Customs Union Benefits Kazakh Producers and Trade, Official Says

РауASTANA – Foreign trade has become not only a determining condition for the growth of national economies, but also the factor that characterises the production capacity of the state. Vice-Minister of Industry and New Technologies Albert Rau said in a recent interview the dynamics for Kazakhstan centred onto components of growth, namely the Customs Union (CU) and the Common Economic Space (CES).

The development and prospects of regional integration are largely dependent on effective cooperation between Kazakhstan and its partners in the CU in the trade and economic spheres. What are the advantages to Kazakh business to be gained from Eurasian integration?

The main advantage is a single large market, and our business, which has specific products, obtained huge opportunities for sales and mutually beneficial cooperation with its partners. Of course, each side seeks to deliver its products to the markets of other countries, increasing export-import operations. And business cooperation in such schemes results in the creation of joint ventures and implementation of interesting projects. In short, the integration space is not just the market for products, but also a limitless set of points of contact between businesses of the partner countries.

Liberalisation of mutual trade within the CU in the crisis period allowed Kazakhstan not only to maintain but also to increase the supply of finished goods, including those manufactured by small and medium-sized businesses. For example, exports of confectionery and chocolate of domestic enterprises Rakhat and Bayan-Sulu grew almost threefold to $35.4 million. In the structure of the external supply of confectionery, the CU share is 53 percent. An 11-fold increase of transformers also became possible due to the potential of the single market. Thus, the CU accounts for about 27 percent or 30 percent of exports of these products. The same picture has been observed with the batteries of the enterprises Kainar AKB and ZHERSUPOWER. Their consumption in the partner-countries today is 79 percent.

Kazakhstan produces light trucks for Hyundai and other brands. And if these industries are oriented only to the internal market, then, of course their prospects for increasing production volumes would be much less than now. Thereby, the total market of Russia and Belarus allows the domestic auto industry to look ahead confidently. Over recent years the external supply of Hyundai trucks reached $10.5 million, meaning 70 percent of all products are exported, and the share of CU countries is 90 percent. And there are a lot of such examples which, in essence, says that the integration of business has more benefits than risks.

Please share some of the statistics on mutual trade?

In 2013, total exports from Kazakhstan to the CU countries amounted to $5.9 billion. Compared with 2010, the level of exports fell by 3.3 percent because of the reduction of supply of raw commodities by 12.9 percent and intermediate processed goods by 13 percent. At the same time, there was an increase in deliveries of finished goods of 1.5 times.

Today, the largest share of Kazakhstan’s exports (53 percent) is directed to the EU, 17 percent to China, 8 percent to CU countries and 16 percent to the rest of the world. In general, the geographical structure of processed exports has changed slightly. In 2013, processed products were supplied to 105 foreign countries. The lion’s share of processed exports amounting to 69 percent was also sent to the EU, China and the CU countries. Meanwhile, with further development of regional integration and the growth of production capacity in Kazakhstan, in the coming years, the CU share of our exports can only increase. Much of that growth can be expected to come from China.

What are the trading positions of Kazakhstan today that have competitive advantages in the markets of CU?

There are many such products. For example, bearing bushes produced by the Stepnogorsk bearing plant for railway transport are in high demand on the Russian market. The annual production capacity of the factory is more than $120 million. Actually, all products are exported to Russia with a small share of exports going to other countries. And if the market for bearing products in Russia is estimated at about $800 million, it is easy to imagine the share of the Stepnogorsk plant in consumption of these products.

The Ust-Kamenogorsk valve plant, which manufactures and supplies pipe fittings, is also increasing production volumes to the CES market. The main customers for its products are dozens of Russian and Belarussian companies, including Transneft, Surgutneftegas, Neftegazstroy, Atommashexport and Minsk Belarmahim.

One of the new businesses, AstEtalonCrown, today occupies a leading position in Central Asia and the eastern part of the Russian Federation in the field of the packaging of metal products. By the end of 2013, the company manufactured more than 500 million units of crown caps, a third of which is exported to Russia. Domestic heavy engineering, construction and the petrochemicals industry, to say nothing of the mineral resources and the food industry, also began to capture a strong position in this market.

Sometimes Russian experts commenting on the situation with the integration talk about the possibility of creating in Kazakhstan production for third countries with the aim to enter the market of Russia and CU. What do you think about this?

Actually, if we are talking about investors who produce goods in Kazakhstan, it is worth noting that the tax regime in Kazakhstan is much more favourable than in Russia and Belarus. This creates a comfortable environment for attracting new investors. For example, the German company Funke invested in the production of window profiles in Astana about $33 million. The factory’s capacity is up to one million square metres per year. And about 60 percent of output of the capital’s enterprise is exported to the Russian Federation.

How intense is the cross-border cooperation between Kazakhstan and Russia?

The largest strategic partner of Kazakhstan in the field of cross-border cooperation is the Orenburg region. There are 38 enterprises backed by Kazakh investment on its territory. The West Kazakhstan, Aktobe and Kostanay oblasts are among its priority partners. Jointly they implement projects such as the Orenburg gas processing plant within the intergovernmental agreement, a joint venture on the processing of natural gas from the Karachaganak field, construction of a plant for the production of polyethylene and polypropylene with a capacity of 1.1 million tonnes per year.

More than 40 joint ventures are working in the Omsk region and currently an agro-industrial clustre combining a number of petrochemical and agriculture industries and companies for deep processing of waste, renewable raw materials, biomass and agricultural waste are under construction in this zone. The third most important border partner of Kazakhstan is the Astrakhan region. There are 31 enterprises involved with domestic investors there and a large proportion of joint projects are implemented in the transport sector. Such interaction of business in border areas today is expanding and is becoming a very important factor of economic growth in these regions.

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