Baku’s skyline is dominated by masts, a testament to the growing use of mobile telecoms in Azerbaijan and BakuTel’s commitment to advancing ICT.

ccording to President Ilham Aliyev, “After the oil sector, the field of communications and information technologies can be intensively developed in our country.” In several ways, the year 2006 marked a watershed for the information and communications technology (ICT) sector. In October 2006, a major trade mission – BakuTel – advanced ICT opportunities domestically and for potential U.S. investors. At BakuTel, President Aliyev reiterated his deep commitment to jumpstarting the knowledge-based sector in Azerbaijan. The rapid growth of technology will create ripple effects for the country as a whole: spurring economic diversification, raising educational standards, and advancing competitiveness in the region.

In culmination of this pledge, the Ministry of Communications and Information Technologies signed an agreement of cooperation with the U.S. government to accelerate reforms. U.S. Ambassador to Azerbaijan Anne Derse remarked, “Telecommunications and information technology are clearly promising sectors, essential for Azerbaijan to fulfill its goal of rapid development of the non-oil sectors of the economy.”

The telecommunications industry represents the fastest-growing and most dynamic part of Azerbaijan’s high-tech sector. In a country where mobile penetration is 27 percent and soaring month by month, Azercell and Bakcell stand out as the market leaders. In 2007, a third mobile company, Azerfon, will launch its operations. Ali Abbasov, Minister of Communications and Information Technologies, embraces policies to fully liberalize the ICT sector. By 2007, his ministry plans to auction off its 35.7 percent stake in Azercell, the market leader, to private companies.

What steps have been taken by your ministry to build an information society so far?

The Ministry of Communications and Information Technologies is in charge of building an information society in Azerbaijan. The ministry has two main directions: to intensively utilize ICT for socio-economic development, and for the civilian development of society. In the socio-economic sphere we continue to create Special Economic Zones and increase the attraction of foreign investment. In the civilian sphere we play a democratizing role for our society.

What do you think are the main assets Azerbaijan can capitalize on, in order to position itself as an ICT hub in the region?

Firstly, there is a delay in ICT production in the region and there is no developed system of ICT production in Central Asia. Secondly, skilful human resources are vital in the ICT sector. Traditionally we have good human resources and we also understand that this can always be improved. Thirdly, Azerbaijan enjoys a positive international reputation following successful oil and gas projects that attracted foreign investors in the country. Finally, the government in Azerbaijan understands that attractive conditions for foreign investment must be created and guarantees have to be given to foreigners.

We have several points in our Special Economic Zones plan. The first is the production and export of ICT products, and the second is the establishment of a technopark. Thirdly, we are working to increase Azerbaijani telecommunications infrastructure, and the fourth is to create a transitional content data center.

Your ministry signed an agreement with the UNDP to develop internet access in the regions. Could you describe the cooperation between your ministry and international organizations to close the digital gap between Baku and the regions?

We have signed two agreements. The first with the UNDP on e-government, and the second on expanding internet access for the education and science communities. Our target is to develop society by improving access to the information resources of the world. The World Bank will also join our e-government project. This initiative gives civilians the chance to take part in governance to build an information-based civil society. The context of e-government in Azerbaijan is accepted as a basic model for the region. While achieving these two projects we want to strengthen socioeconomic development and give people a higher level of freedom of expression.

Dr. Ali Abbasov (left), Azerbaijan's Minister of Communications and Information Technologies, and Jason Hyland, Chargé d'Affaires at the U.S. Embassy in Baku, following the award of a USTDA grant for technical assistance.

The ICT sector is growing at an unprecedented 35-40 percent growth rate. Aside from the oil industry, technology-based industries remain the most profitable in the economy. In your opinion, what have been the main key drivers of this boom?

Annual growth of the ICT sector is 5 percent more than the total economic growth of Azerbaijan. Beginning in 2003, the government initiated policies that made ICT the priority sector for the Azerbaijani economy. The key driver of the development of the ICT sector is that society, business and government are cooperating and interested in this area in unison. The next priority for the ministry will be special technology-driven economic zones. Presently, a consulting company and an international team of experts are preparing recommendations which will be submitted to the government soon. In this regard, I think that the Azerbaijani economy will launch a new stage of development.

In April, you visited the United States with a delegation that included President Aliyev. How has your ministry branded Azerbaijan abroad?

President Aliyev and President Bush agreed to deepen economic relations. After the oil and gas sector, the ICT sector was chosen as the second field for cooperation. About 40 percent of the ICT market is currently dominated by U.S. multinational companies, and the U.S. is the largest source of investment. My visit to Washington aimed to develop the ICT sector in Azerbaijan and to attract the attention of American companies to the Azeri market. We met with leading ICT companies, such as Microsoft, HP, and Cisco, who are willing to invest in Azerbaijan. Microsoft has some requests concerning the protection of intellectual property in Azerbaijan. Our government will soon adopt new legislation on with regard to this issue.

Call Competition

Expanding at around 35 percent annually, the information and communications technologies sector is outstripping Azerbaijan’s breakneck GDP growth rate and is the fastest growing part of the economy. The global mobile revolution has opened a gateway of choices for Azerbaijan’s subscriber base, which tops 2.6 million. The cost of international mobile phone calls has been slashed 20 percent. Mobile and internet penetration increases on a monthly basis. While Azercell and Bakcell continue to provide top-notch service for its base of mobile customers, newcomer Azerfon is set to raise the bar for competition when it launches services in 2007.

Baku ICT Exhibition

The establishment of the Caspian University and U.S. input is carrying ICT forward.

In October, the Ministry of Communications and Information Technology hosted the BakuTel ICT Exhibition. The exhibition’s profound success was attributed to a groundswell of interest from Silicon Valley, centered on Azerbaijan’s high-technology opportunities. A memorandum of understanding was inked between the U.S. and Azerbaijani governments to advance bilateral cooperation for future ventures and investments. “Many American ICT companies are ready to participate and make significant investments,” says Ali Abbasov, Minister of Communications and IT. “The memorandum of understanding guarantees participation from American companies in Azerbaijan’s ICT projects.”

The Caspian University

The Caspian International University of Information Technologies will open its doors by 2009. This institution is part of ambitious plans to establish an international ICT university in Azerbaijan. “Large companies from the U.S. are interested in creating this institution with us,” says Minister Abbasov. So far, Azerbaijani governmental committees have signed a protocol of cooperation with Chalmers University of Technology in Sweden. This breakthrough center for the dissemination of high-tech knowledge will help realize President Ilham Aliyev’s vision to stimulate educational enterprise through information technologies.

U.S. ICT co-operation

2006 witnessed the inroads of two major U.S. technology firms into the Azerbaijani market: Cisco and Microsoft. In July, Cisco opened an office in Baku. Three months later, the U.S. major opened its Cisco Networking Academy at Baku State University to help develop research, educational and civil society capabilities through the training of young ICT specialists. In February, General Director of Microsoft CIS Sergiusz Wiza announced the opening of a branch office in Baku. With a starting budget of $1 million, the company will expand its network and train ICT specialists. Microsoft chose to operate in Azerbaijan due to the country’s strong market prospects.