CENTRAL ASIAN TRADE FORUM VI

EXPORT POTENTIAL AND TRADEDEVELOPMENT: NEW CHALLENGESANDOPPORTUNITIES CENTRAL ASIA

Go North! Or Export Perspectives of theCentral Asia countries with the EurasianEconomic Union.

Kubatbek Rakhimov

2 countries of the Central Asia are alreadymembers of the Eurasian EconomicUnion

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1. Labor export of CA > EEU• Labor export from the CA to the Russian Federation

(RF) is important for several reasons :1. Visa free regime, Russian as a working language;2. Labor market - tangible and coherent;3. Demographic situation in the Russian Federation is

identical to over plus of labor force in the countries ofthe Central Asia;

4. Impact factor of the Russian Federation on the politicsof countries – labor force exporters;

5. Significant role in the GDP – up to 50% (Tajikistan);6. Commuting migration (Border between Russian

Federation and Kazakhstan).

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1. Labor export of CA > EEUCentral Asia Trade Forum VI 4

• Share of migrants remittance in the GDP of the CAcountries (2014 -2015)

1. Labor export of CA > EEU• Labor migrants remittance from the Russian Federation

dropped acutely, however still exceed 2012 level.

2012 2015

100%

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1. Labor export of CA > EEU• Remittance from the Russian Federation to countries of the Central

Asia fell in the dollars terms from 11.176 billion dollars in 2014 to 7.2billion dollars in 2015.

• All remittance sum from Russia to CA, in millions dollars

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1. Labor export of CA > EEU• Plans to develop territories at Far East seem to be well

promising (“Each Russian citizen entitled for free hectareof land!”).

• Deep analysis of tendencies at the Labor market of EEUis necessary, especially in the part of competition.

• For instance, Belarus rely on Ukrainian labor migrantsand their number exceeds 100.000 people. There are 1million of them in the Russian Federation.

• Thus, export of labor force remains as extremelysignificant in the relationships with EEU.

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2. Products export of CA > EEU• Export from CA to EEU is extremely important for

economies of region’s countries.• Let us review the trade of Kazakhstan and Kyrgyzstan as

countries of the CA as if with Russia only without Belarusand Armenia.

• Russian Federation dependency on the prices forhydrocarbons and dependency on external directinvestments directly influences the export and importindicators.

• In 2014-2016 we see their serious decrease. However,simultaneously import structure is altered, that should beof a use.

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CIS Countries share in the foreign trade of the RussianFederation – 12%

Share is stable in terms of %,however dropped in monetaryterms

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The structure of external turnover of Russia in January 2015-June 2016 (in billions dollars )

2. Products export of CA > EEU• Three main product groups in the export of CA to RF :

1. Minerals, including metal, ore, concentrates, coal, oil,uranium and etc.

2. Agro business products3. Products with medium and high added value (margin)

It is necessary to study the changes in the foreign tradeactivities of the RF and use the opportunities (sanctions –anti-sanctions), especially regarding the share of Ukraine inthe import of the RF

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Products export of CA > EEU

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Import stock list from CA to the RF for last 20 years

- Other industrial goods- Iron and steel products- Machinery and transport

equipment- Chemical products- Fuel- Ore and metals- Agriculture raw materials

(including textile fiber)- Food products

CA share in the External Economicactivities of the RF with CIS - 33%

Share of Ukrainedrops three years ina row

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The structure of external turnover of Russia with CIS countries in January-June 2016 (inmillion dollars )

2. Products export of CA > EEU• Conclusions :1. For traditional product groups, it is necessary to

improve logistics, reduce expenses, improve packaging,engage in branding and thoroughly track competitors.

2. It is necessary to create the CA country links (one isalready a member of EEU, another is not) for effectiveorganizations of joint activities, first of all turnovercapital, warehouses and logistics.

3. For instance it seem to be effective the link “Uzbekistan-Kazakhstan” with prevalence of railroad logistics,“Tajikistan-Kyrgyzstan” – auto.

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2. Products export of CA > EEU• Three niches opened in the RF market :1. Exit of Ukraine from Free Trade Area with the RF, drop

of trade volumes between these countries is merelygigantic. The vegetables, fruits, cannery and other foodsniche reasonably can be filled by the CA. It is possibleto establish joint companies with Ukraine side,possessing sufficient marketing communications and(shrinking) share at the RF market.

2. Sanctions-anti sanctions regime (EU, Turkey and etc.)allows to replace certain number of stock lists.

3. Access of companies from EEU including the Republicof Kazakhstan and the Kyrgyz Republic to governmentprocurement of the RF and the RB – nota bene

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3. Services export of CA > EEU• Incoming tourism in countries of CA has a colossal

potential for namely “northern” countries of the EEU, thatis the RF and the RB.

• It is (long lasting) need to establish united touristproducts, since majority of tourists wish to maximallycover region in one trip.

• There is a need for tourist products that will in mosteffective and integrated way engage local productioncapacity – food products (including ones for restaurants),clothing, shoes, souvenirs (examples – India, Mongolia).

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4. Services export of CA > EEU• Transit of goods to third countries. For instance – export

of Russian and Belarus products to China throughKazakhstan, to Afghanistan via Kazakhstan andUzbekistan, Iran via Kazakhstan and Turkmenistan.Transit products, where the RF and the RB also act astransit country for countries of the CA – for example Iran,China, South Asia to Europe and etc., also quitepromising in terms of services export.

• Customs services in the Republic of Kazakhstan andKyrgyz Republic have a lower cost for Russiancustomers, that is, the total price for cargo processing islower than expenses inside the RF. This is also a niche(as we see a number of solutions in the Internationalcenter of Boundary cooperation “Khorgos”).

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4. Services export of CA > EEU• There are certain perspectives for export of medical

services, including the resort treatment in all fivecountries;

• It is also necessary to deeper elaborate the issue ofeducational services export Universities (Kazakhstanprojects as Nazarbaev University) and SecondaryProfessional Colleges (for instance Chefs Training in theRepublic of Uzbekistan and Republic of Tajikistan andetc.)

• Remote business – call centers, online services onvarious spheres, focused on Russian speaking audience(more than 250 million people, including the EEU market.)Benchmark – India in regards to UK and USA.

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5. CAREC AND EEU• The necessity to institutionalize the relationships between

CAREC and EEU is emerged.• 10 countries, including all countries of the CA, Republic of

Kazakhstan and Kyrgyz Republic are members of EEU.Here, it is possible and necessary to bring to new higherlevel the nature of interaction, coming from the fact thatmajority of goals and tasks coincides in terms ofeconomic development of CAREC countries (includingthese great economies as China and Pakistan) and EEU(3% of World’s GDP) Majority of CAREC Projects arefundamental for the Silk Road Economic Belt in a broadsense.

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General Conclusions• EEU is expanding. It is possible that Tajikistan and

Uzbekistan will become its members.• Respectively, many other issues of export from CA to EEU

will become inner issues for integration process, howeverit will not remove the above-mentioned issue from theagenda.

• EEU actively expands its zone of free trade with variouscountries. There will be a certain configuration with China,or/and within SCO (The Shanghai CooperationOrganization). That is the competition will only intensity,therefore the format of Central Asian Trade Forum willrequire further development.

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Thank you for your attention!• Kubatbek Rakhimov, EMBA, PhD in Economics• Chamber of Commerce and Industry of theKyrgyz Republic

• Committee on Issues of Industrial policy, Exportpromotion, Infrastructure and Logisticsdevelopment.

• +996558001111• kubat.rakhimov@gmail.com

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