Transparency as a standard Azerbaijan’s new electronic procurement architecture

A key objective of the economic reforms being implemented in Azerbaijan is to expand public-private partnerships and increase the involvement of the private sector—primarily small and medium-sized enterprises (SMEs)—in public procurement and tender processes. A logical outcome of this effort was the entry into force on January 1, 2024 of the “Law on Public Procurement.”

To strengthen state oversight and ensure greater transparency, as well as to simplify all public procurement procedures for entrepreneurs, amendments to this law were recently introduced during a plenary session of the Milli Majlis (Azerbaijani parliament). All of this work is being carried out as part of the development of Azerbaijan’s unified digital financial system. Recently, issues related to optimising the public procurement sector were also discussed at a meeting of the Economic Council.

The long-term document “Azerbaijan 2030: National Priorities for Socio-Economic Development,” developed in early 2021, along with the medium-term strategy for 2022–2026 derived from it, aims to ensure healthy, balanced, and resilient economic growth in the country. In pursuit of the same goals, tax and customs reforms are being implemented to strengthen the fight against the shadow economy, encourage business activities that are fully transparent for taxation purposes, and promote the development of a most-favoured-nation regime for SMEs.

All ministries and agencies within the economic sector are actively involved in pursuing these objectives, with the planning process overseen by the Cabinet of Ministers through the Economic Council. Established in 2020 to replace the Financial Stability Council, the Economic Council is responsible for diversifying and enhancing the competitiveness of the domestic economy, reducing reliance on oil and gas, and ensuring macroeconomic stability. It also coordinates the activities of state bodies to boost GDP, attract foreign investment, and develop long-term strategic plans for the country’s growth, including the “Azerbaijan Socio-Economic Development Strategy for 2027–2030” and the “Second State Programme for the Great Return to Liberated Territories.”

The most recent meeting of the Economic Council, held on February 26 under the chairmanship of Prime Minister Ali Asadov, focused on pressing issues in the field of entrepreneurship. The topics, prepared by the Reform Working Group aimed at removing obstacles and difficulties for businesses and improving the business environment, covered the areas of “Judiciary and Law” and “Public Procurement Procedures.” Taking into account the opinions and proposals of the meeting participants, it was decided to prepare amendments to the draft relevant legal acts and submit them for government consideration.

Notably, improving the public procurement sector is recognised as one of the most important measures for supporting the business environment in Azerbaijan. This is hardly surprising, given that public procurement and various services provided by the private sector to government bodies account, on average, for around a quarter of all government budget expenditures in Azerbaijan—and likely even more when tenders conducted under the state programme for the revival of the Karabakh region are taken into account.

To support SMEs participating in tenders and ensure transparency in competitive procedures, the public procurement mechanism has been progressively enhanced in recent years: purchases exceeding 50,000 manats (approximately $30,000) are now required to be conducted through the electronic procurement portal (etender.gov.az) via an open tender process. The portal has been integrated with the Central Bank’s electronic guarantees registry, the tax certificates database of the State Tax Service, and subsequently with the State Statistical Committee’s business entity registry.

The digitalisation of public procurement has resulted in significant savings for the state budget and state-owned companies. More importantly, it has delivered a substantial anti-corruption effect. Moving tender procedures online has greatly improved equal opportunities for SMEs participating in digital selection processes. In turn, the transparency of these procedures provides the best guarantee against “grey” schemes in public procurement.

“Azerbaijan has made significant progress in optimising public expenditures — the same goods are now being purchased at substantially lower prices while maintaining volume and quality,” noted Jafar Babayev, Adviser to the Chairman of the State Service for Antimonopoly and Consumer Market Control, during the Second National Competition Forum held last October. “Following the adoption of the new ‘Law on Public Procurement’ and the entry into force of the new regulatory norms, we are observing an interesting phenomenon — while the volume of purchases remains the same, their cost has dropped significantly, resulting in considerable savings for the state budget.”

The positive effect of digitalising public procurement was also evident last year. According to the State Agency for Antimonopoly and Consumer Market Control under the President of Azerbaijan, in 2025, a total of 9,965 electronic procurements were conducted under the state framework, amounting to 4.9 billion manats ($2.9 billion), representing an increase of 11.4% and 1.8%, respectively, compared to 2024. At the same time, the average number of participants in last year’s tenders was 3.5, reflecting a 2.9% growth and indicating increased competition.

Work on improving the legal and administrative frameworks governing public procurement continues, and this process is being coordinated with the development of Azerbaijan’s unified digital financial system. This effort is aimed at enhancing transparency and efficiency in the management of public finances and involves the digitalisation of budgetary processes, accounting, and public procurement.

“Under the implementation of the Presidential Decree by Ilham Aliyev on ‘Additional Measures for the Organisation of Effective Management of Public Finances’ dated 25 August 2025, the ‘Digital Public Finance’ information system is being created as a single integrated ecosystem rather than as separate platforms,” stated Sahil Babayev, Minister of Finance of the Republic of Azerbaijan, at a January meeting of the relevant working group. “The development of information systems based on a unified approach, strengthening mutual integration, and applying centralized management mechanisms will ensure increased efficiency, transparency, and effectiveness in financial governance.”

Recently, during a plenary session of the Milli Majlis, amendments to the Law on Public Procurement were reviewed, aimed at ensuring that the procurement of goods, works, and services with public funds is conducted through electronic contracts and that these contracts are concluded electronically.

Under the amendments, contracts for procurement between procuring organisations and business entities—arising from the procurement procedure (including contracts governed by the Law on Public Procurement, as well as contracts for goods, works, and services specified in Articles 3.2.1, 3.2.4, 3.2.8, 3.4, and 3.8 of the law)—will be executed electronically via the Digital Public Finance information system. The amendments also regulate various aspects of the process, such as sending acceptance notifications, setting deadlines, and transferring necessary information to the portal of the information system. The draft was put to a vote and adopted in the third reading.

Thus, integrating the electronic public procurement system into a single digital portal will accelerate and simplify tender procedures, making the system more transparent and user-friendly for entrepreneurs.