How to deploy istio in aks when azure policy enabled?

With Azure policies enabled in AKS(Azure Kubernetes), we can’t deploy privileged containers.

We have changed our deployments to deploy as non-privileged containers.

we deployed with the below specification and it is working.

securityContext:
            runAsUser: 999         
            runAsNonRoot: true

But, istio deployment is failing to deploy.

But when we try to setup istio now. The istio labelled namespaces are not able to create side car containers. Even when I try to install latest istio, it is getting stuck at the istiod deplyoment only.

 istioctl install --set profile=demo -y
    ✔ Istio core installed
      Processing resources for Istiod. Waiting for Deployment/istio-system/istiod
✔ Istio core installed
✘ Istiod encountered an error: failed to wait for resource: resources not ready after 5m0s: timed out waiting for the condition
Deployment/istio-system/istiod
✘ Ingress gateways encountered an error: failed to wait for resource: resources not ready after 5m0s: timed out waiting for the condition
Deployment/istio-system/istio-ingressgateway
✘ Egress gateways encountered an error: failed to wait for resource: resources not ready after 5m0s: timed out waiting for the condition
Deployment/istio-system/istio-egressgateway
- Pruning removed resources         

The error I am getting in the events is:

Error creating: admission webhook "validation.gatekeeper.sh" denied the request: [azurepolicy-psp-container-no-privilege-esc-30132221bc21e5b724da] Privilege escalation container is not allowed

exactly, we need to find how to set same for Istio as well…I am also looking for the same and I will update you if I find something…