The FINANCIAL -- 25 percent of the population in rural areas in Georgia live below the
poverty line and another 25 percent is at risk of falling below,
according to the research conducted by CARE International in Caucasus.
“A just, flourishing, and peaceful South Caucasus region needs lots of different types of people, lots of different types of ideas, and lots of different types of experiences. Social entrepreneurship can work to bring out the innovation that will move all of society forward together,” so says Thomas Reynolds, Mission Director of CARE International in the Caucasus. FINANCIAL sat down with him last week to discuss one the most pressing issues the region faces in the form of poverty and how social entrepreneurship – as suggested by Mr. Reynolds - can bring about change.
Q. What is the poverty level in the region and where do we stand compared to other countries?
A. There is little consensus on the current poverty dynamics in the region primarily because different organizations use different metrics. CARE, for instance, used World Bank ’s definition of poverty - 2 USD income per day in its research and found that around 25 percent of the population in rural areas in Georgia live below the poverty line and another 25 percent is at risk of falling below. The 2010 Caucasus Barometer survey by the Caucasus Resource Research Centres shows similar numbers: Some 21 percent of the population of Georgia, 7 percent of that of Armenia and 4 percent of that of Azerbaijan say they had a monthly average income of 50 USD and less. These three countries still have dramatic underemployment which directly leads to high rates of poverty.
At a glance Azerbaijan has a good story to tell owing to its increasing oil revenues: the number of people in poverty - as measured by national poverty line - reduced from 75 percent to 49 percent from 1995 to 2002 and its GDP has had a stable growth rate since 1996. However, this is not the end of the story. My question becomes how inclusive has the GDP growth been for the average Azeri citizen or how the benefits from the oil revenues have been spread among the people? Regardless of whether the poverty is going up or going down, I think the government, civil society and business community should ask themselves how they can create value chains that are inclusive so that remote communities and poor people can participate in it at some level. This is an important goal for us to realize collectively.
Q. It seems like South Caucasian countries have similar problems in terms of unemployment and poverty. Would it be better if they managed to work together?
A. Some problems are very similar, some are very different. Would it better to work together? Absolutely! Georgia is a modestly sized market when we think about global economies. The same could be said about Armenia and Azerbaijan. Each of the countries has different competitive advantages and I think there is promise if they manage to collaborate and create more diverse economies. It does make sense to collaborate, to put opportunities on the table and think about the ways the countries can contribute to each other’s development. This is not easy. There are long-standing challenges to the countries working together, but we see cross border trade increasing, and there is further scope for more stable, inclusive economies and better usage of the countries’ competitive advantages.
Q: A number of researches show that poor people suffer disproportionally during economic crisis. Was it a case in the South Caucasus?
A: Poor rural people in the South Caucasus are typically cut off from the market. They have no or little access to credit. They often trade through non-cash means. They are utilizing local inputs and producing outputs that are consumed locally. While this level of economic exchange signals a subsistence level of existence, paradoxically this isolation also insulated the rural poor from external shocks. That is, they were insulated from the global crisis while the major markets across the world were declining in value by 30-40-60 percent.
Poor people in the South Caucasus were distanced from the consequences of the crisis again because they had a built-in-mechanism, a sense of what they can afford in terms of inputs and outputs. “The absolute poverty they face did not significantly decline”, he says. “So, if you are marginalized in remote communities, you are much better at coping than an average global citizen. However, I do not mean to say that global crises do not affect poor people in the Caucasus at all. For instance, what would have happened in terms of infrastructure that was not developed and that could have developed and provided market linkages? Or education, scholarships which could have been provided but were not? Some of the effects will not be able to be seen for a long time.
Q. If you look back over the last decade what do you think was the most significant change?
A. What has not changed? One of the most significant changes are those in the political actors, in who is influencing what decisions, particularly in Georgia, if we look at the events in the early 2000s. Moreover, there has been this move to market orientation: this is reinforced consistently with rhetoric and its applications are going to occur more and more. When I talk to my colleagues about what it was like living in Georgia 10-12 years ago, they talk about how lighting a candle was not considered a romantic activity - it reminds them of the misery of living months and months without power. To think about that now in Tbilisi is almost unfathomable. In terms of reliability of services in the capital, major changes have occurred and security has also improved, not only in the capital but across the country. In some ways, however, things have not changed that much.
Q. Then let me ask the question differently: what are the things that must be changed that have not changed yet?
A. CARE is imagining four areas - if significant changes are to take place - that could make society a better place for poor people. We are interested in a more representative government and a government that is more responsive to the voice of the people. We also want the voice to be clearer and more organized, so that the civil society organizations are representatives of the communities which they belong to and support. In terms of conflict, we are looking at how various institutions can be more conflict sensitive, how conflict can be reduced through peace-building agendas, more understanding of the incentives that encourage a resolution of conflict will enable actors with opposing viewpoints to see the value in not pursuing conflict in the future. As for market access, if we are to track the GDP growth of three South Caucasian countries and their participation in the economy, there has been a significant change, but has this growth been inclusive? How are poor people in rural areas participating? So, the economics and market access continues to be one of the biggest concerns, especially for rural people across the South Caucasus.
Q. How does this apply to young people in rural areas?
A. We have just studied twenty communities across the south Caucasus. In every community that we have researched so far, their number one concern is unemployment. When we are talking about poverty statistics, we know the priorities for young people are employment. They are looking to migrate for employment reasons. They would like to have jobs where they are inspired to live, but actually they do not see these jobs. Together with government, civil society, non-profit organizations and businesses we need to think about how we can bring more jobs, and prepare more people to occupy those jobs among the younger generations in the south Caucasus.
Q. Do you think that creating jobs would lead the region out of poverty?
A. I would say it is one of the solutions. I don’t think it’s fair to define the South Caucasus solely in a post-Soviet context but I think there are vestiges of Soviet life that have hindered entrepreneurship across the region. CARE is interested in identifying what we call social enterprises and using a vetting process to determine which have more promise. Social enterprise is a commercially managed organization fulfilling social change objectives. It has a potential to provide goods and services to underserved or un-served markets, and shows commitment to social values, rather than profits. We will be looking at young people, women, current business entrepreneurs and civil society organizations fostering an entrepreneurial zeal that identifies what is missing in society and looking at market-driven ways of providing that, whether its service, or it’s a good that provides social value. It’s a sense of connectedness and new opportunities.
CARE’s role will be to facilitate enhancing these ideas, so that local people can realize the vision that creates societal solutions right where they are.
Economic incentives created through social entrepreneurship can potentially reduce a variety of conflicts and that reduces the risk analysis foreign investors might have in the region, thereby increasing the likelihood of capital investment. Finally, this applies to people who have ideas about how to encourage public-private dialogue. We see those four areas as the most strategic levers that CARE can have in seeing a prosperous South Caucasus society.
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