Eurasian potential

February 14. Kazpravda


Eurasian potentialRegional economic integration between Russia, Kazakhstan and Belarus as a materialized idea of President Nursultan Nazarbayev has passed the “Rubicon” of its logical development in achieving the next level of interaction between the three countries – the Eurasian Economic Union.

Today in the expert community of the three countries there are no significant arguments against the fact that the establishment of the Eurasian Economic Union has no alternative in terms of both regional economic security and total prospects for growth and prosperity of the countries within the single market. And if earlier the participants of the foreign trade were facing such problems as barriers to access to the markets of the CU and a number of other formalities in declaring cargo traffic, certification and taxation, at present many mechanisms have been adjusted and trade and economic cooperation between the countries is accelerating.

One of the most significant advantages of Kazakhstan gained from the integration, is the access of oil and gas companies to the Russian transit system that reduced the cost of resources’ transportation to the EU markets. The companies of other sectors of the economy which transport the products of primary processing to EU markets have the same benefits.

Meanwhile the integration space is not only the best opportunity for the transit of mineral resources, or large market, particularly for many sectors of manufacturing industry of Kazakhstan , but also the overall economic potential, the value of which plays the role of a counterweight in provision of the interregional balance of power on the continent. Analysis of real sectors of economy of the CU participants determines dynamics and nature of productive processes inside the integration system, including assessment of their aggregate potential for growth of real economy.

Industrial reserve

According to the Department of industrial policy of the Eurasian Economic Commission, the total production volume of the manufacturing sector of the CU and SES participants in January – November 2013 compared to the same period last year decreased slightly, reaching 99.2%.

The EEC experts explain this trend primarily by the decline of manufacturing production in Russia, accounted for only 99.4 % of the previous year, as well as Belarus – 94, 7 %. In Kazakhstan, in contrast, production of real sector increased compared to last year and reached 101.5 %.

In the industrial sectors of the three countries the decline was observed mostly in the Russian machine-building complex and in the production of equipment for agriculture and forestry – 25.6%. In addition, production volume decreased in machine- tools industry – by 17.8 %, hoisting machinery- by 11.9%, in the manufacturing of products for railway transport – 10.3%.

Also a 3.5% decrease was marked in the automobile industry of Belarus.

Kazakh enterprises of machine-building industry reduced their volumes by an average of 7.2%. However, this had no significant effect on the manufacturing sector of the country as a whole, because the value of these sectors is not so big in the structure of gross production of the branch.

In their comments the experts noted that the decline in production of engineering sectors of Russia, as before is explained by lower demand for their products which in turn is associated with the negative expectations of manufacturers in relation to the prospects for the world economy. As for the Belarusian automobile industry, its problems are associated with a slowdown in technical and technological renovation of the park by the enterprises of construction, transport and agriculture industries of the CU participants.

Another negative trend in the manufacturing industry of the “troika” is the slowdown in the steel industry which is caused by reduced demand for their products in the domestic and global markets and fall of prices for key products – steel and rolled metal.

The best way out from this situation is the introduction of the new steelwork technologies and development of high added value production, which ultimately will increase the cost of final product, and also redirect part of exports to new markets.

This problem has already been partially solved in Kazakhstan through a comprehensive program of modernization and diversification of priority economic sectors and expanding the range of high added value products of metallurgical enterprises.

However, unlike mechanical engineering and metallurgy, the dynamics of such manufacturing industries of the CU as pharmaceutics, construction, production of plastic and rubber items, in general, remains high. Among the positive trends observed in the economies of the integration space, the EEC experts noted a significant increase in production of electron-optical devises and woodworking industry of Belarus, in automotive and railway engineering in Kazakhstan and in Russian aviation, space and light industries and in production of household appliances.

Meanwhile, the growth of production in some industrial sectors has not decreased the volumes of imports of similar products and does not increase either their exports to third countries, which indicates the growth of demand in domestic market and gradual increase of its capacity. At the same time, it speaks in favor of a significant reserve that was created and which should be taken into account by Kazakhstani construction, pharmaceutical and other industries in the their development strategies. After all, many of them now have real opportunities to fill this vacuum by achieving mass production. By the way, today the main question in the long-term cooperation with major Russian trading companies is the possibility of Kazakh partners to timely and systematically delivery big volumes of products.

Agrarian niche of EEU

Food security of the single market is one of the functions of the aggregate agro- industrial potential of the EEU countries, both today and in the future. In this regard, the value of Kazakh agricultural complex, which just two decades ago was the main source of meat, milk and bread of the great power is still high. From this point of view, the prospect of returning by the Kazakh AIC of a large market is also a chance to be reborn in a new capacity to perform the same mission.

Last year was notable for the fact that Russia and Kazakhstan for the first time moved from simple to more real intentions and fruitful relationship. However, now we are speaking only of individual projects on the supply of agricultural products, and not of cross-sectoral integration and cooperation. In the meantime not only the intergovernmental mechanisms, but also the trade mission and its activities help establish a strong business bridge between the two countries.

Last year, the representatives of Kazakh trade mission in Russia organized several business missions of domestic entrepreneurs who are really interested in cooperation with enterprises in Moscow and other Russian regions. Thus, they presented project of investment opportunities and export potential of the Aktobe, Atyrau, East Kazakhstan, West Kazakhstan, Karaganda, Pavlodar and Mangistau regions.

In September 2013, together with RK Embassy in Russia business missions of the delegation of South Kazakhstan region in Moscow, Moscow oblast, Kazan and Yekaterinburg were held. As part of these meetings, 14 agreements and Memoranda of Understanding were concluded. One of the important results of this mission was the agreement on the establishment in the localities near Moscow of a trade and logistics center for the supply and sale of Kazakhstan’s agricultural and other commodities.

Also wide response received the fair held in Moscow with participation of producers from South Kazakhstan region, organized by the Trade Representation of Kazakhstan in Russia. And as its representatives noted, the fair demonstrated practical results and the possibility of cooperation between the countries of the Customs Union. The Moscow government expressed readiness to provide full support to the Kazakh region in such activities.