Russian investments in Abkhazia
On October 21, representatives of the opposition in Abkhazia personally conveyed their negative attitude towards the draft agreement on benefits for Russian investments in the Abkhaz economy to members of parliament. According to the opposition, this agreement is extremely disadvantageous for the republic, as it severely impacts local businesses.
Renowned Abkhaz political figure and blogger Tengiz Djopua outlined three threats that, in his opinion, this agreement poses.
- How to save Abkhazia’s economy without offering super benefits to Russian investors? An economist’s opinion
- How to save Abkhazia’s economy without offering super benefits to Russian investors? An economist’s opinion
The first and most significant threat is that the large capital of the donor country (i.e., Russia – JAMnews), with its financial and economic capabilities, far exceeds those of the recipient country, Abkhazia, by tens or even hundreds of times. As a result, such capital could influence not only the economic situation but also the political landscape, since the decision-making center of the investor will be located outside of our republic.
The second threat is that a large investor always enters with their own economic and legal conditions and begins to impose them. For a weak, developing economy, large direct investments risk leading to market monopolization, distortion of the economic structure, capital outflow, and a reduction in the ripple effect of spending on the national economy. All of this is harmful. It is better to allow more households to earn through income from the tourism sector rather than letting tourism giants take over. In the first case, the multiplier effect is always higher.
And finally, the third threat is that the agreement provides benefits that discriminate against all Abkhazian businesses. With this agreement, we are giving priority to foreign businesses, while our own producers of goods and services are not only deprived of the opportunity to grow, but also of the basic conditions for survival.
The Abkhaz authorities neither know how to manage the economy nor have the skills to do so. They leave this entire process to the whims of the market and in the hands of large investors. This is why the agreement is dangerous.
It is extremely risky to give large investors access to developing sectors like tourism and agriculture, which form the basis of income for all Abkhazian households. Moreover, it is unacceptable to attract large foreign capital into strategically important industries and infrastructure.
Direct investments should instead be directed toward developing industries that are currently lacking, such as IT technologies, biochemistry, the chemical industry, bioengineering, and microelectronics.
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