BISHKEK (TCA) — Theoretically, Kyrgyzstan may withdraw from the Eurasian Economic Union (EEU) with Armenia, Belarus, Kazakhstan, and Russia as its regulations allow its member countries to do so, but the country would not have any good alternative, Kyrgyz Deputy Prime Minister Oleg Pankratov told a press conference in Bishkek.
The process of Kyrgyzstan’s accession to the EEU was heavily politicized and the controversy in society caused too high expectations among the population and the business sector, he added.
Before the accession and now, most experts have believed that there are no alternatives to economic development. If Kyrgyzstan exits the EEU, it will not be able to participate in other similar associations, as its geographical location and economic traditions do not allow finding another alliance, said Pankratov. “If we leave, we will lose this market and there will be nothing to replace it,” concluded Pankratov.
The Government’s arguments changed at various periods of Kyrgyzstan’s entry and membership of the Union. First there was a period of euphoria, when the Government said that everything will be fine as soon as the country joins the EEU. It gave way to the period of promises that it is difficult now but everything will be good in some four or six months. Six months have now passed and the Government is now promising that “we will see positive changes in 2017”.
Why enter
There were two main reasons for Kyrgyzstan’s entry to the EEU. The first one was the access to a huge market of the EEU. Before joining the Union, Kyrgyz businesses faced difficulties when selling their products in the EEU countries, as customs control, duties and taxes, and barriers at the borders. The only solution was entering the EEU.
Secondly, a huge number of Kyrgyz citizens had worked in the EEU countries, mainly in the informal sector where their rights were violated. Many were included in blacklists forbidding their stay in the EEU countries.
On August 12, 2015 Kyrgyzstan became a full-fledged member of the EEU including its single labor market. “Our citizens no longer need to get additional permissions,” said Pankratov. Workers from Kyrgyzstan have received equal rights with the nationals of EEU host countries. Diplomas of Kyrgyzstan’s high schools, except for certain ones, are valid in the EEU member states. Kyrgyzstan citizens can easily get employment according to their qualification. They also enjoy a social medical insurance package.
Kyrgyzstan’s entry to the EEU has had positive and negative effects. The crisis in Russia and the Central Asian region, caused by low oil prices and currency devaluation in the EEU countries, has affected Kyrgyzstan, but the impact has been softened due to the country’s membership of the EEU. “If we were not an EEU member in this crisis situation, we would have experienced a greater impact and the losses would be more significant,” Pankratov said.
Negative consequences
Kyrgyzstan is experiencing negative consequences of joining the EEU, including the illegal flow of goods from other EEU countries to Kyrgyzstan. The EEU has no customs control between its member countries, with in fact penalizes honest importers that pay taxes and favors unscrupulous businessmen who import goods illegally and pay no taxes.
Due to the devaluation of the Kazakh tenge Kazakhstan’s products have flooded the market of Kyrgyzstan. That, however, has had a positive effect on Kyrgyz consumers, as the increased competition has pushed the prices down.
The Government’s position is clear: the effects of the EEU membership were marred by the crisis, but that had nothing to do with the EEU itself. However, the situation in the Kyrgyz dairy industry and the garment sector says the opposite — the entry to the EEU has changed the economic situation, and the crisis in neighboring economies increased the negative effect. Therefore, Kyrgyzstan has to rebuild its economy under new conditions.
There are many problems now in all areas, including the export of agricultural products and clothing industry products. Currently, Kyrgyzstan’s dairy products cannot compete with Belarusian products in the Kazakh market as a result of agricultural subsidies applied in Belarus, Pankratov said.
New export opportunities
On January 26, Kyrgyzstan received the user status of the Generalized System of Preferences (GSP+) of the European Union, which will expand the country’s export opportunities.
Kyrgyzstan will now be able to export more than 6,000 items of goods to EU countries duty-free. This will apply to agricultural products, processed fruits, raw materials, food products, tobacco, textiles, felt products, clothing, including leather, and carpets.
Previously, exporters paid 14.6% customs duty for certain types of fruit and vegetables, and up to 9% for clothing. Now Kyrgyz exporters will export above-mentioned types of goods to the EU at a zero rate.
“It will be a good incentive to attract investors to Kyrgyzstan and to create export-oriented enterprises,” Kyrgyz Deputy Economy Minister Kylychbek Jakypov said.
