The Economic Development Complex in the Black Sea Area

cover-09:cover-09 26/05/2010 12:40 Page 1 XENOPHON PAPER 9 no VLADIMER PAPAVA Written by Vladimer Papava, this Xenophon Paper touches upon the consequences of the crisis on the countries of the Black Sea region in a specific analytical framework. Based on his own “theory of necroeconomics,” Papava assesses, in the context of the ongoing crisis, the key eco- no nomic obstacles that the countries of the region face in achieving sustainable economic development. His analysis is based on two economic phenomena: the “necroeconomy” and the “zombie-economy.” A “necroeconomy,” which is created by uncompetitive industries (the “necrocompanies”) that are remnants of the command economy, differentiates the economy of post-Com- munist capitalism from all other models of capitalism. In times of economic crisis, though, THE ECONOMIC DEVELOPMENT COMPLEX IN BLACK SEA AREA 9 XENOPHON PAPER “necrocompanies” can also appear in developed economies, as “zombie-firms,” creating a “zombie-economy.” Following his theory, the author divides the countries of the Black Sea region in two groups: THE ECONOMIC transition states (the “leaders,” to the extent they overcame their Communist past and the “out- siders,” for those that are enslaved by their Communist heritage) and non-transition states DEVELOPMENT COMPLEX (Turkey and Greece). Thus, the key objectives and the means to achieve them differ for each country according to the category they belong. Based on the abovementioned categorisation, IN THE BLACK SEA AREA: Papava’s analysis suggests that while most of the “outsider” countries are more vulnerable to the consequences of the crisis, non-transition states and the “leader” countries are likely to face bet- ter economic conditions in the post-crisis period. THE IMPACT OF THE GLOBAL FINANCIAL AND ECONOMIC CRISIS VLADIMER PAPAVA ICBSS www.icbss.org cover-09:cover-09 26/05/2010 12:40 Page 2 ICBSS Xenophon Papers No. 8 The Policies of the European Union and Russia towards Central Asia November 2009 Fraser Cameron No. 7 The Big Caucasus: Consequences of the “Five Day War”, May 2009 Threats and Political Prospects Sergey Markedonov No. 6 Good Governance and Public Administration Reform in the Black December 2008 Sea Economic Cooperation(BSEC) Member States The International Centre for Black Sea Studies (ICBSS) was founded in 1998 as a not-for-profit Stella Ladi organisation under Greek law. It has since fulfilled a dual function: on the one hand, it is an independent research and training institution focusing on the Black Sea region. On the other No. 5 Regional Cooperation in the Black Sea Area in the Context April 2008 hand, it is a related body of the Organisation of the Black Sea Economic Cooperation (BSEC) and of EU-Russia Relations in this capacity serves as its acknowledged think-tank. Thus the ICBSS is a uniquely positioned Nadia Alexandrova-Arbatova independent expert on the Black Sea area and its regional cooperation dynamics. No. 4 Global Trends, Regional Consequences: November 2007 Wider Strategic Influences on the Black Sea Ian O. Lesser No. 3 Energy Cooperation among the BSEC Member States: October 2007 The ICBSS launched the Xenophon Paper series in July 2006 with the aim to contribute a space Towards an Energy Strategy for the BSEC for policy analysis and debate on topical issues concerning the Black Sea region. As part of the John Roberts ICBSS’ independent activities, the Xenophon Papers are prepared either by members of its own research staff or by externally commissioned experts. While all contributions are peer-reviewed No. 2 Unfolding the Black Sea Economic Cooperation: Views from the Region July 2007 in order to assure consistent high quality, the views expressed therein exclusively represent the Styopa Safaryan, Elkhan Nuriyev, Marin Lessenski, authors. The Xenophon Papers are available for download in electronic version from the ICBSS’ Joseph Chakhvashvili, Panagiota Manoli, Igor Munteanu, webpage under www.icbss.org. Nicolae Micu, Nadia Alexandrova-Arbatova, Aleksandar Fatic, Mustafa Aydin, Omer Fazlioglu, Grigoriy Perepelytsia; edited by In its effort to stimulate open and engaged debate, the ICBSS also welcomes enquiries and Panagiota Manoli contributions from its readers under [email protected]. No. 1 Decision-Making in the BSEC: A Creative Cartography of Governance July 2006 Ioannis Stribis All ICBSS publications can be accessed via the Centre’s website: www.icbss.org XENOPHON-09:xenophon-09 27/05/2010 13:22 Page 3 VLADIMER PAPAVA 9no XENOPHON PAPER THE ECONOMIC DEVELOPMENT COMPLEX IN THE BLACK SEA AREA: THE IMPACT OF THE GLOBAL FINANCIAL AND ECONOMIC CRISIS MAY 2009 XENOPHON-09:xenophon-09 27/05/2010 13:22 Page 4 International Centre for Black Sea Studies (ICBSS) 4 Xenophontos Str. 10557 Athens Greece Tel: +30 210 324 2321 Fax: +30 210 324 2244 Email: [email protected] Website: www.icbss.org Director General: Dimitrios Triantaphyllou © International Centre for Black Sea Studies 2010. All rights reserved. No part of this publica- tion may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior per- mission of the International Centre for Black Sea Studies. The views expressed exclusively represent the authors and do not necessarily reflect those of the ICBSS. ISSN 1790-8396 ISBN 978-960-6885-16-7 Published by the International Centre for Black Sea Studies XENOPHON-09:xenophon-09 27/05/2010 13:22 Page 5 CONTENTS Preface ...................................................................................................................................................................... 7 Dimitrios Triantaphyllou INTRODUCTION...................................................................................................................... 9 Chapter 1. THE POST-COMMUNIST ECONOMIES AND THE MAIN THREAT OF THE MODERN GLOBAL FINANCIAL CRISIS.................................................................. 11 Two Trajectories of Economic Transformation of the Post-Communist Economies.......................................................................................................... 11 Necroeconomy: The Legacy of the Communist Past .......................................... 13 Zombie-Economy: The Legacy of Financial Crises ............................................ 17 The Human Factor and Reproductive Mechanisms of a Necroeconomy and a Zombie-Economy............................................................................................ 20 The Current Financial Crisis and the Threat of Zombie-ing the Necroeconomy .. 27 Chapter 2. THE ONGOING CRISIS IN THE BLACK SEA REGION AND THE POST-CRISIS DIFFICULTIES........................................................................................................ 33 On the Current Global Financial and Economic Crisis ...................................... 33 The Moderate Impact of the Global Crisis on Albania ...................................... 35 Economic Development in Armenia.................................................................... 37 Azerbaijan: Dealing Adequately with the Global Crisis .................................... 39 The Case of Bulgaria ............................................................................................ 42 Georgia and the New Economic Challenges...................................................... 45 Greece: The Case for a Non-Post-Communist Country...................................... 48 Moldova and Political Difficulties ...................................................................... 50 The Romanian Experience .................................................................................. 52 The Russian Economy and the Global Economic and Financial Crisis .............. 54 A Negative Impact on Serbia................................................................................ 58 The Case of Turkey................................................................................................ 61 A Three-Front Crisis for Ukraine.......................................................................... 63 CONCLUSIONS........................................................................................................................ 67 BIBLIOGRAPHY........................................................................................................................ 71 XENOPHON PAPER no 9 5 XENOPHON-09:xenophon-09 27/05/2010 13:22 Page 6 ANNEXES ................................................................................................................................ 93 • Annex I. About the Author.............................................................................................................................. 93 • Annex II. Abbreviations.................................................................................................................................... 94 6 THE ECONOMIC DEVELOPMENT COMPLEX IN THE BLACK SEA AREA XENOPHON-09:xenophon-09 27/05/2010 13:22 Page 7 PREFACE Despite the widely divergent economies of the countries of the Black Sea region in terms of structure and levels of development, a number of common challenges concern them as a whole. Among these, the global economic and financial crisis has deeply affected the region collectively and each country individually. Written by Vladimer Papava, a well-known economist and policy practitioner, this Xenophon Paper touches upon the consequences of the crisis on the countries of the Black Sea region in a spe-

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