ANTI-CRISIS PACKAGE

In spite of the rapid development of this sector, those involved in the local information-technology [IT] market have not yet been able to generate any sizeable investment resources on their own. Therefore the capitalisation of all the long-term beginnings of the last decade, primarily the projects to develop an Internet infrastructure, have largely been implemented at the expense of the state. In conditions where world oil prices have halved so that the treasury's income has noticeably dropped, Azerbaijan's Ministry of Communications and Information Technologies (MCIT) is proposing revising the approach to the development of the IT-industry, in particular by diversifying its sources of funding

Being economical

"The need to be economical with state funds makes it all the more pressing to drum up loans from international financial institutions and foreign banks to inject capital into  Azerbaijan's ICT-sector [information and communications technologies'  sector]," the minister of communications and information technologies, Ali Abbasov, has stated. "It is just as important to actively encourage the input of direct foreign investments and know-how in order to promote the most important innovatory projects and scientific research." According to the communications' minister, this year the ministry will be in a state to finance at its own expense just a number of low-cost vital projects to support small business ventures. In its turn, the top priority of the communications ministry is named as that of creating conditions to expand the markets for marketing Azerbaijani ICT products and services. "In Azerbaijan with its nine-million-plus population there is not a sufficiently large market, and, in this connection, we have set about having talks with a number of states in the region regarding the possible export of our IT-products and devices on the basis of a new free-trade model," A. Abbasov stressed.

What is likely to be the target of the Ministry's new approaches to mixed financing of strategically important capital-intensive projects? In particular, this concerns the Fibre to Home project announced a few years ago, the approximate cost of which is the fairly considerable sum of 500m euros. It envisaged the formation of a ramified optical-fibre infrastructure and the upgrading of the automatic telephone network, thanks to which something like 85 per cent of the country's population, including those living in remote areas, would be provided with Internet broadband access with a speed of 10 to 100 megabits per second.

Right from the start, it was expected that this extremely important project would be financed in stages by the State Oil Fund of Azerbaijan (SOFAZ), with part of the expenditure moreover covered by reinvestments. But, considering the unfortunate state of world markets, the possible funding of this venture project by the State Oil Fund, has been put on hold until after 2016. "Nevertheless, the implementation of the Fibre to Home project may go ahead, funded by alternative sources of financing, including by a number of foreign banks and international financial organisations that have already consented to grant our country loans on favourable terms," the minister said. "Implementing the project in stages and covering the investment over a period of three to five years does not rule out the possibility of the Fibre to Home infrastructure being created without state subsidies."

Satellite for hire

It is noteworthy that the concept of expanding the involvement of foreign capital in implementing the country's future ICT-projects may be quite successfully applied to the dynamically developing space sector. What is meant here are the projects to launch two new Azerbaijani satellites - the Azerspace-2 communications' satellite and a second low Earth orbit-to-ground optical communications' satellite. So, the national satellite operator, Azercosmos OJSCo, and the international communications' satellite services provider Intelsat have concluded an agreement on putting Azerbaijan's second telecommunications satellite into orbit in roughly in 2017. 

Unlike the first satellite, however, 20 per cent of the communications capabilities of which are being used for the needs of Azerbaijan, it is planned to offer the resources of the Azerspace -2 satellite for hire almost completely to the foreign market. This measure should ensure that the project is highly profitable, and it is expected that the investments in the second satellite will be recouped within five to six years. The cost of the second satellite programme is estimated at 157m euros, with only 15 per cent of that sum being provided by the government of Azerbaijan, and the remaining funds being attracted from international loan organisations. By way of comparison, the launching of the first Azerbaijani communications satellite was completely funded by the state. In order for the project to be maximally productive from a commercial point of view, another project has also been worked up to create a second low Earth orbit-to-ground optical communications satellite, which the country plans to launch in two to three years, Within the framework of this project Azercosmos is completely staking on orders from abroad to make radar and optical satellite imagery of one locality or another.  

The Ministry's readiness to expand the export potential of Azerbaijan's IT sector to the states of the Caspian region is viewed as a no less important trend.

Sufficiently successful export practices are already in place to realise these intentions. So, in the first year, programme applications, integration schemes and other decisions by the leaders on the country's software market, of companies like SINAM, R.I.S.K, AZEL, ULTRA, Caspel, SayberNet, are being introduced in the states of Central Asia, Afghanistan, the Southern Caucasus, and a number of products are being delivered to Belarus, Latvia, Estonia, Thailand, Brazil, and the Dominican Republic. The products being made by Mingacevir's KUR factory and Sumqayit's business park (STP), such as computers and monitors, internet and payment terminals, surveillance cameras, digital face-recognition systems, security and fire alarm systems, as well as other sophisticated digital systems could potentially become important export items.

Restrictions on mobile phone imports

While busy boosting export opportunities and ensuring the reliability of Azerbaijan's IT industry, the Communications Ministry is not forgetting about local customers on the ICT-market. By way of example, we can cite the ministry's efforts to bring down mobile phone providers' connection charges.

"Since the company Azerfon entered the mobile communications market, an asymmetrical communications' system has been introduced among providers," Minister A. Abbasov said. "At the moment, we are examining the issue of simplifying this system and going over to a single tariff." This tariff would specify the sum that one provider would pay another per minute of conversation by the subscriber outside their own network. Quite recently the Communications' Ministry informed providers that it was unifying the tariffs on connections among providers, lowering them from 0.05 to 0.02 manats. 

A few days ago the Communications' Ministry made something else clear, an issue that is important to the population at large, namely that in aspects of e-commerce fiscal regulation, there is an extremely dynamically developing commercial trend in Azerbaijan. "Some undesirable facts have recently been uncovered on the market, which were largely connected with the smuggling of mobile phones," Ali Abbasov stated. "Together with the relevant structures, a plan of measures has been drawn up to introduce a special regime with regard to mobile phone imports and ensuring that customs duty will be levied on them."

As far as the trade in electronic devices and consumer goods is concerned, no restrictions are envisaged with regard to them. Thus, in the current period of crisis, the Communications' Ministry is reckoning on optimising the development of the IT industry, providing for the involvement of foreign investors and expanding the sector's export potential. It is intended that there should be a maximally liberal approach to citizens having access to ICT-products, both at home and from abroad, and that the charges for mobile phone services and Internet broadband should gradually come down.