#EurasianEconomicUnion marks important milestone

The Eurasian Economic Union (EEU), of which Kazakhstan is a key member, has just marked an important milestone, writes Colin Stevens.

On 1 January, the EEU – an organization that might loosely be compared with the EU - celebrated its second anniversary.

The EEU passed the two-year landmark soon after agreeing a new Customs Code on 26 December. It is an important legal act affecting the sphere of customs regulation.

The key changes to the code, the result of lengthy negotiations, relate in part to the simplification of customs procedures.

The code is seen as being one of success stories of the EEU, an initiative which was very much the brainchild of Kazakhstan president Nursultan Nazarbayev.

It was Nazarbayev who said that the creation of the EEU, on 21 December 2014, to be the most important event of that year.

But, after 24 months, what else has the EEU achieved?

The organisation is not without its problems but cursory look at the statistics suggests quite a lot has been done since its inception.

Take, for example, on the economic front. Here, there is clear evidence of the added value the EEU has brought about.

The economic results for 2016 for the EEU were better than in the previous year. Although GDP of the EEU deceased by 0.3% in 2016, that is significantly less than in 2015, when GDP deceased by 2.5%.

Inflation was 6% compared with 12.4%, there was a 3.2 per cent growth in agricultural products while industrial production also grew by 0.2% compared with 2015 when there was a decline of 3.4%. The manufacturing sector also grew.

The recent Doing Business report has shown that almost all EEU states boast a strong position. Of the 190 countries rated, Kazakhstan is ranked 35th, Belarus 37th, Armenia 38th and Russia 40th.

Tatyana Valovaya, the integration and macroeconomics minister of the EEU, said that in 2016, the GDP of only two EEU participants (Belarus and Russia) declined.

Economically, Kazakhstan continues to enjoy real benefits from its EEU membership with trade turnover with its four other members totalling some $9.26 billion in the period from January-September 2016.

Much of this trade turnover was with Russia but Kazakhstan still relies on its EEU partners for exports such as mineral products, metals and chemicals.

Like the EU, to which it has been compared, the EEU was set up to forge closer economic ties with its near neighbours (the other members being Russia, Belarus, Kyrgyzstan and Armenia).

But, like the EU, there is rather more to this alliance than mere economics.

The EEU also aims to facilitate the free movement of goods, services and labour.

Since its inception, it is credited also with augmenting greater cooperation in these and other areas between its members. Relationships between every EEU country have also largely improved.

The EEU will also play a vital role in China’s New Silk Road, a multi-national, pan-Eurasian economic initiative to create a network of overland and maritime corridors between China and Europe.

Its aim is to better integrate a region that accounts for no less than 60 per cent of the world’s population and some 75 percent of its natural resources.

The Belt and Road initiative has already triggered large scale infrastructure development in two EEU member countries -Kazakhstan and Belarus – while Kazakhstan was the first to have undertaken practical measures on the transit and transport elements of China’s Silk Road Strategy.

Indeed, Kazakhstan was selected by China as one of its three key partners for the initiative (the others are Pakistan and Iran).

For Kazakhstan, the EEU has been a “win-win”, boosting its position in an increasingly competitive global environment. Kazakh businesses now have access to the EEU market, which boasts a population of 170 million. Kazakhstan has become more attractive to investors who also want to operate in the Russian and Belarusian markets. In turn, the Russian and Belarusian state procurement markets, valued at $198 bn per year, are now open to Kazakh businesses.

Like the EU, the EEU, which is seen as the project of President Nazarbayev, aims to remove barriers to the free movement of goods, services, labour and capital.

The EU, the largest economy in the world, celebrates its 60th birthday this year so is a slightly older “model” but senior EU figures, such as European commission president Jean-Claude Juncker and German foreign minister Frank-Walter Steinmeier, have actively encouraged closer relations between the EU and EEU.

Meruert Makhmutova, an expert at the European Council on Foreign Relations (ECFR), assessed how the EEU might develop in the coming years.

Makhmutova says it has provided simplified customs and passport control at borders and there are “high hope” it will deliver great economic opportunities to business.

Kazakhstan, a bridge builder between Europe and Asia, is especially important to the EU which is urged to “promote trade and cooperation” at Central Asian level.

Still in its relative infancy, the EEU has clearly already delivered in a range of areas and hopes are high that it will become one of the world’s important economic “poles”.

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