Eurasian Economic Union — regional center of investment and high technology attraction

Friday, 31 January 2020, 05:26:34

The next meeting of the EAEU Intergovernmental Council will take place on Jan. 31 in Almaty. One of the main topics of the Intergovernmental Council of the Eurasian Union in Almaty will be the development of trade and digital integration of the participating countries. Almost six years have passed since the signing of the Treaty on the Establishment of the Eurasian Economic Union. During this time, an impressive list of supranational legislation has been created that ensures the free movement of goods, services, and labor in a single economic space.

The idea of ​​creating the Eurasian Economic Union belongs to the First President of the Republic of Kazakhstan – Elbasy Nursultan Nazarbayev, which he voiced on March 29, 1994, giving a lecture at Lomonosov Moscow State University.

The initiative of the First President became a reality only 20 years later, and this became a historic event for the post-Soviet republics that joined the economic union.

The Treaty on the Eurasian Economic Union was signed on May 29, 2014, in the capital of Kazakhstan. This document laid the foundation for the development of Eurasian integration, which provides long-term stable conditions for the development of the economies of the member countries of the Union, and also created opportunities for the realization of four freedoms: freedom of movement of goods, capital, services and labor.

On Dec. 4, 2014, the Armenian parliament ratified the agreement on the country's accession to the EAEU. On Dec. 23, 2014, at a meeting of the Supreme Eurasian Economic Council, an agreement was signed on the accession of Kyrgyzstan to the EAEU. On Jan. 1, 2015, the treaty establishing the Eurasian Economic Union entered into force. On Jan. 2, 2015, Armenia officially entered the EAEU. In August 2015, the process of Kyrgyzstan joining the Eurasian Economic Union was completed.

Main Stages of the the Union Formation

On Feb. 26, 1999, in Moscow, the Presidents of the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation and the Republic of Tajikistan signed the Treaty on the Customs Union and the Common Economic Space, which gave impetus to finding all the requirements that were adapted to the Eurasian realities of economic cooperation.

On Oct. 10, 2000, in Astana, the Presidents of the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation and the Republic of Tajikistan in order to effectively advance the process of forming the Customs Union and the Common Economic Space established the Eurasian Economic Community. This was an important stage in the evolution of the idea of ​​common economic standards. The mechanisms implemented in this organization allowed for eight years of its operation to increase four times the turnover between the participating countries.

The key moment was the signing of the Agreement in 2003 on the formation of the Common Economic Space, which ensured the movement of goods, services, capital and labor.

Another milestone in integration was the launch of the Customs Union between the Republic of Belarus, the Republic of Kazakhstan and the Russian Federation in 2010. The Unified Customs Tariff has been enforced, customs clearance and customs control at internal borders have been canceled, and unimpeded movement of goods on the territory of three states has been ensured. Active work has begun on the development of international treaties that create the basis for the start of the functioning of the Common Economic Space.

In January 2012, international treaties entered into force, forming the legal basis for the Common Economic Space of the Republic of Belarus, the Republic of Kazakhstan and the Russian Federation, creating the basis for the free movement of not only goods, but also services, capital and labor.

On May 29, 2014, the Creation Agreement was signed in Astana, which entered into force on Jan. 1, 2015. Later, Armenia and Kyrgyzstan joined the union. The agreement marked the transition of the Eurasian economic project to a new, deeper level of integration.

EAEU Today

During the functioning of the Union, positive shifts have been observed in creating favorable conditions for the life and work of citizens of the union countries. Thanks to the general rules for the circulation of products in the Union, the number of high-quality and safe products for consumers has increased, and the quality of services that citizens can receive on equal terms in any of the EAEU countries has increased.

Today, workers freely move within the Union, work without additional requirements and permits, their diplomas are mutually recognized. They receive the necessary medical care, send children to kindergartens and schools. And this became possible, first of all, because it was possible to create favorable conditions for the development of business and the economies of the EAEU countries as a whole. The new EAEU Customs Code has been adopted, thanks to which the terms of customs operations have been reduced several times. In addition, the fight against trade barriers within the Union has been institutionalized; since 2016, 51 obstacles have been removed. In recent years, mutual trade turnover within the Union has grown by almost 32%.

According to Kazakhstani political analyst Maygeldinov, a special role in the further development of the Union is played by the internal relations of the EAEU member countries.

The expansion of the EAEU in the post-Soviet space can provide an additional impetus for deep integration. The international image of the Union has seriously increased. Several dozens of countries and associations showed interest in cooperation with the EAEU,” the expert said.

A few more were added to the successful Vietnamese case of creating a free trade zone. An agreement on trade and economic cooperation with China and free trade agreements with Iran, Singapore and Serbia were signed. Consistently advancing dialogue with Israel, Egypt. Negotiations are ongoing on an FTA with India. Memoranda of cooperation have been concluded with Greece, the Republic of Korea, Indonesia, Cambodia, Chile, Mongolia, Peru, Jordan, Morocco, Cuba, many other countries, as well as the largest integration associations, including ASEAN, MERCOSUR, the Andean Community, the Latin American Economic System, and the African union.

It is worth noting that the European Union remains one of the main trading partners of the EAEU. In 2018, trade with the EU grew by 20.1%, and exports to the EU — by 28.5%. There is great potential for enhancing cooperation. So, in 2017, the representative of the European Commission at the meeting of the OSCE Permanent Council in Vienna for the first time recognized the readiness for cooperation between the EAEU and the EU in such areas as technical regulation and mutual trade.

In the future, further creative implementation of the Union’s agenda. It should be a modern association, comfortable for doing business, attractive to the international business community, one of the leading global economic centers that determine the global economic agenda. To make these goals a reality, the EAEU countries need to continue implementing agreed policies, digitalize their economies, develop international cooperation, create and bring to the world market Eurasian brands — recognizable, jointly released products and new technologies. If Member States can produce new knowledge, they will make a breakthrough and occupy their niche in the world market.

Currently, 49 sectors are included in the single service market in the EAEU, which together account for about 55% of the volume of services provided. For example, these sectors include construction work, hotel and catering services, consulting, computer services, and real estate services.

The formation of a single market for services in the EAEU contributes to the development of business, the creation of additional jobs, increasing the level of employment of the population, real incomes of citizens, which is the most important factor in strengthening social stability. In the future, the formation of a single market for services in the EAEU will lead to the achievement of sustainable development goals such as eliminating poverty, decent work and economic growth, as well as reducing inequality.

The achievement of the Sustainable Development Goals by the EAEU countries is also facilitated by close interaction of states, joint solution of the tasks of socio-economic development and economic integration. The single service market continues to expand, liberalization plans are being implemented, the purpose of which is to determine the substantive equivalence of service regulation in countries and, if necessary, harmonize market access in this sector.

To ensure the development of the agro-industrial complex and rural areas in the interests of the population of each member state and the EAEU as a whole, as well as economic integration within the framework of the EAEU, an agreed agro-industrial policy is being implemented. The main goal of the agreed agro-industrial policy is the effective implementation of the resource potential of the EAEU member states to optimize the production of competitive agricultural products and foodstuffs, meet the needs of the common agricultural market, and increase exports.

In recent years, the Union has shown steady growth in economic indicators. According to the EEC, in 2018, the EAEU’s GDP increased by 2.5% by 2017 — up to $1,913,999.8 million. The total volume of foreign trade in goods in 2018 of the EAEU with third countries amounted to $753.4 billion.

Freedom of Movement of Investments

An important advantage of the EAEU is the provision of freedom of movement of investments, which is practically unlimited in scope. The capital market is at the formation stage, it covers not only the sphere of banking interaction, but also the insurance market, brokerage services, that is, the whole range of financial services. Common markets for medicines and medical devices were created, 47 technical regulations of the Union were adopted, which ensure the safety of goods in a single Union market.

In the states of the Eurasian "five" there is a tendency to improve the investment climate and increase the investment attractiveness of the economy for investors from third countries and from the Union. For example, at the end of 2018, the EAEU investment in fixed assets increased by 5.6% compared to the previous year. Growth of investments in fixed assets was observed in all countries of the Union. Mutual foreign direct investment in January-September 2018 across the EAEU increased by 23.4% compared to the same period of the previous year.

The improvement in the investment attractiveness of the Union is also evidenced by the improved position of the EAEU member states in international ratings. So, the Union’s position in the Doing Business 2019 ranking improved by four points, reaching 31st place. In 2018, the EAEU ranked 45th out of 140 economies in the Global Competitiveness Index of the World Economic Forum. According to the Logistics Performance Index, the EAEU in 2018 moved from 98th to 76th place (by 22 points) compared to 2017.

The EAEU Agreement takes to a qualitatively new level such a direction of cooperation among member states as labor migration, with the abolition of restrictions established by the laws of the member states in order to protect the national labor market. Employers and (or) customers of a Member State’s work (services) have the right to involve workers of the Member States in the implementation of their labor activity without taking into account restrictions on the protection of the national labor market. In this case, workers of the Member States do not need to obtain permission to carry out labor activities in the state of employment.

EAEU Customs Code

The key projects of the Union have significantly advanced. On Jan. 1, 2018, the new EAEU Customs Code entered into force. This simplified the procedure for moving goods across the customs border of the Union and made it transparent, including through the introduction of an electronic declaration system. All procedures related to the entry of goods into the common EAEU market have been unified. Thanks to the code, the time of release of goods into free circulation was reduced by six times, and the registration of a customs declaration — by half.

Today, the customs borders between the member states have been removed on the territory of the EAEU, the norms of the single Customs Code are applied, the Unified Customs Tariff, the unified system of foreign trade and customs regulation, and uniform technical regulations are in force.

It should be noted that only in Kazakhstan since the EAEU's operation the number of joint ventures has increased by almost 70%, exceeding 10 thousand enterprises.

The main goal of creating a common customs space is to achieve socio-economic progress. The work was aimed at simplifying trade, improving competitive conditions among business entities of the countries participating in the Customs Union. These actions should lead to an increase in the market where the countries of the Union would have the opportunity to sell their goods and services.

To achieve this, it was supposed to:

  • abolish domestic customs payments, which would lead to a decrease in the cost of products that are produced by members of the Union;
  • accelerate the turnover of goods inside the vehicle due to the cancellation of customs inspection and clearance;
  • adopt general requirements for sanitation and epidemiology, safe standards for services and products, recognize the strength of the results of tests conducted in one of the participating countries, common to all.

Another important goal of creating the Eurasian Customs Union is to protect the Union market, creating suitable conditions for the manufacture and sale of goods from participating countries. But on this issue, mutual understanding between the allies is slightly less, because states have their own priorities for production development.

The Customs Union provides a number of advantages to the participating States, namely:

  • a significant reduction in the cost of processing and transportation of goods within the vehicle;
  • reducing the number of bureaucratic procedures, and hence the time costs involved in transporting products across the territory of the Customs Union;
  • reduction in the number of actions of customs officers necessary for the export of goods to third countries;
  • providing new markets;
  • simplification of legislative standards due to unification.

Important Stage in EAEU Formation is Digitalization of Economies

On Oct. 11, 2017, the presidents of the five countries of the Union approved the main directions for the implementation of the Digital Agenda until 2025. This document contributes to the creation of new jobs and industries, increasing the competitiveness of business through digital transformations in all spheres of society, and will also facilitate the free movement of goods, services, capital and labor.

In February 2018, the Digital Initiatives Management Office was formed under the leadership of the Chairman of the EEC Board. The office received about 50 initiatives.

Digital transformation is the driving force behind global, innovative, inclusive and sustainable growth and can help reduce inequalities and achieve the goals of the Union’s digital agenda as a driver of integration processes and a source of a wide range of synergetic economic effects.

According to political analyst Maygeldinov, the most likely factor that will deepen integration is to achieve progress in implementing the digital agenda of the EAEU. Thus, the World Bank experts developed key recommendations for the development of the Digital Space and the implementation of the EAEU digital agenda until 2025, the implementation of which will lead to accelerated economic growth, creation of new jobs, improved quality of public services and increased competitiveness of the Union. However, as noted in the Atameken NCE, without ensuring the implementation of the basic processes, new digital projects are actively promoted, some of which overlap. In addition, the analytical component of making any decisions affecting the interests of the business is often ignored and, accordingly, at the exit, when launching projects, the business faces a number of difficulties.

Nevertheless, it is important to note some of the achievements of the EAEU. For example, during the 2019 summit in Nur Sultan, an agreement was signed on the formation of a common electricity market, which governs the procedure for mutual trade in electricity between countries, the rules for determining and distributing the capacity of interstate sections.

In addition, from Dec. 1, 2019, for the three EAEU member countries (Russia, Belarus and Kazakhstan), a single market for tourism services began to operate. The single market provides travel agencies with the opportunity to operate in three countries without creating an additional legal entity and entering service providers of other countries in the register.

In general, increasing the economic sovereignty of the EAEU countries should be one of the main directions in 2020. To do this, you need to connect all available modern financial technologies. This would increase the stability of the national payment systems of the EAEU countries, making them less dependent on the dollar and other foreign currencies.

Also, the EAEU Treaty provides for the creation of a common financial market for the union. To achieve this goal, member states will gradually deepen economic integration and harmonize legislation in the financial market.

The most important condition for the functioning of the common financial market will be the mutual recognition of licenses in the banking and insurance sectors, as well as in the services sector in the securities market. In order to prepare mutual recognition, the requirements for these sectors will be determined.

Another difference in the financial market is that countries agreed to create a supranational financial regulator in 2025, because finance is an extremely significant, regulated sphere. Creating a single financial market, it is necessary to provide supervision, regulation over the subjects of the financial market from one source.

Removing barriers to the mutual admission of financial services, creating a common capital market will ensure the efficient distribution of capital, diversify risks, increase competition in the financial services market, improve their quality and reduce the cost of credit resources for the economy.

In the field of tax policy, areas have been identified that help to avoid unfair competition, promote the free movement of goods, works and services, including:

  • harmonization (convergence) of excise tax rates on the most sensitive excisable goods;
  • further improvement of the system of charging value added tax in mutual trade, including the use of information technology.

The agreements are based on the principle of non-discrimination, which will allow avoiding unfair and price competition in mutual trade in goods and services.

The Agreement also regulates the rules to avoid double value added tax when individuals import personal goods. Thus, the strategy of the member states of the union in the field of tax policy is aimed at promoting increased competitiveness of business entities and eliminating tax barriers that affect the development of economic relations between member states of the union.

Another major novelty of the agreement on the EAEU includes equal social security, including the provision of medical services.

In each member state of the Eurasian Economic Union, workers and members of their families are entitled to receive free medical care (in emergency forms) on an equal basis with citizens of the state of employment and regardless of the availability of a medical insurance policy.

Recall that at the meeting of the Eurasian Intergovernmental Council, which was held on Oct. 25, 2019, in Moscow (Russian Federation), important decisions were made in the areas of trade cooperation, the implementation of the digital agenda of the Eurasian Economic Union, the interaction of the Union countries on cooperation in jewelry and agricultural industries and several others.

The heads of government of the EAEU countries adopted a statement on the occasion of the entry into force of the Agreement on Trade and Economic Cooperation between the EAEU and China. The prime ministers of the Member States, Chairman of the EEC Board Tigran Sargsyan and Chairman of the Government of the Republic of Serbia Ana Brnabic signed the Free Trade Agreement between the EAEU and Serbia.

Several international agreements were signed — the Agreement on the features of operations with precious metals and precious stones in the framework of the EAEU, the Agreement on measures aimed at unifying the selection and breeding work with farm animals within the Union.

A number of decisions were made in the field of digitalization of the economies of the EAEU countries and in the jewelry industry. In particular, the Procedure for the interaction of the centers of competence of the EAEU Member States and the EEC was approved within the framework of the implementation of the digital agenda of the Union. Members of the Intergovernmental Council approved an action plan to promote jewelry products of Member States in the markets of third countries.a

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