Economic Aspect of the Civil War That Changed Georgia - Essay Example

There were reduced start-up costs for the civil war due to the accessibility of weapons from the Soviets and an ample number of volunteer fighters. In March 1992 and Kitovani was made the Minister of Defence- with this authority, Kitovani then organized the Abkhazia war in order to establish control over the transportation networks and valuable tourism industry of the province. In the end, though, there was a total collapse of the informal and formal economy in 1993 which made it impossible to supply the troops effectively, and that led to poor organization of military campaigns.

Finally, Mkhedrioni and the National Guard were defeated whereas there was the destruction of the economic assets they were fighting for. Due to the wars, Georgia lost control over a considerable part of its territory which remained an important difficulty for the nation's state-building process as the government is not capable of controlling the smuggling business originating from the two regions.Georgia thus faces a dilemma- if it sets up customs points behind the lines of control, it would advance to identifying them as a border, which is politically unacceptable.

On the other hand, if it would not do this, goods will continue to enter tax-free into the nation and thus help crime networks and tainted state officials who are proving to be an obstacle in the state-building process. As of now, Georgia's official shadow economy is estimated to be around 30% though unofficially it lies between 60-70%. There exist many incentives to smuggling- as there are highest tax rates in Georgia; state officials are more prone to bribes given their small salary. Export of timber and scrap metal is under the control of the Abkhazian de-facto government, shipments of oil, food, and tobacco are under the control of A Western Abkhaz group.

On the other hand, several groups are contending for control over the smuggling of hazelnuts, mandarins, petrol, and cigarettes in the Gali sector. Most of this smuggling takes place under the defense established by Abkhazian paramilitaries who in turn use it in order to generate some revenue through taxation. In conclusion, it can thus be expected that there would be opposition against any effort to bring trade back under Georgia's tax authority.