Baku, June 17, AZERTAC
On the initiative of the World Bank, a video conference has been held between President of the Republic of Azerbaijan Ilham Aliyev, the World Bank’s newly appointed Vice President for Europe and Central Asia Anna Bjerde, Regional Director for the South Caucasus Sebastian Molineus and other representatives of the Bank.
Greeting the participants of the video conference, President Ilham Aliyev said:
- It is great to see you!
Anna Bjerde: Thank you! Likewise. Good afternoon!
President Ilham Aliyev: Good afternoon. Good morning, it is a morning for you.
Anna Bjerde: Yes.
President Ilham Aliyev: I am glad that we have the opportunity to talk about plans for the future and, possibly, consider the work already done. We are very pleased with the level of cooperation with the World Bank. We are very grateful to the World Bank for its continued support for Azerbaijan and the important projects we are implementing with your financial support. Special thanks for the support you provided for TANAP. As you are probably aware, the implementation of the Southern Gas Corridor project is coming to an end. We hope to complete all construction work within a few months. Of course, the World Bank's contribution to the implementation of TANAP, which is one of the most important components of the Southern Gas Corridor, is highly appreciated. This, of course, was a good signal of support for this important project by other banks as well.
I have also reviewed the already completed projects. They cover many areas. We are very grateful for the important contribution. In total, more than $3.5 billion has been allocated for the project. Of course, we have even more plans for the future – plans related to the modernization of the country, the development of the non-energy sector of the economy and, of course, the continuation of investments in infrastructure. Thus, I am sure we will have a very positive cooperation in the future.
I would also like to express special gratitude to the World Bank for its prompt response to my appeal to support us in connection with the self-employment program. This appeal was submitted in January 2019 and in less than a year we have already completed all the preparatory work. I am told informed that the World Bank’s participation in the self-employment program would be approximately in the amount of $100 million. Thank you for that. This year, we plan to cover about 15,000 people with this program, and additional funding from the World Bank is, of course, highly appreciated and welcomed.
Anna Bjerde: Thank you, Your Excellency! First of all, thank you very much for organizing this meeting. I am very pleased to meet you. I would very much like to meet with you in Azerbaijan. However, given what is happening in the world, we will have to hold meetings in this format for the time being. Nevertheless, I do hope to meet with you in Azerbaijan in the near future. I would also like to thank the team we are working with in many sectors for its partnership. I am glad to see how strong the bonds are. I am very grateful to you for your trust in the World Bank as a partner. Ever since taking office, I have been looking forward to a continuation of this path. Thank you again for this.
On behalf of the World Bank, I would also like to express my appreciation for the contribution of Azerbaijan to the International Development Association. This step is very much appreciated. We really appreciate your support for our fund for the poorest countries. I believe that this will take our ties forward even more. I would really like to thank you for this. I am very glad to be here. I am returning to the region after an almost 5-year hiatus. Going back is great. I spent a significant part of my career in the World Bank in this region. This region is very close to me. Last time I was in the region, I had the opportunity to directly oversee a program in Azerbaijan for almost four months. During this period, a partnership framework with your country was also approved. I was very pleased to see the implementation of this partnership framework in recent years. I participated in the initial stages of the TANAP project, so I am well acquainted with it. I want to once again congratulate you on this project. This is truly a flagship project demonstrating that we can support something like this, as well as how well we have mastered both credit operations and collaboration. I want to once again express my gratitude for that. I look forward to continuing the jointly achieved progress and developing it further. I should also note that while reading the information related to Azerbaijan, I was really very glad to see the country's rating in the Doing Business report. I want to congratulate you on this. I think that this is further proof of change. As you noted, Doing Business is a good indicator of the development and diversification of your economy.
The newly appointed Vice President for Europe and Central Asia Anna Bjerde noted that “we live in a period influenced by the coronavirus.” She touched upon the self-employment project being implemented in Azerbaijan and further cooperation in the field of agriculture.
World Bank Country Manager for Azerbaijan Naveed Hassan Naqvi noted with satisfaction that he had been working in Azerbaijan for four years. He emphasized that he was leaving the country due to the expiration of his term of office with abundant impressions and thanked the head of state for supporting the World Bank in Azerbaijan.
President Ilham Aliyev: Thank you, Naveed. Of course, we are sorry that you are leaving us. At the same time, we see how quickly time flies. I remember our first meeting when you just started working in Azerbaijan. Four years have passed. We understand that World Bank staff often change their place of residence and work. But I want to say to you “Thank you very much” because for all the time you have been with us, you contributed a great deal to our cooperation and the implementation of important projects. I wish you success in your future endeavors. I hope to see you in Baku again – as our guest or maybe in another capacity. Thank you for your cooperation.
World Bank newly appointed Country Manager for Azerbaijan Sarah Michael said:
- Hello, Your Excellency. It is a great honor for me to be appointed to this position. I look forward to working with your government and continuing to deepen this partnership. I used to work in Azerbaijan and in the region. Your country is already close to my heart. Based on this experience, I hope that we will keep moving forward.
President Ilham Aliyev: Thank you! As soon as the pandemic is over, we will be waiting for you. We will be happy to meet with you. I think it is very good that you are not a stranger to us. You are familiar with our country and know everything we do. At present, at the current stage of economic reforms, your activity in Azerbaijan will help us plan our cooperation in an appropriate manner and focus on areas that generate growth and employment. You are aware of our plans related to diversification and industrial development. Therefore, I am sure that you will be very busy in Baku.
I want to once again thank the World Bank for everything it has done for Azerbaijan. Thank you for your kind words about our promotion in the Doing Business ranking. As you know, our position in Doing Business was some kind of motivation to focus on very successful areas. Therefore, a special commission was set up. It included members of the government, my administration and representatives of relevant ministries. We have paid special attention to the sectors lagging behind. We managed to achieve substantial progress in a short period of time. Of course, this improves the business environment in the country and allows us to get more profit from investments. Naturally, we are interested in investing in the non-energy sector. As for the issues that are currently a priority for us, in general I would name two main priorities in the current period of the pandemic. We started the year with very encouraging indicators of economic growth, good economic parameters in all areas. However, the results of five months of this year indicate that our economy shrank by 1.7 percent. This is not much but this is still a decline. However, the encouraging fact is that we have seen growth in agriculture – more than 3 percent. Non-energy industry growth was 14 percent. Therefore, the two main issues we have outlined for the future are: to achieve sustainable economic development based on diversification and second, economic growth should be accompanied by even more jobs, as the population in Azerbaijan is growing. We are already more than 10 million. The population is growing. Therefore, we need more jobs for our people, especially today when given these new technologies, many jobs are no longer in demand in the market. New areas of activity are emerging. However, for these new jobs, our people must have special skills. Therefore, these two main factors are always on our agenda. Among our other joint projects, in addition to self-employment where we already have a program, I would mention another important sector – medical insurance. We were planning to start the program in the country in January. However, in connection with the coronavirus, we had to postpone it until January of next year. However, there are already several cities covered by the program. We have good results. Therefore, I believe that we will continue to work with you until the end of the year in order to structure this system, as this is an innovation for us. It is one thing when it is applied in one, two or three cities, and it is quite another thing when it is applied all over the country.
One of the sectors we are paying serious attention to is related to irrigation and water supply. In order to create a roadmap for our future water management systems, I have established a special government commission led by the deputy prime minister. Many ministers are members of this commission. Unfortunately, the service life of a significant part of the infrastructure has expired. In some territories of our country, water losses amount to 40 and even 50 percent, and we are talking about a country that already does not have sufficient water resources. In particular, last year we had a severe drought. It is still there this year. You know, such generosity in water use is unacceptable. Therefore, the government is working on it. We plan to take initial steps within one or two months. Therefore, I would like to invite the World Bank to partnership in terms of financing, monitoring and consultation because you have accumulated vast experience in this area. Therefore, I would name this area among the issues that will be included on our agenda.
You have also mentioned agriculture. We are already interacting with you in this area. We need to increase the competitiveness of agriculture and have an idea of how to move forward because we shouldn’t provide our own resources only for our own needs and should also need more export potential. To do this, we need to access more export markets and think about new markets. All this boils down to the transport and logistical infrastructure, which is in the last rehabilitation stage. Thanks to the World Bank, we have implemented very important projects in this area. Currently, we are mainly working on the North-South transport corridor, because East-West has already been implemented. Rehabilitation of the railway network from the capital to the northern and southern borders... There is a railway but new volumes of cargo require modernization. So this project is also on our agenda.
I would also like to express my gratitude to you for supporting our judicial system. I personally attended the opening ceremony of new courthouses. These are not only new buildings, but also new systems and technologies. All these projects have been implemented with the support of the World Bank. Given the pandemic situation, we naturally need a country strategy to manage the crisis in the post-pandemic period, because some sectors of our economy have been seriously affected, in particular, the tourism sector where we had good results and achieved growth over the past four years. Azerbaijan has truly turned into an interesting travel destination on the tourist map. So we need to work hard to revitalize this sector after the pandemic and make Azerbaijan attractive to foreign tourists again because tourism is one of the sectors that generate hard currency. We need more hard currency, which will come from non-oil and non-gas exports. Therefore, I believe that agriculture, tourism and technology will become the main sectors we will focus our attention on.
Speaking next was Chairman of the Central Bank Elman Rustamov, who said:
- Thank you, Mr President. Dear Madam Vice President, dear colleagues. I would like to point to the history of many years of fruitful cooperation between the World Bank and Azerbaijan. This cooperation has gained momentum over the past 15-17 years, and during this time the economy of Azerbaijan has tripled. The problem of poverty has been overcome.
Mr President, with your permission I want to say a few words about what anti-crisis measures will be taken. As you know, in connection with the current crisis, Azerbaijan has faced challenges, in particular, challenges related to the falling prices of the main exported products. However, we have managed to maintain macroeconomic stability and the inflation rate is at about 3 percent. The national currency is stable and there is no pressure on the exchange rate. According to forecasts, by the end of this year there will be a slight recession. However, the situation in the financial sector is very stable. We have also managed to withdraw some unstable banks from the system. In addition, Mr. President, the law on deposit insurance has been extended and all steps will be taken to maintain stability in the financial sector.
Elman Rustamov focused on potential areas for cooperation with the World Bank. He noted that negotiations had begun with the World Bank last year to prepare a new national strategy for economic development. We are currently working on the basis of the country's partnership strategies covering the 2016-2020 period, and their term has been extended by a year taking into account the current situation. The chairman of the Central Bank also expressed confidence that the work on the financial sector appraisal program would be useful for both parties.
Addressing the event, Assistant to the President Natig Amirov said:
- Thank you very much, Mr President. As you know, the Azerbaijani economy has suffered a triple fiscal shock in the aftermath of the global COVID-19 pandemic. Firstly, as a result of the decline in global trade and growth, the oil price fell sharply. Secondly, after the fall in the oil price before the quarantine associated with the pandemic, there was a decrease in revenue, as well as economic and investment activities. Thirdly, due to the pandemic, expenditure on supporting the healthcare, social and financial sectors have increased. Despite this negative situation, due to the vigorous activity of the tax and customs authorities, budget execution in the first five months of this year was positive. The budget surplus amounted to 1.1 billion manats.
Natig Amirov noted that budget policy in the future should meet the main goal of seeking the optimal balance between the provision of support for macroeconomic stability through social protection and jobs and maintaining a comfortable level of reserves in the oil fund. He emphasized the relevance of continuing cooperation with the World Bank in order to prepare rules for this and find the optimal balance.
Anna Bjerde congratulated Azerbaijan on good macroeconomic and fiscal indicators. She said that Azerbaijan had taken appropriate measures to minimize the damage from the coronavirus, and gave a high assessment to that. The Vice President expressed the Bank’s readiness for cooperation with the country on the strategy and program of socioeconomic development. Anna Bjerde emphasized the importance of paying more attention to the diversification of the economy and the social sector, noting that Azerbaijan was carrying out consistent work in this direction. She expressed the readiness of the World Bank to cooperate with Azerbaijan also in the field of health insurance, water management, agriculture, food security, tourism, technology and in other areas.
Speaking next was the Bank’s Regional Director for the South Caucasus Sebastian Molineus, who said:
- Your Excellency Mr President, it is very nice to see you again. This is the third opportunity to meet with you, and the high-level strategic directions and recommendations you have given at all of the previous meetings are an excellent roadmap for our further cooperation.
I want to note our long-standing partnership again. This has been repeatedly emphasized. Since the first years of independence, including 2008 and 2011 when the world was gripped by an economic crisis, we have been close to Azerbaijan. We intend to remain your strong partner during the COVID-19 pandemic. Mr. President, I want you to know that we are with you with all our knowledge and financial resources, and we are ready to provide any support you need.
I want to express my comments related to the recommendations you have made here. The first is regarding strategy. We have huge opportunities related to diversification and development, and you also noted this. I am talking about the transition from a model focused on public investment to a model for the development of the private sector. This may allow Azerbaijan the opportunity to take up new positions. We have begun preliminary discussions with your government, and, as our Vice President noted, drafting this in the form of an agreement will allow us to do the work in a short time.
In my opinion, the current global crisis may give some kind of an impetus to development. Thus, social satisfaction in society and people's faith in this will be secured. Economic growth and employment issues are extremely important for any strategy, and I appreciate it. Over the years, we have been actively working on both topics.
The World Bank and I personally have long been working on job creation. Having once again analyzed the projects the World Bank has implemented in the field of employment in 20 years, we have identified three to four important factors that can contribute to the creation of permanent jobs in the private sector. First, it is the availability of financial resources, i.e. the presence of a financial sector that supports the development agenda. Second, access to markets. The tensions that exist in the supply chain at the global level today can allow Azerbaijan the opportunity to take a new position and play a key role by establishing a connection between Europe and Asia.
Sebastian Molineus also spoke about the intention to continue cooperation with Azerbaijan in the widespread use of modern technologies in order to increase the productive capacity and efficiency of large and small companies, to assist the process of creating a world-class healthcare system in the country, strong water resources management, and to strengthen the infrastructure and facilitate rational use of water resources. He noted that the recommendations of President Ilham Aliyev on focusing on the development of tourism and agriculture would be taken into account.
President Ilham Aliyev: Thank you for what you said about the work done and our plans for the future. Azerbaijan is showing positive results during the pandemic. I believe that this has become possible thanks to a new stage of very serious reforms launched recently. The main objective here is to reduce the shadow economy and informal employment. Compulsory health insurance, while offering high-level health services, will also help us in the fight against informal employment. In other words, those who are still working in the shadows will have to switch to a white economy.
This is an important achievement. I can provide a few figures. Last year, our tax and customs authorities raised over $600 million in excess of the forecast, mainly due to the reduction of the shadow economy, and this process continues. In the first five months of this year, tax and customs authorities raised over 400 million manats above the forecast. This happened when trade relations were hit hard.
As already mentioned, our national currency is stable, which, in my opinion, is also one of the important factors of macroeconomic stability. We understand that without macroeconomic stability, all our efforts will be undermined. To support the unemployed, low-income people and those working in areas affected by the pandemic, for example, tourism and other sectors, we initiated a $2 billion social and economic package. It covers about 600,000 representatives of small businesses alone.
Thus, we have allocated these funds to provide the necessary support to people affected by the pandemic. As already noted, transformations are also taking place in the banking system, as licenses of some banks have been revoked. The government provided insurance for all deposits.
I would also like to emphasize that during the pandemic, we were very active at the global level. We have provided humanitarian assistance to 29 countries. In addition, we are currently chairing the Non-Aligned Movement, which brings together 120 countries, and hosted an online summit of this organization. This event was very successful. We have provided $10 million in financial assistance to the World Health Organization. That was part of our international commitment.
With regard to the formation of the strategy, we welcome the participation of the World Bank. I think that this will help us with planning the future, so that, having outlined the goals, we will achieve their implementation. In short, the strategy should be very specific in accordance with the content, and thanks to it we need to achieve the goals of sustainable development and reduce dependence on the energy sector.
Thus, after the commissioning of the Southern Gas Corridor, of course, the energy sector of Azerbaijan will gain even greater potential. The non-energy sector will hardly be able to compete with it, but I believe that the private sector will become the main driving force of our economy. From this point of view, I fully share the views of representatives of the World Bank.
As for the healthcare sector, I believe that the investments we have made in the health infrastructure over the past 16 years have enabled us to fight the coronavirus because our healthcare system is capable of treating more people. Unfortunately, after the lifting of strict restrictions in our country, there has been an increase in the number of infected people. However, our healthcare system is coping with this. I hope that these opportunities will also be available in the future too. In short, the healthcare system demonstrates good qualities. However, of course, we need serious improvement and will definitely work on that.
Returning to the matters I have mentioned regarding water projects, I want to say that I absolutely agree with the term “water security” used by Mr. Molineus. This is truly a security issue for us. I absolutely agree that we need to work on the institutional framework in order to form an appropriate hierarchy for companies and state organizations responsible for this area. We will make serious investments in infrastructure. This is reflected in our state investment program for the current year. We hope that together with the World Bank we can work more extensively in the field of infrastructure and economy. This refers to achieving savings through the use of new technologies and good governance.
There is another issue I would like to touch upon. It is always on our agenda. This issue is related to environmental protection. This applies especially to Baku and the Absheron Peninsula. The production of oil and gas in these places for centuries has created serious difficulties for us. We performed major cleaning operations, but we may need more support. This is particularly true of support that can be provided in the form of technology and expertise. Therefore, I believe that one of the areas of our future cooperation may be related to the implementation of environmental projects on oil-contaminated sites in Absheron and Baku.
Anna Bjerde thanked President Ilham Aliyev for creating the opportunity for a useful discussion during the meeting, which is taking place in difficult times. She noted that the World Bank would be very glad to continue to support the establishment of contacts and acceleration of reforms in Azerbaijan.
President Ilham Aliyev: Thank you, Madam Vice President. Thank you, dear guests. I appreciate this initiative. I am very pleased with the discussion. I believe that we have covered all important areas. We will begin to implement the ideas around which we exchanged views today. I hope that our cooperation will be as successful in the future as it was in the past. Of course, time passes and new challenges and priorities appear. However, I believe that through joint efforts all the issues we have discussed can be implemented. Thank you again for the continued support of Azerbaijan and these opportunities. I look forward to seeing you in Baku as soon as the pandemic is over with.
Anna Bjerde: Thank you.
President Ilham Aliyev: Thank you. I wish you success, thank you!
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