THE SOUTH CAUCASUS: A REGIONAL OVERVIEW AND CONFLICT ASSESSMENT
REGIONAL OVERVIEW

Social Development, Health, Poverty

In spite of dire socio-economic conditions and widespread poverty, the Caucasian states are not traditional developing countries. Due to their Soviet past, they have high levels of literacy, relatively high life expectancy, high access to education for both men and women, and a rather advanced health care system. However, socio-economic indicators have dropped dramatically since independence. Poverty is the greatest problem for people that only a decade ago lived in relative wealth. The severance of Soviet-time economic links and the travails of transition from a centrally planned to a market economy are major causes of this phenomenon, which has led to the devastation of industry in the region and to rampant unemployment. Over half of the region’s population lives below the poverty line. The economic collapse has also restricted the state’s ability to fulfill key functions, and as a result both the health care and education systems have deteriorated. The number of HIV-infected persons is increasing at a dramatic rate, even though many of the infected people remain unreported due to the social stigma attached to this disease by society.

The South Caucasian states rank relatively high in the UNDP Human Development index (HDI); Armenia is 72^nd, Georgia 76^th, and Azerbaijan 79^th. These rankings are nevertheless due mainly to high education and literacy levels and other high indicators dating from Soviet time; for example, the number of physicians per capita is higher in these states than in most western countries, while GDP per capita figures, even when calculated according to Purchasing Power Parity, are much lower than countries in the same HDI range.

Refugees and IDPs

The most vulnerable section of the population in the South Caucasus is the refugee and IDP population. They often live in poor to miserable conditions, especially IDPs from Armenian-occupied territories outside Mountainous Karabakh in Azerbaijan and from the Gali district of Abkhazia in Georgia. The Azerbaijani and Georgian government housed numerous refugees in schools and hotels, such as the Iveria hotel in central Tbilisi, and in rail wagons, as in Saatli in southern Azerbaijan. Some IDPs live in prefabricated houses, tent camps, or self-made mud huts, while the worst off still live in dugouts. The IDP issue is politically sensitive, and the governments have been reluctant to integrate the IDP population into society, since they feel that would amount to an implicit acceptance of ethnic cleansing. In the case of Azerbaijan, the country hardest hit by refugee and IDP flows, ca. 12% of the population, one of the highest rates in the world, consists of refugees and IDPs, making it extremely difficult for the population to handle the problem.

International assistance has been meager, and in the early 2000s, UNHCR and other international organizations continued to downscale their assistance to the Caucasus in spite of nothing having changed in the conditions on the ground. UNHCR allocation to Azerbaijan, for example, was $11 million in 1999 but only $2 million are budgeted for 2003. Many Western relief agencies based in the area could soon be on their way out as well. In order to partially compensate for the withdrawal of international humanitarian aid, President Aliyev issued   decree to pay $30 million from the State Oil Fund to the urgent needs of refugees and internally displaced people, to be spent mainly on the improvement of IDP housing. Currently, IDPs receive a monthly stipend of AZM20,000 ($4). The health and educational needs of the IDP populations have been handled either by the IDPs themselves, especially regarding primary schooling, whereas for health matters the local communities where they have settled have borne an additional burden. Generally speaking, the lack of proper education, sanitary and health conditions, and employment among this segment of population is likely to display negative results in the near future, as an entire generation of IDP children is being raised in tent camps. Given the size of this group, it could create a major social and economic blow to the country as well as a source of potential political instability, especially in times of political succession. The same is true to a lesser extent in Georgia.

By the end of 2001 more than 264,000 persons remained internally displaced in Georgia. The overwhelming majority (about 252,200) were ethnic Georgians displaced from Abkhazia, Another 12,000 persons remained displaced from South Ossetia. About 41 percent of Georgia’s displaced population (107,629 persons) lived in the Samegrelo region adjacent to Abkhazia. Large numbers of displaced persons also settled in Tbilisi (89,629 persons, or 34 percent), and Imereti (32,433 persons, or 12 percent). About half of the displaced population lived in collective centers or camps and half in private accommodations. Budgetary constraints have prevented the government from regularly providing the stipends GEL13 ($6) per month to IDPs. IDPs are easily inclined to various diseases, especially tuberculosis. Criminal misconduct among IDPs is rather common, and provokes confrontation between them and local residents. In 2001 the Georgian government, with funding and technical assistance from UNHCR, the UN Development Program, the Swiss Agency for Development and Cooperation, the World Bank, and the U.S. Agency for International Development, tried to implement a Georgia Self-Reliance Fund designed to integrate displaced people into mainstream Georgian society. By early 2002, however, the $1.2 million program had only approved two projects. Georgia and Azerbaijan have also hosted refugees from Chechnya, and Azerbaijan has hosted numerous refugees from Afghanistan. International humanitarian organizations have provided only sporadic aid to over 7,000 refugees in the Pankisi Valley. Chechen sources claimed that an outbreak of viral hepatitis threatened refugees in the Pankisi Valley late in 2001.

Poverty and Poverty Reduction

Armenia is a poor country, with the poverty rate reaching 55%, although the number of those living under extreme poverty has decreased in the past several years. Unemployment is very high and close to half of the population has emigrated to Russia and other countries either temporarily or permanently in search for jobs. The collapse of the Soviet Union has hit the pensioners and disabled people the most, as the state welfare system collapsed overnight. The earthquake in the north of the country in 1988 also brought severe hardships to peoples’ lives as many of them lost homes and jobs. The issue of poverty alleviation has received very careful consideration by government. In January 1999 the government established the ‘Family Benefit System’ – which is a unified social benefit system that was instituted to ensure that only the most vulnerable receive government aid, based on a vulnerability index. However, given inadequate government resources, it is estimated that less than 50% of the most vulnerable households receive welfare assistance. Furthermore, the monthly average family benefit is not enough to cover the gap between disposable income and subsistence. One of the largest anti-poverty programs in Armenia has been the $90 million "Poverty Reduction and Growth Loan" program, funded by the IMF and due to be distributed in three annual tranches.

Whereas literacy rate and access to health system and education remain high in Azerbaijan, unemployment and economic poverty limit people’s opportunities to enjoy sustainable development and income security. The average life expectancy, according to the UNDP’s Human Development Index is 71.3 years. Official unemployment figures remain at the level of 15-20%, although statistics on this question are highly unreliable. Nearly 2 million Azerbaijanis have emigrated abroad, mainly to Russia, to earn a living. Although the government continues to report economic growth, the high and increasing level of inequality in society creates problems in the proper distribution of these economic gains. In order to fight the problem of poverty, a Poverty Reduction Strategy Program has recently been finalized, and includes concrete steps that the government should take in the economic and social sectors for the reduction of poverty.

Unemployment, corruption, poverty, and low incomes have risen to the top of people’s agenda in Georgia. More than 50% of the population lives below the poverty line. Unemployment in urban areas is about 26% and in Tbilisi ranges between 30% and 40% depending on the season. Even for employed people, salaries are often below what is needed to cover basic needs. The current level of the pension flat rate benefit is extremely low, under $10 per month. Despite its problems, the current pension system seems to play a crucial role in reducing poverty. Although benefits are low they have a positive welfare impact on the population in that they help the part of the population that is vulnerable to poverty, however rising arrears have disproportionately hurt the most vulnerable groups. Difficult economic conditions have also increased the number of street children, which are estimated to number over 2,500 in Tbilisi alone due to the inability of orphanages and the Government to provide support. Street children often survive by turning to criminal activity, narcotics, and prostitution. 

In recent years, poverty reduction in Georgia has advanced to the forefront of the agenda of international organizations The fight against poverty is going beyond the income poverty arena to encompass other dimensions of life, such as access to education and health care, and individual freedoms. This approach is reflected in the Government of Georgia’s "Poverty Reduction and Economic Growth Program"(PREGP), which was produced with contributions from international organizations. The PREGP presents actions for the short-term (3 years), medium term (7 years) and long term (15 years). It is an extensive document that covers almost every aspect of public policy, and it has designed a strategy for poverty reduction that is focused on four main fields: Macroeconomic stability and private sector development; Public sector governance and the strengthening of Government finances; the protection of human capital and; and empowerment of the poor. This task, as it has become apparent in Georgia, is not easy. The successful implementation of anti-poverty policies will demand not only first class technical expertise but also overwhelming political support.

Health

Inadequate government resources are also responsible for the deteriorating health care conditions in Armenia. The lack of budgetary funding in Armenia has led to a severe drop both in the quality and the quantity of medical services in the country, although there has been significant amount of international aid and charitable activity. Medical support is poor in major urban areas, but almost non-existent in border areas affected by conflict. As a result of rising unemployment and displaced persons and the growth of poverty, evidence suggests that the rate of chronic diseases and disability is increasing. In 1995, health expenditures amounted to 8% of the total GDP. In 1998, the Ministry of Health reported an outbreak of cholera. Deteriorating health care will inevitably have a negative impact on the economic situation.

Health care in Azerbaijan continues to unction in the Soviet-style system, although several private clinics have opened and the government has partially switched to paid health care. Generally it is a state-subsidized sector, with little developed insurance system. People rely on their own funds to buy medicines and pay for surgeries. The Ministry of Health has cooperated with UNICEF, WHO and UNDP in eradicating polio and malaria in the country. Social security in the country is at miserable levels, providing very little for retired and handicapped people. The majority of current retirees have invested their pension funds in the Soviet Pension system and have lost most of their savings after the collapse of the Soviet Union. As a result, people rely extensively on social networks and kinship to survive. In spite of this, the government, under heavy budgetary pressure from international financial institutions, has decided to slash social benefits from $200 to $30 million. Other important sectors, such as education, health care and science remain under-funded. According to the state budget for the year 2002, submitted by the government to parliament for ratification, science receives 1.2%, the health sector 5.2%, education 21%, and social benefits 13% of the budget’s share.

Social security in Georgia includes a system of social allowances and unemployment benefits and the pension system. However, due to state budget restrictions, institutional weaknesses and poor management the overall resources available do not provide social security even for the most vulnerable. Approximately. 90 % of benefits goes to the pensions for more than 900,000 pensioners in Georgia, or around 20 % of the population. The average pension is only 14 GEL ($5) per month.  The crisis in the pensions system has deep implications in terms of poverty, as well as social and economic marginalization. The 1998 economic crisis had a large negative impact on the health care system. Expenditures on health care constituted only 0.9% of the GPD in 1999. Due to the inability of the major part of the population to use the health care system, diseases like tuberculosis, hepatitis, HIV, other sexually transmitted diseases and socially dangerous infections spread widely. Drug use has also increased sharply.

Education

Compulsory education up to the age of 16 is free and universal in Armenia. University education is also free, but there are problems with the provision of electricity and heat to these institutions during winter. Several private universities also function in the capital city, most notable of which is the American University of Armenia.

The education level in Azerbaijan is also high, although there has been some decline in the quality of education after the collapse of the Soviet Union. According to UNDP statistics, there is no difference between females and males when it comes to the access of primary and secondary education, the participation of females in higher and post-graduate education slightly lags behind that of males. There are nearly 20 universities in Azerbaijan, with the number of private universities skyrocketing after independence. The literacy rate is around 97%. According to minister of Education Misir Mardanov, in the past decade, only one secondary school has been built in the country.

Georgia’s high HDI score is also based on secondary education enrolment figures, which although high, has been declining substantially over the last 10 years. Georgia ranked first among the Soviet Union’s republics in terms of education. It was an important cultural and intellectual center in the Soviet Union, and its universities hosted many students from other Soviet republics and from overseas. The positive legacy of the Soviet system is that more than 20 percent of the adult population has higher education. While the level of education remains generally high, the HDI index does not portray a fair picture of the overall sustainability of the education system. The quality of the education provided is very poor, suffering from out-of-date curricula and teaching methods, lacking investments in infrastructure, low or unpaid teachers’ salaries, and overall low public expenditures on education in constrained state budgetary conditions. Many schools have been obliged to close during harsh winter weather. Attendance rates have dramatically fallen in primary and secondary schools, and education differs greatly according to income. The richest 20 percent of households spend an average of 22 times more on educating children than the poorest 20 percent. Access to quality education is now confined substantially to those who can afford fees, or private tuition.