Azerbaijan ‘Digital Trade Hub’ set to bind Regional and Eurasian Markets

Azerbaijan ‘Digital Trade Hub’ set to bind Regional and Eurasian Markets

A Digital Trade Hub Project (DTH) is being implemented with the purpose of strengthening Azerbaijan’s position as a key digital trade hub in the South Caucasus region as it now attempts to discard its traditional image of an oil and gas exporting country.

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By Hriday Ch. Sarma

Azerbaijan, a small country in South Caucasus, will launch a Digital Trade Hub Project (DTH) starting August 2017. This will be launched as a section of – an online portal managed by the Centre for Analysis of Economic Reforms and Communication (CAERC). Azerbaijan will also start offering an electronic-signature service and all types of government issued (ASAN) signature certificates through the DTH. At present, the Ministry of Transport, Communications and High Technologies, the Ministry of Taxes and the Ministry of Foreign Affairs are jointly-coordinating their efforts with diplomatic missions and consulates of the Republic of Azerbaijan to achieve this technological milestone. The DTH is being implemented with the purpose of strengthening Azerbaijan’s position as a key digital trade hub in the South Caucasus region as it now attempts to discard its traditional image of an oil and gas exporting country.

The aforesaid step is being executed in compliance with a Decree – “on additional measures for strengthening Azerbaijan’s position and expanding foreign trade transactions with the launch of Digital Trade Hub”, which was signed by Azerbaijan’s President, Ilham Aliyev, on February 23, 2017. It officially assigns the task of building the DTH to CAERC – an economic research institute that is steering the latest policy reforms in the country. CAERC has been commissioned to introduce a system of e-registration of export contracts, online export support and customs escort for domestically produced non-oil products and an e-purse for cashless payment of export goods. The under-construction portal will need businesses to use mobile digital signature Asan Imza and country-recognized digital signature certificate.

Currently few digitally advanced countries in the world have their indigenous versions of electronic-trade hub (aka DTH). For instance, South Korea has u-Trade Hub, Hong Kong has Single Window Initiative, the UK has and China has Paperless Trading Bridge and E-Port. All of these are based on ‘a single window concept’ that provides information pertaining to local manufacturers – i.e., product line, product mix, quality of products, stockpile volumes, etc.- and a market searchable export directory for matching businesses across the world. In simple words, DTHs’ act as single digital destination for trade and investment, bringing together and connecting local businesses, international buyers and capital investors.

A DTH provides number of advantages to the home country and those from outside who get connected, like private businesses and public enterprises from countries worldwide. It enables to create a generic foundation for all industries and countries. This means it defines a vision and pathway for global e-business for common understandable business logic and semantics. Further, it builds a level-playing ground for online traders to compete in a transparent and healthy environment.

In recent times, Azerbaijan has been striving to cope with falling global oil price and the need to finance new revenue generating projects for maintaining calm and prosperity among its citizens. Therefore, its government is endeavouring to address this shaky situation by implementing new initiatives, like Azerbaijan DTH, etc., and participating in international projects, like International North-South Transportation Corridor, etc. Moreover, it is heavily investing in infrastructure development and service sector in some of its neighbouring countries to give a boost to cross-border trade. The International Bank of Azerbaijan-Georgia, a subsidiary of the International Bank of Azerbaijan, has helped to finance large-scale projects, such as the Baku-Akhalkalaki-Kars railway, and has also become a major component part of the banking sector in Georgia. While on the other hand, it is making massive defence budget cuts in a geo-politically charged environment of rising tension with Armenia, which continues to occupy Azerbaijani territories of Nagorno-Karabakh and surrounding regions. According to State budget of Azerbaijan for 2017, the defense budget for the year is 1.62 billion manat, which is 27.5 percent less compared the projected spending in 2016. This infers Azerbaijan is currently prioritizing geo-economics over geo-politics.

The digitization of Azerbaijan’s trade with the coming into operational of the DTH will build regional value chains in South Caucasus and across Eurasia. This will benefit big Azerbaijani industries that have an export potential to deeply tap into South Caucasian and Eurasian markets by moving towards internationally acceptable quality standards, including environmental safeguards. Also, it will empower small and medium industries in Azerbaijan that sell locally to increase their productivity and profit by improving general quality of offered products/services. On the other hand, the international market players will have the opportunity to engage with prospective counterparts in a post-Soviet country, which is endeavoring to balance its economic-political relationship with Russia and other global and regional powers.

If the technical performance of the DTH remains efficient and no major conflict of interest arises between participating parties, i.e. government agencies and buyers-sellers, then Azerbaijan will emerge as a new destination for value creation and addition for traded goods and services in South Caucasus and Eurasia in the coming time.

Hriday Ch. Sarma is the Founder and Team Coordinator for Center for South Caucasus-South Asia Business Development. He is enrolled as a PhD candidate in Energy Studies Programme at School of International Studies, Jawaharlal Nehru University (New Delhi, India), and works as a Fellow with South Asia Democratic Forum (a Brussels based think tank). He recently worked as a Visiting Research Fellow with Center for Analysis of Economic Reforms and Communication.

The views expressed in this piece do not necessarily reflect those of TransConflict.

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