Going digital proves key to business survival through the pandemic and beyond in Azerbaijan

By Leyla Seyidzade and Nargiz Guliyeva

While the ongoing pandemic is severely impacting businesses worldwide, the digital economy has not only proven instrumental in the battle against COVID-19 but has also thrived in these unprecedented business circumstances.

What we have witnessed in Azerbaijan and across the world is that those who embraced internet technology before the outbreak have had a crucial advantage in being able to fast-track business growth.

The ability to leverage digital tools has emerged as a ‘must’ for most businesses to survive the ongoing crisis.

Since the first case of COVID-19 was detected in the country in March 2020, the Government of Azerbaijan has undertaken all necessary precautionary measures to help mitigate the spread of the virus. These measures have included the imposition of a special quarantine regime severely limiting the operations of a significant number of businesses.

To reduce the negative economic impacts caused by COVID-19, some 1.5 billion US dollars have been allocated from the state budget. The Government has also been quick to implement state programmes to prevent job losses, to subsidize loans and to allocate more funds where needed.

In spite of all these mitigation measures, however, the majority of micro, small and medium enterprises in Azerbaijan have been hit heavily by the crisis. Many have had to seek new opportunities to survive — including exploring ways of going digital.

To help maximise these opportunities, UNDP’s Accelerator Lab team has conducted a rapid analysis of the current situation with digital business.

Here we offer a summary of our key findings:

Although the number of enterprises with internet access in Azerbaijan has increased significantly over the last ten years, the overall proportion of enterprises with internet access has remained low.

Currently, only 12% of companies in the country have a website and only 1,524 websites are placed on servers in Azerbaijan. An additional finding is that only 10% of .az domain names are owned by women.

How have the COVID-19 restrictions affected digital businesses in Azerbaijan?

To find out how digital businesses have coped with the new circumstances, we talked to ten randomly selected owners of digital SMEs and conducted an e-survey and Zoom interviews with some of the key platforms in the country, including: Hesab (the biggest online payment system in the country), Tap.az (the biggest online platform for ads),Uber (the global taxi platform), Azexport and Digital Trade Hub (government-owned trade platforms).

We also conducted a brief but focused review of local social media and media reports.

What we found is that it is the most experienced business owners who have proven better prepared to cope with the pandemic.

Sixty percent of businesses that normally operate both offline and online say their online activities have been positively influenced by the current pandemic.

However, our analysis also detected some flaws in the digital ecosystem in Azerbaijan:

Many respondents highlighted numerous challenges with hosting, internet banking and online payment, as well as with the online government services they need to navigate in the current situation. Twenty percent of respondents say they typically experience delays in public fees and taxes. Fifteen percent say they need financial support, and 15% call for the cancellation of tax credits.

A clearly positive finding is that the crisis has boosted innovative adaptation, with six out of ten companies coming up with new solutions to cope with the new challenges. For example, a newly introduced Client Management System called ‘Enterprise Resource Planning’ is now cooperating with the government to introduce new legislation — something they weren’t considering before the pandemic.

And all of the businesses we surveyed have redirected their marketing expenses to digital advertising.

Recommendations for the near future

👀 We must work on accelerating the development of enabling regulatory environment for e-commerce by introducing new legislation, including digital signatures and documents, online consumer protection, and data privacy.

👀 Improving access to the internet and electronic equipment is a crucial first step to ensuring access to the digital economy for all, especially those most at risk of being left behind.

👀 Liberalization of the electronic payment system must become accessible to all MSMEs.

👀 More needs to be done on cyber-security to strengthen the consumer protection system.

👀 MSMEs and large companies have the capacity to transition their business operations to digital, but we can do much more to help more by:

✔ Creating a roadmap for MSMEs seeking to transition to online business.

✔ Introducing a Future of Work programme to prepare people for careers in the digital society.

✔ We need to help entrepreneurs better leverage the digital economy and create solutions to address the challenges faced by their communities, finding ways not only to cope with the crisis but to thrive in the long term.

UNDP has been working with the Ministry of Information and High Technologies in Azerbaijan to provide this kind of support.

At the peak of the pandemic, for example, we helped to create the Evdeqal.Az (‘Stay home!’) platform as a one-stop shop for all e-services available in the country, enabling all businesses to place their products and advertise free of charge.

We are now working on adding some new components to this platform that will now be rebranded as Reqemliol.az (‘Go digital!’). These components will include webinars and mentorship and advice to help all businesses prepare to go digital.

Want to partner with us? Get in touch!