Dear friends. The meeting today is dedicated to the implementation of the state development program. Such meetings are conducted on a regular basis. As you know, the first state program on socioeconomic development of districts was adopted in 2004 and covered 2004-2008. Afterwards, the second program was adopted, and we will discuss its implementation today.
The adoption of the first program played a very important part in the development of our country. As a result of its implementation, extensive construction work has been carried out in districts. Hundreds of thousands of new jobs have been created. New industrial enterprises have been set up. In other words, the development and revitalization of districts was associated with the adoption of the program. It is also worthy of note that additions and amendments were introduced to the program in 2004-2008 because our development was very rapid. In those years our average gross domestic product exceeded 20 per cent. Under such circumstances, the additional budget revenue certainly led to some amendments to the program. Overall, I can say that the program covering 2004-2008 was over-fulfilled. As a result of the program, major and successful steps were taken to develop our country and diversify our economy.
The program covering 2009-2013 is being implemented as successfully. It has been under way for two years. I can say that all the issues and tasks we are faced with are being addressed. The 2009-2010 period will go down in history as years of a global financial and economic recession. Despite that, Azerbaijani economy grew further over these years, which is of special importance. Over the last two years Azerbaijani economy grew by 15 per cent. I can say that such a growth was made possible also because of the adopted programs on socioeconomic development of districts. If we hadn’t paid due attention to the development of districts, our economy could be lop-sided today. But our goal is to diversify our economy. Special attention is being paid to the development of the non-oil sector. Therefore, I can say that if our economy grew in 2009-2010, the most difficult years for the whole world, our further development will, of course, be even more rapid.
Growth of the gross domestic product is, of course, very gratifying. But it is also important to develop every sector of our economy, to ensure that the country is rapidly industrializing, small and medium-sized businesses are developing. The steps being taken by the state in this regard are bearing fruit. Our budget is growing. For comparison, I can say that our state budget for this year is 12 times higher than it was for 2004. Today our state budget is around $16 billion, and it is quite likely that budget expenditure will rise within a year as the oil price envisaged in it is $60. Currently, the price of oil is almost twice as high.
Therefore, I am sure that the pressing challenges the country is faced with are and will continue to be resolved. I am confident that by 2013, thanks to the implementation of the second program, the country’s major economic, social and infrastructure issues will be resolved. In any case, these issues are reflected in the state program.
Essentially, this program is the fundamental document for the development of the economy and our country as a whole. The program specifies all the tasks, mechanisms of their implementation and financial resources. There are deadlines as well. Therefore, we must ensure complete implementation of this program on the ground with direct participation of public agencies. To do that, we will now discuss last year's results of the program.
In 2004-2008, major resources were invested in Azerbaijan. It is encouraging that most of the investment made in the past year was domestic. Domestic investment is already ahead of foreign. This indicates that, on the one hand, the power of the Azerbaijani state has grown, while, on the other, a certain portion of investments is made by the private sector. The private sector is benefiting from the successful processes taking place in Azerbaijan. Among other things, private companies are carrying out government contractual work, thus becoming stronger and receiving extra funding. They reinvest these resources in the economy. Therefore, the private sector is getting stronger and there is an additional source of economic investment.
We will continue to implement public investment programs. Major funds are allocated from the state budget every year. But I would like to see the private sector investing more and expanding its capabilities. This is also of great importance for the development of the country.
The investment process will be continued even though major infrastructure projects in Azerbaijan are to be completed by 2013. Roads, water lines, gas, electricity and all other infrastructure projects are part of the state program, and all these issues must be fully resolved before 2013. Appropriate instructions have been given. In subsequent years, we will probably identify new areas to be invested by the state. At the same time, we must seek and explore new opportunities for public investment both in and outside the country. Government agencies and the private sector can work together in this area. As we established the State Investment Company through which we succeeded in attracting domestic and foreign investment to the economy, so we can invest resources in foreign countries with the participation of public and private sectors. This will both secure our business interests and expand Azerbaijan’s international opportunities, while our international standing will further strengthen.
Considering the fact that state companies, in particular the state oil company, are investing a lot in foreign countries today, we have, so to speak, already opened that door. That was a new area for us, never before have Azerbaijani companies invested heavily in other countries. We have always been interested in foreign investment in Azerbaijan. And we still are, but the development of our country already dictates the need for accessing new markets. Government agencies should also work actively both on investment and on securing the participation of our companies in different contracts.
I have repeatedly talked about that. Today I want to say that we should pay more attention to foreign markets in order to further develop our country. The process of investment in the Azerbaijani economy is going well. Last year alone a total of $15.5 billion was invested in the country's economy. This is a very large figure. We will continue to invest this year too. Azerbaijan has covered a long and successful road in protecting foreign investments. These investments are well protected in Azerbaijan. We need to further improve the business environment in the country. We will talk about that today.
Along with all this, we could not achieve long-term and sustainable economic development of the country without a strong social policy. With this purpose Azerbaijan is conducting a very strong social policy. It manifests itself in different ways. We do not limit our activities to raising wages and pensions. We are also investing a lot in the social infrastructure.
Over the last six to seven years, more than 2,000 schools, 400 hospitals and 29 Olympic centers have been built in our country, and this process is ongoing. The creation of the social infrastructure in districts, in particular in the public health sector, is highly important, and we will further step up our activities in this field both from the state budget and other sources in the coming years.
Of particular importance to the development of our country is the strengthening of the private sector. These are not just words and slogans. In our day-to-day activities we do everything possible to develop the private sector, the private enterprise. I regularly meet with business people both in Baku and in districts. The government is providing tremendous support for private enterprise development. All state agencies, both central government and local executive authorities, must help entrepreneurs in this field. Business activity in a normal business environment will ensure future development of our country. We live in a market economy. A significant share of our economy, more than 80 per cent, is made up by the private sector. I think this is a good progress.
If we consider that the main strategic resources of our state, such as oil, gas, the main transport infrastructure, power facilities, etc. are under monopoly of the state, the large share of the private sector in the economy explicitly shows that there is a completely liberal economy in Azerbaijan, the principles of a market economy are fully embedded, which, of course, is playing a positive role in the development of the country. Therefore, additional measures will be taken in the future to develop private enterprise, especially small and medium-sized businesses, in Azerbaijan.
I want to repeat that the Azerbaijani state, for its part, is taking all the measures necessary: providing political support and assistance through economic means. In 2004-2010, low-interest loans totaling around AZN 700 million were provided through the National Fund on the Support for Entrepreneurship. The provision of those loans gave a powerful impetus to the development of the private sector. Eighty per cent of the loans are provided to districts, which demonstrates our policies and intentions.
It is very encouraging that the loans are being repaid. The private sector is showing great responsibility here. Of course, before the loans were granted, the situation was carefully analyzed, the possibilities of private companies were examined and those approaching this matter responsibly were selected. But, again, it may have happened that some loans could not be repaid, and that would have caused us problems. It is gratifying that the loans have been repaid, and the repaid funds are being lent out again. This year, the National Fund on the Support for Entrepreneurship will provide the private sector with low-interest loans worth AZN 125 million. Thus, the amount of loans that will be repaid in a few years will increase, and no matter how much money is repaid, the entire sum will again be channeled into loans.
By providing loans, we both support the private sector and give an impetus to economic development of the country. This year and in subsequent years we will be providing loans for the most important spheres for our country. The interests of both the private sector and the state here must overlap, so that the economy could develop in a diversified manner and the private sector could strengthen.
We are aware of international practices. We are also tracking the processes unfolding in the world and seeing that the development of private enterprise provides overall development of nations. It is true that Azerbaijan has rich oil and gas resources, we have a thought-out oil strategy. This strategy is already bearing fruit. I can say that this factor has played a very important role in diversifying our economy. If we did not have financial resources, we would have to rely on loans from foreign financial institutions. In some cases there are problems with obtaining such loans. In other words, the energy sector, the oil and gas industry are of great support for us. But the country cannot fully develop by developing only this sector. This is a major financial source for us. This, beyond doubt, is one of the factors strengthening Azerbaijan’s international standing.
Issues of energy security are at the forefront of the global agenda. Azerbaijan promptly took the necessary measures. We have discovered our rich oil and gas fields. We have an extensive network of pipelines through which we can transport and, in fact, are transporting our resources in any direction. This is a reality today. We are already in a state of absolute readiness. We have done all the work and are ready for major investment.
I think that billions of dollars will be invested in the energy, the oil and gas sector, especially the natural gas sector of our economy, this year and in subsequent years. Both the country’s economy and the private sector should be prepared for that. It is no secret that thanks to the implementation of our strategy, hundreds of Azerbaijani companies have been awarded contracts and have benefited from these opportunities. These companies have expanded their financial opportunities through the work done in the petroleum industry. We are now on the eve of the second major investment. Now we are more prepared for that. I want to encourage the private sector to take an active part in the future major investment, so that Azerbaijani companies could derive maximum benefit from the money to be invested in Azerbaijan’s gas sector from abroad.
At the same time, small and medium-sized businesses, the businesses that will determine the future of our country are being developed not only to improve the business environment or to create new jobs. Private enterprise development in essence means a major reform. This reform is being successfully implemented in Azerbaijan, and I want to repeat that the vast majority of our economy is formed by the private sector. We have achieved that in a short period of time, in the years of independence. But reforms in the economic sector are always complemented by reforms in all other areas. In other words, we cannot limit our work to economic reforms only. In fact, this is not possible.
We intend to modernize the country and create a modern state. Therefore, the reforms that are and will be conducted in Azerbaijan must be multifaceted. Economic reforms will lead to the liberalization of the economy, create a strong private sector and people will live even better. People’s well-being will improve, jobs will be created and local industries will grow. I have said “will be created”, but in fact they have already been created and this process is ongoing. All freedoms will be fully secured in Azerbaijan. In other words, private enterprise development effectively gives a powerful impetus to the comprehensive development and modernization of our country.
A class of entrepreneurs has emerged in Azerbaijan. I think that in the coming years we should pay more attention to improving the quality of work in the private sector. Let me repeat what has already been said. The future economic development of Azerbaijan – if we look at a long-term future – will largely be secured by investments in foreign markets. Azerbaijani market is, to some extent, limited. Of course, it is smaller than in neighboring countries. Our population is growing. A nine millionth citizen was born last year. But the country's economy and the emerging financial resources require us to access external markets. We can only access foreign markets with competitive products. We must try to ensure that our products not only intended for external markets but also consumed domestically meet high standards.
I am very glad that the new enterprises I get to see on my visits to districts in recent years, the new factories I am inaugurating meet world standards and requirements. They are receiving international certificates, certificates for entering the European Union. We must go along this path. At the same time, I believe that in the coming two years our key products must be manufactured at home. A year ago we spoke about that. Today we will see what has been done. So far we cannot provide the domestic market in full, but we must strive to do so.
We know that in the conditions of a market economy and globalization, this may not or should not be goal number one because all countries are linked with each other. Azerbaijan is part of the global economy. But we can also see the processes and events unfolding in the world, both on the political plane and in the field of economics, agriculture; the natural disasters in different parts of the world and on different continents – this is also a reality. Two or three years ago, we could see maybe ten per cent of that. It happened quite rarely. Now we can see floods, mudslides and fires almost every month. In fact, they may happen regardless of the time of year or geographical location. This affects agricultural production in one way or another. To a certain extent, we rely on imports – I mean food. If there were no worrying issues like that, we would not have to talk about them at all. We produce what we produce, and buy what we can’t produce.
Today the price of oil on international markets exceeds $110. Some in Azerbaijan may rejoice at that. But there is little reason for joy. The price of oil exceeding $100 will create big problems. In particular, it can create problems for us as long as we, to a certain extent, rely on imports. The rising oil price will elevate the price of other products which, when imported into Azerbaijan, will become even more expensive. The political processes are unfolding in such a way that it is somewhat difficult to predict their further scenarios. Therefore, we must fully ensure our food security, as we have done with our energy security. Today, Azerbaijan is playing an important part in the energy security of other countries, and this role will grow further. We are ensuring our transportation security. All the roads pass through Azerbaijan today. Such is our geographical location. We are creating a powerful transportation infrastructure. This is already bringing us both economic and political dividends. Food security in Azerbaijan must also be ensured. Today will talk about that.
I can say that all these issues are of paramount importance. I want to say again that we are not dealing with a short-term plan, but with a long-term development strategy of our country. What will happen today, after 10, 20 years? Azerbaijan must be prepared for any challenges and scenarios. We have extensive opportunities. In addition, we have thought-out policies. We are watching the developments unfolding in the world, we know about them. Azerbaijan has become a very important country for regional stability, for the strengthening of economic and political stability. We have done that thanks to our policies, reforms and discreet steps. Azerbaijan is now perceived by the world as a regional factor. Our influence opportunities are expanding. Azerbaijan’s power is growing. The public and political stability observed in Azerbaijan has played an important part in achieving all these realities. At the same time, the reforms, the liberalization of our country, the serious fight against negative phenomena – this is our strategic course. And now let’s move on to discussions.