What hinders Abkhazia’s economic development?

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What causes Abkhazia’s slow economic development?

Apsnypress- Almost thirty years have passed since the Georgian-Abkhaz war, but the military devastation has not yet been overcome, and the country’s economy is developing very slowly. After several decades of stable development, when Abkhazia was a ceremonial showcase of socialism, the country fell deep into devastation and underdevelopment and is yet to get out of it.

Abkhazia has a number of clear advantages – a resort sea coast, lush nature, and several different climate zones- from subtropics to alpine meadows, rich natural resources, an abundance of high-quality freshwater (the country is the source of 6% of freshwater flow into the Black Sea), borders with Russian Federation, whose citizens make up the main tourist flow to Abkhazia, and a large capacious market that could completely absorb locally produced agricultural products.

It would seem that all this should have given an impetus to the real development of the country. In addition, over these decades, a number of development plans that fully meet international development standards and take the current state of the economy into account have been developed. However, none of these plans were accepted and implemented as there are internal and external reasons for this slow development.

Internal reasons

The post-war blockade and long-term isolation led to a slowdown in the development of public consciousness in comparison with other post-Soviet countries, but there are also significant features.

The first and main reason is the mental unwillingness of the population and the political elite to build a modern rule-of-law state with its complex structure, in which the executive and legislative powers are balanced, the judiciary is autonomous and independent, and citizens are not only protected by law from arbitrariness and violence, but and they themselves strive for a law-abiding lifestyle and paying taxes, realizing that without a conscious reciprocity of society and the state, it is impossible to achieve sustainable development.

Instead, two seemingly mutually exclusive tendencies prevail – on the one hand, obvious Soviet inertia and the hope that the state is obliged to provide the population with everything necessary; on the other hand, there is an undisguised anarchy in paying taxes, paying for utilities and electricity, connecting to the power supply, returning bank and other loans, and so on. That is, citizens do not fulfill their duties in relation to the state well, not realizing that they themselves fundamentally undermine its normal functioning.

A misunderstanding of the importance of the phenomenon of the state itself has led to the fact that in the last ten years there have been two coups d’état, to which the bulk of the population practically did not have any clear reaction, which proves the absolute insignificance for the majority of citizens of the change of power – in their position this the change does not change anything.

The current confrontation between the two groups is not based on the difference in socio-political programs and views, which reflects the real absence of any ideological struggle in the country – we have no right and left, there are no real political parties with clear ideological programs and ideas. just a banal struggle for access to resources.

Going to power, each side promises one and the same gentleman’s set of reforms that has set the teeth on edge, which is not carried out and modestly passes, almost on a knurled one, into the next breakthrough to power. A special problem is that we do not have at least a somewhat intelligible system of training the political elite, which is especially noticeable now, when a change of generations in the socio-political space is gradually taking place. Projects like “Young Leaders” and “Pride of Abkhazia” are all initial stages, the effect of which is not yet clear. The state of voters, who are guided not by the political literacy and professional competence of the candidate, but by kinship-clan and neighborhood relations, as well as handouts from candidates and their promises to put in order the road, lighting and solve other minor purely economic problems, does not inspire optimism either.

To paraphrase Vladimir Lenin, neither the top nor the bottom are ready for the real construction of the modern foundations of life; as a result of all this, there is no conscious internal need for modernization in the country, almost everything is left to chance.

Barriers to sustainable development

The very weak legal and economic literacy of the bulk of the population clearly hinders the creation of a structured system of relations between labor forces and capital. The idealization of the past and the final transition from a rural to an urban mentality, which was not completed during the twentieth century, hinder the formation of a modern competitive environment operating in conditions of strict observance of rules and laws.

Even in the state sphere, laws work poorly – there was not a single criminal case in which at least one major official would be punished for large-scale embezzlement. This creates an atmosphere of impunity that provokes further malfeasance. The amount of money that leaves the state budget annually at all levels has long been one of the main threats to the existence of the Abkhaz state.

The situation on the border with Georgia is indicative – it is well known that for many years, goods were exchanged illegally across this border: a significant part of the nuts collected on the territory of Abkhazia went to Georgia, and from there there was a flow of agricultural products and industrial goods (for example, a significant part of the so-called Abkhazian souvenirs were produced there). & nbsp; The proceeds from this illegal activity went past the state budget, according to the estimates of knowledgeable people, it is in the amount of 2-3 billion annually, which is approximately equal to financial assistance from the Russian Federation. & nbsp; But all modest attempts to legalize this exchange of goods by establishing a customs service on the Georgian-Abkhaz border were actively blocked under the slogan that we cannot trade with the enemy.

That is, you can put this money in your pocket, but you can put it into the state budget and use it to solve many problems in our country – even if the budget received one billion, it would have been possible to significantly increase payments to all categories of pensioners. In essence, the shadow business dictated its terms at the state level, hiding behind patriotic rhetoric. Until now, society is dominated by, to put it mildly, not a very favorable attitude towards private initiative, there is no understanding that the basis of the state budget is & nbsp; & nbsp; & nbsp; & nbsp; taxes paid by entrepreneurs. Businesses are poorly protected and pay taxes sluggishly, believing that a significant part of them goes to the left.

The lack of competent trust between business and the state, between business and a less economically active part of the population does not allow creating a stable taxation system that provides the necessary finances. Establishing order and further development is also hampered by the lack of some basic documents and norms, for example, there is still no Land Cadastre, there is no single system for registering real estate owners – in villages, almost all owners of land plots and buildings do not have legal and legally impeccable documents on them! Ownership is based on the loose wording “Everyone knows our family has owned this for many years.” Meanwhile, the famous Peruvian economist Hernando de Soto, in his book “The Mystery of Capital”, based on many years of research, convincingly proved that the sustainable development of the leading countries of the world began only after all property and legal ownership relations were legally formalized. And here we can blame our intelligentsia, especially economists and jurists, who are not engaged in consistent educational work in this area in order to help the population to understand the specifics of modern economic management and existence as a subject of the legal field.

The neglect of the professions associated with manual labor has led to a significant shortage of a wide range in the domestic labor market – from electricians and plumbers to cooks. Labor migration to Abkhazia is mainly due to low-skilled personnel from Central Asia, which further erodes the intellectual level of the population.

Fictitious local government

The absence of real local self-government, replaced by a power vertical without transparent control and accountability, led to indifference of citizens and individual survival – in villages this paralyzed the traditionally general concern for the state of local infrastructure, and in cities it stimulated alienation from power. The recent elections to local self-government bodies demonstrated this clearly – in the capital there were no elections at four polling stations, which has never happened.

The fact that heads of administrations at all levels are simply appointed from above deprives active people who want to make a career in management of the opportunity to gain experience in competitive competition – elections would force them to develop specific programs for the development of districts, cities and villages, to debate with competitors in open air, communicate with voters in an attempt to gain their trust, etc. That is, there is no primary school of managerial growth that lays the foundations for a political career. The heads of administrations are often random people who are busy only with solving personal problems.

Management

The lack of modern management at almost all levels has a catastrophic effect. At the same time, an openly consumer attitude towards attempts at joint activities with foreign partners is flourishing. Multiple visits to Abkhazia by representatives of the Abkhaz diaspora from Turkey and the Middle East, as well as investors from different countries, including the Russian Federation, in most cases end in nothing, because our side offers unacceptable conditions. & nbsp; Officials on whom the permission or development of the proposed project depends, as a rule, try to enter into a share and ask for such a part of it that investors leave dumbfounded, because other percentages of share participation have long been accepted in the world.

Implemented joint projects often end in the illegal ousting of a foreign partner, which creates an unfavorable business reputation for our country, which is aggravated by the lack of security for investors – all this has led to large economic losses and slowdown in growth. The same thing happens in a rural area when an investor tries to lease land. The simplest scenario for the development of such relations is that land owners lease it on condition that local labor resources participate in the production process; are trained in new technologies for them and after the end of the lease they can continue this business on a new basis. Instead, our landowners immediately demand such a rent or, again, such a percentage of the profit that investors are blown away by the wind.

There are no deliberate attempts by the state to conduct at least an elementary economic educational program in rural areas; It is not surprising that the money given out for various projects often goes to waste in the sand, and the agricultural equipment bought with state money often rots in the bushes. The long-term lack of sane management is striking even in such an area as the export of grown agricultural products across the Russian border – instead of helping those farms that do not have the opportunity to export themselves, and to organize reception points for citrus fruits and other crops for further transportation across the border, the state simply withdrew. & nbsp; Over the past decades, it would be possible to agree at least on acceptable export conditions, which would not turn this simple procedure into many days of torture. The successful export of the products of LLC “Wines and Waters of Abkhazia” to the Russian Federation for several years already proves that this task can be solved.

What professional inspirational management can do even in our conditions is clearly demonstrated by the example of the F. Iskander Russian Drama Theater. In just a few years, the new general director Irakli Khintba, who came to the theater from a completely different professional field, raised the level of the theater to such a height that he had a permanent loyal audience and was received on equal terms in the Russian Federation, not the last theatrical power in the world. This proves that the country has opportunities and reserves that are not used for reasons beyond the control of an external factor.

Banking sector

Currently, the banking sector of Abkhazia is not able to really help the economic growth of the country, because the financial hole formed over decades of dishonest and incompetent management of Sberbank will be dragging on for a long time. The largest state commercial bank in Abkhazia so far cannot even support itself, it cannot go to zero in any way, let alone provide substantial assistance to someone. In fact, Sberbank itself has become a competitor to business.

The rest of the commercial banks are too small to actively influence the situation; moreover, we do not have our own currency and emission center. For all these reasons, only small loans are real. However, there are significant problems with them, because it is very difficult to return them. Even if the borrower provides real collateral, for example, real estate, then even if the bank wins the court, this property is transferred not to the bank itself, but to the bailiffs, who must sell it, and send the proceeds to the bank. This process can take years, which puts banks at a clear disadvantage. The only thing that works well is if a loan is given against the guarantees of large firms, then banks simply write off unpaid amounts from their accounts. In such conditions, the development of the banking system is slow, which also slows down the development of the economy.

Power supply

From the very beginning of post-war life, Abkhazia receives electricity from the IngurGES free of charge, which has formed both the state apparatus and the population do not care – the authorities thought little about the development of their energy base, postponing it for an indefinite future and being mainly engaged in the current repair of power grids, and more two thirds of the population does not pay for electricity at all. Many state institutions are also among the worst defaulters.

With such a monstrously irresponsible state of affairs, there is not even a hint of attempts to save electricity! We can safely say that Abkhazia is the only country in the world where they simply have no idea about saving natural resources and electricity. Even in the last months of this year, when the entire population groans from frequent power outages, and we pay for the Russian flow at high Russian prices, there are no attempts to more rational use of electricity by reducing unnecessary consumption – lighting in the central districts of the capital can be on all day long. on stadiums and football fields, etc .; The lighting in beach cafes has been on for years.

At night, the central highway from Psou to Sukhum is fully illuminated, although this has long been abandoned even in wealthy countries, replacing lighting in sections of roads that are little used at night with reflective elements. I don’t remember at least one clear call from the authorities to save on electricity for all the post-war years, which once again demonstrates the lack of understanding of what a modern economy is, even in the ruling echelon.

With such a wasteful use of electricity, it is simply naive to expect that the repaired IngurHES will fully satisfy our needs. The restoration and reanimation of the local power plants that existed during the Soviet era is beyond our budget; for example, the restoration of the Sukhum hydroelectric power station cost $ 25 million, allocated by a Russian investor, and the prospects for the return of the money spent are vague, unless there was an initial hope for mining. We must frankly admit that we did not use the very real opportunity to create a whole network of private mini-hydroelectric power plants on mountain rivers, providing electricity to at least remote mountain villages.

To do this, it was necessary to conduct a public campaign explaining the ease of installing these mini-hydroelectric power plants (the Internet has been full of instructions even for self-assembly and installation for 10-15 years) and financial affordability. It was necessary to distribute mini-loans specifically for this activity, and not for mythical projects. But our authorities continue to follow the administrative-command path, absolutely not using public energy for constructive purposes. Chernomorenergo, in the form in which it has existed all these years, is not able to modernize the existing power grid – apparently, in this area, too, it is necessary to gradually switch to market rails, retaining a controlling stake for the state in order to somehow keep electricity prices are reasonable. Of course, prices should be raised, because this will teach us at least to save money.

Electricity consumption in all spheres of the economy will grow, it is unlikely that it will be possible to introduce mining into a civilized framework, the modernization of the power grid in the coming years is unlikely, so we can safely predict further long-term problems with power supply, which significantly limits the country’s opportunities for successful development.

Agriculture

The degradation of agriculture that took place after the war is largely associated not only with the devastation and outflow of labor, with the inability to sell the products, as mentioned above, but also with the lack of modern agricultural technology in our country. That is why, for example, the cost of Abkhaz tangerines is significantly higher than those imported from North Africa, which completely excludes the supply of this type of product to large Russian retail chains, although the Russian consumer still prefers Abkhaz tangerines in many respects. Despite the fact that every year the resort sector, which is getting on its feet, consumes more and more agricultural products, this does not in any way affect the development of local agriculture, because the overwhelming majority of products are purchased at the Sochi markets. The owners of the resort facilities explain this by the fact that our manufacturers are not able to provide constant and high-quality supplies. As a result, a significant part of the money earned during the holiday season leaves the country again. And here everything again rests on the lack of competent management – we do not have professional intermediary firms that could ensure the consistency and quality of supplies, uniting manufacturers in networks that insure each other. Apparently, the producers themselves do not think of this, again due to insufficient economic literacy. If we are not able to organize a stable connection between the resort sector and local producers in the coming years, our agriculture will remain in a semi-embryonic state, because it is hardly realistic to count on a stable export of agricultural products abroad. The situation is aggravated by bad roads in rural areas, the money for the construction of which is also often stolen. By and large, the climatic conditions of Abkhazia make it possible to implement multidisciplinary projects – for example, the Babushar essential oil farm in Soviet times supplied raw materials for the Moscow cosmetics industry, tung oil for the aviation industry, etc. Unfortunately, we still cannot restore even the most successful farms for the above reasons.

Tourism

Tourism is the only branch of the Abkhaz economy that brings tangible income and is gradually developing, but its sustainable development is hampered by the lack of a systematic approach in all areas. Over the past ten years, several hundred tourist sites have been built and adapted to accommodate clients, including unreported small forms such as apartments in multi-storey buildings and private houses. Many of them take into account all modern requirements for comfort. In this sense, there is clear progress. Unfortunately, the absence of a roadmap approved by the state commission for the construction of resort facilities throughout the country often leads to chaotic development (and this will certainly create colossal problems in the future) and violation of basic sanitary standards, including the lack of sewerage and, accordingly, the discharge of wastewater. into rivers or directly into the sea, which sharply worsens the quality of sea water and threatens future complications. The development of the tourism sector is very significantly limited by constant interruptions in power supply, hindering the development of year-round tourism and increasing the comfort of living. General devastation, lack of qualified personnel in the industry, lack of good roads at the entrance to many historical and natural sites and other problems hinder the attraction of new tourists who are already familiar with the developed service of developed tourist countries.

External causes

All of them are related to the unsettledness of the Georgian-Abkhaz conflict and the resulting long-term isolation of the country, which has been softened by partnership with the Russian Federation only in the last fifteen years. Thanks to the consistent efforts of Georgia, the country is practically excluded from international trade, scientific and cultural exchange, from the current political processes – a small country that won the war unleashed by Georgia, found itself in the position of a pariah, and this is an unnatural political phenomenon, the existence of which is contrary to the UN Charter, which proclaims the principle of equality and self-determination of peoples and nations, and other international documents, and common sense. Unfortunately, the isolation imposed by Georgia also affects the change in our tourist image – if in Soviet times Abkhazia was one of the most popular and comfortable resorts, now, due to years of devastation, we are already called the “Land of Zabroshka”; it will be difficult to get rid of this impartial name, especially since the traces of war are being eliminated very slowly even in the capital. The grave consequences of this unnatural state affect many things, and if we estimate the opportunities for development missed in the post-war years, then the total amount of economic and cultural losses will most likely be expressed in multibillion-dollar figures. In fact, this short-sighted policy of Georgia, contrary to the expectations of its leadership, only led to a further deepening of the geopolitical split along the Ingur River

Possible ways out of isolation

The longer the isolation lasts, the more Abkhazia lags behind in economic and other development from its neighbors, which gradually creates new risks – when a peace treaty between us and Georgia is signed, and someday this will inevitably happen, history shows that not a single the conflict does not last forever, we may not be very ready for a new reality, since we have not developed many modern financial instruments, we are not very experienced in international commercial obligations of various types and levels; using this, foreign citizens will be able to simply buy up the main Abkhaz assets at the root under various schemes that have long been worked out in a sophisticated competitive world.

If you look at the situation from the outside, and we must do this for a more objective assessment of our current status, Abkhazia looks like a political and economic marginal, excluded from many regional processes.

We seem to be frozen in one position, not noticing that the world is rapidly changing, and we do not show any significant economic initiatives to change the situation. The covid-19 pandemic has shown that it is dangerous and shortsighted to rely only on tourism – the colossal losses of developed tourist countries are only growing due to the forced extension of at least a partial quarantine; in Italy, for example, where the situation was especially tense, even traditional folk crafts associated with the manufacture of souvenirs for Easter and other religious holidays were endangered.

Abkhazia should have more reliable sources of income that are less prone to market fluctuations. It seems that the most realistic and rational version of the initial activity, which will launch the general process of modernization, would be a large project directly related to the interests of the Russian Federation in the Black Sea region.

In the early Middle Ages, one of the spurs of the Great Silk Road that connected China with Europe passed through Abkhazia, and, in principle, we have objective prerequisites for the resumption of this transport corridor through the Caucasian ridge. Regional competition for the transportation of goods from Asian countries to Europe is becoming more and more fierce, one of the world’s most powerful players has recently actively joined it, China – its expansion into the Mediterranean region is actively growing, the Chinese are already investing a lot of money in the reconstruction and expansion of the main Italian ports … Very soon, China will become an outspoken competitor to the Novorossiysk port, which is now the leader in container transportation of goods transported from Asian countries to the West through the territory of Russia.

It is in the interests of the Russian Federation to have one more port, but on the Caucasian coast of the Black Sea there are only two deep-water places suitable for the construction of large ports capable of receiving the largest vessels – these are Anaklia in Georgia and Skurcha in Abkhazia. The commercial port in Anaklia has been under construction for several years, but there is a prospect of turning a significant part of it into a naval base of the US Navy, which will significantly narrow its capacity for peaceful cargo.

The construction of a large commercial port in Skurcha would be beneficial for both Abkhazia and Russia, because it would unload the Novorossiysk port and create new opportunities for the Russian Federation in this type of traffic flow. It is clear that we ourselves cannot build such a colossus, but we can lease part of the coastline for a long-term lease to the Russian Federation for the construction of a port, having stipulated the participation of the Abkhaz side in important moments for us, including equity participation in profits and the use of the Abkhaz labor force in construction and further operation … It would be the only large industrial zone in Abkhazia, high-tech and allowing to use the nearby railway and airport, the launch of which is currently unprofitable and therefore delayed.

The construction of a highway through the Southern Shelter and the Kodori Gorge, connecting the Abkhaz coast with the North Caucasus, will enhance the importance of the port in Skurcha and will contribute to the further development of the North Caucasus, which is also in the interests of the Russian Federation. In general, the implementation of this project will bring financial benefits to our country, comparable and possibly superior to the profit from tourism. This money will allow Abkhazia to independently form a full-fledged state budget, modernize many areas of the economy and invest in culture in all its areas, increase salaries and pensions, and modernization will significantly strengthen our position in the negotiation process with Georgia, because our regional importance will immediately grow, and neighboring countries will begin take Abkhazia into account in future plans.

In the end, the inability to use the transport artery running through the territory of Abkhazia objectively damages the entire region in one way or another. An analysis of the current state of affairs shows that it is already unsafe to postpone modernization in the main areas – we can lag behind in our development for so long that we will turn into an exclusion zone. Megaproject with a port in Skurch – & nbsp; & nbsp; This is a matter of many years, and internal problems can be resolved now, all that is needed is political will and a conscious understanding of the majority of society that changes are fundamentally important for the further survival of the Abkhaz state and improving the well-being of citizens. Nobody will do it for us!

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