Closing speech by Ilham Aliyev at the meeting of the Cabinet of Ministers dedicated to the results of socioeconomic development of 2015 and objectives for the future10 january 2016, 12:40
We must secure the pace of economic development in 2016. This is no easy task. In particular, the ideas voiced here and the overall picture observed last year does not suggest that the global economic recession will end in 2016. This being the case, we have to work even more effectively to secure the pace of economic development by domestic resources, judicious policies and reforms, including structural reforms.
The development of the non-oil sector is of particular importance is. A lot has been done in this area in recent years. If we hadn’t tackled the development of the non-oil sector earlier, our economic development today would not be as successful. Economic diversification and non-oil sector development will be the main priorities in the economic sphere in 2016. I am sure that we will achieve even more impressive strides in this direction this year.
In general, the structure of our gross domestic product is changing for the better. The share of the non-oil sector is increasing. This is a positive fact. The dependence on oil is reducing. However, we have to minimize this dependence in order not to depend on the oil price in the future. This is the task. I believe that as a result of a focused policy and hard work, we can achieve this.
This year, we have to attract even more foreign investment to Azerbaijan. However, there is a struggle for foreign investment on a global scale. Azerbaijan is a great country for foreign investment. Foreign investments are protected. It is true that investments are largely made in the oil and gas sector. Recently, however, there have been foreign investments in the non-oil sector as well. We should try to attract foreign investment to our country, particularly to the non-oil sector, the industries whose development would strengthen our export potential and reduce our dependence on imports. I believe that the attraction of foreign investments to agriculture, the industrial sector and the service sector may be considered as the most suitable for us, and the government should work hard in this direction. In previous years, we attracted foreign investment mainly on the basis of applications we received. Foreign investors used to come and make suggestions, while relevant authorities considered them and made decisions. In the present circumstances we must work hard ourselves. Our economic entities, as well as the embassies abroad, should also be involved in this work. Potential investors should be provided with more extensive information about Azerbaijan. I believe that our capabilities, the increasing economic development, the expanding domestic market, as well as the regional markets, could be attractive to potential investors. In other words, it is necessary to do very serious work in this direction, and there must be results.
At the same time, local entrepreneurs should also invest more in the economy of Azerbaijan. We have seen that in recent years. In particular, we are seeing this thanks to the soft loans provided by the State. Of course, it is a government policy. When these loans are given to entrepreneurs, they are urged to invest in a particular sector. We already have a broad stratum of business people. They should also invest in the country's economy. First of all, investments should be made in the real economy – creation of production, agriculture, industries and the service sector. State bodies – both central state bodies and executive authorities on the ground – should create conditions for them, not to interfere in their work, to actually encourage them and to regularly report on how much was invested in each region and what the sources of investment are. Public investment, of course, is made by the state. The activities of central and local executive bodies are not particularly important here. But, of course, central and local government agencies should try to attract private foreign and domestic investment.
We are preserving and must preserve the foreign exchange reserves of the country. In previous years, large transfers were made from the Oil Fund into the state budget. It had natural reasons. We tried to implement major infrastructure projects as soon as possible, and we achieved that. Today I can say that the major infrastructure projects in Azerbaijan have been implemented. Our generating capacity associated with electricity is fairly large. Projects on gasification, drinking water and road construction are well under way. In other words, the purpose of transfers from the State Oil Fund was to create the best conditions for the development of infrastructure and businesses, and we were able to achieve that. In the current circumstances, we need to protect the resources of the Oil Fund. The policy we pursued in previous years cannot be continued. This year, the transfers from the Oil Fund into the state budget will reduce, and we must now consider each particular project and its value before we can make a decision on it.
It is necessary to broaden the tax base. We have sufficient resources to achieve this. We need to move the informal economic activity into the legal plane. Very serious steps should be taken in this direction. A number of changes to the tax code are already in force, and creates even better opportunities.
Customs clearance and all import and export operations must be carried out transparently. It is necessary to fight monopolistic trends even more vigorously. I believe that if we work hard in these three areas, we can significantly increase the amount of budgetary revenues. I believe that the budget should receive funds in excess of the current forecast.
In the coming days, the State Investment Program for 2016 should be submitted to me. This program will reflect the major infrastructure projects. In addition, public investment should be invested in areas that can fetch revenues to the country and replace imports.
It is necessary to further tighten financial control. In particular, the work of the Chamber of Accounts needs to be organized more effectively. It should exercise very strict control over the spending of government agencies and state-owned companies. I can’t say that this control was at the proper level in previous years. In some cases, government agencies and state companies made some unnecessary and wasteful spending. This must end. Financial control should be very strong and stern. Those committing violations must be severely punished.
There are several government agencies and state-owned companies in Azerbaijan that have strategic importance for the economy of the country and are in the monopoly of the state. But these companies need to change management rules. It is necessary to apply the principles of corporate governance. They should study and apply the experience of leading corporations in the developed world. These companies should be absolutely transparent.
In addition to that, the mechanisms of public oversight should be deployed. I have repeatedly expressed my thoughts on public oversight. But I think that we should develop mechanisms of public control, because it would be difficult to achieve this by simply asking people to go and monitor this or that sphere. Both public activity and mechanisms should be at the right level here. We should definitely apply the mechanisms of public control. The government should submit its proposals on the issue. Of course, we should not allow waste, especially in the current environment. There should be very strict controls.
We need to reduce the turnover of cash. It is necessary to expand non-cash payments. There are different resources. To achieve this, it is necessary to apply mechanisms of fiscal encouragement, so that companies are interested in conducting non-cash transactions.
I can say that in general, the reforms we have carried out in recent years are producing results. The international economic and financial institutions highly appreciate the policy Azerbaijan has pursued in the economic sphere. One of the largest and most influential global institutions, the Davos World Economic Forum, ranks Azerbaijan in 40th place in terms of economic competitiveness. This is a truly great achievement. Leading rating agencies in 2015 confirmed our positive ratings. This is really a huge success. But we have to work even harder, and if there are errors in some areas, we should eliminate these shortcomings and drawbacks.
It is necessary to take additional measures to improve the business environment. Last year we took very serious steps. There has been mentioned here. The number of licenses has been reduced. The number of permits is reducing. Bureaucratic obstacles are being eliminated. This year, we need to do more serious work in this area. It is necessary to take into account the suggestions of the business community. We are in regular contact with it. In the present circumstances, I think that their opinion may be even more important: what are the problems and what obstacles are they facing, so that we could eliminate them and improve the business environment.
It is necessary to ensure that entrepreneurs are provided with soft loans. Last year, loans worth 250 million manats were granted on favorable terms. Most of them were provided to the agricultural sector and the regions. Concessional loans were granted to 5,240 entrepreneurs. This year, this policy should be continued. Of course, our financial resources are not the same as in previous years now, but we have to arrange funds for this sphere, because this means investment in the real economy. This investment fully reflects our public policy, because we have to develop the sectors necessary for the state in order to grow products that can replace imports and be exportable. Therefore, targeted provision of concessional loans has played a positive role. The state budget for this year should envisage funds at least at the level of last year for this purpose. If we consider that a significant portion of these loans are issued at the expense of previously taken and repaid loans, the fiscal burden here is not so great. And even if it is, it still is a very important and profitable sphere.
I expressed my thoughts about it earlier, too. Under the current circumstances, there is still a great need for that. Private banks need to allocate more loans to the real economy. The state supports private banks. Overall, the banking sector should be reformed. The banking sector is in need of consolidation. Private banks should participate in the economic development of the country more actively. Of course, private banks need to earn an income. Other tools may be more appealing to them, but state interests are above all. Therefore, private banks should be encouraged to allocate more funds to the real economy. If we look at their credit portfolio today, we can see that more funds are allocated to the real economy. However, I believe that we need to strengthen this policy, because our country’s top priority today is to develop the non-oil sector, manufacture import substituting and exportable products which would bring currency to our country. After all, our foreign exchange reserves have declined sharply. Of course, first and foremost, funds should be allocated to such areas as agriculture, processing and construction materials, so that we could become self-sufficient in these products on the account of domestic production.
It is necessary to exercise very strict control over consumer prices. Due to the change of the exchange rate of the manat, some dealers have tried to artificially inflate prices. Of course, in relation to food products we are dependent on imports to some extent. We have yet to provide ourselves by 100 per cent. But price increases on products manufactured in Azerbaijan are impossible. This should not be the case. Actually, I am aware from the incoming messages that some dishonest people and dealers are trying to take advantage of the exchange rate issue. This must end. We must put an end to artificial rice increases, and very strict punishments should be applied to this area. We should not limit ourselves to fines. Prosecuting authorities should take this very seriously. Very severe penalties should be applied to those trying to take advantage of this situation for their personal avail. It is necessary to cover this in the media in order to put an end to this.
This year, it is necessary to provide for an increase of pensions and salaries. The government should prepare proposals. Of course, this is not so easy to do in the present circumstances, but I have repeatedly said that we are conducting a very strong social policy. As I mentioned in my opening remarks, we have taken very serious steps to create the social infrastructure and provide people with targeted social assistance. We have taken steps requiring major large funds. Therefore, the government should consider increasing pensions and salaries, and submit relevant proposals. Of course, the state budget will also be amended and the necessary adjustments made to it. It should address both issues of social security and investment issues.
I have already expressed my thoughts in connection with the devaluation of the manat. This issue did not depend on us. I want to say again that the three- to four-fold reduction of the oil price and the devaluation of national currencies in neighboring countries made this step inevitable. Our task is to get out of this situation with minimal losses. I am confident that we can achieve that. The issues I have identified need to be resolved.
This year, we will fully implement all social programs. Let no-one doubt this. This includes the allocation of major funds for the housing problems of IDPs. Last year, 15,000 IDPs moved into new homes. In 2014, a further 20,000 IDPs moved into new homes, and this policy will be continued. The State Oil Fund has sufficient resources for this purpose.
Last year was a "Year of Agriculture". I am very pleased that in the "Year of Agriculture" agricultural growth reached 6.6 per cent. This is an excellent indicator of non-oil sector development. The reforms carried out in the field of agriculture have contributed to that. These reforms should be deepened. In this case, we can fully provide ourselves with food, i.e. by 100 per cent, and the local content may increase further. Our goal is to provide ourselves with food by 100 per cent. This means food security.
We need to increase our export capacity because agricultural produce will be our main exportable products in the future, in addition to oil and gas. If we consider that we have access to traditional markets, we need to look for new markets. The biggest market for our agricultural produce is Russia. Russia today has a great demand for our products. We must meet this demand and access the Russian market with even more products. At the same time, a modern logistical center has been built in Kazakhstan. It is practically ready. In the near future, we will start exporting our food also to Kazakhstan. Our products are of interest to countries of the Middle East. This issue is discussed during visits, and we have to access these markets because our quality products are of great interest. Our main goal is to access traditional markets with greater volumes and deliver our products to new markets.
If we consider that we took very serious steps in connection with land reclamation, we need to engage unusable lands, thus adding tens of thousands of hectares of land to the circulation. These lands are already provided with irrigation, and we need to raise productivity and increase acreage. Thus, I am quite sure that we will be able to achieve major growth in agriculture this year.
The state investment program will reflect infrastructure projects. Among them, I want to highlight drinking water projects, because the level of gasification in Azerbaijan has now reached nearly 90 per cent. This is an excellent indicator. "Azerishyg" works quite extensively in the regions. When I visit the regions and enquire about the situation, local representatives report that energy supply in the regions has further improved in recent years. We must make sure that the supply of electricity to the regions is the same as in Baku. Therefore, we have created sufficient generating capacity. Today the main challenge is to provide uninterrupted supply of electricity to the people.
A total of 300 artesian wells were drilled last year. This is also a very important infrastructure project. In addition, treatment plants were built in almost 60 villages last year, bringing the total number to 384. In these villages situated along rivers people experienced a shortage of clean drinking water. A total of 625,000 people have been provided with clean drinking water provided through such projects in recent years.
Very serious work should be done in the field of industrial production. It is necessary to create industrial estates and clusters. All regions should have industrial zones. I expressed my opinion on this matter in previous meetings. I want work in this direction to go even faster, so that we could see tangible results. We have long been talking about it for a long time, work is under way but there are still no results. Both central executive bodies and the authorities responsible for this area, in particular, local executive bodies should work hard here. They need to organize this, allocate space and create suitable conditions. This is their job. So I believe that our local executive bodies have to work even more effectively and be proactive. They should not sit and wait for instructions from the center. It is their daily work. The economic and industrial potential of each district should be strengthened. The possibilities are there. However, most of our districts live at the expense of subsidies. In previous years, we could, as they say, turn a blind eye to that. We received large revenues and provided subsidies. But why should our districts live on subsidies? The population of our districts is not so big on average. If they work more efficiently in economic terms, they will be able to cover all their expenses. Instead, they are waiting to see how much will be allocated to them in subsidies. Funds are already allocated. Roads are built, gas and water communications laid, even meters are installed at state expense. Where else are meters installed at the expense of the state?
All infrastructure projects are being implemented. Major investments are made and the tourism infrastructure created. Who is doing that? The state and private companies do. But on the ground they have to work harder. I tell them to provide information on the work done, jobs created and new businesses on a quarterly basis. So let them make the right conclusions. The state will continue to conduct its policy and invest the necessary funds. But I am sure that all our districts can work more efficiently and achieve even better results.
I have repeatedly raised the issue of establishing industrial zones in the districts. But only one pilot project is being implemented now – in Neftchala District. Why aren’t they implemented in other districts? Because they show indifference! This can’t be tolerated. Therefore, the task of every head of executive authority is just that. Those who can’t cope with this task will be dismissed. This year, we need to carry out structural reforms. There is a need for that. In general, it is necessary to develop a more flexible and efficient management mechanism. In some cases, certain agencies overlap with each other. This can’t be tolerated.
We must carry out structural reforms. In some cases, jobs are created artificially. For example, people don’t work, but they get a salary. Then this salary disappears in the pockets of certain individuals. Such practices must end. Therefore, there is a need for strict financial control, public oversight, state control. This must end. Unnecessary structures should be abolished, and specific steps will be taken in this direction in the near future.
We should take more serious steps to develop the information and communication sector. This sector has a huge potential. There is development in this sector. But even in this sector we should provide complete transparency. The state should benefit from its development. So far, only public funds are invested in it, loans provided and projects in the field of information and communication implemented. We have two satellites. In other words, the state should already derive benefit and receive an income from that. Unfortunately, sometimes the income goes into the pockets of others and the state does not receive any benefit. There must be complete transparency here. Mediation companies earn unreasonable money here – their activities must be stopped. All revenues should reach the state budget. This is how the sector of information and communication technologies will be further developed. The state has already allocated more than enough funds to this sector. Audits show that these funds have been shamelessly misappropriated. We are not talking about waste, but heinous crimes here. Currently, the prosecutor’s office is seriously dealing with this issue. The cost of a product is blown several times out of proportion – three to four times. This is a crime, dishonesty and treason, and the people committing these acts are now brought to justice. This should be a lesson for all, for all agencies. So I am sure that very strict control will create good opportunities for such events not be repeated.
The sector of information and communication technologies should develop. Foreign companies are also interested in that. Azerbaijan is now launching the production of computers. This is a very positive development that demonstrates our intellectual potential. At the same time, it shows that foreign companies are showing an interest in that. There must be complete transparency in this.
We need to attract local and foreign investment to develop the tourism sector. The state has already done quite a lot. At the expense of the state we have created the "Shahdag" resort. It is true that private companies subsequently built hotels there. But the entire infrastructure and the first hotel were built there by the state. Why? In order to create favorable conditions for the people and to develop this region, the northern region, to create jobs, to attract foreign tourists and to receive income in the future. This is our goal. This is how our social, regional and economic policies complement each other. Therefore, tourism should develop in all other areas that are suitable for tourism. We have such zones now. The "Shahdag" center and Gabala have now evolved into international travel destinations. Currently Naftalan is regaining the glory of an international resort. There are excellent opportunities in the southern and western zones. It is only necessary for local companies – and indeed foreign ones – to invest there, so that we could pave the way for the influx of tourists. All artificial obstacles are being eliminated. Visa problems are being eliminated, so that foreign visitors interested in coming to Baku and Azerbaijan could waste no time, buy tickets and, having passed relevant procedures, come here and relax.
This year we should take very serious steps to ensure a more efficient operation of transport corridors. Significant steps were taken late last year. A Coordinating Council was set up to facilitate the transit of goods through the territory of Azerbaijan. This is a very serious step. The Coordinating Council brings together all agencies associated with transport. We are and will be conducting a common tariff policy. At the same time, these issues have been discussed with the leadership of Georgia and Turkey. We suggested that Azerbaijan, Georgia and Turkey should pursue a common tariff policy for this corridor. All relevant bodies should pursue a common policy for this corridor to become even more attractive. If we are the only ones making concessions in the tariff policy and neighboring countries do not follow suit, this will not produce any effect. At the same time, we held serious talks with potential shippers. These issues were widely discussed during my state visit to China at the end of last year. The first container train has already been sent from China to Azerbaijan through this corridor. I am confident that we will achieve transportation of large volumes of goods through this corridor in the future, because the shortest route passes through the territory of Azerbaijan. There is infrastructure. We have created it – railway, maritime transport, a new commercial port is under construction. In fact, part of it has already been put into operation. In addition, the public is well aware that in the aftermath of a deterioration of Turkish-Russian relations, the movement of Turkish trucks to Central Asia and Kazakhstan has become complicated. Azerbaijan immediately offered its capabilities, granted privileges, and the corridor works in this direction now. We must be better prepared for this, and the infrastructure on the east coast of the Caspian Sea should, of course, also be prepared for that. This creates opportunities for us, because we are not using our transit potential at the appropriate level now. Why? Because all transport agencies – the Caspian Shipping Company, the Railway, and the Port – pursue their own corporate interests at the expense of national interests of Azerbaijan. This can’t be tolerated. There should also be complete transparency here. Revenues should reach the state. Using them we will invest even more and create the right infrastructure. I want to say again that our rapid growth recently has somewhat reduced attention to these issues as we tried to direct oil revenues into the necessary spheres as quickly as possible. The state took on the entire burden. Therefore, some government agencies and companies were passive, not proactive. At the end of each year, they simply placed orders: give me so much money and I will build a road here, etc. Speaking about construction, we should apply new rules here too. Open biddings should be announced. Companies winning the tender should implement a particular project. We have developed a habit: if a railroad is laid, it must be built by the railway department. Why? This creates a monopoly and leads to inflated prices. An open tender should be declared. I have already given the necessary instruction. Preference should be given to local companies. If foreign companies are interested, they can also participate. Let the project be handled by whoever builds with better quality and at a lower cost.
Our water communications are laid by "Azersu". Firstly, they do not have the technical capabilities to implement such large-scale projects. Here too, it is also necessary to attract different companies. In this case we can do it at lower prices, with a greater effect, transparently and openly. The same applies to the construction of roads. We have an agency building roads. It should be open. Whoever has the opportunities, equipment, experience, local and foreign companies should take part. There must be complete transparency here. I am urging the government to exercise very strict control over that.
With regard to transport corridors, we should complete the remaining section of the Baku-Astara railway this year. It is 8km long. This year, this section should be built. Talks have been held with Iran. The importance of this road is huge. It will turn Azerbaijan into a very important partner of the North-South corridor. Thus, all roads – East-West and North-South – will pass through Azerbaijan. This will secure our political and economic interests. Therefore, I want to say again that at least this 8km stretch should be built as soon as possible this year. We should also carry out coordination work with all relevant agencies.
Last year, we took measures necessary to regulate public transport. Our country imported new modern buses. New bus service routes have been opened. New management rules are in place. Public transport should become an integrated system. Here too, we must apply the experience of developed cities. Subway, buses and other means of transport should become part of a unified system. Appropriate instructions have been issued. A new institution has been set up. In the near future, we should organize work of this structure, so that municipal transport in Baku meets the highest standards. Today we have the technical capacity, have bought modern buses and should purchase more. The system should be such that roads, bus stops, traffic lights, subway and buses could operate as a single system. The new roads in Baku should be an integral part of the overall policy.
We have recently done a great job to improve municipal transport in Baku. We have built bridges, widened roads and built overpasses. A lot has been done. If we hadn’t done this work, the city would have suffocated in traffic now. But from now on, we should work in a more focused and intelligent manner. We should work on the basis of programs, not spontaneously. What areas need new roads and where resettlement is required. This area should be given serious attention this year.
Environmental measures are taken all the time. Last year, over 4 million trees were planted. This policy should be continued. I remember describing this as a tree planting campaign. We started this work as part of a "Year of Ecology". But even then I said that this should not be a campaign, but a continuous process. The planting of trees in Baku and on the Absheron Peninsula should become a continuous process. Polluted areas should be cleaned. Last year we implemented the first stage of cleaning Lake Boyukshor. This polluted and stinking area pleases the eye today. The cleaned lake is now used by migratory birds. A large boulevard has been created there. This year we should carry out the second phase of cleaning Lake Boyukshor. We should also implement a project on cleaning Lake Zykh. Funds should be allocated from the state budget for that.
This year two new “ASAN xidmət” centers are to be opened in Gabala and Masalli. Thus, the number of “ASAN xidmət” centers will reach 11. In addition, mobile services are provided by a total of 10 buses. “ASAN xidmət” is an Azerbaijani brand. I am very pleased that this expertise is used by some other countries. In some cases, however, no reference is made to “ASAN xidmət”. But never mind – the most important thing for us is that this service benefits the citizens of Azerbaijan. In two years, it has received more than 7 million applications. If I may say so, the approval rating of “ASAN xidmət” is close to 100 per cent. This is a revolution in the field of public services and fight against corruption. At the same time, we have created a class of volunteers. Active patriotic youth act as volunteers. So this initiative is of great positive significance. In the future, the number of services provided by “ASAN xidmət” should be increased. The areas in which we have not yet ensured transparency should be addressed by “ASAN xidmət”. Therefore, the government should submit further proposals on this issue: what other services we can pass over to “ASAN xidmət”.
This year Baku will host a prestigious international event - the Global Forum of the Alliance of Civilizations. This is a major international event of global scale. It is an event held with the active participation and support of the United Nations. I am very pleased that this year’s Global Forum will be held in Azerbaijan. It is evidence of the high assessment by the UN of the work carried out in Azerbaijan in this direction. As you know, Baku traditionally hosts humanitarian forums. Several times we have held forums on intercultural dialogue. The fact that the Global Forum of the Alliance of Civilizations is to be held in Baku attests to the high assessment and a great honor for us.
Azerbaijan is doing everything possible to enhance the dialogue between civilizations. Unfortunately, this work gradually becomes more complicated. I have already touched upon this issue in my opening remarks and do not want to repeat that. No matter how hard we try, unfortunately, there is less dialogue among civilizations and more misunderstanding, mistrust and clashes between civilizations and religions.
However, we will not deviate from this path. Azerbaijan is a multiethnic and multi-confessional country. This is our greatest asset. We are protecting it. We are doing it for ourselves. Of course, I would very much like other countries to use our experience, to understand that sectarian conflicts lead to disaster, to realize that representatives of different religions and nationalities can live together, can live in normal conditions of friendship and brotherhood as they do in Azerbaijan. Of course, we will continue to try to resolve these issues in the country on a sound basis, as is the case today, so that the dialogue between religions and civilizations in the region and the world could further deepen.
Considering the fact that the Global Forum will be held in Azerbaijan, the attention being paid to this area in general and the progress made, I declare this year a "Year of Multiculturalism" in Azerbaijan. Azerbaijan has done a lot in the area of multiculturalism. The example of Azerbaijan shows that multiculturalism is alive although some politicians argue that it has failed. It may have failed somewhere else, but it still lives in Azerbaijan. These trends and ideas are amplified and receive growing public support. We will go down this path. Thus, this year in Azerbaijan is being declared a "Year of Multiculturalism".
In 2016, we must work hard. All our goals should be met. In the shortest possible time, it is necessary to develop and submit to me the mechanisms for completing these tasks. Relevant decisions will be made, so that we could successfully complete 2016 as well. Thank you.
His Excellency Mr Ilham Aliyev, President of the Republic of Azerbaijan
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