Social: Donovia
The Caucasus countries that possess hydrocarbon resources will continue to depend on the oil and gas industries to drive their economies, while those that do not possess such resources will attempt to tie themselves to hydrocarbon-rich nations. Both Ariana and Atropia face geopolitical difficulties in exporting their oil and natural gas. Bordered by adversaries, the Arianians and Atropians must rely on tenuous routes to export their resources. For Gorgas and Limaria, which lack extractive or mature industries, transshipment of hydrocarbon products or providing other services to oil-wealthy countries will be their primary short- to medium-term means to achieve economic development.
Donovia continues to recover from a collapse two decades ago that crippled its economy. All nations of the Caucasus have relatively high inefficiency due to corruption, government involvement in the economy, and/or lack of export industry development.
Donovia’s current economic structure and situation stem from a sudden internal financial collapse that occurred in 1991. The Donovian government instituted major changes at that time, liberalizing the banking, tax, and private enterprise systems to assist recovery. These reforms, coupled with vast natural resources, enabled the country to stabilize economically and gradually recover.
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Table of Economic Data
| Measure | Data | Rank in World | Remarks (if applicable) |
| GDP | 1.78 trillion USD | 10 | |
| Labor Force | 69.14 million | 8 | |
| Unemployment | 8.3% | 94 | Increasing |
| Poverty | 12% | Percent below poverty line | |
| Investment | 19.4% of GDP | 104 | |
| Budget | $210 billion revenue
$273 billion expenditures |
||
| Public Debt | 12.3% of GDP | 122 | |
| Inflation | 10% | 198 |
Participation in the Global Financial System
Over the past decade, the Caucasus nations made considerable efforts to integrate themselves into the global financial system. While focused on local conflicts, the Caucasus region opened to other countries to increase global markets for its products, especially petroleum, and looked to the West for economic developmental aid, usually in the form of loans and grants.
IMF/World Bank/International Development Aid
In the past 20 years Donovia has transformed itself from an aid recipient to a donor country. Struggling in the decade after its financial collapse, Donovia took advantage of its membership in the IMF to receive several loans, all of which have since been repaid. The World Bank (WB) has provided over $11 billion in financing for more than 65 projects in the country since the collapse, including 14 that are currently active for a combined $1.4 billion. The vast majority of the current projects focus on improvements in governance issues such as judicial reform and customs development, while others pertain to economic development and natural resource management. At present, Donovia is working to position itself as a major donor country, with a foreign aid budget of $450 million and a $7 billion fund created specifically to assist struggling neighbors.
Foreign Direct Investment
Donovia has implemented considerable economic reforms in recent years, including large-scale privatization and price liberalization, in order to attract foreign direct investment (FDI). Still lacking, however, is a legal and regulatory environment based on rules and applied consistently throughout the country. Property rights need to be revised in particular, including contractual rights, dispute resolution, and acceptable accounting practices. Donovia currently possesses total FDI of $238 billion, with $34 billion of that amount being added last year. This is expected to increase to $50-60 billion annually within the foreseeable future. Sectors that have recently seen significant FDI include energy, high-tech, transportation and infrastructure, and food and beverage.
Economic Activity
Donovia’s current economic structure and situation directly results from the Four Traitors incident of 1991. Prior to this, the country made extensive use of profits from its vast natural resources to heavily influence neighboring countries through political and economic means (aid, grants, industrial projects, etc.). This ended abruptly when Donovia experienced a major economic collapse precipitated by discovery of a massive embezzlement scheme perpetrated against the government.
Member of Parliament Yassar Akbari, General Ibrahim al-Fatem, Ismail Jinat of the Jinat crime family, and Viaprom CFO Muhammad Hafiz, conspiring together, embezzled tremendous amounts of money from the Donovian government over a period of eight years. Referred to as the Four Traitors, these men fled the country when the situation was discovered in the fall. The Donovian government spent considerable time and effort in attempts to recover both the Traitors and the lost funds— around 20% of government revenue for the years in question—but met with no appreciable success.
The effect of the Four Traitors on the Donovian economy was instantaneous and enormous. Massive government spending cuts and layoffs were instituted, as well as an immediate curtailing of all foreign aid and the abrupt dissolution of many economic agreements with neighboring countries. Unemployment tripled overnight, while government aid became all but impossible to obtain. Considerable social unrest resulted, and the military had to be called out to maintain order.
In an attempt to recover from this crisis, Donovia decided to base its economy on free-market principles. The country has made considerable progress in the past two decades, but much remains to be done. Laws and business regulations remain complex and contradictory, and implementation is both inconsistent and heavily influenced by politics and corruption. The situation is gradually improving, though, with a noticeable dec