Eurasian Economic Integration 2014 EDB Centre for Integration Studies

2 2 Section I. Eurasian Economic Integration and its institutions

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

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

5 5 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

6 6 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.

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

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

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

10 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

11 Provisions of the Treaty relating to the Customs Union Information exchange and statisticsOperation of the Customs UnionRegulation of trade of medications and medical productsForeign trade policyTechnical regulation Sanitary, veterinary-sanitary and phytosanitary quarantine measures Consumer protection

12 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

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

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

15 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

16 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

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

18 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

19  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 recommendations on monetary, fiscal and policy based on the results of forecasting;  The work is carried out in collaboration with EEC and national authorities (Belarus) EEU macroeconomic policies analysis and forecasting system Countries Armenia, Belarus, Kyrgyzstan, Kazakhstan, Russia Type DSGE Financial Programming Econometrics Imple- menta- tion Quarterly data MatLab and IRIS Multi-country model and 5 country models

20 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 CountryFDI stock, $ billion (CBR data) FDI stock, $ billion (MMI CIS data) Total, CIS and Georgia Ukraine Belarus 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.

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22 Monitoring of direct investment of SES and Ukraine in Eurasia 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. Country Kazakhstan number of transactions in the database number of transactions with FDI from $ 100 million to $ 1 billion (end of 2012) number of transactions in the database number of transactions with FDI over S1 billion (end of 2012) FDI stock at the end of 2012, S billion Belarus Total Russia Ukraine Joint projects

23 EDB Integration Barometer: attitude to the CU and SES in member states In use from A monitoring study of integration preferences of the former Soviet Union population (11 CIS countries and Georgia) In 2013, 12 countries participated in the survey. More than 14 thousand people interviewed (from 1000 to 2000 in each country). Absolutely positive/ mostly positive Indifferent Mostly negative/ absolutely negative Not sure

24 EDB Integration Barometer: attitude to the CU and SES in third countries Uzbekistan Tajikistan Kyrgyzstan Armenia Georgia Moldova Ukraine Turkmenistan Azerbaijan Absolutely positive/ mostly positive Mostly negative/ absolutely negative Indifferent Not sure

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

26 Eurasian Integration Indicators System 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 Russia Belarus KazakhstanUkraineMoldovaUzbekistan Tajikistan AzerbaijanGeorgia Turkmenistan ArmeniaKyrgyzstan

27 Database of regional economic organizations: global experience for EEU RIO Power index (cinc) Population (Total) GDP per capita (current US$) GDP per capita, PPP (current internatio nal $) Exports of goods and services (% of GDP) Imports of goods and services (% of GDP) Total trade, bln $ GDP, bln $ CAN0, , ,367923, , ,72684,48 CACM0, , ,451533, , ,65148,13 COMESA0, , ,595226, , ,78607,82 ECOWAS0, ,22120,849,130,7290,05395,67 MERCOSUR 0, ,512652,715,716,2803,023184,87 EEA ,533927,84340,911673, ,43 Regularly updated open database on 80 regional economic integration associations / arrangements; Comparative analysis of 110 indicators (database fragment) :

28 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 Important areas of continental integration: EEU - West EEU - East Eurasian continental integration

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

30 Շնորհակալություն ուշադրության համար. Дзякую за ўвагу! Назар аудар ғ андары ң ыз ғ а рахмет! Thank you for your attention! Centre for Integration Studies Eurasian Development Bank Russian Federation, Saint-Petersburg 7 Paradnaya str. Tel.: +7 (812) Fax: +7 (812)

31 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

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

33 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.