Regionalization and integration of the global economy

Abstract

Object: The aim is to disclose the processes of involving most of humanity in a single system of financial, economic, socio-political and cultural ties, demanding effective ways to streamline relations in a space. Like other countries Kazakhstan is involved in the process of regionalization, Kazakhstan is also interested in free access to foreign markets. The authors of the article determined the role of Kazakhstan in the international community in matters of regionalization and integration.

Methods: The main methods: analysis, detailing, generalization.

Findings: It has been established that free economic zones, having a structural effect on the international movement of goods, services, capital, contribute to the processes of globalization and the development of economic integration.

Conclusions: During the writing of the article, the authors concluded that regionalization and integration of the economy have both positive and negative sides. On the one hand, they contribute to the convergence of national economies that interact with each other. On the other hand, it is contributing to the split of a single world market, which is leading to rivalry and competition.

Introduction

The relevance of the research topic is justified by the fact that studying the experience of regionalization and integration of economic processes, as well as the functioning and development of free economic zones in developed and developing countries, is important for improving the activities of free economic zones within our state, as well as with the aim of determining the ways of development of the country's economy.

At the heart of deep and stable economic relations between companies at the international level, a process such as regionalization arises. Countries with different levels of economic development, but with relatively the same problems, are entering the integration process (Bruno, 2017).

The regionalization of the world economy has become one of the most important manifestations of the process of economic integration. Regional economic groups formed on a compact area from countries that have common features in the economy, intensive economic ties, as well as common goals regarding further economic development. The key criteria regarding the economic conditions of integration are the following: the level of development of countries, their resource and technological potential; the market relations'degree of maturity, in particular national markets for goods, services, capital and labor, the scale and prospects of development of economic relations between countries. In addition, socio-cultural compatibility is important (Hyoung-kyu, 2012).

Speaking about integration, noted that this is a common project, which is accepted by all participating countries, while they differ in the level of economic development, but each country individually seeks to provide itself with a favorable strategic perspective in the context of joint project implementation (Ignatov, 2019).

Literature Review

A sufficient number of articles and studies have been devoted to regionalization and integration. Nevertheless, systemic approaches to the theory of regionalization and integration of the world economy have not yet been fully formed, questions of determining the role of free economic zones in the structure of regional development have not been fully disclosed. There are questions on the goals of creating and developing regional blocs in relation to free economic zones, as well as the role of the state in solving these problems.

It should be noted that the work of V. Leksin, V. Doronin, M. Storper, A.J. Scott, S. Zhakupova, G. Kop- taeva, G. Agabekova, G. Berdibekova and other authors is devoted to the solution of these issues. Moreover, opinions among researchers sometimes differ. Therefore, for example, some authors believe that globalization is widely available for the regional blocks of the global economy (Moberg, 2015). Others at this point believe that without national and regional barriers there cannot be a single global economy. At the present stage of economic development, a meaningful approach is required to study the features of the development of free economic zones, to develop proposals for their use in the domestic economy.

Methods

When writing the article, the authors applied various general scientific methods: using inductive and deductive methods, the analysis of the collected material was carried out, the accumulated information was analyzed, detailed, generalized. The work used logical and systemic approaches.

Results

In regional integration associations, an effective mechanism is being formed that promotes the integration of national economies into a single whole, an organic system. The components of such a mechanism are: the charter of the organization, which determines its goals and methods of activity; supranational governing bodies; coherent economic policy.

Regional integration associations essentially differ from each other both in their territorial organization and in the depth and maturity of integration processes. In spatial terms, it can be distinguished as macro- regional, interregional, and micro-regional levels of integration (Kozlov, 2017).

At the macro-regional level, organizations are being formed that are composed of integral economies of states that are located in a rather large space. There are already several dozen of such organizations on all continents of the planet. Among the most famous are the European Union, the Asia-Pacific Economic Cooperation (APEC), the Commonwealth of Independent States (CIS), and the North American Free Trade Agreement (NAFTA).

At the interregional level, the integration process takes place in the form of cooperation between the border administrative-territorial entities of states. European regions can serve as an example (among them, with the participation of Ukrainian territorial units — the Lower Danube, the Carpathians, and others).

At the micro-regional level are formed (“special zones”, “free zones”, “economic zones”) (SEZ, 2018).

Authors N.N. Livintsev, G.M. Kostyuninina noted that free economic zones are “a kind of foreign trade enclave, part of the country where goods are considered to be outside of the national customs territory and therefore are not subject to ordinary customs control and taxation” (Livincev, 2004).

According to the definition of M.M. Boguslavsky, “free economic zones in international practice are understood to be separate territories of states where special favorable conditions for the activities of foreign enterprises are created to solve specific economic and other problems” (Boguslavskij, 2004).

The definitions given in the literature do not have much difference between the concepts of “free economic zones” and “special economic zones”, although in the early 1990's Kazakhstan adopted the concept of “free economic zones”, and since 1996 the concept of “special economic zones” had been legalized (Zakon, 1996).

According to the law of the Republic of Kazakhstan “a special economic zone is a part of the territory of the Republic of Kazakhstan with precisely defined borders, on which a special legal regime of a special economic zone operates for the implementation of priority activities” (Zakon, 2019).

Thus, the authors note that so far there is no single concept of “free economic zones”, since these concepts are ambiguously applied to investment and foreign trade activities.

Free economic zones have a favorable economic and geographical position in a region or part of a country where duty-free or preferential export-import regimes are established and some trade, currency and financial isolation are achieved compared to other regions of the country.

Creation of SEZ leads to the achievement of the following goals: saturation of the domestic market with high-quality products; ensuring full employment of the workforce; attraction of investments; organization of production whose products are exported; the inclusion of national economies of individual countries in international economic relations; implementation of the latest scientific and technological achievements; solving the problems of regional policy (Kozlov, 2017).

The expansion of the integration of the world economy and the openness of the economies of different countries led to the emergence of various specialized types of free economic zones. Widespread types of free economic zones are: joint venture zone, technopolis, service free economic zones, free network information zone, integrated free economic zone (Kurmanov, 2019).

Free economic zones are also grouped by the degree of integration into the global and national economies; sectorial characteristic, by the nature of ownership, but, the main grouping of free economic zones is considered a classification by the nature of activity. Despite the various groups of free economic zones, the main tasks are: increasing the international competitiveness of national production; increase in domestic goods and services; development of new types of production; scientific and technical development of the country; solving social problems; development of effective forms of organization of production, management of modern marketing activities, etc.

For example, in the territory of the Republic of Kazakhstan, the following special economic zones function: “Astana is a new city” (Astana), “Seaport Aktau” (seaport of Aktau), “Information Technology Park” (Almaty) and “Ontustik” (South Kazakhstan region). “Burabay” (Shuchinsk district), “National Industrial Petrochemical Technopark” (Atyrau region), “Khorgos — East Gate” (Almaty region), “Pavlodar” (Pavlodar region) and “Saryarka” (Karaganda region) (table).

Table Key performance indicators of some of the free economic zones of Kazakhstan, 2018

Name of SEZ

Manufacturing value, Bn. Tg.

Cumulative investment

Workspaces, persons

“Pavlodar”

91.1

35.4 ~

1460

“Seaport Aktau”

344.1

119.3

1650

“Ontustik”

42.9

29.5

1400

“Turkistan”

12

19

1630

Note — compiled by the authors

During the period of functioning of Kazakhstan's SEZ, new projects and new jobs were implemented, investments were also attracted to the regions.

Today, Singapore and Irish companies, which have vast experience in managing special economic zones, show great interest for Kazakhstan. Studying the experience of the functioning and development of free economic zones in developed and developing countries is important for improving the activities of free economic zones and determining the development paths of the country's economy.

The regionalization of the global economy has become one of the most important manifestations of the integration process. According to the degree of development of the integration process, these levels or stages of regional integration are distinguished:

– preferential trade zone — at this level, trade in certain goods and services between member countries is liberalized. This form of integration is the most common in the world, it is, in particular, inherent in the CIS;

– free trade zone — tariffs are removed in trade between members of the association for all goods and services, and in trade with third countries each member of the association carries out its own tariff policy; an example is the North American Free Trade Association (NAFTA); European Free Trade Association (EFTA);

– Customs Union — members of the association establish a single tariff in trade with third countries. One of the example is the Customs Union between Russia, Belarus, and Kazakhstan;

– Common market — not only trade is liberalized but also the movement of factors of production, an example is MERCOSUR;

– economic and monetary union — a common policy is implemented in all areas of the economy and a common currency is introduced; so far, the only example is the European Union (Gorda, 2018).

Currently, there are already dozens of regional integration associations at various levels. The most important of these are:

  1. Europe.

– European Union (EU): Austria, Belgium, Bulgaria, Great Britain, Greece, Denmark, Estonia, Ireland, Italy, Spain, Cyprus, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Germany, Poland, Portugal, Romania, Slovakia, Slovenia, Hungary, Finland, France, Czech Republic, Sweden — 27 countries in total.

– European Free Trade Association (EFTA): Iceland, Norway, Switzerland, Liechtenstein.

– Organization of the Black Sea Economic Cooperation (BSEC): Azerbaijan, Albania, Bulgaria, Armenia, Greece, Georgia, Moldova, Russia, Romania, Turkey, Ukraine, Serbia.

– GUAM: Georgia, Ukraine, Azerbaijan, Moldova.

– The Commonwealth of Independent States (CIS): Azerbaijan, Belarus, Armenia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Uzbekistan.

An example of the sustainable development of integration is the formation of a Common economic space (CES) of the states: Kazakhstan, Russia and Belarus, Armenia, and Kyrgyzstan. Until 2015, Russia, Belarus and Kazakhstan were members of the Customs Union, which later became the Customs Union (CU) on the basis of the EurAsEC, and subsequently became the Customs Union of the Eurasian Economic Union (CU EAEU) (Gridneva, 2018).

The Customs Union is a real and effective anti-crisis tool that increases the chances of the survival of national producers in the global crisis, protecting national economies from the negative manifestations of globalization.

Among the obvious benefits of the customs union, it is possible to highlight increased cooperation between producers, the creation of a common market, the promotion of competition and the overall activity of business, and the facilitation of movement of goods, services, labor, finance, and technology across a common territory. Economists predict an increase in the competitiveness of commodity producers of the countries participating in the customs union and a decrease in the cost of bureaucratic procedures, along with the solution of a number of social problems — employment, etc.

Of course, Kazakhstan's entry into the Customs Union a real chance for domestic entrepreneurs to develop and expand their business. The advantages of the Customs Union for Kazakhstan are obvious. First of all, among the positive aspects, it is possible to unify transport tariffs. This will allow Kazakhstan significantly reduce the cost of transit transportation of its export cargo through Russian and Belarusian territories to world markets. Kazakhstan has long raised this issue with partners, and if the plan now can be implemented, the price competitiveness of domestic goods in European markets will increase. For certain cargoes, tariffs may decrease by two or more times.

The restoration of technological chains in industry, broken since the time of the collapse of the USSR, will also bring real benefits to the economy. There are many areas in Russian industry and regional development programs in which, within the framework of the economic and territorial division that existed in the Soviet era, Kazakhstani enterprises can now fit quite easily. Within the framework of a single space, such spheres of the national economy as energy, engineering, transport, etc. can be developed.

  1. Asia and the Pacific Rim.

– Asia-Pacific Economic Cooperation (APEC): Australia, Brunei, Vietnam, Indonesia, Canada, China, Republic of Korea, Kiribati, Malaysia, Mexico, Marshall Islands, New Zealand, Papua New Guinea, Peru, Russia, Singapore, USA, Thailand, Taiwan, Philippines, Chile, Japan.

– Association of Southeast Asian Nations (ASEAN): Brunei, Vietnam, Indonesia, Cambodia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand.

– “Colombo Plan” for joint economic and social development in Asia and the Pacific: Great Britain, USA, Canada, Japan, Australia, New Zealand, India, Pakistan, Sri Lanka, Afghanistan, Iraq, Nepal, Myanmar, Maldives, Bhutan, Bangladesh, Laos, Cambodia, Malaysia, Thailand, Singapore, Papua New Guinea, Indonesia, Philippines, Fiji, Republic of Korea.

– Council for Arab Economic Unity (SAEE): Egypt, Iraq, Jordan, Yemen, Kuwait, Libya, Mauritania, United Arab Emirates, Palestine, Syria, Somalia, Sudan.

– Shanghai Cooperation Organization (SCO): Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, China.

  1. North and South America.

– North American Free Trade Agreement (NAFTA): USA, Canada, Mexico.

– Latin American Integration Association (LAI): Argentina, Bolivia, Brazil, Venezuela, Colombia, Mexico, Paraguay, Peru, Uruguay, Chile, Ecuador.

– Southern Common Market (MERCOSUR): Argentina, Brazil, Paraguay, Uruguay.

  1. Africa.

- Economic Community of West African States (ECOWAS): Benin, Burkina Faso, Côte d'Ivoire, Cape Verde, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra — Leone, Togo (Gridneva, 2018).

– Customs and Economic Union of Central Africa (UDEAC): Gabon, Cameroon, Congo, Central African Republic, Chad, Equatorial Guinea.

Discussion

World experience shows the higher and more homogeneous the level of technical, economic and social development of the participating countries, the more similarities in their economic and geopolitical goals and interests, in economic and political structure. Integration processes is faster and developing more dynamically under these conditions, and the unification of economic and legal norms, as well as the political conditions of interaction. The important conditions for the effectiveness of integration processes include civilizational factors of mutual attraction of countries and peoples, as well as the necessary degree of mutual trust of the interacting states. The practice of regional economic integration in the modern world shows that the affiliation of integrating countries to similar types of civilizations (for example, one religion) has a positive impact on its dynamics, which creates the basis for the formation of a qualitatively new unified not only economic, but also humanitarian space within the regional community (Lagutina, 2015).

Modern international economic integration is influenced by a number of factors of world development, among which the most significant is globalization. However, if globalization is a new quality of internationalization at the highest level of development in breadth, then integration is the highest level of development of internationalization inland. Recently, regional integration has been seen in the context of globalization. Both of these main trends in the development of the modern world economy are in a complex, ambiguous, contradictory interaction. On the one hand, there has been an accelerated process of globalization of economic activity, on the other, an increase in regionalization and integration.

Under the influence of complex globalization factors, states share the traditional model of the main sovereign with supranational integration structures, within which common interests are combined to strengthen the positions of each of the states. At the same time, the risk's global nature appears: emerging alliances do not complement each other, but begin intense competition among themselves for the economic and political space. At the same time, the problem remains that strong world powers are trying to form their integration systems and are forcing others to adapt to new structures. A striking example of a modern geo-economic strategy is the United States (Moberg, 2015).

The processes of global economic development, covering all regions and sectors of the world economy, fundamentally change the relationship between external and internal factors in the development of national economies in favor of the former, which requires adaptation to unified procedures, norms and rules of behavior for the main participants in world economic activity. On the one hand, free economic zones act as an effective tool for enhancing integration processes, creating favorable conditions for the functioning of foreign and domestic capital, building up modern production potential, and on the other hand, various types of free economic zones that promote typological imperatives (the market nature of the national economy, an open economy), participate in the globalization process in accordance with their functionality, the chosen field of activity, a multifunctional role in creating the prerequisites — algorithms for adapting the national economy both to internal trends of moderate liberalization, competitiveness), and to the external inclusion of the country through a system of techno-poles in international economic relations (Zhakupova, 2015).

The creation of SEZ reflects the desire of individual territories and regions of countries for greater independence. From this point of view, the development of SEZ reflected in the following of the regions to market principles. Acting to a certain extent, regardless of the higher authorities, the regions are able to resolve the problems they face faster and more efficiently. They solve a wide variety of issues: they plan the activities of the zone, advice investors on various issues, and deal with a number of other problems.

Moreover, the work of free economic zones has its drawbacks. For example, the creation of SEZ reflects the interest of many countries of the world in greater integration into the global economy, while it may conflict with the principles of a number of international organizations, for example, the World Trade Organization (WTO) provides privileges and preferences for certain territories, which diverges with the principle of creating equal conditions for all market conditions.

There are conflicts between the countries of Eastern Europe — the new members of the European Union, where in the SEZ there are incentives for foreign investors, and the requirements of the European Union to cancel them. However, in many countries where SEZs are successfully operating and there is a lot of experience in using their potential, there have been ways to overcome the contradictions that arise from time to time between the interests of SEZs and the requirements of international organizations. If the enterprises in the SEZ are working efficiently and the mechanism, underlying the functioning of the zones is well developed, tax revenues to the budget, even if tax benefits are applied, will be provided. If any problems arise, alternative sources of tax revenue may be used. It should also be borne in mind that in a number of countries on the territory of the SEZ there are a significant number of enterprises. Together they provide a fairly substantial amount of tax revenue. If we talk about the requirements of the WTO, then we can recognize that the SEZ create unequal opportunities for the regions of the countries in which they are located. This also means the uneven involvement of the regions in world economic relations. However, on the other hand, the sides of the country are aware of the advantages of free economic zones and strive to use them. The conflictscan be resolved by the creation of small free economic zones in various regions — local zones. They operate, for example, in Poland. The divergence of views between individual developing countries and supranational structures, their conflict is often caused by the fact that neoliberal views on the globalization process prevail in international organizations, and in many cases, they are not consistent with the capabilities and needs of the above countries. The rapid implementation of liberal reforms does not always benefit these countries; in most cases, they are not ready for drastic changes. Distrust in the SEZ also caused by the fact that in a number of developing countries a rather significant share is made up by the shadow sector of the economy. In international structures, they are afraid that they will provoke even greater development. With the effective operation of the SEZ mechanism, investments in the free zones create opportunities for the development of the legal sector.

In a number of countries, international SEZs are being created, somewhat reminiscent of offshore zones, but whose activities are more associated with the production of goods and services. Multinational firms and national companies from various countries could operate there.

Conclusions

The research results contribute to the formation of a number of conclusions and proposals on the effective use of free economic zones to accelerate the integration of national economies in the world system, to increase their competitiveness in the context of globalization.

  1. Using SEZ, states will be able to defuse socio-economic tension in the country, while solving a whole range of socio-economic problems, reduce poverty and unemployment, and increase employment.
  2. The concepts (“special zones”, “free zones”, “economic zones”) reflect the effective elements of the autonomous organization of world economic processes to attract investment, innovation, and new technologies.
  3. Various models of SEZ are involved by “intermediaries” between participants in international integration processes and national economies.
  4. The most productive models of free economic zones contribute and have a serious impact on increasing the economic activity of individual countries, on the rehabilitation of depressed regions, idle large enterprises and industrial complexes, on the removal from stagnation of certain sectors of the country's national economy, on the attraction of advanced technologies and management.
  5. Using productive models of free economic zones, it is possible to increase labor productivity, expand the list of competitive products, increase export potential, ensure the development of production networks of import-substituting goods and, in general, increase the growth of the country's economy.

 

References

  1. Bruno, D. (2017). Comparative economics and European integration. Society and Economy, 39(3), 321-348.
  2. De Boyrie, M., Kreinin, M. (2016). Regional Integration in Latin America. Global Economy Journal, De Gruyter, 16(2), 293–311.
  3. Hyoung-kyu, C. (2012). The impact of affinity on world economic integration: The case of Japanese foreign direct investment. Japan and the World Economy24, 57–63.
  4. Ignatov, A. (2019). Analyzing the determinants of the European union's regional economic development. Global Economy journal. Retrieved from https://www.worldscientific.com/worldscinet/gej
  5. Moberg, L. (2015). The political economy of special economic zones. Journal of Institutional Economics11(1), 167– 190.
  6. Boguslavskij, M.M. (2004). Mezhdunarodnoe chastnoe pravo [Private international law]. Moscow: Jurist.
  7. Bu, T. (2016). Teoretiko-metodologicheskie podhody k issledovaniju mezhdunarodnoj ekonomicheskoj regionalizacii i integracii [Theoretical and methodological approaches to the study of international economic regionalization and integration]. Jekonomicheskie nauki142, 16–20.
  8. Bugaeva, T.N. (2016). Svobodnaja ekonomicheskaja zona i ee rol' v jekonomicheskom razvitii regiona [Free economic zone and its role in the economic development of the region]. Dni nauki KFU im. V.I. Vernadskogo: Sb. tezisov uchastnikov II nauch. konf. PPS, aspirantov, studentovi molodyh uchenyh — Collection of abstracts of participants of the scientific and practical conference. Faculty, postgraduates, students and young scientists. Simferopol: V.I. Vernadsky KFU. — P. 798–800.
  9. Gorda, O.S. (2018). Razvitie mezhdunarodnojj ekonomicheskoj integracii v uslovijah global'noj regionalizacii [Development of international economic integration in the context of global regionalization]. Integration processes in the modern geoeconomic space: Materialy nauchno-prakticheskoi konferencii — Materials of the scientific and practical conference (pp. 90–93).
  10. Gridneva, E.E. (2018). Kazahstan v sisteme mezhdunarodnoj ekonomiki [Kazakhstan in the international economy]. Almaty: Akademija “Kajnar”, 150 p.
  11. Deystvuyushchiye SEZ v Kazakhstane [Existing Free Economic Zones in Kazakhstan]. (n.d.). business.gov.kz. Retrived from https://business.gov.kz [in Russian].
  12. Zhakupova, S.T. (2015). Kazahstan v regional'noj ekonomicheskoj integracii [Kazakhstan in regional economic integration]. Karaganda: BAZIS.
  13. Zakon Respubliki Kazahstan O special'nyh ekonomicheskih zonah № 2823-VI ZRK ot 26 janvarja 1996 [Law of Kazakhstan. About special economic zones in the Republic of Kazakhstan]. online.zakon.kz Retrieved from https://online.zakon.kz/Document/ doc_id =31038117
  14. Zakon Respubliki Kazahstan O special'nyh ekonomicheskihi industrial'nyh zonah № 242-VI ZRK ot 3 aprelja 2019 [Law of Kazakhstan. About special economic and industrial zones]. kodeksy-kz.com Retrieved from https://kodeksy- kz.com/ka/o_spetsialnyh_ ekonomicheskihi_industrialnyh_zonah.htm
  15. Kozlov, A.A. (2017). Svobodnyej ekonomicheskie zony kak faktor regional'nojj ekonomicheskoj bezopasnosti [Free economic zones as a factor of regional economic security]. Proceedings from Problems of socio-economic stability of the region: XIV nauchno-prakticheskaia konferenciia — XII scientific and practical conference (pp. 32–38).
  16. Koptaeva, G.P., Agabekova, G.N., Berdibekova, G.S., Chernobaj, L.I. (2019). Prioritetnye napravlenija modernizacii sistemy regional'nogo upravlenija [Priority areas for the modernization of the regional management system]. Vestnik Karagandinskogo iniversiteta. Serija Jekonomika — Billetin of the Karaganda iniversity. Economy series, 4(96), 83–93.
  17. Kurmanov, N.A., Amirova, G.K., Tleuberdieva, S.S., Mutalieva, L.M., Bykov A.A. (2019). Analiz jeffektivnosti innovacionnoj dejatel'nosti v stranah Evrazijskogo jekonomicheskogo sojuza [Analysis of the effectiveness of innovation in the countries of the Eurasian Economic Union]. Vestnik Karagandinskogo iniversiteta. Serija Jekonomika — Billetin of the Karaganda iniversity. Economy series, 4 (96), 194–206.
  18. Lagutina, M.L. (2015). Integracija kak instrument global'noj regionalizacii [Integration as a tool of global regionalization]. Naichno-tehnicheskie vedomosti Sankt-Peterbirgskogo gosidarstvennogo politehnicheskogo iniversiteta. 3(227), 9–18.
  19. Livintsev, N.N., & Kostyunina, G.M. (2004). Mezhdunarodnoye dvizheniye kapitala (Investitsionnaya politika zarubezhnykh stran) [International capital movement (Investmentpolicy of foreign countries)]. Moscow: Economist [in Russian].
Year: 2020
City: Karaganda
Category: Economy