Azerbaijan is on the cusp of large-scale economic transformation, actively developing its digital economy and promoting green and sustainable projects. In a rapidly changing world, the country is attracting investors thanks to its strategic location, reforms, and focus on innovation. AZERTAC presents an interview with Marcia Favale, an international expert in finance and market development, an advisor to sovereign wealth funds, and a technology entrepreneur with over 30 years of experience in investment, restructuring, and innovation. In this interview, we will examine in detail the key factors influencing foreign direct investment in Azerbaijan, the potential for green economy and sustainable development, as well as the challenges and opportunities for investors in this rapidly growing market.

- Azerbaijan is actively developing its digital economy and attracting innovative projects. What, in your view, really drives FDI into developing countries?

- Azerbaijan is off to a good start. Two new state data centers at AzInTelecom are foundational for sovereign cloud and secure e-government. I would build on this and bring top-tier operators—or even a hyperscaler—this would cause increased interest and participation from other players deepening and brooding the pool of operators. The Trans-Caspian “Digital Silk Way” cable has moved from study to marine survey, positioning Baku as a low-latency bridge between Central Asia and Europe. On financial rails, the Central Bank has taken open banking from policy to practice—requirements approved, a technical manual published, and a regulatory sandbox graduating firms into production. The public data layer is opening, with the national open-data portal and a new AI Acceleration Center to turn datasets into products. The ecosystem is drawing scale, too: INMerge has become a serious founder-investor meeting point, and a venture vehicle with White Hill Capital and IDDA signals co-financing for local companies.

What brings investment capital in is simple: a stable rule set, real revenue, and transparent data. Predictability around licensing, data protection, dispute resolution, and convertibility lets investors underwrite long-lived assets like payments and cloud with confidence. Revenues materialize when the public sector or private sector buys outcomes and pays on time, giving platforms and startups recurring cash flows. Reliable, machine-readable scorecards across identity, payments, cloud, and cyber compress diligence and speed decisions. Minimizing due diligence friction is important for speed to investment. In practice, that’s where venture capital and project finance meet: investors back the rails and the applications on top; whereas growth funds scale companies that prove product-market fit on those rails.

Bottom line: FDI is driven by valuation —priced certainty—predictable rules, bankable pipelines, and proven delivery. In the digital economy that translates into trusted rails that are visibly used. Azerbaijan is assembling the right pieces; if it keeps turning those rails into transactions and publishes the results, interest increases, the cost of capital falls and the depth of capital rises.

- How do you assess Azerbaijan’s potential in the green economy and sustainable development? What investment opportunities do you see in this area?

- The potential is real and financeable. In my INMerge 2025 keynote—Banking Beyond ESG: How Financial Discipline Drives the Economy—I set a general principle: disciplined contracts and verifiable data turn ambition into better risk-adjusted returns. Applied here, Azerbaijan has three advantages: proven energy execution, export-grade geography, and post-COP momentum. The question isn’t if; it’s how quickly those strengths convert into bankable deals. And yes—the domestic financial system should be part of the engine: empower banks and investors with clear taxonomies, reporting standards, and prudentially sound green/refinancing products so “sustainability” shows up as lower risk and better portfolio performance.

We can already see movement. A utility-scale solar plant is operating; a large wind project is advancing; a 240 MW solar project in Karabakh has been signed; a 400 MW solar auction ran during COP; and the Black Sea “Green Energy Corridor” JV is positioned to export clean power to the EU—an export-led pathway investors watch closely. The government has also launched a climate fund to co-finance alongside the private sector and set medium- and long-term targets. What will convert this into priced certainty are three proof points: auctions that close on standard contracts and on time; storage with a defined revenue stack so reliability can be financed; and visible methane reduction so the gas value chain is investable through the cycle.

Where capital typically goes first is the enabling layer—the part that makes every megawatt and every ton measurable. Utility-scale wind and solar clear faster when contracts and grid access are unambiguous. Storage becomes financeable when capacity, arbitrage, and ancillary services are defined up front. Cross-border interconnects are natural homes for long-dated private capital —when tariff logic is transparent. Industrial decarbonization follows: cement, steel, and petrochemicals need efficiency that pays, electrification where the numbers work, and early CCUS pilots with honest measurement so abatement becomes part of unit economics. Buildings, water, and waste are immediate wins: energy-service agreements paid from verified savings; desalination and reuse on take-or-pay; modern waste systems with clear gate fees and materials-recovery revenue. These are standard structures you can drop in and scale.

Azerbaijan can use INNOLAND, SABAH.HUB, and the national High-Tech Park to source solutions—forecasting and dispatch software, leak detection for pipelines and water networks, AI-driven maintenance, circular platforms that monetize waste—low-capex tools that lift the cash flows of big assets. If ministries and SOEs buy outcomes on 6–12-month contracts and protect “fail-forward” pilots, founders get revenue and investors get proof.

My view is straightforward: tighten contracts, grid access, and measurement; pair that with an export-oriented transition; keep usage data public; crowd in entrepreneurs; and stand up a repeatable financing program. Do that, and Azerbaijan won’t just attract sustainability-labeled capital—it will attract disciplined, repeat investors who fund the next project before the current one is finished.

- What are the main challenges faced by investors entering fast-growing markets like Azerbaijan? How can these challenges be overcome?

-After we assess the sovereign—Azerbaijan is investment-grade at two agencies, with S&P one notch below—project investors look for four things: steady execution, dependable cash flows, bankable contracts, and clear exits. On the sovereign/market side, the local-currency market needs more depth; given the manat’s stability, a stronger AZN yield curve could become a real funding option and diversify beyond dollars. It also helps that Azerbaijan is establishing the Baku Arbitration Centre as an international venue—useful for cross-border comfort—but for now exits will still lean on strategic M&A and regional listings until domestic market depth improves.

At the project level, the fixes are practical. Execution risk comes down with predictable timelines for permits, land, grid connections, and procurement—with a single public sponsor accountable for progress. Cash-flow confidence improves when contracts have clear indexation, public counterparties pay on time, and—where appropriate—targeted guarantees or DFI backstops cover delay risk. Contract quality is sector-specific: curtailment/indexation/dispute language in power and midstream; transparent tariff logic and performance incentives in logistics; enforceable service-level and data-protection terms in digital. Using standard forms repeatedly shortens diligence. And preparation still matters most: data rooms with feasibility, permits, environmental baselines, and model contracts before launch.

On exits, the way forward is to make them routine. Here are some proposals: pre-clear a dual-listing route—Baku plus a regional venue—under one harmonized disclosure pack with depository receipts; make market-making and early research coverage standard for an initial period and set sensible free float so there’s depth and price discovery; normalize venture secondaries and ESOP liquidity with a brief circular confirming enforceability of SAFEs/convertibles, simple share-transfer mechanics, a plain-English ESOP tax note, and periodic company-run liquidity windows—augmented by venture debt/revenue-based financing to avoid premature equity sales. Keep dividend, buyback, and M&A proceeds freely convertible with clear settlement timelines and publish a rolling 24-month pipeline of listings and strategic sales so investors can plan against a calendar. None of this requires sweeping reform; when these basics are visible and consistent, pricing tightens, deal sizes grow, and capital stays through cycles. A win for Azerbaijan is participatory, value-added growth—Azerbaijanis not only as employees, but as owners, suppliers, and investors—so the upside of new projects is widely held and steadily compounds. That means retail tranches in IPOs and green bonds, ESOP-friendly rules so workers own a stake, and procurement and training that pull local SMEs up the value chain.

- Based on your experience working with governments and international organizations, what steps should Azerbaijan take to create a favorable environment for the development of venture capital and private investment?

- Drawing on what has actually moved capital in my world, the countries that keep serious money coming back do four things at once across both the digital stack and the industrial economy: they make the rulebook investable, they create real demand for solutions, they make capital formation easy, and they show a clean path to liquidity.

Start with the rulebook. Give fund managers and founders a lane they can trust - modern LP/GP structures and carried-interest treatment; fast company formation and, just as importantly, fast, orderly wind-down when something doesn’t work. Enforceable shareholder rights; clear, published mechanics for cross-border M&A; and simple, stable rules for FX convertibility and dispute resolution are important. Do the same sector-by-sector on the “old economy”: standard terms for PPAs/capacity and curtailment in power, transparent tariffs and throughput incentives in logistics, and service-level and data-protection duties that are actually enforceable in digital. When the paperwork is repeatable, diligence shortens and pricing tightens.

Then create demand that pays. Venture only scales when the first cheques convert to customers. Ask large SOEs and ministries to run outcome-based procurements on the state’s digital rails—e-ID, instant payments, sovereign cloud—in fintech and govtech, but also in industrial tech: energy-efficiency in plants and public buildings, loss reduction in grids and pipelines, predictive maintenance in refineries, ports, and rail. Publish a simple “problems to be solved” list each year and pay for measured results (fraud down, losses down, collections up, kWh saved). Those references turn pilots into bankable revenues.

Make capital formation easy and neutral. Stand up a rules-based co-investment lane where the state sits alongside top private managers in VC, growth, and infrastructure on constant terms and with fast closes—crowding in, not crowding out. Add venture-debt and revenue-based financing so founders aren’t forced to sell too much equity before product-market fit. Let domestic banks participate through prudentially sound green/transition credit lines so the local system learns and earns. Where scale helps, invite one or two anchor operators—for example, a carrier-neutral Tier III/IV data-center operator or a hyperscaler on transparent land–power–fiber terms; in industry, a storage or grid-edge operator under clear tariffs. Anchors set technical and commercial standards and pull their ecosystems with them.

Show a clean exit at entry. Keep strategic M&A straightforward with transparent change-of-control thresholds and predictable timelines. In public markets, pre-clear a dual-listing route (Baku plus a regional venue) under one disclosure pack and enable depository receipts so international funds can hold local names easily. Normalize private secondaries for venture—confirm enforceability of SAFEs/convertibles, keep share transfers simple, publish a plain-English ESOP tax note, and allow periodic company-run liquidity windows. When founders and funds can see liquidity paths, they commit more, faster.

Finally, prove delivery with data. Run small, time-boxed trials and publish what worked and what didn’t. Issue quarterly scorecards that matter to investors—time from sandbox to production, API uptime/latency, instant-payment volumes; in traditional sectors, time from award to financial close and to grid/port connection. A compact like that turns narrative into evidence and lowers the risk premium without new subsidies.

One more point I care about: make growth participatory. Let workers, savers, and SMEs own a slice of the upside—ESOP-friendly rules, supplier-development tied to real contracts, and modest retail tranches in qualified IPOs or green bonds—so value-added growth compounds at home. When the rules are investable, demand pays, formation is easy, and exits are clear, venture and private capital don’t just arrive; they stay through cycles.

- What technologies and digital innovations do you believe will have the greatest impact on the Azerbaijani economy in the next 5–10 years?

- The biggest effects will come from the “trust and throughput” stack—tech that makes transactions instant, data reliable, and operations measurable. Azerbaijan’s financial rails are the foundation: ubiquitous e-ID and e-signature, instant payments, and open-banking APIs that turn integrations into paying users. Add real-time e-invoicing and lightweight regtech so KYC/AML is automated, not manual. When those rails are dependable, MSME credit widens, collections improve, and the cost of doing business falls—that’s inclusion showing up as margin.

The second engine is sovereign-grade compute with strong cybersecurity. Impact arrives when secure cloud regions, modern data centers, and edge computing sit behind critical services. Confidential computing and zero-trust architectures let banks, utilities, and ministries analyze shared data without leakage. Pair that with a top-tier, carrier-neutral operator or a hyperscaler on clear land–power–fiber terms and you don’t just add servers; you attract an ecosystem—interconnection, cloud on-ramps, and enterprise software that stays through cycles.

Next is applied AI with sensors. In energy, logistics, and water, combining IoT, SCADA modernization, and AI cuts losses and downtime: leak detection in pipelines and networks, predictive maintenance in plants and rolling stock, dynamic routing at ports and rail, and demand response in power. Digital twins of grids and terminals will matter as interconnectors and storage scale; they let operators plan curtailment, congestion, and maintenance with money-on-the-line accuracy. This is also where the transition becomes bankable: storage control systems, distributed-energy-resource (DER) management, and flexibility markets are software before they’re steel—and methane detection with credible MRV turns reductions into underwritable outcomes.

Trade tech will be a quiet revolution. Paperless trade along the Middle Corridor—single-window customs, eCMR and e-bills of lading, trusted carrier programs—moves goods in days rather than weeks. When documents are digital and verifiable, insurance costs fall and working-capital cycles shorten. The same logic applies to public services: verifiable credentials in education and health, and tele-services that cut queue time for households and compliance time for firms.

-How do you envision the future of public–private cooperation in Azerbaijan to support innovation and sustainable growth?

- I would shift from a focus on isolated projects to a product-and-portfolio model where the state and businesses co-create solutions that can be reused, exported, and financed at scale. This approach would build on existing efforts such as procurement reform and the development of a PPP pipeline that includes initiatives from tech parks to water and solid waste management, using these processes as a backbone for repeatable, private-ready deals. The discipline of performance contracting already exists in energy-efficiency ESCO/EPC rules, and this should be extended to areas like water loss, grid losses, and public-building retrofits so that outcome-based contracts become routine rather than bespoke. Azerbaijan’s national open-data portal and ministry datasets are active and should be curated into high-quality packages for operators and startups to enable product launches from day one. Trade facilitation programs like trusted-trader and “green corridor” initiatives are operating, and linking these to digitized documents and measurable service levels would help finance logistics upgrades based on performance. Industrial platforms such as AFEZ and major industrial parks offer testbeds for bundled efficiency measures, on-site renewables, storage, and waste solutions with integrated contracts and telemetry. Local-currency market development through AZN bonds by development finance institutions and BSE retail initiatives is positive, and expanding the AZN curve will provide domestic funding options as projects scale.