Azerbaijan: Reversing Brain Drain

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AZERI OBSERVER EDITORIAL STAFF

Azerbaijan is dynamically developing in the field of high technologies, with dozens of online services and applications coming to the country every year, for example, entertainment services, fintech, logistics services, etc. All this positively affects both local businesses and the overall impression of citizens. People do not strive to stand in live queues for hours, testing their patience; they prefer electronic queues and services that help resolve issues directly from their smartphone. This applies to both private businesses and government agencies.

Having restored territorial integrity during the 44-day war, Azerbaijan began to invest in various clean energy technologies, as well as smart cities. According to the Karabakh reconstruction plan, a project was adopted to create several pilot smart villages that will combine rural life and high technology.

Also, a culture of start-ups began to develop in Azerbaijan. Many private startup hubs contribute to this. One of the leading innovation and technology centers is the IdealHub Innovation & Technology Center, which, as part of the Learn & Earn project, in collaboration with global IT companies and the Center for a new economy StrategEast, launched a series of courses on front-end programming, Java, and QA tester. The purpose of the courses is to prepare young personnel for work in global IT companies without leaving Azerbaijan.

“Now we have launched a very interesting training programme for young IT professionals in Azerbaijan. It is conducted by world-class mentors and teachers who teach practical knowledge, not theoretical. I think that in a few months we will be able to show how Azerbaijani specialists work in foreign companies without leaving home,” President of the StrategEast Center Anton Motkin says.

Since the topic of education has been touched upon, at the present moment in Azerbaijan there are many schools in programming and other areas of IT. One of the leaders in this segment is the branch of the Ukrainian Academy “Step”. The main feature of the academy is a more in-depth and meditative program that prepares specialists in all areas of IT. The academy also has many successful stories; their students receive job offers at such giants as Amazon and other large IT companies around the world.

It may seem at first sight that the ICT ecosystem is sufficiently developed, but not everything is so rosy. There is a total brain drain in the country. Local talented specialists are trying to immigrate to the EU countries, USA and Ukraine. Those who stay in the country prefer not to work for local companies, but work remotely for foreign companies. As a rule, the main factor is rather low salaries and lack of a favorable environment in most local companies. Many believe that this is due to a clear lack of top professional managers in the country and uncompetitive working conditions and wages.

Despite the high-tech park available in the country, local startups are trying to register in the United States and, in fact, this makes them no longer Azerbaijani startups, but startups that only have roots in Azerbaijan.

Others are trying to break through the state hubs of neighboring states. For example, this year, several Azerbaijani startups submitted their applications and were accepted into the “Google for startups” program run by the hub in Astana, Kazakhstan. Local startups and young IT entrepreneurs explain this by the fact that there are poor conditions in the country for comfortable doing business; one of the most serious problems is extremely high taxes, so it is beneficial to register a company either in the west, which will make it easier to enter Western markets or in the neighboring Georgia.

“We started working in Georgia two years ago, during the coronavirus pandemic. Georgia, as a tourist country, suffered from these events, perhaps most of all, because the country’s economy was heavily dependent on tourism. Therefore, we decided to make significant efforts to develop the export component of the local IT sector. First, we looked at what elements are needed to create this ecosystem. We began to create these elements ourselves, using the contacts and cooperation relationships that we have,” Anton Motkin said.

“We have involved in this process such financial institutions as the World Bank, the European Bank for Reconstruction and Development, financial institutions from Germany, Sweden and other countries, and technology companies from Silicon Valley. First, we created a pilot group of 40 people, similar to how we are currently operating in Azerbaijan. The advantage of our training system lies not only in the high level of training, but in the fact that we measure our success not by the number of people trained, but by the number of real jobs that we create. Therefore, we work closely with companies that hire our graduates. When it became obvious that we would have 40 graduates in Georgia, this number was already enough to create a branch of the company in the region. With this in mind, we turned to the government with a proposal to create a special tax regime, a result of which the income tax for employees of export-oriented IT companies was reduced from 20% to 5%. After that, on such terms, we attracted other companies and an acceleration center from Silicon Valley to work with startups,” the StrategEast Center head said.

The largest IT companies were founded in the mid-90s and 2000s. They have a dominant position in the Azerbaijani market, which is one of the hard start factors for potential new companies. In recent years, even the largest players in the Azerbaijani ICT market, whether integrators or software developers, have begun to export their services abroad. But the most interesting thing is that companies do not seek to conquer the markets of Europe and America. After analyzing the projects in the portfolio, which are in the public domain, we can conclude that their main goal is the countries of the Middle East, Africa and Asia. Undoubtedly, the export of IT services is the most promising factor in the development of the local ecosystem.

The country is in critical need of tax and legislative reforms regarding ICT business similar to those in neighboring countries such as Kazakhstan, Uzbekistan and Georgia.

“So, if we look at the results of our first year in Georgia, 31 foreign IT companies have started hiring employees by opening an office in Georgia. Secondly, revenues from the export of IT services in the first year alone exceeded $35 million, which is an excellent indicator for the first year,” Motkin said.

According to him, more than 2,000 new high-paying jobs have been created in the country, not only in Tbilisi, but also in other cities – this is also an important point.

“At the second stage of the project, with the support of foreign financial institutions, we intend to expand the training network to 13 cities in Georgia. Each of them will train 40 people, training will be carried out remotely, online, so that young people can learn a new specialty and start working without leaving their city. We are striving to implement the same program in Azerbaijan. I don’t want to name names now, but we want to start such trainings in 12 regional centers through our donors,” Motkin said. “I really believe in the development of the IT industry in Azerbaijan. Because you, smart children, traditionally maintain a high level of teaching fundamental sciences.”

“What is missing here, and where we plan to assist, is the involvement of large companies in the training and recruitment process. We want to attract here such companies that already have clients and customers, and they are able to immediately provide people with jobs.

“That is, we do not want the young people trained by us to struggle to find a job. We aim to create real jobs in the country. Considering the experience of Georgia, I am convinced that we will get through this. Cooperation with government agencies and companies is also important here. Moreover, the presence of donors allows not everything to be done at the expense of the state,” President of the StrategEast Center said.

With proper tax reforms and benefits, Azerbaijan can become attractive to global IT companies. By setting up their representative offices, they will be able to draw the most talented engineers to themselves. Therefore, the country can stop the brain drain and take a step towards a leading position in the region.