, , , , ,

The Progress of Georgia’s Economic Policies

Georgia's economic policiesGeorgia’s poverty and unemployment rates hit 13.3% and 18.5% respectively in 2020. A vast number of factors have contributed to these statistics. The Borgen Project spoke with Toby Davis, the former division chief for the Caucasus and Central Asia Office for the Analysis for Russia and Eurasia, to explore the economic landscape of Georgia and the factors impacting Georgia’s economic policies.

Unemployment and Poverty in Georgia

Davis explains that 70% of polled citizens will declare unemployment. However, when taking away pensioners, students and people who are not currently looking for work, only about a third of the 70% are actually unemployed. For example, many subsistence farmers register as unemployed because they are not currently working for a recognized business and thus do not consider their trade as a job.

Davis explains that “Unfortunately, this tilts the balance of the statistics, resulting in government decisions that may not always be the best for those who are genuinely unemployed and struggling to find work.” Despite a sometimes inaccurate reflection of statistics, Georgia is nevertheless working to improve the level of poverty and unemployment within the country with solutions that can bring Georgia’s citizens out of their current state of poverty.

Causes of Georgia’s Economic State

Two main factors impact Georgia’s economic state. First, Davis states that Georgia’s economic problems stem from the establishment of the Georgian Dream-Democratic Georgia party in 2012. Billionaire politician, Bidzina Ivanishvili, established Georgia’s previous state of government, changing the motives of politicians within the country.

Teona Zurabashvili, policy analyst at the Georgian Institute of Politics (GIP), explains that when the Georgian Dream came into power, it “squandered the political capital” it accumulated and supporters “never received the social justice they were promised.” She explains that the political climate reflected “an unfocused economic program, clannish rule in the judiciary system, rampant nepotism in the civil service, decreased direct foreign investments, a devaluation of the national currency and clear signs of state capture.”

Due to poor governance, poverty in Georgia has largely gone unaddressed. Davis reaffirms that because of political interests and weak governance, many of Georgia’s economic policies do not help the economy reach its fullest potential.

The second major contributor to Georgia’s economic state is the imbalance between exports and imports. Currently, Georgia spends more than it sells and produces, with export levels barely making one-third of the number of imports. The statistics show that the total exports are around 3.3 million, whereas its imports are at approximately 9.1 million. In 2016, Georgia imported most of its oil and natural gas to satisfy the energy demand in Georgia. With a transition to renewable energy, Georgia may be able to reduce these imports.

Past Plans and Current Projects

The Economic Development and Poverty Reduction Programme was a past proposal to fix Georgia’s poverty. It was approved in 2003 but was never implemented. Although the plan had funding from the World Bank and the IMF, Georgia’s government lacked interest and never followed through with it. Davis seconds this point, stating that, “there are individual party projects trying to fix [poverty rates], but nothing ever reaches the grand government scale. The projects improve it in increments, but there are a lot of questions as to why it isn’t improving faster.”

The Namakhvani HPP project aims to help Georgia gain “energy independence” through hydropower. The project’s goal is to satisfy 20% of the energy demand in Georgia, increasing domestic annual generation by 15%. A large portion of Georgia’s spending goes toward importing oil and fuel for energy demands. Therefore, Namakhvani HPP would reduce these expenditures. Wealth from this project would allow Georgia to gain energy independence and focus on implementing poverty reduction programs.

Reviving the Deep Sea Port Project

Another option regarding Georgia’s economic policies is the revival of the canceled deep sea port construction that would have taken place on the coast of the Black Sea. The project has the potential to generate cargo trade with China and Central Asia, with the potential to bring in significant revenue. The project was canceled due to a lack of funding. Thus, if the project were able to garner the international support and funding it needs, the project could positively impact the import and export sector.

The government of Georgia needs to prioritize developing the economy and reducing poverty, which should be reflected in Georgia’s economic policies. With politics aside, Georgia has the potential to thrive.

– Seren Dere
Photo: Flickr

, , , , , , , , , , ,

What Exactly Is Happening in the Northern Triangle? 

The Northern Triangle
Latin America is in a vicious circle of crime, poverty and corruption. High crime rates thwart economic opportunities and crime rates push people into poverty, all cumulating into corrupt leaders who use the pain for their power and self-interest. Nevertheless, nowhere is crime more prevalent than in the Northern Triangle.

The Northern Triangle is region in Central America that includes Guatemala, Honduras and El Salvador. It has experienced the worst problems such as poor economic growth, rampant gang violence and political corruption. This three-prong nightmare has fueled an estimated 265,000 people toward the Southern U.S. Border and will continue to grow into the foreseeable future. While some do attempt to find safety in Europe and elsewhere in South America, others take the risk and traverse their way to the U.S-Mexico border, where they risk entering the country illegally. Others surrender to U.S. border patrol and seek asylum. However, it is unlikely that they will receive asylum. On average, only 13% of individuals receive asylum and experience integration into the United States.

Gang Corruption

In 2017, a survey asked the people in El Salvador, “who runs the country?” About 42% of respondents said “Delincuencia/Maras.” For non-Spanish speakers, this translates to gangs, like MS-13.

These answers have visible ramifications that strike at the core of the government. Governments in the Northern Triangle are weak, and the people know this; the gangs know this. People understand the country’s power lies in gangs’ hands, not in the government’s.

For example, in 2012, the Salvadorian government agreed to sign a truce with the criminal organizations to address skyrocketing homicide rates. The profoundly unpopular legislation did lower the homicide rate but the people still had to continue to pay gangs. Tactics like homicide and racketeering are not the only ways these organizations flex their might.

Throughout the Northern Triangle, gangs rely on drug and human trafficking, money laundering, kidnapping and theft to export their criminal enterprise well beyond the Northern Triangle. Issues in the Northern Triangle are not just an inter-state problem but also a problem for the entire Western Hemisphere.

Governance Problem

Northern Triangle nations have made some progress when it comes to corruption. But the total damage that such corruption caused is still in the billions: $13 billion to be precise.

In 2006, Guatemala successfully combated corruption when it appealed to the U.N., which established the International Commission Against Impunity in Guatemala (CICIG). This independent body investigates the infiltration of criminal groups within state institutions. Such an organization resulted in the conviction of hundreds of officials and reduced the homicide rate.

In El Salvador, in 2019, the country created its own independent body called Commission against Corruption and Impunity in El Salvador (CITIES), which could yield the same results as CICIG. Over in Honduras, the hopes of establishing such independent oversight do not seem to be gaining the same traction. After the resignation of President Lobo Sosa in 2013, an investigation into the Honduran Institute of Social Security revealed a scandal that cost the people over $200 million. It also implicated President Orlando Hernández, who admitted to unknowingly using some of the money to fund his presidential campaign.

Unlike Guatemala and El Salvador, the Honduras legislature rejected a proposal to create its own CICI. Instead, it created Support the Fight against Corruption and Impunity in Honduras (MACCIH). Although intended to fight corruption, it does not have the same autonomy as CICIG and CITIES. MACCIH is not autonomous and cannot investigate Honduran Public Ministry. Instead, it relies heavily on its relationship with the Attorney General and Congress, which could shield the people committing corruption. This inability to pass support for CICIH instead of settling for MACCIH might be signaling that the $200 million white-collar crime is the beginning of a giant iceberg.

A Path Forward

In Washington DC, support exists for CICIH and CITIES. Congresswoman Norma Torres and others released a statement in 2019 supporting these institutions. Reinstating the CICIG and implementing the same structure in CICIH and CITIES would stop corruption. This would allow the state to use its monopoly on violence to fight crime and allow positive economic growth. In April 2021, the State Department announced $740,740 in available funding for “competition for organizations interested in submitting applications for projects that empower civil society to combat corruption and protect human rights.”

– Diego Romero
Photo: Flickr

, , , , , , , ,

Poverty and Income Diversification — The Escape

Poverty and income diversification The World Bank estimates that 78% of the world’s poor live in rural areas. Most individuals who reside in these areas depend on farming and agriculture not only for sustenance, but also for household income. There is consequently a correlation between poverty and having one, dominating occupation. Yet according to researchers, there seems to be a solution to this relationship through increased income diversification.

Farming

There is an issue of volatility that is inherent in farming. Variability in conditions can adversely affect crop yield, which ultimately impacts the income received by farmers. According to Farm Europe, competition can also be problematic. If all the poor in a given region take up farming as a means of earning income, then at some point, the supply outweighs the demand. When that happens, either crop prices will either decrease or crops will waste away in storage. This effect is further amplified when governments are unable or unwilling to offer adequate compensation for farmers’ excess crops.

Even in the United States, abundant in resources and well-developed in agricultural techniques, farming is a constantly changing industry. The USDA reports a wide fluctuation in income earned by a typical commercial farmer between 2000 and 2014. As a result, there is a need for income diversity worldwide, and this is particularly illustrated by some of the success stories in impoverished countries.

Vietnam

Since the 1990s, Vietnam has experienced high rates of economic growth. Researchers with the IFPRI (International Food Policy Research Institute) assert this is due in large part to income diversification.

Vietnam’s highest concentration of poverty is located in the Northern Hills. An analysis of the region suggested that those able to earn income by way of agricultural production, as well as non-farming activities, experienced the highest spike in their earnings over time. However, where does that leave those solely reliant on farming?

Residents limited to farming only managed to earn a living by applying the principle of diversification to their crops. They deviated from the typical crop grown, rice, and added cash crops, like coffee and tea, to their output. The cash crops yielded a much higher profit per unit of sale and required less land, labor and resources to grow and maintain. Even so, their spike in income did not match that of those who participated in both farming and non-farming activities. Nonetheless, the practice of diversification provided a much more stable source of income overall.

Niger

Niger currently ranks as the fifth most impoverished country in the world, and it is actively striving to end its poverty issue. People are seeing positive results attributed to the dynamic between poverty and income diversification.

A study conducted on over 600 smallholder rice farming families in Niger revealed that those who also participated in non-farming wage employment were better off than those who strictly farmed or were self-employed in some capacity related to farming. An important effect of a second stream of income was the ability to maintain the size of a given farm. The ancillary job could generate enough profit during a poor season to cover overhead costs for the following season.

Conclusion

The relationship between poverty and income diversification has become a central focus for policymakers across the globe. It is an effective way for individuals to mitigate the impacts of poverty. Empowering impoverished families to earn steady income can solve many issues embedded in poverty. If a family can individually afford food and water, they can pay to keep their lights on or go for a visit to a doctor. Moreover, the idea of attaining an education or further developing their current form of income becomes a realistic possibility. Diversifying income creates a pathway to not only sustaining livelihoods, but lays the groundwork for prosperity.

– Christian Montemayor
Photo: Flickr