Diaspora, external trade and FDI in South Caucasus countries

Pavel Chistyakov, Russia (Centre for Strategic Research; Geographic department of Moscow State University)

What can excuse the Russian intervention to the topic?

არც ისე წვამს, როგორც ქუხს or “a fish can not be estimated in water”

Multiple fieldworks in all three countries Sociologic research in 2007-2008 in Moscow

(links to diaspora, remittances, identity of migrants from South Caucasus)

Affection to South Caucasus

Geographic structure of export

>80% of Armenian export goes to countries where 70% Armenian diaspora lives

Near 60% of Georgian export is directed to countries bordering Georgia by land or by sea .

97% of Azerbaijan export is determined by oil contracts and configuration of pipelines

40%

Diaspora and sustainability of external trade

Liaisons with Diaspora provides higher sustainability of external trade compared to extreme dependency of oil export but it is more risky than diversified economic relations with neighbours

Armenia showed how diaspora can stimulate external trade during the period of rapid growth of the world economy. The future challenge is to elaborate mechanisms how diaspora can contribute during depressions

Diaspora inspires external trade: how it works and what should be done Experience of Armenia

1) Diaspora raises demand

1) Diaspora raises demand

“Nostalgic”(FMCG)

“Nostalgic”(FMCG)

“Corporate”(eg: metalls, chemicals)

“Corporate”(eg: metalls, chemicals)2) Diaspora helps to

reduce transaction costs of trade in foreign

countries

2) Diaspora helps to reduce transaction costs

of trade in foreign countries

Challenges for Azerbaijan1) Structuring and moving

out of “shadow” trade networks based on kinship

1) Structuring and moving out of “shadow” trade

networks based on kinship

2)Collaborate with

governments providing access to markets

2)Collaborate with

governments providing access to markets

Challenges for Georgia

Exploring consumers’ preferences

Exploring consumers’ preferences

Dealing with institutions

Dealing with institutions

Establishing business-contacts

Establishing business-contacts

Geography of FDI: similar tendencies?

Armenia

Azerbaijan

Georgia

>85%

70%

80%

Structure of FDI by economic sectors

Benefits and hazards of FDI made by diaspora The key issue of policy towards diaspora’s investment

activity is to keep balance between corporate and governmental interests

Sector Main benefit Main hazard

Industry Rise of productivity via technologic modernization

Conservation of “heavy” structure of economy and dependency on raw market conditions

Energy Reduction of accumulated depreciation of funds and risks of emergency

Dependency on energy companies corporate policy

Transport Opening borders of a country

Lost control of strategic objects in politically not stable region

Real estate Stimuli for construction, industry and services

Growth of real estate prices

Finances Availability of credit resources and derivatives

Risk of capital outflow

Consequences in Russia

Universal outlines of diaspora-policy

Projecting of collective action institutions – online (eg: “diaspora-social network” project startup) and offline

Personalization as of liasons between object and subject of help – support of concrete people by concrete people/villiges/small projects

Creation of conditions for repatriation – temporary (eg: well qualified youth) and permanent (eg: pensioners)

Formalization of informal networks based on kinship. International development institutions should be mediators

in process of Diaspora-Motherland interference due to

higher level of trust to them compared to local governments.

International development institutions should be mediators

in process of Diaspora-Motherland interference due to

higher level of trust to them compared to local governments.

Specification of the policy for South Caucasus countries considering cultural differences

What can unite Diaspora and country

Methodology Approach to instruments

Arm Ethnicity & history

To direct efforts of diaspora to reduction of dependency on diaspora

Elaboration of the joint concept of interrelationships –exchange of commitments

Az Kinship, fellowship and traditions

To develop “bridging” against bonding

Regionalization of diaspora-policy - social networking with territorial linkage

Geo Spiritual unity

Individualization and fragmentation of diaspora

Shaping the set of event and economic contacts according to interests of key-persons

Thank You for Attention!

Pavel Chistyakov, Russia (Centre for Strategic Research; Geographic department of Moscow State University)