TBY talks to Ilham Aliyev, President of the Republic of Azerbaijan, on diversifying the economy, the importance of education, and his hopes for peace in Nagorno-Karabakh.
TBY What might be regarded as Azerbaijan’s most significant achievement during the period starting from independence in 1991 until 2003 when you became the President?
ILHAM ALIYEV In 2011, the Azerbaijani people are commemorating the 20th anniversary of their national independence. The last 20 years represent an important milestone in Azerbaijan’s history. During this time, Azerbaijan achieved all the fundamental domestic and foreign tasks it faced. The state became a fully fledged member of world politics as an actor—equal in rights and took its deserved place in the system of international affairs. Today, we can say with confidence that, over the course of the last 20 years, we have succeeded in building a modern, strong, vibrantly developing, democratic country ruled by laws that rely upon its interests and international law and pursues a policy of independence. I think that this is the biggest achievement of our people.
However, the process of building a nation state in Azerbaijan and creating civil relations with the international community has not been as smooth as it would appear today. Our independence had been seriously undermined by a number of factors, which included the aggression of neighboring Armenia and its occupation of parts of our sovereign territory, the internal struggle for supremacy, and the resultant anarchy and civil disobedience, which at that time increased the threat of civil war.
The social life of the people suffered greatly due to the country’s then economic decline. Inflation reached a critical point. Individual incomes dropped by more than three times and wages by 5.7 times. It was only on the return of the national leader of the Azerbaijani people, Heydar Aliyev in 1993, that it became possible to halt these economic problems, and focus our attention on re-building the state.
Azerbaijan entered into a period of stability, and the national development that laid the foundations of our statehood started in 1995. The main directions of state policies pursued until 2003 were to establish public and political stability, build a democratic state ruled by law, create a liberal economy, implement new oil strategies, realize the successful integration of Azerbaijan into the international community, ensure the restoration of territorial integrity, and strengthen national independence and solidarity. Certainly, during those years, Azerbaijan was able to overcome the wall of information blockade and represent itself internationally. By focusing on the decisive importance of the national economy and of independent development, the signing of the first major oil contract—known as the “Contract of the Century”—and the implementation of global transnational projects, such as the Baku-Tbilisi-Ceyhan (BTC) oil pipeline and the Baku-Tbilisi-Erzerum (BTE) gas pipeline, have paved the way for the future dynamic development of Azerbaijan. During 1995-2003, GDP grew by 90%, state budget revenues trebled, the country’s foreign currency reserves rose 85 times, while average monthly salaries grew five fold. The volume of investments made into the national economy exceeded $20 billion. These successful changes in the country’s economy have been decisive and have permitted Azerbaijan to move forward with the opportunity to further develop its
future aims and plans.
How would you evaluate the results of your policies to obtain serious progress in the field of economic development following your election as President in 2003?
Many important changes took place in the global political system at the start of the third millennium. New priorities have been established for our activities in global politics. Humanity has stepped forward into a new information era. This era and its realities require a more balanced, pragmatic, and flexible policy for newly independent nations such as our own. For this objective, real potential and resources had to be defined accordingly and used in a distinct way. The experience of several resource-rich countries demonstrates that work only yields results if you have a substantiated course of strategic development.
The continuation of the democratization process built on the strong foundations formed since 2003, the implementation of social and economic development based upon parallel concrete programs, and the building of a modern society and a well-balanced foreign policy have all become the main priorities of Azerbaijan’s state policy. The main goal was to establish Azerbaijan as a strong and modern state, ensure the prosperity of its citizens, foster equal cooperation rights at a global level, and reach the fair resolution of the Armenian-Azerbaijani, Nagorno-Karabakh conflict in the framework of international legal norms and restore the territorial integrity of Azerbaijan. We understand and the practice shows that it is very difficult—and even impossible—to solve other issues without having a strong economy.
As a result of the implementation of the massive energy projects in the coming years, a large amount of oil revenues will flow into the country. Therefore, we will focus our attention on the resolution of social and economic issues. First of all, it is a priority to diversify the economy, forge the competitive potential of the non-oil sector, create a modern social and economic infrastructure, and reduce the drastic difference between the capital and the regions by paying particular attention to regional development to solve the social problems of the population. For this purpose, over 2003-2004, two important documents—the State Program for Social and Economic Development of the Republic of Azerbaijan and the First State Program for the Social and Economic Development of the Regions for 2004-2008—were adopted. Furthermore, special programs and projects have been approved for sustainable development in each specific field.
Very important work has been carried out in Azerbaijan over the last seven years in terms of modernizing the country, liberalizing the economy, and making investments in fields that may potentially bring large returns in the future. These efforts have been noted in particular by all prestigious international ratings and monitoring organizations. During recent years, Azerbaijan has been a leading country in the world due to its pace of social and economic development. During 2004-2010, GDP and industrial production increased three times. The number of poor people fell by a factor of five and dropped to 9.1%. The transport and public utilities infrastructure has been largely renovated across the country, and this work continues.
Wide-scale renovation and reconstruction work is being carried out in Baku and in regional areas. The Second State Program for the Social and Economic Development of the Regions for 2009-2013 envisages solving all problems in the regions by 2013. We assigned ourselves the task of creating a modern infrastructure, and it is highly possible we will hit our targets. Thousands of new enterprises and almost 1 million jobs have been created in our country over the last 7 years. We succeeded in solving important issues such as energy security, and today we contribute to the energy security of other countries. The food security problem has also been successfully solved in Azerbaijan. We are paying much attention to the development of agriculture.
Large-scale foreign economic activities are being implemented to ensure Azerbaijan’s business community has access to the international marketplace. Long-term loans and favorable subsidies have been allocated for the development of entrepreneurship inside the country.
I would like to note in particular that the economic crisis that started in 2009 created serious consequences for the economies of many countries, deepening trends of economic decline and halting the implementation of social and other programs. However, the implementation of all projects envisaged in Azerbaijan has continued, and economic growth stood
at 9%.
Azerbaijan has made tremendous steps to attract investments. We hold one of the leading positions in the CIS region in terms of volume of foreign investments per capita. Over the last several years, national investments have exceeded foreign investments. Taking into account 2011, the volume of investments made into the national economy will surpass $80 billion. In 2010 alone, $16 billion was invested into our economy.
In 2011, the state budget of Azerbaijan surpassed $20 billion. By comparison, the state budget in 2003 was equal to only $1.2 billion. Our budget for the current year will be social- and investment-oriented again. Social issues are being successfully solved in the country. Wages and pensions are regularly raised, while large funds are being allocated to create social infrastructure. This is already the second consecutive year that the development of the non-oil sector has dominated the performance indicators of the oil sector. This domination reached 9.8% during the current year. Over the first 4 months of 2011, the average monthly salary increased by 13% and reached AZN350. Today, the average level of pensions constitutes 40% of average wages. Over the course of recent years, over 2,000 schools, hundreds of medical centers, 31 Olympic sport compounds, and many cultural centers were built in Azerbaijan. At the same time, modern cities are being created to improve the living conditions of almost 1 million refugees and internally displaced persons (IDPs). Their social problems are being actively solved by the government.
Azerbaijan is a leading country in the region due to its economic potential. The general share of our country in the South Caucasus economy reached 75%. Having completed its period of economic transition, Azerbaijan has become a country with a stable economy. The high assessment given by international financial institutions to the economic reforms implemented proves my arguments. The Doing Business 2009 Report produced by the World Bank and International Financial Corporation declared Azerbaijan the top reformer country in the field of improving the business environment. Azerbaijan is also the leader among CIS countries in the Global Competitiveness Report prepared by the World Economic Forum for 2010-2011.
Azerbaijan’s important oil and gas industries have become the center of attention of the international community. What is being done by the government of Azerbaijan to direct revenues to the comprehensive development of the real economy?
In fact, the rich natural resources of Azerbaijan have been in the limelight of different states and power centers in all periods of time. Having gained its state independence near the end of the 21st century, and following the signature of the “Contract of the Century” in 1994, this wealth started to serve Azerbaijan’s national interests.
One cannot claim to be wealthy due to natural resources alone. It is a very difficult issue to utilize these resources, produce oil and gas, define its free export routes, and create the relevant infrastructure. It is not hard to perceive the difficulty in implementing giant energy projects for the country when it was involved in conflict due to the military aggression of Armenia, facing the resistance of powerful circles and not having its own financial resources. However, as a result of the firmness, wisdom, and well-balanced pragmatic policy of Heydar Aliyev and the efforts of our partners, it became possible to eliminate all difficulties, attract billions of dollars to Azerbaijan, and implement important transnational projects that would have seemed an illusion in the past.
Currently, Azerbaijan exports 1 million barrels of oil per day. In 2010, over 50 million tons of crude oil were exported to the world’s markets. This level will be maintained in 2011. At the same time, Azerbaijan’s proven gas reserves have passed 2.2 trillion cubic meters, while the general potential is estimated to be 5 trillion cubic meters. In order to bring energy resources to world markets, Azerbaijan has paid much attention to diversification issues by creating its infrastructure in line with modern standards. The country currently has seven export pipelines in various directions. Our important contribution ensures the energy security of not only the region, but also Europe. We intend to gain access to new markets to realize our country’s rich gas potential and strengthen our position in traditional markets. Depending on the results of future talks, we can increase the export level of our energy resources in any direction.
In addition to all of these achievements, the rational use of oil and gas revenues and transparency in this field hold significant importance for Azerbaijan. Azerbaijan joined the Extractive Industries Transparency Initiative (EITI) and oil-generated revenues are accumulated in the State Oil Fund, which is audited internationally. Resources from this Fund are spent transparently following the approval of Parliament.
Oil-generated revenues are used to form the state budget and fund various programs. For the time being, bringing oil production to 1 million bbl/d ensures the influx of financial means into the national economy for the resolution of social and economic issues. At the same time, we are already thinking about the future generations. Today, foreign currency reserves totaling $35 billion have been accumulated in Azerbaijan. Despite our large oil and gas reserves and vast revenues, we wish to see sustainable development that is not dependent on oil prices or production levels. In the years to come, our foreign currency reserves will increase as the development of the non-oil sector will increase and budget payments from other fields will
accumulate also.
What level of importance does the education system have in your plans to upgrade and diversify Azerbaijan’s economy?
We know that natural resources are not eternal, and they will exhaust over time. Natural resources represent a tool to develop other sectors of the economy, create both intellectual and scientific potential in line with the requirements of the contemporary period, and ensure sustainable development. Therefore, converting black gold into human capital is not simply a slogan. It is a reality. The role played by education in forming human capital of high intellectual abilities and establishing a strong economy is more topical than ever.
Today, a modern and effective educational system is being created to develop human potential in line with the requirements of an information and knowledge-based society and the economy of a developing country. Also, the development of Azerbaijani science by strengthening the activities of the National Academy of Sciences and its logistical basis are priority issues. Our goal is to link scientific development with the general pace of national development and to create a harmony between science, higher education, and the economy.
As a result of the work done, Azerbaijan was named as the country with the fastest progress in the field of human development for 2005-2010 in the UN’s Human Development Report 2010. Our country was added to the list of the fastest developing countries.
How would you evaluate the potential of ICT to act as a driving force for economic development for Azerbaijan?
In the contemporary period, ICT is very popular in all fields of life, and has become an integral part of public and economic processes. ICT is regarded as the most promising segment of the Azerbaijani economy. The National Strategy of Information and Communication Technologies for 2003-2012 and the First State Program for 2005-2008 were adopted in Azerbaijan in 2003. During this period, we created a free and competitive environment in the ICT market, attracted investments to this field, developed a legislative basis, modernized telecommunication infrastructure, and started to widely use the latest
in technology.
At present, the development pace of the ICT sector in the country surpasses general world indicators by several times. The report on the Global Development of Information Technologies for 2008-2009 prepared by the World Economic Forum indicates that Azerbaijan is moving ahead of several leading countries in its development of ICT and holds the leading position among CIS states.
Today, Azerbaijan has become the region’s ICT hub, and the possibilities of the internet are expanding rapidly. According to the latest statistical data, the national internet penetration rate is 50%. If, several years ago, one computer was available for every 1,000 people in Azerbaijan, today the proportion goes to one computer per 15 persons. Azerbaijan is also becoming a country with a space industry. Azerbaijan’s first telecommunications satellite will be launched in 2012.
Taking into account the geographical location of Azerbaijan and the development level of our national economy, we think that we have all the opportunities for the ICT sector to become the second most profitable field after the oil and gas sector in the near future.
Your Excellency declared 2011 as the “Year of Tourism." What does your country intend to obtain by paying so much attention to the tourism potential?
In general, we have the intention to fully develop all promising fields of life in Azerbaijan. Our country has quite a large and attractive tourism potential. On the one hand, Azerbaijan has nine climatic zones, beautiful and picturesque nature, rich flora and fauna, cultural heritage, historical monuments. On the other hand the large-scale measures undertaken in recent years to ensure rapid social and economic development have renovated all fields of public life and created an infrastructure of services, transport, communications, and public utilities that make conditions favorable for tourism to become an economic priority. The State Program on the Development of Tourism for 2010-2014 is being implemented in Azerbaijan. Our main objective is to bring the national tourism sector in line with world standards by 2014. In the light of all these tasks, 2011 was declared the “Year of Tourism” in Azerbaijan.
Modern hotels are being opened in large cities of the country to receive foreign guests. The system of tourism services is forming rapidly in all the regions. Almost 100 hotels were operational in 2003. However, their numbers exceeded 500 in 2010. For the time being, the construction of 35 new hotels is underway. By the end of 2011, six five-star hotels will be commissioned. The world-class Shahdag Winter-Summer Tourism Complex is of particular importance, being among the largest projects in the field of tourism.
Of course, the state allocates substantial funds to help shape the modern tourism infrastructure. However, hotels are constructed by the private sector. This means that there is much confidence in the development of Azerbaijan, which makes it possible to spend hundreds of millions in this economic field. Investors have confidence that these investments will make good returns.
Azerbaijan won the Eurovision Song Contest in 2011 and obtained the right to host this event in 2012. In 2012, we expect a large number of tourists to come, and therefore we have already started to undertake the relevant measures to create convenient conditions to stage this event as well as to accommodate the guests that will arrive and ensure their safety. There is no doubt that we will fulfill all our obligations entirely in appropriately organizing this major event.
One-fifth of Azerbaijan’s territory remains under occupation, and the Nagorno-Karabakh conflict remains an issue of nationwide importance. What opportunities do you see in resolving this conflict and restoring Azerbaijan’s territorial integrity?
The resolution of the Armenian-Azerbaijani, Nagorno-Karabakh conflict is the main problem and the most painful issue for our country. Despite all our efforts, this conflict has not been resolved so far.
Currently, Armenia and the Armenian lobby put forward their groundless claims related to the Nagorno-Karabakh conflict and attempt to mislead the international community. In fact, it has been internationally recognized that the territorial integrity of Azerbaijan has been violated. Over 1 million people have been expelled from their native lands. The Azerbaijanis have been subjected to an ethnic cleansing policy. Our historical and cultural monuments have been destroyed in the occupied territories. All our tangible wealth has been plundered. As a result of the massacre committed in Khojaly in 1992, 613 Azerbaijanis were brutally killed. Hundreds of people were taken hostage. The fate of many of them remains unknown to us.
The UN Security Council adopted four resolutions demanding the immediate and unconditional withdrawal of troops from the occupied territories and the return of civilians to their lands. These resolutions have not been fulfilled as yet. The decisions and resolutions of the OSCE, the European Parliament, the Council of Europe, the Organization of Islamic Conference, and other international organizations have not been fulfilled by Armenia. Fact-finding missions from the OSCE visited the occupied territories twice. It proved the illegal settlement policy of Armenia implemented in the occupied lands was contrary to international legal norms.
Dealing with the settlement of the conflict since 1992, the OSCE Minsk Group co-chairs’ efforts have appeared futile due to the non-constructive position of Armenia. Every time there is a mood of getting closer to resolving the conflict, significant events occur in Armenia, such as the ousting of the president from power, or the assassination of the prime minister in the Parliament building, or the retreat by leaders from previously agreed positions in an attempt to violate the negotiations process. We think that the international community should be more active in exercising pressure on Armenia to deter it from such a destructive position. It is the only way out.
Nagorno-Karabakh is one of Azerbaijan’s ancient lands. Azerbaijanis have always lived in these territories. All historical monuments and toponyms belong to Azerbaijan. It is an integral part of our history and culture. The Armenians moved into these territories at a later period. Now they wish to create a second Armenian state upon Azerbaijan’s historical lands. However, neither Azerbaijan nor the international community will allow this to happen.
We positively accepted the joint statement of leaders of the countries co-chairing the OSCE Minsk Group released on May 26, 2011. Azerbaijan strives for the quick resolution of the conflict. According to the Helsinki Final Act, there is no contradiction between the principles of territorial integrity and the right of self-determination. The right of self-determination can be realized within the framework of the principle of territorial integrity, and it is the only possible way for conflict resolution to come about.
Our principal position in relation to the Armenian-Azerbaijani, Nagorno-Karabakh conflict is to restore the territorial integrity of Azerbaijan and make possible the return of our citizens to their native lands. Only after these steps can peace and cooperation be created in the region, and all sides of this issue can justly benefit from this development. Azerbaijan will never agree to the independence of Nagorno-Karabakh and its attachment to Armenia, and will not let it happen.
I would also like to point out that time is not in Armenia’s favor. Over the last 20 years, Armenia has been isolated from all regional projects. Its economy is in full decline. The population is not tolerating the tense social conditions any longer and people are leaving the country. The difference between Azerbaijan and Armenia is increasing significantly. The military budget of Azerbaijan has already surpassed the full state budget of Armenia. The leaders of Armenia and the Armenian lobby should properly assess the current realities and understand that the international community will never recognize the outcomes of occupation, and this conflict will be resolved sooner or later.
How can you assess the position of Azerbaijan as a regional and international economic and political power over the long term?
We are very optimistic about the future. After 1993, Azerbaijan became a fully independent, self-reliant, and modern country with a sustainable economy and a national and civil unity that has stepped firmly towards democracy and is integrating successfully into the international community as well as acting as a leader in the South Caucasus region. In the years to come, we are resolved to make further achievements and participate more actively in regional and world politics in order to foster mutual cooperation, confidence, security, peace, and prosperity.
Relying upon the successes and potential opportunities gained so far, I can say that Azerbaijan has a very brilliant future ahead of it, and we will use all possible means to reach this target.
© The Business Year