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Integration effect of the Eurasian Economic Union and ways to improve its competitiveness

15 March 2016
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Authors: Rano Yussupova

Economic integration has become the leading trend of the modern world economy, as well as the internationalization and globalization of the world economic life. Moreover, in the context of globalization of world economy, substantial economic integration has become more diverse.

Creation of the Customs Union and the Common Economic Space within the Eurasian Economic Union - is an objective necessity due to the global economic and technological changes that demonstrates the importance of a large domestic market to ensure macroeconomic stability and sustainable economic growth.

Activation of integration processes is a part of economic development policy focused on the yield of the raw traps on the path of innovation economy. This policy involves the activation of the preserved scientific and industrial potential, the development of existing and new high-tech industries with high added value and wide cooperation.

The desire of Kazakhstan to participate in the economic integration process is seen as a path to stability, ensuring high economic growth in Kazakhstan, the region's progress and functioning in the world community as a full member. N. Nazarbayev noted at the Eurasian Media Forum that it is an only economic integration [1]. He also  noted that "... no matter how scientific potential country may possess, no country alone is able to keep up with worldwide technological advances. Therefore hinder economic interpenetration in our conditions - means to protect highly costly and inefficient production management [2]. In this case refusing of cooperation and the isolation from the world economy are fraught with stagnation. Kazakhstan, under any circumstances, do not give up the policy of integration into the world economy [3].

On the one hand all these are characterized by the dynamism of the integration process, on the other - are responsible for the destruction of the integrity of economic systems, their embeddedness in a fragmented world networks [4]. Hence the presence of the "for" and "against" the need for the integration of countries into the union.

Establishment of the Eurasian Economic Union was formally signed by three states - Russia, Kazakhstan and Belarus, as a purely pragmatic measure that should have been for a number of positive effects on the economies of these three countries. The participation benefits of the Republic of Kazakhstan in the framework of the Eurasian economic integration are presented in Table 1.

 

Table 1 - Participation benefits of the Republic of Kazakhstan in the Eurasian Economic Union

Simplifying declaration

Growth of revenues due to growth in the customs tariff

Development of the logistics market Potential growth of transit trade (China, Europe)

 The output of goods to new markets (Russia, Belarus), and increase the competitiveness of products

Simplification of transit of Kazakh goods through Russia and Belarus

Growth of investments through the establishment of joint ventures

Kazakhstan

Simplifying the movement of human resources, the inflow of specialists in Kazakhstan

Significant political pros - integration with a strong partner

 

Note - Compiled by the author

 

 

Let’s assume that a valid cumulative effect of the creation of a single customs territory is expressed in dynamic effects determined in 10-15 years. According to experts, the removal of barriers to the movement of goods within the Eurasian Economic Union, the transition to a common system of economic regulation and the formation of the Eurasian Economic Space, where the customs union is the first step, will enable the three participating countries in 2020 to receive an additional GDP growth of more than 15 % [5].

Institute of Economic Forecasting of the Russian Academy of Sciences have been carried out calculations that show the macroeconomic impact of the creation of the Common Economic Space of Russia, Belarus and Kazakhstan (Table 2).

From these data it is possible to judge about the possibility of dynamic effects from Kazakhstan's participation in the Common Economic Space, In particular, it is projected that in the absence of the Common Economic Space GDP in Kazakhstan in 2020 will increase by 1.51 times, and in 2030 - in 2 times. Participation of Kazakhstan in the Common Economic Space provides an increase in GDP in the same periods, respectively, 1.53 and 2.62 times [6].

 

Table 2 - Integration effect of the creation of the Common Economic Space

 

Dynamics of GDP (2011 = 1,0)

GDP (billions of US. Dollars.)  2011

Lack of Common Economic Space

Years

2015

2020

2030

2015

2020

2030

Russia

1,25

1,60

2,47

2380,3

3809,0

9411,1

Belarus

1,18

1,37

1,77

65,3

89,4

157,9

Kazakhstan

1,19

1,51

2,36

224,0

338,5

797,6

Creation of Common Economic Space

Years

2015

2020

2030

2015

2020

2030

Russia

1,27

1,62

2,53

2411

3905

9890

Belarus

1,23

1,44

3,23

67,8

97,4

314,3

Kazakhstan

1,22

1,53

2,63

229,5

350,8

921,1

TOTAL

 

 

 

38,65

116,76

758,96

Note - Source: [7]

 

Estimates of the macroeconomic effects of integration obtained by Russian scientists as a result of macro-variant calculations for the integrated model of interbranch balance of states - members of the CU, proved that the country's foreign trade policy orientation has a significant impact on the dynamics of the economies. We are talking about the possibilities of enhancing the medium-term economic growth by 1.5-2 times due to the restoration of cooperation ties and common economic space [7].

Today positive trends prevail in the socio-economic development of the Eurasian Economic Union. States are in a position of economic growth and the integration of countries - is one of the ways to speed up the economic growth. The changes in the export structure of the Customs Union can not keep up the rates of economic growth, thus it’s accompanied by a relative increase in the proportion of low-productivity goods. In Kazakhstan, the less likely appearance of new products in the export basket of the country. In general if the Customs Union has potential opportunities to improve the structure of export baskets that are available in medium and high-tech production, Belarus and Kazakhstan alone has the potential only in the field of low-tech manufacturing.

For developing the modernization of national economies and technological cooperation and competitiveness in the EAEU:

  • Specialization in high-tech areas of production.
  • Optimisation of current industrialization priorities and rejection of the "withering production areas."
  • Creation of new productions and their distribution to produce not from the point of the internal priorities of the country, and with the border areas, the integration of development schemes.
  • It is necessary to strengthen research capacity in the production areas as a "clean energy", robotics, nanotechnology, genetic engineering in agriculture and aerospace technology in unoccupied niches.
  • Creation of TNCs within the EAEU, operating on a global scale.
  • Encourage the formation of venture capital and investment.
  • Strengthening scientific cooperation of EAEU countries potential creation of joint industry or project design offices.
  • Preparation of high qualified and creative professionals with a high level of theoretical knowledge.
  • Creating conditions for investments that increase the degree of processing of raw materials.
  • Improving effects on investment, coordinating them with the implementation of infrastructure projects.
Bibliography and references
1 Nazarbayev N.A. Kazakhstan will come out of any union in the event of infringement of independence // [Electronic resource]. Access: http://m.tengrinews.kz/ru/news/232988 2 Nazarbayev N.A. Together we can resist globalization // [Electronic resource]. Access: http://www.ng.ru/ideas/2001-04-29/1_nazarbaev.html?auth_service_error=1 3 Aubakirov Y.A. National economy: theoretical, methodological and practical problems of development // Coll. scientific. tr. - Almaty Raritet.- 2009.- 512 p. 4 Ashimbaev A. Alternatives to Globalization // Kontinent.- 2001. - № 4. - S. 31. 5 The Customs Union: the obvious advantages and hidden defects, which are not aware citizens of the CIS // [Electronic resource]. Access: http://www.profi-forex.org/novosti-rossii/entry1003131704.html 6 Integrated assessment of the macroeconomic effects of various forms of deep economic cooperation between Ukraine with the Customs Union and the Common Economic Space within the EurAsEC // The final scientific and technical report. Center for Integration Studies. - SPb. - 2012. 7 Present and Future of the Eurasian integration. Need to restore the common economic space: rep. Sergey Glazyev // [Electronic resource]. Access: http://www.dynacon.ru/content/articles/1299/?sphrase_id=468969

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