00:00The digital economy, a global economic entity which connects people, businesses, devices and data through digital technology.
00:09Its aim is to replace or improve traditional business practices with cutting-edge tech,
00:14including the internet, mobile networks, software and artificial intelligence.
00:20I'm Nadira Tudor and welcome to Business Horizons.
00:24On today's program, we're looking at the digital economy,
00:27Azerbaijan's new rules for technology and investment.
00:39Welcome to Business Horizons, Mr. Osmanov.
00:42Thank you very much.
00:43Let's start with the broader vision behind Azerbaijan's new technology and innovation reforms.
00:50The broader vision is to create a complete competitive innovation ecosystem in Azerbaijan
00:55where the companies can run not only the business, but also actively invest in R&D, invest in startups,
01:05develop actively digital products and services, but also expand their services and products not only in the local market, but
01:13in international market.
01:15So to encourage companies to get on board, there's an offer for eligible tech companies of 0% tax, for
01:23example, for 20 years, a huge concession.
01:25That will enable the local market and global market to predict our, let's say, investment package here, what we are
01:35going to implement for the next 20 years.
01:39Encouragement to reinvest is a clever strategy.
01:43From our standpoint, the main rationale behind this reform to minimize the cost of the companies and the startup, but
01:51to invest, reinvest this money, this fund for their future growth, for their hirings, for their products, for their services,
02:01to expand their services locally in Azerbaijan, as well as the international.
02:06It's really important, isn't it, to set those transparent standards so that you can level up as well as operate
02:14locally.
02:15Transparency and regulation and governance of this framework is very critical.
02:21So why Azerbaijan as opposed to other countries for those investors?
02:25We do believe this holistic and comprehensive approach will bring the huge attention to our local market.
02:33Mr. Farid Osmanov, thank you very much.
02:36I do appreciate it. Thank you.
02:42Azerbaijan is rewriting some of the rules for its technology sector.
02:46The country has introduced a package as part of its digital development plan, which are built around three pillars.
02:54Azerbaijan's new legislation covers several areas, including taxation, research and development, investment, infrastructure and access to talent.
03:03Simple agreement for future equity or safe agreements and convertible debt are now recognized in law.
03:10Accredited investors can deduct qualifying local investments from taxable income and venture capital funds are exempt from profit tax on
03:18investment returns.
03:19The legislation gives venture investors new legal instruments where emerging technologies can be tested before they move into the wider
03:27market.
03:28We went on location and spoke to people working on the ground at one of the technology hubs.
03:41Our domestic market size is 10 million people.
03:44They are selling their products to the EU, US, MENA and other CIS countries.
03:49Right now, we have a couple venture funds and couple angel investor clubs who are doing active investment for the
03:58startups.
04:00We have a couple of success stories.
04:02First one is Polygraph AI.
04:04AI Security and Governance Platform, which is headquartered in Austin, Texas.
04:08But the operation team is located in Baku, Azerbaijan.
04:13Another success story is IOMETA, which is headquartered in United States and operating from Azerbaijan.
04:20To sum up, our main goals are develop the national tech ecosystem, increase information and communication technology, export and grow
04:33Azerbaijan positions as an international innovation and technology hub.
04:42An important question for business communities is how to exploit these changes to grow the digital economy further.
04:49Be that a startup or a well-established corporation.
04:53That's all for this edition of Business Horizons.
04:55Thanks for watching.
