Abstract
This paper presents an analysis of trade of Kazakhstan with other EEU member-states at the regional level. The findings confirm the relevance of the geographic location of the regions in predicting their trade with other countries. The regions of the north, east and center of Kazakhstan trade more intensely with other EEU member-states compared to the rest of the regions. The share of trade of southern and western Kazakhstan with EEU partners are relatively smaller. The role of the two major urban centers of Almaty and Astana in trade with EEU countries is highly important since their shares of trade with EEU member-states is very high in comparison to the rest of the regions. The city of Almaty, for instance, accounts for nearly 29% of all the trade with the EEU.
Introduction
Location plays an important role in determining certain patterns of economic activities. Issues of location, accessibility and peripherality have been put forward in the European spatial economic context by Keeble et al. (1982 [1], 1988 [2]) reports of the early 1980s. These analyses were aimed at the identification of European core areas with high accessibility. The basic idea was that underdeveloped region should build better connections with these core regions in order to converge with them in economic development. The connections between regions implied free movement of labor and capital and intense trade. This topic is, however, not thoroughly studied in Kazakhstan in the context of the Eurasian Economic Union (EEU), which was created in 2015 and was the continuation of the Customs Union that existed from 2011 to 2015 between Russia, Kazakhstan and Belarus. The EEU implies a common economic space for all the member- states with free movement of goods, capital, services and people and provides for common policies in macroeconomics, transport, industry, agriculture, energy, foreign trade and investment, customs, technical regulation, competition and antitrust regulation.Kazakhstan borders with two member-states of the EEU, which are Russia in the north and Kyrgyzstan in the south-east. The trade between Kazakhstan and Russia in 2016 amounted to $12.639 billion while the trade with Kyrgyzstan reached $576 million. The GDP of Russia is $1283.7 billion, which is incomparably larger than those of other EEU member-states. For instance, the GDP of Kyrgyzstan in 2016 was at $6.5 billion. In this light, it would be interesting to see the spatial implication of such neighborhood for Kazakhstan. Particularly, we will compare the patterns of trade of the regions of Kazakhstan with other EEU member-states. Other things being equal, the gravity theory (Tinbergen, 1962) of trade applied to our case of regions of Kazakhstan suggests that regions along the border with Russia and regions with higher GDPs should trade more with Russia due to small distance and high GRP [3]. Recall that according to the gravity theory of trade thepatterns of bilateral aggregate trade flows between two countries are proportional to the gross national products of those countries and inversely proportional to the distance between them. Consequently, regions that share common border with Kyrgyzstan should trade more with Kyrgyzstan compared to other regions.This sounds ratherrational if to take into account the transportation cost, which tends to be high in Kazakhstan primarily due to its landlocked geographical location (Josheski and Fotov, 2013 [4]; Shepherd and Wilson, 2006 [5]).However, the trade barriers are not limited to formal barriers like borders and distance. They also include unobservable barriers like cultural and historic ties (Anderson and Van Wincoop, 2004) [6].
Data Analysis and Findings
It is worth mentioning that the data for regional trade used for analysis are taken from the State Revenue Committee. The importing or exporting region is identified based on the registration of the firm. Therefore, we can be sure that the role of the major trade hubs is not exaggerated.
In order to see whether it is coherent with the reality and to see whether there are other patterns of trade with EEU-member-states between the regions we compare the ratios regional trade data from the Committee on Statistics of the Ministry of the National Economy and the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan. The results are presented in Figure 1 below:
Figure 1: Trade with other EEU members-states by regions of Kazakhstan in 2016.
As it can be seen from Figure 1 a), the region with the highest amount of trade made with EEU is the city of Almaty ($3,901.6 mln.), followed by Karaganda ($1,385.5 mln.), Astana city ($1,319 mln.) and East Kazakhstan ($1261.1 mln.) and Pavlodar ($1,161.5 mln.). Thus, in absolute terms, the trade turnover of the city of Almaty with EEU partners is by far the largest among the regions of Kazakhstan.
The ratios are shown Figure 1 b). Thus, the trade with EEU in percentage terms of the GRP is the highest for Pavlodar regions (0.208) followed by Kostanay (0.187), Aktobe (0.156) and East Kazakhstan regions (0.154).
The picture is a bit different when calculated as . Thus, as it can be seen from Figure 1 c), the city of Almaty ($2,265.6) has the highest per capita trade with EEU among the regions. Pavlodar ($1,529.8), Astana ($1,498.5) and Aktobe ($1,061.1) also have volumes of trade with EEU in per capita terms. The complete set of ratios by regions are shown in Tables 1-3 below:
Table 1: Trade with EEU/GRP ratio
Figure 2: Trade with other EEU members-states by regions of Kazakhstan in 2016.
From Figure 2 a) we can see that many regions tend to trade intensely with Russia. However, the regions of East Kazakhstan, (7.85), Pavlodar (6.67), North Kazakhstan (6.31) and the city of Almaty (7.75) are the regions with the highest trade with Russia by GRP ratios.
As for trade with Belarus shown in Figure 2 b), the picture appears to be very irregular beyond any clue. Thus, the two regions of Kostanay (0.53) and East Kazakhstan (0.34) are by far the leading ones in terms of trade with Belarus. The regions of Almaty (0.25) and Astana (0.21) and the region of Aktobe (0.23) also tend to have higher volume of trade with Belarus compared to the rest of the regions of Kazakhstan.
The trade with Kyrgyzstan appears to be highly concentrated in terms of geography. As we can see from Figure 2 c), the North Kazakhstan and East Kazakhstan regions have by far the highest trade by GRP ratios in relations to Kyrgyzstan compared to the rest of the regions, which is rather unexpected given that these regions do not share common border with Kyrgyzstan and are located far from it.
The ratios of trade by GRP for Armenia also look rather interesting despite the fact that the total trade turnover between Kazakhstan and Armenia was merely around $3.3 million in 2016. The city of Almaty (0,0052), Almaty region (0,0035) and the region of Aktobe (0,0016) have the highest trade ratios with Armenia. The trade ratios with Armenia for the rest of the regions are negligibly small. In fact, half of all the regions of Kazakhstan do not trade with Armenia at all.
Concluding Remarks
The results of our analysis show that the intensity of trade with the countries of EEU varies a lot among the regions of Kazakhstan. Northern, Eastern and Central parts of Kazakhstan and the cities of Almaty and Astana have larger trade turnover amounts with EEU partners than the rest of the country. Meanwhile, despite very large GRP the two main oil-producing regions of Atyrau and Mangystau have the lowest shares of trade with the EEU member-states. Southern regions also have little trade with the EEU. However, the Almaty and South Kazakhstan regions trade significantly more with EEU countries whereas Zhambyl and Kyzylorda regions have the lowest trade ratios with EEU both in absolute and relative terms. The city of Almaty appears to be extremely important when it comes to the trade with the EEU accounting for nearly 29% of all the trade volume. Three out of all fourteen regions account for nearly half of all the trade with EEU, which are the cities of Almaty and Astana and the Karaganda region.Roughly, the same pattern can be observed in trade with Russia. The trade with Belarus, Kyrgyzstan and Armenia is highly concentrated in regional terms.
The intensity of trade of the regions of Kazakhstan with the EEU member-states varies a lot from region to region and, thus, forming certain patterns that are not fully explained by the gravity theory of trade. The high ratios of trade with Russia in the regions of the north, east and the center of Kazakhstan indicate to the relevance of the transportation cost. However, the extremely low ratios of trade with Russia for major oil producing regions in the west of Kazakhstan questions the relevance of the gravity theory of trade. It also appears to be irrelevant when it comes to the trade with Kyrgyzstan. Our findings also point out the major importance of the two largest urban centers of Almaty and Astana in trade with EEU. Thus, despite their geographical locations, the share of trade done by these urban centers with the EEU countries is considerably high compared to the rest of the regions of Kazakhstan.
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