Azerbaijan accelerates process of digital transformation Review by Caliber.Az

In recent years, the world has been paying more attention to digital transformation, providing for the introduction of modern IT technology in the business processes of enterprises and the financial sector, activities of government, and public organisations. This major trend is fully supported in Azerbaijan, where the charter, structure, and regulation of the Information and Communication Technologies Agency under the Ministry of Digital Development and Transport was recently approved by a presidential decree.

The acceleration of digitalisation processes is one of the most complex and demanded tasks to be implemented by the Azerbaijani government in the coming years. Building on the basic network infrastructure of the country, it is necessary to accelerate the development of the digital economy, expand innovative production and service sector, and create prerequisites for the formation of human capital, including in software businesses, start-ups, etc. These tasks are to be solved within the strategic programme "National Priorities for Socio-Economic Development: Azerbaijan 2030" and the "Strategy for Socio-Economic Development of Azerbaijan 2022-2026" implemented in accordance with it. One of the goals of the digital transformation of the domestic economy, in particular, is to increase its competitiveness, focus on innovative trends, and be more fully included in the international division of labour. To this end, the country has already started to form an ecological niche for IT start-ups, the introduction of IoT technologies and other elements of Industry 4.0, with considerable support from Türkiye, Israel, some European countries, as well as relevant structures of the World Economic Forum (WEF), at the initiative of which a branch of the Industrial Revolution IV Centre was recently established in Baku.

The digitalisation processes in Azerbaijan are not yet developing evenly enough. For quite some time now, a significant part of public services have been provided in electronic format, digital signature mechanisms have been introduced, public utilities and financial services have been digitised, and IT elements are generally used in public administration, but the country still lags behind in the digitalisation of corporate governance, industrial production, financial and transport sectors, trade and a number of other spheres.

The need to accelerate the digital transformation and the new tasks assigned to the country's communications agency were formulated in the decree of the head of state dated April 27, 2021. The logical continuation of this trend was the decree on certain measures to improve governance in the field of digitalisation, innovation, high technology, and communications signed by President Ilham Aliyev on October 11, 2021. In particular, based on a new vision of the goals and objectives of the Ministry of Communications, it was renamed to the Ministry of Digital Development and Transport and within its structure, four agencies were created - legal entities of public law, one of which was the Information and Communication Technologies Agency (ICT Agency).

A few days ago, by another presidential decree on ensuring the activity of the ICT Agency, the statute, structure as well as regulation of the new subdivision of the ministry were approved. In particular, the statutory fund of the Agency will amount to 100,000 manats, and within a month the Communications Agency should approve the salary fund, and staff, and take other measures prescribed by the decree.

The key purpose of creating a legal entity of public law - the ICT Agency - is to optimize the process of regulation of the ICT sector and create more flexible mechanisms of industry management for its adaptation to global technological changes. In this respect, the Agency is responsible for certification, accounting, regulation, and control (including quality control) in the field of mobile communications and ICT, including the regulation of relations between telecommunications operators and other market participants. The Agency is also responsible for the registration of telecommunication operators and providers of internet telecommunication services.

The Agency has also been assigned the task of managing the radio frequency spectrum, which is a very urgent task, to optimise its use and ensure a fair distribution of frequencies among market participants. An equally important goal is to increase the efficiency of the protection of the republic's radio frequency resources, taking into account the periodic violation of international rules for broadcasting and cellular communications by the bordering countries (Iran, Armenia).

Modernisation of the regulatory framework, implementation of the best international practices, as well as fulfilment of the obligations undertaken by Azerbaijan under international treaties are other areas of the regulator's activities. At the same time, the Agency together with the relevant government agencies has been tasked to take measures to attract investment in the IT sphere and ensure the preparation, implementation, and management of international and local investment projects. All these steps are designed to accelerate the digital transformation, including the development of the digital economy, and will eventually increase the added value of the ICT sector in the country's GDP.

The most important task of the new structure will be to act as regulator in the field of price and tariff policy: in particular, to ensure healthy competition in the industry by preventing monopolization of certain sectors and suppressing unfair competition. This may be the most important point for the domestic telecommunications sector, as regulatory gaps and not always well-developed and clear administrative mechanisms, as well as the lack of clarity of the regulator's functions sometimes cause dissatisfaction among local market players, not to mention that the country has also been criticised by relevant international organisations.

The Agency will also work to overcome difficulties and strengthen control over mobile and fixed broadband and universal services in peripheral regions. The latter is an urgent task, as access to high-speed internet services is difficult in some remote regions and mountainous villages. The new agency will also have to optimise policies on quality standards and technical regulations and conduct systematic monitoring in this area. The lack of proper control is also a source of criticism among consumers of IT services and has a serious negative impact on the country's technical readiness indicators.

It is also worth mentioning that the ICT Agency, as a legal entity under public law, will need to acquire all the functionality to become an independent regulator of private IT-sector activities in the near future. The fact is that over the years, criticism of the communications ministry's activities was mainly due to the fact that, due to its structure, it simultaneously performed several mutually exclusive functions. The ministry was responsible for regulating the ICT market and drafting ICT legislation, while at the same time it regulated fixed-line Internet and telephone service providers (which in the past had shares in mobile phone companies). In addition, a number of divisions of the communications authority operated DATA centres, optical backbones, and other resources. All of these and a number of other divisions of the ministry were market participants and provided commercial services. This complicated situation often created a conflict of interest between public and private companies, with some market participants believing that the communications ministry defended government agencies more zealously.

The Ministry of Digital Development and Transport plans to privatise all of its enterprises and denationalise its affiliated structures, after which it will act exclusively as a regulator of the telecommunications market in Azerbaijan. In this case, the most important market regulation tasks will be performed by the ICT Agency, which is being created nowadays.