on the independent policy of our country. We will defend and uphold justice. From the very first days Azerbaijan has taken a principled stance in the Security Council. We have never hidden and will not hide our position because it is a fair position.

Next month Azerbaijan will assume the function of presidency in the Security Council. This is also an event that will happen for the first time. Azerbaijan will preside in the most prestigious and important organization in the world, and I sure it will do a good job.

In the first quarter Azerbaijan took part in very important international events. We participated in a Nuclear Security Summit in Korea. Although we don’t have a nuclear industry or nuclear power plants, Azerbaijan was invited to this prestigious forum and announced its fair position. Azerbaijan has said its word as an important player of the international community.

In the first quarter, our country participated in two major international events – the World Economic Forum in Davos and the Munich Security Conference. I can say that these two events are very important for Europe and perhaps the world.

One covers economic issues, the other –security and political matters. Azerbaijan was represented at both. At both events I outlined the views, positions and policies of our country. In particular, I spoke about the Armenian-Azerbaijani conflict over Nagorno-Karabakh, the occupation of our lands and the suffering of one million of our countrymen, and drew the world’s attention to these issues.

The second session of the Euronest Parliamentary Assembly was also held in Baku in the first quarter. I can say that such a session has been held outside the European Union for the first time. Baku was not chosen as a venue by chance. The session was held at a very high level, it gave us the opportunity to inform members of the European parliament about the work ongoing in Azerbaijan, our position, in particular, on the history and realities of the Armenian-Azerbaijani conflict over Nagorno-Karabakh, the genocide against Azerbaijanis, the Armenian fascism. Those who perpetrated a bloody tragedy, an act of genocide in Khojaly are fascists, there is no other name for them. Taking the opportunity, I spoke about the realities and shared my thoughts on Azerbaijan's position and its general outlook for the future.

In short, the first quarter saw very interesting and serious discussions concerning Azerbaijan in the international arena. As a respectable member of the international community, our country has and will continue to have a say.

Our foreign policy is a logical continuation of the internal one. Our foreign policy is aimed at deepening cooperation. We are taking steps in that direction. Our foreign policy is open, clear and unambiguous. Our role in the region and the world is growing. This must be reckoned with.

At all international events I have spoken about the Armenian-Azerbaijani conflict over Nagorno-Karabakh and exposed Armenia’s policy of aggression. I will continue to expose it at all international events. Our principled position on the settlement of the conflict remains unchanged. The territorial integrity of Azerbaijan must be restored unconditionally, the occupying forces must withdraw from our land. The internationally recognized territorial integrity of our country will be fully restored. I have no doubt about that. We are growing stronger both economically and internationally. Our military capacity is also growing. This area is and will always be in the focus. We are creating a powerful military industry. At the same time, we buy and will continue to buy large volumes of military equipment, weapons and ammunition. Not to mention anti-aircraft guns. We are and will be buying tanks, artillery units, combat aircraft, weaponry, all modern equipment needed for combat. I can say that, as in other areas, we are pursuing a diversified policy in this area too, we don’t rely only on one producer. A growing number of countries want to cooperate with us and we have the opportunities for that. Unlike some other countries, we don’t get anything for free, we buy everything, and this policy will be continued.

Azerbaijan already has a strong army. All the armed forces are ready and capable of fulfilling any task in the interests of our country. They are ready to restore Azerbaijan’s sovereignty over Nagorno-Karabakh and other occupied lands. We simply want to do this without bloodshed, by peaceful means, through talks, and every minute and every day brings us closer to victory. Armenia is plunging into a deep recession, while Azerbaijan is growing stronger. Victory day is nearing us. The day will come when the Azerbaijani flag will fly in Khankandi and Shusha.