DEVELOPMENT PHASE

A plan is not usually made in a market economy and the term is replaced by the less binding "forecast". A forecast is of course not an obligation, but just a well-founded expectation. The forecast might not come true, though. The example of Azerbaijan shows that, if objectives are achieved successfully and on time, forecasts can come true earlier than predicted. To be convinced of this, it is enough to look at the figures for the country's socio-economic development in 2007, which President Ilham Aliyev presented at an expanded session of the government. 

Citizens of Azerbaijan should not be poor and all the country's economic capacity should be aimed at eradicating poverty and improving the standard of living of Azerbaijani citizens. This was the main thread of the president's speech at the sitting.

The head of state said that according to the figures for 2007 the level of poverty in the country had fallen to 16 per cent. "In 2003, 49 per cent of citizens of Azerbaijan lived in poverty, as of 1 January 2008 this figure has fallen to 16 per cent - this is a great achievement," Ilham Aliyev said. "There are poor people in developed countries too. Of course, there are other figures there for the minimum consumer basket. But taking into account the current state of Azerbaijan's economy, the reduction of the poverty level to 16 per cent is a great success for us. I am convinced that as a result of steps taken in 2008 this figure will fall even further. There will, therefore, be no poor people in Azerbaijan. I believe this and am doing everything necessary to achieve it."

Ilham Aliyev said that great attention had been paid in 2007 to tackling social problems. "Wages and pensions have risen and this trend is continuing. From 1 January 2008 the minimum wage and pension were increased by 20 per cent to 60 manats. If you think that just a few years ago this figure was the equivalent of nine manats, we have come a long way. The minimum wage and pension will certainly be increased again in 2008," he said.

The head of state also noted the successful implementation of the targeted social assistance programme. "This programme covers around 78,000 families and the average state assistance to each family is $100. In this way we are helping the needy sections of the population and this process will be continued."

The president said that he had kept his promise to liquidate all the tent camps for refugees and forced migrants. "As you know, in 2003 on the eve of the presidential elections I made a statement that if the people trust me and support me, in five years time not one tent camp will remain in Azerbaijan. I am very happy that we managed to do this in four years, not five."

Ilham Aliyev recalled that a new programme was adopted in 2007 to tackle the social problems of refugees and forced migrants. "It will take around $0.5bn to implement this programme. The programme envisages constructing new settlements. The problems of forced migrants will be tackled and also of our fellow citizens who live in difficult conditions in prefabricated houses, military units and schools. In this way we are trying to solve the difficult problems of our fellow citizens and provide them with temporary, normal living conditions."

In the past four years in Azerbaijan 640,000 new jobs have been created, of which 460,000 are permanent. "In 2007 alone, 145,000 new jobs were created, including 105,000 permanent positions," Ilham Aliyev said. He said that the aims of the state programme for regional development in 2004-08 have already been achieved and a good infrastructure created in the regions. "The government has already been instructed to draw up a new programme for regional development in 2009-13. This programme must take into account all outstanding issues. In this way, by 2013 and even before, we must complete all the infrastructure projects and tackle all social issues. All village problems must be solved. We have the necessary financial resources and we must use them," the president said.

The head of state said that in 2007 alone, additional capacity of 700 MW had been created in the energy sector. "This meant that electricity could be supplied to the whole country," the president said. "In the next three years capacity of 3,000 MW will be created, which will provide electricity for the country for many years to come and allow us to export power." He highlighted the full supply of electricity to the Naxcivan Autonomous Republic which is blockaded by Armenia.

The head of state also mentioned the improvement in gas supplies to the population. "Now around 80 per cent of the country's population has gas. This is a high figure for the region, the CIS and the world. In countries that extract and export more gas than us, this figure is 50-60 per cent while here it is 75-80 per cent. Taking into account the growing volumes of gas extraction, we must provide as much gas as possible to the people. We are already gas exporters which produces big economic and political dividends."

He mentioned the importance of providing gas to the Naxcivan Autonomous Republic. "Today 90 per cent of the population of Naxcivan has gas. However, in the past few days problems have arisen, as for technical reasons Iran stopped supplying gas to the autonomous republic. In order to avoid a repetition, I instructed SOCAR [State Oil Company] to build a 300 million cubic metre gas storage facility in Naxcivan. In summer we will fill the storage facility and will use these reserves if there are any problems in the gas supply from Iran."

The president said that water supplies to the population are also a priority. "An Oguz-Qabala-Baku water pipeline is being built at the moment. This is a historic project. It was under discussion for many years, we asked for loans but none were forthcoming. In the end we allocated money ourselves and the water pipeline will come on stream this year. This pipeline is as important for me as the Baku-Tbilisi-Ceyhan oil pipeline and has symbolic significance. We built the oil pipeline and with the oil profits we are building the water pipeline. Azerbaijani oil is serving the Azerbaijani people."

He said that 2007 was successful for the republic's economy. "Overall 2007 was successful for Azerbaijan, positive trends developed further last year and in this way Azerbaijan's economic potential grew significantly."

The president said that GDP grew 25 per cent last year in Azerbaijan and overall grew 96 per cent in the past four years as a result of reform, which is unprecedented worldwide. The president expressed his dissatisfaction with the level of inflation which reached 16 per cent in 2007. "This is a high figure. It's true that the population's money income increased by 38 per cent so the real income was 22 per cent. But this income is not distributed proportionally. There is a stratum of the poor - 16 per cent. Inflation, and especially price increases for food, creates great problems for them."

He said that there were objective factors behind inflation, including the increase in the price of oil on world markets which led to an increase in prices for other production. "At the moment on the consumer market we are still largely dependent on imports. The aim of the regional development programme and industrial and business development programmes in the country is to reduce the dependence on imports," Ilham Aliyev said.

The president said that special attention should be paid to tackling the subjective factors that lead to inflation, including monopolies. "The principle of free competition must be fully observed, tendencies towards monopolism must be overcome. Our market must be completely liberalized. We must not allow monopolies to appear in domestic production or imports. Therefore I hope that inflation will be at a normal level as a result of macroeconomic and administrative steps taken in 2008."

Ilham Aliyev expressed satisfaction that the growth in industrial production in Azerbaijan is equivalent to the GDP growth rate. "In 2007 industrial production grew by 24 per cent; much is done in Azerbaijan to strengthen industrial potential and in the next few years we must increase attention to this sphere."

The head of state noted that the high level of investment in the economy had been maintained. "Most major energy projects in Azerbaijan have already been completed; major investment in the oil and gas sector is falling away. Despite this, investments topped $6bn and what is most pleasing is that most of them are internal investments."

Ilham Aliyev said that the growth in the volume of domestic investment is evidence of Azerbaijan's increasing capacities. "This says that foreign and domestic investors have great confidence in Azerbaijan's economic potential and this will allow the republic to remain attractive for investment."

The president said that the country's currency reserves are $7bn and are to be doubled this year. "We have created the State Investment Company. Talks are under way but without result as yet, although we have allocated $100m. The company's aim is to attract foreign investment to help the private sector. But some spheres that have priority for the state do not interest private investors. The Investment Company aims to attract funds to these spheres. I expect the company to increase its activity in 2008."

The president said that the state can allocate funds itself to develop priority spheres. "We must pay attention to the development of the non-oil sector in 2008. The aim is to overcome dependence on the oil sector in a few years' time," the head of state said, adding that according to the World Bank's calculations Azerbaijan will have an income of 200bn from oil in 2020. 

It should be pointed out that the World Bank's calculations are based on an oil price of $60 per barrel. Prices now are above $90. Thanks to the high oil price, Azerbaijan's revenue is increasing, not only in the absolute sense but also in percentage terms. Up until now Azerbaijan has received only 30 per cent of the profit oil from the Azari-Ciraq-Gunasli field, while foreign companies have had 70 per cent; in 2008 the distribution will be 55 per cent to 45 per cent in Azerbaijan's favour. When the Contract of the Century was signed, this level of income distribution was not forecast until 2011.

In 2009-10 Azerbaijan might receive 80 per cent of all the profit oil under the contract. Extraction will reach its peak of one million barrels of oil per day from the fields during this period. This means that the country will be able to make full use of its oil resources. 

There is somewhere to use them too. The country's favourable geographic location, its natural resources and rich historical and cultural heritage allow oil and gas revenue to be targeted at developing agriculture, the chemical industry, transport and telecommunications, tourism and other spheres of the non-oil economy. The government is already implementing major infrastructure projects in all these spheres without outside financial help. Moreover, Azerbaijan itself is turning into a major investor and creditor for the region's countries. All this, in turn, ensures the comprehensive development of the economy and the diversification of sources of revenue and protects the country against oil dependence.