Artificial intelligence is increasingly becoming part of the global economic agenda, reshaping approaches to governance, business, and the development of human capital. For countries undergoing active digital transformation, AI is not merely a technological trend but a strategic choice capable of determining their position in the regional and global economy for decades to come. Azerbaijan today stands at an important stage of this journey. A combination of a favorable geographical location, investments in infrastructure, the development of electronic government services, and a drive toward economic diversification creates unique conditions for the adoption of advanced digital solutions. At the same time, the country faces challenges familiar to many developing markets: how to build a sustainable AI ecosystem, prepare the workforce, maintain public trust, and ensure the responsible use of technology.

Valeria Sadovykh, Senior Data and Artificial Intelligence Specialist at Microsoft, an expert with more than 15 years of experience in digital transformation and AI, lecturer at Cologne International Business School, a U.S. government–recognized individual of extraordinary ability, and a recipient of the University of Auckland 40 Under 40 2024 award, answers AZERTAC’s questions.

– What key challenges and opportunities do you see in implementing artificial intelligence in economies undergoing active digital transformation, such as Azerbaijan?

– Azerbaijan has everything it needs to become not only a regional but also a global leader. Its geographical position—between Europe and the Middle East—provides access to diverse markets, infrastructure, and experience. The country can learn from its neighbors, adopt best practices, and avoid mistakes that have already been made elsewhere.

One of the key areas is the optimization of basic resources. This includes energy diversification, the use of natural resources, and the development of transport corridors. Artificial intelligence can support innovation, transform traditional business models, and create new sources of value and revenue.

AI is important not only for business but also for people, especially future generations. It helps reduce the digital divide. Digitalization gives more people access to knowledge, tools, and public services, reduces illiteracy, and strengthens the digital state.

As for challenges, I prefer to call them “dependencies,” because AI success is impossible without certain conditions. First, there is infrastructure. AI does not exist on its own—it requires an ecosystem. Despite significant resources and progress, Azerbaijan still has room to grow in certain sectors. Infrastructure limitations in the region can slow down digital transformation.

Second, there is governance and regulation. Clear rules of the game are needed: policies, standards, laws, and government oversight. These are essential to protect citizens, businesses, and institutions. In this area, Azerbaijan still has substantial work ahead.

The third important factor is people. Azerbaijan rightly takes pride in its citizens, but people need support in adapting to change. AI is transforming how we work, learn, and make decisions. This requires trust in technology and new forms of interaction between humans and machines. Human nature is such that we resist the new, especially when it affects traditions. Here it is important to find a balance: preserving values while not being afraid of change.

– Taking into account the specifics of the Azerbaijani market and technological infrastructure, what approaches to adapting and applying AI would you recommend?

– At the center of any successful transformation are people. Technologies can be purchased and processes can be changed, but embracing AI is a matter of motivation and trust. Leadership plays a key role here. Leaders must set an example: use technologies themselves, speak openly about their benefits, and not be afraid of change. They do not need to be technical experts, but it is important for them to understand why AI is needed and what value it brings.

Training alone is not enough. A shift in mindset is required. Employees must be ready to learn, experiment, and make mistakes. New generations will not be able to work effectively in old, rigid structures. The work environment must evolve along with them.

At the same time, it is important to develop local innovation. Support from international companies and the experience of neighboring countries are important, but Azerbaijan needs to develop its own ecosystem of startups and developers. Local solutions better reflect market specifics and deliver maximum impact. This creates jobs, raises the qualification of specialists, and strengthens the economy.

Data deserves special attention. Data is the fuel for AI. Without high-quality, structured, and accessible data, success is impossible. A national data strategy, unified standards, and clear rules are needed. It is especially important for small and medium-sized businesses to build a culture of data management.

Finally, market flexibility is a major advantage for Azerbaijan. There is now a unique opportunity to take a leading position in the region in the responsible implementation of AI and the creation of an ecosystem aligned with international standards.

– What role should government bodies and regulators play in creating an ecosystem for AI development and supporting innovation?

– The public sector of Azerbaijan is already a regional leader in digital services. In recent years, significant investments have entered the country, and international attention to the region has grown noticeably. The success of AI is measured by its real benefits for society, the economy, and the state. Regulators play an important role because for many organizations and users, AI governance appears complex. Clear rules, ethical norms, and oversight help build trust.

Azerbaijan can actively adopt best practices from neighboring countries, especially in the areas of ethical AI and data protection. Support for small and private businesses creating AI solutions will accelerate innovation and economic growth.

At the same time, it is important that companies and individual specialists do not rely solely on initiatives “from above.” Training, experimentation, and the development of new products should proceed in parallel with government programs.

– What steps are necessary to prepare qualified AI specialists for Azerbaijan’s digital economy?

– Here it is important to look at two groups: the current workforce and future specialists. For those who are already working, a combination of efforts by business and the state is required. Future specialists—university graduates—are already technically prepared and expect a modern, flexible work environment. It is important for them to have the opportunity to collaborate with AI rather than compete with it.

As for the more distant future, AI education and the ethics of its use should begin as early as school. It is important not only to teach technologies but also to form a responsible attitude toward them. Ethics must go hand in hand with innovation.

– What ethical and social aspects of AI implementation are particularly important for Azerbaijani society and business?

– Traditions and customs will change, and AI accelerates this process. The main difference between AI and previous technological waves is speed. It brings efficiency, but at the same time some familiar ways of working will disappear.

Humans are physically incapable of processing the volumes of data that machines can handle. AI increases transparency, reduces errors, and improves the quality of decisions.

But everything ultimately comes down to trust. People must understand both the benefits and the risks of AI. Education in this area is critically important, including understanding how AI influences thinking and decision-making. Transparency allows people to make informed choices.

AI accelerates the development of the digital economy, creates new industries, and strengthens human capital. By focusing on sectors with competitive advantages—logistics, agriculture, and energy—the region can become a center of high-tech growth.

– How can artificial intelligence contribute to strengthening cooperation and developing the digital economy in the South Caucasus?

– AI can become a neutral platform for cooperation, reducing the impact of political disagreements and focusing on shared economic objectives. Instead of fragmented national strategies, the region needs joint projects with real value—in trade, security, and expertise development.

One of the most promising areas is the digitalization of cross-border trade and logistics. AI can forecast bottlenecks in supply chains, optimize routes, and automate compliance checks.

Shared digital infrastructure and regional workforce training programs will create a solid foundation for a sustainable digital economy.

– How do you see the development of AI and digital transformation in Azerbaijan over the next 5–10 years?

– Azerbaijan’s strategic position between Europe and the Middle East will shape its digital trajectory. Dependence on natural resources will gradually decrease through economic diversification and the adoption of digital technologies.

AI will become an essential element of business. Companies that do not implement AI will be less attractive to investors, as AI underpins security, compliance, and efficiency.

Early adopters will gain advantages, but those who join later will also be able to benefit by leveraging accumulated experience and more accessible technologies. Universities and research centers will continue to play a key role in talent development and solution creation.

AI will become part of everyday life, changing how people interact with technology. At the same time, the principles of responsible AI will be critically important. The labor market will change: routine tasks will be automated, while the value of creativity, flexibility, curiosity, and leadership will increase. Soft skills will become no less important than technical ones.