As Azerbaijan is rapidly expanding its GDP and gaining significant amounts of oil revenues, the political leadership of the country is seeking ways to diversify the economy and develop the non-oil sector to ensure sustainable growth in the future. Development of the IT sector and making Baku the IT hub of the region was chosen as the new icon of Azerbaijan’s future economic model – one which will not depend on oil and gas.

Speaking at the third anniversary of the implementation of the State Program on “Poverty Reduction and Economic Growth” last week, President Aliyev re-emphasized his intention to invest oil revenues into the IT sector and called it “a priority area.” The President also instructed the Ministry to transform Azerbaijan into the regional center for the “transit of information.” “If we manage to improve our legislative basis and implement it with transparency, we can succeed in making Azerbaijan the center for the transit of information between the East and the West,” Minister Abbasov noted later.

Minister Abbasov also stated that in order to succeed in this direction, works are being done in several directions. Foremost, the computer network in the country is being upgraded and remodeled and it is expected that by 2009, the number of computer users in Azerbaijan will more than double. Secondly, the government of Azerbaijan is engaged in negotiations with the World Bank and the South Korean Government to receive $30 million for the implementation of the E-Government project in the country.

The most ambitious project, however, is the creation of the Regional Investment Zone (RIZ), which in the words of Minister Abbasov, is already underway. An American company was selected to consult with the Ministry in its execution. It is planned that the packet of suggestions on the establishment of RIZ will be submitted to the Parliament in March. The packet will include suggestions on how to change the fiscal and monetary policy of the state, as well as customs tariffs, taxes and legislative acts in order to simulate the development of the IT sector in the country.

As part of the development of the IT sector, it is planned also to expand the human resources in the country by creating an IT university, sending Azerbaijani students abroad and improving the quality of education at local colleges. At the same time, by the end of 2008, the whole country will be provided with telephones based on a digital system. Abbasov recently also announced that the state companies Aztelecom and Baktelecom will be privatized as another step towards the development of a dynamic IT and telecommunications sector in the country. Aztelecom, a natural monopolist in the country, uniting 54 companies, will be privatized to stimulate the competition in the IT sector.

The growing potential of Azerbaijan’s IT sector was felt recently when a “war of hackers” erupted between Azerbaijan and Armenia. Minister Abbasov warned the Armenian side that, “Azerbaijan’s technological capabilities are several times higher than the ones of Armenia. So Armenian hackers should stop destroying websites in Azerbaijan, otherwise they will regret it.”

Last year, Minister Abbasov traveled to the U.S. to launch his campaign on turning Azerbaijan into the IT hub of the Caspian region and subsequently came up with the idea of creating a “Technopark” in Azerbaijan. Although Azerbaijan was never a center of communications and technologies during Soviet times, the opportunity is ripe now to change the country’s image for future decades.