Azerbaijan’s transformation into an IT hub: reality and prospects

South Caucasus has become one of the world’s geopolitical hotspots in recent years, and the region has become one of the main transit routes for gas supply to Europe

 Azerbaijan & Israel Cooperation  (photo credit: PIXABAY)
Azerbaijan & Israel Cooperation
(photo credit: PIXABAY)

The South Caucasus has become one of the world’s geopolitical hotspots in recent years. The region is one of the main transit routes for gas supply to Europe and serves as Europe’s window on Central Asia, two factors that make the South Caucasus strategically important. 

The global attention to the South Caucasus is having a major impact on development in the countries of the region, especially Azerbaijan. Transport infrastructure linking East and West and rich hydrocarbon reserves further reinforce Azerbaijan’s role in ensuring global energy security.

Alongside success in these sectors, serious competition in information technology and digitization has been under way for some time among the three South Caucasus countries – Azerbaijan, Georgia and Armenia. Azerbaijan is aware that in order to retain its position of strength and leadership in the South Caucasus it requires IT infrastructure and serious human resources capacity in the sector.

Ilham Naghiyev (Credit: Courtesy)Ilham Naghiyev (Credit: Courtesy)

In his book Shifting Paradigms, prominent economist Zia Qureshi researches the impacts of digital transformation on the economy and state policies. He writes that in the past decade growth in the global economy has been weak, and productivity and economic growth are on a downward trend. According to him, it is key for a state’s policies and leading institutions to adapt to the digital economy.

Maintaining its rate of economic growth will depend on the extent to which Azerbaijan’s economy adapts to modern technology and digitization. In its report on Azerbaijan in 2022 the World Bank notes that the digital economy will account for 25% of global GDP by 2030, and this remains an upward trend in Azerbaijan too. 

The report on the development of digital management and electronic government puts Azerbaijan in 70th place out of 193 economies, a higher than average position. It says that digitization and development in the IT sector are a major part of Azerbaijan’s new development model and will give a stimulus to diversification of the economy. 

For several years now Azerbaijan has been expanding its work to provide state-level support to develop the IT sector and to create new start-ups.

In 2021 a programme was drawn up to develop the start-up ecosystem and began to issue Start-Up Certificates exempting newly created start-ups from profit and income tax. This kind of incentive for start-ups has given a serious impetus to the creation of many start-ups in Azerbaijan’s IT sector. Some national start-ups are already developing their work in the USA, Great Britain and the United Arab Emirates.  

The IT sector is clearly developing along three main tracks in Azerbaijan today. The first two tracks – developing financial technologies and ensuring cyber security – are taking shape to meet the needs of the IT sector. In parallel, another track is making Azerbaijan a foreign outsourcing country for IT programmers from different countries.

The creation of the Association of Cyber Security Organizations of Azerbaijan in April 2022 was a major step forward in the cyber security sector. The platform brings together most of the organizations and companies working in IT, strengthens the cyber security system and promotes the subject.  

The need to digitize and to ensure the security of critical information infrastructure in turn requires the education and training in IT of local personnel. Today Azerbaijan is developing local professional capacity in the IT sector in a variety of ways. The Ministry of Science and Education and the Ministry of the Economy are implementing an IT Academy project, which aims to produce 3,000 professional IT specialists in the next two to three years. Another track in preparing human resources is to bring and apply foreign experience to Azerbaijan. 

Azerbaijan’s collaboration with Israel on IT and cyber security should be highlighted in this context. In June 2022, following an agreement between Azerbaijan’s Ministry of Digital Development and Transportation and Israel’s Technion University a Cyber Security Centre was set up. Technion University staff teach courses in IT and cyber security at the center, which plans to produce over 1,000 IT professionals in the next three years.  

The IT education and training provided by the Azerbaijan-Israel Training Centre at the Azerbaijan State Oil and Industry University is a successful example of the use of foreign experience in educating personnel. Alongside the links between universities and official bodies, there is a noticeable development and expansion of cooperation between Azerbaijani and Israeli private IT companies. At the same time, to further increase Azerbaijan’s role in the cyber field, one of the leading Israel companies AS-Holdings is currently establishing a practical cyber educational program for executives, technicians and youth in Azerbaijan.

In addition, the creation of special courses and a separate School of IT and Engineering at ADA University is a key component in training personnel. Since 2013, the School has produced many professional IT specialists. 

The work done in the IT sector, the establishment of international cooperation and boosting of personnel capacity increase the opportunities for Azerbaijan’s gradual transformation into an IT hub in the South Caucasus. It will allow Azerbaijan to become a leading IT service center for other countries in future. 

The transformation of Azerbaijan into an IT hub is a decisive factor taking into account its geopolitical position, global energy and transport infrastructure. Azerbaijan is the only safe corridor between Central Asia and the West and for that reason the integration of the region’s countries with the West is in large part possible because of Azerbaijan. Moreover, factors such as the integration of innovations in global technology and technology transfers are reasons for Azerbaijan to develop as an IT center. 

The number of data analysts in Azerbaijan is already increasing and the first investments have been made in research into artificial intelligence and in capacity building in the sector. Though it has an industrial economy, Azerbaijan is closely following the trends relevant to post-industrial states and taking advantage of them to further develop its IT sector.

Written by Ilham Nagiyev, entrepreneur, co-founder of Odlar Yurdu Organization in Azerbaijan