"Azerbaijan 2030": staking on digitalisation and corporate governance standards  Anaysis by Caliber.Az

About two years ago, work started on the implementation of a new long-term development program of our country "National priorities of socio-economic development: Azerbaijan 2030". It was subsequently used as the basis for the development of a medium-term strategy. These documents are aimed at achieving qualitative changes in the activities of state companies and the sphere of public finance, expanding private investment, and accelerating the development of the digital economy, innovation, and human capital. The most important element of the new strategy is the introduction of corporate governance mechanisms and the digitalisation of the economy and labour market. Prospective plans for these areas have been recently discussed at the Baku International CEO Summit.

Azerbaijan 2030 has five priorities: to ensure sustainable growth and competitiveness of the economy; to create a dynamic, inclusive society based on social justice; to build competitive human capital and attract modern innovation; to make a great comeback in the liberated territories, and to develop programmes that create a clean environment and green growth countries.

A significant part of these messages was reflected in the "Socio-Economic Development Strategy for 2022-2026" developed at the beginning of this year. Moreover, the five-year strategy emphasises the economic series of transformations - it plans to introduce corporate governance mechanisms and create a transparent environment in state and private companies, and to create ecosystems with effective incentives for the private sector. There are also plans to expand public-private partnerships, including as part of the process of digitalisation of the economy and the formation of Industry 4.0. The latter is particularly necessary for innovative, high-tech projects, where private companies still need public support and participation. The most important objective of the strategy is to ensure further labour market reform through digitalisation of all mechanisms in the employer-employee nexus.

It is noteworthy that the first steps towards implementation of corporate governance standards based on the principles of transparent and equal management of collective forms of business were taken in 2005-2011 in the framework of joint "Azerbaijan Corporate Governance Project (ACGP)" with International Finance Corporation (IFC) and Swiss State Secretariat for Economic Affairs (SECO). Under the ACGP project, the implementation of corporate governance standards was mainly carried out in the banking sector. Assistance was also provided to a number of microfinance institutions, insurance companies, and pension funds, but it was mostly limited to the financial sector.

However, within the framework of a number of programmes implemented in recent years by the Ministries of Economy, Labour and Social Protection, Transport and Digital Development that envisage a fundamental reform of the socio-economic sphere, the implementation of corporate governance standards and their convergence with the digitalisation process is becoming an all-encompassing area. These objectives encompass almost the entire spectrum of administrative and production process transformation in the public sector, and subsequently in the private sector and the labour market.

The vision for the reforms envisaged in Vision 2026 became clear during the Baku International CEO Summit held in mid-November, which was attended by a number of local and foreign companies, as well as representatives of government agencies.

"The future of business development is associated with digitalisation, and in the long term trillions of dollars will be invested in this area worldwide," said partner of McKinsey & Company Murat Gursoy at the forum. - The second important factor is sustainable business development and transformation of the labour market to ensure sustainable human resources policy. Undoubtedly, digitalisation will play a significant role in these areas as well."

In Azerbaijan, a five-year strategy has been developed to introduce corporate governance mechanisms in state-owned companies, orienting the public sector towards productivity growth and cost reduction, creating a transparent environment, and reducing the share of "toxic" assets in government-supported projects. In support of these objectives, the EU and the World Bank (WB) have initiated the Instrument for Operational Technical Assistance (AZTAF) programme to provide advice and technical support for better management of state-owned companies, as well as increased digitalisation, energy efficiency, and green projects. Nevertheless, along with the support of international donor agencies, the government's engagement in this area needs to be strengthened.

"New steps need to be taken to improve corporate governance in Azerbaijan, as such tools that increase the competitiveness and commercial value of businesses are not yet widespread in the country. Therefore, new steps are needed in this area, including for training specialists in the field of corporate governance, expanding its scope," said another forum participant, chairman of the Small and Medium Business Development Agency (KOBİA) Orhan Mammadov.

In this regard, Azerbaijan should accelerate the process of digital transformation of the economy, expand innovative production and the service sector, and create prerequisites for the formation of human capital, including in software businesses, start-ups, etc. There is some groundwork in this direction: for more than a decade, a significant portion of public services in the country has been provided in electronic format, digital signature mechanisms have been introduced, and the services of the public utility sector and fiscal sphere have been digitised, as have the IT elements in the sphere of public administration.

An illustrative example is such an effective tool as the ASAN Xidmət centres operating for over 10 years in all regions of the country, which provide more than 320 services to the population and businesses through the principle of "one window", a transparent control mechanism with the widespread introduction of IT technologies. "By 2025 Azerbaijan plans to create a model of ASAN Xidmət based on artificial intelligence. This year for the first time we provided ASAN services outside our country - in Türkiye, and our experience in the field of e-government is now implemented in Indonesia and applied in several other countries," Fariz Jafarov, director of the Center for Development of e-government in Azerbaijan, said at Baku CEO Summit.

The scientific and technical achievements in the field of digitalisation will also be actively applied in the field of social protection, and development of the labor market: the national projects "Azerbaijan 2030" plan to improve the welfare of vulnerable populations, the disabled, including children with disabilities under the age of 18, and further improvement of the pension system, strengthening of its financial stability. Thus, according to the State Employment Agency under the Ministry of Labour and Social Protection, the digitalisation of labour relations will be strengthened, and in addition to large enterprises, this work will cover small businesses and their employees.

Among other things, a digital employment map containing regional, demographic and other information has been created at the initiative of the State Employment Agency. Through this IT tool, it will be possible to track factors such as population growth, number of jobs, employment of men and women, number of school graduates and students, and the number of relevant professionals. This data will make it possible to quickly identify supply and demand in the labour market in a particular area of the country.