Azerbaijan is keen to enhance digital tech opportunities with the Middle East
Targets reciprocal collaborations
Azerbaijan is undergoing significant digital transformation to enhance its economy through innovation. The digital economy has become a key driver for growth, contributing 5% to the GDP in 2023, with projections for further increases as digital initiatives expand.
The government has implemented the ‘Online Azerbaijan’ project to foster technology adoption and improve public services. Furthermore, the country has invested heavily in information and communication technology, leading to a rise in startups and digital enterprises, critical for economic diversification away from oil dependency.
The country’s Innovation and Digital Development Agency nurtures Azerbaijan’s steadily growing digital sector. The agency was a key country exhibitor at GITEX Global 2024 – the world’s largest tech and startup event – held at Dubai World Trade Centre from October 14 to 18.
In an exclusive interview on the sidelines of GITEX Global 2024, Igor Ovcharenko, Innovation Ecosystem Consultant at Azerbaijan’s Innovation and Digital Development Agency (IDDA), discusses the country’s digital transformation aspirations.
Excerpts from the interview:
What constitutes the IDDA’s presence at GITEX Global 2024?
We have brought six startups and four medium-sized tech companies from Azerbaijan to showcase their potential for scaling in international markets. As a nodal agency, we aim to support local [Azerbaijani] startups and tech companies in expanding into new markets.
GITEX is one of the most significant events in the Middle East and North Africa and is also increasingly relevant in Central Asia and Caucasus regions.
GITEX is an excellent opportunity for these companies to meet potential investors, clients, mentors, advisory board members and potential employees. It is really about inspiration and networking.
What do Azerbaijani companies bring to the digital tech industry that sets them apart from companies in other countries?
Our ecosystem includes various companies, from startups to larger organisations. While we may not be at the forefront of groundbreaking innovation, our strength lies in adapting existing business models to meet the Middle East region’s needs. We have solutions in payment processing and systems integration, for instance.
For instance, we brought to GITEX a ticketing platform operating in five countries, allowing users to purchase tickets for various events. While these may not be revolutionary technologies, they are well-established solutions that can scale across markets.
This adaptability and practical application of technology make Azerbaijani companies stand out as valuable players in the digital space.
What aspects of the Middle East market appeal to Azerbaijani tech companies?
There are a couple of critical factors. First, the Middle East presents a more competitive environment than Azerbaijan. Companies willing to take on this challenge can learn from the advanced market and avoid pitfalls others have experienced.
Moreover, there is the potential for partnerships with larger organisations in the Middle East region, which could lead to acquisitions in the future.
Companies in the Middle East are more advanced, providing our firms with significant learning opportunities and the potential to evolve more quickly. This enables them to compete better in the local and broader regional markets. This emphasis on learning and growth can make the audience feel the potential for development in the Azerbaijani tech industry.
Are Azerbaijani tech companies targeting the government, private sectors, or both in the Middle East?
About 90% of our companies focus on B2B interactions, while only a few pursue B2C opportunities. Most of our solutions are business-centric, like the ticketing platform, which operates on a B2B2C model.
Our companies are not trying to compete with established B2C solutions in the Middle Eastern region, mainly because they require significantly more funding and market presence to succeed.
How crucial is the Middle East region for the IDDA?
The Middle East is not just a market but a strategic partner for us. As an agency, we play a catalytic role in enabling the startup ecosystem in Azerbaijan. We aim to learn from more advanced regional markets and avoid past mistakes. Our mission includes attracting larger companies to Azerbaijan, which can bring jobs and innovative job opportunities.
It is about knowledge transfer and gaining insights to propel our local firms to become regional players instead of remaining localised.
What incentives does the IDDA offer foreign tech investors interested in operating in Azerbaijan?
Our soft-landing project offers several incentives, simplifying market entry for foreign companies. Critical considerations for any investor include market size, talent availability, and a stable business environment.
We provide significant tax exemptions for software development and system integration firms. For instance, companies in our Technopark can enjoy complete profit tax, social tax, and land and property tax exemptions. We also provide streamlined processes for obtaining foreign employees’ and residency permits.
Overall, Azerbaijan boasts a stable economy with a low external debt ratio and substantial savings, creating a conducive environment for investment.
What steps is the IDDA taking to develop local talent for Azerbaijan’s emerging knowledge economy?
We are implementing several initiatives to cultivate talent. One of our key programmes is Technest, which offers scholarships covering up to 100% of tuition fees for short-term courses ranging from three to ten months. So far, we have supported about 10,000 individuals.
Additionally, we have partnerships with institutions that provide specialised training, such as a cybersecurity programme with an Israeli technical university, Technion. We also focus on peer-to-peer education and have established a collaboration with Holberton School, which offers innovative peer-based learning.
Moreover, we send talent abroad to learn from leading startups and ecosystem players, gaining practical insights they can bring back to Azerbaijan.
Why is participation in exhibitions like GITEX crucial for the IDDA?
Participating in exhibitions serves multiple purposes. First, it showcases the dynamic developments occurring in Azerbaijan. Many people remain unaware of our technological advancements; events like GITEX help change that narrative.
Second, exhibitions provide valuable benchmarks for local companies, illustrating achievable goals and encouraging them to think bigger. We aim to connect them with mentors and industry leaders who can guide them on their entrepreneurial journeys.
Is the IDDA currently partnering with any UAE government entities?
We have a Memorandum of Understanding (MoU) with G42. In 2016, the Ministry of Communications and High Technologies of Azerbaijan and the Telecommunications Regulatory Authority of the UAE signed a MoU encompassing information and communication technologies.
Also, in late 2023, an MoU about investment cooperation in data centre projects was signed between the Ministry of Digital Development and Transport of Azerbaijan and the Ministry of Investment of the UAE.
Companies in the Middle East are rightfully concerned about cybersecurity. What measures are in place in Azerbaijan to address these concerns?
Cybersecurity is a significant focus for us. We are working on a project to establish undersea cables connecting Azerbaijan and Kazakhstan, enhancing internet access for Central Asian countries. This initiative will improve the overall infrastructure and give us greater control over data sovereignty.
We are also investing in geofencing and implementing various access levels for data management to ensure protection and compliance with international standards.
Can you provide details of data centres in Azerbaijan?
We are establishing tier-four data centres and plan to begin construction by December.
Azerbaijan already has a robust telecommunications infrastructure, with 96% of the country expected to be fibre-optic covered by the end of this year. This expansion will increase our capabilities and enhance our appeal to international firms.
Is the IDDA targeting Saudi Arabia as a potential market?
Yes! We conduct roadshow events in Saudi Arabia, similar to those in Turkey, Kazakhstan, and other regions. We see great potential in the Saudi market and are actively working to establish connections and opportunities there.
Azerbaijan is making significant strides in the digital space.
Thank you for having me. We are indeed focused on innovation and growth, and we are excited about the future of technology in Azerbaijan and the region.
Featured image: Igor Ovcharenko, Innovation Ecosystem Consultant at Azerbaijan’s IDDA, pictured at GITEX Global 2024 in Dubai. Credit: Arnold Pinto
Last Updated on 2 months by Arnold Pinto
