President of the Republic of Azerbaijan Ilham Aliyev has received Minister of Economy Mikayil Jabbarov.
Touching upon the measures being taken to fight the coronavirus in Azerbaijan, President Ilham Aliyev said:
- In order to fight the coronavirus more effectively, new restrictive rules have come into force today. I am sure that all our citizens will abide by them. The main goal of the new restrictive measures is to take more effective steps in this fight and reduce the rate of infection. Despite all the decisions made by the state and the steps taken, unfortunately the dynamics is increasing and the main reason for this is the lack of responsibility of some citizens. At the initial stage, the Azerbaijani state made great strides by adopting preventive measures in the fight against this tragedy and the situation in Azerbaijan is more favorable in comparison with other countries today. But despite this, the number of cases of internal infection is growing and thus there are more infected people. More than 60 people were infected yesterday, and if it goes on like this, then the disease will inevitably acquire a wide scope in the coming days and months.
I want to say again that the Azerbaijani state has taken all necessary measures. From the very beginning, we closed all land borders, introduced a quarantine regime, closed all schools, kindergartens, universities, catering facilities, reduced the number of flights, currently there are only two international flights operated once a week. Thus, very important measures were taken against the spread of this disease, and the input of our citizens arriving from other countries to the spread has fallen sharply. I must also say that Azerbaijani citizens who have arrived from abroad have been placed into quarantine and there are about 4,500 people currently in quarantine. The most favorable conditions were created for quarantine, people are accommodated at 4-5-star hotels, at the Athletes Village, at hotels and recreation areas of Lankaran, Lerik, Nabran and Baku. Conditions are also being created for patients – more than 10 hospitals are at the disposal of patients infected with coronavirus in different places of our country. The most modern hospital in our country, the “Yeni klinika”, was placed at their disposal a few days ago. In other words, these are important steps being taken by the state. Despite this, however, due to the lack of responsibility on the part of some citizens, this disease is becoming more widespread in Azerbaijan. Therefore, all people must abide by the restrictive measures that have come into force today. I am sure that if people act responsibly and abide by the rules of self-isolation, then we can prevent the extensive spread of this disease.
We can clearly see what is happening in different parts of the world these days. It is possible to say that the situation in the leading countries of the world and Europe, in the most developed countries is getting out of control, about a thousand people die there every day, and it is already difficult for medical personnel to provide patients with proper care. Hospitals are overcrowded and patients are placed in corridors. Many people die because they do not receive medical attention in a timely manner because the number of patients is growing rapidly and the health system of countries can’t catch up with the growing number of these patients. After all, the health systems of all countries are designed for normal conditions, including Azerbaijan. If the pandemic gets widespread in Azerbaijan, then a tragic turn of events will be inevitable in our country too. Therefore, all decisions made by the state should be enforced without exception and without any privileges. I am urging citizens once again to act responsibly. They shouldn’t go out if they don’t have to, they should fully comply with the rules published and announced yesterday. They should protect themselves, their loved ones and doctors. Because doctors are risking their own lives. They should protect police officers, just as police officers are protecting them and risking their own lives. Therefore, I once again demand responsibility from all our citizens and hope that Azerbaijani citizens will demonstrate a sense of responsibility.
Of course, the pandemic has dealt a major blow to the economic development of the whole world. Leading financial institutions of the world are already openly declaring that the possible crisis in the aftermath of the pandemic will be even harsher than the recession of 2008-2009. At the same time, a sharp drop in the oil price on world markets, the decline by more than in half can create major problems for our economy. Our revenues are reducing, of course. Despite this, I want to say again that there should be no problem with the execution of the state budget for this year. First of all, all social obligations must be completely fulfilled and the implementation of all social infrastructure projects must be ensured. At the same time, budget expenditure needs to be reviewed and non-urgent projects can be postponed. Of course, when reviewing issues of implementation or, on the contrary, postponement of these projects, employment issues must definitely be considered as well. Because the investment projects implemented by the state also provide employment, and for Azerbaijan with its growing population issues of employment are certainly in the foreground.
Our economic momentum this year has been very positive. In January-February, the gross domestic product increased by 2.8 percent, in the non-oil sector by 6.7 and in the non-oil industry by 21.7 percent. Inflation was only at 2.8 percent, while household incomes increased by 9 percent. In other words, revenues exceeded the inflation. At the same time, tax and customs authorities transferred large amounts of money into the state budget in two months. Tax authorities contributed 170 million into the budget and customs authorities a further 80 million manats. Of course, we hope that this dynamics will be continued throughout the year and thus additional revenues will come into our budget, making it possible to implement additional social programs.
It is a little too early to talk about the results of March. The State Statistical Committee usually submits data about a week after the end of the first quarter. Therefore, we will certainly analyze these figures but it is not too difficult to guess that the pandemic is posing and will pose great obstacles to our economic development, of course.
In order to minimize the economic and social repercussions of the pandemic, 1 billion manats was allocated to the Cabinet of Ministers on my decision. On my decision, four working groups have been set up and their main focus has been on analyzing the issues of employment, submitting proposals, ensuring economic stability and economic development, maintaining macroeconomic stability and, having analyzed our financial situation, taking the necessary additional measures in this area by the end of the year. Of course, we are primarily paying attention to businesses operating in the areas worst affected by coronavirus. First of all, we must take into account the financial situation of the people working there because the note submitted to me by the Ministry of Economy indicates which areas have suffered the most from this situation, and more than 300,000 people work in these areas. Of course, we are worried about their financial situation. We must support them, especially if we consider that I urged all Azerbaijani businessmen not to lay off workers. This request or requirement remains valid. I should also note that in these circumstances, Azerbaijani entrepreneurs are fulfilling their civic duty with dignity. To date, the Fund to Support the Fight Against Coronavirus, which was set up on my decree, has already accumulated over 100 million manats, and only 20 million of this amount was transferred from the President’s Contingency Fund. This suggests that a significant part of the funds represent donations from entrepreneurs who have shown solidarity in this matter. I am sure that my call not to lay off workers will and should be taken into account, of course. At the same time, it is clear that many areas and more than 40,000 businesses are practically inactive or work to a limited capacity. The state should help them. Therefore, an instruction has been given to take into account both the social security of those working in these entities and the activities of individual entrepreneurs. There are about 300,000 of them. The Ministry of Economy has received these instructions. You are ready to report now. Please submit your proposals on this and other issues, so that we could arrange payments without wasting any time, i.e. starting this week.
Minister of Economy Mikayil Jabbarov said:
- Thank you, dear Mr. President. First of all, please allow me, as a citizen, to express my deep appreciation for such a response to this important multifactorial challenge under your leadership. Given the importance of the health of our people and citizens, measures are being taken to protect the population. You are making these decisions today proceeding from the priority importance of the health of our people. In the last days and weeks, you and the First Vice-President of the country have shown us the direction and created the opportunity for the daily and timely implementation of every decision in this unusual situation.
In accordance with your instruction, carrying out activities in working groups and conducting regular consultations with the leaders of four working groups in conjunction with the government, we have engaged ministers, representatives of committees, the private sector, the Association of Banks of Azerbaijan, the Central Bank, small and medium-sized businesses and the Development Agency, as well as representatives of the Confederation of Entrepreneurs, and tried to prepare a comprehensive program which I want to bring to your attention today. When defining the framework, you also set us the task of informing the public in a working manner, and the process of completing the programs is expected to take place within the framework of these consultations.
The program on direct financial support for the payment of wages to 304,000 hired workers employed in 44,000 business entities operating, as you noted, in the areas affected by the pandemic and the program of financial support for 292,000 private micro-business entities and private entrepreneurs working in areas affected by the pandemic are being submitted for your kind today. The most important condition and framework of both programs are aimed at preserving jobs. Although the programs are intended for individual audiences such as employees and entrepreneurs, they provide direct financial support as a holistic approach. During this period, entrepreneurs and enterprises that do not have short-term liquidity are offered the opportunity to continue to work and pay a significant portion of salaries of their hired workers and employees, which often constitutes the main expense item.
The third program is a program of tax incentives, privileges and breaks for business entities operating in areas affected by the pandemic. This is an extensive program. Although it primarily covers the adversely affected sectors, some of them are much broader.
On your request, a loan support program has also been prepared for the new bank loans issued to business entities operating in areas affected by the pandemic. The volume of this program is 500 million manats. Here you told us not to cease funding of new projects in order to maintain the development trajectory of the Azerbaijani economy and facilitate a recovery in the post-quarantine period.
On the other hand, I want to bring to your attention another program, the fifth one. This is a loan guarantee program under the existing loan portfolio of business entities operating in areas affected by the pandemic. The volume of this program is even larger – 1 billion manats. It envisages the attraction of funds partially from the state budget and from the Entrepreneurship Development Fund. The most important goals here are both to provide support for our businesses and maintain the loan portfolio of the financial and banking sector, which is necessary, very important and significant for us.
As the sixth direction, you will be separately provided with a social package to support the material status of the population. Discussions are currently under way around a program to support the payment of tuition fees for students from families belonging to a socially sensitive group of the population. It is possible to say that things today are at this stage.
In addition, a financial support program for the mortgage and credit guarantee mechanism has been identified as the eighth direction. We believe that this program will make a great contribution both to the continuation and expansion of the construction sector’s activities and to the solution of the housing problem, which is always important for the population.
The direction of the ninth program is the support with public utility costs, primarily seasonally adjusted electricity charges. On your instruction, we have analyzed this issue: people spend more time at home, therefore energy consumption increases. We will present the expansion of limits for your attention.
Finally, a number of our companies engaged in vital activities – passenger transportation, state and private companies, have for objective reasons – as you have mentioned as well – practically stopped operating. A target program has been prepared in connection with these enterprises.
President Ilham Aliyev: Very good! I believe that this large-scale economic and social package will have a positive impact on the growing dynamics in the economic sphere and at the same time protect those in the sensitive category from this crisis. Our first and foremost goal is the safety, health and well-being of our citizens. Of course, during a pandemic, Azerbaijan, like other responsible countries, first of all thinks about the health of its citizens. All other issues are secondary, including issues related to economic development, although we must definitely pay the necessary attention to these issues. Both the health and well-being of people as a whole are one of the main social issues in Azerbaijan. Today, all issues related to human health are being addressed in Azerbaijan and the main goal, I want to say this again, is to control the scale of the pandemic. This is what we must achieve in the first place. I want to say again: the main factor here is the responsibility of citizens.
At the same time, the proposals you have submitted are large-scale and take into account the interests of people working in areas affected by the pandemic now. A significant part of their wages will be temporarily paid by the state. At the same time, I want to repeat that entrepreneurs should not lay off workers, of course. I also consider it necessary to take additional measures in the field of social security, including the issues related to the social sphere you have mentioned. The Azerbaijani state must once again demonstrate and is demonstrating its social policy here. Our policy is centered on the people of Azerbaijan, and we have repeatedly proved this.
In general, since the beginning of the year, steps have been taken to improve the banking sector. Several meetings have been held on this issue. I believe that it is necessary to deepen reforms even in areas not related to the pandemic, and we will do that. Additional measures will be taken in the area of improving the banking sector and financing the real economy. I also consider the suggestion on loan guarantees to be very timely. We will definitely take this into account.
As for the social sphere, the Azerbaijani state showed its intentions and steps last year. An unprecedented social package was implemented last year, benefiting 4.2 million people. The minimum wage was doubled, the minimum pension was increased by 70 percent, benefits by 50 percent, while some benefits were even doubled. This had a very positive effect on people's lives. In addition, the issue of overdue loans was resolved in Azerbaijan at the highest level. This year we are demonstrating social responsibility again. We are taking tangible steps to prevent a decline in people’s well-being, and I believe that we are first in this area too.
Countries have self-isolated because of the coronavirus today, and this is natural. We are seeing that even countries and organizations very close to each other are already solving their problems themselves. Different countries have different approaches to this issue. I believe that our approach is the broadest and most correct. First of all, as a result of the preventive measures, steps were taken to prevent the spread of the disease. However, I believe that people should be more responsible. Nevertheless, when drawing comparisons on a global scale, we see that the situation in Azerbaijan is much better. Cases of infection in proportion to the population are at a very low level, and so are deaths. However, this does not give us any reason to be satisfied with the results achieved. All necessary work in this field has been and will continue to be done in Azerbaijan.
I am sure that the rules that have come into force today will reinforce the positive dynamics. At the same time, a very broad economic package has already been reported on and its implementation, as well as the implementation of the social package, is scheduled for the coming days. A call to entrepreneurs not to lay off workers is not only a call, but also support for entrepreneurs. We understand that it is difficult for them and that they are suffering losses. Who should support them? The state should! The state, as always, is doing that. Therefore, the fight against the disease, economic activity, the solution of social issues, the understanding of every person’s problems, our desire to help and our intentions reflect our policies and, at the same time, will be the best service to the citizens of Azerbaijan in my opinion. Therefore, I believe that the issues you have reported on should already be fully completed and it is necessary to proceed to the actual payments without wasting any time. Of course, lists have been compiled as well.
At the same time, the outlined reforms related to our overall economic development should be deepened too. The pandemic should not stop us. We should not waste time. Our main goal – I set this goal before the Ministry of Economy – is to narrow the scale of the shadow economy. I believe that very serious steps have been taken in this direction. Last year, tax and customs authorities transferred one billion manats in to the treasury in excess of the forecast. Due to what? By reducing the shadow economy.
We started this year very well. Revenues in two months exceeded 250 million manats. Due to what? Due to the fight against the shadow economy. This process will be continued. I want to appeal to representatives of the private sector again. I have already spoken about this several times. We are carrying out fundamental reforms. This means an end to the shadow economy. However, we are doing everything in a consistent manner. There are hundreds, perhaps even thousands of businesses. We gave them time. At the same time, the Ministry of Economy both gave them some time and carried out awareness work. What I am talking about today is no surprise to them. This is our policy and strategic course. Therefore, I believe that the time has come for the business entities still carrying out activities in the shade to put an end to this. We were patient and gave them enough time. I believe that the timeframe was quite broad.
Many entrepreneurs have already left the shadow economy and are working in the “white” economy, are paying taxes to the state and have removed informal employment from their agenda. But there are entrepreneurs who still believe that they can work the old-fashioned way. I want to say to them quite unequivocally that this will not work and no-one will help them. If someone relies on some acquaintances, relatives or senior friends, then they are mistaken. Both they and the person patronizing them will be punished. There are no privileges for anyone. I am instructing you again. Citizens of Azerbaijan hear my instructions and see that all business entities without exception must get out of the shadow. Thus, I believe that our cleaning policy as a whole will give excellent results and the Azerbaijani economy will continue its sustainable development.
I have repeatedly said this and life is proving that we must work and live as if we were living in a post-oil era. Now that the price of oil is $21-22, this is actually a post-era period for us. We have carried out preparatory work for this period and it is still ongoing. Therefore, a lot also depends on entrepreneurs. We have made all the necessary decisions, made and will make all the necessary amendments to the legislation. So entrepreneurs must work in accordance with our common cause, in which case we will be able to overcome this crisis with dignity.
What can you say about the shadow economy? What are the results of the work done so far and what remains to be done? Please report on this.
Mikayil Jabbarov: Thank you, dear Mr. President. By your Order dated 19 March 2020, you also set us the task of preparing and submitting a medium-term economic program and strategy. I want to bring to your attention that its outlines have also been defined. First of all, the construction of a “white” and formal economy, a competitive and sustainable economy runs through all the proposed measures like a golden thread. More space is given to measures aimed at stimulating domestic production and consumption, while maintaining and expanding the export orientation of our economy. As you noted, we consider the preservation and expansion of employment our most important task.
We intend to pursue a policy aimed at replacing oil and gas revenues. The topic of the shadow economy has been specifically discussed. I would like to bring to your attention today that during these discussions, representatives of both the private sector and banks, members of the Association of Banks of Azerbaijan requested to consider an important tool in the process of reducing and eliminating the shadow economy – the amnesty of capital and property. As part of the general pack, we will submit this to the government and for your attention.
I also want to bring to your attention that today is the last working day of the first quarter. According to our operational data, the forecast for the state tax service has been completely fulfilled and about 200 million manats collected in excess of the forecast is to be transferred into the budget of the Republic of Azerbaijan.
As the main direction, we have been collecting payments into the State Social Protection Fund since last year. About 120 million manats more was transferred into the State Social Protection Fund in the first quarter. Among the directions for the medium term, the important priorities include the expansion of the agricultural processing sector, enhancing the support for the construction sector and expanding activities in this area. I would like to thank you once again for giving us clear instructions on these areas, as well as the fields of trade, transit and logistics. As for cargo transportation, in the current conditions we are even observing an increase in the trend compared to March last year. This is a direct result of your visionary policy.
Of course, a number of projects are also being prepared in the field of mining, and they serve to increase and expand Azerbaijan’s export potential, create more jobs in the regions, modernize them and strengthen the industrial potential. I am sure that we will be able to submit that as part of the pack.
President Ilham Aliyev: Very good! I believe that all the issues you have mentioned should be resolved before the end of the year. The sectors you named have always been a priority for us. Under the current circumstances, the development of these sectors will to a certain extent allow us the opportunity to replace oil revenues at the expense of the non-oil sector, of course. It is true that the oil sector remains fundamental to our economy. However, other sectors, the development of the non-oil economy are a priority. I believe that it is necessary to increase the production of exportable products, to continue the certification process in business entities so that our products are competitive both in the domestic and foreign markets. Of course, domestic consumption should be stimulated by domestic production. It is worth noting that it is becoming increasingly difficult to access foreign markets with every passing year, as many countries are pursuing import substitution policies. Therefore, we must both look for new markets and increase the competitiveness of our products. At the same time, it is necessary to try to maximize domestic demand through domestic production. As for the self-sufficiency index, there should be more accurate statistics in this area because different government agencies submit different numbers to me. Therefore, I am instructing you to do that. Analyze the figures of all government agencies and report to me on the real state of affairs – what is our self-sufficiency index in basic consumer goods so that we could forecast our policy more accurately, including the allocation of funds and loans from the Entrepreneurship Development Fund to the areas that are still dependent on imports. In addition, when analyzing our exports and self-sufficiency opportunities, it is necessary to take into account the percentage of the external component in the goods produced in Azerbaijan because sometimes the share of imported raw materials is high. The Ministry of Economy is working hard on these areas, so carry on. I believe that if we can correctly build all this work – and I have no doubt that we will – then we will pass this difficult test with dignity.