How to save Abkhazia's economy without offering super benefits to Russian investors? An economist's opinion
On Russian investments in Abkhazia
Next week, leaders of the Abkhaz opposition will have the opportunity to personally express their extremely negative stance on the draft agreement on Russian investments to the parliament. Many believe that this agreement, which provides unprecedented benefits for Russian investors, will not save but rather completely ruin Abkhazia’s economy.
Abkhaz economist Akhra Aristava suggests an alternative approach to solving the republic’s economic problems.
Akhra Aristava:
Those who claim that there is no money in Abkhazia, that only a large investor can save the republic, and that such an investor should be given benefits, have one goal — to mislead and manipulate citizens for narrow corporate interests.
In the modern world, the issuance of money depends entirely on the produced goods. Our Ministry of Economy reports that Abkhazia’s GDP is growing. This means that there is an opportunity to issue money for economic lending up to 50 percent of the value of the labor output of all citizens. And since we do not issue our own currency but use the Russian ruble, it is only natural that Russia should supply us with rubles based on the results of our labor.
And this is not about a gift, but about long-term loans, as was the case in 2009 when the Bank of Russia provided a large loan to the National Bank of Abkhazia.
However, since 2020, it has not been possible to secure a similar loan. As a result, the executive branch has failed to address the key issues of the economy—growth in domestic production and export growth.
We are stuck at around 7 billion rubles [about $73 million], we failed to maintain the positive currency balance in foreign trade that had developed by 2020, and as a result, there is currently no way to stop relying on Russian co-financing for public sector salaries and begin paying bonuses independently, as was planned by 2025.
In other words, the government has not even achieved the goal it set for itself. Experts have been warning all these years that inaction would inevitably lead to a crisis.
In reality, the money shortage in the republic is artificial. The National Bank of Abkhazia has the right to request at least 17 billion rubles [around $177 million] from the Russian side, based on our GDP, to issue long-term loans to local entrepreneurs for 5-10 years at a low interest rate.
However, this requires the support of the authorities, backed by a development plan for the republic. Instead of addressing real problems, they are trying to convince us that without offering benefits to foreign oligarchs, we will fail, which is clear manipulation.
There is significant experience of investing substantial amounts of money into Abkhazia’s economy. For instance, major Russian companies like MegaFon, MTS, Rosneft, and many others have entered the local market long ago. And to develop their business in Abkhazia, they did not ask for any super-benefits, super-conditions, or super-guarantees.
Any business is always associated with certain risks. But the large investors I mentioned have conducted and continue to conduct themselves with respect for the Abkhaz people and Abkhazia. They understand that taxes must be paid without any special preferential treatment.
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