VIRTUAL REALITY

In recent years, digital transformation of the economy and the use of modern IT technologies in production and business processes have become global mainstream trends of development. These trends are also evident in Azerbaijan, where incubation centres and start-ups are already in operation, efforts are being made to establish robust DATA-centres and a G-cloud system, and the Centre for Analysis and Coordination of the Fourth Industrial Revolution (4IR) under the Ministry of Economy is operational. Other elements of the IT-ecosystem are also taking shape in the country in areas such as industry, energy, transport, and the creation of ‘smart’ cities and villages. The ‘Strategy of Digital Economy in Azerbaijan’, which aims to consolidate the country’s digitalisation objectives within the framework of the Fourth Industrial Revolution, is set to be approved soon.

A Future Realised

The Fourth Industrial Revolution, or Industry 4.0, represents a swift evolution in technology, industry, and societal norms. This term was introduced in 2015 by Klaus Schwab, founder and executive chairman of the World Economic Forum (WEF). It refers to the current period of burgeoning high-tech advancements that are fundamentally altering traditional industrial capitalism. This phase of transformation includes the convergence of technologies such as artificial intelligence (AI), advanced robotics, and Smart City systems that span all aspects of human life, eventually blurring the lines between the physical and digital worlds.

The primary objective of 4IR is to revolutionise the global production and supply network by automating conventional production and industrial practices using cutting-edge smart technologies, extensive machine-to-machine communication, and the Internet of Things. In essence, the 4IR concept of innovative manufacturing hinges on the process of converting scientific research into a marketable product or service through the collective efforts of global vendors - chip manufacturers, software and research IT companies, universities, venture capital funds, and so on. The commercialisation of knowledge and research is most effective in a supportive environment - an innovation ecosystem that formalises all these efforts, enabling a synergistic effect.

While these solutions are primarily utilised in highly developed regions of the world, components of 4IR are gradually being implemented in post-Soviet countries, including Azerbaijan.

Big Clouds

The tasks outlined align with the strategic programme ‘National Priorities of Socio-Economic Development: Azerbaijan 2030’, adopted approximately two years ago, and the ‘Strategy of Socio-Economic Development of Azerbaijan for 2022-2026’, which is being implemented under this document. These documents propose the accelerated development of the digital economy, expansion of the innovative production and services sector, and creation of conditions for rapid development of human capital - in software businesses, start-ups, etc. In recent years, this work has been supported by companies and specialists from Türkiye, Israel, several European countries, and China.

For instance, Azerbaijan’s communications department is fostering close collaboration with the Defence Industry Committee and the Digital Transformation Office of the Turkish Presidential Administration. With their assistance, several programmes are being developed to cultivate human capital, including in the field of cyber security, etc. In the implementation of the G-cloud project, which is nearing completion, best practices from the US, the UK, Türkiye, Norway, Ireland, and Estonia have been utilised, cloud services have been organised, and the transition of information systems of 36 government agencies to the cloud has commenced. A crucial component of the G-cloud is the establishment of high-performance and high-capacity DATA centres in Azerbaijan. These will enhance the efficiency of key initiatives on digitalisation of the economy and public administration in Azerbaijan, such as Big Data and others.

In response, the Agency for Innovation and Digital Development is focusing on enhancing the digital skills of the population. They are organising training centres and unique innovation platforms, which will soon be operational not only in Baku but also in Lankaran, Ganja, and Sumgayit. Under the unified Digital Azerbaijan brand, the agency is initiating projects on digital government, digital competencies, and an innovation ecosystem. This includes the development of products like Digital Academy, Digital Finance, Mygov, Digital Docs, Digital Login, and others. It’s worth noting that the country has been working for several years to establish an ecological niche for IT startups and specialised incubation centres for software business development. IoT and AI technologies are being introduced, and pilot assembly of civilian drones is underway. As part of the Smart City programme, digital management systems for ‘smart’ cities and villages, incorporating ‘green’ energy and energy-efficient technologies, are being implemented in Baku, Ganja, and the revitalised cities of the Karabakh region. In this context, the City Digital Twins project, a virtual model of urban space and its systems reflecting real-time changes, will be implemented in the capital in the future, enabling effective urban infrastructure management with Smart City technologies.

From Theory to Practice

The World Economic Forum (WEF) has played a significant role in the strategic plans for the digitalisation of the economy. With its support, the Centre for Analysis and Coordination of the Fourth Industrial Revolution was opened in Baku a year and a half ago. The WEF Azerbaijan Centre was the first of its kind in the CIS countries. It aims to accelerate the introduction of modern technologies, digitalisation, and the application of innovations in our country. This work is being advanced through three main platforms: the development of artificial intelligence and machine learning, IoT systems and urban transformation, and digital trade.

The next step in implementing the initiatives of the 4IR concept will be the inauguration of the country’s first Digital Opportunities Centre, which is being established by the Ministry of Economy. “The establishment of the Digital Opportunities Centre in Baku in 2024 will assist local companies in introducing innovations and expanding the digitalisation of work processes to enhance productivity and competitiveness. The centre will also showcase digital innovations,” said First Deputy Economy Minister Elnur Aliyev. He added that the agency plans to launch a comprehensive programme to support high-tech businesses throughout the entire process - from conception to development and further to implementation.

The primary goal of forming the digital space 4IR is still the use of high technologies and AI in industrial production. To this end, the country is conducting research on the introduction of industrial robots and digital know-how in waste-free, environmentally friendly production.

In 2024, the first steps in this direction are planned, with budget funds allocated for the creation of the innovation cluster ‘Absheron Valley’. The objective is to provide state support for the introduction of innovations in priority areas of the national economy.

Incidentally, SOCAR’s structures are leading the way in addressing the challenges of the Fourth Industrial Revolution. They aim to minimise resource and time losses and increase productivity, primarily through the transition to digital technologies and maximum automation of all production processes. For this purpose, SOCAR has established the Caspian Innovation Centre, which has been ensuring digital transformation in planning, drilling and commissioning of wells in oil and gas production for several years. Similar work is also underway in the refining and marketing of oil products, fuel, fertilisers, occupational safety and accident prevention, etc.

New Direction

Another sector where Azerbaijan has made significant strides in the Fourth Industrial Revolution (4IR) is transportation. This involves integrating the digital systems of the Caspian states to develop the Middle Corridor. Digital transformation already covers the data and document exchange mechanisms of the Trans-Caspian International Transport Route (TCITR). Systems for streamlined customs procedures are being integrated, and customs risk analyses are being shared through preliminary information exchange, significantly reducing the time lost when goods cross borders. Customs and other relevant agencies in Ankara, Astana, Baku, and Tbilisi are currently integrating information exchange technologies. A crucial step to expedite this process was Azerbaijani President Ilham Aliyev’s approval of the Law on Intergovernmental Agreement “On Primary Information Exchange for Simplification of Transit Customs Procedures within the Baku-Tbilisi-Kars (BTK) Project” on June 21, 2023.

According to Farid Ghattal, Director of Technology Consulting at PwC Azerbaijan, the introduction of digital solutions on the BTC railway route aids in cost optimisation affecting tariffs, thereby becoming a competitive edge for the Middle Corridor. At present, Azerbaijan is faced with an equally important task - to ensure interagency coordination of the 4IR projects, their synergy, as well as long-term planning and detailing of specific measures on the digitalisation of the economy. For this purpose, a special document, the Strategy of Azerbaijan’s Digital Economy, is being developed. Its provisions span several sectors, including tourism, transport and logistics, industry, agriculture, food security, etc. The document plans for the active introduction of public-private partnership mechanisms. “Information and cyber security, as well as the creation of a sustainable technological infrastructure for transitioning to a digital economy are also prioritised in the Strategy,” said Deputy Economy Minister Sahib Mammadov. Ultimately, these measures will accelerate the digital transformation processes of Azerbaijan’s economy, enhance its competitiveness, orient it towards innovation trends, and facilitate its more comprehensive inclusion in the system of international division of labour.