Ilham Aliyev chaired the meeting of the Cabinet of Ministers dedicated to the results of socioeconomic development in the first quarter of 2015 and objectives for the future
President of the Republic of Azerbaijan Ilham Aliyev has chaired the meeting of the Cabinet of Ministers dedicated to the results of socioeconomic development in the first quarter of 2015 and objectives for the future.
President Ilham Aliyev made a speech at the meeting.
Opening speech by President of the Republic of Azerbaijan Ilham Aliyev
- Today we will discuss the socioeconomic results of the first quarter and talk about future plans. I can say that the results of the first quarter are very positive. We successfully completed last year as well. Despite the fact that a crisis had already started in the region at the end of last year, Azerbaijan managed to ensure the dynamic development of the economy, and we finished last year with excellent indicators.
These positive trends were continued in the first quarter of this year too. At the end of last year I was confident that 2015 would also be successful for the national economy. The results of the first quarter confirm these words. The gross domestic product has grown by more than 5 per cent. This is an excellent indicator both for the region and the world. Only a handful of economies around the world have achieved growth of 5.3 or around 6 per cent.
Azerbaijan has secured dynamic development, and it is gratifying that our non-oil sector has grown by 7 per cent. This was made possible as a result of sound economic policies carried out in recent years. The funds invested in the Azerbaijani economy for many years, the policy of diversification and the development of the non-oil sector have enabled our economy to develop steadily and not depend on the oil and gas sector. Even the sharp decline of oil prices in the world has had no impact on our overall economic development. This is the uniqueness of Azerbaijan’s economic model, and these figures show once again how correct the path we have chosen is.
The non-oil sector remains a priority, because as of now the economy of Azerbaijan will develop in a diversified manner. I am glad that our non-oil sector has been accounting for a large part of the gross domestic product for some time now. I am sure that this percentage will gradually grow further, and thus the economy of Azerbaijan will be even less dependent on the oil and gas factor.
I want to say again that the drop in the oil price by more than a half has had no impact on our overall dynamic development, as the non-oil sector assumed much of the economic burden. From now on, it is the development of the non-oil sector that will ensure the successful economic development of our country.
It is gratifying that industrial production has increased in the first quarter. As you know, in recent years, as a result of a certain decline in oil production, we observed no growth in industrial production. Industrial production increased by nearly 4 per cent in the first quarter of this year. This is a result of the work done. The past year was declared a "Year of Industry" in Azerbaijan, and this area was given special attention. Thanks to the establishment of modern industrial complexes and industrial estates in previous years, the development of small and medium-sized businesses, our industrial capacity has been significantly increased. As a result, industrial production in Azerbaijan is growing.
There is growth in agriculture. Growth in agriculture constitutes more than 3 per cent. I think that in the future we will observe great agricultural development, because the ongoing reforms, the improving work and our thought-out policies will, I am sure, give an impetus to more rapid growth in the coming years.
Inflation in Azerbaijan is at a very low level. Last year it was just over one per cent. This year it is 2.8 per cent. It is noteworthy as well that although the rate of the manat was amended in February of this year, inflation is still very low. This shows that control over the consumer market is fully guaranteed in Azerbaijan and that the state and the government constantly keep these issues in the spotlight.
The low level of inflation, of course, has a positive impact on people's living standards. At the same time, we need to know that when inflation is at a very low level, it somewhat constrains economic development. Therefore, of course, we must select the right balance here. The macroeconomic situation in Azerbaijan is constantly in the spotlight. Inflation should cover social functions and, at the same time, ensure the development of our country, in particular, the expansion of our export potential. This year, as is the case every year, the incomes of the population exceed inflation. Incomes of the population have grown by 5.3 per cent, which is about twice the rate of inflation.
These are the key economic indicators. I believe that this is a very positive indicator for any country in 2015, especially for countries with the developed oil and gas sector. I can say that this is our great success. These successes have been achieved by us, by the Azerbaijani people. If we hadn’t paid great attention to the development of the non-oil sector of the country in good time, our results today might not have been so delightful. On the contrary, we would have been faced with stagnation and recession we are now seeing in some parts of the world and the region.
What makes the Azerbaijani economy special is the fact that it is built on a solid foundation, is self-sufficient and does not depend on external financial resources. On the contrary, as a donor country we provide financial resources both to other countries and international financial institutions. This brings us additional revenues. By securing full economic independence, Azerbaijan further enhances its political independence.
Positive trends were observed in the regions in the first quarter. The process of job creation is under way, about 30,000 jobs have been created, of which 25,000 are permanent. This is an ongoing process, because, as I have repeatedly pointed out, there is a positive demographic situation in Azerbaijan. The population is growing, so job creation should be a continuous process. Our economic potential must be consistent with population growth. Population growth is a very positive process, as it strengthens our country and, at the same time, demonstrates the rapid development of Azerbaijan. Looking at the demographic dynamics, we can see that our population has started to grow rapidly in recent years. The economy, in turn, should create excellent opportunities for this growth, generate permanent jobs and keep unemployment at a low level. Currently, unemployment and poverty are at the lowest level - at the level of 5 per cent.
Social issues are being addressed. This sphere is always in the spotlight. Our thought-out economic reforms have always been complemented by a strong social policy. This year we are fulfilling all our social obligations. Additional funds are allocated for the social infrastructure. Schools, kindergartens and medical institutions are built. Currently, more than 20 medical institutions are being built and renovated. Issues related to medical diagnosis of the population are being addressed. The process of health checks is well under way. Last year a total of 5 million people were examined and as many as 4 million citizens of Azerbaijan have already been examined this year. In recent years, we have created modern medical centers in all our regions. So there is no need to come to Baku to undergo a health check today. There are modern medical facilities everywhere, and they should provide people with an excellent service.
Other aspects of our social policy are always in the spotlight as well. The social sphere is an area that provides for the well-being and comfortable life of the people. Therefore, the Azerbaijani government always keeps this area in the spotlight. Of course, our revenues have declined, as oil revenues have dropped. However, the financial resources received in previous years, as well as a thought-out policy, the development of the non-oil sector and the attraction of foreign investments, have allowed us the opportunity to fulfill all our social obligations even in the face of declining revenues and to implement infrastructure projects important for the country.
The state investment program is fairly broad for this year too. This program reflects the main infrastructure projects, the completion of which will create better conditions for the development of our country. Infrastructure projects, of course, have an important role to play in providing for people’s comfort and improving the business environment.
Our reforms are praised by leading international financial institutions. The Davos World Economic Forum has honored Azerbaijan with 38th place in the ranking of the world’s most competitive economies. Our positions are improving with each year. We have gone up yet another step, and I think that 38th place in terms of competitiveness on a global scale is a great success for our young state. We have reached this place not because of oil and gas, but as a result of judicious reforms.
Our economic policy is prudent. It is based on national interests and internal resources. Therefore, Azerbaijan’s foreign debt is at a very low level. For this indicator we are among the most advanced nations of the world. This gives us economic independence. At the same time, we can attract any amount in funding from foreign markets to Azerbaijan. I simply believe that this is not necessary. In a sense, we are certainly doing that, but we largely do our job and future projects in the country at the expense of our own opportunities.
The international authority of our country is growing every day. Azerbaijan is a reliable and respected member of the international community. In all meetings with my colleagues I observe great respect for Azerbaijan. The work ongoing in Azerbaijan is monitored and greatly approved by the international community. Our foreign policy is very active and flexible. It is based on national interests, which form our top priority. This is probably why, if I may say so, Azerbaijan has come out of the crises occurring throughout the region in recent years without any losses and is now carrying out its policies with dignity. We do not take steps under any anyone's guidance. We take prudent steps. If these steps correspond to our national interests, we take them, if not, we do not! There is no power that could force us to do anything or involve us in a campaign that does not correspond to our interests. Therefore, this position and our principled stance on every issue have, of course, earned us a lot of respect. Today, Azerbaijan is a country enjoying great esteem and authority on a global scale. When I say "the international community", I mean all countries, because the international community is not some organization. The world community means all countries. All countries are represented at the UN and, as you know, our positions in the UN are very strong. Otherwise, 155 countries would not have elected us a member of the UN Security Council a few years ago.
We continue our principled foreign policy this year as well. Although only a little more than three months have passed since the beginning of the year, my numerous visits have further strengthened our international position. Since the beginning of this year I have paid two visits to Turkey, have been to Germany, Bulgaria, Vatican and Saudi Arabia. So these visits paid over the course of three months already show that Azerbaijan is pursuing a multi-vector foreign policy. Saudi Arabia is the center of the Muslim world. This country is home to our shrines, while the Vatican is the center of the Christian world.
Remaining committed to its religious, national and spiritual values, Azerbaijan successfully and confidently moves towards modernization. We have built equitable relations with all countries on the basis of mutual respect and noninterference in each other's affairs, friendship and partnership. The respect showed to us is, of course, very gratifying. At the same time, it shows again that our foreign policy is flawless. I want to publicly announce that. We have not broken ties with any country.
We do not have tensions with any country. In fact, look how many friends we have gained in recent years and many countries want to cooperate with us! This is evidenced by the visits of heads of state and government to Azerbaijan, as well as my participation in international events. Today, Azerbaijan is a country that has a firm place in the world. Respect for our country in the world is gradually enhancing.
Earlier this year, I also participated in two leading economic and political forums, in Davos and Munich: the Davos World Economic Forum and the Munich Security Conference. It is no secret that a limited number of guests are invited to these events. These meetings openly and confidentially discuss the challenges facing the world. At the same time, there is an opportunity for all participants to express their views and share ideas. Azerbaijan's position on many issues is very important. I am talking not only about energy policy, but also about geopolitical and security issues in general, economic cooperation and stability. Look at the confrontation, wars, conflicts, crises, coups and other negative phenomena all over the world. Everything around us has been ablaze for more than a year or two – for about 10 years. Azerbaijan is an island of stability and development, and, of course, this is highly valued by the world community.
Of course, anti-Azerbaijani forces incessantly work against us. I have repeatedly stated my thoughts on the matter. The circles that can’t come to terms with the successful development of Azerbaijan, want to cast a shadow over our achievements and tarnish us carry on with their efforts. However, their efforts don’t and can’t produce any result both in and outside Azerbaijan. I have just provided very accurate arguments, albeit rather briefly, of Azerbaijan’s authority outside the country and our international image. The situation in the country is also evident. The stability, development and unity between the people and the government show again that the ongoing campaign against us or attempts to provoke some disturbances here don’t and can’t have any effect. Azerbaijan is developing confidently.
But these attempts, of course, will be continued, because the circles that can’t digest our successes won’t get off us easily.
We, in turn, are giving them the best answer by what we do. We do not and will not attach any importance to their words, articles or statements.
Our main problem, the Armenian-Azerbaijani Nagorno-Karabakh conflict, unfortunately remains unresolved. I have repeatedly stated my thoughts on this issue. I want to say again that the only reason for this is the fact that Armenia does not want peace and wants to maintain the status quo even though the heads of the OSCE Minsk Group co-chair countries have repeatedly stated about the unacceptability of the status quo. Armenia ignores this, while these states are not taking any concrete steps except for making such statements. This is why these statements remain unfulfilled. Thus, the conflict is delayed and not resolved. In the middle of last year the leaders of co-chair countries began to display some activity. In August, September and October, the leaders of Russia, America and France held summits in order to quickly find a way out of the situation and put an end to the conflict. Azerbaijan, of course, supports this activity because, as I have always pointed out, we are the most interested party in resolving the conflict. However, Armenia displayed an insincere attitude at these meetings, did everything to leave the essence of the negotiations on the sidelines and talk more about some confidence-building measures. We are not opposed to that. Confidence-building measures are also important, but the essence is to end the occupation. Despite this, after the Paris meeting, we reached verbal agreement that both sides would try to reduce tension on the line of contact in the hope that it would have a positive impact on the negotiations. However, the hypocritical policy of Armenia manifested itself once again. Less than two weeks later they launched large-scale military exercises in Agdam District. These exercises had one goal – to drag Azerbaijan into provocation and disrupt the process of negotiations.
We tolerated this provocation for a few days, but then we gave a fitting rebuff to the enemy, pointing them to their place.
They immediately took advantage of that to start accusing Azerbaijan of aggressive behavior.
Of course, no-one took this thesis seriously. Azerbaijan has always displayed a very restrained position. Our participation in the talks for over 20 years shows that we want to resolve the issue in peace. Armenia does not want the issue to be resolved because it does not want to vacate our lands. Since late last year the Armenian side has been constantly attacking our positions, and this continues this year too. As a result of these attacks, dozens of Armenians have been killed. According to the information available to us, more than 50 occupiers have been killed on the frontline in the last three to four months. Armenia’s criminal regime, its leaders and the dictatorial leadership of this country are to blame for that. I have already expressed my thoughts about it. If you do not want to die, then get out of Azerbaijani lands.
Azerbaijan will not retreat from its position of principle. We will defend this position. Armenia, meanwhile, is paying a high price for this occupation – the economic downturn, the complete loss of the last remains of independence, the casualties on the contact line, the growing evidence of desertion in the Armenian army. The Armenian soldiers joining the Azerbaijani side are saying that the number of those who wish to go over to the Azerbaijani side is fairly large. They are simply afraid because there is an order there: if someone wants to join the Azerbaijani side, he should be shot in the back and killed. That is a reality. This is the price being paid by the aggressor, and as long as the Armenian-Azerbaijani conflict remains unresolved, they will be paying this price.
We must and we do wage a more active struggle with Armenia. We have isolated it from all international and regional projects. According to their own official statistics, 30 per cent of their population lives in poverty. Real data is around 50-60 per cent. According to their own official statistics, every year 60,000-70,000 people leave the country forever. The information we have indicates that this figure is close to 100,000. In other words, after a few years, there will be no Armenian population in Armenia, a state that was created on historically Azerbaijani lands.
I have repeatedly said that our society, especially the younger generation, should never forget that the Armenian state was created on historically Azerbaijani lands. This is our historical land, the land of our ancestors. All place names are of Azerbaijani origin. Suffice it to look at the maps published in Tsarist Russia in the early 20th century. You can’t find a single Armenian place name there. In the present-day Armenia, 80 per cent of all villages have place names of Azerbaijani origin. These are our historical lands, and we will definitely return to this land. It can’t be otherwise. This is our strategic goal, we are committed to it and we will try to achieve this goal. Our economic, political and military power, our demographics give reason to say that. In the near future Azerbaijan's population will exceed 10 million people, and this is of considerable importance in addressing the issue.
In short, we will continue to make effort to restore our territorial integrity. The conflict must be resolved within the framework of international law and Azerbaijan's territorial integrity. There is no other option. An end must be put to double standards. The territorial integrity of our country is no less important than the territorial integrity of other countries. If the Western world demands a resolution of conflicts in post-Soviet republics within the framework of territorial integrity, then our conflict must also be resolved on these principles. But when it comes to us, you can see that the attitude is different. This is hypocrisy, double standards and injustice. During every meeting and summit, I use the same wording when talking to my counterparts. This hypocrisy and double standards must end. Armenia has occupied historically Azerbaijani territories. But when it comes to official statements, very abstract expressions are used. We are speaking and will continue to speak our word. As I have said, our international authority is growing. It is no longer possible to ignore Azerbaijan, and no initiative can be put forward and resolved in the region without the consent of our country.
There were two important events in the energy sector in the first quarter. On our initiative, the first meeting of the Advisory Council of the Southern Gas Corridor was held in Baku on 12 February. As you know, the foundation of the Southern Gas Corridor was laid on 20 September of last year, and the holding of the Advisory Council meeting was a very important event.
This meeting was attended by all current and future members of the Southern Gas Corridor cooperating with us. The final statement for the media was also very positive. It noted the leading role of Azerbaijan. In March, the foundation of the TANAP project was laid in the Turkish city of Kars. This event, of course, attracted the attention of the world. The TANAP project is part of the Southern Gas Corridor. As you know, the Southern Gas Corridor consists of four parts, and TANAP is an important part of it. Azerbaijan participates in the TANAP project as the main shareholder. Work has already begun, and I believe that in 2018 the Azerbaijani gas produced from "Shah Deniz-2" will reach Turkey. The TAP project must also be implemented. I believe that the barriers artificially created for TAP sometimes will be eliminated, and the European countries involved in the project, the European Union will resolve these issues. In any case, Azerbaijan and Turkey will fulfill their obligations and commitments related to the implementation of the TANAP project in a timely manner.
The Southern Gas Corridor presents a completely new energy map, and the role of Azerbaijan is gradually increasing. As you know, the European Union has put forward a number of proposals on energy alliance, and Azerbaijan is already mentioned in the documents of the European Commission as an important partner. Of course, we keep track of all this work.
We know how important the role of Azerbaijan is. We know that at present Azerbaijani gas is the only new source for the European space. We are doing our job, and it brings results. In 2012, President Erdogan and I signed the TANAP project in Istanbul and in 2015 we laid the foundation for the TANAP project. Look how much has been done in a short period of time.
Prior to that, the TAP project was selected, the "Shah Deniz-2" project was launched and the South Caucasus Pipeline which will link Azerbaijan and Georgia is already under construction. This is our job. We don’t just talk, but do work designed for specific results. We have never made populist promises. We have always done what we said. Therefore, the words I have said regarding the overall economic development in the first quarter demonstrate our successful policy once again. At the same time, very important steps were taken in the first quarter to further our energy policies. I am sure that all our plans will be fulfilled by the end of the year, the dynamic development of the economy will be provided, our non-oil sector will grow, and Azerbaijan will reach even greater heights in 2015.
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Closing speech by President of the Republic of Azerbaijan Ilham Aliyev
- As I have already mentioned, we are very pleased with the indicators for the first quarter. We must try to keep this pace until the end of the year and ensure national economic development.
As I mentioned in my opening remarks, the non-oil sector remains a priority. All necessary measures are being taken. I believe that this year our non-oil sector may grow even more. Growth of 7 per cent in the first few months, of course, is an excellent result. We should try to make sure that the non-oil sector accounts for a very large share of the gross domestic product. However, it is also true that a few years after the commissioning of the Southern Gas Corridor our gas exports will be increased dramatically. Thus, our oil and gas sector will grow even more. We will therefore need to take further measures to ensure that the non-oil sector is always ahead of the oil sector. We are taking these measures. These, of course, include infrastructure projects which create conditions for economic development in the regions. At the same time, there is a good attitude, attention and support of the state for entrepreneurs.
During the year I regularly meet with entrepreneurs. These meetings take place every year and we discuss the state program of socioeconomic development of the regions. In addition, during my visits to the regions, I attend the opening of various industrial facilities. Thus, the political support provided to entrepreneurs is quite large. At the same time, the government is taking other measures to promote private enterprise development. The National Fund on Entrepreneurship Support provides loans on favorable terms. These loans contribute to the development of the real economy and create conditions for the creation of jobs. This year we have also allocated a fairly large sum in loans. These loans subsequently return in full and are re-issued to entrepreneurs as a resource base. There are funds in the state budget envisaged for business development. At the same time, entrepreneurs are provided with loans which were issued in previous years and have been repaid. In other words, the repayment of these loans also creates the conditions for business development.
I can say that a very large class of entrepreneurs has emerged in Azerbaijan. From now on, the overall growth of our country will depend more on the development of entrepreneurship. Of course, the strategic areas that are in state monopoly should remain in state hands. These include the strategic transport infrastructure, the oil and gas sector and the strategic energy infrastructure. These areas should be controlled by the state so that work here is done in a consistent manner. Of course, when the key infrastructure is in state hands, control over tariffs is also exercised by the state. It prevents the tariffs from rising and having a negative impact on people's lives.
The other spheres are already emerging thanks to the private sector. Around 80 per cent of our gross domestic product is generated in the private sector. Last year was declared a "Year of Industry" and, as I have already said, this area received a lot of attention. We must fully provide ourselves with all building materials. We are already close to that. I voiced these figures in earlier meetings. We currently produce and export many types of building materials. And we need new markets for exports.
It is not so easy to access new markets – products must be competitive and affordable. For its part, the government provides entrepreneurs with this support because fuel in Azerbaijan is relatively cheap. The price of gas sold to the private sector and the general public is very low – only 100 manats. The world price is several times higher. The price of electricity is quite low. So these are great benefits provided by the government for the development of entrepreneurship. This is an additional benefit for the competitiveness of Azerbaijani products. And entrepreneurs need to make effective use of that.
First of all, the price of goods sold in the country should not be artificially inflated. The state controls this area. At the same time, in order to access foreign markets, the price must be reasonable, of course. In other words, if tariffs on fuel in Azerbaijan were not at such a low level, it would create major problems for entrepreneurs. Business people should realize that this is great support from the state. Entrepreneurs are provided with loans, political support and even the guidelines of the Ministry of Economy and Industry. Various packages of recommendations are provided for the volume of investments.
There is rapid industrial development in the regions as well. We have already identified several industrial centers. This is the time to create an industrial zone in each district. The first zone is being created in Neftchala. According to my information, local entrepreneurs are very enthusiastic and interested in this. We are even seeing that the number of entrepreneurs working in this industrial zone is higher than we expected. This is very gratifying. This is the first pilot project. I think that we now have to create similar zones in other districts. I expressed my thoughts about that a few months ago – each district should have a special place. There should be infrastructure, transport routes – everything you need to ensure that our industrial capacity develops in one place.
This year has been declared a "Year of Agriculture". It is also a testament to the emphasis placed on this sector. Industry and agriculture are the sectors that contribute to the successful economic development of any country, especially a country like Azerbaijan. After all, almost half of our population lives in the regions, in the countryside. Food security is a priority for us, because we have yet to fully ensure that. But we have come a long way in this direction. Azerbaijan is self-sufficient in basic food commodities now. In some cases, however, some components of these commodities are imported. I think that it is certainly a viable option at the first stage. But we must try to ensure that all components of food produced in Azerbaijan are also made in Azerbaijan: from seeds to finished products. Therefore, we are creating and will create a whole chain. First of all, of course, we create industrial enterprises, i.e. processing plants. In some cases, the goods produced by these enterprises were imported from abroad as raw material and were packaged here. This was the first stage. Now we are moving on to the main stage. There should be complete localization because food security will be the biggest issue for the world in the future, and countries not providing for their own food security will be faced with great problems.
Of course, the principles of a market economy are fundamental for us. We both import and export. But we see that when we depend on certain sources, this may lead to problems sometimes, including those related to prices. The work we have done in recent years has enabled us to keep inflation at a very low level. Why? We are not particularly dependent on external markets, on external food markets. Local production is already fairly strong. If local production is fully based on local raw materials, then the processes ongoing abroad, the crises or the decline in oil prices will not have any impact on us.
Therefore, food security is of top priority. The process of increasing local production is under way. Processing enterprises are being established in various locations. Our export opportunities are also expanding. Now we also need to expand the range of our exports. Azerbaijan has traditionally exported fruits and vegetables. Now we must export more finished and other products, i.e. dairy products. In the future, we should export meat and other products.
Very serious measures are being taken for agricultural development. Reforms are carried out. Electronic registration of lands is a very important issue at the current stage. If we can achieve that, then there will be transparency and we will know exactly what we have. Sometimes the maps available do not correspond to reality. This issue is being clarified and revised now. The allocated land parcels do not reflect reality. The images obtained from the satellite do not coincide with the data indicated on the map. This is a very serious matter. Major mistakes were committed in this area in the past. So now we have to readjust everything. Electronic records are necessary for entrepreneurs to know what land they own. At the same time, the state must know what land it has, what is and what is not cultivated on this land. Sometimes people take land and then change its purpose. Or land is fenced and just stored as property. This should not be allowed to happen. In order to make things completely transparent here, we must resolve the issue of electronic registration of lands. It's not just about statistics. It is about crops and about our agricultural policy. In addition, we can give recommendations and provide additional benefits: if you grow these crops on this land, fine! The state will give you more subsidies and help because it is necessary for the state and the country. Therefore, it is a very serious matter. I know that the Ministry of Agriculture is working hard on this. All relevant bodies should also join this work, so that we could have electronic records of land. All discrepancies should be eliminated.
In recent years we have paid great attention to irrigation and land reclamation. We have allocated major financial resources to this area. I think that this policy was absolutely correct. The Takhtakorpu and Shamkirchay water reservoirs are now in operation. From now on, these reservoirs will serve us all the time. The irrigated area will increase a lot, it is already increasing, and land reclamation activities will be carried out in the future too. Now we need to attend to the construction of canals more. The reservoirs have been created. Power plants have also been built on these water reservoirs, there are canals as well. But it is also important to branch out canals, because we must provide water to the allocated lands as much as possible. These figures have been voiced many times. We will include more than one hundred thousand hectares of new lands into the circulation and improve irrigation of the existing lands. This work, of course, is of great importance. I always keep this area in focus.
While visiting Khizi District last year, I was shown empty and unsuitable lands there. Now water will be supplied to these lands. Before the end of this year, more than 3,000 hectares of land in Khizi District will be provided with water. This is always in the spotlight. Overall, as a result of the operation of the Takhtakorpu water reservoir, thousands of hectares of land will be irrigated. What crops will be grown there? This should be determined by the Ministries of Agriculture, Economy and Industry. Entrepreneurs will be provided with assistance and loans. After that, the entrepreneurs will be told what they should grow there. There can be no arbitrariness and confusion here. The government pursues this policy, provides recommendations and directions, because we need to know what crops must be grown and marketed. Otherwise, we are likely to encounter certain problems here. There are profitable products which bring more money and there are products which bring less money. There are products that quickly recover the investment and there are products that take longer to pay back. We must know all this now – what the state needs to meet the domestic demand and where we will export these products.
We are now looking for and finding new markets. There are traditional markets. Our traditional market is the Russian market, and most of our agricultural products are exported to this market. A large logistical base is being created in the Kazakh city of Aktau now, where it is possible to store 10,000 tons of produce. This market is also very interesting for us. I believe that we will see tangible results in this area by the end of this year. Products conforming to the market demand should be grown on the new lands to be included in the circulation. Therefore, there must be complete state control and supervision here. We include hundreds of thousands of hectares of land in the circulation and provide irrigation. Billions have been spent on this. The funds invested in the construction of the Takhtakorpu and Shamkirchay water reservoirs account for nearly 1.5-2 billion manats. And then there are canals and other measures. Why? In order to create opportunities for people to live better, for farmers to cultivate products and earn money so that we properly use this produce, to provide the domestic market and stop the prices from rising, to sell products abroad so that both entrepreneurs and the state could earn more. So I want to say again that there can be no arbitrariness on the new lands to be included in the turnover. These lands should be used only as directed by the state. I am ordering the two ministries to rule out any outside interference.
Azerbaijan is already creating agricultural estates. This is also a great initiative. We have already laid the foundation of the first agricultural estate. The activities of large farms, the farms engaged in grain growing are expanding. The pilot project has paid off. The pilot project provided a yield of 55 quintals, although the country average was around 24 and in some places 25 quintals. So it was more than twice as high. Therefore, we must apply these pilot projects and this experience to all other areas in order to increase the yield. If we achieve that, we will be able to meet our need for grain and wheat using the available land.
In general, exports, the exports of agricultural produce and industrial goods will become the main driving force of our economy in the future. Exports bring the country foreign exchange reserves. The source of our foreign exchange reserves is oil and gas. We must produce and export food, industrial goods, construction materials and finished products, and we will go down this road.
Macroeconomic stability is always in the spotlight. Inflation is at a very low level. Last year I said that inflation this year would be in single digits. In the first quarter it grew by only 2.8 per cent. This is an excellent indicator despite the fact that the rate of the manat was amended in February and this could inadvertently affect the prices of imported goods. But as a result of the measures taken, the situation in the consumer market is absolutely stable. We did not allow prices to rise. Prices are stable and should remain stable.
I have already spoken on this subject and want to say again that, in general, the change of the manat rate was an inevitable phenomenon. When conducting the currency reform in 2005, we equated one manat to one dollar. Prior to that, one dollar was equal to 5,000 manats. This balance had to be maintained. In fact, we could not have allowed the manat to grow very expensive. The economists are well aware that this has a negative impact on local producers and hampers our export opportunities. However, the rapid development of the economy and the influx of oil revenues to the treasury strengthened the manat a lot, of course. In 2005, we conducted the monetary reform, while the Baku-Tbilisi-Ceyhan oil pipeline was commissioned in 2006. We began to receive large incomes. As a result, we saw that one manat was already at the level of 1.3 dollars. Then we saw that one manat was even more expensive than one euro. So it was a completely unnatural rate. We had to put an end to that, and all reputable international financial institutions today support and welcome our step. At the same time, the population sees that the change has not affected our daily lives – first of all because we produce most of the products of daily demand ourselves as a result of the work done in previous years. On the other hand, we have tightened control over the consumer market and taken measures against speculators.
As you know, we wanted to change the rate gradually and slowly. But then there was anxiety. People bought $500 million every day, and if that had gone on, the foreign exchange reserves of the Central Bank could fall sharply. Therefore, as a result of the measures taken, the diversification of our economy and our social policy, we did not allow unscrupulous people to take advantage of this situation. All this has contributed to the preservation of a stable situation.
My concern was also associated with prices on medicines. I issued a special instruction to exercise strict control over all pharmacies and prevent price increases. At the same time, I have to say that the pharmaceuticals market in Azerbaijan, unfortunately, has remained uncontrolled in a sense. In fact, it was unbearable. I can say that this drew more serious attention to this area, and we have revealed serious violations and imperfections here. In some cases prices on medicines are inflated several times, even up to 10 times. In other words, there were complete arbitrariness and anarchy in this area. Pharmacies sold medicines at whatever price they wanted. And people had to buy these medicines, spending heavily, especially pensioners who are in need of more medicines.
At the same time, low-quality medicines were imported to the country in some cases. So I told the Ministry of Health and the Ministry of Economy and Industry to establish complete control over the situation in this area. At the same time, I ordered the government to exercise strict control, and a new mechanism is being developed now. I do hope that we will begin to apply this mechanism in a few months and people should feel it in everyday life. Prices should not rise. In fact, I think that prices of some medicines should actually decline sharply.
In connection with this topic I want to note the following. This situation has shown once again how important domestic production is to the economy. Therefore, I am ordering the Ministry of Economy and Industry to prepare additional measures to stimulate local production and submit proposals, and we will make the necessary decisions and issue further instructions.
I should also note that Azerbaijan is not the only country where national currency has undergone depreciation. I have been provided with a note with some figures. I just want the Azerbaijani public to be aware of the events taking place around us of late. The situation in the region in the recent times has been as follows: the national currency of Kazakhstan has depreciated by more than 20 per cent, in Turkmenistan the depreciation has exceeded 20 per cent, in Georgia the national currency has fallen in value by more than 30 per cent, in Turkey the Turkish lira depreciated by 40 per cent over in 2013-2015, in Iran the national currency depreciated by 113 per cent in 2013-2015, the Russian ruble has recently dropped by 80 per cent. One of the leading currencies of the world, one of the two or three leading currencies, the Euro, has lost 25 per cent of its value. The Norwegian national currency has dropped by 34 per cent. I am voicing these figures just for comparison.
I would like to note again that the change of this rate in Azerbaijan actually means its reinstatement. We have restored the rate that was fixed in 2005. One manat was equal to one dollar at the time. Today one manat is equal to one dollar too. I think that this should be the case from now on. At the same time, we must further strengthen the fight against monopolies. It is necessary to take additional measures. In addition to boosting local production, we should pay attention to this area. If it is necessary to adopt some additional legislative or regulatory measures, we will do that. We must ensure free and fair competition.
This year we will continue the implementation of social infrastructure projects – the construction of schools, hospitals, kindergartens and vocational schools. Now there is a great need for that. This year we expect to open three more “ASAN xidmət” centers. The number of “ASAN xidmət” centers has reached eight – four in Baku and four in the districts. Three centers are now under construction. There are four centers in Baku now. “ASAN xidmət” centers have been opened in Ganja, Sumgayit, Sabirabad and Barda. Another center is now under construction in Baku. “ASAN xidmət” centers are also built in Gabala and Masalli now.
In the first quarter of this year, we conducted serious reforms in the electricity sector. We have established the "Azerishig" organization. "Azerishig" has been set up on the basis of the "Bakielektrikshebeke" Joint Stock Company, and the main goal is to improve power supply in the districts to the level of Baku. This was the main goal, because "Bakielektrikshebeke" has operated very successfully in Baku in recent years. Many have already forgotten the times of "Barmek". "Barmek" brought Azerbaijan to a deplorable plight! The "Barmek" infrastructure was in an appalling state before "Bakielektrikshebeke" took over from it! It is good that many have forgotten those days. But we all remember those dark nights. The younger generation probably does not remember that, and it is good.
There is still a lot to do in the districts. You know that I often visit the districts – practically every month. There are districts and cities I have visited more than 10 times. There is no place in Azerbaijan where I have not been to at least twice. When I come on a visit, I enquire. I also have other sources of information about how things are going with the provision of gas, drinking water and electricity. In some cases, the heads of local executive authorities try to portray a very positive picture. However, the reality is that power supply in the regions is not at the desired level. It is true that we have created major energy capacities and power plants. The energy potential we have created in recent years is bigger than the one that was created in the entire Soviet period. So many power plants have been created! If it hadn’t been for them, our current economic and industrial development would be impossible. So we have focused on this area in order to create generating capacities.
Both alternative hydroelectric and gas-fired power plants have been built in Azerbaijan. However, the plight of power lines is not very good, in particular in rural areas – as soon as there is a small wind, the pylons fall and power supply stops. This can’t be tolerated. I have repeatedly raised this problem and issued instructions to rectify the situation in this area. During meetings with people in the regions I listened to their requests and concerns. They said that power supply was often cut off and people were left without electricity. In a country such as Azerbaijan this situation is intolerable. Therefore, seeing that these administrative measures do not bear fruit, we moved on to structural reforms. I am sure that in the near future "Azerishig" will improve power supply of our cities and districts to the level of Baku. It is very difficult and challenging work.
We must make great effort now. However, the task has been set, and I want to emphasize this structural reform in the first quarter.
Environmental activities are always carried out in Azerbaijan, including Baku. Lakes are cleaned, trees planted and parks created. Baku is a city of parks and gardens today. At the same time, water treatment plants are established in the regions to provide people with drinking water. To address the problem of drinking water we work in three directions. In the first place, there are projects implemented by "Azersu". Drinking water projects have been completed in several cities. This process is welcomed and perceived well by the public. At the same time, this work is done by the "Irrigation and Water Management" Joint Stock Company. In addition, the Ministry of Ecology and Natural Resources builds sewage treatment plants in the villages along rivers. To date, clean drinking water has been provided to 480,000 residents of villages located along rivers, in particular the Kura and Araz. In 292 villages we have built modern treatment plants. Until now they used river water, allowed it to settle or took the water from canals. This negatively affected people’s health. At present, work is under way in 28 villages and treatment plants are constructed. These villages are home to 51,000 people. I believe that this work should be completed by the end of this year. Thus, these water treatment plants alone will provide drinking water to 530,000 people.
Little time is left for the European Games. The next meeting of the Cabinet of Ministers will be dedicated to the first six months of the year. Therefore, in the time remaining for the European Games all relevant agencies should work even harder. In fact, we are already completing all preparatory work. Transportation, infrastructure, technical, organizational and security issues are being addressed. The organizing committee is working well and fruitfully. The International Operations Committee is also working hard. Our sports facilities are practically ready. Last month we celebrated the opening of the Baku Olympic Stadium and the Baku Shooting Center. Final finishing work is under way at the Aquatic Palace. Repairs are in the final stages at the Heydar Aliyev Sports and Exhibition Complex. Work is being completed at the Sports Palace located on the boulevard. As you know, we are creating new sports facilities and, at the same time, repairing and reconstructing the centers that were created in previous years.
A European Games Park is being established. In fact, it was envisaged as a temporary sports facility. But if we consider that Baku will host Islamic Solidarity Games in 2017, I believe that the Games Park should stay after the European Games. Perhaps it will stay even after the Islamic Solidarity Games, because a beautiful recreation area is currently being set up in Baku. In the near future, our people will be able to enjoy a beautiful park and a recreation area stretching from the Flag Square to Bibiheybat. We are gradually expanding the boulevard. If you remember, the Flag square was handed over to the people a short while after being created. Now major construction and landscaping work is under way on the section from the Flag Square to Bibiheybat. Thus, together with the "White City" boulevard, the length of the boulevard will reach 16 kilometers.
The repair and restoration work at the Tofig Bahramov Stadium has been completed. Currently, relevant facilities are under construction there. Competitions in several sports will also be held at “Crystal Hall”. There, too, everything is ready. At the rowing base "Kur" in Mingachevir, temporary facilities and stands are being set up. The village of athletes is almost ready. A media village has been created. I can say that a media village is being created for the first time – in summer and winter Olympics media villages have never been created before and journalists had to stay in different places. We have shown attention to journalists and identified a great place for them to stay. They will live right next to the village of athletes.
There is a huge interest in the Games around the world. About 60 TV channels have signed broadcasting agreements for the Games. Thus, the world public will also watch the first European games "Baku-2015". We are in the final stages, so I am glad that we have done this work in a very short period of time – two and a half years. In fact, I had no doubt at all – after all, everything we start is always completed successfully. I am confident that the Games will be a great European festival of sport and friendship.
In short, the objectives are clear. We must work hard until the end of the year in order to successfully complete all the tasks and further strengthen our country. Thank you.
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Minister of Taxes Fazil Mammadov, Minister of Transport Ziya Mammadov and Minister of Culture and Tourism Abulfas Garayev also addressed the event.