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Kazakhstan is the most efficient and investment-friendly transit hub for the greater Eurasia region. By 2020 the country aims to become a key logistics hub for Eurasia and beyond by developing transportation and export centers on the territory. Kazakhstan and the US have established a robust trade relationship that has generated skilled jobs in both countries. Kazakhstan imports annully from the U.S. high tech medical equipment, industrial machinery and livestock.
Proximity to Large Markets and Market Capacity
Kazakhstan is the most efficient and investment-friendly transit hub for the greater Eurasia region. By 2020 the country aims to become a key logistics hub for Eurasia and beyond by developing transportation and export centers on the territory. Kazakhstan is setting up the Western Europe - Western China International Transportation Corridor, which will cut ground transportation time from China to Europe in third (from 30 to 10 days) and multiply the transit cargo volume by 1,000%, to 170 million tons from the current 16 million tons, allowing the country to jump from the 86th spot on the World Bank’s Logistics Performance Index to 40th place. This will increase Kazakhstan’s GDP by 68% above a 2010 baseline while also boosting the GDP of neighboring countries by 43%, providing an additional boost to Kazakhstan’s export economy. Kazakhstan’s integration into the EEU has already reduced border crossing times and gives Kazakhstan access to a wider market of more than 171 million people with $2.7 trillion annual GDP.
Kazakhstan is the Eurasian Hub
The continental bridge for goods that move from East and West, South to North. By 2020 the country aims to become a key transit hub for Eurasia and beyond by developing transportation, logistics, and export centers on the territory and neighboring foreign countries. Kazakhstan is setting up the Western Europe - Western China International Transportation Corridor, which will cut the transportation time from China to Europe in third (from 30 to 10 days), will multiply the transit cargo volume by 1,000 percent, to 170mil tons from the current 16mil, allowing the country to jump from the current 86th spot on the World Bank’s Logistics Performance Index to 40th place by increasing cargo transport. This will increase Kazakhstan’s GDP by 68 per cent above the 2010 baseline, while boosting the GDP of neighboring countries by 43 per cent. Kazakhstan’s integration into the customs union with Russia and Belarus, which took full effect in January 2012, has cut border-crossing time in half and significantly reduced pilferage. The deeper integration under the umbrella of the Eurasian Economic Union (EEU) promises to further reduce transportation costs and transaction costs.
EEU builds on the successes of the Customs Union (CU) and Common Economic Space (CES) to establish a market for more than 171 million people with $2.7tn annual GDP. The objective of the union is to form a legal framework for a united economic zone, establish a common energy market, and enable the free movement of people within the community. With the current size of 76.8mil people, the middle class accounts for around 30 per cent of total population in Kazakhstan and more than 55 per cent in Russia. Both are both growing at an annual rate of 7 per cent, which makes both of them attractive for importation of consumer goods. Russia is the 6th biggest middle class consumer in the world.
For many investors Kazakhstan is a great springboard for expanding not only into the member countries of EEU but also the entire Central Asian region. It shares borders with all the other Central Asian countries and lies close to the Caucasus region. Central Asia and Caucasus offer a combined disposable income of over $260 billion. Projects in the transportation and energy sectors supported by the Central Asia Regional Economic Cooperation (CAREC) Program will give additional impetus to the development of intra-regional trade relations as well as connectivity with China and Europe.
Eurasian Economic Union
The Eurasian Economic Union represents the opening of new economic opportunities without sacrificing political independence. The EEU builds on the economic success of the Customs Union, and the EEU is in line with Kazakhstan’s multi-vector foreign policy. Kazakhstan unequivocally maintains the EEU will not erode the country’s political independence, which is critical to Kazakhstan’s priorities and multi-vector orientation. The EEU in its final form serves to advance Kazakhstan’s economic integration with the European Union, the United States, China and Latin America.
Facts about the EEU:
- The EEU builds on the Customs Union (CU) and Common Economic Space (CES) to establish a market with the total GDP of $1.9 TN. The Member-States of the Eurasian Economic Union are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic and the Russian Federation. The objective of the union is to form a legal framework for a united economic zone, establish a common energy market, and enable the free movement of people within the community.
- The EEU is an economic, not political union. It will not have any supra-national authority, over the sovereign states. Kazakhstan has made it clear that it will not support any supra-national political bodies, such as an EEU Parliament.
- No country will dominate the decision-making process in the Union as each country has an equal vote as well as the right to veto. Resolutions will be based on the ruling of the majority.
- As in the case of the EU, the member countries have various predispositions and concerns reflecting their endowments and power. Kazakh officials favor an economic association (much like UK’s disposition to the EU) while Belarus and Russia support stronger and deeper political and economic union (much like Germany). Given Kazakhstan’s insistence that EEU will not go beyond economic union, it is unlikely that integration will proceed further than the currently agreed-to format.
- The Union is created to facilitate trade, both inside of the Union and with outside economies – not to act as a barrier to trade.
- As a result of the creation of a new business environment and conditions for interaction between different businesses, all countries will see structural benefits that manifest themselves in the use of workforce, production and infrastructural cooperation and mutual investments. According to analysts, this will generate up to 25 per cent growth in member states by 2030 (15 years after the creation of the economic space), or around $600bn.
Accession to the WTO has been a foreign policy priority for Kazakhstan since its independence in 1991. Kazakhstan gained WTO membership in 2015. Kazakhstan worked to create the Eurasian Economic Union prior to WTO membership, which is viewed as a practical realization of the Kazakh President’s idea concerning the economic integration of Eurasian countries similar to the European Union announced by him in the mid-1990s.
It is well known that a unified customs territory is an integral step towards that high level of economic integration. Neither in negotiations on the WTO, nor in negotiations on the Customs Union did Kazakhstan ever renounce its interests, and the country considers both processes to be mutually complementary rather than mutually exclusive. Therefore, the processes of Eurasian integration and WTO accession have always been in parallel.
WTO advances Kazakhstan’s Economic Interests
Kazakhstan’s goal is further strengthening integration among global economies, and facilitate trade and investment freely among WTO countries. Elimination of internal customs borders and harmonization of legislation of the WTO members is already creating additional benefits for the trading partners by insuring free circulation of goods between the Eurasian countries and thus, providing traders and investors with bigger economic space and more attractive market for potential investors. Kazakhstan’s Regional Trade Agreements
Kazakhstan’s decision on creating the EEU with Russia and Belarus was based solely on the country’s own economic interests including the following factors:
- Mineral Reserves. Kazakhstan has the sixth largest mineral reserves in the world and is a major player in the energy markets. A major portion of mineral and energy resources produced in Kazakhstan is exported to external markets. One of the main tasks of the Government of Kazakhstan is development of nonextractive sectors and diversification of the economy and export promotion of highly marketable products. A unified customs tariff within the Customs Union would expand the regional market and promote Kazakhstan’s exports. Future customs tariff policy within the Customs Union will allow the import of raw materials and equipment under low custom duties within the development of investment projects. Establishment of the Customs Union would entail creation of a unified commodity market with a total GDP of about $2 trillion (2008) and a population of 180 million people, as well as create preferential conditions within the Customs Union. Such a large market within a unified customs territory would make Kazakhstan even more attractive for foreign investors who have considered Kazakhstan as one of the most attractive markets in our part of the world.
- Geopolitical Realities. Kazakhstan is the largest land-locked country in the world and much of its foreign trade depends on the routes that go through the territories of neighboring states. Membership in the Customs Union will provide Kazakhstan’s businesses with domestic (non-discriminatory) transit tariffs, taking into consideration that almost all the trading relations, particularly with the European Union, are implemented through the transit of the territory of Russia.
- Global Financial Crisis. The crisis has thinned down the flow of FDIs, decreased trade turnover, led to the introduction of protectionist mechanisms by some trade partners, and seriously damaged the economies of neighboring states. This harsh reality, therefore, demanded a more active and joint approach to further integrate and modernize the regional economy. Creation of the Customs Union will allow for more efficient use of the limited financial resources due to the global economic crisis. It will also provide a rationale for companies to use available resources to increase their production capacity.
WTO accession provides sizable benefits for Kazakhstan and serves its long-term economic priorities. The decision was based on the need to meet Kazakhstan’s national economic interests including:
- Unimpeded access to global markets
- Expanding trade with large neighboring economies, such as Russia and China
- Accelerated economic diversification by moving towards service and technology based economy.
Therefore, any speculations suggesting political motivation behind the decision are baseless.
WTO and EEU Negotiations Moved in Parallel
As mentioned earlier, negotiations on Kazakhstan’s accession to the WTO and efforts to join the Customs Union were moving in parallel. The idea of establishing a single customs territory was initiated earlier and had been moving at a much better pace, which was in full compliance with Kazakhstan’s economic interests. The process of harmonizing tariffs within the creation of the Customs Union demanded flexibility from every member and a transition period was introduced for some major commodities sensitive for Kazakhstan. It is also important to understand that the pace for creating the Customs Union has been, to a large extent, dependent on the political will from the Governments of the three states. Therefore, promotion of trade and economic cooperation with the neighboring countries has become the most important priority.
Kazakhstan’s team reassured American counterparts that the accession to the WTO has always been top priority for Kazakhstan’s foreign policy. The United States welcomes progress achieved by Kazakhstan in bringing its legislation in compliance with the WTO rules and supports its continuous trade liberalization process. In particular, such issues as sanitary and phytosanitary measures, intellectual property rights and veterinary certificates are at the final stage of negotiations.
Kazakhstan has finalized negotiations with the Unites States on Goods market access. Minister of Economic Development and Trade Zhanar Aitzhanova signed a document with U.S. Representative to the WTO Michael Punke in Geneva.
National Chamber of Commerce
The National Chamber of Commerce of the Republic of Kazakhstan was founded in October 2013 to further develop entrepreneurship and strengthen business stands in the dialogue with the Government and state bodies.
Export Products of Kazakhstan
The government of Kazakhstan provides a wide range of support services to Kazakh exporters and foreign buyers. Kazakh manufacturers supply original and value-added products across many sectors. This annual report by the government export office provides foreign buyers with a comprehensive guide to Kazakh exporters, and the government’s available supports and services.