Davos, January 22, AZERTAC

A session on “Advancing the Belt and Road Initiative: China`s Trillion Dollar Vision” has been held in Davos as part of the World Economic Forum.

President of the Republic of Azerbaijan Ilham Aliyev and first lady Mehriban Aliyeva attended the session.

President Ilham Aliyev had a conversation with Founder and Executive Chairman of the World Economic Forum Klaus Schwab.

Session facilitator: Let's begin with you, Mr. President. What does the "One Belt, One Way" initiative mean for a neighboring country such as Azerbaijan? I am aware that you see economic activity of your country not only in the oil and gas sector, but also in the creation of infrastructure.

President Ilham Aliyev: Yes, you are absolutely right. Creating a modern infrastructure is one of the main goals of our government. I believe that we did the right thing by taking advantage of our geographical location and investing mainly in infrastructure, i.e. our domestic infrastructure and the infrastructure that will allow Azerbaijan the opportunity to turn into one of the international hubs. We are investing in infrastructure inside the country to build roads, highways, airports, for gasification and power generation. We have also invested in transport infrastructure. This will enable us to transport cargoes from the East to the West, from the North to the South and from the South to the North.

Azerbaijan is an active member of the East-West transport corridor initiative. Of course, we support the "One Belt, One Way" initiative of the Government of China. Azerbaijan is creating an opportunity for countries to its north and south to join this project. We are already seeing this. Azerbaijan is the only country participating in the East-West and North-South transport corridors. The modernization of our railway systems, the construction of the largest seaport on the Caspian coast with a cargo handling capacity of about 25 million tons, and the construction of the Baku-Tbilisi-Kars railway linking us to Turkey and Europe by creating the missing link between Europe and Asia opens up good opportunities for those interested in using our infrastructure. We are spending money to create a good tariff policy. The volume of freight traffic is also growing. Ten times more cargo than in the previous year was transported along the North-South corridor last year alone.

Facilitator: I must admit that I have already interviewed Mr. President and he remembers all the numbers. We are currently analyzing only a small part of these figures. Mr. President, let's talk about the debt, because you have repeatedly faced this issue. If I remember correctly, you have had to repeatedly answer people's questions about debt over the course of 10 years. What can you say about this?

President Ilham Aliyev: As for the infrastructure, we financed it mainly from the state budget. I believe that we have managed to correctly channel our revenues from the sale of oil and gas into the infrastructure, and we can be proud of that now. According to the Davos World Economic Forum, Azerbaijan ranks 34th in the world for the quality of roads. We did this using the funds fetched from the sale of oil and gas. Then, of course, this contributed to the creation of a business environment because if you have modern infrastructure, gasification, electricity, good incomes and highways, then it is easier for businesses to invest in your country. We have done work in this direction. According to the latest Doing Business report of the World Bank, Azerbaijan is in 25th place in the world, having improved on its previous position by a record of 32 steps. In this program of the World Bank, we are among the world's top 10 reformist states.

Facilitator: With your permission, I am aware that you can mention some excellent results. However, the process leading to these results is not always easy. This is why I asked you about the debt because you, like many others, were criticized for accumulating debts as a result of this infrastructure. So in your opinion, what are the investments leading to the accumulation of debts and how can this question be resolved?

President Ilham Aliyev: Over the years, our strategy has been to spend less than we earn. It would be nice if this difference was greater. This is why we did not accumulate debts. As for our domestic debt, it is very low. Our external debt accounts for only 19 percent of the gross domestic product. We have a strategy to reduce it to 10 percent. Therefore, as I have already noted, all infrastructure projects implemented in Azerbaijan, i.e. as I said, the projects linking countries to each other, were implemented without borrowing. Twenty years ago, when we were not very developed and were rather poor, we had to borrow. We are grateful to the financial institutions that lent us money. Today we are lenders ourselves. At present, Azerbaijan has an investment strategy not only for other countries, but also for infrastructure and the real economy. At the same time, we provide funds for infrastructure projects being implemented in other countries. Our debt has nothing to do with infrastructure. By investing in infrastructure, we did not expect our funds to pay off immediately. We understood that there would be no direct return of the money. You cannot make money on the construction of a road but you will earn on taxes paid by those using this road to deliver their goods to the market. Or we will earn the funds paid by those who use our territory as a transit from East to West and in the opposite direction. And this means a return on investment. At the same time, I believe that the money we have spent on infrastructure in the country and our regional cooperation may pay off in 10 years.

Facilitator: And yet not every country is as happy as Azerbaijan. You have ample resources of oil and gas. I once discovered this as a surprise. Is this a cause for concern in other countries building infrastructure and participating in this platform? What is the way to balance this situation?

President Ilham Aliyev: Of course, I think that this is a concern. If we did not have money to invest, we would have to borrow it from foreign investors. I can give you an example related to the railway project we completed a year and a half ago. I am talking about a railway link between Azerbaijan and Turkey which connects the East with the West. For several years, we were looking for funding from external sources.

Facilitator: When was that?

President Ilham Aliyev: It was at the beginning of the 2000s, 2004–2005. Our applications were rejected because this investment, as you noted, would not have paid off even in the medium term. Of course, the countries that do not have financial resources find themselves in a difficult situation. Those who do not have financial resources have more urgent issues to address, such as unemployment and investment in the real sector of the economy to generate income. So infrastructure projects are not a priority for these countries. Therefore, I believe that financial institutions should pay more attention to this issue. I mean international financial institutions in particular. They should provide assistance in investing in the infrastructure of countries that will create opportunities for job creation within 10 years.

Then the head of state answered questions from the audience.

Lourdis Cardsanella from Cornell University: Investments from countries of the "One Belt, One Way" initiative have increased by 50 percent over the past five years. Given the constraints faced by Chinese companies in the United States and Europe, will there be any further growth?

Representative of the largest energy company in China and the world: I have a question for His Excellency President Aliyev. I know that you are paying attention to transport infrastructure. But what can you say about the energy infrastructure, including the provision of electricity? Are there opportunities for our companies in this area? Thank you very much.

Representative of Swiss Parliament Fred Bigley: To what extent is the "One Belt, One Way" initiative an infrastructure project and to what extent is it a project of consolidating foreign relations?

Employee of "Omata Group" operating in Thailand: We have spoken a lot about the tensions between China and the United States. Will the "One Belt, One Way" initiative slow down or speed up these tensions? Thank you.

President Ilham Aliyev: We have invested heavily in the generation of electricity. We have now completely eliminated the shortage, have become an exporter of electricity and have earned tens of millions of dollars. We are open to investment. We also invite companies to become contractors. This year we will commission a new power plant with a capacity of 400 megawatts. Of course, we are currently working on efficiency and loss reduction. From a practical point of view, if you come to our country as investors, contractors or in any other capacity, I will be very happy.

I would also like to touch on the question of the representative of the Swiss Parliament. I am absolutely convinced that any transport project connecting countries has a geopolitical basis. These projects have a positive impact on the geopolitical situation, on stability, on predictability, because they create interdependence. Without our neighbors, we will not be able to become a transit country. Our neighbors cannot become transit countries without their neighbors. So this is a chain of countries, as I have already said, and we are located on the road from East to West and from North to South. In this way, we connect continents, countries and create a more predictable future.