From oil to algorithms: Azerbaijan's journey to digital excellence

In today's rapidly evolving landscape, the integration of automation and digitalization has become paramount across many industries. According to a report by the International Data Corporation (IDC), global spending on digital transformation is expected to reach $3.9 trillion in 2027. Governments, international organizations and multinational corporations are spearheading efforts to streamline processes and eliminate barriers between economies. The World Economic Forum estimates that by 2025, the digitalization of various industries could contribute up to $45 trillion to global GDP, underscoring the economic potential of embracing digital technologies. This concerted push towards greater connectivity holds immense potential to bolster global GDP, marking a pivotal step forward in our collective economic journey.

It's crucial to recognize that the exponential increase in global GDP can serve as a powerful tool in mitigating potential challenges on the way. The International Labor Organization (ILO) reports that by 2030, up to 375 million workers globally may need to switch occupational categories as a result of automation and digitalization, highlighting the importance of reskilling and upskilling programmes for workforce readiness. By fostering robust economic growth, we can create new opportunities for innovation and job creation.

In pursuit of the aforementioned globally streamlined processes and borderless connectivity, governments are diligently working towards formulating robust digital ecosystems within their jurisdictions. At the heart of this endeavour lies the imperative to cultivate an environment – including digitally adept physical and regulatory infrastructure – conducive to innovation and collaboration.

Research by the Organization for Economic Co-operation and Development (OECD) suggests that countries with digitally adept regulatory environments experience higher rates of innovation and economic growth, emphasizing the significance of regulatory frameworks in fostering digital innovation. Furthermore, governments, in collaboration with international organizations, are actively refining strategic roadmaps to navigate the complexities of the digital landscape and achieve a seamlessly interconnected global economy. With the transformative impact of automation, digitalization and strategic initiatives on global economies, collaborative efforts are essential to harness the potential of digital technologies for economic growth and societal advancement.

The Centre for Analysis and Coordination of the Fourth Industrial Revolution under Azerbaijan’s Ministry of Economy, which also hosts the Azerbaijan Centre of the Fourth Industrial Revolution Network of the World Economic Forum (C4IR Azerbaijan), has embarked on the journey of improving the country’s digital economy strategy for 2024-2030.

Developed in response to advanced technological progress and global challenges, alongside Azerbaijan's development dynamics, the strategy aims to comprehensively transform the economy across business, societal and governmental spheres. Its mission is to address field-specific challenges through collaborative and flexible decision-making, fostering connectivity among businesses, civil society and governmental institutions. Additionally, it seeks to bolster Azerbaijan's regional and international standing amid the transition to a digital economy.

This strategy also encompasses research and analysis to assess and continually enhance the digital economy ecosystem. It prioritizes creating a conducive environment for digitalization and fostering the emergence of new businesses. Support will be extended for the digital transformation of existing enterprises, while promoting data-driven decision-making in the realm of the digital economy. With nine flagship projects and over 60 initiatives, this strategy is poised to play a pivotal role in driving the digital transformation of Azerbaijan's economy.

In alignment with the strategic objectives outlined in the Strategy, C4IR Azerbaijan, in collaboration with the World Economic Forum's Investment and Practice platform, is spearheading the Digital FDI (Investing in the Digital Economy of Azerbaijan – IDEA) project. The first phase of this initiative has been successfully concluded, marked by comprehensive surveys involving approximately 100 firms and interviews with 15 entities investing in Azerbaijan's digital economy. Through these engagements, 13 key policy directions necessitating government action were identified.

To further validate these findings and prioritize actionable steps, a workshop was convened in June 2023, bringing together representatives from both the public and private sectors. This collaborative effort resulted in the identification of three specific action areas that will be prioritized in the project's second phase.

This phase will encompass targeted workshops designed for startups and SMEs operating in the digital realm, providing them with invaluable insights and strategies for scaling up and attracting investments. Furthermore, Azerbaijani firms will be introduced to the SIRI (Smart Industry Readiness Index) assessment tool, offering them the opportunity to evaluate the effectiveness of their operations across 16 essential aspects. These initiatives are poised to equip businesses with the tools and knowledge needed to thrive in the digital landscape, fostering innovation, growth and competitiveness in Azerbaijan's evolving economy.

The Investment Calculator tool, valuable for businesses and investors alike, is also a key component of the second phase. It enables stakeholders to make informed decisions by providing accurate projections of potential returns on investment, facilitating strategic planning, risk assessment and resource allocation. Additionally, the Investment Calculator aids in streamlining the investment process, enhancing transparency and fostering confidence among investors. Overall, it empowers users to optimize their investment strategies and maximize their financial outcomes.

Ultimately, the project aims to enhance the country's attractiveness for foreign direct investment (FDI) while empowering local firms and startups to effectively target foreign investors. By addressing these strategic action areas, the project endeavours to foster a conducive environment for digital investment and economic growth in Azerbaijan.