Closing speech by Ilham Aliyev at the at the meeting of Cabinet of Ministers dedicated to results of socio-economic development in nine months of 2016 and future objectives07 october 2016, 12:00
Before the end of this year, we have to meet all the outstanding objectives. In particular, we should carry out work related to investment projects. The state investment program must be implemented. In some areas there are delays, some infrastructure projects have not been implemented in full. Therefore, although there is little time left for the end of the year, we need to pay serious attention to these issues.
I have pointed out that we have conducted profound economic reforms this year, and they are already producing results. We have adopted and signed by very many important decisions and orders in the field of governance and other areas in order to boost exports and reduce our dependence on imports. Therefore, I am sure that there will be very good results in the reduction of imports and increase of exports next year.
Our reforms are valued quite highly by leading economic centers of the world. The world’s top economic forum, the Davos World Economic Forum, ranks the economy of Azerbaijan in 37th place in the world in terms of competitiveness. Last year we were in 40th place, which was also an excellent indicator. Although the world is experiencing a crisis this year, which has not bypassed us either, the Azerbaijani economy has received an even higher assessment. To be in 37th place in the world is a very high and, I think, historic indicator. In the CIS, as always, we are in first place and are maintaining this leadership.
We are discussing the state budget for next year. Our state budget should reflect all social programs. In general, despite the decline in our revenues, we fully provide funds for the social sphere. Not a single social initiative and project has been reduced. In 2017, our budget must also be socially oriented and, of course, sufficient funds must be provided for investment. In previous years, we gave preference to state investment. This was natural, because we had to implement numerous projects, particularly infrastructure ones. If we had not implemented them, there could be no talk of development whatsoever today. We would not be able to develop agriculture, tourism or other spheres today. Therefore, public investment has been of particular importance, and we have already implemented many of these projects in recent years. Of course, the state investment program for 2017 is being prepared now and will soon be submitted to me. But we need to attract even more private sector investment.
We have taken very serious steps to improve the business landscape in Azerbaijan. I can say that entrepreneurs are enthusiastically involved in this work. There is great enthusiasm in our country, especially in the agriculture, processing and industrial sectors. There is extensive activity in Baku, in our cities, in all our cities and districts. This, of course, is a manifestation of our policy, as we have taken serious steps to develop the private sector and entrepreneurship. At the same time, it is evidence of the sense of responsibility of our entrepreneurs. Entrepreneurs should invest the money earned in the economy. In 2017, we will take serious steps in this direction.
As for public investment projects, they are also envisaged, and I think that we should provide sufficient funds for that. Once again, I should note that key infrastructure projects related to electricity and gasification have been completed. We have realized and are still realizing many projects of rural roads, drinking water and sanitation. Of course, we should, as usual, pay great attention to social infrastructure projects. In 2017, we should pay serious attention to macroeconomic stability. Inflation should be in single digits. I believe we will achieve that.
We can’t allow artificial price increases. We need a very strict control. It is necessary to strengthen both public oversight and control on the part of state bodies, because we can’t allow some unscrupulous people and speculators to artificially inflate prices, causing our people to suffer from this. Of course, prices of imported goods are formed on world markets. If a product that is not produced in Azerbaijan becomes more expensive on the world market, it will naturally grow in price here. This is why we should try to reduce our dependence on imports as much as possible, i.e. reduce it to the minimum. Besides, there are foreign components in food items produced in Azerbaijan. We should reduce this component. Work in this direction is under way.
It is necessary to continue the policy of reforms and consolidation in the banking sector. The banking sector should undergo very serious reforms. The banking sector should be transparent and meet the highest international standards.
This year, as always, we have paid great attention to the development of the industrial potential of our country. We are working to establish several industrial estates. Among them, I want to highlight the Sumgayit Chemical Industry Park. Detailed information on the activity of this estate was provided at a recent meeting I chaired in Sumgayit. I do not want to repeat anything and want to say only one thing: as a result of the full commissioning of this estate, thousands and perhaps even tens of thousands of jobs will be created and our non-oil sector will acquire huge export potential.
The process of creation of the Balakhani and Pirallahi industrial estates is under way in Baku. There are specific projects for both areas. In Pirallahi, we plan to start the production of medicines. I do hope that we will lay the foundation of the first factory for the production of medicines in the coming months. We are dependent on foreign medicines by practically 100 per cent. This is a matter of concern in terms of security. At the same time, major funds in foreign currency are spent to buy medicines abroad. Therefore, the decision was made and investors are also involved in this. We have created good conditions. At the initial stage, medicines of more than 100 denominations should be produced in Azerbaijan.
The process of creation of industrial zones in the regions is under way. In Neftchala, we have already started the construction of an automobile plant together with the Iranian side. Work is under way to establish an industrial estate in Masalli. Work in this direction should also be carried out in other districts.
We have managed to attract major investment to the sector of building materials. There was no public investment in this sector, but both local and foreign businesses have invested heavily in this area. Thanks to these investments, we can provide ourselves with building materials to a fairly large degree, but not completely. Therefore, our respective offices, state agencies, the Ministry of Economy and others should see what building materials are being imported to Azerbaijan. We need to create such manufacturing sites in Azerbaijan and provide preferential loans. Entrepreneurs should pay more attention to this area.
To protect the domestic market, we have recently increased state duties on some imported goods. This is a very correct move. We have to protect domestic producers, but domestic producers should not abuse of this because people will have a choice – to buy local or foreign product. People may like foreign products better, but the price may be higher. Local products should be much cheaper than foreign ones. Therefore, we need to closely monitor the consumer market, so that unscrupulous business people do not take advantage of this. If the prices of imported food or other goods rise, they may try to raise prices on their products too. This should not be allowed. Both local and central executive bodies should exercise very strict control over that.
We need to take additional measures to protect the domestic market, and it is necessary to conduct a very flexible policy here. We should not waste any time. These issues should be dealt with very quickly. If we see that we provide ourselves with a particular product by 100 per cent, the duty on these products should be immediately increased. Not only in this but also in all other areas we should conduct a very swift and flexible policy. In some cases, problems are posed by bureaucratic obstacles. Certain issues take months to be approved. Opinions are collected and we are wasting time. In the current economic conditions, time wasting means a loss of money. It is necessary to work fast, and if the decisions are correct, they should be adopted immediately.
The newly-established State Agency of Housing Construction has started to operate. A major construction project is being implemented in Yasamal District, and the process of building social housing is already beginning. We have talked about this at a Cabinet meeting. We are already starting this work. This is a great social significance and will have a great impact on the construction sector, in particular the sector of building materials. Our entrepreneurs should also be prepared for that. In these projects, we should try to use construction materials made in Azerbaijan.
In the near future, there are plans to construct a large metallurgical complex in our country. To do that, we have a resource base such as the Dashkesen mines. Today, these fields are used very inefficiently and the mined ore is sold abroad simply as a raw material. In the earlier months, we managed to ensure the operation of this sector. Unfortunately, nothing was done there for months. People were out of work and large debts emerged. Currently, there is a revitalization process there, and we have to use these great natural resources very efficiently. Therefore, there are plans to build a large metallurgical complex, which would consist of several plants. Major funds will be invested, and we should try to make sure that everything from raw materials to the final product of the highest quality is manufactured in Azerbaijan. I am sure it will be the case.
I would like to touch upon another issue today. Currently, we are implementing numerous large-scale industrial projects in industrial parks, other areas, in the metallurgical industry, and we can say that all the products to be manufactured will be exportable. Therefore, we should also consider our transportation capacity and plan how we will transport exportable products. Do we have the capacity to transport them? Is there sufficient infrastructure? Are there carriages, tanks and dry cargo infrastructure? We already need to examine this. We have invested heavily in the transport sector – the railway, air and sea transport. Currently, a major shipyard in Baku is already building large ships. But this should be comprehensively examined again. The volume of exportable products, including agricultural produce whose exports will dramatically increase now, should be predicted accurately.
This year, the production of cotton alone will increase threefold. Next year it will increase 10 times compared to this year, and then 20 times. How are we going to transport it? Do we have sufficient infrastructure to transport it? We will have finished products, but won’t be able to transport it. Therefore, all of this needs to be planned on and envisaged in the state investment program, so that we are not faced with an unexpected situation in the future.
Thus, the ongoing and future projects in the industrial sector will bring us great benefits. We will create thousands, tens of thousands of jobs and increase non-oil exports. This is the key issue. Today, the price of oil is 50 dollars. Last month, it was 40 dollars. At the beginning of the year, it dropped to 30 dollars. So we can’t plan our future on this basis. Therefore, we must compensate for the reduction in oil exports by non-oil exports. The key directions in this area are industry and agriculture.
A turnaround has already occurred in agriculture. We have implemented specific programs and projects in different spheres, allocated major funds and provided equipment. Changes are being made to subsidies. Subsidies will stimulate the farmers now. This year has been some kind of a test year in this area. I am sure that there will be good results.
I would like to raise certain questions regarding agricultural sectors. Work related to cotton growing is progressing well. A meeting has been held in Sabirabad District. Currently, cotton growing is successfully developing in 24 districts. This year, we should harvest 100,000 tons of cotton, next year a further 250,000-300,000 tons and even more in the coming years. We should try to gradually approach the level of production in the best years of the Soviet period. This means jobs. This year alone, about 70,000 people work in the cotton industry. If we increase our acreage by two or 2.5 times next year, more than 100,000, perhaps even 150,000 people will be provided with jobs in this area. Taking into account our future plans, we already need to take action here. I am told that the capacity of our ginneries is 300,000-350,000 tons. We will achieve this figure most likely in 2018, perhaps even earlier. Therefore, we need to build new ginneries. The Ministry of Economy has already received instructions. Of course, the private sector should also be involved in this work. It is necessary to determine places where they will be built, so that we waste no time in the future.
We have taken serious steps in the provision of subsidies. Additional funds have recently been allocated. Prior to that, the purchase price of cotton was increased from 40 to 50 gapiks. We are doing this for people working in this difficult industry to earn more. The 10-gapik increase will double peoples’ incomes. At the same time, we have now developed a mechanism that will encourage the peasants and farmers, so they will show more interest themselves.
At the same time, our weakness in agriculture is the production of grain. We provide ourselves with grain by about 65 per cent. In recent years, large farms have been established, where yields are about twice the average. Despite this, we still depend on imports. Every year, Azerbaijan imports more than a million tons of grain, wheat. Therefore, the realization of new projects is beginning now, and we should try to provide ourselves with grain by 100 per cent. It is possible. By increasing the yields, proper organization of irrigation and inclusion of new lands into the circulation, we can achieve this and significantly reduce our dependence on imports.
This year, sericulture has developed in 24 districts and there are good results. 70 tons of mulberry cocoons have been harvested. Subsidies have been provided for sericulture. The Sheki silk factory is already in operation. It employs hundreds of people. It is necessary to carry out reconstruction there. This factory can process more cocoons. I do hope that in the next two to three years we will be able to harvest thousands tons of cocoons. So far, this work is carried out in 24 districts. It will be done in other districts in the future, and people will be able to earn good money in 40-45 days. There are people earning thousands manats, and this improves their well-being. We should try to export finished products here, and I am sure we will achieve that. For effective organization of this work, assistance was provided in the amount of 3.5 million manats.
One of our traditional sectors is viniculture. Most of the plantations set up in Soviet times on the initiative of great leader Heydar Aliyev were unfortunately cut down. This happened as a result of Gorbachev's campaign at the time. And for some reason it happened only in Azerbaijan. Vineyards in other republics were saved. Our then leaders went out of their way to please Gorbachev. As a result, our vineyards were destroyed. At the same time, it should be noted that even after that viticulture was unfortunately neglected. I am told that about 150,000-160,000 tons of grapes will be picked this year. In the Soviet period, we collected 1.7-2 million tons of grapes in the best of times. We must definitely link viticulture to winemaking. Unfortunately, we were unable to access the wine markets in the world. Although several wineries have been constructed, they seem either not to show any interest or lack the capacity. But we have to access world markets with our wine, just as we did with the Russian market once. As far as I know, we are not exporting significant amounts of wine even to the Russian market now. However, this is a very profitable sphere, especially for farmers.
New vineyards are being set up as well, and the dynamics is positive. Government support here should be even greater. It is necessary to identify places. This would mean jobs and a sector fetching the currency. Speaking about winemaking, I first of all mean exports, of course. The development of winemaking should not lead to alcohol consumption in the country, as our people must lead a healthy lifestyle. The same applies to tobacco growing. The less our citizens smoke, the better. This will only benefit their health and the family budget. But the development of tobacco growing will create huge opportunities for us. This year we will produce twice as much tobacco as last year. But, of course, we can’t be content with this figure of 2,500 tons. We should increase the production of dried tobacco to 10,000 tons in a short period of time. Tobacco is cultivated in 14 districts. I know that the recent subsidies have inspired the rural population. The government should also provide support. There are no serious problems with the export of dry tobacco. There are countries waiting to buy it. We need to export more to these countries and increase the production of cigarettes in Azerbaijan – not for our citizens to smoke more, but to import less from abroad. Most of all the currency is spent on grain, cigarettes, raw sugar and butter. Therefore, we must improve local production and exports.
Raw sugar is imported to the country in large quantities. In order to reduce that, we should certainly expand the acreage of sugar beet. Instructions have already been given, i.e. the acreage has been determined. We need about 40,000-50,000 hectares of land to grow sugar beet and eliminate the dependence on imports of raw sugar and cane sugar. Serious work needs to be done in this area too. Our sugar factory should work on the local sugar beet. The imports of cane sugar and raw sugar from abroad cost more than 100 million. However, without this plant the entire volume of raw sugar would be imported from abroad. The plant has created jobs for hundreds of people. At the same time, we are exporting ready sugar. In other words, the operation of the plant, of course, is a positive factor, but it would be very nice if it worked on local raw materials. Therefore, the cultivation of sugar beet is of particular importance. We do not grow it and 100 million dollars go abroad. If we grow it, 100 million dollars will stay in Azerbaijan. It is a very simple task.
Let’s move on to the development of tea growing. Serious work is being done in connection with this sphere. There are new technologies that dramatically increase productivity. We need to create good conditions for the farmers. They also need to be interested in tea growing in the southern region. We export tea, but we also import it. In other words, there is great domestic demand. Therefore, the development of tea growing will reduce imports in the first place. The Azerbaijani tea is of high quality, and we need to export it more.
Work carried out in connection with animal husbandry in recent years is commendable. I have recently attended the opening of the Yalama agricultural estate. This is the first such estate. There are plans to raise 3,000 head of cattle there, and we need to expand this sector. The Ministry of Agriculture is seriously dealing with these issues now. Purebred cattle have been bought, but the main task today is to fully introduce the system of artificial insemination. Work in this direction is already under way. I am told that in three to four years we will change the breed and obtain animals of high quality. This, in turn, will give us an additional acreage, as we are using the pastures very irrationally. Some of them are empty, while others are used by significantly fewer animals than required by the standard. Therefore, our animal husbandry should develop in closed conditions. According to the available data, we need about 500,000-600,000 head of cattle to develop the production of milk and meat and meet the latest standards in this area. At the moment, we have more than two million head of cattle, but their breed is not as good. The difference between them and the pedigree cattle imported from abroad is like between heaven and earth. Therefore, serious steps are being taken in this sector. Sowing should be systematically carried out on unused pastures. The Ministry of Economy, the Ministry of Agriculture and the Presidential Administration are already dealing with these issues. Thus, we will provide ourselves with dairy products and butter.
According to the latest information given to me, complete self-sufficiency with butter requires additional 50,000-60,000 head of pedigree cattle and, of course, new companies for the production of butter. We provide ourselves with milk and dairy products at the level of 80 per cent. This figure should reach 100 per cent in the near future. The operating plants should build new production lines, new enterprises should be built and Azerbaijan should produce all kinds of dairy products. This is the goal. So you should analyze the issue again and submit a specific proposal to me spelling out how much money, acreage, investments, loans and public investment are required for a speedy solution of this problem.
I mentioned this at the previous meeting and I want to say it again: we need to develop the agricultural sectors that bring foreign currency. Among them, the cultivation of hazelnuts has a lot of potential. Hazelnuts are among the crops that bring us the greatest amount of currency. New proposals are being prepared. New hazelnut orchards should be established on an area of 40,000 hectares. The current area of hazelnut orchards is smaller. Therefore, we will more than double the area of hazelnut orchards. We have selected 12 districts for the cultivation of hazelnuts. These 12 districts have favorable climate and fertile soil conditions for the cultivation of hazelnuts to develop seriously. This, of course, takes time. We are starting this work this year. Seedlings are purchased by the state. The private sector should also be involved. It will be of great benefit to the private sector as well. We need to carry out this work systematically.
Unfortunately, the number of traditional almond orchards in Baku and the Absheron peninsula is decreasing. But this sphere brings a lot of currency. I am told that we have only 500-600 hectares of almond orchards. This is too little. We should set up thousands of hectares of almond orchards. There is a lot of vacant land on this territory. We need to make rational use of these lands and create large almond plantations, especially around Baku, Sumgayit and in Absheron.
We import olives from abroad. We have so many olive trees and so many possibilities now. We have great opportunities in Baku, Absheron and elsewhere. But unfortunately we can’t provide ourselves, and the production of olives is at a very low level. Therefore, we need to set up new olive orchards. Currently, we are determining places – both in the Absheron Peninsula and in the northern zone, in Khizi District. I am aware that work is under way to enable the exports of olives to world markets. This sector also brings a decent income to both farmers and the state.
Every branch of agriculture is important for us now. But I want to say it again: the domestic demand should be met by 100 per cent and exports should be maximized. It is also necessary to determine the export markets. We have a traditional export market, which is Russia. Russia is implementing large-scale agricultural projects now. They are also getting rid of their dependence on imports. Therefore, we need to consider new markets. These are the Middle East, the Persian Gulf states, other countries, Asia, China. We need to reach out to them. Therefore, we are working on the brand “Made in Azerbaijan”. Specific work is under way. Funds have been allocated. Our delegations should visit different countries, travel a lot and make presentations. We are sitting here and waiting for someone to come and buy something from us. All companies and countries are competing for markets today. Therefore, there should be a new approach. The government should provide organization, while entrepreneurs should also be interested. We should definitely pay more attention to cash flow, because 50 or even 100 per cent of the money for exported products never comes back. Therefore, there should be very strict control here. A new system associated with the promotion of exports is being put in place now, and this is envisaged there. Everything should be fully transparent. No violations should be tolerated here.
All of this calls for more attention to be paid to irrigation and land reclamation. In recent years, we have allocated major funds for this. We have constructed two large water reservoirs – Takhtakorpu and Shamkirchay. We have implemented other projects. But we still have a lot of non-irrigated land. Therefore, I have issued the instruction, and the Presidential Administration is working in cooperation with the Ministry of Economy, the Ministry of Agriculture, the Open Joint Stock Company "Irrigation and Water Management". I expect to be provided with a specific report on the measures for next year. According to the Presidential Administration, we will be able to provide water to 80,000-90,000 hectares of land next year with relatively minor expenses. This work is being analyzed in all our districts now. Executive authorities have joined the work, and it is the right approach. People on the ground know best. Of course, the central executive authorities and the Open Joint Stock Company "Irrigation and Water Management" should prepare a plan on how many tens of thousands of hectares of land need to be irrigated annually, where these lands are and what will be grown on them. What kind of support should the government provide for the cultivation of these lands? It is necessary to calculate manpower. Therefore, we can significantly increase the area of irrigated lands. There is a lot of land.
I have said this earlier too. There are seized territories, but a significant portion of them has already been returned. As I was informed, more than 200,000 hectares of captured and unused lands have already been returned. Illegal lease agreements were signed. If someone cultivates these lands, we will be only happy about that. But if someone has seized them, is engaged in speculation, keeps them as a deposit and waits for prices to go up to sell or share them afterwards or build a house, then this should not be allowed. Therefore, instructions have been given and this work should be continued. The illegally seized lands should be returned to the state. Those using them should receive state support. All of this work, of course, should be supported by the state, including the financial support.
Financial support is provided for the development of entrepreneurship. This year, we have issued preferential loans worth 120 million manats. But before the end of the year, we should provide loans in full for the envisaged projects, and allocate enough funds for next year.
This year, we are creating the “ASAN dəstək” system to support family businesses. This was presented to me at the Masalli center of “ASAN xidmət”. The initiative is commendable. In other words, it will greatly support the development of small businesses. Therefore, the government and relevant agencies should take up the issue. The Ministries of Economy, of Agriculture, of Labor and Social Protection of the Population, local executive bodies should divide, along with “ASAN xidmət”, the spheres in those small containers, so that family businesses could develop in our country. In developed countries, especially countries with developed agriculture, the bulk of agriculture is created in small farms where family businesses extensively develop. This should be the case here too.
The number of “ASAN xidmət” centers has reached 11. This brings a huge benefit. The centers have received 12 million aplpications. In the coming year or two, we expect to establish four new “ASAN xidmət” centers. It is necessary to envisage this in the public investment program for next year and for 2018. In the next two years, we should establish at least four centers.
We can see that the measures taken and the reforms carried out have given a strong impetus to the influx of tourists this year. In particular, the number of visitors from Arab countries has increased 20-30 times. In the summer months, there were no empty rooms in most of our hotels. So this brings our country a large amount in currency. This may be an innovation for us. Some people are not used to this. But there is a large number of tourists in all developed countries. The flow of tourists is evidence of development, security and hospitality of people in these countries. We have all this here. Our people are hospitable and there is security. We have historical and scenic sites and modern infrastructure. There was a time when some people said: so many hotels are built in Azerbaijan and in Baku. Who needs them? We can see that they are necessary, and whatever we have done is right. But in the current circumstances, we must calculate the potential influx of tourists, as we are switching to the “ASAN viza” system now. Electronic visas will be issued in a matter of three days. Therefore, the flow of tourists will be even greater. We all see the benefits of the "Formula-1" competition. Therefore, our hotel infrastructure must keep pace with this development. Let this be heard by entrepreneurs, local executive authorities, the Ministry of Culture and Tourism. They should create conditions for the number of hotels in Baku and the regions to increase.
Next year we will implement social infrastructure projects. There are plans to build schools, hospitals and Olympic centers. We should build modular schools, because we still have a lot of schools that are in disrepair. I think we will completely demolish them in 2017-2018 and new schools will be built in their place. Thus, there should be no schools without renovation or in an emergency state.
The problems of IDPs are always in the spotlight. It has been stated here how much funds have been allocated for this work, that about 100 IDP settlements and houses have been built in the regions and in Baku. I think that in order to find a more rapid solution of the issue in 2017, we have two options. Of course, we should build and are building new settlements. At the same time, we need to construct new buildings. The unsold apartments must be purchased by the state and passed on to refugees. Thus, we will be able to quickly resolve the problems of our compatriots who are in a difficult situation, because the construction of buildings takes time. In addition, there are many empty apartments in Baku and other cities, and the state can acquire them. This, in turn, can revive the construction sector and increase taxes.
In short, 2016 is coming to an end. As I said, this year has been a difficult one for the global economy, for the world. However, I am confident that thanks to the work to be done in the last three months of the year, Azerbaijan will successfully finish 2016. Year 2017 will also be successful. I am sure that we have enough power and determination to meet all our objectives. The people support our policy. The results of the referendum confirm this again. The road ahead of us is open. We will continue to follow the path of development and progress. Thank you.
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