1 Development of a Knowledge-Based and Innovative Economy in Azerbaijan –– Evaluation and Recommendation Document Innovation Economy Azerbaijan Focus on ICT UNDP 2 This document has been prepared by the United Nations Development Programme (UNDP) in Azerbaijan We wish to express our appreciation to the many persons who performed background research for this document, and to the many persons in Azerbaijan who gave the ir time for interviews. 3 Table of Contents List of Abbreviations ................................................................................................................... 6 Executive summary ..................................................................................................................... 8 Defining a National Innovation System ....................................................................................... 9 The Challenges of National Innovation ................................................................................................. 10 The Landscape of Azerbaijan’s Economy .................................................................................. 10 Structural Characteristics of the Economy in Azerbaijan...................................................................... 11 Institutional Characteristics of Azerbaijan’s National Innovation System .................................. 12 Demographics ....................................................................................................................................... 12 Role of Petroleum ................................................................................................................................. 13 Still-Emerging Non-Oil Sector ............................................................................................................... 13 New Experience in Manufacturing ....................................................................................................... 14 Building Logistic Systems for Exports .................................................................................................... 14 Operating the Patent System ................................................................................................................ 15 The Innovation System for ICT in Azerbaijan ............................................................................. 16 The Value Chain of ICT Innovation ........................................................................................................ 16 National cloud and infrastructure services ....................................................................................... 19 Focused innovations of small entrepreneurial teams or individuals ................................................ 20 The Azerbaijan National Academy of Sciences ..................................................................................... 20 The Role of Government ....................................................................................................................... 22 Implication for ICT Innovation .......................................................................................................... 23 The Role of Universities ........................................................................................................................ 25 Strategy I – Concentration and Focus ............................................................................................... 26 Strategy II – Outreach to Specialised Educational Institutions ......................................................... 26 National Fund to Support Entrepreneurship and the Role of the Private Sector ................................. 28 The National Business Incubator System .............................................................................................. 30 The Innovation Triad – Three Innovation Mechanisms for ICT ............................................................ 30 The ICT University ............................................................................................................................. 31 The High Technology Park System .................................................................................................... 32 The ICT Fund ..................................................................................................................................... 34 The Role of Government Ministries and State Organisations .............................................................. 36 The Role of Innovation Centres ............................................................................................................ 40 State Agency for Public Service and Social Innovations .................................................................... 40 Next Step Innovation Centre ............................................................................................................. 41 Uluchay Social-Economic Innovation Centre .................................................................................... 41 Social Innovation Lab ........................................................................................................................ 42 Barama Innovation and Entrepreneurship Centre ............................................................................ 42 National Innovation Centre of Azerbaijan National Academy of Sciences ....................................... 43 Information regarding patents ............................................................................................................. 43 Benchmark of Azerbaijan’s Innovation System .......................................................................... 43 4 Recommendations .................................................................................................................... 45 Appoint a national Chief Information Officer (CIO) for Azerbaijan ...................................................... 45 Role of Government CIO ................................................................................................................... 46 Challenges for a Government CIO..................................................................................................... 49 The Model of the ICT Fund should be extended to all sectors of innovation ....................................... 49 Encourage more funding for start-ups.................................................................................................. 50 Consider more intensive use of government purchasing policies ........................................................ 51 Import Substitution ........................................................................................................................... 51 Capital Formation ............................................................................................................................. 52 Build a national supercomputer centre with virtual machine architecture ......................................... 53 Appoint a Study Group to Develop Plan for Cross-University ICT Innovation Pathway ....................... 54 Create a national study group to consider improvement of the patent system .................................. 56 More intensive utilisation of online educational resources ................................................................. 57 More use of vendor-provided training and certification programs ...................................................... 57 Improve coordination between ministries in supporting the innovation system ................................ 59 Centralise government funding for start-ups in a single department using the current ICT Fund as a model .................................................................................................................................................... 61 Background of this document ................................................................................................... 62 Timing of research ................................................................................................................................ 62 Methodology ......................................................................................................................................... 62 Works Cited .............................................................................................................................. 63 List of Figures ............................................................................................................................ 65 List of Tables ............................................................................................................................. 65 Appendix – Laws Regarding Intellectual Property Rights in Azerbaijan ..................................... 66 Main IP Laws: enacted by the Legislature ............................................................................................. 66 IP-related Laws: enacted by the Legislature ......................................................................................... 66 Implementing Rules and Regulations ................................................................................................... 67 Appendix – Issues for a National Commission to Examine the Patent System in Azerbaijan ..... 70 Appendix – Universities in Azerbaijan ....................................................................................... 71 Public Universities 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