Harnessing AI and green technologies Azerbaijan’s path to a sustainable digital economy

In recent years, Azerbaijan has been rapidly advancing its digital transformation, embracing key elements of the Fourth Industrial Revolution — Industry 4.0. As part of this effort, the country recently launched a comprehensive strategy to develop the digital economy, with a strong focus on integrating artificial intelligence (AI) across sectors such as manufacturing, energy, transport, and utilities.

The strategy is structured around three main pillars: business, society, and government. Notable progress in these areas was highlighted yesterday at a conference reviewing the 2025 outcomes of the Center for Analysis and Coordination of the Fourth Industrial Revolution (C4IR).

According to the “Azerbaijan 2030: National Priorities for Socio-Economic Development” adopted several years ago, as well as other strategic development plans, the comprehensive digitalisation of the economy and the implementation of global Fourth Industrial Revolution (4IR) standards have been identified as a key objective in transforming the country’s non-oil sector. This vision includes the establishment of new industrial capacities — Industry 4.0 — with the goal that within the next decade, two-thirds of domestic industry will belong to high-tech sectors not related to the oil and gas industry or other raw-material sectors.

Similar objectives were also outlined in the “Concept of Digital Development of Azerbaijan,” approved in January last year by a decree of President Ilham Aliyev. This document covers a range of initiatives for digitalising public administration, improving the e-government system, and enhancing other state information resources and systems. Notably, the Concept also envisages accelerating the adoption of digital technologies in the country, including systems such as Smart City, the Internet of Things (IoT), and AI applications across various areas of government, society, and business.

However, the main efforts to support the digitalisation of the business environment and the industrial sector are being implemented under the auspices of the Center for Analysis and Coordination of the Fourth Industrial Revolution (C4IR), which operates under the Ministry of Economy of Azerbaijan and was directly involved in developing the “Strategy for the Development of Azerbaijan’s Digital Economy for 2026–2029.” 

Five years ago, at the initiative of the World Economic Forum (WEF), the C4IR structure began operating in Azerbaijan in January 2021. Since then, in close coordination with the WEF, it has been implementing projects aimed at enhancing the competitiveness of the economy through innovation and expanding digital infrastructure in entrepreneurship.

“In Azerbaijan, a digital ecosystem is taking shape, and this work is being carried out within the framework of the Digital Economy Development Strategy for 2026–2029. The document defines three goals, nine priority areas, and fifty initiatives,” said Fariz Jafarov, Executive Director of C4IR, during a press conference reviewing the Centre’s activities in 2025. “These initiatives are distributed across three key areas — 26 are focused on business, 15 cover the social sphere, and another 9 target the government sector.”

According to the executive director, the main objective is to build a comprehensive digital economy ecosystem, accelerate the digitalisation of business, and generate added value through innovative digital business models. As part of the strategy’s implementation, hundreds of enterprises are expected to participate in digital transformation programs, new startups will be established, and the pool of highly skilled IT professionals will be expanded.

Specifically, the strategy aims to engage 300 enterprises in digital transformation initiatives, launch 250 new startups, provide 200 small and medium-sized enterprises (SMEs) with access to digital markets, and enrol 40,000 citizens in digital skills training programs. Overall, the plan encompasses modernising network infrastructure, fostering startup development, and advancing Industry 4.0 digitalisation, with active involvement of the private sector through public-private partnership (PPP) mechanisms.

The plan also includes supporting private business initiatives expected to generate 70 million Azerbaijani manats ($41 million) in added value through generative AI solutions. Artificial intelligence is a top priority for C4IR, with ongoing efforts to develop a regulatory framework, ethical standards, and AI governance rules, as well as to establish educational and research resources aimed at preparing young people and equipping all citizens for the AI-driven labour market of the future.

Under the guidance of the Center for Analysis and Coordination of the Fourth Industrial Revolution, pilot projects are already testing the responsible use of AI in sectors such as healthcare, energy, education, agriculture, sports, and e-government, including its active application in call centres. Efforts are also underway to expand AI adoption across various economic sectors, leveraging advanced international experience in the field.

“In Azerbaijan, the first comprehensive concept for applying AI in the energy sector has been developed. The document, titled ‘AI-Based Solutions in Energy,’ analyses the current situation and key challenges in Azerbaijan’s energy sector and identifies potential areas for AI application based on 40 global solution concepts,” noted Jafarov during the event. “This initiative is grounded in international experience and contributes to the deepening of digital transformation in the country’s energy sector.”

The executive director also reported that a new AI-based application is scheduled to launch this year: an electronic platform providing comprehensive information on living, working, and doing business in Azerbaijan for foreign investors, startups, and talents wishing to localise in the country. Another focus of the Center’s AI initiatives includes the implementation of large language AI models, as well as the development of a digital twin of the country to better understand and visualise real-time economic processes.

Notably, under the strategy, C4IR is actively focusing on the development of industrial clusters, integration into international initiatives, and the promotion of a “green” economy. In January of this year, during the Davos Forum, Azerbaijan submitted an application to join the World Economic Forum’s Global Initiative on Transitioning Industrial Clusters. This partnership aims to stimulate the creation of industrial clusters in sectors such as petrochemicals, metallurgy, textiles, and food production, while encouraging the adoption of efficient production models, advanced digital technologies, and the reduction of CO₂ emissions.

In this regard, Jafarov noted that Azerbaijan was among the first countries in the region to receive top recognition from a prestigious organisation such as the World Economic Forum (WEF). Last year, the Petkim and STAR plants, owned by a SOCAR subsidiary, were awarded the WEF’s prestigious prize as some of the most advanced digitalised industrial facilities in the world. In January 2026, SOCAR Carbamide became the first domestic plant to receive this award, making SOCAR the only energy company globally to have earned three Digital Lighthouse Awards.

These achievements reflect systematic transformation, innovation, and effective digitalisation, alongside the efficient integration of Industry 4.0 technologies into operational processes and improvements in energy efficiency. Such experience is highly valuable, and replicating it across the country through C4IR initiatives is a key factor in building a sustainable digital economy ecosystem.