Economist names 6 prerequisites for Azerbaijan's transformation into regional financial centre

Conditions are being formed in Azerbaijan for transforming the country into a regional financial centre, Russian Gazprombank’s Research Department Deputy Head, Chief Economist for the CIS countries Gulnara Khaidarshina said.

According to her, this potential is due to six prerequisites, Report informs.

First, Azerbaijan occupies a unique position at the crossroads of key Eurasian transport routes from North to South and from East to West.

"On the one hand, Azerbaijan is at the centre of the Trans-Caspian International Transport Route. This project, which connects the East and West of the Eurasian continent, is being implemented jointly with Kazakhstan, Türkiye and Georgia. On the other hand, Azerbaijan occupies a central position next to the North-South transport corridor, oriented on the development of trade with the countries of South Asia. At the same time, Azerbaijan has all the necessary transport and logistics infrastructure, namely air, rail, pipeline and sea routes," Haidarshina said.

Secondly, the expansion of the transport and logistics infrastructure will contribute to the creation of new industries, including high-tech enterprises located near key transport hubs.

In her opinion, a good example is the urea plant built in 2019 by SOCAR in the Sumgayit Chemical Industrial Park, which began exporting nitrogen fertilizers to India in 2022. In addition, a new large enterprise for the production of aluminium products will be created in the West of Azerbaijan. In the first stage, investments will amount to 132 million US dollars.

"We also note that large oil and gas reserves, combined with proximity to transport corridors, increase the importance of Azerbaijan in ensuring the energy security of Eurasia," Gazprombank's chief economist said.

Thirdly, Azerbaijan is turning into a Eurasian digital hub. The national Internet provider AzerTelecom is implementing a large-scale program called "Azerbaijan Digital Hub".

The program aims to eventually transform Azerbaijan from an importer of digital services into the largest exporter in a region that is home to a quarter of the world's population (Middle East, Central, South and Southeast Asia).

This program is being implemented in partnership with the even larger Digital Silk Way project, in which Azerbaijan participates jointly with Kazakhstan and Turkmenistan. The implementation of this project will speed up the transfer of data between the countries of Central Asia, China and Europe.

Fourthly, Azerbaijan focuses on the development of the IT sector with the assistance of government programs.

"With state support, three directions for the development of the IT sector are being implemented, namely the creation of financial technologies, ensuring cybersecurity [Azerbaijan’s Association of Cybersecurity Organisations was established in 2022] and the development of IT outsourcing in Azerbaijan with the involvement of foreign programmers and other industry workers. The goal is to turn Azerbaijan into a regional centre for outsourcing IT services, which will also help strengthen its role in the Eurasian space," Khaidarshina believes.

Fifth, Azerbaijan is actively developing a startup ecosystem with the support of leading countries in this field. In 2021, the state program for the development of a startup ecosystem was launched.

As part of this program, a preferential tax regime has been introduced for start-ups, providing for exemption from income tax and VAT. In addition, the StartUp School project, as well as IT schools at major universities, have been created and are successfully operating in the country.

And finally, the last prerequisite is the improvement of the indicators of the digital development index in Azerbaijan. According to the UN Digital Infrastructure Development Index, over the past 10 years, Azerbaijan has risen by 10 positions in the ranking among 193 countries and ranked 80th in 2022.

"Thus, given that the creation of a large-scale interregional transport and logistics infrastructure, as well as new industries, requires an expanded coverage of financial services supported by a developed digital infrastructure, and Azerbaijan demonstrates all the prerequisites for becoming a regional financial centre," the representative of Gazprombank emphasized.