Problems and prospects of development of the Shanghai cooperation organization

The article deals with the main problems of mutual trade of the SCO countries, which are of particular relevance in the development of integration processes. The development of cooperation in mutual trade of the SCO member States sets the task of finding optimal mechanisms to increase the share of national currencies in mutual settlements between the SCO member States. Cooperation within the SCO is today one of the important directions of the foreign policy of the Republic of Kazakhstan. Constructive participation and focus on an equal dialogue with the SCO partner countries contributes to the growth of mutual trust and understanding between States, strengthens the position of Kazakhstan not only in the region but also at the international level as a guarantor of regional security and strategic stability on the Eurasian continent. The problems of development of cooperation caused by factors of internal and external environment are considered. The impact of the national economies of the participating countries, trends in the world economy and geopolitics. Proposals for the formation of a single SCO space are given.

The Republic of Kazakhstan is the initiator and active participant of the Eurasian integration. The formation and creation of the SHCO means the emergence of a regional Association of countries in the Eurasian space with huge natural, technical and human resources. The historical role of the SHCO is that these regional associations put forward a global and adequate response to the threat of the XXI century. First President of Kazakhstan N. Nazarbayev rightly stressed, speaking to the SHCO, that it is «an alternative to global insta- bility». The entire world community is aware of the powerful potential of this Association and cannot ignore it as a real factor in the world economy and politics.

The SHCO was established in 2001 on the basis of the Shanghai five, formed after the signing by Kazakhstan, Kyrgyzstan, China, Russia and Tajikistan of the Agreement on confidence-building measures in the military field in the border area (1996, Shanghai) and the Agreement on mutual reduction of armed forces in the border area (1997, Moscow). In 2017, India and Pakistan became full members of the SHCO [1].

Since the establishment of the SHCO, Kazakhstan has been not only one of its most active participants, but also the initiator of many ideas, projects and programs. Thus, only in 2011 at the anniversary Summit of the SHCO in Astana the First President of Kazakhstan N. Nazarbayev put forward a number of the following initiatives:

  • organize a Meeting on the regulation of territorial and regional conflicts with the participation of foreign Ministers, secretaries of security Councils;
  • the draft concept of the unified prognostics SHCO;
  • to create within the SHCO a specialized body — «Cyber pal»;
  • to create a Water and food Committee;
  • to create the SHCO Center for emergency situations.

In 2014, at a meeting of the SHCO Council of heads of state in Dushanbe (Tajikistan), the First President of Kazakhstan in his speech focused on border issues, calling on countries to comply with the Shanghai and Moscow agreements, providing for confidence-building measures and reduction of armed forces in the border area. Also on N. seizing Nazarbayev stressed the importance of resolving the situation in Ukraine and helping to restore the economy of Afghanistan [2].

During the chairmanship of the Republic of Kazakhstan in the SHCO, the formation of a three-level mechanism of interaction on combating the drug threat within the SHCO was completed. Kazakhstan has made a significant contribution to the development of the SHCO member States ' anti-Drug strategy for 2011-2016.

It was during the Kazakh chairmanship that a Protocol of understanding was signed between the Regional anti-terrorist structure of the SHCO (SHCO rats) and the Central Asian information coordination center for combating illicit trafficking in narcotic drugs and psychotropic substances [3].

In 2016, during the SHCO Summit in Tashkent (Uzbekistan), the First President of Kazakhstan N. Nazarbayev took the initiative to form a Eurasian transit and transport hub, which will unite the member States and the SHCO observer countries. He also proposed to concentrate the efforts of the member States of the organization on a number of areas, including the interface of the EAEU and the Chinese project «Eco- nomic belt of the silk Road». N. Nazarbayev also noted that Kazakhstan has already started to implement the program of infrastructure development «Nurly Zhol», which harmoniously complements the «Economic belt of the Silk Road» [4].

For Kazakhstan, it is essential that cooperation with the SHCO brings our country some success in geopolitical and strategic plans. The SHCO's activities contributed to China's integration into the structure of regional cooperation, thus Kazakhstan received reliable security guarantees, including the non-use of nuclear weapons, signing a number of strategic agreements with China [5].

The presence of two regional powers (China and Russia) in the Organization allows to significantly expand trade and economic cooperation between the SHCO members and give a positive impetus to Kazakhstan's foreign trade. It should be noted that in 2018 within the SHCO the share of trade turnover between Kazakhstan and Russia amounted to 50.7 %, between Kazakhstan and China 33.7 %.

Trade turnover between Kazakhstan and the SHCO countries in 2018 amounted to 34.6 billion dollars. This represents an increase of 10.4 per cent over the same period of the previous year ($31.4 billion).

Exports from Kazakhstan to the SHCO countries in 2018 increased by 13.4 % and amounted to 15.2 billion dollars USA.

The growth of exports to the SHCO countries is justified by an increase in the supply of such goods as natural gas — an increase of 3 rubles or 1 billion dollars. (From $0.5 to $1.5 billion). Copper and copper cathodes — 22.7 per cent or $249.1 million USA (1 096,6 to 1 345,7 million), crude oil — by 8.8 % or 138.4 million dollars. (From $1,564. 3 to $1,702. 7 million). Hot-rolled flat-rolled unalloyed steel — by 29.3 % or $126.9 million. (From $432.8 million to $559.7 million USA), wheat — by 25.3 % or 122.3 million dollars. (From $482.9 to $605.2 million). Silver — $84.2 million. (From $0 to $84.2 million) Copper ores and concentrates by 7.6 per cent or $82.9 million USA (1 093,5 to 1 176,4 million USA) [6].

However, a decrease in export supply of commodities, such as uranium — 18.7 %, or of 234.2 million. USA (1 254,0 019,9 to 1 million. USA), zinc raw — to 58.4 %, or $219.5 million. (From $375.5 million to $156.0 million) Waste and scrap copper — by 44.8 % or $46.7 million. (From $104.1 million to $57.4 million) Ferroalloys by 4.3 % or $41.7 million. USA (935,3 to 976,9 million USA), coal — 14.6 % or $41 million. (From $279.8 to $238.8 million USA.)

The main exports from Kazakhstan to the SHCO countries are: crude oil — $1.7 billion USA (with a share of 11.2 %), natural gas — $1.5 billion. USA (10 %), copper and copper cathodes — $1.3 billion. USA (8.9 %), copper ores and concentrates — $1.2 billion. USA (7.7 %), uranium — $1 billion. USA (6,7 %), ferroalloys — 935,3 million dollars. USA (6.2 %), wheat — $605.2 million. USA (4 %), flat- rolled products of non-alloy steel, hot-rolled — $559,7 million. US (3.7 %), ores and iron concentrates — $477.1 million dollars. USA (3,1 %), flat-rolled products of non-alloy steels plated — $368,5 million. USA (2.4 %).

More detailed information on the main exported goods to the SHCO countries for the period 2018 is shown in Tables 1, 2.

Table 1 The indicators of mutual trade of Kazakhstan with the SHCO countries

Billions of dollars USA

2017 y.

2018 y.

Grow th 2018/2017, %

Trade turnover

31,4

34,6

+10,4

Export

13,4

15,2

+13,4

Import

18,0

19,4

+8,2

Trade balance

-4,6

-4,3

Improved

Note. Foreign and mutual trade statistics [6].

Table 2 Indicators of mutual trade of Kazakhstan by countries

Country

2018 year

ShareTrTU in 2018 year, %

Growth 2018/2017

ТО ($ mln.)

Export ($ mln.)

Import ($ mln.)

TrTU,

%

Export, %

Import, %

In total

34 636,9 ~

15 191,5

19 445,3

100

10,4

13,4

8,2

1

Russia

17 554,2

5 162,1

12 392,1

50,7

7,2

11,3

5,6

2

China

11 657,1

6 272,9

5 384,2

33,7

11,1

8,2

14,7

3

Ozbekistan

2 488,2

1 643,3

844,8

7,2

25,3

31,6

14,8

4

India

1 196,9

954,1

242,8

3,5

26,5

30,1

14,2

5

Kyrgyzstan

865,3

634,9

230,4

2,5

13,1

22,9

-7,3

6

Tajikistan

845,9

522,0

323,9

2,4

8,2

13,8

0,3

7

Pakistan

29,4

2,3

27,1

0,1

3,4

-59,2

18,6

Note. Foreign and mutual trade statistics [6].

Imports to Kazakhstan from the SHCO countries in 2018 increased by 8.2 % and amounted to 19.4 billion dollars. USA.

The growth of imports from the SHCO countries is justified by the increase in the import of such goods as telephones — by 29.2 % or by 153.7 million dollars. (From $527.0 to $680.7 million). Aircraft — 3.1 R. or 135,6 million. (From $64.5 million to $200.1 million. US), semi-finished products of unalloyed steel — an increase of 3.1 p. or 104.1 million. (From $49.1 to $153.1 million). Road and construction machinery by 87 % or $90.9 million. (From $104.6 to $195.5 million. USA), the cars of a freight train or tram — 70,8 %, or $84.1 million. (118,9 to 203,0 million. doll. USA), apricots, cherries, sweet cherries, peaches, plums and slows, fresh — 81 % or USD 79.2 million. (From $97.8 to $177.0 million). USA, diodes, transistors and similar semiconductor devices — an increase of 5.8 p. or 73.1 million. (From $15.2 million to $88.4 million) USA.)

At the same time, there is a decrease in imports of such goods as petroleum products — by 26.8 % or by 251.2 million dollars. USA (937,1 to of 685.8 million. Steel alloy ingots — 94.2 % or $75 million.

(From $79.6 to $4.6 million). Zinc ores and concentrates — by 32.5 % or $64 million. USA (196,8 to

132,8 million. Non-self-propelled rail or tram cars accounted for 75.9 % or $44 million. (From $58.0 to

$14.0 million. USA), isolated wires, cables — by 21.4 %, or $40.3 million. (From $188.4 million to $148.1

million). USA.)

The main imports to Kazakhstan from the SHCO countries are: oil products — $685.8 million dollars. (With a share of 3.5 %), telephones amounted to $680.7 million. US (3.5 %), natural gas — $391 million. USA (2 %), cars — $310.8 million. (1,6 %), tubes, and pipes and hollow profiles seamless of iron or steel — $300,4 million. USA (1.5 %), computers — $286.3 million. USA (1.5 %), coke and semi-coke — $270.3 million. USA (1.4 %), tires — $262 million. US (1.3 %) [7].

More detailed information on the main imported goods from the SHCO countries for the period 2018 is shown in Tables 3, 4.

Table 3 The main exports from Kazakhstan to the SHCO

Goods

2017 y.

2018 y.

Growth

2018/20

17, %

physical volume

mln. $

Share,

θ/

physical volume

mln. $

Share,

θ/

physical volume

mln. $

1

2 ~

3

4

5 ~

6

7

8

9

Total exports from Kazakhstan to the SHCO countries

 

13 400,3

100

 

15 191,5

100

 

+13,4

1 Crude oil

(HS code 2709, in t)

4 134 822,4

1 564,3

11,7

3 225 864,9

1 702,7

11,2

-22

+8,8

2 Natural gas (HS code 2711, in t)

8 334 910,6

501,0

3,7

8 856 663,3

1 522,1

10,0

+6,3

+3

1

2

3

4

5

6

7

8

9

3 Copper and copper cathodes (HS code 7403, V t)

192 992,6

1 096,6

8,2

218 008,1

1 345,7

8,9

+13

+22,7

4 Copper ores and concentrates (HS code 2603, V t)

1 047 030,0

1 093,5

8,2

1 060 941,8

1 176,4

7,7

+1,3

+7,6

5 Uranium

(HS code 2844, in t)

24 286,6

1 254,0

9,4

18 097,1

1 019,9

6,7

-25,5

-18,7

6 Ferroalloys (HS code 7202, V t)

716 202,1

976,9

7,3

779 165,1

935,3

6,2

+8,8

-4,3

7 Wheat

(HS code 1001, V t)

3 403 553,8

482,9

3,6

4 248 711,1

605,2

4,0

+24,8

+25,3

8 Flat-rolled, unalloyed, hot-rolled (HS code 7208, V t)

862 057,8

432,8

3,2

997 664,6

559,7

3,7

+15,7

+29,3

9 Ores and concentrates, iron (HS code 2601, V t)

9 459 777,9

511,5

3,8

9 406 091,2

477,1

3,1

-0,6

-6,7

10 Flat-rolled, nonalloy steel, clad (HS code 7210, in t)

479 426,8

360,4

2,7

467 405,3

368,5

2,4

-2,5

+2,2

11 Oxides and hydroxides of aluminium (HS code 2818, in t)

1 013 650,0

330,4

2,5

968 337,3

337,0

2,2

-4,5

+2

12 Flat-rolled, nonalloy steel, cold-rolled (HS code 7209, V t)

442 024,9

243,7

1,8

406 763,5

243,4

1,6

-8

-0,1

13 Coal, stone (HS code 2701, in t)

22 437 360,5

279,8

2,1

20 645 618,5

238,8

1,6

-8

-14,6

14 Ores and concentrates zinc (HS code 2608, V t)

297 097,7

242,4

1,8

238 666,2

201,8

1,3

-19,7

-16,7

15 Waste and scrap of ferrous metals (HS code 7204, V t)

811 487,5

181,6

1,4

959 278,2

201,5

1,3

+18,2

+11

16 Raw aluminum (HS code 7601, V t)

75 185,0

150,0

1,1

84 321,8

188,9

1,2

+12,2

+25,9

17 Mineral oils (HS code 2710, in t)

394 421,5

119,2

0,89

474 715,5

176,1

1,2

+20,4

+47,7

18 Semi-finished products of alloy steel (HS code 7207, V t)

388 442,0

138,1

1,0

379 691,3

168,4

1,1

-2,3

+21,9

19 Tubes and pipes and hollow profiles seamless of iron or metals

(HS code 7304, V t)

125 924,2

114,4

0,85

167 867,0

163,7

1,1

+33,3

+43,1

20 Zinc, untreated (HS code 7901, in t)

129 270,4

375,5

2,8

53 586,2

156,0

1,0

-58,5

-58,5

Note. Foreign and mutual trade statistics [7].

Table 4 Major imported products in Kazakhstan SHCO

Goods

2017 y.

2018 y.

Grow

2018/20

th

17, %

physical volume

mln. $

Share,

θ/

physical volume

mln. $

Share

physical volume

mln. $

1

2 ^

3

4

5 ^

6

7

8

9

Just import to Kazakhstan from the countries of the SCO

 

17 971,1

100

 

19 445,3

100

 

+8,2

1 Mineral oils (HS code 2710, in t)

1935 655,8

937,1

5,2

1142 116,7

685,8

3,5

-41

-26,8

2 Telephone

(HS code 8517, in t)

3 295,7

527,0

2,9

13 966,2

680,7

3,5

growth

4,2 р.

+29,2

3 Natural gas (HS code 2711, in t)

2996 239,0

323,4

1,8

3191 888,8

391,0

2,0

+6,5

+20,9

4 Cars

(HS code 8703, PC)

21 346,0

297,2

1,7

18 111,0

310,8

1,6

-15,2

+4,6

5 Tubes and pipes and hollow profiles seamless of iron or metals (HS code 7304, V t)

195 200,1

241,0

1,3

231 686,6

300,4

1,5

+18,7

+24,7

6 Computer

(code 8471 HS, in PCs)

2390 767,0

221,6

1,2

2680 457,0

286,3

1,5

+12,1

+29,2

7 Coke and semi-coke (HS code 2704, in t)

951 479,4

263,8

1,5

930 038,1

270,3

1,4

-2,3

+2,5

8 Buses

(code 4011 HS, in PCs)

3849 637,9

249,2

1,4

4964 928,0

262,0

1,3

+29

+5,2

9 Ores and concentrates, lead

(HS code 2607, V t)

148 014,2

206,7

1,2

181 592,9

230,1

1,2

+22,7

+11,3

10 Parts and accessories for cars and tractors (HS code 8708, in t)

44 516,4

188,1

1,0

47 649,8

213,3

1,1

+7

+13,4

11 The cars of a freight train or tram

(code 8606 HS, in PCs)

3 363,0

118,9

0,66

6 123,0

203,0

1,0

+82,1

+70,8

12 Aircraft

(code 8802 HS, inPCs)

15,0

64,5

0,36

221,0

200,1

1,0

growth

14,7 р.

growth

3,1 р.

13 Ferrous metal structures

(HS code 7308, V t)

119 900,4

197,5

1,1

124 913,5

200,0

1,0

+4,2

+1,2

14 Trucks

(code 8704 HS, in PCs)

5 815,0

150,5

0,84

8 256,0

197,4

1,0

+42

+31,2

15 Road and construction machinery (code 8429 HS, in PCs)

2 367,0

104,6

0,58

2 765,0

195,5

1,0

+16,8

+87

16 Ores and concentrates of precious metals (HS code 2616, in t)

21 203,7

160,8

0,89

235 908,5

194,6

1,0

growth

11,1 р.

+21

17 Corners, shaped and special profiles of nonalloy steel

(HS code 7216, in t)

255 360,3

169,1

0,94

233 675,6

178,3

0,92

-8,5

+5,5

1

2

3

4

5

6

7

8

9

18 Apricots, cherries, peaches, plums and thorns, fresh (HS code 0809, V t)

103 101,4

97,8

0,54

121 247,1

177,0

0,91

+17,6

+81

19 Polymers of ethylene (HS code 3901, in t)

105 870,8

129,6

0,72

138 631,1

174,9

0,90

+30,9

+34,9

20 TVs, monitors and projectors

(code 8528 HS, in PCs)

1374 570,0

140,9

0,78

1538 517,0

162,2

0,83

+11,9

+15,1

Note. Foreign and mutual trade statistics [7].

The development of mutual trade of the SCO member States is influenced by both internal and external factors. The development of the world economy and the geopolitical situation in the world has an impact on the national economies of the SCO member States. It should be noted about the impact of the trade war between the US and China, Western sanctions on Russia, Brexit in Europe, the ongoing political trends in Central Asian countries. In a polycentric world, the expansion of the SCO is useful for the organization, as it creates conditions for increasing its aggregate potential.

As world practice shows, an increase in the number of members and the consolidation of the total capacity is not always equivalent to improving the effectiveness of an organization. This can be observed in the SCO. In any case, so far the reception of India and Pakistan has not given obvious advantages for the development of the organization There are problems that have a negative impact on the activities of the SCO. The first, the desire of many members to preserve the geopolitical neutrality of the SCO, distancing themselves not only from the contradictions between the SCO member States and the «collective West», but also from bilateral contradictions between the member States, is becoming increasingly obvious, which complicates the procedure for developing some common solutions. The prospect of the SCO-the transformation of the organization in the near future into a «club of interests» — is seen more clearly. Secondly, with the expansion of the SCO, one of the «generic problems» of the organization has become aggravated — what is the SCO functionally, what is its mission and the geography of its efforts? With the inclusion of India and Pakistan as permanent members, the SCO has gone beyond the traditional Central Asian format. And not only geographically. In its expanded composition, the organization must be able to respond to various threats not only in Central Asia but also in other regions of Asia. And the question arises: is the SCO capable of this? Especially given the fact that the development of a joint position of the organization on a particular issue is very difficult. Third, today, when the way to join the SCO as a permanent member is opened, it is necessary to clearly determine how far the organization can move in the direction of expansion, not losing, on the one hand, the main focus on the problems of Central Asia, and on the other — without making the activities of the new members with conflicts among themselves, the additional critical capacity.

This raises questions. First: to what extent is the increase in the efficiency of the SCO functionality related to the prospects for expansion? Second: to what extent is the organization able to expand the existing framework of cooperation and start implementing the program of economic cooperation, mechanisms for financing joint projects, the SCO Bank and the SCO Special account, as well as the development of new promising projects in case new members join it?

Currently, 72 international treaties have been signed within the framework of the SCO, including 51 international treaties between the SCO member States, 11 international treaties between the SCO and individual States, 10 international treaties of the SCO Secretariat with other international organizations.

The results achieved by the SCO and the Shanghai five cover a number of important areas of cooperation, such as politics, security, the economy and the humanitarian sphere.

Since the establishment of the Organization, the Republic of Kazakhstan has been and remains one of the active founding States, which initiated many different ideas, projects, documents and programs [8].

In 2018, at the Qingdao Summit of the SCO (June 9–10, 2018), the First President of Kazakhstan proposed initiatives to develop a «Road Map» for the transition to settlements in national currencies in mutual trade of the SCO member States, to create a platform in the SCO for the exchange of experience in the field of digitalization and new technologies, to attract more countries to the work of the AIFC.

As a result of the study of Kazakhstan's initiatives, together with the National Bank of Kazakhstan, a Road Map to increase the share of national currencies in mutual settlements between the SCO member Stateswas developed and sent to the parties for consideration. At the same time, the draft concept of cooperation in the field of digitalization and information and communication technologies, as well as the Memorandum of understanding between the AIFC and the SCO Secretariat, developed jointly with the Uzbek side, are under approval of the parties.

Cooperation within the SCO is today one of the important directions of the foreign policy of the Republic of Kazakhstan. Constructive participation and focus on equal dialogue with the SCO partner countries contributes to the growth of mutual trust and understanding between States, strengthens the position of Kazakhstan not only in the region but also at the international level.

For more effective development of the organization, in our opinion, the following is necessary

The first, it is necessary to strengthen the economic component in the SCO's activities. Security issues are, of course, a priority area, but they are hidden from the population of the SCO member States, and therefore the image of this organization in public perception is low. The implementation of specific economic projects can help to solve this problem.

Secondly, it is necessary to strengthen the prognostic and analytical component in the SCO's activities; this is where the deficit is felt. This in turn, would improve the quality of decision-making.

Thirdly, member States do not yet have a common vision of the threats and challenges to regional security. And without this, it is impossible not only to build a long-term strategy for the development of the organization, but also a strategy for ensuring security in the SCO space.

The solution of all these problems will raise the cooperation of the member States of the organization to a qualitatively new level of development and will contribute to a more effective formation of the SCO common space.

 

References

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  2. Baktymbet, A.S. & Baktymbet, S.S. (2012). Predposylki razvitiia mezhdunarodnoi ekonomicheskoi intehratsii [Prerequisites for the development of international economic integration]. Vestnik ENU imeni L. Gumileva — Herald ENU after L. Gumilyova, No. 1, 391–395 [in Russian].
  3. Baktymbet, A.S. (2014). Modeli intehratsionnoho sotrudnichestva Kazakhstana v usloviiakh novoi heopoliticheskoi situatsii [Models of integration cooperation of Kazakhstan in the new geopolitical situation]. Vestnik KazUEFMT — Herald: KazUEFMT, No. 3, 19–24 [in Russian].
  4. kursiv.kz. Retrieved from https://kursiv.kz/news/politika/2016-04/rk-i-knr-obsudili-sopryazhenie-nurly-zhol-i-odin-poyas- odin-put [in Russian].
  5. Shaltykov, A.I. & Tinalieva, A.M. (2015). ShOS kak faktor novoho intehratsionnoho poriadka [SCO as a factor in the new integration order]. Vestnik KazNPU — Herald: KazNPU. Retrieved from https://articlekz.com/article/19163 [in Russian].
  6. stat.gov.kz. Retrieved from http://stat.gov.kz/official/industry/31/statistic/7
  7. Statistika vneshnei i vzaimnoi torhovli Respubliki Kazakhstan [Statistics of foreign and mutual trade of the Republic of Kazakhstan]. economy.gov.kz. Retrieved from http://economy.gov.kz/ru/kategorii/komitet-po-statistike [in Russian].
  8. Tsindaoskaia Deklaratsiia Soveta Hlav hosudarstv-chlenov shankhaiskoi orhanizatsii sotrudnichestva [Qingdao Declaration of the Council of Heads of Member States of the Shanghai Cooperation Organization]. rus.sectsco.org. Retrieved from http://rus.sectsco.org/documents/ [in Russian].
Year: 2019
City: Karaganda
Category: Economy