Mikayil Jabbarov

Graeme Wilson: One of the things I have been looking at is the economic impact of the conflict. There are various broad figures out there. I cannot find what may be considered a definitive figure. Are you not there yet or is it still evolving? How long will that take?

Mikayil Jabbarov: Philosophically, what is that we want to calculate? You know what is the basis that you are taking? If you take a replacement value of the asset, that is one approach. You know we had buildings, residential, administrative, roads, power stations. You name it. These were cities and villages with thriving population. Would they be outdated and amortized over this 30-year period? Probably, some part of these assets. Some part of these assets will probably go even more up in the value.

When it comes to monuments, can you really put a price, can you put a dollar figure on a monument, historical monument that has been destroyed or neglected or completely lost? So, one way to look at it is, as I say, is replacement value, upgrade or reconstruction value. Every year, we spend a significant amount of funds on reconstruction.

Graeme Wilson: Are you saying it is important to reach that figure? So, for example, there was a conference, I think, in South Africa, where they came up with 888 billion for slavery. So, it took a long time – a hundred years. It took them some time to come up with the figure. I wonder is Azerbaijan going to say, “That is the figure”?

Mikayil Jabbarov: My approach to this is that we have a figure which is the combination of natural energy riches that were looted over the years. There was illegal exploration of gold, copper, natural materials, silver, you name it. There were a lot of urbicide and ecocide type of violations and destructions. There is a figure that can be put on it. There is a development cost or actually lack of it.

Do you put over these 25-30 years the state-carried financial burden of placing the refugees and internally displaced persons, paying them subsidies, meals, providing for free utilities? Do you also put that figure? So, I think, what I am trying to say is 2 things: one is about methodology that you want to use and the purpose – if it is for a claim, when you go to an international court and seek compensation. That is one thing. If you put the developmental cost of it, I think it is another. If you take a broader view, I think a lot of things, although I am the Minister of Economy, but I think a lot of things cannot be assigned economic value to. The most obvious one of them is lives, broken families, lost opportunities. That is what I am trying to say. But overall, yes, the short answer is just to give a glimpse in terms of numbers. We have calculated and we have done a methodology for direct losses.

We have done a methodology for looting and exploiting the mineral resources. We have numbers for the extra cost which state and society beared on these internally displaced persons and refugees living. In the last three years, we have invested over 10 billion dollars only in infrastructure, repair works, those residential buildings that were restored, on the urban planning.

There is a huge bill to be picked up on demining. We can only estimate, but because the maps are not there, you cannot assume it with a degree of precision. There will always be certain assumptions to be made. But I think we are certainly talking within tens of billions of dollars magnitudes, comparing to the size of the territories, to the size of the GDP, time over which this has taken place.

Graeme Wilson: The cost is the human capital. Very much so. You have an interesting perspective, because you were in education. You have looked after IDPs. How do you think the nation has done in preparing the IDPs for this moment in time?

Mikayil Jabbarov: From the viewpoint of nation, there was a deliberate decision made to ensure the social integration of the individuals, of our citizens who were forcely displaced and evicted. I do not think in that sense, we could have predicted with any degree of reasonableness for how long the occupation will last. It is well known that Azerbaijan’s position was always to try to resolve this issue through peaceful negotiations.

Therefore, there was a deliberate decision made to ensure the social integration when it comes to education, jobs, housing, healthcare, you name it. Administrative units of governance were maintained. Although as an example, the city of Aghdam was under occupation, but the Executive Power of the City of Aghdam was functioning. Although people from the region of Aghdam were not placed in one specific city, some of them lived in Baku, some in Ganja, some in Lankaran, some elsewhere. The schools were also relocated, they were Aghdam schools.

It was the second element of providing for social integration, but at the same time, keeping the community, trying to keep the villages, cities to a certain extent intact and interrelated in an expectation of the day when people will have to go back, and along with physical reconstruction, to also bring back the social pattern of communities living together and coming back together.

From viewpoint of IDPs, I think there was this incredible patience and belief. Trust, I think, was the basis for this belief and patience. People trusted when they were told by the President that we will return there. Be it by late Heydar Aliyev, be it by President Ilham Aliyev today.

Were we preparing? How were we preparing? I think the best criteria to look at is the percentage of people, who express readiness and willingness to go back, although it is a hard trip no matter how much the government does to rebuild, to reconstruct, to provide for a new and free housing, although it comes at a huge cost.

The first survey we did in 2021, we saw that the percentage of people, who were willing to return, was above 99.0%. And I think that is a very good illustration with respect to whether we were preparing for today. I think everyone was, I think nation was.

Graeme Wilson: When Mr. President made the statement he was going to turn Karabakh into paradise, did he make your job a lot harder, because you will have to do better?

Mikayil Jabbarov: I think it will be fair to say that raison d'etre of the modern Azerbaijani state, from the day of reestablishing our independence in 1991, was actually liberation of Karabakh, Eastern Zangezur and restoration of our territorial integrity. In that sense, it is a dream job. Because this is something we have been dreaming about, to go back to Shusha, Aghdam, Fuzuli, Lachin, Kalbajar.

When it comes to the technical level of implementation, it is a burden, it is a burden on the state budget. It is a burden on the resources. We have to allocate and we do allocate the significant amount of our capital expenditures for restoration of territories. It impacts any other direction of government spending. Be it education, be it healthcare, be it infrastructure development, be it in any other place, public services. But again, there is a consensus among nation that we have to be consolidated and to provide for a dignified level of living in liberated territories which will be in line with the standard of living in Azerbaijan.

Maybe, actually, when it comes to the fact that this is an infrastructure which we create today, these are the cities which we rebuild today, these are the roads which we build today, it will set a new standard, simply because of the age of technology, modern construction that was not available 30-50 years ago.

People must work and must have jobs and opportunities for entrepreneurship, for self-employment, or for being employed by the private or public sector

Graeme Wilson: Sitting in your seat and being told you are going to reconstruct 20% of the nation, did you have any models to work from or are we talking about the Azeri model here?

Mikayil Jabbarov: I think we did not find any comparable in terms of the scale. And I am not just talking about the number of square kilometers, but exactly as you said, in comparison to the size of the country, in relation to the number of people, with respect to the percentage of the population being involved, etc.

In that sense, we did not find any benchmarks or any examples to learn from. It is a complex issue that entails issues from security - we have already talked about demining - to social fabric of the villages, to urban planning, to connectivity, to economic activity, because any return can only be sustainable, only if it is provided for by the economic activity, by the jobs.

Otherwise, it would not be sustainable, people must work and must have jobs and opportunity for entrepreneurship, for self-employment or for being employed by private or public sector. So, in that sense, it is a new challenge.

Graeme Wilson: Again, sitting in your seat, you have just talked about the size of the territory, you have to build an economy on that scale, was that daunting?

Mikayil Jabbarov: No, I do not think it is the right emotion to use. It is challenging. It is complex. You need to ensure that the speed of economic activity and the speed of return of economic activity coincides, comes parallel, is synchronized with the time that it takes to rebuild village, to rebuild roads, to demine the territory.

That is a challenging part of it. We really did a high level planning for it. It was already finalized by mid-2021 which put together the holistic framework and concept that we follow. It looks into the economic specialization of each of the liberated regions. It looks at the composition, at the know-how, at the skills, historical skills, but also the present skills of returnees.

It looks at and provides for a special legislative regime which ensures tax incentives, loan incentives, many different social security payment, support for pensions, for those who work on the entire liberated territory, establishment of the industrial zones, where some centralized infrastructure will be brought in, linking the jobs needed mainly for construction and reconstruction of cities and infrastructure with the composition of population who returns.

That is pretty complex and pretty sophisticated. And that is why it took by the decision of the President the establishment of the Coordination Council led by the head of the Presidential Administration and composing of all government agencies.

And in addition, to ensure also the direct accountability, effectiveness, there was a new governance institute introduced on these territories – special representatives of the President in each of these regions were assigned. And it also ensured the direct access and efficiency in decision-making and coordination.

Graeme Wilson: May I take one step back? You have just talked about mid-2021. In 2019, you made the statement about whitening the economy, you were dealing with the IDPs, then came COVID, you had a lot on your plate. But how you as the Ministry, did you have any basis prior to the liberation?

Mikayil Jabbarov: For the liberated territories or for the economy of the entire region?

Graeme Wilson: For the liberated territories. Did you have a plan in place? Even a vague plan?

Mikayil Jabbarov: We have had open and closed researches. Some of them are in public domain, some of them were not. Attempting to diagnose and provide if not for a blueprint, but at least for a concept of rebuilding and redevelopment of the liberated territories upon their liberation. But, as I said, that work was institutionalized in a project with involvement of not only all relevant governmental agencies and experts, but also with certain international professional expertise, looking at whether or not there has been a similar challenge. If not, what are dos and don’ts, what are no regret decisions, what are strategic bets.

So, when I say it was finalized by mid-2021, that was a blueprint, and in a way, it is reflected in a number of our policy setting documents, decrees by the President, state programs, Ministerial level documents. The issues, which you have mentioned, like reducing the role of shadow economy, increasing the transparency, providing for more economic activity. This was and continues to be a political direction of economic reforms by the President. And it was very well received and supported by the people. Did it help? Of course, it helped, because today, we see that in a very short period of time, that Industrial Park in Aghdam becomes the second largest industrial park in the entire country, second to Sumgait, which is the largest in terms of the number of residents.

Is there also an element of people willing to contribute, entrepreneurs willing to contribute to the liberated territories and to rebuilding? Of course, there is. When I said it was raison d'etre for the independent state of Azerbaijan, because it also reflected the idea of unity, because it was not an issue of debate in the society, because it was an issue around which there was full consensus, regardless of political model or economic model or social coexistence model one could prefer.

When it came to this issue, I think it was fully the matter of the national consensus. And that is the way how it also transforms today in a very speedy rebuilding and bringing back economic activity to the liberated territories, although it is challenging.

Graeme Wilson: When you say it is challenging, what do you mean?

Mikayil Jabbarov: Just think about it. You open an enterprise which produces goods, but you do not have a local market in this region for these goods, because people, who are supposed to live in this city, have not arrived yet, because the city has not been built yet, it has been destroyed. We have adopted new Master Plan.

We started building it, but it will take 7 years or 10 years for Fuzuli to be filled in with all the residents, or for Aghdam. So, that is a small example. Imagine that you are a producer of bread or dairy. So, you need to take your product, travel to where your market is. You are a producer; you are an industrialist. Of course, you need people who know technology. You need engineers, you need people with knowledge. What do you do?

Graeme Wilson: We have been looking before the interview at some of the private sector, businessmen, who have supported the Foundation, Karabakh Fund sorry. As we met them, they told stories that they supported the war effort and that they are investing in Karabakh, they are investing in the Fund, obviously. What you are saying is these hard-nosed businessmen are willing to take a longer term view because of their patriotism when it comes to Karabakh?

Mikayil Jabbarov: I think they do. And I think that when it comes to what we see in Karabakh Revival Fund activity or activity of the Ministry of Economy, what we observe is that they are willing to take a much longer view with respect on return of these investments or they are ready to take a minimal or neutral return on their investment.

Again, this is not sustainable, this is not something on which we want to build our economic model, but it will be unfair and unjust to deny that among these economic investments that have already happened, there are also those which are not based on the hardcore economic rationale. And again, it will be very dangerous, if there will not be economic rationale, because it will not be sustainable.

Because it means that if this enterprise cannot make money, cannot support itself, these 100 or 200 jobs, which it has created, are temporary. And that is not what we need. That is why we are similarly trying to make sure - it should not be charity. Charity is also a part of what Karabakh Revival Fund does, but not when it comes to economic projects.

Graeme Wilson: More hard-nosed is FDI. One thing I have noticed as I have been writing the book and involved here is that, especially the First Vice-President has created Karabakh into a brand. Probably, if nothing had happened and Karabakh had just been a part of Azerbaijan, it would be a sleepy backwater, but now, it is front and center. Plus, the President said it is going to be paradise. If we take a less patriotic, more hard-nosed view when it comes to FDI, how is the international community responding to what you are doing?

Mikayil Jabbarov: In general, Azerbaijan ranks well in terms of its attractiveness for foreign direct investment. I think we need to distinguish between FDIs or investments in general that mainly aim Azerbaijani domestic market, from those which take a benefit of either the existing business environment or combination of business environment and geographical location or maybe natural resources, or maybe know-how, and maybe trade regime which Azerbaijan enjoys with a number of countries, etc., and sees goods produced in Azerbaijan or services for that matter for export markets.

So, therefore, I think that in case of FDI to Karabakh, we witness both. We already have some big brand names present in Azerbaijan, of those companies who have been in Azerbaijan before. Cement producers, construction material producers, because there is a lot of construction, there is a lot of economic activity.

But we also have interest from, for instance, power generation companies, because territories are very rich in solar power. BP implements, actually the largest for BP renewable solar power project in liberated territories. Not only them, there are Turkish investors doing hydropower project.

In general, Azerbaijan ranks well in terms of its attractiveness for foreign direct investment

Graeme Wilson: And the United Arab Emirates is also heavily involved I think.

Mikayil Jabbarov: Not on liberated territories yet, but yes, they are the largest investor in general in renewable in Azerbaijan – Masdar is. But their main focus is not on liberated territories, but we also have foreign investors active in the liberated territories in renewable power generation.

For natural resources, of course, there is a natural appetite and interest. It is also true that we believe that foreign investors will and do watch behavior of local investors. It will be irrational to expect FDI if your own business does not believe. We are content with the level of business interest.

We do a lot of promotion works. I already mentioned that we provide some of the tax breaks, some of the fiscal incentives for those, who do business in liberated territories, regardless they are foreign investors or local investors, joint ventures, as compared to the rest of the country. So, there is also a set of economic incentives.

Graeme Wilson: Azerbaijan has ranked high in many international league tables for ease of doing business over a number of years. Is it something that is hard to maintain, I am talking about Karabakh here, when you are dealing with somewhere new, still developing, still evolving. Are you able to maintain that ease even there?

Mikayil Jabbarov: We try to ensure that is the same. We are also very mindful that it is a constant competition. All countries in the world always compete for investments, for domestic investments and for foreign investments.

Yes, lately, we see elements of fragmentation in the world economy, you know friendshoring, nearshoring, many types of changes, I would say, to the way how investors behave. That makes us even more mindful of the fact that we have to provide for even better business climate which consists of many elements from infrastructure to quality of regulation.

Graeme Wilson: I interviewed Taleh Ziyadov. Excuse my pronunciation. When you have this narrative, and there is quite a narrative there, does it make it easier for you, because you have got a dynamic guy telling a dynamic story, and this part is going in there, and this Cross Caspian trade? You have got a story to tell. Is that helping you?

Mikayil Jabbarov: In general, I think any economic activity in any country is about teamwork. So, you have a leader. In our case, the President, who sets the vision, who in a way, sets the example, who puts together a team, and then, the job of this team is to deliver together working as a team, not being locked in this circle, but hopefully, trying to project it to the business people.

And then, at the end of the day, it is not my job, which creates GDP or which creates a product or a gadget. It is a work of an entrepreneur. The share of private sector in the economy of Azerbaijan is well over 80%. So, it is hundreds of thousands of economic actors. We have over 800,000 active taxpayers. That is teamwork.

Graeme Wilson: I have been working on the book. We have been lucky enough to meet a lot of the President's representatives, a lot of senior folks here. I am reminded a little bit of the UAE where in Dubai and in Abu Dhabi, they have got this young, bright, new, dynamic generation. And it is very much the similar case here. It is a perfect storm in a way. There are some brilliant people out there who are surrounding the President, a part of the President’s team. Everything is aligning for Azerbaijan at the moment with these people and with the story, with the dynamic, isn't it?

Mikayil Jabbarov: I think human capital is what defines a place of the country in the modern world, and it will continue to be so, even more with every year passing. So, this is the first of the fourth industrial revolution and economy. Therefore, the attention and importance we were paying and will continue to pay to the development of human capital, to the attraction of talent, to growing talent, is a must, it is constant.

We are already benefiting from the fact that the visionary President back in 2007, signed a program, the State Program to enable education of young Azerbaijanis abroad. Now, 17 years after, many graduates of these programs, graduates of the best universities. Some of them have already worked, not only in Azerbaijan, they worked abroad. They gain experience, they bring back this knowledge.

On the other hand, Baku and Azerbaijan is also attracting international and regional talent. Baku is the only capital on the Caspian Sea, it offers very attractive lifestyle and infrastructure, social culture. We are aware of our strengths and weaknesses. We think our strengths enable us to fight our weaknesses and to be stronger, to get stronger not in an aggressive way, but in a developing way.

Graeme Wilson: I told the story, Mr. Minister, about that old couple in Lachin. A beautiful story. And on a completely different scale, Azerbaijan is telling that story at a regional level. You are talking beyond peace, you are talking about this peace dividend for the region. Some people may think it is extraordinary, because you are the victim in this whole scenario. Some people may think it is extraordinary that you are talking about the region, you are still trying to sort out Karabakh. is there a dividend to this for Armenia, Georgia, all the South Caucasus?

Mikayil Jabbarov: President Aliyev and Azerbaijan have initiated the peace talks and peace agreements right after the liberation of the Azerbaijani territories. There are many reasons for that, but I think in the context of your question, it is also the reflection of the fact that Azerbaijan takes very seriously, in a responsible manner the fact that it is the largest economy in the South Caucasus, that it is the largest in terms of the size of its population.

In that sense, our economic contacts are not limited, of course, by the neighbors with whom we have land borders. We similarly actively cooperate and develop relationship with Central Asian nations across the Caspian Sea. As we speak, the European Union is the largest trading partner of Azerbaijan with Italy being number 1 sort of individual trading partner of Azerbaijan. I think it takes vision and willingness to cooperate and build bridges rather than walls. I think that is the belief that we have.

Graeme Wilson: How is the Ministry of Economy integrating sustainable development principles into what you are doing, especially in terms of COP29?

Mikayil Jabbarov: Sustainable development goals are well reflected in our governmental programs and priorities. Some of them have more relevance in Azerbaijan than in some other jurisdictions. I already mentioned the example of demining.

When it comes to COP29, the process of which Azerbaijan is a host this year, that is again the reflection of vision and commitment and belief of our country to the fact that the impact and footprint of our continuous development, and I do not mean in Azerbaijan, but rather all countries taken together, all humanity, shall not result in us effectively losing the planet to processes, which science proves, cannot be reversed if certain steps are not taken in consensus.

Graeme Wilson: You talk about this a lot, Mr. Minister. Do you think Azerbaijan is telling its story well enough in regard to sustainable development, COP29? There is a lot of discussion here. Are you telling that story outside? Do people know?

Mikayil Jabbarov: My colleague, President Designate of COP29 Minister Mukhtar Babayev and his team are doing a lot of job. On the one hand, bringing awareness, on the other hand, being a responsible host and presidency of the process. Can we do more? Probably. As we already discussed, you always can do more and you shall aim to do more. But please, do not also forget that we had a very little time to prepare for COP.

Usually countries know two years in advance that they will be hosting COP event. In case of Azerbaijan, this decision was blocked by Armenia for almost a year. Reaching this decision by consensus of all nations has also shown that commitment of Azerbaijan to peace is the first.

I think it was the first joint decision and joint statement reached by Azerbaijan and Armenia without mediators in the room, showing that our countries can work together and, therefore, among the initiatives which Azerbaijan puts forward for COP29, there is also so called COP truce initiative. And it is based on the realization and understanding that COP should also be a process that supports peace.

Graeme Wilson: Karabakh comes across as a gigantic battery in many ways. It is attracting BP, as you mentioned. I talked about Masdar which is more in central Azerbaijan. Is that really something that is leading the charge of the development of Karabakh? Is that something that is going to continue? You have had the headliner which is the BP development. Is that an ongoing process? You are going to see more and more and more.

Mikayil Jabbarov: Azerbaijan is blessed with rich renewable energy resource potential. We are also very mindful of the fact that along with traditional energy, renewable energy is and shall be one of the backbones of our economy and of our development. We are implementing and spearheading a number of projects.

Our ambition is to continue to be a reliable energy supplier. And we have projects of green electricity and its export to Europe. So, we are not just happy and ready along with our partners to provide renewable energy to European markets, to neighboring markets. We are also enabling and linking to our friends and partners across the Caspian Sea to do that.

Graeme Wilson: Again, as I mentioned, I met several of the giants who support Karabakh Revival Fund, one of the things I learnt is although it is a national duty, when it came to their own people, the families of martyrs, they support those people. When researching you, I think you have 146 employees of families in the Ministry, families of martyrs or people who have been injured, etc. You meet those guys personally. I understand you have a rapport with them. Is it some template here? Is everybody doing that? Is the nation taking care of its own?

Mikayil Jabbarov: I believe so. Yes. I believe that it is a part of our society. It is not only reflected in the legislation, in provisions, in state aid, or exclusions from personal income tax or many other legislatively approved means, but also it is true as a matter of social and corporate culture that people support.

I thank you really for paying attention to that – I think these last 30 years if you go back at the beginning, we basically started off with having 1 in 8, maybe 1 in 9 people in this country being IDP or refugee. So, we had the population of just over 7 million people, and we had 800,000 combined IDPs, refugees, people replaced from Karabakh, Azerbaijanis ethnically cleansed from Armenia.

And of course, it created a certain awareness, it created a certain compassion in addition to, I would say, national values. But you also live in this context. That is why I think it is not an exception, but it is rather an accepted model.

Graeme Wilson: The norm.