Eurasian Economic Integration EDB Centre for Integration Studies

Eurasian Economic Integration EDB Centre for Integration Studies 2014

Section I. Eurasian Economic Integration and its institutions 2

Regional integration stages STAGES Economic Union SUPRANATIONAL REGULATORY BODY Single Economic Space Customs Union Free Trade Zone 3

History of Eurasian integration FORMATION OF THE SES Agreement on deeper integration Treaty on the Customs Union and SES Treaty on the establishment of Eur. As. EC SES PROJECT Belarus, azakhstan, Russia Decision of IGC to form the CU as a part of Eur. As. Ec COMMENCEM ENT OF EEC OPERATION FORMATION OF THE EURASIAN ECONOMIC UNION (EEU) FORMATION OF THE CU SINGLE CODED DOCUMENT CU: Russia Belarus CU: Russia Kazakhstan no later than 01. 2015 NO INTERNATIONAL ORGANIZATION AND LEGAL PERSONALITY EXISTS INTEGRATION STRUCTURES CREATED Eur. As. Ec structures: IGC, IPA, IC Secretariat CU Structures: SACU, CUC Secretariat SES structures: SEEC, EEC Court EEU structures: SEES, EEC, Court, Assembly 4

Treaty on the Eurasian Economic Union The Treaty (signed May 29 th 2014, functional January 1 st 2015) establishes the Eurasian Economic Union (EEU) • EEU ensures free movement of goods, services, capital and labor • Coordinated, coherent or uniform policy in economy sectors • The Union is an international organization of regional economic integration, which has international legal personality The Union operates on the basis of the following principles: • Respect for universally recognized principles of international law • Respect for difference of political structure of the Member States • Promotion of mutually beneficial cooperation, equality and consideration of national interests • Compliance with the principles of market economy and fair competition • Operation of the Customs Union without exceptions and limitations after the transition periods 5

Goals of establishing the EEU • Creation of conditions for stable development of economies of the Member States in order to improve the living standards of their population • Aspiration to create a single market for goods, services, capital and labor within the Union • Comprehensive modernization, cooperation and improvement of competitiveness of national economies in the context of the global economy. 6

EEU bodies Supreme Eurasian Economic Council (Supreme Council) Eurasian Intergovernmental Council (Intergovernmental Council) Eurasian Economic Commission (Commission, EEC) Eurasian Economic Union Court (Union Court) 7

EEU management bodies Supreme Eurasian Economic Union (Heads of State Parties) Eurasian Intergovernmental Council (Heads of Governments of the Parties) Council of the Commission 3 Council members, one Vice Prime Minister of each Party EEC Commission Board (9 Bod Members, 3 per each Party) Advisory bodies Chairman of the Board Member of the Board (Minister) for main areas of integration and macroeconomics Member of the Board (Minister) for Economics and Financial Policy Member of the Board (Minister) for Technical Regulation – Member of the Board (Minister) for Trade Member of the Board (Minister) for Competition and Antitrust Regulation Member of the Board (Minister) for Industry and Agroindustrial Complex Member of the Board (Minister) for Energy and Infrastructure Member of the Board (Minister) for Customs Cooperation– Departments Advisory bodies Departments 8

EEU budget ASSESSED CONTRIBUTIONS OF THE PARTIES Proportional to standard distribution of import customs duties for each party (Treaty on the Eurasian Economic Commission) RUSSIA KAZAKHSTAN BELARUS 9

Customs Union Single customs area Abandonment of customs clearance of goods in mutual trade Uniform Customs Code Single trade regime with third countries Transfer of customs controls to the external borders Single customs tariff and non-tariff regulation system 10

Provisions of the Treaty relating to the Customs Union Information exchange and statistics Operation of the Customs Union Regulation of trade of medications and medical products Foreign trade policy Technical regulation Sanitary, veterinary sanitary and phytosanitary quarantine measures Consumer protection 11

Single Economic Space (SES) Implementation of "four freedoms": free movement of goods, services, capital and labor Harmonization and unification of the rules of economic regulation in key areas (competition, subsidies, government procurement, technical regulation, activities of natural monopolies, protection of intellectual property, etc. ) Implementation of coordinated macroeconomic and monetary policy Formation of integrated sectoral markets 12

Provisions of the Treaty relating to SES MACROECONOMIC MONETARY POLICY TRADE IN SERVICES, INSTITUTION, OPERATION AND INVESTMENT ACTIVITIES TAXES AND TAXATION GENERAL PRINCIPLES AND RULES OF COMPETITION LABOUR MIGRATION INDUSTRY TRANSPORT GOVERNMENT PROCUREMENT INTELLECTUAL PROPERTY ENERGY NATURAL MONOPOLY AGRICULTURAL COMPLEX REGULATION OF FINANCIAL SERVICES 13

MACROECONOMIC POLICY Main macroeconomic indicators of sustainable economic development Inflation in annual terms does not exceed by more Annual consolidated than 5 percentage budget deficit of the State debt does not points the level of country does not exceed 50% of GDP inflation in the exceed 3% of GDP Member State in which this index has the smallest value. 14

Labour migration in the EEU • Workers of the Member States are not required to obtain permits for work in the State of employment. • The State of employment recognizes documents confirming education , with no recognition procedures applied for these documents (exception educational, legal, medical, pharmaceutical activities). • The period of temporary stay (residence) of a Member State worker and his family members in the State of employment is determined by the period of employment or a civil contract. • Social security (social insurance) (except pension) is provided for Member State workers and their family members on the same terms and in the same manner as for the citizens of the state of employment 15

Transitional provisions of the EEU Treaty 2016 Common market for medications and medical products 2019 Common electric power market 2025 Creation of a supranational regulatory authority for financial markets Common market for gas, oil and petroleum products 16

Section II. Permanent projects of the EDB Centre for Integration Studies 17

EDB Centre for Integration Studies • Centre for Integration Studies was founded in 2011 • It is a structural unit of the EDB • Focus on application quantitative studies: macroeconomic modeling, databases, calculation of economic effects • Located in St. Petersburg • 7 employees, outsourcing is actively used 18

EEU macroeconomic policies analysis and forecasting system § Evaluation of long term trends and the current state of SES economies; § Coordination of efforts and positions on the development of short and medium term outlook, as well as scenarios for the development of economic situation; § Forming proposals and Countries recommendations on monetary, fiscal and policy based on the results of forecasting; Type § The work is carried out in collaboration with EEC and Imple menta national authorities (Belarus) tion • Armenia, Belarus, Kyrgyzstan, Kazakhstan, Russia • DSGE • Financial Programming • Econometrics • Quarterly data • Mat. Lab and IRIS • Multi country model and 5 country models 19

Monitoring of mutual direct investments (MMI) in the CIS • • • MM is the largest international database on mutual direct investment in the CIS region MMI CIS uses only public information sources of various types The database has structured information on 1060 projects since 1992 Russian FDI stock by countries CBR and MMI CIS data Country FDI stock, $ billion (CBR data) FDI stock, $ billion (MMI CIS data) Total, CIS and Georgia Belarus Ukraine Kazakhstan Armenia Uzbekistan Tajikistan Moldova Georgia (excluding Abkhazia and South Ossetia) Kyrgyzstan Azerbaijan Turkmenistan * Preliminary estimate by adding to the data at the beginning of 2012 information on net inflow in 2012 published by CBR on 11 June 2013. 20

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Monitoring of direct investment of SES and Ukraine in Eurasia Country number of transactions in the database numberofof transactions with transactions in FDI the over S 1 billion (end database of 2012) number of transactions with FDI from $ 100 million to $ 1 billion (end of 2012) FDI stock at the end of 2012, S billion Russia Kazakhstan Ukraine Belarus Joint projects Total • Based on improved methodology; • Geographical coverage the whole of Europe, Turkey, China, Mongolia, both Koreas, Japan, and Vietnam; • More than 300 transactions, though dominated by Russia. 22

• • • EDB Integration Barometer: attitude to the CU and SES in member states In use from 2012. A 2012 monitoring study of Kazakhstan integration 2013 preferences of the former Soviet Union population 2012 (11 CIS countries Russia and Georgia) 2013 In 2013, 12 countries participated in the 2012 survey. Belarus More than 14 2013 thousand people interviewed (from 1000 to 2000 in each country). 80% 10% 4%6% 73% 15% 6% 7% 72% 17% 5%6% 67% 60% 65% 24% 28% 23% 5%3% 6% 6% 3%9% Безусловно положительно / Скорее положительно Absolutely positive/ mostly positive Безразлично Indifferent Скорее отрицательно / Безусловно Mostly negative/ absolutely negative отрицательно Затрудняюсь ответить Not sure 23

EDB Integration Barometer: attitude to the CU and SES in third countries 77% Узбекистан Uzbekistan Таджикистан Tajikistan 7% 5% 75% Кыргызстан Kyrgyzstan 14% 72% Армения Armenia 12% 67% Грузия Georgia 19% 59% 9% 54% Молдова Moldova Украина Ukraine 50% 12% Туркменистан Turkmenistan 50% 13% Азербайджан Azerbaijan 37% 6% 3% 9% 14% 3% 5% 10% 16% 11% 16% 24% 11% 28% 9% 9% 53% Absolutely positive/ positive Безусловно да / mostly Скорее да Indifferent Мне безразлично Скорее нет / Безусловно нет Mostly negative/ absolutely negative Затрудняюсь ответить Not sure 27% 4% 24

EDB Integration Barometer: general preference indicators Culture Kazakhstan Azerbaijan Tajikistan Kyrgyzstan Turkmenistan Uzbekistan Economy Armenia Belarus Georgia Moldova Russia Ukraine Kazakhstan Armenia Azerbaijan Belarus Kyrgyzstan Georgia Tajikistan Moldova Uzbekistan Russia Turkmenistan Ukraine All areas Policy Kazakhstan Azerbaijan Tajikistan Kyrgyzstan Turkmenistan Uzbekistan Armenia Belarus Georgia Moldova Russia Ukraine Kazakhstan Belarus Tajikistan Kyrgyzstan Turkmenistan Uzbekistan Armenia Azerbaijan Georgia Moldova Russia Ukraine Vector "Former USSR countries" Vector "EU countries" Vector "Other countries" 25

Eurasian Integration Indicators System 1 0, 5 0 0, 5 2002 • • an i Бе Ро сс Ruи sяs ja n Гр Ту Gуз eи рк ме orяgi Tu н a rk и m ст en а Ар isнta ме n Кы Armни eяn рг ia ы Ky з rgст yzа stн ia ла р Bу Ка elсaьr us Kзaа zхaс kтhа stн an Ук ра Ukин М raаin ол e Mдо ol в Уз бе doаva Uzк bиeс Та т дж kiаstнa n ик Аз Tиaст ер jikiаsн ta ба n Azйд erж baа н 1 2008 2012 Indicators system shows long term integration trends of the CIS 12 region The purpose of the composite index is to combine various aspects of regional cooperation into a single indicator reflecting the degree of integration of each country with CIS 12 To determine the composite index the nine integration indices of each country were normalized with the CIS 12 Region, from macroeconomics and trade to labor migration and academic mobility EIIS was republished twice in 2009 and 2013 26

Database of regional economic organizations: global experience for EEU • Regularly updated open database on 80 regional economic integration associations / arrangements; • Comparative analysis of 110 indicators (database fragment) : RIO Power Population index (Total) (cinc) GDP per capita (current US$) GDP per Exports of Imports of capita, goods and Total PPP services trade, bln GDP, bln $ (current (% of $ internatio GDP) nal $) CAN 0, 0029 103680776 6601, 7211 9881, 3679 23, 189838 23, 322026 275, 72 684, 48 CACM 0, 0005 3693, 145 5934, 4515 33, 890266 45, 49147 94, 65 148, 13 COMESA 0, 0017 469492802 1317, 5201 2293, 5952 26, 348766 34, 573136 302, 78 607, 82 ECOWAS 40113099 0, 001 318500013 1242, 2 2120, 8 49, 1 30, 7 290, 05 395, 67 MERCOS 0, 007 UR 279780342 11383, 5 12652, 7 15, 7 16, 2 803, 02 3184, 87 514412456 33448, 5 33927, 8 43 40, 9 11673, 59 17146, 43 EEA 27

Eurasian continental integration Important areas of continental integration: EEU West EEU East Regarding westwards direction, the possibility of economic integration with the EU is being studied As to eastwards direction, China, India, Vietnam, and other countries are important 28

Single Economic Space from the Atlantic to the Pacific Liberalization of trade, including creation of free trade regimes Creation of four common spaces EU Economic union Common internal market Single economic space APEC Customs union Free trade area 29

Շնորհակալություն ուշադրության համար. Дзякую за ўвагу! Назар аударғандарыңызға рахмет! Thank you for your attention! Centre for Integration Studies Eurasian Development Bank Russian Federation, 191014 Saint Petersburg 7 Paradnaya str. Tel. : +7 (812) 320 44 41 Fax: +7 (812) 329 40 41 www. eabr. org 30

FOREIGN TRADE POLICY • • • The union may grant tariff preferences in respect of the goods from developing and least developed countries Uniform rules apply for determining the origin of goods imported into the customs territory Introduction of counter measures in the customs territory of the Union carried out by the Commission, including by increasing the rates of import customs duties and introduction of quantitative restrictions, temporary suspension of preferences Joint measures to promote exports include, in particular, insurance and export credits, international leasing, promoting the concept of "Eurasian Economic Union Product" and introduction of single labeling for the goods of the Union, organization of fairs and exhibitions, advertising and branding activities abroad In the customs territory of the Union the single Commodity Nomenclature of Foreign Economic Activity of the Eurasian Economic Union and the Common Customs Tariff of the Eurasian Economic Union apply, which are approved by the Commission and used as trade policy instruments of the Union Measures can be introduced to protect the domestic market with respect to the goods originating in third countries and imported into the customs territory of the Union, in the form of special protective, antidumping and countervailing measures 31

Key powers of the Eurasian Economic Commission Macroeconomics Determination of scenario parameters forecasts of socio-economic development for the 3 -year period natural monopolies Making decisions to expand the spheres of natural monopolies government procurement Decision to cancel the exemption from national treatment Making decisions to correct the fact of violation of obligations to implement the Agreement competition Cancellation of decisions on introduction of state price regulation. Approval of extension of the terms for introduction of state price regulation Railway transport Approval of application of exceptional rates Making decisions on suspension / cancellation of decisions on tariff changes competition Decisions to apply sanctions and fines. Decisions on restraint of violations Industrial subsidies Decisions on the admissibility of providing specific subsidies 32

EEU effects for membership candidate countries Armenia: • In case of Armenia's accession to the CU short term effects will be about 4% of GDP; • Attracting major targeted investments in the Armenian economy. Tajikistan: • Additional increase in potential GDP growth by 3. 5% in Tajikistan in the medium term. Kyrgyzstan: • Potential stable GDP growth to 6%; • Increase in remittances from labour migrants (in 2012 amounted up to 29% of GDP of Kyrgyzstan); • Improvement of the investment attractiveness of Kyrgyzstan. 33