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RF-Belarus-Kazakh SES to help overcome resource dependence-view

October 06, 2011, 16:06 UTC+3

According to Economic Development Minister Elvira Nabiullina, Russia is ranked 140th of 183 countries on simplicity of customs formalities

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MOSCOW, October 6 (Itar-Tass) — The Single Economic Space (SES) of Russia, Belarus and Kazakhstan will help these countries to get out of the natural resources trap. This opinion was expressed in an interview with Executive Secretary of the Customs Union Commission Sergei Glazyev published by the Rossiiskaya Gazeta newspaper on Thursday.

“For decades, Russia, Belarus and Kazakhstan have developed as a unified country with a common national economic complex. The economies of former Soviet republics complemented each other, and thousands of cooperative ties formed holistic reproductive contours with the full production cycle - from raw materials to finished products, from fundamental research to mass production technologies,” Glazyev said. “Today's intensification of integration processes is a purposeful policy on the reconstruction of the single economic space that was lost two decades ago, in the market conditions. This policy requires activation of the preserved scientific and industrial potential, the restoration and development of the existing contours of manufacturing of high-technology products with wide-ranging cooperation and specialisation.” This approach, according to Glazyev, “will allow our countries to get out of the resource trap on the path of innovative development.”

A “good-quality regulatory framework,” according to Glazyev, is the necessary but not sufficient condition for the effective regulation of the single customs territory and the SES. In addition, it is also “important to build a quality system of customs and other forms of state control over the movement of goods that should be carried out uniformly.” “This requires the earliest introduction of the modern information technologies - an integrated system of external and mutual trade and the electronic digital signature,” the Customs Union Commission’s executive secretary explained.

Asked if the SES creation will solve the painful problem of monopoly on the markets, he said: “Obviously, with the formation of a common market of the Customs Union competition increases in many sectors. For example, in the construction sphere competition on the market of construction materials, the most important niches of which are monopolised by large companies that systematically overstate their prices, increased with the creation of the Customs Union.” “Therefore, the activities of companies in a single customs territory reduces the monopolisation of markets and will make many products more negotiable to the consumer,” Glazyev concluded.

A deep, multi-stage integration project for the SES proposed by Moscow is a response to current challenges. As a first step, the Customs Union of Russia, Belarus, and Kazakhstan, was launched in January 2010. Russia, Belarus, and Kazakhstan, with a combined population of 170 million, account for almost 83 percent of the former Soviet Union’s economic potential. The three countries’ combined GDP is equivalent to $2 trillion and the value of their aggregate trade is $900 billion. According to Kazakhstan President Nursultan Nazarbayev, a proponent of integration, “the Customs Union may gain prominent positions in the global energy and grain markets, with the three countries together holding 90 billion barrels of oil reserves and accounting for 17 percent of global wheat exports.”

According to Economic Development Minister Elvira Nabiullina, Russia is ranked 140th of 183 countries on simplicity of customs formalities. If Russia fails to create comfortable business conditions, foreign trade players will prefer to “cross the border” in Kazakhstan or Belarus, or even to do business there. Unresolved issues include the freedom of workforce movement within the union, the status of migrants and immigration quotas.

According to the Russian Audit Chamber’s estimates, Russia lost some $158 million to the reduction of customs duties in the first quarter of 2010. In order to attract Belarus’s recalcitrant President Alexander Lukashenko to the SES, Moscow has agreed to unprecedented concessions, such as supplying oil to Belarus without levying a duty in exchange for Minsk’s revenues from export duties on oil products. Experts believe the elimination of the duties will cost the Russian budget around $2 billion a year.

The “Customs Troika” signed a declaration in early December, in which they announced what in fact amounts to a new stage of deeper integration, this time around an SES format. “The establishment of the Customs Union is the second stage of the integration process. The first is a free trade area. The third is a common market, a common economic space, to be followed by an economic union according to the European model, but without losing sovereignty,” Nursultan Nazarbayev told the summit. The Single Economic Space of Russia, Kazakhstan, and Belarus will become operational effective January 1, 2012. This opens up new opportunities, including free movement of capital, services, and ideas, as well as a single economic policy.

However, the establishment of the SES is not the destination point in and of itself. “By developing the Single Economic Space, we are moving toward the establishment of the Eurasian Economic Union,” a summit document declared. According to Russian President Dmitry Medvedev, who spoke at the closing press conference, “an action plan for the next few years is in essence being laid out today.” “Our new Union and the SES… will be open for membership by other countries,” the Russian leader said.

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