Azerbaijan: Charting the path for a digital breakthrough Analysis by Khazar Akhundov

Leading countries worldwide are striving to build resilient digital ecosystems that foster human capital, address climate risks, and support the UN Sustainable Development Goals (SDGs), particularly those aimed at narrowing the digital divide. In recent years, Azerbaijan has actively embraced international best practices from the Fourth Industrial Revolution (4IR), integrating advanced digital solutions into its e-government system. Preparations are also underway to deploy artificial intelligence (AI) across industry, transport, and finance sectors.

The country’s prospects for accelerating digitalisation were highlighted at a meeting on February 11, chaired by President Ilham Aliyev, which focused on a unified action plan — the “Azerbaijan's New Digital Architecture.”

“The application of artificial intelligence, the creation of data centers, and the introduction of reforms related to digitalization actually determine the future development of countries,” President Aliyev said. In Azerbaijan, significant work has been carried out in this direction,” President Ilham Aliyev said at the meeting. “Our initiatives in the areas of digitalization, artificial intelligence, and the establishment of data centers should ensure the long-term and sustainable development of our country.”

To accelerate these efforts, last year Azerbaijan adopted the “Concept of Digital Development of Azerbaijan” and the “Azerbaijan Artificial Intelligence Strategy for 2025–2028”, initiatives led by President Ilham Aliyev. These documents aim to drive the country’s digital transformation, including in line with Industry 4.0 principles.

In recent years, significant steps have been taken to develop the government cloud system (G-Cloud), expand Big Data and data centre infrastructure, and create an artificial intelligence ecosystem through the Center for Analysis and Coordination of the Fourth Industrial Revolution, operating under the Ministry of Economy.

Speaking at the meeting, President Aliyev outlined upcoming priorities under the national digitalisation programme. “Currently, a project to lay a fiber-optic cable connecting us with the eastern shores of the Caspian Sea is well underway, and I hope it will be completed this year,” he said. “This will ensure our connectivity with the East, and we must also work on new connections with the West.”

A robust fibre-optic network is a fundamental requirement for advancing digitalisation, and Azerbaijan has made notable progress. According to the International Telecommunication Union (ITU), the country now ranks among regional leaders in providing 100% broadband internet coverage to its population.

To further enhance the network’s capacity, the final stage of the TransCaspian Fiber Optic (TCFO) project will be implemented this year in partnership with Kazakhstan. A 380-kilometre fibre-optic cable will be laid along the Caspian Sea floor, providing high-speed internet connectivity of around 400 terabits per second and ensuring stable transit of digital traffic from China and other Asian countries. The TCFO will become part of the international Digital Silk Way megaproject, positioning Azerbaijan as a regional digital hub.

The next priority under the “Azerbaijan's New Digital Architecture” action plan is to attract international vendors, chipmakers, software companies, and network integrators, as well as specialised organisations in High-Tech and FinTech sectors, to the country.

“[...] the Charter on Strategic Partnership signed between the U.S. Government and the Government of Azerbaijan in this building yesterday further reinforces this advantage. This Charter is a historic document. It has already been published in the media, and everyone can see its provisions, including data centers, digitalization, artificial intelligence, and our close ties with American companies in this area,” the president said, emphasising that documents on strategic partnership have also been signed with ten European Union member states, and last year — an agreement on comprehensive strategic partnership with the People’s Republic of China (PRC).

Leveraging the advantages of strategic partnerships with the U.S., China, and the EU, the government must make every effort to attract advanced expertise, knowledge, and know-how in IT technologies and digitalisation to Azerbaijan.

At the same time, the country needs to optimise the digitalisation process, overcome the fragmentation of initiatives implemented by various government agencies, and ensure unified coordination of all projects. The Ministry of Digital Development and Transport (MDDT), together with other state bodies, must quickly prepare a concrete action plan for the upcoming work. The president noted that, to organise operations more effectively, each government agency — primarily ministries — should appoint a deputy responsible for digitalisation, artificial intelligence, and cybersecurity to liaise with the MDDT leadership, and that this area should be recognised as a priority within every state institution.

Another important upcoming task involves unifying the various digital platforms and applications developed by ministries and agencies in recent years. Government electronic services should be provided through a single platform, my.gov, from a centralised hub. Such optimisation of the e-government system will significantly simplify technical processes and software updates, providing substantial benefits to citizens.

Among the upcoming tasks, the head of state also highlighted reforms in the education system and curricula to train highly qualified personnel, while ensuring that issues of cybersecurity remain a central focus. Equally important is the development of support mechanisms to encourage the private sector to invest in digitalisation and the application of AI in their operations.

“In the digital world, the digital economy is already beginning to surpass the traditional one: we expect that the value added created by artificial intelligence by 2030 will amount to around $16 trillion,” said Rashad Nabiyev, Minister of Digital Development and Transport, during the meeting. “In Azerbaijan, an initial action plan has also been prepared to advance the country’s technological development.”

According to the minister, this action plan is based on four pillars: accelerating digitalisation and digital transformation; broadly implementing AI solutions in government agencies and private companies; creating an innovation ecosystem that allows private companies to generate added value; and ensuring robust cybersecurity in the emerging virtual environment.

To achieve all the goals outlined in the action plan, it will be necessary to comprehensively develop human capital, modernise and expand existing infrastructure, bring sectoral legislation in line with contemporary requirements, and ensure flexibility in management processes and administrative mechanisms.

Under the “Azerbaijan's New Digital Architecture” action plan, a key priority is the creation of financial mechanisms to support startups, including venture capital, crowdfunding, and other funding models. According to the minister, a draft law has already been prepared to facilitate the development of these mechanisms, with adoption expected in the coming months.

Once enacted, the law is expected to significantly expand the local startup ecosystem, which is currently served by only three venture funds with a combined capital of 12 million manats ($7 million), by attracting both domestic and international investors.

On the human capital front, the plan calls for implementing favourable fiscal policies and adopting globally recognised measures to attract “digital nomads” and IT freelancers. Equally important is ensuring early-stage revenue for startups, including through government support in purchasing digital products developed by these companies. The action plan already outlines specific mechanisms to achieve this goal.