I am very pleased to meet with representatives of the US Chamber of Commerce. I am aware that the companies and members of the Chamber have been working in Azerbaijan for many years, contributing greatly to the economic development of our country. First of all, I want to express my appreciation to the companies for such an important contribution and long-term partnership.
I am told that the Chamber was established 20 years ago. This coincides with the start of a rapid economic development of Azerbaijan, because prior to that time the situation was very difficult. There were serious economic difficulties, an economic recession and stagnation. Year 1996 marked the beginning of our economic development, and this growth has continued for 20 years.
I am also aware not only American, but also local companies and companies from other countries are members of the Chamber. But, of course, the Chamber was established by US companies, which is why it is called the US Chamber of Commerce.
As you know, I have recently paid a very successful visit to the United States. I attended a Nuclear Security Summit and had meetings with political leaders – the Vice-President and Secretary of State. We discussed important issues of the bilateral agenda, political and economic cooperation, cooperation in the field of security and energy security. Our economic cooperation was discussed mainly in the meeting with the Secretary of Commerce. In fact, we also discussed your activity in Azerbaijan and came to the agreement that economic cooperation between our countries should be consistent with the development of our country and the region, US interests in Azerbaijan and our plans for the development of the country, the sustainable development of Azerbaijan.
You have been working in our country for many years. You are aware of our realities and achievements. Therefore, I would not like to talk much about that. It would be better if I say a few words about our plans. These plans are well known to the public, as well as the business community, because, as you know, I often have meetings with the business circles of Azerbaijan. Once a year we hold an extensive conference. The event discusses the successes achieved during the year, including the development of the districts. We review all the important issues. In addition, we examine the work done, our achievements, shortcomings and plans for the next quarter at meetings of the Cabinet of Ministers.
Therefore, what I will say to you may not be a secret. However, I believe it would be better if you hear it directly. Given the current economic situation in the world and the political situation in the region, it is obvious that no country can rely only on its own resources in the long run. Different countries have different resources. As far as the countries of the former Soviet Union are concerned, they mainly rely on resources. In some cases we are talking about oil and gas, in others about other resources. Perhaps at the beginning it was only natural, because we had to change the economy at the time, create the initial capital and think of ways of integrating into the mainstream economies.
Currently, this period has ended, which is mainly due to the sharp – three to four times – fall in oil price. It was a kind of signal to the fact that we need to do more work in the area of reforms. If you look at the experience of developed countries, we can see that almost all of them are not rich in oil and gas. However, innovation, business environment and technology contributed to their development. Today they are the leading force in the global economy. There are excellent examples of that, and we are committed to deep and serious reforms.
Our top priority is to reduce the dependence on oil and gas although oil and gas will continue to play an important role in our economy, region and energy security. As you know, Azerbaijan plays an important role in the energy security of our partners. The investment in the oil and gas industry is investment in the future of our country and indeed other countries. But this is no longer a priority for our economy. I have recommended to the Cabinet of Ministers that it should forget about oil. Production, transportation and beginning of large-scale production of gas are needed only to accumulate more funds in our Oil Fund. I hope that there will come a time when we will dramatically reduce the transfer of funds from the State Oil Fund into the state budget. Currently, these transfers are taking place, which is due to the oil price. However, I believe that this situation is a good opportunity for diversifying our economy. Goal number one is to reduce the dependence on oil and gas, and to ensure economic diversification. We are working on this, and over the last more than 10 years we have been able to create over a million permanent jobs. We have achieved the development of regional infrastructure and services.
We have also created the industrial potential. However, this is not enough, because we need more rapid growth in the non-oil sector of the economy. Therefore, diversification is issue number one. At the same time, we should create more jobs, because due to the positive demographic situation in Azerbaijan, we must create thousands and even tens of thousands of jobs annually. Our population is increasing faster than the new jobs. A growing population is clearly due to economic development. If you look at the dynamics of population growth, we can see that it is consistent with the economic situation of Azerbaijan. Of course, in the future we plan on a more rapid economic development. Therefore, the creation of jobs should be linked to educational reform, because the sectors where the government plans on the greatest economic activity we will need experts. Until now, there was no such link. Therefore, there is a certain imbalance. In a number of sectors, we have more experts than we need, while in other areas we have a shortage of them.
One of the priorities is also to reduce the dependence on imports. We have managed to reduce dependence on main areas of consumption. However, we are still in a state of dependence. Therefore, the inevitable devaluation of our national currency due to the oil price and what is happening in the neighborhood, of course, had an impact on inflation. If we provided ourselves on all areas of consumption by 100 per cent, then the negative impact of devaluation would be less. At the same time, it is an opportunity to build a more competitive local industry.
Currently, one of the main priorities is to produce export-oriented goods. At first, it was not a priority, because, frankly, the oil revenues were sufficient to ensure a budget surplus and tangible foreign exchange reserves. Now that the oil price has dropped fallen, we have to compensate for it with other products of export orientation. To do this, we need to carry out proper marketing and active diplomacy. Accessing international markets with new products is not easy, especially at this stage and in the current geopolitical situation. Even traditional manufacturers are experiencing difficulties in accessing traditional markets.
In other words, what can we offer to foreign markets? Above all, we are talking of goods it is easy to sell. Therefore, our top priority now should be to focus on these sectors of the economy, in particular, the infrastructure sector. We have taken significant steps in the field of export promotion and improvement of the business environment. Therefore, it would be good to hear from you what needs to be done in this area to create an export-oriented economy. Of course, improving the business environment is one of the main priorities. This is the aim behind improving the investment environment. In the energy sector, there is a very favorable investment environment, because all production sharing agreements are approved by the Parliament and signed into law. But, of course, we have to ensure the same in all other sectors of the economy, so that investors are fully confident that their investments are protected, that there are no changes in the conditions and procedures. We must have a predictable investment environment. Only in this case can we attract investment under the current circumstances. We need that. But this, as you know, requires relevant conditions. The legislative framework, the rule of law, the protection of investment, the elimination of bureaucratic obstacles and the illegal interference in the work of both local and foreign companies are highly important. I think that foreign companies are in the best conditions, because when unlawful interference happens sometimes, they can report it directly or through their governments, and these issues are resolved.
Local companies are sometimes in a hopeless and helpless situation. This is one of the biggest obstacles to sustainable economic development. In short, we are committed to reforms, good governance and the creation of more opportunities for businesses, including the investment environment, stimulation of the export potential and attraction of investments. There is a lot to do. I think we will achieve our goals. At the same time, there are some sectors that are a priority for us. Of course, it would be nice to attract investments to these sectors. One of them is agriculture, which could create additional capacity, including exports. It can also promote employment, because almost half of our population lives in rural areas. We have already set up an appropriate infrastructure in rural areas, provided gas, electricity and water, built roads, etc. All of these projects are either fully implemented or are nearing completion.
The priority for us is also the high-tech sector. There is good cooperation sphere between Azerbaijani and American companies in this sector. By using your technology, including agriculture, we can grow more products on the same land plots.
With regard to tourism, we are actively investing in this area. Currently, additional steps are being taken in order to facilitate the visits of foreign tourists to Azerbaijan. In particular, given the geographical location, the hospitality of our people, the security, the friendly atmosphere and the existing infrastructure in Baku and the regions, as well as a variety of climatic conditions, we can attract more tourists. Unfortunately, the current situation does not suit us. We need to create a tourism industry. We do not have it. Certain steps have been taken to create, if I may say so, an additional volume of tourism, but there is no tourism industry. We need to do this. Currently, there are internationally renowned hotels in our country. I think that companies can help us in this.
Of course, as I have already noted, employment will always be on our agenda. In this area, we never consider our work complete. Therefore, the creation of industrial sectors, heavy and textile industries are also associated with our resources. Given the large reserves of iron ore, the steel industry has great potential. If we consider appropriate climatic conditions for growing cotton, there are opportunities for the textile industry and so on.
I can talk about this for a long time, but I would not like to spend all our time on comments. However, I wanted to inform you about our plans, and you can express your thoughts on what should be done. What hampers more active investment, the work of local and foreign companies? What do you think the government needs to do to create a situation we want to create? Given all this, I invite you to speak up. Thank you for your attention.
