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Kyrgyzstan's Eurasian Economic Union membership: official view and business opinion

The Times of Central Asia
21 августа 2017

BISHKEK (TCA) — Two years ago, Kyrgyzstan joined the Eurasian Economic Union to gain full access to its 180-million people market. The adaptation period is over, and Kyrgyz producers and suppliers of products now work on an equal footing with those from other EEU member countries.

Official opinion

The Kyrgyz Government reports on favorable results of the country's adaptation period. Last year, the economic crisis in the EEU partner countries affected the annual results of Kyrgyzstan’s economic development but the results of the first half of 2017 are inspiring: GDP growth was 6.4% (3.1% excluding Kumtor gold mine). The production of processed vegetables and fruits increased 1.9-fold, flour by 30%, meat and milk products by 20.4%.

Exports to the EEU countries increased by 29.3% since the beginning of the year, and imports by 10.9% compared to the same period in 2016. Remittances grew by 39.2%.

In terms of growth of GDP and industrial production, Kyrgyzstan leads in the EEU, the Eurasian Economic Commission Minister Tatiana Valovaya said. According to forecasts, this positive trend will continue due to access to the single market of the EEU countries, she added.

Prior to joining the EEU, Kyrgyzstan mainly earned by re-export of products, but now the re-export reduction is compensated with the inflow of investments, Valovaya said. In the coming years, investment flows will increase in Kyrgyzstan, and this is evident from the results of the light and textile industries. Countries that have had an interest in importing Chinese products and distributing them in their markets are now interested in investing in Kyrgyzstan due to the prospects of the EEU single market, availability of qualified and cheap labor force, and preferences that Kyrgyzstan has as an EEU member, the EEC Minister concluded.

Having entered the EEU, Kyrgyzstan joined the unified system of technical regulations, which provides more stringent requirements for product safety, which are based on international experience and best practices. For instance, the EEC recently decided to apply strict measures to the goods that do not meet the established requirements, when importing into Russia. Earlier, if it was found at border checkpoints that the imported goods did not have the necessary documents, they were returned to the manufacturers. From now on, such products will be destroyed. In particular, this rule concerns vegetables, fruits, and dairy products.

Latest statistics

Since the beginning of 2017, trade between Kyrgyzstan and the EEU member states amounted to $1.88 billion, 12.2% more than in the same period in 2016, the National Statistical Committee of Kyrgyzstan reports. Exports increased by 29.6%, and imports by 7.3%.

Russia is Kyrgyzstan's main trading partner in the EEU (60.4%), followed by Kazakhstan (38%). Kyrgyzstan’s exports of men's and knitted garments to Russia increased 1.7-fold, dried fruits 3.1-fold, onions and garlic 6.5-fold.

Kyrgyzstan increased the export of glass to Kazakhstan 2.8-fold, clothing 2.2-fold, mineral and carbonated water 1.5-fold, and ice cream by 16.3%.

Business opinion

According to representatives of Kyrgyzstan’s business, the EEU was created so that the countries included in it could fully use their export potential. This goal has been achieved to some extent.

According to the International Business Council based in Bishkek (IBC), Kyrgyzstan’s entry into the Eurasian Economic Union has already yielded positive results. Many negative forecasts made before creating the EEU have not been justified. Many of the current problems are not a matter of joining the EEU but a problem of Kyrgyzstan’s economic growth and conditions for business development and attracting investments. Low competitiveness of manufactured goods is among the main business problems not only in Kyrgyzstan, but also in other EEU member countries.

However, the export growth could be higher if barriers that prevent entrepreneurs from entering the EEU market are removed. Business tries to promote issues related to taxation, accompanying documents for transportation of products from one country to another, complicated reporting, and product labeling.

Food safety and labeling

Some changes in the EEU technical regulations or the introduction of completely new EEU regulations have not been fully discussed with business community, Askar Sydykov, IBC Executive Director said.

For example, the EEC has recently drafted a new regulation on food safety and labeling which provides additional information on the packaging including a graphical information on fat, sugar and salt in red, yellow, green (so called traffic lights technique). These changes will require additional financial costs from food producers.

In addition, the introduction of color labeling of nutritional elements of food products is voluntary for market participants in the world.

Drinking water

The business also has some comments on the EEU draft technical regulations on the safety of packaged drinking water, including natural mineral water, Sydykov said.

According to the new rules, marking of treated drinking water should contain information on the method of processing the source water. It will be necessary to indicate the whole technological cycle of production of drinking water on the label.

The proposed additional labeling will require remaking all packaging materials, and the related costs will affect the price of the final product.

“Such labeling is appropriate for fish and meat products, but why it should be applied to drinking water? The use of various treatment methods does not affect the properties and organoleptic characteristics of the final product — drinking water,” Sydykov said.

In Kyrgyzstan, it is necessary to duplicate information in three languages — Kyrgyz, Russian, and English. “Not to mention the additional costs for manufacturers, we should say about the impossibility to fulfill these requirements, for example, on 0.25-0.3 liter bottles where there is not enough space for it,” he added.

The IBC proposes to assess the economic costs of both the State and business related to changing legislation and to discuss the issue with businesspeople before the adoption of the regulations.

Removing barriers

The Eurasian Economic Commission promises to remove all barriers preventing local producers from developing under the EEU conditions. The EEC has recently published a White Paper, a report on barriers, constraints and seizures in the EEU member countries. The business community is the main source of information on the current obstacles and barriers, the EEC says. Entrepreneurs from EEU member countries can submit their appeals and get a response on monitoring details. Another way to get information is to hold meetings with the business community, the EEC said.

https://www.timesca.com/index.php/news/18515-kyrgyzstan-s-eurasian-economic-union-membership-official-view-and-business-opinion