ASTANA – The idea of an economic union of Kazakhstan, Russia and Belarus was first proposed by President of Kazakhstan Nursultan Nazarbayev, who thought the initiative would bring great benefits to the economies of independent states that once made up the Soviet Union. His initiative was supported by the leaders of Russia and Belarus.
The first step towards such an association was the Customs Union (CU), which eliminated obstacles to the free movement of goods between the three countries in mid-2010. According to official figures, since the launch of the CU, mutual trade between the three member states has grown by almost 16 percent.
Today, Kazakhstan, Belarus and Russia are also members of a new regional association, the Common Economic Space (CES), which differs from the CU in that it also provides for the free movement of capital, labour and services.
Kazakh Vice Minister of Economy and Budget Planning Timur Zhaksylykov announced on Jan. 13 that from Jan. 1 of this year, CES states may participate in each other’s public procurement processes. This means that Kazakh suppliers will compete on par with Russian and Belarusian suppliers for the chance to win public procurements in all three nations, and vice versa. Public procurement in the CES countries amounted to about $198 billion in 2012.
“The market of the partner-countries exceeds the domestic market by 26 times, thereby providing clear potential for the development of domestic manufacturers,” Zhaksylykov said.
For Kazakhstan, Zhaksylykov stressed, the main task in Eurasian integration is the expansion of outlet markets and opening up new opportunities. The additional freedoms of the CES, therefore, can be expected to have a huge impact on the Kazakh economy. However, in practice, there are a number of exceptions that impede the access of Kazakh goods to the markets of Russia and Belarus.
Kazakhstan’s partners in the CES are strongly protecting the interests of their entrepreneurs. Work is now being done to improve the CES agreements concluded between the three countries from 2007 to 2012. The three heads of state plan to sign a new agreement, the Treaty on the Eurasian Economic Union, this year.
A Contract Without Conflict and Without Restrictions
The National Chamber of Entrepreneurs of Kazakhstan (NCE), which defends the interests of domestic producers, has actively joined the discussion of the new draft agreement.
Opening a recent video conference in Astana organised by the NCE and attended by businessmen and producers from all regions of Kazakhstan, NCE board member Rakhim Oshakbayev stressed that the draft treaty will not be easy to review because of its scale: the latest version of the draft consists of 800 pages, to be discussed at working meetings in the coming weeks.
In his opinion, the optimal solution is to have basic concepts like the institutions, structure and functions of the union fixed by an international treaty with ratification, while sectoral issues that are more subject to change and contain more significant details should be addressed in legal documents of narrower force.
“This position reflects our understanding of the opinion of our President, expressed at the most recent meeting of the Supreme Eurasian Economic Council on Dec. 24 last year: ‘In general, I reaffirm the commitment of Kazakhstan to the creation of a strong, yet adaptable, Economic Union,’” Oshakbayev recalled.
The draft treaty is expected to be agreed upon by this spring. At the meeting of the Supreme Eurasian Economic Council in Minsk last fall, Nazarbayev gave March 2014 as the final date of the agreement, and Russian Prime Minister Dmitry Medvedev instructed his subordinate structures to complete all conciliations by Apr. 17, 2014.
The question now is how Kazakhstan will protect and support domestic producers within the CES and after its imminent accession to the World Trade Organisation (WTO).
Oshakbayev believes that even while strictly observing the treaty’s requirements, the government has the right to use additional tools to protect domestic businesses. He gave neighbouring China, a longtime WTO member, as an example.
“Recently, China lifted the ban on foreign companies selling gaming consoles in their market. But at the same time Chinese authorities created a condition: production or trade of foreign consoles must be carried out through a local resident. Or take, for example, the countries of Latin America, which, though WTO members, also have policies to protect their own producers. Today, the question is how to correctly use this support,” Oshakbayev said.
According to him, subsidies could be one protection tool. To support its domestic auto industry, Russia introduced state subsidies in the amount of 100 billion roubles (US$3 billion) to compensate the costs automakers have to bear in order to modernise and train personnel. In addition, Russia introduced a “recycling fee” for imported vehicles.
“Nothing is preventing us, for example, from introducing lowered tariffs on goods we export by railway. Everyone knows that our goods are not competitive due to the remoteness of Kazakhstan from seaports,” Oshakbayev said.
According to him, it is important to satisfy the basic requirement of the Treaty on the Eurasian Economic Union, the absence of discrimination, but flexible mechanisms to support domestic producers can and should always be used.
Also problematic for Kazakhstan are the technical regulations in the future treaty. The current technical requirements of Russia and Belarus are a serious obstacle for Kazakh goods.
According to Oshakbayev, the technical rules to be adopted within the framework of the Eurasian Economic Community are very cumbersome. They contain more than 60 sections, while the technical regulation of the European Union, for example, is more compact.
“We believe our national legislation in the sphere of technical regulation is more perfect, because it clearly defines objectives and instruments, especially as these rules should not create barriers to entrepreneurship,” Oshakbayev said. He urged all Kazakh entrepreneurs to participate in the discussion of the draft Treaty on the Eurasian Economic Union.