Baku, June 1, AZERTAC

On the initiative of the Asian Development Bank (ADB), a videoconference has been held between President of the Republic of Azerbaijan Ilham Aliyev and the bank’s President Masatsugu Asakawa, Vice-President Shixin Chen and other executives of the ADB.

Greeting President of the bank Masatsugu Asakawa, President Ilham Aliyev said:

- Good morning, Mr President. It is very nice to see you.

Masatsugu Asakawa: Good morning, Mr President. Thank you very much. Thank you for taking the time to meet with us despite your busy schedule. The cooperation between Azerbaijan and the Asian Development Bank has been deepening since 1999. It is not only about a series of projects. Our joint regional cooperation is also underway. The successful holding of the 48th annual meeting of the Board of Directors of the Asian Development Bank in Baku in 2015 was a clear example of our partnership built on mutual trust and respect.

Direct communication with you personally and with your government is very important for me and my team. As your reliable partner, we fully support the steps Azerbaijan is taking during the COVID-19 pandemic and the sharp drop in oil prices. This will allow us the opportunity to prepare the best response that meets the needs of your country.

Attending this videoconference today are the Executive Director for Azerbaijan on the Board of Directors of the Asian Development Bank, Anthony McDonald, the Bank’s Vice President Shixin Chen, Director General for Central and West Asia Werner Liepach and ADB’s Country Director, Azerbaijan Resident Mission Nariman Mannapbekov.

President Ilham Aliyev: Thank you, Mr President. First of all, I would like to congratulate you on being elected president of the Asian Development Bank and wish you success in your activities. I am sure that during your leadership, Azerbaijan and the Asian Development Bank will continue to cooperate close, as they have done for the past 20 years. As you have noted, we have established a very strong partnership. We all remember that the annual meeting of the Asian Development Bank in 2015 was held in Baku. It became a very good sign of cooperation and the meeting was very successful.

As you know, we are working on a number of important projects. The total amount of loans and guarantees issued by the Asian Development Bank to Azerbaijan exceeds $3 billion. These funds have helped us invest in infrastructure. We are very grateful to the Asian Development Bank for supporting the numerous infrastructure projects related to the production of electricity, construction of railways and roads, water and sewage. Of course, we are very grateful to you for your commitment to the implementation of the Southern Gas Corridor project and your support, financial support. I can tell you that the Asian Development Bank was the first major international bank to provide a loan for this project. Your important and timely support also helped us set up a large group of lenders. As you know, the Southern Gas Corridor is very close to completion. Three projects have already been completed. The fourth, the Trans-Adriatic Pipeline, is more than 95 percent through. This is a truly great sign of cooperation.

We are currently working on new projects. I am told that there are some projects in our portfolio related to irrigation and education that will be implemented. All of them are of great importance. I am sure that our cooperation will be continued in the coming years. Your team here in Baku and at your headquarters knows our priorities, i.e. what the priorities for our development are. These are mainly associated with the private sector, issues of infrastructure development, support for small and medium-sized enterprises.

Of course, all our efforts during the pandemic have focused on saving people, protecting their lives and health. Thanks to the measures Azerbaijan took in a timely manner, our losses are minimal. According to the World Health Organization, Azerbaijan is considered a model country in the fight against the pandemic. We have also allocated major funds. To support the sectors of the economy affected by the pandemic, as well as the unemployed, those who have lost their jobs, the low-income people and even those informally employed, we have allocated more than 2 billion euros.

We are fighting informal employment and have taken serious measures. This year alone, more than 100,000 employment agreements were signed between employees and companies. At the same time, we understand that these people suffer from this problem. For this reason, our economic growth over four months was very low. But it was still at 0.2 percent. I know that, unfortunately, many countries are in recession now. We don’t know the results of the first five months yet - we will probably find that out in about a week’s time. However, I believe that we will cope with this situation. You rightly noted that a sharp drop in the oil price is a challenge for us, of course. However, we have managed to align our actions and budget with the new realities, and we must take into account the realities, whatever they may be. We have not reduced a single social project and all of them remain in our budget. However, projects that can wait for several years may be delayed to some extent. In general, I think that Azerbaijan will be among the countries showing good results.

I know that many countries - I believe there are more than 150 of them - have already applied to international financial institutions for financial support. Azerbaijan is not among them. You know that we are fulfilling the work entrusted to us and our expenses have always been lower than profits. I would say that our most important economic goal is to maintain and increase reserves.

Masatsugu Asakawa: Thank you Mr. President. I was informed about the gigantic package of reforms you have undertaken to combat the pandemic and its impact on Azerbaijan. The coordination of efforts against the pandemic on international platforms under your leadership - within the framework of the Cooperation Council of Turkic-Speaking States and the Non-Aligned Movement - made a deep impression on me. It is also commendable that Azerbaijan provided the World Health Organization with a total of $10 million for the COVID-19 fund, including donations of $5 million to the needy member countries of the Non-Aligned Movement. I also know that Azerbaijan provided assistance to 13 countries suffering from the pandemic, including the People's Republic of China, Pakistan, Kyrgyzstan, Tajikistan and Uzbekistan.

Along with this, I want to take this opportunity to express my gratitude to you for your government’s decision to contribute to the 13th Asian Development Fund. The poor and vulnerable countries of the world will benefit from this opportunity. Thank you!

Regarding the state of affairs with COVID-19, I was informed about the preventive measures your government has taken against the pandemic, the low mortality rate and the increase in the number of tests conducted. This suggests that the country is managing its health risks very well.

For four months of this year, the macroeconomic indicators of your country were quite stable. The increase in revenues to the state budget is commendable. However, there is a risk of a strong reduction in the second half of the year. In this context, we welcome the prompt adoption of an extensive package of economic assistance equal to 4.3 percent of the gross domestic product, the implementation of health measures to prevent the spread of the pandemic, the social measures and support for businesses. As far as I know, the Central Bank of Azerbaijan has also taken a number of measures to support the financial sector.

President of the Asian Development Bank Masatsugu Asakawa also spoke about the Bank’s anti-COVID-19 support package. He said that this package included the provision of grants for the purchase of medical supplies and personal protective equipment, budget support to reduce the impact of the pandemic on the economy and society, and the provision of loans and guarantees to ensure permanent employment and sustainable activities in the private sector. He also touched upon the bank’s cooperation with Azerbaijan in diversifying the economy in the circumstances of a sharp decline in oil prices in 2016. He noted that the bank is currently assessing compliance with the criteria to meet all countries' needs and provide long-term access to the funds of the Asian Development Bank, thus maximizing loan support for every country.

President Ilham Aliyev: Thank you very much, Mr President. First of all, I would like to note that I am very pleased with your good awareness of our initiatives in the fight against coronavirus on a global scale as well. Azerbaijan happens, as you noted, to preside over two organizations - the Cooperation Council of Turkic-Speaking States and the Non-Aligned Movement. Last year we held a very successful summit, and Azerbaijan was elected chair of this organization by a unanimous decision of 120 countries. Therefore, we thought that at this important time for the whole world, we are obliged to show leadership and create a necessary format for cooperation. Both summits were successful. I can tell you that we not only exchanged views on the fight against coronavirus but also showed mutual support. After the summit, with the participation of relevant ministers of member countries, a series of conferences were held on very important issues related to joint efforts in the fight against coronavirus.

You are also well informed about our donation to the World Health Organization. I think that the first time we were one of the first countries to allocate $5 million and then we allocated another $5 million as chair of the Non-Aligned Movement. The humanitarian support Azerbaijan has provided already covers 14 countries. It included financial support and support in the form of equipment and medical supplies. In addition, through the World Health Organization, we will support 15 most needy countries. These 15 countries are identified in consultation with the World Health Organization. So during this period, Azerbaijan provided support to almost 30 countries. I think this is a manifestation of our responsibility because countries and people should support each other in this difficult time.

As for the new ideas related to our cooperation, we are very interested in that. I remember that when we needed financial support five to six years ago, the Asian Development Bank reacted very quickly. It made a deep impression on me, and I want to once again express my appreciation for the very timely friendly approach. We considered this a great sign of cooperation. As I already noted, you were the first to support the Southern Gas Corridor project. By the way, we organize annual meetings of the Advisory Council of the Southern Gas Corridor. I remember that when other banks were examining financial obligations under the project, I noted that the gas produced from Shah Deniz would be transported to Europe. But while the process was still underway in European banks, the Asian Development Bank already provided funding. I believe that your very friendly support played an important part in consolidating the whole group.

Speaking next, Minister of Finance of Azerbaijan Samir Sharifov said: “Thank you very much, Mr President, President Asakawa. Mr President, in continuation of our conversation I want to note that we are currently working with the Asian Development Bank on the basis of the business operations strategy for the country. As part of this strategy, the Asian Development Bank is trying to determine credit priorities related to Azerbaijan for the next three to four years. I would like to note that at present they are also actively involved in important technical assistance programs related to Azerbaijan. Some of them are very important, in particular the preparation mechanism. This includes, among other things, a technical assistance program that can be completed through a loan. Mr President, another important project is a technical assistance project for creating startups. These are extremely important projects.”

Touching upon cooperation with the bank on strengthening the vocational education system in Azerbaijan, Minister of Finance Samir Sharifov said that negotiations had begun between the Asian Development Bank and the Ministry of Education on a vocational education project submitted by the ADB. The Minister noted that another project was mainly related to the private and financial sectors. He said that traditional projects include irrigation projects. The Asian Development Bank is aware of the establishment by a presidential decree of the Operational Headquarters to deal with water use in Azerbaijan and intends to contribute to this issue. Samir Sharifov said that the Asian Development Bank proposes to consider a project in this area in the Nakhchivan Autonomous Republic.

Masatsugu Asakawa: It is now clear what our contribution to the sustainable development of Azerbaijan will be. Let me highlight some points. The Asian Development Bank will continue to support your government's strategic development agenda aimed at accelerating economic diversification and promoting inclusive growth, as well as speeding up economic recovery after the coronavirus crisis. At the same time, the development of infrastructure is envisaged in order to better meet the needs of a diversified economy and to promote partnership between public and private sectors. All these are strategic priorities of our partnership with your country. Public-private partnerships remain the focus of our government projects. In the field of management, we must advocate a very active position. This area includes the issue of the ratio between the external debt and the gross domestic product, and this ratio is reducing at a faster pace than expected. I fully understand your position, which is to support the investment in innovative and new technological projects. Proceeding from this, the team I am leading is doing everything possible to ensure that these projects give tangible results in the field of high technology. We would like their impact to manifest itself in sectors that the government considers strategic. For example, water resources, management, financial, energy efficiency, etc.

In a word, based on the above-mentioned and after consultations with government bodies, my team prepared a number of documents. Firstly, Mr President, as you noted, the project of irrigation and the development of drainage systems is of particular importance. Secondly, vocational education and trade liberalization are also part of our program. Finally, thirdly, the financing of small and medium enterprises, which will play a catalytic role. We also remain committed to the energy distribution obligations. For this purpose, an investment program to improve the power grid is envisaged. If your government makes a positive decision, then these programs can be implemented.

Mr. President, you also noted the Southern Gas Corridor. I congratulate you on the completion of the main stages of this project. The Asian Development Bank will continue to provide financial assistance with the goal of fully completing this project this year.

Speaking next was Director General for Central and West Asia Werner Liepach, who said: “Thank you Mr President. I am delighted to be here. With your permission, I will remind you that we met in 2018. At that time, you suggested that we apply high-tech irrigation technology on farmlands. You noted the contribution of the Asian Development Bank to the work carried out in the Nakhchivan Autonomous Republic. Based on this, we started preparing a project for the development of irrigation systems in Nakhchivan. In January this year, a grant of $1.2 million was allocated to prepare a feasibility study of irrigation systems. In May, we submitted this document to the State Commission on Water Resources established by your order in April 2020. This project involves the use of geo-membrane technologies at water utilities, the use of a geographic information system when choosing the direction of a canal, the creation of control installations and a database, including the use of the SCADA system. In addition, water productivity and system performance testing will be conducted through external control and satellite surveillance. All this work is aimed at reducing salinity and increasing productivity in agriculture.”

Werner Liepach also spoke about the measures being taken to expand cooperation with Azerbaijan in the vocational education system. He noted that a program proposed in February this year in relation to the development of vocational education is aimed at sectors selected in terms of adaptation to the Fourth Industrial Revolution and envisages the development of professional skills. This also coincides with the idea of creating a regional center of the Fourth Industrial Revolution in Baku on the basis of agreement reached in Davos. He then touched upon a project to regulate financial issues for small and medium-sized enterprises and said that the government could prepare a financing portfolio at the initial stage to stimulate small companies and improve their access to finance. Werner Liepach emphasized the possibility of allocating funds to the government for this purpose and forming this loan portfolio in local currency, i.e. in manats.

President Ilham Aliyev: Thank you! All the issues raised here are of great importance, and I will comment on some of them. I am glad that we are successfully moving forward on issues related to vocational education. For us, this is one of the priority issues. We have already established contacts with some countries and implemented several projects. When constructing buildings or purchasing equipment in Azerbaijan, we invested in the entire infrastructure and they brought the technologies. Therefore, when we are going through active industrial development, the training of good specialists is of great importance. I can give you one of the indicators of this year. Despite a very small increase in the gross domestic product in the first four months, 0.2 percent, growth in the non-oil industry in our country exceeded 16 percent over the same four months. This shows that our efforts to invest in infrastructure that gives impetus to the development of industrialization, diversification and industry are indeed producing good results. Therefore, I am sure that the rapid growth of the non-energy sector will be continued and we will need good specialists capable of doing this work. Therefore, I fully support the fact that we are engaged in vocational education. In addition, your help to the private sector is also very useful as you provide support to small and medium-sized enterprises in the national currency. As you know, our borrowing strategy is very conservative, and this will allow us the opportunity to borrow in our own national currency.

As far as issues related to irrigation are concerned, I appreciate your response to my appeal. I have been informed that the irrigation project in Nakhchivan is already very close to being approved. I am told that the total loan amount will be approximately $100 million. I believe that this will greatly benefit the development of agriculture in Nakhchivan. Through the state investment program, we annually invest in the development of the irrigation sector in Nakhchivan. However, of course, additional funds coupled with the experience of your specialists will be very useful. In addition, I would like you to consider our irrigation plans throughout the country. We are currently assessing the situation and see that we are experiencing huge water losses. In some cases, due to outdated infrastructure and an inefficient water management system, we lose 40-50 percent of water. Therefore, a special government commission has been set up. It is led by the deputy prime minister and also includes different ministers and other representatives. They will evaluate our entire water potential and determine priorities: what needs to be done and what investments to be made. Therefore, I want to ask you to consider this project. I hope that in a few months we will have the first results from this commission. We can begin to identify measures that will result in the adoption of a state program to develop irrigation and ensure its greater efficiency. Therefore, we will be happy to work with you on this issue in terms of technical and financial support.

Another issue I would like to raise today - and have already mentioned it - is related to energy efficiency. We are currently doing this work in two companies - AzerEnergy and AzerIshig. Thanks to certain investment made this year and in 2019, AzerEnergy managed to increase the productivity of existing power plants by at least 600 megawatts, and this process continues. Our Mingachevir power station, the largest in the Caucasus, has been completely overhauled. It will reopen after restoration perhaps in a month or two. In addition, we are currently working hard on renewable energy. In January this year, two preliminary agreements were signed with two large companies operating in this area. The total energy production will be 400 megawatts. Investments will fully come from abroad and there will be two power plants - solar and wind. Given that we have enough solar and wind sources, we have plans on the development of this sector. Therefore, I ask you to consider this option.

As you correctly noted, our relations with the Davos World Economic Forum today have entered a new stage. In January, Mr Berge Brenda and I signed a document in Davos on the creation of a regional hub of the Fourth Industrial Revolution in Azerbaijan. I believe that this is an example of a high appreciation of our efforts towards industrial development. We are ready to cooperate with you in the development of a strong platform not only for Azerbaijan, but also for the region, so that the existing infrastructure, communications and geographical location of Azerbaijan can be used to create great opportunities.

Another issue I would like to raise is that we already worked together on a railway project. However, we are currently in the process of rebuilding our railway in the North-South direction. Azerbaijan has already invested heavily in this corridor, which has great potential. We are already receiving goods coming from the north, from Russia, and transported through the territory of Azerbaijan in the western and southern directions. However, the quality of our railway from the border with Iran to the border with Russia is not very good. Therefore, in order to increase the speed of train traffic, we have already invested some funds and plan to implement this, as it may happen that our existing infrastructure will not be sufficient to handle all the cargo. Today, traffic jams are already observed on our border with Russia, because growing exports from Azerbaijan and Iran no longer allows them to be transported by trucks. Therefore, we need a modern railway system which will become part of the North-South corridor. I would like to ask you to consider this project. In the course of further contacts, you may be provided with more detailed information about the work done and our plans.

Masatsugu Asakawa: Thank you very much, Mr President. I am very glad that we have the same opinion on the form in which the Asian Development Bank can contribute to the sustainable development of Azerbaijan through irrigation projects, vocational education and financing of small and medium-sized enterprises. Mr President, you also noted renewable energy. We would like to make a great contribution to this area. You also talked about restoring the railway system. We will think about what contribution the Asian Development Bank can make and will get back to you on that shortly.

Werner Liepach: In short, based on previous experience, we can start new work. I think that my colleagues would be very happy to work with you to implement this agenda. Thank you!

President Ilham Aliyev: Very good!

Masatsugu Asakawa: We are very grateful for the very useful discussion related to the situation in Azerbaijan. As soon as the bans are removed, we want to visit Azerbaijan as soon as possible at your convenience.

President Ilham Aliyev: Thank you very much, Mr President. Thank you for the opportunity to discuss these important issues with you. Mr President and participants, I am sure that immediately after the pandemic we will be honored to receive you in Azerbaijan. I invite you and also urge you to address these issues. Our teams will continue to work on the issues discussed today. Thank you very much!

Masatsugu Asakawa: Thank you!