The development of Azerbaijan’s telecommunication sector, which provides the infrastructural foundation of the digital economy, has not kept pace with regional and income comparators, curtailing the country’s potential to realize digital dividends, Report informs, citing the World Bank 2022 Systematic Country Diagnostic (SCD) Update on Azerbaijan.
“The absence of separation between sectoral policy making, service provision, and regulation and market structure dominated by SOEs (state-owned enterprise) is a long-standing barrier to telecommunication sector development in Azerbaijan.
Combined with an outdated enabling environment, the lack of competition has contributed to limited investment in the expansion and upgrade of digital connectivity infrastructure, resulting in an urban-rural digital divide in access, affordability, and quality in digital connectivity.
This digital divide risks increasing spatial inequities in access to economic opportunity, which is compounded by the ongoing COVID-19 pandemic and the significance of digital connectivity in the COVID-19 response,” reads the update.
According to the World Bank, effectively realizing the benefits of digital economy development will require the improvement of digital access and the promotion of digital adoption by individuals, businesses, and the government.
“Barriers to digital development include a divide in accessibility, a skills and usage gap, and low digital adoption by private firms, such as in financial services.
Ensuring that digital opportunities are available for all individuals, businesses, and levels of government requires the availability of high-speed broadband across the country.
Yet, in Azerbaijan, the broadband market exhibits an urban bias. The quality of digital infrastructure and broadband services needs to be upgraded, with significant investment in modern technologies such as fiber-optic networks and 4G and 5G. The government can also support digital literacy and digital skill development programs, particularly in rural areas, to build familiarity and comfort with broadband connectivity and digitally delivered services. Given the low digital adaptation of private firms, there is a role for the public sector in raising awareness and building trust in the online environment to drive digital adoption,” says the WB.
The bank notes that the Government of Azerbaijan has recently focused on reforms to stimulate digital economy development.
“Ministry of Digital Development and Transport (of Azerbaijan) has been given the responsibility to coordinate digital transformation initiatives. The new management of the ministry declared that broadband development was a key priority, setting a target for universal broadband access by 2024, which follows the inclusion of broadband connectivity under the universal service obligation,” the WB update reads.
“The government also announced reforms to improve the enabling environment and market structure by establishing a telecommunication sector regulator and merging the two SOEs operating in the fixed broadband market to mobilize private investment in the sector.
In addition to initiating reforms in telecommunications to improve market outcomes such as in digital access, affordability, and the quality of connectivity, the government has undertaken steps to improve the use of digital connectivity and services across the economy, for example, by expanding the mandate of the Ministry of Digital Development and Transport to include digital economy development and establishing the Agency for Innovation and Digital Development to catalyze progress toward economy-wide digitalization, with the goal of fostering a digital society,” the World Bank says in the SCD update.
According to the WB, economy-wide digital transformation is a key contributor to economic diversification, growth, human capital development, transparency, and inclusive development in Azerbaijan.
Digital development is also featured in “Azerbaijan 2030: National Priorities for Socio-Economic Development” as a driver of sustainable growth and global competitiveness.
“As the economy becomes more diversified, the digital economy not only offers an avenue to develop a new industry in digital services, but also enables the traditional sectors of the economy (including the public sector) to deliver better services, drive efficiency and productivity, and gain greater access to markets, inputs, information, and innovation,” reads the update.