The unresolved conflict hinders Abkhazia’s development
Abkhazia-Inform – We continue to publish a series of interviews with scientists and public figures about the economic situation in Abkhazia, about external and internal factors influencing its development, about international projects that could be of interest to Abkhazia, as well as how, without yielding to political positions, find ways to unblock Abkhazia for contacts with the outside world.
Doctor of Economics, Professor, Academician of the Academy of Sciences of Abkhazia, Director of the Institute of Economics and Law of the ANA Zaur Shalashaa.
– How freely is Abkhazia developing? Why are modernization processes so late in different areas?
– After the recognition of its independence and state sovereignty, Abkhazia received more opportunities for free development politically, economically, technologically and culturally. However, there are areas where our state is not able to fully fulfill its functions. In particular, this concerns one of the main functions – the defense of the country. This is due to the limitedness of our own resources – both human and technical.
On September 15, 2009, Russia and Abkhazia signed an Agreement on cooperation in the military field, which provides for strengthening military security and confidence-building measures, ensuring security and control of the republic’s airspace, and interaction in the naval area. In accordance with the document, Russia was given the opportunity to build, use and improve military infrastructure and military bases on the territory of Abkhazia, as well as create a joint group of forces, both in peacetime and in wartime. By concluding this Agreement, the leadership of Abkhazia deliberately decided to limit its sovereignty, but this was done for the sake of ensuring the safety of the country.
The fact that Abkhazia is only a partially recognized state prevents its involvement in world economic processes. That is, there is no free movement of capital, resources, or people & nbsp; & nbsp; and so on. The opposition is also observed in political terms.
As for technological development, Abkhazia does not have its own enterprises that could produce modern technological equipment, so it has to import it from other countries.
At the same time, we have a fairly large enterprise in the processing industry, more precisely, in the wine industry, such as Wines and Waters of Abkhazia LLC, in which in 2000 the entire production cycle was modernized and the most modern equipment was installed … The management of Wines and Waters of Abkhazia did the right thing by inviting specialist consultants from Italy and training our local specialists. Today this production is successfully developing and is competitive not only in the Russian market. Innovative technologies are actively used by A-Mobile and Aquafon, which are mobile operators. However, in contrast to LLC “Wines and Waters of Abkhazia”, they are subsidiaries of the Russian companies “Megafon” and “Beeline”. If at the beginning cellular operators experienced a shortage of local personnel and invited Russian specialists, then gradually the situation improved. Today, up to 95% of the employees of these companies are local staff, there are many qualifiedIT specialists.
– What restrictions and in what areas does Abkhazia face due to partial recognition?
– In various spheres of the national economy – whether it be industry, agriculture, transport and communications, banks, etc. We, in due time, in 2015, on the basis of the Center for Strategic Research under the President of the Republic of Armenia, developed, and in 2016 it was the “Strategy for the socio-economic development of the Republic of Abkhazia until 2025” was adopted. There is given a SWOT analysis of the branches of the national economy and foreign economic activity. And we note everywhere that one of the main obstacles in the development of all spheres of the national economy of Abkhazia is the unresolved conflict with Georgia. As soon as any organization or company, be it from Russia, Western countries, Asia or Latin America, becomes interested in Abkhazia and begins to negotiate with our authorities on the creation of a joint production or investment, it immediately falls on the sanctions list as a violator of Georgian the law on the occupied territories.
Serious problems arise with the movement of finances, remittances, since Georgia and its Western allies monitor the work of banks. Problems also arise with the free movement of the working & nbsp; strength. But it is easier here, as guest workers from the Central Asian republics and other Asian countries come to us. There are also Baltic people. According to the Migration Service, up to 10 thousand people from Central Asia worked in Abkhazia in 2019. Among the migrant workers were not only people engaged in unskilled labor, but also specialists in the field of construction, energy, elevators, etc.
The United States and most Western countries that actively support Georgia and oppose Russia are also obstructing Abkhazia. Russia is the real defender of Abkhazia, the guarantor of its military security and strategic partner. Invaluable & nbsp; & nbsp; and the financial assistance that the Russian Federation provides to Abkhazia in the socio-economic sphere.
– What international projects or opportunities that are interesting for Abkhazia from a development point of view are not available due to the restrictions associated with the unresolved conflict?
– Recently, we have often come up with the topic of the activities of non-governmental organizations and the grants they receive from international organizations. I want to express my point of view. In the late 90s of the last century, the first president of Abkhazia allowed the opening of a branch of the Soros Foundation in Abkhazia. This branch was headed by very famous, respected people in the country. Many very interesting and necessary projects for Abkhazia were financed, including educational ones, many books were published.
There have been various overseas trips of mixed delegations, which included both officials and NGO representatives. The composition of these delegations was agreed with the authorities, with President Vladislav Ardzinba.
The President considered it necessary that Abkhazia, albeit in a personal capacity, be represented by representatives of NGOs and officials. I myself, being a member of parliament, twice traveled to Austria, was in Germany. The meetings from the Georgian side were also attended by both NGO representatives and officials. These meetings gave us the opportunity to better understand what the Georgian side thinks, to express our point of view, our interests and concerns ourselves. Once I was asked how I can participate in peacekeeping projects and meetings if I fought myself, to which I replied: “It was not Abkhazia that attacked Georgia, but Georgia entered Abkhazia with troops and unleashed a war. And I defended my land, my home, my family. ”
The organizers of these meetings were various international, European & nbsp; & nbsp; non-governmental organizations. After all, they are to one degree or another connected with the official authorities, prepare analytical information and reports for them. So we tried to use this opportunity to convey the point of view of Abkhazia to different countries.
I would especially like to emphasize that all the participants from the Abkhaz side – both representatives of NGOs and officials – adhered to a single point of view and defended the foreign policy of the government of Abkhazia.
I also remember the following case: an additional person was included in the Georgian delegation, representing the so-called “Abkhaz Autonomous Republic”. It was a well-known doctor, a former deputy of the Supreme Soviet of Abkhazia, Napoleon Meskhi. As you know, in Abkhazia they were against participation in any kind of meetings and negotiations with representatives of the so-called “autonomous republic”. We also lodged our protest. But, in the end, after consultations with our Foreign Ministry, on the second day we continued to work. To be fair, I must say that he argued more with the Georgian participants, & nbsp; & nbsp; very honestly and frankly spoke about the military conflict. He expressed regret that the Georgian part of the deputies of the Supreme Soviet of Abkhazia, elected in 1991, did not expressly oppose the introduction of the Georgian State Council troops into Abkhazia under the guise of guarding the railway in August 1992.
I see recently that many are afraid that Western funds do not finance anything so easily, that there is “brain processing” going on, especially among young people. I can understand people and their fears. But we have people here who are responsible for organizing such meetings. Elders are responsible for our youth – for children, schoolchildren and students, who must control this process, its format and content. By the way, we are implementing projects not only with the participation of young people. The UN Development Program supports interesting and useful projects in the field of small business and agriculture. I know those who are engaged in these projects today. Rural residents are given the opportunity to start a specific business, to grow agricultural products both for their own consumption and for sale. There are projects when villagers are helped with seed, with the purchase of equipment – mini-tractors, etc.
But we are also interested in cooperation with various foreign companies, in attracting investments in the country’s economy. Our legislation on investment activities provides, depending on the amount of investments and their term, tax incentives, state protection, support. This is done through the Investment Agency of Abkhazia, created under the RA Ministry of Economy. Unfortunately, & nbsp; for a number of objective and subjective reasons, the process of external investment in our economy is proceeding at a very slow pace.
– How would you assess the losses of Abkhazia due to restrictions related to the Georgian-Abkhaz conflict?
– First of all, in order to assess the losses from restrictions, it is necessary to say what damage the military actions inflicted on Abkhazia. In 1994, a special commission was created, which, using international standards and methodologies & nbsp; & nbsp; calculation, estimated the damage at 1994 prices at $ 14.3 billion. Imagine how much this figure has grown today. It was calculated for all sectors, what damage was caused to the economy of Abkhazia. These figures are given in the book by Oleg Bagratovich Shamba “Fundamentals of the Transitional Economy of Abkhazia”, reprinted in 2004.
Unfortunately, today in Abkhazia little is remembered about this. I believe that our Parliament should have raised the issue of reimbursing Abkhazia for material damage caused by the war, before conducting serious negotiations with Georgia. This question should be raised both to the Georgian authorities and to the international community.
As for the missed opportunities, it is difficult to assess them, but the war had a negative impact on all spheres of life in Abkhazia. But all those restrictions on the part of Georgia, which we talked about, & nbsp; & nbsp; hinder the development of the economy of Abkhazia. If we had opportunities for the smooth movement of capital, technology, labor, we could recover faster. Of course, there are many other objective and subjective reasons hindering the successful development of Abkhazia, but first of all, it is the unsettledness of the conflict.
– How significant are the losses for other countries of the South Caucasus from blocked communications?
– Here, unambiguously, Abkhazia itself suffers losses from the fact that our transport communications are blocked, and other states too. We are talking about Georgia and Armenia. But freight traffic could move even further. And this is a lot of revenue for the state budget.
This issue was discussed back in the late 2000s. Then everything stalled. Unblocking transport communications, and not only railway communications, but also aviation and sea, would certainly be beneficial to Abkhazia.
– There is an opinion that it is unacceptable to negotiate with the Georgian side before the signing of the Agreement on the Non-Use of Force or even before Georgia recognizes the independence of Abkhazia. Does this position bring the recognition of Abkhazia closer in reality?
– It is necessary to talk, but at the same time at all levels the issues of national security, the interests of our state, the future of our children should be put at the forefront. But what is primary and what is secondary – it’s hard for me to say. But if Georgia recognized the independence of Abkhazia, the process of broad international recognition of Abkhazia would accelerate significantly, we would gain access to foreign markets.
The first is recognition, and the second – whether we like it or not, the same joint operation of the Ingur HPP forces us to contact the Georgian side, thereby ensuring our energy security.
I believe that in those areas where it is possible and beneficial, contacts are necessary. But a single national point of view must be developed so that society and the state have a single point of view on the possibilities of external relations, not only with Georgia, but also with respect to other countries. In all countries, foreign policy and foreign trade are strategic issues. They are never at the mercy of any private person or public organization. The state must direct and control the entire process.
I would like to emphasize that no matter who we negotiate with, issues of national security; Should come first.
– Could we, without yielding to political positions, find a way to unblock the paths of economic development?
– We cannot boast that we have many allies, the only one we can count on is the Russian Federation and those countries that have recognized Abkhazia. Without a political settlement of the conflict with Georgia, it is possible to establish economic ties with Turkey, involving the diaspora, and not only the Abkhazian, but also the Circassian. In this regard, more progress can be achieved, because the desire to invest in the economy of Abkhazia is expressed not only by representatives of the Abkhaz diaspora in Turkey, but also by the Circassian.
There are prospects for the development of economic relations with Syria, which has recognized the independence of Abkhazia. Latin American countries – Nicaragua, Venezuela, Cuba and Bolivia – cannot be discounted, despite the fact that they are very far from Abkhazia. Former foreign ministers Maxim Gvindzhia and Vyacheslav Chirikba have repeatedly stressed that the Foreign Ministry should work more actively in different regions of the world. I think that our foreign ministry is dealing with these issues, but does not publicly declare everything, fearing opposition from Georgia.
One of the fears of our citizens about external contacts is related to the fact that representatives of the Georgian diaspora, the so-called “former refugees”, living in the same Russia and having Russian citizenship, are interested in investing in Abkhazia either directly or through dummies. & Nbsp; & nbsp; Those who are not indifferent to the problems of our country, who are worried about it at heart, who are concerned about national security issues, emphasize the importance of state control in this matter.
But we also have a lot of those who fear that the authorities, being corrupt, can, using various schemes, grant Abkhaz citizenship to representatives of other nationalities, including Georgians, thereby making it easier for them to return or purchase residential real estate. We are all witnesses to various lawsuits.
I believe that the authorities should be directly responsible for the state of affairs in the country, and society should have mechanisms for effective control over the activities of the authorities.
One may ask a question: will some point project between Abkhazian and Georgian businessmen, coordinated with the authorities, harm our state? So the recent incident with one of our Abkhaz businessmen clearly illustrated that society is not ready for such contacts. Too little time has passed for the wounds inflicted by the war to heal. Our people are divided: those who want to develop business are negotiating so that the Georgian authorities unblock rail, air and sea traffic; the other part of society cannot tolerate this in any way.
We suffered heavy human losses during the war, as well as after it as a result of frequent sabotage and terrorist acts, which ended only after Russia recognized Abkhazia in 2008 and the Russian border guards took control of the border.
Georgia, which unleashed the war, must be the first to take some steps: to compensate for the damage caused by the war, to abolish the law “on the occupied territories”, to repent before the Abkhaz people. The official authorities of Tbilisi must draw the right conclusion if they intend to establish relations with us. Then our society will mature, appreciate, and the negative that has been accumulating over the years may gradually recede.
– What economic, energy or transport project could be a breakthrough for Abkhazia if the restrictions are lifted?
– I can safely say that in Abkhazia only those projects that are implemented by national entrepreneurs, including jointly with foreign investors when it comes to the production of competitive goods and services on an innovative technological and technical basis. It makes no sense to build just a hotel facility without modern equipment. Such a project cannot be breakthrough. Breakthroughs in our country are, as already noted, such large industries as “Wines and Waters of Abkhazia”, ”Sukhum Brewery”, companies “A-Mobail” and “Aquafon”, as well as medium-sized enterprises producing various kinds of non-alcoholic sweet drinks , mineral water … Good prospects for the production of environmentally friendly products that are in demand all over the world. Environmentally friendly products from Abkhazia will be in demand with a competent marketing process from the authorities, the Ministry of Foreign Affairs and the Chamber of Commerce and Industry of Abkhazia, as well as entrepreneurs themselves.
Clean water is a hot commodity. When this issue began to be actively promoted in 2014 – 2015, many were skeptical about it. We know that even before the war an Israeli company was negotiating with the Abkhaz authorities on the supply of clean water to Israel. Today Arab countries and Crimea need clean water. The quality of our water in the Bzyp, Kodor and Gumista rivers meets the highest standards. We need to promote this brand of ours and the ability to export water by rail and sea. Our water is competitive and can take its rightful place in the world market.
– What do you think about energy or transport projects?
– Energy projects can be. In our system of the Academy of Sciences, a project of alternative energy sources is being developed, calculations are being prepared. The energy sector of our republic found itself in a very difficult situation, the energy sector is worn out as much as possible. Its restoration requires colossal funds, which Abkhazia simply does not have. The Institute of Ecology of the Academy of Sciences of the Republic of Armenia is engaged in a project of hybrid installations combining elements of solar batteries and wind generators. SPTI has its own developments. & Nbsp; & nbsp;
We have a lot of water resources and the construction of small hydroelectric power plants could & nbsp; & nbsp; would also prove to be a breakthrough.
We already have a project that has actually been implemented. This is the restored Sukhum hydroelectric power station. But such projects are possible in both Eastern and Western Abkhazia. As you know, we are currently having a lot of disputes over the production of cryptocurrencies. Mining is prohibited until March 31, 2022. But, if mini-hydroelectric power stations are built in certain areas where people do not live nearby, then the electricity they generate could be used for the same mining. And this is the employment of the population, profit and additional income to the treasury. We can organize it without spending huge amounts of money. There are almost no risks to society in such projects. Local residents themselves could invest in them. It could also be a joint production in the form of a public-private partnership.
Today it is possible to invest in small energy without lifting restrictions on the part of Georgia. Those who invest in a new business, whether they are locals or foreigners, are always at some risk, so it is important to calculate the possible risks here.
Russian investors today are not so much concerned about the safety of their investments from criminals as whether they will be able to get real profit, export products from Abkhazia. & nbsp; & nbsp;
We have an Investment Agency under the Ministry of Economy and a Presidential Council to determine priority areas for the development of Abkhazia. I am a member of this Council. One of the projects that we are discussing is the creation of the “Corporation for the Development of Abkhazia”. So, investors express a wish that the protection status of their investments should be increased to the level of president or government.
As you know, in order to support the real sector of the economy of Abkhazia in 2016 – 2019, leading Russian commercial banks, with the support of the leadership of the Russian Federation, allocated 1.2 billion rubles for concessional lending to projects in the agro-industrial complex and the tourism industry. Seven projects were funded. However, unfortunately, most of the projects are still incomplete.
Since one of the main functions of the Investment Agency under the Ministry of Economy is to promote the protection of the rights and legitimate interests of investors, today the possibility of raising its status to the level of an agency under the government or under the Presidential Administration is being considered as one of the options.
– Returning to the question of the transport project, what could be its format?
– Our Parliament has already spoken out about the through traffic through Abkhazia. He supports such a project. It is necessary to sign a through traffic agreement. I believe that this agreement could be signed not at the presidential level, but by the supervising ministers of Abkhazia, Armenia and Georgia. We have an example of concerted action in the energy sector.
This project is not directly related to the settlement of the conflict. It provides an opportunity for unhindered transportation of goods through our territory, without losses and risks.
Abkhazia is interested in sea and air communication with the world. Unblocked transport communications will drive economic growth. But Georgia in every possible way prevents Abkhazia from obtaining the international civil aviation code ICAO, an airport index, which is a very important parameter for international passenger traffic.
– There are many in Georgia who believe that they do not need a project to resume through railway traffic.
– To say that we do not need this is a mistake, because any country should be interested in the smooth movement of cargo flows. Distances are also important. In addition, the opening of the through traffic will allow moving through Georgia not only in the direction of Armenia, but also Iran.
– And in what could be the interest of Russia or other regional players in this regard?
– For Russia, the project to resume through traffic through Abkhazia is undoubtedly beneficial. It shortens the route of delivery of goods to Armenia, and even further, for example, to Iran. The economic costs are getting lower.
We have not touched upon the issue of supplying goods from Georgia to Abkhazia, or rather the issue of smuggling.
In 2012 – 2013. a study was conducted with the participation of experts from Abkhazia, Georgia, Western countries. The study showed that about 4% of Abkhazia’s foreign trade turnover fell on Georgia, and for some types of agricultural products and consumer goods – from 25 to 40%. And this, not counting those goods that were transported and transported ford across the border river Ingur. All this was carried out bypassing the 2007 decree of the President of the Republic of Armenia on the prohibition of trade with Georgia.
We know that at one time there was a customs post on Ingur, and a customs duty was levied.
– By the way, how do you feel about the fully functioning customs post at the Ingur checkpoint?
– I have already expressed my opinion on this matter. I am familiar with the opinion of almost all heads of the State Customs Committee. I believe that the full-fledged operation of the Abkhaz customs post on the Abkhaz-Georgian border means the consolidation of state sovereignty on its territory. The state should receive income in the form of customs duties for imported and exported products. After all, we know that a significant part of the hazelnut harvest goes to Georgia, and from there various fruits and vegetables, food products, furniture, etc. come to us.
Uncontrolled import of goods to Abkhazia causes much more harm to the economic security of the country, and food. But we have the Gal customs department, the Quarantine Inspection, and other services stationed in this area. The state spends considerable financial and other resources on their maintenance, but nothing comes to the budget from them.
At the end of our conversation, I would like to draw your attention to one circumstance. We conduct surveys of the population on various economic and social issues, but with the study of public opinion about Georgia, the situation is much worse.
As I already said, someone can support some economic projects based on their personal interests, but others will oppose. To avoid collisions of interests of different groups in society, as well as society and government, public authorities should & nbsp; & nbsp; to work with our citizens through different organizations, in different regions, with different segments of the population, including schoolchildren and students, to study people’s opinions, to explain their intentions and actions.
What prevents, by order of the state authorities, to conduct a survey of the population (this will not require large financial costs) on the same issue of attitudes towards Georgia, and to present the results of the study to the Government and Parliament – this is the opinion of our society as a whole, in this or that region in particular. Such a survey should cover a much larger number of people than the so-called representative sample of 500 – 1000 people.
The government itself can initiate and implement such a thing. And most importantly, there are structures that can accomplish this – the administrations of villages, settlements, cities and regions. I would not like to compare the current situation with the Soviet era, but then there was more communication, more meetings on the ground with senior officials, politicians, scientists, writers, cultural figures. For more than 20 years, some parties have been gathering their supporters, others – their own. The schism in society has reached dangerous proportions, while, unfortunately, little is being done for overcoming the split and real unification of the people around some basic idea, concept, strategy of the country’s development.