Closing remarks by Ilham Aliyev at a meeting of the Cabinet of Ministers on the results of socioeconomic development in the first nine months of 2010

Once again I want to say that there are two months remaining until the end of the year. All the outstanding issues must be resolved during these months. All investment and infrastructure projects must be completed. I am confident that the outcomes of 2010 will be successful for Azerbaijan. The macroeconomic situation is stable – I cited figures showing that earlier. I want to repeat that the rate of inflation of 5.2 per cent is acceptable. At the same time, we must exercise strict control to avoid artificial price increases, thus keeping inflation low. Work in this area is under way. Control over the consumer market is improving, and this question must always be in the spotlight.

The rate of the Manat in Azerbaijan is stable. This also strengthens our economy and plays a very important role in addressing social issues. National currencies in most CIS republics depreciated last year. In some countries this was inevitable because their economy could not withstand the crisis and the depreciation of national currencies occurred in some way at people’s expense. Despite the crisis, we have kept the rate of the Manat stable. We did encounter certain economic difficulties, but tried to address social issues first. We could not allow the crisis to affect people’s daily lives. In general, the crisis of 2009 had very little impact on Azerbaijan. As for citizens, we can say that overall the citizens of Azerbaijan did not feel the crisis - first of all because we maintained the stability of the Manat. To do this, of course, we must have material resources and a strong political will. Currently, we are satisfied with the rate of the Manat, and I am sure that the Manat, as a strong currency, will play a role in developing Azerbaijani economy and addressing social issues in the coming years too.

The Azerbaijani economy can be considered as being developed in terms of its competitiveness. According to a report of the World Economic Forum, our economy is in first place in the CIS for the level of competitiveness. This shows that oil revenues were invested in other economic sectors. At the same time, it has been acknowledged that there is absolute transparency in this area. We have achieved this as well. We must make sure that all matters in the financial and economic sectors are organized at the same level as the management of oil revenues. In this case, a 100-per-cent transparency will be ensured in Azerbaijan in general – in economic and financial sectors. At the same time, conditions will be created for an even more effective management of our affairs.

There are opportunities in Azerbaijan to remain highly competitive. We are pursuing liberal policies in the economic sphere. Azerbaijan is a very attractive country in terms of investment. The new contracts signed recently between the State Oil Company of Azerbaijan and foreign companies are evidence of the growing interest in Azerbaijan. At the same time, major investment is made in our non-oil sector, and we can see it every day. This is confirmed by the improving appearance of Baku. Private companies are investing heavily in infrastructure and service sectors. If the government wasn’t implementing infrastructure projects, no-one would invest in the service sector in the capital and districts. Five-star hotels and beautiful recreation centers are under construction in our districts. There are broad tourism opportunities in our districts. Modern hotels and recreation centers corresponding to the level of our beautiful natural environment are being built. This will significantly expand Azerbaijan’s tourism opportunities.

The political and financial support the government provides to the private sector, the low-interest loans being allocated are increasing the competitiveness of our economy and creating a solid foundation for its further diversification. I remember discussions being held at certain research centers abroad 5-10 years ago regarding Azerbaijan’s oil strategy. It was believed that Azerbaijan would soon be affected by the Dutch Disease, that our economy would become lop-sided and that we would not be able to efficiently use our natural resources. I remember those discussions too well and am very happy today that we hear them no longer. We knew back then that Azerbaijan would not be exposed to the Dutch Disease and that our economy would not be lop-sided. We knew that Azerbaijan’s oil revenues would be managed at the highest level. With this purpose Azerbaijan joined the Extractive Industries Transparency Initiative (EITI). Today, the Executive Director of the Oil Fund has said that Azerbaijan has become the first country to secure fully-fledged membership in the program. We are doing this not only to receive good feedback from foreign centers. We are doing this because it strengthens our country.

Today, there is no disagreement on these issues in Azerbaijani society. There is complete transparency in this field. Every citizen knows or can easily find out how much revenue Azerbaijan has earned from oil, what percentage of it is being saved, how much has been spent and how. It is possible to use the funds of the State Oil Fund only after parliament’s approval. And this means that every citizen, through his/her representative in parliament, is involved in the distribution of these revenues.

We have achieved the current level by ensuring transparency. Our revenues are growing. If there were no transparency, I can say that we probably would not have foreign exchange reserves of $28 billion today. Only transparency and effective use of the funds have allowed us to build up these reserves. In the coming years, these reserves will further increase. We are already receiving large profits by managing these funds. Naturally, as the volume of revenues increases, our income from management will also rise. There will come a time when Azerbaijan’s state budget will in part be made up of the revenue from the management of these funds.

Therefore, we will continue to pay attention to issues of competitiveness. The government supports the development of entrepreneurship and private sector in Azerbaijan. I think that the social factor of the issue must also be taken into account at the next stage because the loans being provided serve the creation of new jobs and raise living standards. This factor should always be in the spotlight. At the same time, we must strive to allocate more loans to the areas and companies that could produce competitive products so that they could satisfy domestic demand for quality goods. This would also expand Azerbaijan’s export potential.

Along with this, additional measures are envisaged to develop the related industrial potential. A policy of industrialization is being conducted in Azerbaijan. Both the government and the government-supported private sector are actively involved in this work. Our major plants are being restored. These enterprises were built in the Soviet time and are now in a dilapidated condition. They are being knocked down and new enterprises are emerging instead. This process is progressing fast, especially in the city of Sumgayit. At one time, Sumgayit made great strides in the development of the chemical industry. The activities of the petrochemical complex and the realization of additional plans will now turn Sumgayit into an industrial city. One of the major steps taken in this direction is the industrial park under construction in Sumgayit. A number of competitive enterprises are already emerging there. We must develop Sumgayit in this direction to turn it into Azerbaijan’s industrial hub. A wonderful new road has been laid from Baku to Sumgayit, and the distance has actually reduced. Sumgayit holds a special place in the development of our industry. At the same time, the process of industrialization should go rapidly in other regions of Azerbaijan too.

This year has been declared the Year of the Environment in Azerbaijan, and a great job has been done in this area. I am very pleased that my initiative to plant trees was supported by the public. I am proud that according to the information provided to me, six million trees have been planted in Azerbaijan in nine months, of which 800,000 in Baku and the Absheron Peninsula. This process is still under way, and I am confident that all environmental issues will be successfully resolved in 2011.

Of course, by declaring the Year of the Environment, we had one aim: to further enhance attention to this area from both the public and government agencies. And we have achieved that. We must continue these excellent initiatives in the coming years. The treatment plants built along the Kura and Aras rivers are now providing hundreds of thousands of people with clean water. The cleanup of contaminated lakes, of the Caspian Sea, the establishment of a sewage system - all this work is envisaged for the next year too. We must resolve all environmental problems of Baku and the Absheron Peninsula, drain the oil-polluted ponds. Cleaning work should be carried out in other lakes – I spoke at length about this at the previous meeting. A sewage system must be established. In short, this sphere must always be in the spotlight.

I think that further measures should be taken to clean up the Baku bay. Now we are expanding the Baku Boulevard by bringing it even closer to the sea. Today Baku residents and visitors of our city can walk in places quite close to the sea. Therefore, the water in the bay must be clean. Unfortunately, the wastewater still flowing there from different places prevents cleaning of the bay. Therefore, I am issuing an instruction to elaborate sewage matters in the Baku bay in the near future. I gave this instruction some time ago too and some preparatory work was done. Starting next year, as a special project, we must ensure that the sewerage system in the Baku bay functions at the highest level. The work must begin early next year and the problem must be solved as soon as possible. Thus, I am sure that within a few years the water in the Baku bay - along the boulevard and around it - will be absolutely clear.

This year we experienced major calamities, unprecedented mudflows and floods. They brought great suffering to people and inflicted major damage. At the same time, great damage was caused to agriculture. Thousands of hectares of land remained under water, thousands of homes have become unusable. However, all our bodies worked very hard and effectively. Both state agencies and private companies joined the work. This was seen as a nationwide issue, and all the unpleasant phenomena were eliminated in a short time. Most importantly, all people were saved. Now we can see fires, floods, mudslides leading to human deaths in different parts of the world. But we have saved everyone. All measures were taken in good time, rescue workers and all organizations dealing with the issue worked very effectively.

I mentioned last time that the process of rebuilding the houses should be completed before winter. Work in this area is ongoing. First homes have already been commissioned in Hajigabul District. I know that construction is underway in other districts too. This work should proceed faster so that we can provide people with good housing prior to the onset of winter. It should also be noted that in comparison with the destroyed houses those being built are much better, more spacious and comfortable. Most of the destroyed houses were built of air-dried brick. They were small and run-down. They did not look too good and had no amenities. Now we are building beautiful stone houses with all the amenities, which are more comfortable and spacious.

I should also note that the Azerbaijani government has done all this work at its own expense. All rescue work was also conducted by Azerbaijani rescuers. Today, all construction and restoration activities are also carried out by the government. This work is being funded from the state budget without any outside help. We are not just building houses. Also destroyed were schools, roads, electricity and gas lines, water pipes. Therefore, we are also renewing the infrastructure and have been doing this for several months. This work requires great technical skill and huge financial resources. The state budget was amended and AZN 300 million was allocated. This shows that the government of Azerbaijan will never leave its citizens in distress.

This also suggests that the main issue for us is to improve the welfare and interests of the Azerbaijani people. Now we have built our economy on the basis market economy principles, and this makes us stronger. But at the same time, we cannot build our work solely on this basis. If we did, i.e. if we built our work solely on the basis of a market economy, the government of Azerbaijan could not have done anything. In foreign countries, if someone’s house collapses or is destroyed in a calamity, the affected person applies to an insurance company. All the houses are insured there. The person receives compensation, while the government does not spend anything and remains uninvolved. Are our homes insured?! Which of the houses built of air-dried brick were insured? Therefore, the government assumed this burden on its own. I also want to say that the government looks after the people, pays them compensation. I think that the amount of compensation covers a portion of the damage. So it is a manifestation and a sign of good intentions of the government, and this must be appreciated.

I know that the vast majority of those affected are very grateful. And this is natural. I believe that everyone should know that the government is and will be doing this as a sign of its developing social policy. I should highlight that we need to complete the job before the cold weather to allow the people living in temporary shelters to move into comfortable homes soon. At the same time, measures are and must be taken to prevent such phenomena in the future - bank protection, management of water resources. Now we are attracting foreign experts to the work. Local specialists are also experienced in this field. We must do everything to insure ourselves against such disasters in the future. I am confident that we will achieve this.

I want to repeat that all the infrastructure projects must be continued in the coming months. Road construction – there is great and successful work being done in this area too. We have recently celebrated the opening of the Mingachevir-Khaldan road. The Silk Way is almost ready, work is now being done in certain parts of it. A beautiful road is now being laid from Baku to the western border. At the same time, highways and local roads are being built in the northern and southern directions. Major investment is and must be made in this area. We can see the results of this investment through the developments of districts. After a few years, all the highways in Azerbaijan will meet international standards. We must pay attention to highways and, especially under current conditions, local roads because there is still much to do in this area.

In general, all the programs of the transport sector are being implemented. Construction of the Baku underground in ongoing. Perhaps we will hold a separate meeting on this issue after some time. Work is under way and a long-term program is being prepared. We need to discuss this extensively. The investment program for the coming years should also consider the expenditure on the underground construction, so that we could do this work at the highest level. The population of Baku is growing. At the same time, of course, roads are being built and expanded. However, the rapid development of Baku requires additional measures on the development of the underground. We must do it and I am sure we will.

In the near future, we must begin the construction of a new seaport in Alat. This project is also very important. Of course, the goods passing through the territory of Azerbaijan are transported through respective ports today. But we must look into the future. We know that even greater volumes of cargo will be transported through the territory of Azerbaijan. According to preliminary calculations, more than 10 million tons of cargo is to be transported following the commissioning of the Baku-Tbilisi-Kars railway. These figures will only increase in the future. A new seaport of international standards must be built in Baku.

Preparatory work is well under way. I do hope that we will begin the construction of the port soon. Of course, the seaport in the center of Baku will be relocated and its territory turned into a recreation area. There is a project on extending the Baku boulevard in both directions. The territory occupied by the present Baku seaport will be reconstructed for the leisure of people and our city will become even more beautiful.

At the same time, the Baku Boulevard should be extended in another direction - towards the Flag Square. Work is already under way there. New embankments and parks are being set up around the Flag Square. After completion of the work we will open this area to the population. At the same time, to connect the present Baku Boulevard with the Flag Square certain things need to be relocated. We need to accelerate that. There are some enterprises and facilities which we will move elsewhere. Thus, we must join the Baku Boulevard with the Flag Square. And a separate project will be developed in subsequent years for the area behind the Flag Square. Therefore, the present boulevard will probably become twice longer and more beautiful.

Steps are being taken to develop the road infrastructure in Baku. Road junctions, tunnels and bridges are under construction. This contributes a lot to the solution of the transport problem in Baku. A road is being built from the Heydar Aliyev Airport to the Mardakan roundabout. In fact, there is no such roundabout now, there are only names such as the Mardakan roundabout, the Sabunchu roundabout, the Azizbayov roundabout. None of them is there any more. We have got rid of them. Instead, we are building modern tunnels, bridges, road junctions. But many people, including myself, are used to saying the Mardakan roundabout. At present, a road is under construction from the airport towards Mardakan. From there we will have a new road to Bilgah, Kurdakhani, Pirshagi and Sumgayit. In essence, this will be a new artery, a new blood vessel. This six- and eight-lane road will meet the latest standards and link the villages located in those parts of Baku and Absheron with each other, with the city and with the northern direction. At the same time, as you know, we are building a circular road which will connect the southern and western directions bypassing the city. This is an immense project. I have recently examined progress of work there. This work should progress on schedule.

The remaining loans associated with the development of entrepreneurship must be granted before the end of the year. Work in this area is going well. These loans work and create new jobs. Today, the private sector accounts for 82 per cent of the national economy. The provision of loans, machinery, fertilizers, agricultural leasing and seeds should be in the spotlight. I want to emphasize seed growing because work on other issues I have mentioned has been under way for a long time. While visiting Yevlakh recently, I attended the opening of a new seed growing enterprise, Azertokhum. This is very important because it is the first such enterprise in Azerbaijan.

According to the information I have received, this enterprise alone will meet Azerbaijan’s demand for seeds by 15-20 per cent. While in Yevlakh I issued an instruction on further expansion of this plant and construction of such modern facilities in other parts of Azerbaijan so that we could fully provide ourselves with seeds. If we achieve that, there will be no problems left in agriculture and crop production. To do this, instructions have been issued. The Azerbaijan State Investment Company will participate in this work and invest funds. We must ensure that specific measures are taken next year both to expand existing enterprises and build new ones.

Cold storage chambers are being established. Every farmer can see the benefits of that. Granaries are under construction. The programs planned in this area will be completed in about 1-2 years. This will help regulate prices and prevent products from spoiling.

Specific assignments relating to livestock and poultry breeding have been issued as well. They are being executed. In poultry, we cannot fully meet our needs yet. We can meet our domestic demand by around 70 per cent, but we should, as is the case with meat production, be fully self-sufficient. Specific projects are being developed now. I do hope that we can fully meet our needs in 1-2 years. Purebred cattle is imported to the country. This also gives a big boost to agriculture.

I also want to point to several issues relating to the energy sector. First, we are taking positive steps in the field of gasification. We must make sure that 90 per cent of Azerbaijan is gasified – both the population and industrial enterprises. This is our goal. Work is underway in this area, new pipelines, trunk lines, compressor stations are being built. It is very important because our gas potential is growing. Our current gas reserves exceed domestic needs and export capacities. We have pumped 2.5 billion cubic meters of gas into underground reservoirs. This has never happened before. We must increase gas storage capacity to 3 billion, perhaps even to 5 billion cubic meters. But we cannot always inject gas into storages. After reaching a certain point, we will have to either export the gas in even larger volumes or use it at home. At the same time, gasification plays a very important role in solving social problems of the population. Therefore, gasification should proceed faster so that this work is done with high quality and in a short time.

Along with this, we must further expand our export capacity. In 2010, very important steps were taken in this area. We have expanded our export opportunities and geography. As I mentioned earlier, Azerbaijan exports gas to neighboring countries. In the future, we must increase these volumes. At the same time, I look forward to hearing good news from the blocks where exploration is now under way, especially the Umid field. This is necessitated by the very name of the field (translates as Hope). The development of this field is quite special because the State Oil Company of Azerbaijan is conducting exploration and drilling in deep horizons on its own and at its own expense for the first time after a long break. Preliminary information is quite encouraging. We look forward to seeing major exploration at Umid. Therefore, Azerbaijan’s gas potential will become even more significant. The exploration of Umid will become a landmark event both in terms of addressing domestic needs and increasing exports.

The president of Azerenergy has provided information about the work being done on the renewable energy project. We attach great importance to this area. We must use all our water resources. Work is under way this year, we have laid the foundations of new stations. The opening of the Bilav hydro power plant in Nakhchivan is a major event. It will step up Nakhchivan’s energy potential. Small hydro power plants should be built in all other districts next year. There are enough resources in the budget and we must use them rationally. Sometimes the red tape creates problems and leads to delays. If we could pass through the bureaucratic procedures more quickly, if were no bureaucracy, red tape and unnecessary approvals, we could do more, particularly in the field of the environment. Everything is quite clear – we must do it. To plant a tree or clean up a polluted lake we do not have to wait for permits and approvals for months. It is clear. The President has set a task and it must be accomplished soon. In addition, we have everything – technical capabilities, qualified professionals. We must not waste time on these issues. Funds are available, including those on the development of renewable energy. Now we need to see how these funds were spent. In my opinion, we could not use even half of the money. This is so. Therefore, it is unacceptable. The year is ending. Earlier this year, we set a task. So far we have laid the foundations of only three hydro power plants although their number could be bigger.

Earlier this year, I raised the issue of developing renewable energy, including solar. An agency was established. I understand that this required the solution of certain organizational matters and the development of a feasibility study. But the year is already ending. Do we have at least one solar battery? We don’t. I was shown one or two outside the Central Election Commission, and that was all. I am aware that a plant which will produce solar batteries is to be built in Azerbaijan. The plant must be built, it is very good, there will be new jobs and domestic production. But are we supposed to wait in the meantime? I think we could install solar batteries in certain places this year.

So I think that all our agencies should be more efficient in these matters. There must be an end to a certain misunderstanding between government bodies. This is our common cause. Sometimes the red tape and bureaucracy rob us of a very long time. I want everything resolved quickly so that we do not waste time. Especially when we know that we should do it. If there is hesitation or doubt, then, of course, the question must be seriously studied. However, how much time do we have to lose planting trees or cleaning a lake, and why?! Therefore, I ask all relevant bodies to make the right conclusions and eliminate the red tape.

Once again I want to say that we will discuss the results of 2010 next year. But we can already say that these results will be good and ensure the successful development of Azerbaijan. Thank you.