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Review of key events in Azerbaijan's ICT sector for 2022

ICT Materials 30 December 2022 15:13 (UTC +04:00)
Review of key events in Azerbaijan's ICT sector for 2022
Sadraddin Aghjayev
Sadraddin Aghjayev
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BAKU, Azerbaijan, December 30. Trend News Agency presents an overview of the most important event in the ICT sector of Azerbaijan for 2022.

Digital economy, digital currency, crypto industry

Azerbaijan has started to prepare Strategy of Digital Economy Development, and a special working group has been assembled. The group consists of representatives of Azerbaijan's Ministry of Economy, Azerbaijan's Center for Analysis and Coordination of the Fourth Industrial Revolution (C4IR), Ministry of Finance, Central Bank of Azerbaijan, and Ministry of Science and Education.

The Strategy of Digital Economy should solve such issues as creating a digital ecosystem and ensuring proper and systematic development of digital economy. Azerbaijan has studied the international experience in this field.

The formation of digital economy also requires strengthening of cybersecurity, and preparation of relevant regulations as well as laws and statements. The other important direction is human capital. In accordance with this, the work on implementing the IT Hub project (provision of free courses on information technology for people interested in modern technologies in the regions of Azerbaijan) is underway. This project is being implemented within the framework of cooperation between the European Bank for Reconstruction and Development and the Azerbaijani government.

Also, it was agreed to use blockchain technology in Azerbaijan's insurance market as part of the social and economic development strategy for 2022-2026. Blockchain technology is also supposed to be implemented in other areas of the Azerbaijani economy in the future.

Meanwhile, the Central Bank of Azerbaijan (CBA) carried out work on the development of digital manat [country’s national currency] with International Monetary Fund. Step-by-step work was conducted to form the concept of digital currency. CBA also conducted research to assess possible risks.

Along with all of the above, the world's largest cryptocurrency exchange Binance announced this year its readiness to support the CBA in creating mechanisms for the regulation of crypto assets. So, Binance held a meeting with the Central Bank and discussed the issues of regulating crypto-assets in Azerbaijan.

Binance sees great potential for the development of the cryptocurrency market and blockchain technology in the foreseeable future. It has been revealed that the cryptosphere has considerable innovative potential, which is confirmed by the number of startups that are increasing in this sector.

Cybersecurity, cloud technologies

It was announced that in recent years Azerbaijan has taken serious steps to ensure information and cyber security, developing new laws on critical information infrastructure security. Besides, it was noted that licenses for new startup and security service providers will be eliminated. Government agencies will establish specific security requirements, and providers will regulate their operations in accordance with these requirements.

Introduction of cybersecurity strategy elements in Azerbaijan’s financial sector will start in 2023.

Besides, specialists of CBA and International Finance Corporation (IFC) started preparing strategic programs on cybersecurity. During its preparation, international practice was taken as the basis. It’s not only about the technical strengthening of the infrastructure, but it’s also planned to conduct educational activities aimed at increasing knowledge.

Moreover, in order to form a clearer program, the CBA conducted appropriate surveys and assessed the activities of financial market players.

Also, Azerbaijan has strengthened the development of cybersecurity in the country. In particular, a Cyber Security Center was launched with the support of Israel. One of the main advantages of the Cybersecurity Center will be the training of local instructors along with cybersecurity specialists. The training of cybersecurity experts is expected to expand in the future.

Furthermore, it was reported that similar cooperation can be established between Azerbaijan and the US, in particular, in the development of solutions in the field of cybersecurity. The parties have great opportunities for cooperation in the field of cybersecurity, and the US can share its best practices with Azerbaijan.

Azerbaijan is also working to develop cloud services on the basis of local servers. Projects being implemented are aimed at strengthening local data so that all data transmitted passes through local services. Azerbaijan has its own server at Delta Telecom (internet operator and telecommunications company of Azerbaijan) to do this.

It was reported that creation of such projects helps to reduce dependence on external services, and risk of any data leakage and also contributes to the development of information technologies in Azerbaijan. The cloud services have already been launched in Azerbaijan, which are used not only in the country itself but also in other countries worldwide.

Electronic wallets, Apple Pay, Google Pay

This year it was announced that roughly two million transactions are carried out in Azerbaijan every month via Apple Pay and Google Pay. Contactless cards in Azerbaijan account for 70 percent of the overall number, which indicates the possibility of linking them to Apple Pay and Google Pay and paying through a mobile phone or smart watch.

The CBA noted that most of the information components of the national payment system of Azerbaijan have been brought into line with ISO 222 standard (international standard for the exchange of electronic messages between organizations in the financial industry).

According to CBA, this work will be fully completed by the end of 2022 or the beginning of 2023. The introduction of this standard will enable the CBA to simplify the automation of payment processes and increase the efficiency of reports. In this regard, the importance of the formation of a regulatory framework was also emphasized.

The CBA also spoke about the introduction of Open Banking in Azerbaijan. The Central Bank, with the support of IFC, prepared a roadmap, which provides for implementation of various activities from 2021 through 2025. It was also noted that implementation of Open Banking will simplify entry into the market for fintech companies, ensure the availability of financial services, simplify integration with banks and provide a number of other benefits.

Besides, the CBA noted that the adoption of the law ‘On payment systems and services’ will determine the support and control mechanisms in this area.

The CBA has also prepared and agreed upon the bill ‘On payment systems and services’ with the relevant state bodies and submitted it to the Azerbaijani government. During the preparation of this bill, the focus was made on international practice and leading technologies. The bill was formed on the basis of the directive on payment services and systems of the EU. With the adoption of this bill, consumer protection mechanisms will be defined in the payments ecosystem and at the same time, a legal framework will be created to control the activities of organizations and operators of payment systems, as well as third-party service providers (which give information about accounts and intermediary services on payment transactions).

According to CBA, this bill will allow to create enhanced user authentication mechanisms. The bill also covers control measures for ‘Open Banking’. Measures of a special control regime will also be reflected in the law. The bill also reflects issues regulating the activities of financial organizations, issues of ensuring safe and reliable payment systems and their efficient operation, and the rights of a paying agent (a legal entity or an individual entrepreneur engaged in accepting payments from individuals).

Thus, according to CBA, the paying agent will receive the authority to legally carry out intermediary services, that is, payment transactions on behalf of banks, non-banking organizations and other financial institutions. It was also noted that the formation of a legislative framework for monitoring and controlling the activities of financial players will increase financial inclusiveness in Azerbaijan.

Broadband internet, mobile communications and data transmission

Ministry of Digital Development and Transport of Azerbaijan will provide the entire territory of Azerbaijan with fiber-optic communication by the end of 2024. The ministry noted that all cities and villages, including the most remote ones, will get broadband internet access.

For this, the European Bank for Reconstruction and Development (EBRD) signed a loan agreement with Azerbaijan's Aztelecom LLC. The agreement envisages implementing projects to reconstruct the communications infrastructure and improve the quality of service in Azerbaijan.

It was also reported that EBRD plans to allocate a loan of up to $50 million (consisting of two tranches of $25 million each) to finance the rollout of state-of-the-art broadband infrastructure to more than 280,000 households in the regions of Azerbaijan.

Besides, the country’s mobile operator Azercell Telecom, within its network modernization project, has upgraded 250 base stations in Beylagan, Aghjabadi, Lerik, Gusar, Guba, Fuzuli, Astara, Shaki and Yardimli at the beginning of August since the launch of this project.

It was noted that over the next 18 months, the mobile operator will deploy more than 300 new, and upgrade about 1600 existing base stations throughout Azerbaijan.

Azercell has already deployed 11 base stations in Lachin district and started providing mobile services in Zabukh, Sus and other villages. Its network covers the districts of Shusha, Aghdam, Fuzuli, Jabrayil, Zangilan, Gubadli and Kalbajar, the settlements of Istisu, Hadrut, Sugovushan, as well as villages of Khojavand and other districts.

It was also reported that similar work was carried out by Bakcell and Nar operators. In addition, the mobile operators have launched eSIM [Subscriber Identity Module] service for the first time in Azerbaijan, as well as the possibility of remote purchase.

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