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EBRD Transition Report 2014 – Box 5.5. ICT-oriented innovation policies in Armenia, Azerbaijan and Egypt

TRANSITION REPORT 2014 Innovation in Transition

Box 5.5. ICT-oriented innovation policies in Armenia, Azerbaijan and Egypt

Almost all countries in the transition region regard ICT as a priority area when it comes to innovation. Armenia, Azerbaijan and Egypt, for example, all singled out the ICT sector as a driver of growth in the early 2000s. However, they have used different measures to support the development of the ICT sector and have made progress at different speeds.

Armenia

Armenia was one of the major R&D and production centres for computer science, electronics, precision engineering and chemicals in the former Soviet Union.42 When many of these industries were shut down in the early 1990s, a number of highly qualified professionals emigrated and established companies abroad. However, they then contributed to the rise of the local ICT industry by creating development centres back home in Armenia.

In 2000 the government recognised the ICT sector’s potential and declared its development a national priority. In 2002 it established the Enterprise Incubator Foundation (EIF), a one-stop support agency for innovative ICT companies. The agency delivers business and workforce development services, along with consultancy services and legal and financial support, with a focus on start-ups.43

The EIF has conducted several projects with international ICT companies, including firms with no specific ties to the Armenian diaspora.44 Notable examples include the launch of the Cisco Systems Networking Academy Program in 2010, which fosters computer and software penetration in business and education, and the launch of the Microsoft Innovation Center in 2011, which provides resources and infrastructure to SMEs and start-ups in the ICT sector. In addition, a number of events targeting start-ups have taken place in Armenia in 2014, including the sixth BarCamp Yerevan, Digicamp, the launch of the Hive tech start-up accelerator and Seedstar Yerevan.

The ICT and high-tech sectors are among the fastest growing industries in Armenia. The number of ICT companies in Armenia has grown from around 175 in 2008 to around 380 in 2013. What is more, in 2011 exports accounted for 44 per cent of these firms’ revenues. However, the development of the ICT sector is being constrained by a shortage of skilled labour with IT training. Several initiatives have been devised in order to overcome this problem. They include Sun Training Labs, a project established by the EIF, Sun Microsystems Inc. and USAID with a view to strengthening the skills of university graduates, and the Synopsys Armenia Educational Department, which provides training in microelectronics in partnership with major Armenian universities.45

Azerbaijan

Since the early 2000s Azerbaijan has acknowledged the importance of developing its non-oil sector and diversifying its resource-based economy. Until 2010 the focus was mostly on improving infrastructure, resulting in communications networks being completely digitalised and the capacity of external internet channels being increased. The liberalisation of the telecommunications market has opened up opportunities for the private sector and tariffs for unlimited broadband internet have plummeted.

A number of other initiatives have been carried out in recent years. The country’s e-government portal was launched in November 2011, with a total of 40 state agencies signing up by 2013.46 Total investment in ICT – both state and private investment – more than doubled between 2009 and 2011. Azerbaijan’s high-technology park was launched in 2012, and its business incubation centre had accepted a total of 20 projects by March 2014. The country branded 2013 “The Year of ICT” and launched its Online Presence Project, which seeks to improve the accessibility of government and public institutions, as well as private companies, via online channels.47 In July 2014 the State Fund for the Development of IT, which was established in 2012, awarded grants to 31 start-up projects in areas such as high-technology, e-payment software applications, air navigation systems and e-government.

2013 also saw the establishment of the University of Information Technology and the launch of Azerbaijan’s first telecommunications satellite, AzerSpace-1. These developments will improve the quality of telecommunications throughout the Caucasus and foster the development of Azerbaijan’s space industry.

Overall, Azerbaijan’s ICT sector has grown by an average of 25 to 30 per cent per year over the last decade, becoming the second largest recipient of foreign investment after the oil industry.

Egypt

Similar to Armenia, Egypt drew up an ICT master plan in 2000 and launched the Egyptian Information Society Initiative, which aimed to foster Egypt’s transformation into an information society and a hub for the offshoring and outsourcing (O&O) of ICT services. The Information Technology Industry Development Agency (ITIDA), which was established in Egypt in 2004, serves as a one-stop shop for O&O investors.

In recent years increasing emphasis has been placed on stimulating the provision of high-value and innovative ICT services. In 2010 the Technology Innovation and Entrepreneurship Centre (TIEC) was established with a view to supporting innovative ICT companies and start-ups. Success stories include SilGenix (a semiconductor intellectual property company specialising in on-chip power management solutions for system-on-chip products) and Bey2ollak (a mobile app for sharing real-time information about traffic in Cairo and Alexandria).

Since 2007 ITIDA and the Information Technology Institute have been running the EDUEgypt programme, which provides students (8,735 of them in 2012) with professional training in business process outsourcing (BPO) and IT outsourcing. Moreover, in 2013, in cooperation with Intel, the TIEC organised the Egypt Ideation Camp, a skills training workshop targeting young people. It also runs an innovation recognition programme which unearths young talent and provides links to the industry.

The O&O industry has grown strongly in recent years, as has the wider ICT sector. Exports of IT and BPO services totalled more than EGP 9 billion in 2012, with around 45,000 people employed in O&O centres,48 working for firms such as IBM, Oracle, Orange, Vodafone and Yahoo.

In 2011 Egypt was ranked fourth in the Global Services Location Index, a list of the world’s most attractive offshoring destinations, up from 12th place in 2005.49 In 2014 Cairo and Alexandria were ranked 76th and 81st, respectively, in Tholons’ list of the top 100 outsourcing destinations, with Cairo dropping 18 places compared with 2013 (mainly because of the continuing political unrest).50