Baku, May 4, AZERTAC

An official opening ceremony of the 48th Annual Meeting of the Board of Governors of the Asian Development Bank has been held in Baku.

President of the Republic of Azerbaijan Ilham Aliyev and his wife Mehriban Aliyeva attended the event.

The head of state addressed the meeting.

Speech by President Ilham Aliyev:

Dear President Nakao,

Ladies and gentlemen, dear guests,

First of all welcome to Azerbaijan. It is a big honor and privilege for us to host the annual meeting of the Board of Governors of the Asian development Bank. The meeting is taking place in the newly-built Baku Congress Center inauguration of which took place less than a week ago. This is the biggest venue in Baku. The construction of the center started a year ago. The speed of the construction is equal to speed of development of Azerbaijan. And I am sure that with the support of the Asian Development Bank our country will achieve even bigger results.

Azerbaijan joined ADB in 1999. Since that time we have enjoyed a very fruitful cooperation and we are very grateful to ADB for continuous support of our efforts to modernize our economy, to provide better living standards for our people. And I am sure that our fruitful cooperation will continue because a lot needs to be done in Azerbaijan in the area of reforms, improvement of infrastructure and investment in the real sector of our economy.

So far more than 1.5 billion dollars have been allocated from the Asian Development Bank to Azerbaijan and, as we said, these projects have served the benefit of our people, economic development and sustainable development of Azerbaijan.

Majority of our guests visit us for the first time. And I think it is a good opportunity to know Azerbaijan better because as an independent country it exists only something more than 20 years on the world map. So Azerbaijan is famous for its ancient history, culture, traditions and, I am sure, the guests will find time to visit our historic places to know more about Azerbaijan, our traditions, our people, our past and the present of our country.

Azerbaijan’s geographical location definitely influenced the development of our nation. Situated just between East and West, between Asia and Europe, Azerbaijan has enjoyed for centuries a multicultural society. One of our biggest assets is that Azerbaijan always was an area of cooperation, area of mutual understanding. We are proud of our history, proud of our multicultural history and we are strongly committed to the development of Azerbaijan as a modern, tolerant country, where representatives of all the nationalities and religions live in peace and dignity.

A recently created international center of multiculturalism is our contribution to the development of positive tendencies in the world so that the world is safe, so that people can feel themselves more protected, so that we jointly address the issues of racial discrimination, religious hatred. We need to strengthen these tendencies.

Due to our efforts Azerbaijan is now known in the world as one of the centers of multiculturalism. Cultural diversity of our nation is one of the biggest assets for us. And today we are proud to host the guests from so many countries. I am sure that our fruitful cooperation based on mutual trust, mutual respect and mutual interest will successfully continue.

As an independent country Azerbaijan emerged as a result of the collapse of the Soviet Union. Though, in the beginning of the 20th century after the collapse of the Russian empire Azerbaijan became independent for two years. And the first democratic republic in the Muslim world was created in Azerbaijan in 1918. But independence was taken from us by invasion and we lost independence for 70 years, and only in 1991 Azerbaijan restored its independence.

Those were difficult times, the times of big expectations because we had to build a country, we had to build a strong economy. But unfortunately Azerbaijan at that time was in a very difficult situation. Internal tensions, civil war, Armenian aggression against Azerbaijan and economic difficulties were the biggest challenges for us. Economy was not only in stagnation because of the recession, inflation was more than 1000 percent, and the prospects for economic and political development were not very clear.

Reforms, political and economic reforms started in mid 1990s allowed us to overcome difficulties and develop Azerbaijan, and it is today a modern, democratic country with very good prospects for the future.

We started to implement political and economic reforms but at the same time we had to address two important issues. First, state-building, because we didn’t have a state before, and second, transformation of political and economic system. Political system was a system which existed in the Soviet Union and economy was based on the principles of planned economy.

Macro-economy did not exist. So we had these challenges - state-building process, transformation of political system, transformation of our economy. I think that in a very short period of time, in less than 20 years, starting from mid-90s until today we made substantial progress.

Azerbaijan is strongly committed to its democratic development. All the freedoms are fully provided in Azerbaijan - freedom of political activity, freedom of media, freedom of assembly, religious freedom, we have free Internet. The number of Internet users is growing day by day, and now it is more than 70 percent. Our government is actively investing in the modern technologies, ICT. We are now bringing broadband Internet to every village of Azerbaijan.

This shows our intentions. We clearly realize that without a political transformation, without modern system of governance we will not be able to achieve success. Therefore, political, economic reforms are implemented in parallel. We started the policy of attracting foreign investments because we didn’t have financial resources and that was how Azerbaijan became known again in the end of the 20th century as a country famous for oil and gas.

I’d like to say that the first oil in the world was produced in Azerbaijan in the well which is situated in Baku in the second part of the 19th century. The first oil from offshore fields was also produced in the Caspian Sea - in the Azerbaijani sector of the Caspian Sea in the middle of the 20th century. Therefore, attracting investments of major international energy companies to our oil industry was a way for us to develop. But we say that for us this is the means to develop, it should not be our ultimate target. We need to use our reserves in order to transform the country, to modernize, create better conditions for our people.

We had to implement these reforms in a situation when we were attacked by neighboring Armenia, which launched aggression against Azerbaijan. As a result of that aggression now almost 20 percent of territory of Azerbaijan is under occupation. One million refugees and IDPs still suffer from Armenian aggression and our people were a subject of ethnic cleansing. Armenian army and separatist forces committed ethnic cleansing and genocide in Azerbaijan. Unfortunately, despite that negotiations are taking place for more than 20 years, we don’t have results. This is a brutal violation of international law. This is absolutely unacceptable in the 21st century that one country occupies an integral part and real part of another country and does not pay the price for that.

This also brings us to the understanding that sometimes international law is not working. In our case the United Nations Security Council, the highest international law body of the world, adopted four resolutions demanding immediate and unconditional withdrawal of Armenian forces from the territory of Azerbaijan. These resolutions have not been implemented for more than 20 years.

This is the biggest injustice and biggest violation of international law. This once again shows that international law sometimes works selectively depending on political preferences of countries which have influence on world affairs. We had this humanitarian catastrophe, which we also had to address. Azerbaijan had one of the highest number of refugees per capita in the world. One million out of 9.6 million population.

So we had to take care of these people, we had to develop economy and attract investments. But we needed stability, we needed peace.

Therefore, we now have a ceasefire with Armenia and we are trying to resolve the issue on the basis of international law and territorial integrity of Azerbaijan. Territorial integrity is the fundamental principle of international law. It cannot be changed by force, it cannot be changed without an agreement of the government and the people of the country.

Therefore, all the conflicts in the world must be based and resolved on the same basis - international law, territorial integrity - without any exception. We had to develop in this situation and we realized that only if we are strong, we can achieve our goals.

Economic development, political development, investments - all this allowed us to achieve what we planned. And if we look at the foreign policy of Azerbaijan, it is very active. It is aimed at winning more friends, it is very open. Azerbaijan is an active member of the international community, member of different international organizations. For instance, Azerbaijan is a member of the Council of Europe, at the same time, the Islamic Cooperation Organization. We also relevantly recently joined Non-Alignment Movement.

We have a very positive reputation in the world. Several years ago Azerbaijan was elected as a non-permanent member of the United Nations Security Council with the support of 155 countries. Absolute majority of the international community supported Azerbaijan, trusted Azerbaijan and voted for us. That was our biggest diplomatic and political achievement.

We are proud of that. At the Security Council, as we declared, we defended justice and international law. We clearly realized that our destiny and our future is in our hands. Therefore, our target was to create a self-sufficient, sustainable economy. We were looking for the means to achieve that. Of course, energy factor was the most obvious. It attracted the most attention of our investments.

Therefore, in 1994, Azerbaijan started its energy strategy, which now resulted in a very active and broad cooperation between our government, foreign companies and our neighbors. We had huge oil and gas reserves, but we needed investments and we needed means to transport these reserves to the broad market. We are not connected with the world oceans, we are landlocked, and therefore we had to build pipelines. Now due to our energy strategy and our commitment we have connected for the first time in the world the Caspian Sea with the Black Sea and with Mediterranean Sea with crude oil pipelines. This was the first step in changing the energy map of the region.

Attractive investments in oil and gas allowed our local companies to get contacts and to get experience. They allowed us to train young generation and prepare the new generation of Azerbaijanis, which already have experience in working in major international energy companies. When we discovered huge gas reserves in the end of 1990s that was also a challenge for us and a big opportunity. Today we know that energy security is primarily based on the natural gas reserves. From this point of view the role which Azerbaijan plays in the region is very important. Azerbaijan was the leading country in this process to initiate the construction of the Southern Gas Corridor which now connects almost 10 countries in the region and in Europe. And the construction already started.

This is the biggest infrastructure project which is now being implemented in Europe. Total investment for the construction of the Southern Gas Corridor and development of our gas fields is planned at the level of 45 billion dollars. Azerbaijan is the leading force in this process. Today gas of Azerbaijan is needed for consumers in different parts of the world. So energy policy, of course, increases the geo-political importance of our country, increases our opportunities. We started to get benefits from oil resources. When we complete the Southern Gas Corridor project in 3-4 years, Azerbaijan for many decades ahead, maybe for hundred years, will be one of the important suppliers of gas to our consumers in Europe, and, of course, geopolitical importance of Azerbaijan will grow, our influence will grow. And as many other countries we also want to have more opportunities in regional affairs.

But all our policies aim at regional cooperation. And we always tried to create a win-win situation. For instance, in energy policy between producers, transitors and consumers. Only in this case these projects can be successful. Also we never use our energy resources as a means of pressure or means of achievement of some unjustified advantages. On the contrary, we are always supporting our partners, our consumers, our transitors so that we create a family of countries united in one goal - to implement a project which will serve to benefit of all of us.

Now energy policy of Azerbaijan plays more and more important role in our region. The projects which we are now implementing are completely changing the energy map of Europe. Diversification of resources and sources is now largely dependent on how successful Azerbaijan is in implementation of the projects. But we were always saying that for us, for our economy the most important is sustainable development. We are always trying to reduce dependence on oil and gas. And the policy of diversification, which we have implemented for many years, already creates big opportunities for further development.

If we look at the structure of our GDP we see that almost 70 percent of GDP is non-oil GDP. But when we look at our export, we see that absolute majority of our export is related to oil and gas, which is natural because it is large volumes and the volumes will grow because with the huge, new volumes of natural gas, which we will start to export in several years, the ratio of energy resources and our export will grow.

Therefore, we are trying to invest and attract investments and create good opportunities for local and foreign investors in non-energy sector. We are very proud that non-energy sector of our economy is growing faster than economy itself. In the first three months of this year non-oil sector grew 7 percent, while GDP growth was 5.3 percent.

Of course, as an oil producing and gas producing country, the radical change of oil prices is a matter of concern. But I have to say that it is also a big challenge for us to be more efficient, to do more for budget consolidation, reduce spending which is not so important, and to concentrate on good governance and management.

Therefore transformation of black gold, as we call oil, into human capital was a state policy of Azerbaijan. Today the economy is much more diversified than ever before and our target is to create sustainable economy where oil factor will not play an important role. It will play a role only in accumulation of more financial reserves, which for us is a matter of economic and legal security and it is a kind of guarantee from unexpected developments on the financial market.

But the main concern and main attention is aimed at non-energy sector of Azerbaijan. I know that during the meetings and seminars which took place these days our representatives already informed the audience about the economic achievements of Azerbaijan. I would like to provide just several figures to remind what has been done in the last 10 years, which were the years of rapid economic development of our country. GDP grew three times, we have a very low foreign debt, it is around 10 percent of our GDP. We enjoyed billions and billions of investments - during the years of independence it is 200 billion dollars. Last year it was 27 billion dollars and we see that it is growing and for us it is also very important that about 70 percent of our investments are local investments. Azerbaijan is still a very attractive country for foreign investors. We managed to create more than a million jobs in a country of something more than 9 million. Therefore, unemployment rate is very low, it is around 5 percent. The biggest achievement, I think, is reduction of poverty which was 50 percent 15 years ago and now is 5 percent. That shows that we managed to avoid so-called Dutch syndrome, one-sided development of economy. We managed to transform black gold into human capital because, as we know, oil sector does not generate a lot of jobs and not in every case its leads to prosperity. In some cases it leads to alienation, fragmentation of society. The rich become richer and the poor become poorer. And it leads to social problems, leads to injustice. Therefore, our main target was that every citizen of the country benefits from this development. And every citizen can see it - in construction, in new schools, hospitals, in living standard, in infrastructure, in development, in jobs.

Therefore, reduction of poverty was one of the main targets for us and also regions of Azerbaijan. We wanted our regions to develop. Therefore, we adopted three regional development programs which created opportunities not only for citizens of Baku, but for most of those who live in the regions. Investment infrastructure is important. We used to import electricity and now we export it. We used to import natural gas and now we export it. With the help of ADB and other financial institutions and our state funds we invested largely in the social infrastructure. More than 500 hospitals and medical centers, more than 3,000 schools were built in the last 10 years, which totally changed the social infrastructure.

We now have to address issues related to ecological protection. Baku always was an industrial city and due to oil Baku actually became the center of Azerbaijan. Before the oil discovery it was one of the destinations on our map. We produced more than half of the world’s oil production in the beginning of the 20th century.

During the Second World War Azerbaijan produced more than 70 percent of the oil produced in the Soviet Union, which played a decisive role in the victory over fascism. But when we became independent what we had? We had inflation and stagnation, we had devastation of oil industry and ecological catastrophe. When the people who haven’t been to Baku for 10 or 15 years come they cannot recognize it because it was dark, in dust and everywhere there were industrial sites which were out of date. But today Baku is a city of vacation, a city of events. We invested largely in public places, invested in the ecological issues. We had to spend a lot to clean those oil spills and to re-cultivate our soil here around Baku and Absheron peninsula. But this is possible only when you are independent, only when you are free, only when you are the owner of your own resources. If Azerbaijan gained independence not in 1991 but in 1971, for example, today we probably would have been one of the richest countries in the world. This is the reality. But in a short period of time, we are trying to catch-up, we are trying to compensate what we lost when we were not free and not independent.

And we clearly understand that without economic independence our political independence will not be full-scale. Therefore, energy security, economic independence and relying on our own resources was the driving force of our development. Of course we are trying to take advantage of other instruments, which we have, particularly our location. Azerbaijan is becoming a transportation hub. We have good location and good infrastructure, we invest largely in transportation infrastructure. Now we are building the biggest sea port in the Caspian with 25 million tons capacity. We have built 7 airports, 5 of them international. The construction of the railway connecting Azerbaijan, Georgia and Turkey very soon will be completed and thus we will connect Europe and Asia by the new Iron Silk Way. This road will cross Azerbaijan. This will be the shortest, the most convenient road for transportation. This will be a route for transportation of goods from Europe to Asia and in the opposite direction that will increase our geopolitical importance and attract additional investments and create a better situation.

What we are planning to do? What are our plans? It is modernization, increasing the quality of public services. We introduced our know-how, which is called ASAN. It is a one stop shop under one roof, which provides over the 30 public services to population within minutes. We will continue the policy of diversification. Information-communication technologies, space industry is developing now in Azerbaijan very successfully. There is great potential in agriculture. We think that agriculture and the export of more energy products will be the driving force for our economy. We need to look for new markets and to get our place there because very soon we will to hundred percent provide ourselves with main agricultural products, and most importantly will be access to international markets. Taking into account that more than 40 percent of our people live in rural areas this also has a social impact.

We will closely watch macroeconomic situation in Azerbaijan. We devaluated our national currency a couple of months ago because we gave it a lot of weight. When we introduced the monetary reform one manat, our national currency, was equal to one dollar but in ten years manat gained weight in front of dollar which was not very natural. In all the neighboring countries national currency was already devaluated so we had to devaluate our national currency to the level of 33-34 percent. But taking into account that most of the daily consumption goods are produced here, it did not impact on the consumer prices. Macro-economic stability, lower rate of inflation will be under control to allow our exporters act freely.

We will continue to accumulate financial resources. Today our financial resources are approximately about 70 percent of our GDP. We will continue to accumulate and, at the same time, spend on the most important areas of infrastructure. We will continue to stimulate private sector and attract investment in the real sector of economy with mechanisms of low interest loans for the private sector. Diversification of our economy as a main priority for us, of course, will be in the center. We will try to keep the foreign debt as low as possible. Today the level 9-11 percent is considered to be an excellent result, but we must always take that into account. If we do not pay attention to it, one day it will grow and then it will be too late to react.

And, of course, taking into account our geographical location and climatic situation - we have 9 climatic zones in Azerbaijan - tourism will be also one of the important sectors of our economy in the coming years. And the gatherings like this, of course, create real impression and real picture about our country. We are young as an independent nation, not everybody knows about us, but we are committed to continuing this path of progress, independence, political, economic independence, freedom. I am sure that with support of such a great partner as the Asian Development Bank we will achieve all our goals.

Thank you very much.

Then President of the Asian Development Bank Takehiko Nakao made a speech.

The event featured a presentation on Azerbaijan`s ancient history, favorable geographical location, rich cultural heritage and accomplishments in recent years.