Kyrgyzstan in EEU: the ice broke up

For two months in the Eurasian Economic Union, Kyrgyzstan has not felt any of its advantages. On the contrary, we have felt on our skin all the negative sides of the EEU. The encountered problems, of course, were expected, but the attempt to change the situation came up against a blank wall of incomprehension of the partners. As a result, the President Almazbek Atambayev had "to resolve" the situation.

Dumping batch

After the official opening of the customs border with Kazakhstan on August 12, a flood of goods, which are quite legal and meet all relevant standards and regulations of the Eurasian Economic Union, rushed to the Kyrgyz Republic from the neighboring country. But the domestic manufacturers clutched their heads. Kazakh products, primarily flour and eggs, were much cheaper. The problem is not in a big price markup by the Kyrgyz manufacturers, but in the low net cost of Kazakh goods. The Kyrgyz government admitted the risks to the budget because of falling exchange rate of ruble and tenge.

"There is a large flow of goods from Russia and Kazakhstan to the Kyrgyz Republic. The exchange rate of ruble and tenge has changed, and the products in the markets of our allies have become cheaper than ours. As a result, the economic lever turned in our direction. We must take measures not to lose the revenue side of the budget due to lower turnover and the level of sales in the domestic market," the Deputy Prime Minister Valery Dil said.

Meanwhile, the amount of domestic products in the markets of the capital was reducing. After the abolition of import duties on flour, nearly 90 percent of its market is filled by the Kazakh producers. At least 13 out of 40 flour mills have been closed in Kyrgyzstan. More than 2,000 people were sent on leave without pay.

"We have to fight against dumping from other countries and to take care of our producers. There is a special program for this purpose. At the same time we can not close the market for goods from other countries on the basis of WTO rules and the rules of EEU. There must be equal access of goods to the markets, regardless of manufacturing country," the Economy Minister Oleg Pankratov commented on the situation to 24.kg news agency.

On the other hand, the Kyrgyz goods almost do not enter the markets of the EEU. Officially, there are no barriers for our products to enter the market of Kazakhstan. With the exception of goods, which have to pass a veterinary inspection. But informal fees and restrictions become an insurmountable obstacle for domestic goods. Kyrgyzstan failed to earn something for the first two months in the union.

"We need to protect manufacturers, and accession to the union gives us that opportunity. On the one hand, we can not close our market for cheaper goods from Kazakhstan. But on the other - everyone should have equal opportunities. In our case, there is not any. Kazakhstan in many ways subsidizes its production. Due to this, its cost reduces, so the goods from Kazakhstan on the market are cheaper than ours, domestic. We do not do this, and should not do. The market should develop by itself. Therefore, we will bring up the issue for discussion at the level of the EEU Heads of Government and, if necessary, even the Heads of State. There should be support of manufacturers but in well-defined limits. Again, all the participants of the market should have equal opportunities," Oleg Pankratov said.

Supreme forces

So the country finally had to solve the accumulated problems at the level of Heads of State. A meeting of the Supreme Eurasian Economic Council took place in the village Borubay (Kazakhstan). Nearly two hours the Heads of State discussed the accumulated problems behind closed doors. Partners have something to put in to each other. Moreover, these are not only the old members of the union, who very rigidly defend their interests, but also the newcomers.

With the opening of the borders, Kyrgyzstan faced with an unprecedented flow of smuggled goods. Goods of dubious origin and quality are increasingly found in the markets of the country. But the most serious blow was the illegal import of fuel. After the opening of borders and devaluation, gasoline in neighboring Kazakhstan turned to be 12 soms cheaper than in Kyrgyzstan. Anyone, even not involved in the economic activities, understands that it is cheaper to fill a car not at the official refueling station but at home from the canisters.

The volume of smuggled fuel was too large for the state to put a blind eye to. As a result, the Cabinet had to put additional posts on the Kyrgyz-Kazakh border to better control the passage of goods across the border. But it is not in the Eurasian way, although Kazakhstan also is not seeking to open its doors to us. Outrages of the Kazakh border guards have long been a living hell for our entrepreneurs, trying to get into the market of EEU.

The meeting of the Supreme Eurasian Economic Council became an opportunity for the Kyrgyz Republic to resolve the pain issues. Almazbek Atambayev almost forced the colleagues in spite of approved agenda to discuss the problems.

 "Today was a hard day for the Heads of States. First they went far beyond the agenda, approved by the CIS Council of Heads. The same situation repeated during a meeting of the Supreme Eurasian Economic Council. We discussed a lot of issues at the request of the President of Kyrgyzstan. These are issues related to the accession of Kyrgyzstan to the EEU. We agreed on the proposal of the President of Russia, and he was supported by the President of Kazakhstan, that the countries would seriously study the issues, relating to the problems on Kyrgyzstan- Kazakhstan border," the President of Belarus Alexander Lukashenko said.

 He added that there were no reasons to criticize the President of the Kyrgyz Republic. He took a "decent" position. "The people of Kyrgyzstan should feel the benefit of joining the EEU. I think that after today's meeting there will be essential changes in favor of Kyrgyzstan. In particular, in the supply of goods. These issues will be promoted before the New Year, and the Kyrgyz Republic will not regret that joined the EEU," the head of Belarus concluded.

December time check

The last summit was the first for Kyrgyzstan, where it participated as a full member of the union. It is symbolic that this meeting has allowed us to defend the vital questions. Now, Kyrgyzstan, Russia and Kazakhstan will have to re-start negotiations to really, not virtually, open the borders.

 Experts agree, Kyrgyzstan is to blame for many of its problems. It was necessary to start production, focus on imports but not to engage in trade and imports of goods in large quantities.

"To increase import the country needs currency. And it comes into the country only in the form of loans, grants and money transfers. Kyrgyzstan buys more than it sells. This means that all the available cash we spend on other economies, but not on ours. If the country develops exports, it will be a more reliable mean for the inflow of currency," the Head of the Payment Balance and External Debt Branch of the Financial Statistics Department of the National Bank of the Kyrgyz Republic Kubanychbek Kudabaev told to reporters.

In December 2015, Moscow will host the next meeting of the Supreme Eurasian Economic Council. Then it will become clear whether the parties are able to implement the agreements reached. To become a successful country within the EEU, Kyrgyzstan would have to reformat the entire economic system. The process is not quick but hard. But our little attempts to adequately get into 180-million market of the union are not enough. This requires the support of partners. The EEU participants will have to learn it along with the fact that Kyrgyzstan should be considered as an equal participant of the Eurasian integration.