Opening speech by Ilham Aliyev at the meeting of the Cabinet of Ministers

- This meeting of the Cabinet of Ministers is to discuss the socioeconomic results of the first six months of 2012. Such meetings are traditional. It was indicated at the previous meeting on the results of the first quarter of the year that 2012 would be a very successful year for our economy. The first months of the year were very positive economically, giving us the opportunity to assess 2012 in general as yet another successful year for the Azerbaijani economy.

The results of the first six months confirm this yet again. Because our economy has successfully developed and all our goals have been met in the six months. The GDP has increased by 1.5 per cent. It is not particularly high in comparison with previous periods, but as our economy grows, each per cent has a great value for us. I can also say that each per cent of economic growth is equal to about $700 million. So the 1.5-per cent economic growth suggests that we have produced $1 billion worth of more goods than in the same period of last year.

But we are particularly pleased with the development of our non-oil economy. We can say that this is the main direction of our economic policies. Our non-oil economy has grown by 11.3 per cent in six months. I believe this is the highest indicator worldwide. The overall economic growth of 1.5 per cent is explained by a certain decline in oil production. If we consider that the oil sector accounts for a major share of our economy, this decline inevitably affects overall indicators. But we will keep the focus on non-oil sector development in the years ahead. The first six months of the year are the logical result of the reform ongoing in Azerbaijan. Total industrial output has dropped 3 per cent, which is also due to the decline in oil production. But the development of the non-oil industry is at the level of 8.3 per cent. And this is the result of the industrialization program implemented in recent years. Various large and small enterprises are commissioned in different parts of Azerbaijan and in Baku, new jobs are created. So the industrialization program is well under way. This issue will always be in the spotlight in the coming years. The launch of new industrial facilities this year and in the years ahead will further bolster the non-oil sector.

In the first three months the investment was $4.3 billion. Investment figures for six months are still being calculated, which is a positive sign. As compared to last year, investment in our economy has increased by 30 per cent. If we keep working at this pace until the end of the year, and I think we should work even faster, we will reach the level of investment of $18-19 billion. This is a large figure for Azerbaijan, a country with a relatively small population. Considering the fact that at least $10 billion is invested every year, all infrastructure and social issues on our agenda will be resolved in the coming years.

The macroeconomic situation is very positive and stable. Inflation is only 2.2 per cent. Attention is permanently paid to the consumer market and prices. People’s incomes have increased by 14.2 per cent. So there is a difference of 12 per cent between the inflation and people’s incomes, which shows how fast real incomes are growing.

Agriculture has developed by 10.4 per cent in six months. I believe this is also a record figure in recent years. We had expected this figure, were aware of it. Because the attention paid to agriculture in the recent period, the investment and reforms have increased productivity. The new areas under crop that have been commissioned and will be commissioned in the coming years will certainly boost agricultural development.

So these are our key economic indicators. Of course, we will discuss this in more detail today, information will be provided. But six months of the year suggest that 2012 will also be quite successful for the national economy.

Unfortunately, we experienced another natural disaster in the past quarter. There has been a powerful earthquake in the north-western region, thousands of homes became uninhabitable, schools, medical institutions, social infrastructure were destroyed. But as a result of the prompt action taken, the consequences of this powerful earthquake are being eliminated. Additional funds were allocated from the contingency fund and the state budget. I told residents during a visit to the affected region that even better homes would be built for them in a short time, the entire social infrastructure would be replaced and rebuilt, and their living conditions would actually improve.

This is not the first time we have encountered a natural disaster. Two years ago there were major mudslides. We passed that ordeal with dignity. Thousands of homes were built, compensations paid, and this process is still ongoing. We also approve of the allocation of extra funds. A similar approach was applied to the earthquake-affected region. Because we primarily need to create normal and comfortable living conditions for Azerbaijani citizens and all the houses will be built at government’s expense.

I expressed my view on this issue in the aftermath of the mudslide and want to repeat now: governments of developed countries don’t take on this responsibility because all private properties there are insured. Every citizen buys an insurance policy and, in the event of a calamity, receives compensation from the insurance company. Our situation is different, of course. But we should try to speed up the transition to the insurance system. So far this is impossible. The government has taken on this responsibility.

I can also note that it is a very rare occasion worldwide for a government to assume the financial and technical burden in full, i.e. by 100 per cent. But this is a key element of our policy. Citizens of Azerbaijan are at the heart of our policies. I am sure that the new homes, schools and social infrastructure will be of much better quality and more comfortable than before.

The first year of the State Program on the socioeconomic development of Baku and its suburban settlements ended in the past quarter. A broad conference was held. The work done in the first year was analyzed and future goals identified. In general, extensive creative and landscaping work was carried out in Baku and its suburban settlements in one year. We will see the logical and real results of this work in the near future. Dozens of schools are built and renovated, kindergartens, medical facilities are built, roads are laid, the process of gasification is under way. Water and sanitation projects are implemented. There had never been a sewage system in the suburban settlements of Baku. Roads within settlements are rebuilt. In other words, we have a comprehensive approach to the issue. At the same time, the issue of job creation in the suburban settlements is being addressed. The National Fund on Entrepreneurship Support has started giving loans to the business people working in suburban settlements. So I am sure that the Second State Program on the development of Baku and its suburban settlements will be successfully implemented by the end of next year.

At the same time, the program on the development of our districts in ongoing. A total of 46,000 jobs were created in the past period, i.e. in six months of the year, including 37,000 permanent. This process is ongoing, which is natural.

Because new enterprises, factories and plants are put into operation in Azerbaijan almost every week, the employment rate is growing. There should also be more rigorous control over the labor market. Relevant instructions have been given in this regard. Unfortunately, Azerbaijan has yet to apply a precise system to this sphere. There are cases of unofficial employment, of foreign migrants coming to our country and working illegally, and these trends are increasing. And this is also natural. Because Europe has been stricken by an economic and financial downturn for the past four years, while Azerbaijan is registering unprecedented growth. Of course, the number of those coming here to work is increasing. The State Migration Service is taking all the measures necessary. These measures should be even more effective. We first need to provide citizens of Azerbaijan with jobs, to fully resolve these issues. True, the level of unemployment in Azerbaijan is low – according to last year’s results it was 5.4 per cent. But it is still there and in some cases these figures don’t reflect the reality. It is no secret that there are people working in certain jobs, in construction without registration but receiving salaries. Such cases are not registered anywhere. So they do exist, relevant instructions have been handed out so that we could create complete transparency, ensure greater revenue to the budget, including the retirement fund. Therefore, there should be law and order in this sphere, once and for all.

The creative and landscaping work ongoing in the districts has already become traditional. I regularly visit the districts and am very delighted to see change. I can say that districts have entered a sound competition with each other. District authorities, the public and, of course, all residents want to see their district beautiful, developed and landscaped. We are strengthening these trends as the bulk of the funds allocated from the President’s Contingency Fund is channeled into the development of districts.

Social issues have always been in the spotlight and they still are. One of the most memorable events this year has been the compensations paid for lost Soviet deposits. I want to reiterate that the government of Azerbaijan does not bear any legal or moral responsibility for those deposits. Azerbaijan is an independent state. As an independent state Azerbaijan is fulfilling all of its commitments.

Considering the fact that there were 2,400,000 depositors in the Soviet time and that these people were waiting for compensation, this decision was made in order to further reinforce the social nature of our policy and the principles of social justice. I can say that the most effective, fair and beneficial mechanism among all post-Soviet countries has been used in Azerbaijan. Both in terms of the timing – all compensations will be paid in the course of two years – and in terms of the amount to be paid. If we compare the Soviet ruble not to the manat but to the dollar, the compensations are paid in a one-to-five or one-to-six ratio, which is the highest indicator for all post-Soviet republics. The process has now started. Thousands, tens of thousands of people have already applied. Thousands have received their deposits and this process will last until the end of 2013.

So this initiative shows our intent again. Social issues should always be in the spotlight. Market economy principles are certainly fundamental for us. But they don’t always overlap with social justice. But both these factors are in the focus in Azerbaijan and the measures taken are a logical result of that. The program of targeted social assistance is ongoing, the amount paid to each family is at the level of 109 manats and 143,000 families are receiving social assistance. This factor also strengthens our social policies.

Our international standing has also strengthened in the past six months. Our activities both in the bilateral format and in international organizations have been very successful. Our bilateral relations and contacts have strengthened, the number of our partners is growing, the scope of our diplomacy is expanding. We are going beyond traditional regional partnerships to access new regions and continents, are forging close cooperation with African and Latin American countries. This corresponds to the new status of our country, reflects our political image and is an indicator of our foreign political agenda. We must diversify our diplomacy. Our relations with traditional partners are certainly maintained and stepped up. We are making new friends. We have joined the Non-Aligned Movement. This was also a judicious and correct step.

Shortly after joining the Non-Aligned Movement we began to work hard and soon earned great respect. Our relations with Latin American countries are strengthening, which is confirmed by reciprocal visits. There are excellent conditions for promoting our political and economic interests in Latin America. Azerbaijani investments are in demand there and we are carefully examining this issue. We have started work with the African continent. So our foreign political agenda is enhancing and I want to repeat that this is a requirement of the day. Also, the foreign policy of a developing Azerbaijan should be even more diverse.

In May this year, Azerbaijan presided over the UN Security Council for the first time in its history. This is a historic event. Azerbaijan presided over the world’s top organization for one month and this period will go down in our history.

Azerbaijan’s growing authority, image, opportunities and power have brought about this reality. As a new member of the Security Council, Azerbaijan displays a principled stance on all issues and, as I stated shortly after we became a member of this authoritative organization, Azerbaijan defends justice and international law in the Security Council. It is no coincidence that Azerbaijan is engaged in an active and extensive debate on issues of global importance, we are in permanent contact with the world’s leading countries and our principled stance is duly appreciated.

There is a large number of countries that are friends with Azerbaijan. There is a large number of countries supporting and approving our policies. The fact that 155 countries supported us in the election to the UN Security Council is clear evidence of that. But it is naturally impossible to please everyone. Nor has such a task ever been set. There are forces and circles that don’t like us. But even they treat Azerbaijan with respect. We have earned this respect with our principled stance. Our words and deeds have always been the same.

So there is more work in store for us in the coming months and years relating to our foreign policies, our relations will further expand. I reiterate that our principled stance on the Armenian-Azerbaijani conflict over Nagorno-Karabakh is based on justice and international law. Azerbaijan’s territorial integrity has never been and never will be negotiable.

Azerbaijan will restore its territorial integrity. I have no doubt about that. There is a certain standstill in the process of talks now although the presidents of the Minsk Group co-chair countries have made a statement confirming that the status quo was unacceptable. No specific and real steps have been taken so far to change the status quo. The status quo must be changed. The unacceptability of the status quo has been repeatedly confirmed by the presidents of the Minsk Group co-chair countries, the President of the European Council during a visit to Baku, representatives of the OSCE, other international organizations and politicians. These are very valuable statements. The change of the status quo means removal of the Armenian forces from our occupied lands. Of course, when these forces abandon the occupied lands, the positive trends in the talks will be intensified and the issue will soon be resolved.

But along with all the political and diplomatic efforts, we are certainly building up and strengthening our military capacity. We have built and are still building a strong army. A strong army is an important factor in the talks. Azerbaijan’s economic opportunities are expanding. Azerbaijan is turning into a strong country not only in the region but also in the world. Of course, our economic, financial and political resources will lead to a fair solution of the issue in accordance with Azerbaijan’s territorial integrity. Our economy, foreign exchange reserves and population are growing. According to the latest information, Azerbaijan has a population of 9.3 million people. As to Armenia, their latest statistics suggests that 80,000 people have left the country for good in the first five months of this year. By the end of the year this figure will reach 170,000-200,000. So in a few years’ time the demographic situation will become a crucial factor. It is no coincidence that I have been highlighting this issue in my speeches. The demographic situation in Azerbaijan is good and positive, there is a natural increase. But I think this increase should be even higher. I believe that further measures should be taken to stimulate growth and ensure a further population increase.

Our economy, industrial capacity, financial opportunities will enable us to provide jobs to twice as many people and create all the necessary conditions for them.

This will definitely happen. We are 9.3 million people now and will be 15 million, 20 million in several years. So this process is ongoing and will be continued. We need to further stimulate it by taking certain additional measures now.
As regards Armenia, its leaders are probably pleased that their population is shrinking. Because there are no jobs, no money, no economy, no industry and no prospects there. The smaller the population, the lesser the burden on the government. This is an approach.

Our approach is totally different. Our economy, industrial capacity and political will require the population of Azerbaijan to grow further. This is necessary not only to resolve the Armenian-Azerbaijani conflict over Nagorno-Karabakh – we will resolve it anyway and hoist the Azerbaijani flag in Khankandi. This is necessary for our future in general. Unfortunately, international law doesn’t work in a number of cases today. International law is flouted. The factor of strength comes to the fore. This, in fact, was more typical of earlier centuries. But after World War II, when a new world order set in, international legal norms were taken as basis, which is still the case now. But when we look at current trends, at the developments unfolding in different parts around the world, we see that steps that run counter to international law are often taken and strength often prevails. Might is right. This is not our choice, but unfortunately the events occurring in the world show this. To be strong, we need to have a strong economy, a military and industrial potential, and a large population. So we should address this issue seriously. So far this process has been flowing naturally. Simply put, as the economy grew, the natural increase was fast, so to speak. We can see that in statistics. The number of births in Azerbaijan in recent years has been higher than 10-15 years ago. This is an issue directly linked to economic and social factors. But let me repeat that we need to approach this issue from a new angle now. Azerbaijan’s population should grow even faster.

As to the Armenian-Azerbaijani conflict over Nagorno-Karabakh, I would like to note that we – the state, the government, diplomacy, public and Diaspora organizations – have done a lot in the past period to have the Khojaly genocide recognized as an act of genocide. This is a very important and significant issue. Three countries – Columbia, Mexico and Pakistan – have officially recognized the Khojaly genocide as an act of genocide. I am sure that this process should and will be continued. Our embassies, government agencies and public organizations will certainly keep applying effort to this end. The number of countries recognizing the Khojaly genocide as an act of genocide will gradually increase.

I can say again that whilst discussing the results of the first six months of the year, we can confirm that 2012 will be another successful year for the Azerbaijani economy. Because we are implementing major infrastructure projects this year. Azerbaijan’s political clout has significantly increased. Our election to the UN Security Council is a truly historic event. The fact that it coincided with the 20th anniversary of our independence is quite symbolic. Of course, we will discuss the work to be done before the end of this year, relevant instructions will be given. We already need to think about 2013, and we are doing that. I think that the positive dynamics will be maintained for the rest of the year and our economy will continue to develop.