Exclusive interview of Trend with the Azerbaijani Minister for Economic Development, Heydar Babayev
Question: The Azerbaijani government expects big oil revenues, which makes to think over the influence of this factor on the economic processes in the country. In particular, it might impact on the growth pace of inflation. What are your forecasts on the growth pace of inflation by the end of the year and how real are the calculations by the State Statistics Committee if to take into consideration that consumer goods prices are still high, while the inflation ratio demonstrate absolutely different scene?
Answer: We always correct a mechanism on calculation of inflation, as we want to have a quite clear scene. Without having a necessary scene, it is impossible to determine the reasons and concretely struggle with manifestation of high inflation ratio. The inflation is not so dangerous phenomenon, but must be well regulated. For us it assumes paramount importance. Firstly, we pursue a specially oriented policy, increase salaries and the welfare of the nation gets improved, whereas if the inflation absorbs these incomes, then all efforts will turn out in vain. Therefore, we try to maintain it in the digit-figure level.
This year, I think, we will manage to retain it as a digit-figure. Nothing dangerous if it is not 9.8%, but 10.1%. At any rate it must be retained.
The first months of the year showed the inflation in the level of 5%. We and the international organizations had claims on the methods of calculation held by the State Statistics Committee, while on the other hand the order of calculation was designed in accordance with the international recommendations. We should not forget about the seasonal fall and seasonal rise of consumer prices.
Question: Is there necessity for development of measures in addition to anti-inflation decree by the President?
Answer: The last session of the Cabinet of Ministers dedicated to the state of money mass in the country and secret subsidizing, did not take special resolution on the necessity of a new document in this respect. This is our daily work. The President issued a decree to determine the anti-inflation measures, which also include the sterilization of money mass through securities and provision of efficiency of the work.
During the meeting we in particular underscored the deficit in money mass. The Prime Minister stated that the government will not retain artificially the money mass. There are a number of questions in this respect ranging from collection of communal payments which are waiting for their resolution. The use of money for energy and water consumption is also a type of sterilization. In this respect they offer to cover communal payments and some expenses at the expense of the public budget without conversion into the national currency, which reduces burden on inflation. A special mechanism will be worked out in this respect.
Question: What is the governments position on indirect subsidizing in the subsequent years?
Answer: First of all, it is necessary to increase collection and the task has been set for increase of the rate of collection of gas, energy and water charges to 100% next year. The task is to be implemented by the end of the year. It is necessary to take measures to provide all subscribers with meters and achieve entire collection of charges.
Question: As the Minister for Economic Development how do you estimate the policy by the National Bank of Azerbaijan (NBA) on the consolidation of the national currency for retaining the inflation and how it is possible to reduce the rate of dollar to 4,000 old manats, as some experts predict?
Answer: It is a natural process. Any oil producing country with big oil revenues sees consolidation of the national manat. All measures that we are considering target retaining the process of consolidation. It will drop in natural way, whereas the process is currently developing more tensely. Moreover, the consolidation of manat should not be an only way for retaining the inflation, therefore other methods are also offered. These are expansion of the state securities market, collection of communal charges. Low collection rate also affect on the inflation process.
I think impossible the drop in the rate of US dollar to 4,000 manats.
Question: A large mission of Russkiy Alumininiy visited Baku. When is the next mission of RusAla experts to Azerbaijan expected?
Answer: Recently a meeting of RusAl has arrived in Baku, while a larger delegation is expected to visit the country late July or August 2006. We should agree upon major cooperation, the terms of investing, source of gas supply for the new aluminum plant, cost of energy supplied. It is also necessary to define the place for construction of the plant, clarify whether Azeraluminiy will further deliver alumina.
Today 70% of alumina, produced at the Ganja Alumina enterprise, is purchased by RusAalom. In this respect it seems logic to present this company all, but at what price? For this end it is necessary to conclude an agreement, while RusAl is unwilling to conclude agreements for every year. It is unwise, because RusAl intends to build in Azerbaijan a plant with the capacity of $1bn. The company offers an agreement for the term of 10 years.
Question: Is it possible to build a plant on the base of Azeraluminiy joint stock company, if to take into consideration that the new aluminum plant will use alumina merely produced at this enterprise?
Answer: It is not an easy question. Despite the cancellation of the contract with the Dutch company Fondel Metall on the management of Azeraluminiy, there are still a number of issues on the agreement. How it can be given to management of a new owner, when Fondel Metall suddenly will appeal to court to demand the repayment of the investments raised under the contract?
Question: Could you tell us about the process of creation of free economic zones in Azerbaijan and talks with the companies, which will render assistance in this respect?
Answer: We are currently in talks with a consultative company. There are only 3 proposals under consideration. One of the companies is well specialized in the free-economic zone, the second industrial, and the third financial. But we want the consultant to be universal in order to assist in the implementation of plans on establishment of free economic zones.