Eurasian economic union as a factor of economic growth
Table of contents: The Kazakh-American Free University Academic Journal №7 - 2015
Trofimova Yuliya , Kazakh - American Free University, Kazakhstan
Kolesnikova Vera, Kazakh - American Free University, Kazakhstan
Economic Union (EAEU) is an international integration economic union
established by a treaty which was signed on May 29, 2014 in Astana and came
into force on January 1, 2015. The union includes Russia, Kazakhstan and
Belarus. Also, another country that signed the treaty to join the union in October
2014 was Armenia; and on January 2, 2015 the treaty came into force. In
addition, the Republic of Kyrgyzstan, which signed a corresponding agreement at
the end of December 2014, is likely to join EAEU in 2015 (http: // www. kursiv.
based on the Customs Union of the Eurasian Economic Community (EurAsEC) to
strengthen the economies of the member countries and contribute to
"rapprochement to each other", modernize and improve the
competitiveness of the member countries in the world market. EAEC member states
plan to continue economic integration in the coming years. Signing this treaty
is a milestone event, which offers broad prospects for economic development and
improvement of the population welfare.
Work on the
document lasted for almost 3 years. The document describes the procedure of
elimination of customs and immigration barriers between the member countries.
Now, the citizens of Russia, Belarus and Kazakhstan will be able to move freely
across the territory of the union. This means they can decide for
themselves where to live, work and study. Entrepreneurs are now able to import
goods and conduct business in any of the member countries.
will have a coherent policy in the key sectors of the economy: energy
generation, manufacture, transportation and agriculture. It is expected that
all this will increase the incomes by at least 15%.
countries of the union plan to unify investment procedures. Investors will have
the right to get reimbursement for the damage to their investments from the
public funds. The nationalization of private assets, on the one hand, is
prohibited; on the other hand, the appendix to the treaty describes a
compensation mechanism: it should be market-oriented, quickly redeemed and
delay in recovery of damage should result in interest accrual (http: //
Belarus and Kazakhstan will agree to pursue a common macroeconomic,
anti-monopoly, monetary and financial policy. The document says nothing about
an adoption of a common e currency. The states may introduce exchange
restrictions for the period of up to one year "in exceptional cases".
Economic Union (EAEU) is an integration association, which does not address
issues of independence of member states.
integration is based, primarily, on the economic pragmatism. The fundamental
principle of the future Eurasian Economic Union is a Common Economic Space,
which is a significant resource for the joint development of the CIS countries.
integration is a voluntary initiative. Each state and society should come to
the understanding of its necessity independently (http: // ria.ru).
As a union
of states, EAEU is based on the principles of equality, non-interference in
internal affairs of each other, and respect for sovereignty and inviolability
of state borders.
As a whole,
EAEU gives an opportunity for Kazakhstan and its partners to come out as an
integrated economic bloc in issues of international relations, which
contributes to the strengthening of national economies.
the advantages that the union offers the citizens of the Republic of
Kazakhstan? The advantages are quite numerous.
all, it is the development of competitiveness of the Russian-Kazakh-Belarusian
market as a whole. Considering open trade borders, all goods produced by EAEU
countries will compete with each other in terms of price and quality.
Kazakhstan offers Russia and Belarus its goods produced by metallurgy, machine
building, processing industry and agriculture. This expanding market for us,
Kazakhstan citizens, provide both favorable and negative outcomes. For example,
due to a sharp currency depreciation in Russia, Kazakhs literally devastated
automobile showrooms in all border regions of Russia. Of course, buying a car
30-40% cheaper than its cost in Kazakhstan is an incredible stroke of luck. But
if you look at the situation in terms of outcomes for of our country, you’ll
see that significant amounts of money are "funneling" from the
country and Kazakhstan automotive industry is losing its customer. This, in its
turn, affects the state tax revenues and the salary of people who work at
Kazakhstan plants. Fortunately, this kind of craze is a short-term situation
during the crisis. Of course, very soon the acute phase of the crises will pass
over, and the price range for products in Russia will stabilize .
As you can
see, the consumers in Kazakhstan get a wide choice of goods and services, which
results in tough competition leading to market regulation of price for imported
and local products. Increased imports also entail the arrival of new equipment
and technology. But what consumers benefit the most is the high quality of
products that meets the world standards. There are also new jobs created as a
result of opening joint ventures and expansion of the existing manufacturers
that are focused on the markets of the partner countries. It leads to the
reduction of unemployment and increase in the welfare of the people.
easy migration of the human capital allows people to significantly reduce time
and simplify procedures of employment or training in the EAEU member countries.
For example, now a citizen of Kazakhstan has the right to stay in Russia for 30
days without a previously mandatory registration. All citizens of the EAEU
member countries have the same employment rights and responsibilities in
Kazakhstan, Belarus and Russia, with some exceptions (http: // www.
the moment, EAEU member countries develop a list of higher education
institutions whose diplomas will be acknowledged in all three countries. For
example, a graduate of Nazarbayev University has the full right to work in
Russia and Belarus, as well as a graduate of Lomonossov Moscow State
this treaty eliminated the procedure of getting work permits that the countries
previously established in order to protect the domestic labor market. The
worker, who arrived from a EAEU member state, enjoys the same professional and
social preferences (the right to work, to placement of children in school and pre-school
institutions, possibility to use the services of medical institutions,
obligation to pay taxes), as the workers of the host country. The only
exceptions are civil and military service.
difficulties in this matter are related to the 30% income tax for migrant
workers from Kazakhstan in Russia, while the Russians, working in Kazakhstan,
pay only 10%. Kazakhstan insisted on the reduction and adjustment of the income
tax in our countries, and got an agreement of the Russian party. Since January
1, 2015 the income tax rate in Russia for Kazakhstani migrant workers will
Also, if a
Kazakhstan citizen decides to move, for example, to Belarus their work
experience in Kazakhstan will be taken into account while calculating their pension
payment. Securing this rule (work experience off-set) is currently under
advent of the Eurasian economic space should give a new impetus to development
of joint ventures. Even in the early years of EAEU existence we can expect the
successful impact of this association on the following plants:
Kazakhstan-Russia - "Asia Auto" JSC, "Kazrospromarmatura"
LLP, Kazakh-Bela-rusian "SemAz" Ltd and others. There is another
important point. Opening the borders is expected to increase the inflow of
investments from Russia and Belarus. Kazakhstan creates favorable conditions
for foreign investors. Therefore, doing business in Kazakhstan is becoming
profitable (http: // www. ereport. ru).
extensional consumer market is definitely an attractive investment. Kazakhstan,
as a participant and one of the founders of this market, gets more powerful
negotiating position and competitive advantages in economic relations with the
third countries. An example of this is the negotiation of a number of major
world economies concerning free trade areas and preferential trade with
EAEU allowed a significant increase in the capacity of the domestic market. The
common member states market size is 2 trillion US dollars, its human resources
is estimated at about 170 million people, its area is 20 million sq. m., and
its total productive capacity is 600 billion dollars.
to the substantial expansion of the boundaries of the market for the
businessmen of Kazakhstan, creation of EAEU has provided additional
opportunities for domestic businesses in terms of reducing transaction and time
costs at the border and releasing significant working assets, which can now be
spent for business development .
should become a powerful incentive for the development of new industries in the
union territory, the cooperation of complementary companies and the creation of
vertically integrated corporations. Ultimately, in the long term it will allow
EAEU countries compete in the world market with their products.
the Customs Union will increase the marketing outlet for Kazakhstan producers
tenfold, which, in its turn, will allow them to significantly increase
important factor is the fact that the larger domestic market becomes more
attractive for foreign investors.
is a country distant from major markets and having almost no access to sea
ports. In this regard, particular attention is paid to providing Kazakh
exporters with a better access to the Russian transportation infrastructure
which will reduce transport costs and, thus, increase the competitiveness of
Kazakhstan products in the markets of the third countries. Absence of internal
customs borders now allows reducing transport costs and travel time for
Kazakhstan exporters of grain and flour and other finished and raw goods to
EAEU results in the following advantages for Kazakhstan:
- growth of
GDP by 25% by 2030;
in prices due to increasing competition;
of new jobs in modern companies and enterprises;
significant development of non-resource sector of the economy;
improvement of investment climate;
- new level
of human resource market development;
development of new capital- and knowledge-intensive industries;
improvement of product quality due to higher requirements;
in production and technology, and build-up of industrial power;
of single market for 170 million people without tariff and non-tariff barriers;
resilience to the global crisis.
understanding of the EAEU goals and objectives can be explained in the
following way: any joint efforts, resources, opportunities always increase
chances for further successful development of the country. This is the
objective of a common Eurasian space – to compensate for the shortcomings due
to interaction within EAEU.
that there is a severe crisis in Russia, what are the chances that the neighbor
will not pull us back? The difficult economic situation in Russia gives
additional opportunities for Kazakhstan. We become a more valuable and
attractive partner when Russia's ties with other countries are weakened. This
increases our value and makes our partners consider our interests. Therefore,
from a strategic point of view, we can’t step aside now. Stepping aside may
result in rather adverse effects (2014).
has its doubts and weaknesses. Experts point to the specific and real problems
of EAEU functioning. These problems are the following:
guaranteed dominance of Russia in the EAEU bodies eliminates the possibility of
equitable coordination of economic interests of the union member states;
- in the
monetary system, each state retains its significant national characteristics,
which objectively impede integration in this area. The flip side of this model,
which has ensured high rates of economic growth, is the underdeveloped
financial markets and, to a certain extent, a close nature of the financial
still remain competition in the fiscal sphere of national jurisdictions;
consequently, the unification of monetary systems as the final phase of integration
is also under development;
experience suggests that if EAEU members want to have a common currency, we
need to set limits on the emission of debt securities so that public debt were
financed by a single paper, issued on the basis of the overall balance and
common borders. Thus far these states are not ready for this (Stolyarova,
political elites perceive EAEU as a hostile project, capable of creating
serious competition to the dominant influence of the West not only in the
post-Soviet market, but also in the global market. Everyone saw how much had
been done in order to prevent the entry of Ukraine into the Eurasian project.
But in spite of the situation in Ukraine, establishment of EAEU and
strengthening of cooperation of Russia and Kazakhstan with China hit the West
hard. Therefore, in the near future we can expect attempts to destabilize the
situation, especially in the Central Asian region. As to the Western
businesses, they have long been looking narrowly the Eurasian project and are
looking for new forms of collaboration and business communications with
If we view
EAEU with the eyes of Kazakhstan citizen, we can say the following: less than
20% of Kazakhstani people are informed about the Eurasian Union, but nearly
half of them see it as "a powerful impetus to the development."
of respondents admitted that they have a very superficial understanding of the
project, they "heard or read something, but they don’t know the
details." 29.6% had heard about the Eurasian Union. And only 19.9% said
that they are aware at what is happening and "are closely watching the
events related to the establishment of the Union."
positive aspects of active integration with Russia and Belarus, Kazakhstan
citizens name the development prospects. In particular, 47.5% of respondents
believe that "it will give a powerful impetus to the development."
12.7% hope that "EAEU will be one of the major economic and geopolitical
centers of influence".
on political support of Russia, and 9.2% believe that the Eurasian Union will
serve as an effective "bridge" between Europe and Asia, and, first of
all, between Europe and China. "Removing trade barriers" is an
advantage for only 2% of respondents, border security around the EAC perimeter
- for only 1.2%, and the prospect of using a single currency – for just 0.9%.
assessing possible negative effects of the creation of the Eurasian Union, 32%
of respondents said that they see no disadvantages in this project. However,
20.5% of respondents expressed apprehension that "it is unknown how
reliable are the Russian Federation and Belarus as partners."
12.6% of Kazakhstanis negatively assessed the likelihood that "the
countries will have to sacrifice a part of their independence to create the
Union." 3.2% see EAEU as a threat to sovereignty in general. "The
increase in prices, reduction in product choice" is a negative factor for
only 8.4% of respondents. And only 4.7% believe that "Kazakhstani
producers won’t be able to compete with Russian and Belarusian goods".
whole, the survey demonstrated a very low awareness of Kazakhstani people about
the Eurasian Union and other integration initiatives, which the population
considers either in the context of the experience of the Soviet Union, or as
yet very uncertain future.
believe that the Eurasian Union provides a real chance for the member states
and prospective members to improve their competitiveness in the global markets,
as well as modernize the economy with their joint efforts.
Eurasian Economic Community is an international economic organization created
to effectively promote by its stakeholders of formation of the Customs Union
and the Common Economic Space, and also to implement other goals and objectives
associated with deep integration in economic and humanitarian spheres. The main
objectives of the Eurasian Economic Community are: formation of a common
financial market, establishing common rules for trade in commodities and
services and their access to domestic markets, creation of a common unified
system of customs regulation, creation of equal conditions for production and
business activities, development of a common market of transport services, creation
of a common energy space, creation of a collective security system, ensuring
free movement of citizens of the EurAsEC states within the Community and
potential of the Eurasian Economic Community is unique both in terms of
availability of energy resources and transit opportunities and exports of these
resources within and outside the Community. The territory of EurAsEC allows
organizing export of resources in all promising directions: west, east and
south-east. Today, Kazakhstan, Russia and Tajikistan have fuel, energy and
hydro resources of global significance and are very attractive for investors.
All EurAsEC states are connected with regional pipelines into a single system
that allows transport resources within the Community. At the same time, there
is a number of states, including Kazakhstan, Russia and Belarus, that are
connected with a system of export pipelines, allowing to export natural gas
extracted by the Community countries.
priority is given to the formation and development of agreed principles of
customs, tax and tariff policy of the EurAsEC countries, deepening cooperation
of electric power systems of the Community members, effective use of transit
potential, joint construction of power facilities, development of favorable
conditions for active attraction of investments from both EurAsEC and foreign
Eurasian Economic Community is a developing economic system with a huge
economic potential, a large sphere of geopolitical influence and real prospects
for development, important for each member of the Community. However,
development of the Eurasian Economic Community is a fairly complex and lengthy
process. For the efficient operation of any economic integration organization
it must be integrated into the global economic system, which is not possible,
above all, without its functioning within WTO. This will take time, but will
provide an opportunity for each country to realize its potential and become
equitable members of the regional and global economic cooperation.
to the President of the Republic of Kazakhstan N. Nazarbayev in the long run
one of the strategic goals of the Eurasian Economic Community is its
evolutionary transition to a more advanced structure - the Eurasian Economic
Union of Russia, Belarus and Kazakhstan, which is planned to be created by
2015. In addition the President of Kazakhstan considers it necessary to
gradually expand the Customs Union, which at the moment consists of three
members. He said Turkey and Syria expressed their interest in joining the
Customs Union. N. Nazarbayev said that it is possible to invite Kyrgyzstan and
Tajikistan into the Customs Union as observers. The future will show if these
goals are justified. At the present stage, it is important to consider that
most of the economic plans of EurAsEC will depend not only on the degree of
interest of these states in collaboration, but also on the real possibilities
of economic integration. Significant differences in the levels of
socio-economic development, economic structure, territorial remoteness of the
states of the Community from each other and high transport rates, a complex
socio-political situation in some member countries require careful
consideration of the implementation prospects of objectives related to their
close economic cooperation within EurAsEC.
and criteria of EAEU success is not an increase in economic indicators, but
development of the most important social institutions. Because this is the
ultimate goal; economics is only a tool to achieve it. People do not live for
the purpose of making money. We live to create a family, raise children, to
realize our personal potential. The economy is to create the conditions for
this. We often confuse GDP indices and quality of life of every individual,
substituting one concept with the others, forfeiting the difference between
ends and means. When in a year, two or three years we will start drawing first
conclusions, we can’t focus on economic performance only. We need to assess how
they are transformed into a more accessible healthcare system, better
education, etc. The main question to be asked is whether people began to live
better? Time will prove if it is so.
1. Eurasian Economic Union treaty. Retrieved from на http: // www. kursiv. kz
2. Economic News. Retrieved from http://bnews.
kz, http: // total. kz
3. Russian Information Agency News at http: // ria.ru
4. Articles in Issues of Economics at http: // www.
5. International Conference "Integration Processes in Eurasia and
modern world. (2014). Conference Proceedings held at Kazakhstan Institute for
Strategic Studies under the President of RK. Almaty. 234 p.
Stolyarova, E. (2015) Interview. Retrieved from http: // altaynews.kz
Table of contents: The Kazakh-American Free University Academic Journal №7 - 2015