Speech of Heydar Aliyev, the President of the Republic of Azerbaijan at the opening ceremony of the international conference on "Investments for Azerbaijan" held under auspices of World Bank - Paris, 5 December 1995

Ladies and Gentlemen!

First of all, I would like to say that I am very pleased that I was given an opportunity to visit the Head-Quarters of World Bank in Paris and to be amongst you, to communicate with you and deliver a speech before you. I would like to greet all of you at this special meeting on the occasion of the opening of conference held under auspices of World Bank and dedicated to the Republic of Azerbaijan. I would like to thank World Bank for its very big attention to the Republic of Azerbaijan and support to settle complex and difficult economic, financial and other problems facing our country.

Actually, the Republic of Azerbaijan can be satisfied with the fact that relationships between new independent country and such a big bank like World Bank were established. We feel that in the short period of our relationships and cooperation we achieved concrete results and we see the benefit of this cooperation.

Of course, all this is only the beginning for us. However, we are very satisfied with such beginning and we hope that the cooperation with World Bank will be enhanced in the future. We consider that the most important mean of joining the world financial system, global integration processes and world economics, as well as successful implementation of economic reforms that we started is expansion and development of cooperation with World Bank.

I cordially express my gratitude to the World Bank for this initiative, today`s meeting and the conference dedicated to Azerbaijan. I would like to assure you that we will be decent partners for the World Bank, as well as for those willing to cooperate with us and those gathered here today and displayed the interest to Azerbaijan. I would like to express my gratitude to all those who overcame all transport difficulties caused by the complicated situation in Paris and came to this hall.

It seems that you are interested in the current situation in Azerbaijan. Esteemed chairman has given some information about it already. However, I think that it will be more interesting to you to hear the information on the issues both known and not known to you from the president of the Republic.

I found it necessary to come here and attend this meeting just for the reason that I personally attach a great importance to the implementation of economic reforms in Azerbaijan, to the intensification of the flow of investment to Azerbaijan and establishment of the direct contacts with investors, and naturally, I aspire for the establishment of the direct cooperation with World Bank.

Azerbaijan is a republic having the ancient culture and the great history. Azerbaijan is a country that experienced many stages of the development of the mankind. The people of Azerbaijan is the people contributed a lot to the world civilization. Azerbaijan is a republic that gained its state independence four years ago. Nowadays, it is a plenipotentiary member of the world community and affiliated with all international organizations. It is the member of the United Nations Organization and independently promotes its rights together with other world nations on the equal basis.

Azerbaijan is located in Caucasus, on the conjunction of the two continents - Europe and Asia; it has favorable geographical and geopolitical position for the commerce and of course, the other countries are attracted by other factors as well. Azerbaijan is in the possession of the very abundant natural resources, underground resources and different soil and climatic conditions. It has high industrial potential, multi-branch agriculture and high intellectual potential. We have many research and project institutions and institutions of higher education preparing highly skilled professionals, scholars and specialists. It is natural that we are proud with our past and current culture that has always been meeting to the requirement of the time.

As you know, the Republic of Azerbaijan has been the part of Russia for a long time and since 1920 it was the part of the Soviet Union, it was one of the 15 allied republics. At that time the abundant resources of Azerbaijan have been using for the industrial development of Azerbaijan.

I would like to remind that the major part of the overall volume of the oil extracted in Russia belonged to Azerbaijan. I would like to remind you also that in spite of the fact the all big countries were engaged in the World War II, during the war between fascist Germany and Soviet Union more than 70% of the oil products was provided by Azerbaijan. Many people think that if there would be the oil of Azerbaijan and there would be the possibility to extract the oil and to transport it for satisfaction of the needs of the front in that hard condition, perhaps it wouldn`t be possible to gain the victory over fascism during the World War II. The 50th anniversary of the victory was celebrated all over the world. I remember that festivities were held in Paris, London and Moscow and I was honored to take part at these festivities as well.

In reality, this victory resulted in the creation of the Organization of the United Nations. Recently we have celebrated the 50th anniversary of this organization as well and I was honored to deliver a speech from the tribune of the United Nations Organization as the President of the independent Republic of Azerbaijan. I think that the World Bank is also under some guidance of the United Nations Organization as well.

That`s briefly about the history of Azerbaijan. However, I would like to return to the point that when we were within Soviet Union, our resources were being used for the sake of this great country. Of course, it made possible the development of Azerbaijan as well. We cannot complaint. I would like to reiterate that at that period we managed to create a large industrial potential, agriculture large developed and the people became educated. Now, we have highly experienced specialists, professionals, scholars and a wealthy culture.

However, we didn`t have the state independence at that period. This fact didn`t let us to take benefit from our possibilities.

Nowadays, when we gained the state independence and we are masters of our destiny, we can solve our problems by ourselves. We have mutual relationships with all countries of the world and we follow the processes underway in the different regions. However, in spite of the difficulties related to the gaining of our independence, the state independence that enabled us to resolve the problems by ourselves is a distinguished historical event and great achievement for us. We appreciate it. Because it enables me to be here as the President of the independent Azerbaijan and to deliver a speech at the conference organized by World Bank in Paris and dedicated to Azerbaijan.

From the economic viewpoint, we are in the transition period like all countries of the former Soviet Union and those of the Eastern Europe. We have been living for a long time, along tens of years within the socialist economy, communist ideology and communist regime separately from the world economy; we were living under other rules and our economy was based on different principles.

Now we broke off with this system, definitely and forever, we don`t` want anymore to be within any union - Soviet Union of any other. We highly appreciate our state independence and we think that this is forever. However, this transition period is naturally accompanied with great difficulties. Because we are passing from one economic and social system to another one.

For this reason we have to clearly define our strategy in the sphere of the national state-building, as well as the sphere of public and political life and the sphere of the economy. Our strategy is aimed at building if a legal and democratic state in Azerbaijan and creation of the democratic civil society. We adhere the way of market economy and implement market reforms in our economy, it is to say that we are integrating with world economy, world system and world community in the sphere of the national state building, public life and economy. It is to say that the system that the world nations exist within will be the ours as well. This system succeeded to pass many tests and it proved its viability, it successfully functions and creates prosperity for the human existence.

I reiterate that we are an independent, democratic and legal country and we adhere this way. And it requires us to provide all freedoms - establishment of political, social and economic freedoms, creation of favorable conditions for private entrepreneurship and establishment of independent economic relationships with different companies, liberalization of our foreign economic relationships and foreign trade as well as liberalization in the sphere of price policy. It is to say that we approach the system that all over the world lives within. However, we are in the transition period. Replacement of a social-economic system with another one is naturally accompanied with difficulties, shortcomings and losses and this process requires some time.

However, one thing is clear. And I would like you to know about it: our country is open. We follow the way of economic reforms. We create all possibilities for free entrepreneurship, use of all possibilities by every citizen of our republic and to have his own property and to establish economic relationships with foreign companies, firms and persons. All of this makes us think that we need a strong financial support and we must use foreign investments.

Fortunately, we started to receive such financial support. Good relationships exist between us and the World Bank. Finally, World Bank felt that Azerbaijan is such a country and partner that one can cooperate with it. Therefore, it allocates loans to us, it is true that is does it very cautiously but it does it. We think that it will allocate loans in the future as well. Thus, due to this we can facilitate our situation and I hope that our reforms will be implemented more successfully.

We receive the support from the International Monetary Fund as well. Now it actively cooperates with us. We established contacts with some large transnational companies, especially in the sphere of oil industry. I will speak later about it. There are good relationships between us and European Bank of Reconstruction and Development. Some days ago while visiting London I found the possibility to meet with the leadership of this bank and discuss some issues with them. We started to receive the loans from them as well.

We are very interested in establishment of the financial relationships with Asian Development Bank. We have relationships with Islamic Bank. It is true that these relationships are not very developed for the time being. I would like to say that we try to establish close relationships with all financial centers, financial structures and banks of the world. Indeed, today`s meeting and my presence here is for communicating our wish and intention to you and persuading you that we are on the right way and we are reliable partners. It is to say that we need support and foreign investments in order to follow successfully the way of market economy reforms.

For instance, what did we do in the sphere of reforms? We have adopted laws and the reforms in the agrarian sector of our economy are implemented on the basis of these reforms. We have adopted the program of the privatization of the property. The program has the legal power and is implemented practically. More than 40 laws are adopted, it is to say that a good legal basis is available now for the favorable conditions of the foreign investment and development of the economic relationships. More than 200 legal acts are adopted for this purpose. There are more than thousand joint ventures and firms working with foreign companies, as well as some 150 foreign commercial firms and entities in Azerbaijan. In my opinion, these are quite good indicators for the beginning.

Carrying out reforms in the agrarian sector, we attach a great importance to the creation of the farmer economies. There are more than 1500 farmer economies in our country. We follow the way of establishment of farmer economies and it is natural that implementation of the large-scale reforms will result in creation of large-scale property in the agrarian sector.

All this is done. However, even greater conditions are created for the future. They are reflected at the Constitution of the Republic of Azerbaijan adopted recently. I said that we have been independently living as long as four years. These years were complex and difficult. I will give you some information about it as well as about its reasons.

On October 12 we have adopted the first ever Constitution of the independent Republic of Azerbaijan. This is a constitution creating every conditions for continuing of state building and legal democratic state building in Azerbaijan. This is such a constitution providing a human and a citizen all freedoms, it ensures the freedom of a person and finally it creates conditions for political pluralism, it democratizes all spheres of our life - public, political and economic spheres and it serves a good basis of the utmost importance for adopting of the new laws for the development of the enterpreneurship, the development and strengthening of the private property and providing of its immunity. I reiterate that this constitution opens wide possibilities both in public-political and economic spheres.

We have established good relationships with large transnational oil companies. Perhaps you know that a year ago, on September of the last year a large contract on the joint exploration of the oil fields of Azerbaijan was signed with the consortium consisted of the 11 largest oil companies in Baku. These 11 companies originate from 7 countries of the world. The contract entitled "The Contract of the Century" is being implemented in practice. A lot of work was done last year. Recently, the leading body of the consortium - International Operating Committee has approved the budget of the contract for the next year. The budget equals approximately to 600 million US dollars. It should be noted that about 100 million US dollars were spent in 1995.

For the export of the first oil we agreed with the consortium on construction of the 2 pipelines. One of the pipelines will stretch on the north itinerary from Russia up to Novorossiysk, the other one will stretch from the territory of Georgia up to Supsa port on the Black Sea coast. The works on designing of the large pipeline are underway as well. Recently, on 10 November we have signed one more contract with a consortium consisted of four large oil companies on joint exploration of another oil field having great perspectives. We have other oil and gas fields. We are conducting negotiations and it may happen that other contracts will be signed in the future. What do these contracts signify? They show that we are open for the world and we are ready for the cooperation. We invited the largest oil companies of the world to our country and we signed contracts on long-term cooperation with them. The contract is signed for thirty years.

It also shows that Azerbaijan enjoys the confidence, do you understand? There is confidence and it is possible to cooperate with Azerbaijan. In my opinion, this indicator of the utmost importance shows that foreign investors may come to Azerbaijan actively and without anxiety. Of course, there are some terms for enabling a foreign investor to any country. I can assure you that such terms are available in Azerbaijan. First of all, a constitution is adopted and a legal basis is available. Secondly, we held parliamentary elections in independent Azerbaijan on 12 November. The elections were held on the democratic basis, the new parliament was elected and the absolute majority of the elected parliamentarians support the strategy of the state, in other words that of the president aimed at carrying of the economic market reforms and democratization of the country.

However, aside of this more concrete information on public and political stability is needed. I can say that Azerbaijan experienced the hardest period of its history in the course of the last years. You know that Armenia unleashed an armed aggression against Azerbaijan with the purpose of the annexation of Nagorno Garabagh region of Azerbaijan seven years ago. This aggression resulted in war and armed conflict. In the result of this more than 20 percent of the territory of Azerbaijan was occupied, more than 1 million citizens of Azerbaijan were forced to leave their homelands. Nowadays they are living in the different regions of Azerbaijan and majority of them are in tents in harsh economic and social conditions.

However, despite of all this and all difficulties, we hold the position of the peaceful settlement of the conflict and we launched a great initiative within the frameworks of the international organizations, OSCE and Minsk group. The negotiations on the peaceful settlement of this conflict are underway within OSCE. In this connection we managed to achieve signing of an agreement on cease-fire between Armenia and Azerbaijan a year and a half ago. There is a year and a half that there is no war, no fire is opened, no bullet is launched and people are not killed. We are living in the conditions of the cease-fire and the peace and we promise that we will keep the ceace-fire regime till signing of the peace agreement. We hold negotiations for establishment and provision of the absolute peace. It is to say that there are not military operations in our region. It is an important factor showing the stability in Azerbaijan.

Complicated internal political processes have been underway in Azerbaijan in the course of the last years. This was a catastrophe for our people. On one hand Azerbaijan experienced an armed aggression, on the other hand different armed groups emerged within the country and carried out armed struggle for the power. All of this violated the stability in Azerbaijan.

I can say you that it is ended now. We managed to prevent the civil war that was at its beginning in 1993. After this 2 attempts for coups d`etat were undertaken. Of course, they were prevented as well. The sovereignty is already consolidated in Azerbaijan. All of these criminal groups are disarmed. The situation in the country is safe and favorable. Therefore, I can assure you that I, as the President of Azerbaijan control absolutely the public and political situation and I give you a guarantee for the long-term stability. By the way, I took this responsibility according to the newly adopted Constitution, while being elected the president I gave the vow of fidelity before the nation and I promised to do my best for provision of the safe life conditions for every citizen of the country.

The outcomes of the past two and half years show that I cope with my responsibilities. In my opinion, I cope with them well. The situation in Azerbaijan is completely changed. If somebody amongst you visited Azerbaijan two or three years and did it recently he could see the difference. Those who visit Azerbaijan repeatedly say it to us. They say me: you know, we were here two years ago. However, the situation in Baku, in Azerbaijan is completely different now. People live freely and they act without fear. There is no sign of the past anxiety and terror and criminality.

This is our achievement. Of course, they were not achieved easily. Anyway, we achieved them. I assure you that we are capable to preserve, and not only just keep but strengthen further this situation.

Therefore, I think that necessary conditions for coming to Azerbaijan, to work jointly, to make investments in Azerbaijan and to take appropriate benefit were created in Azerbaijan. I promise you that we will accelerate further our works for creation of the conditions for the free enterpreneurship.

I know that today`s meeting is dedicated essentially to the development of the private sector in Azerbaijan. I gave you the information of the common interest. Because this information is useful for everybody in all cases. As for the development of the private sector in Azerbaijan, this is the sphere of the utmost importance in our activity. It is to say that if we follow the way of the implementation of market reforms and privatization of the property, then we actively develop the private sector. Therefore, you can be confident that we consider this issue as a guarantee for the intensive development of Azerbaijan and improvement of the well-being of our citizens in the future.

Yesterday I met with the representative of a company. He said me: you think that the development of the private sector and enterpreneurship is the only way of the economic development, however, economy can be developed in the state-owned sector. I don`t except it. Of course, it is possible. I know that the state-owned sphere takes a considerable place in France and in some other countries. What can I say? I lived all my life within the conditions of the system of state ownership. I am a person that has never had private property, I governed a large economic system, a state system both in Azerbaijan and even within Soviet Union. I was one of the leaders of the Soviet Union. When I was the Vice Prime Minister of the Soviet Union I was dealing only with economic issues. In Azerbaijan as a leader of this republic I was dealing both with political and economic issues, however, while working in Moscow at the position of the Vice Prime Minister and member of the Political Bureau, I was essentially dealing with economic issues.

In general, I am familiarized with the state sector. At the same time, I am aware of the situation in the Soviet Union and that in Azerbaijan, which was the part of it. Perhaps, the state sector is not guilty in everything. It had its own advantages. There are such spheres in the state sector where economy could be developed more effectively herein. In some period the Soviet Union achieved some economic results. We saw all of this. Therefore, we definitely took the strategy of the development of the private sector and creation of the conditions for the private property. As I mentioned earlier, our constitution guarantees the inviolability of the private property. On the basis of these principles we think that we can provide intensive flow of the foreign investments to the private sector and to all other sectors of the economy in general, moreover, it can be invested in many directions. As I said earlier, we have a great industrial potential. We invite you to come, this potential is at the disposal of the foreign investors. We are ready for the cooperation.

I know that people gathered here today are interested in knowing the possibility of investments to the private sector of the agriculture. We have a multi-branch agricultural economy. We don`t have an extended territory. However, the Lord gave us fertile lands and favorable climatic conditions. Azerbaijan has many climatic zones. We have plane valleys where we plant tobacco, fruits and cereals. Generally speaking, we have a multi-branch agricultural economy. As I said, we develop farmer economies. We intend to use the possibilities of the World Bank for creation of the exemplary private farms for showing how to achieve great results in the production of agricultural products implementing the principles of the private property. Now we have great possibilities for foreign investments in the sphere of the services and infrastructure.

I have said that we signed large contracts. Large oil companies and other foreign companies work in our country. It is natural that investments in the sphere of the hotel industry and all other spheres of the services is profitable. We can intensively cooperate with you in this sphere.

Our country can be a good tourism and recreation basis. The investments in this sphere can bring good results also. In all other spheres, for instance, in the industrial sector we have a huge engineering and oil engineering complex. This sector of industry should be modernized and developed. We have a great petro-chemistry industry complex. We have own sources of oil, oil products and gas. We have such enterprises that if modernized it can produce goods meeting world standards. A powerful industrial sector processing agricultural products as well as agricultural raw products is available in Azerbaijan; moreover, a processing industry related to production of consumer goods, different products and agricultural raw materials exists in Azerbaijan. Small and medium business and private sector can give good results in this sphere. I can say you that in connection with the shortcomings of the transition period only one third of the overall capacity of our agriculture is used, the rest remains without use. For instance, in 80s, 70s, in the period of the socialistic system our state owned sector produced 1 million ton of cotton annually, unfortunately now we produce only 300 thousand tons. If in 70s, in the conditions of the state owned sector we produced 2 million tons of v------ and passed it for wine and alimentation production, now we produce only 200 thousand tons, or ten times fewer in comparison with previous years. Thus, there was such capacity in the conditions of the state owned sector and system of socialistic management.

Imagine than if we increase the private ownership and use these lands more rationally then we can produce much more than we did in 70-80s. Moreover, this production would be of higher quality. Such an economic advantage can be achieved. I know that there are people interested in tobacco production. A firm addressed to me in England. We have been producing approximately 60 thousand tons of raw tobacco leaves. This volume of production was in 80s, in the conditions of the state ownership, in kolkhozs and sovkhozs. You are aware of such forms of the agriculture. Now we produce only 20 thousand tons, 3 times less than at that time. The same situation persists in the other fields of the agriculture.

In general, there are great potential capacities. We should actively cooperate. We need investments. We promise to create maximal favorable conditions in order to use them in the conditions of our intensive partnership with foreign investors. In this case we can achieve more benefit.

I must tell that we have adopted a decision to give some large enterprises to foreign companies for governing in order to attract foreign investors. I think that it can also cause some interest. In cooperation with the United nations industrial development organization we are going to establish a free economic zone in Sumgayit, one of the biggest industrial cities of Azerbaijan. Large economic objects related to oil chemistry, plants of drilling pipes and other enterprises are gathered in this city. I think that it can also cause the interest. We have established a special body dealing with the management of the foreign investments in our country. Recently I issued a decree and such a department dealing with coordination of foreign investments was established under the Cabinet of Ministers.

Another important point. I touched upon liberalization of our foreign trade and politics of price making policy. We will adhere this way in the future too. I can say you that in the result of the measures that were undertaken in 1995 a good financial condition established in Azerbaijan. For instance, the exchange rate of our manat remained stable for a year. We did it on the advise of World Bank and International Monetary Fund. We achieved it. For example, we considerbly downed the level of inflation. If the level of the inflation in the beginning of the year was 60%, now, in the course of a half a year it is not more than 2%. In my opinion, it is not a bad result. If we manage to keep the exchange rate of manat stable, if we can down the level of inflation from 60 to 2% and if we can continue to adhere this strategy further, it shows that we can work and cooperate with you in the new conditions and on the basis of the new principles.

I reiterate once again, it is natural that we need financial assistance, foreign investments and the support of the World Bank and the International Monetary Fund for all of this.

I was told that our relationships with the Asian Development Bank are being arranged. We addressed ourselves to the Asian Bank and we wanted to establish relationships with this bank. I would like that investors from all countries and especially those from Japan show interest to us. I don`t know why but Japanese investors showed small interest to Azerbaijan so far. In my opinion, if we look the territory of the former Soviet Union then we can see that Japanese investors are gathered within frontiers of Central Asia. I was told that investors from Japan are present here. I invite them also. I address to them personally because they have never been in Azerbaijan. In general, I appeal to all of you.

In brief, we definitely adhere the way of the implementation of economic reforms, reforms in the field of financial and banking system. We will use the loans from World Bank and International Monetary Fund for meeting the requirements of these financial centers - protection of manat, structural changes and restructuring of the banking system.

Actually, there is favorable public and political situation, a strong legal basis and all guarantees for the foreign investments in Azerbaijan. Therefore, I invite all of you to cooperate, I invite you to Azerbaijan. You can be sure that this cooperation will be successful.

I wish all of you successes in your activity and I express my gratitude to the World Bank for organizing this meeting, I hope that I will meet each of you in Azerbaijan. In my presidential activity I pin a considerable importance to this kind of problems and I am ready to meet with any entrepreneur or share-holder coming to Azerbaijan with concrete proposals.

Thank you very much for your attention. I express you once again my best regards and sincere wishes. Good bye.