A new phase of integration processes development in the Eurasian integration space associated with the formation of its new Central Asian economic region began since the entry of the Kyrgyz Republic in the Eurasian Economic Union (EEU). The participation of Kyrgyzstan in the EEU establishes economic conditions, firstly, to promote the EEU deep into Central Asian region, and secondly, - the consolidation of Central Asian countries in the promotion of its trade flows within the EEU market.
Agoal of the Kyrgyz economy is to maintain close economic and trade relations, both with Kazakhstan and with Russia, despite the liberalization of the trade space, and accession to the WTO in the making of political and economic independence.
Kazakhstan is the largest trading partner of the Kyrgyz Republic. The membership of Kyrgyzstan in the EEU further extends the possibilities of strengthening the economic presence of Kazakhstan’s economy in Central Asia; despite the insignificant proportion of the Kyrgyz republic on the EEU market and Kazakhstan market, the new participant’s joining the Union is usually accompanied by problems associated with adaptation to the new conditions of cooperation.
Problems can have varying degrees of depth for different EEU countries and the Union in general, in this regard, assessment of economic opportunities and implications of the entry of
Kyrgyzstan is relevant for Kazakhstan and it is necessary for understanding the prospects for the development of Kazakhstan’s economy within the conditions of the EEU expansion.
Kyrgyzstan's economy in terms of globalization: main trends
Kyrgyzstan’s economy in a globalizing world is being influenced by a number of factors that determined its current state:
- The collapse of the Soviet economic system, which included the Kyrgyz Republic;
- Integration into the global economy as a consequence of the liberalization OfKyrgyzstan trade policies;
- The development of the Eurasian integration processes in Eurasia, participated by Kyrgyzstan.
Besides, geo-economic features of the country led to increased competition of global integration projects (with the participation of the European Union, the United States and China). Landlocked Kyrgyz Republic that has no the primary commodity exports were less susceptible to economic changes rather than the neighbouring countries of the region. Economic recession has also contributed to the unfavourable situation on the world market as to key export products for CIS countries and partners.
In aggregate, the listed factors have affected the economy OfKyrgyzstan as follows:
- It specified the dynamics of economic development;
- It changed the structure of the national economy;
- It formed the nature of participation in the globalization and regionalization.
The collapse of economic ties in the post- Soviet space was accompanied by a slowdown in the economic development of Kyrgyzstan, internal political instability, particularly in the first years Ofindependence. The objective difficulties of establishing the economy and foreign economic relations in the first decade after independence were relatively depreciated with overall direction of liberalization and reforms conducted in the country. Further dynamics of economic development in the next decade was in correlation with events such as the Revolution in 2005; the global crisis of 2008-2009; Revolution in 2010, since 2011 the trend to increase the participation in the Eurasian integration processes.
The relative stabilization of the economic situation in Kyrgyzstan was observed in the 2000s, but it does not show of the dynamics of sustainable economic development of the republic at the present stage, and economic progress in general.
Now, Kyrgyzstan yields to other CIS countries on the dynamics of the industrial and agricultural production development.
Structural deformation in the economy of the Kyrgyz Republic was accompanied by a decrease of industry and agriculture share in GDP in the period of market economy establishment.
Kyrgyzstan maintains the stance as one of the most economically and socially vulnerable economies of the former Soviet Union. Currently, Kyrgyzstan occupies 108th place (for comparison - Tajikistan - 91st, Armenia - 85th, Kazakhstan - 50th, Russia -53rd) in the ranking of global competitiveness (2014-2015). The lowest level of human development in the CIS region is also recorded in Kyrgyzstan and Tajikistan, which take 125th and 133rd position in the ranking of HDI (Human Develop- ment Index).
Kyrgyzstan yields to all CIS countries, except Tajikistan on value and dynamics of growth rate of GDP per capita. In the year 2013, GDP per capita in Kyrgyzstan (1213 dollars) was more than 10 times lower than GDP per capita of Russia (15011 dollars) as well as Kazakhstan (13415 dollars).
Since gaining economic independence, Kyrgyzstan, like all the countries of Central Asia, was in the area of political and economic interests of the world powers, which are primarily related to:
- Access to the natural resources of Central Asia countries (CA);
- Influence on the regional market of Central Asia,
- Due to the use of transit potential and transport infrastructure of countries between Europe and East and South Asia.
The processes of Kyrgyzstan’s integration into the global and regional economies are associated with the intensification of the country’s participation in international economic alliances. Kyrgyzstan’s participation in globalization has its own specifics, based on the specifics of the transition to a market economy, including:
- Joining the WTO as the first country among the CIS countries;
- Presence of US and NATO troops in the country under deployment of anti-terrorist operation in Afghanistan;
- External labour migration.
Kyrgyzstan is a country with one of the most liberal trade regimes. According to the WTO Trade Policy Review, the average rate of import duty on all product groups is 4.6%, on agricultural products is 7.4%, and on other types of goods is 4.2%. Today, as before independence, the total volume of imported goods exceeds the export. Joining the WTO, in our view, contributed to the problem of the trade deficit, and solved no issues of improving the competitiveness of the national economy. During the period 2000-2013, the share of exports fell from 47.8 to 22.8% in the total volume of foreign trade while the share of imports was increased, respectively, from 52.2 to 77.2%. Because of exceeding the growth of imports over exports, the trade deficit is growing and it reached 4279 million dollars in 2013.
Kyrgyzstan’s economy is dependent on the economic situation of its trading partners. By the mid-1970s, the Kyrgyz Republic exported more than 90 types of products to 68 foreign countries (mainly the CMEA countries and Yugoslavia). In 2013, the Republic was carried out trade with 143 countries of the world. The goods were exported to 89 countries and imported - from 131 countries.
Accession to the WTO consolidated the trends of the formation of the trade balance structure and geographical structure of foreign trade in the context of different types of economies associated with outstripping growth of foreign trade, particularly imports over exports and a reduction in the share of transition economies in the trade turnover OfKyrgyzstan. During the period 1995-2013, imports from the developed states - members of the WTO into Kyrgyzstan increased by 5.5%, while exports to these countries fell by 5.2%. Imports increased from developing countries in Asia, in particular, the People’s Republic of China (PRC), while exports after a relatively long period of growth became close to the level of 1995 
Despite the fact that the geographical structure of both exports and imports since the early 90s and until the 2000s, is gradually changed toward reducing the overall proportion of trade with the CIS countries, the share of CIS countries in total trade turnover of Kyrgyzstan remained at a relatively high level (about 50%).
In general, the dynamics of foreign trade turnover of Kyrgyzstan is ensured by faster growth of imports over exports. In 2012, the ratio of total foreign trade turnover to GDP (in current prices) amounted to - 116% (this figure was 90% in 2013). This key condition is the predominance of (up to 2012******) of one commodity group (precious metals and products from them) in exports of the Kyrgyz Republic
The structure of imports in 1995-2013 changed in the direction of reducing the share of agricultural products, chemical and mining industries, as well as mineral fuels (although the share of this group in the import - 24.1% is high) and an increase in exports of machinery and transport equipment and other manufactured goods.
Given that the share of the Kyrgyz Republic in the world exports is 0.01%, while the share in exports of transition economies is 0.02%, the value of different commodity groups for the global and regional markets and the participation of Kyrgyzstan in the processes of globalization and regionalization are not equivalent. At the present stage, the competitiveness at the regional and global markets belongs to a number of product groups. Precious metal ores, ineluding gold and nonmonetary gold (0.4% of world exports), electricity (0.24%), fruits and vegetables (0.32%) have the most competitiveness on the world market. The structure of Kyrgyzstan exports to the regional market (mainly the CIS market) is more diversified. A significant share of the exports of Kyrgyzstan takes light industrial products and food products. The most competitive product groups are women and children’s clothing, textiles (10.56% in the exports of transition economies), fruits and vegetables (12.5%), ores of precious metals, including gold and nonmonetary gold (9.95%), waste non-ferrous metals (7.67%), electricity (3.42%).
The competitiveness of these product groups and industries in the global and regional markets led to the influx of foreign direct investment (FDI), receipt of which, with the exception of 2010 and 2012, steadily increased; at the same time structural imbalances in the economy in general and industry in particular were aggravated.
Currently, the bulk of industrial output is produced by four economies - forming manufacturing industries, which accounts for 83.4% of total industrial production. The manufacturing industry in Kyrgyzstan contains metallurgical production and fabricated metal products (59.7%); manufacture of food products (15.8%); textile and clothing production (5.9%); manufacture of other non-metallic mineral products, construction materials (10.7%). Sub-sector “metal production” (98.5%) is dominated in the metallurgical industry. Growth in this sub-sec- tor is mainly achieved by increasing the volume of production ofKumtor Gold Company CISC,
Public Corporation “Kyrgyzaltyn” taking into account the refinery.
Over the past five years, the largest share in the volume of incoming foreign direct investment (FDI) belongs to other capital, the structure of which was dominated by loans from foreign co-owners of enterprises, excluding the year 2011, when the largest share (56%) was reinvested earnings. FDI is concentrated mainly in the manufacturing industries (49.6% of FDI) and trade, repair of motor vehicles, household goods and personal items (14.2%), the financial activities (5.9%) and operations with real estate, renting and rendering the services to consumers (11%).
The main investors of FDI over the past five years were China (32% of FDI), Canada, United Kingdom, Russian Federation (RF) and the Republic of Kazakhstan (RK). The volume of FDI receipts from non-CIS countries in 2013 increased 1.6-fold (compared to 2009 -2.1 times) compared to 2012. The volume of investments from China increased by 3.3 times, Britain - by 15.6% and the investments from Canada, by contrast, fell by 21.2%.
Despite the fact that the volume of FDI from CIS countries increased by 2.1 times compared to 2009 in the year 2013 compared with 2012, their inflow decreased by more than 2 times due to a sharp decline in investments into financial sector by Kazakhstani investors. The volume of investments made by investors from the RF in 2013, compared with the previous year increased by 2.7 times, from the RK - by 1.5 times.
Thus, the participation of Kyrgyzstan in globalization defined dynamics of the economic structure of the country and the main trends of foreign trade and trade policy development. The integration feature of the RK into the global economy, apart from the negative factors on slowing growth, increasing structural imbalances, debt on loans, was a positive trend, in our view, of preserving and enhancing the capacity of regional economic cooperation in the CIS, including the countries of Central Asia and the EEU.
Kyrgyzstan in terms of regionalization process: Key Partners
Participation of the Kyrgyz Republic in the regionalization is related to the integration processes of Eurasia under international organizations, and the prospects of integration define trends in the development of trade and economic relations with major trading partners in post- Soviet Eurasia, overseas in Europe and Asia.
Major trends in foreign trade OfKyrgyzstan reflect the priority of the regional relations with the other CIS countries, which accounted for 38.5% of exports and 49.2% of the country’s imports, as well as the growing role of the Asian vector of cooperation and reducing the role of the European direction. In the geographical structure of foreign trade, the main share (56.9% of turnover in the year 2013) is typical of three countries - China, Russia and Kazakhstan.
Russia is a key partner of the KR in the CIS, China - in the SCO, Kazakhstan - in Central Asia region. The depth of the economic and trade relations and involvement of Kyrgyzstan in regional economic relations under the integration strategy of the Russian Federation, Republic OfKazakhstan and People’s Republic of China determine regional economic impact of these three states.
Currenlty the Republic of Kazakhstan has a leading influence on the formation of the import policy OfKyrgyzstan (18.8% of Kyrgyzstan imports), the Russian Federation - on export policy (33.2% of the Kyrgyzstan exports). However, China has more leading prerequisites as to the economy of Asia, Central Asia and the SCO, as well as the impact on the trade policy OfKyrgyzstan in the long term, given the positive dynamics Ofbilateral trade development, a strategy of combining trade and transit potential of Central Asian countries in the framework of the Chinese concept of “One zone - one way”, China’s investment opportunities and initiatives in the region.
At the moment the economic space of the EEU and the CIS remains of strategic importance for Kyrgyzstan in terms of formation of export policy and reducing of the negative balance of trade of the Republic, as well as a policy of diversification and overcoming of the structural imbalances in the economy. Trade and economic relations with Central Asian countries of Kyrgyzstan are still alive. In the year 2013, the share of the CA-4 (Kazakhstan, Tajikistan, Uzbekistan and Turkmenistan) accounted for 29.5% OfKyrgyzstan exports and 11.6% of Kyrgyzstan imports. The Kyrgyz Republic established the highest level of trade and economic relations with Kazakhstan and Uzbekistan. The coefficient of trade and economic cohesion of Kyrgyzstan with Kazakhstan and Uzbekistan in 2013 was equal to 0.44, and 042, respectively. For example, the figure is 0.14 for the CIS countries; Russia - 0.1; China - 0.02, Switzerland - o.O8.
At the same time the negative trend of reducing the CIS share becomes more profound in foreign trade, especially imports of Kyrgyzstan (from 56.5% in 2009 to 49.2% in 2013), which may adversely affect the economic prospects of cooperation development within EEU.
Central Asia is a unifying space for coordination of the interests of Russia, Kazakhstan and China in the region through projects for establishment of:
- EEU under the auspices of the Russian Federation;
- Central Asian economic system under the auspices of the Republic OfKazakhstan;
- A unified Asia under the auspices of the PRC.
However, the lack of a Russia - Kazakhstan’s overall vision and strategy for the integration of Central Asian countries as a unified regional economic system in the space of the EEU and SCO complicates the process of the interests’ consolidation of key trade partners in Central Asia.
The participation of Kyrgyzstan in the EEU is of fundamental importance for the economic stability of the EEU regional market by:
- Promotion of the Eurasian integration project in the region and the market of Central Asian;
- Deepening of the integration processes within the CIS’s free trade area;
- Increase the opportunities for combining of EEU and SCO economic potentials.
The positive effect of the Kyrgyzstan participation in the Eurasian integration project is due, in our opinion, to a positive influence of the country’s economy on the formation of:
- The dynamics of the EEU macroeconomic development (the Central Asian countries are among the most dynamically developing countries of the world);
- The total resource policy in the framework of the EEU (the development of natural resources and infrastructure in the development of the common market);
- Structural policy (diversification of export and import flows in the framework of the common commercial policy).
A high proportion of the EEU and CIS in trade turnover of the country influence the background of the integration cooperation potential OfKyrgyzstan with the EEU countries. Kyrgyzstan and the Republic of Belarus (RB) are the states, the most focused (in the CIS and EEU) on the regional market and integrated into the commercial space of the CIS. The share of transition economies in Kyrgyzstan exports is the highest among the countries of the EEU-5 and greater than 68%, for comparison, the share of transition economies in the exports of the Republic of Belarus - 61.6%, exports of Armenia - 37.1%, exports of the EEU-5 - less than 15%.
The CIS Economic Space and market are also important in the formation of the import policy of Kyrgyzstan within the EEU. The share of transitional economies in Kyrgyzstan imports amounted to 50.6%, which is significantly higher than the average value in the EEU - 18.7%. For comparison, the share of the transitional economies in Kazakhstan imports is equal to 44.6%, Russia -13.2%, Armenia - 37%, Belarus - 58.1%. The CIS countries account for a total of 49.6% OfKyrgyzstan trade turnover, non-CIS countries - 50.4%; Central Asian countries -14.3%; four participating countries of the EEU -38.8%, of which Kazakhstan and Russia - 38.5%. At the same time, the participation of Kazakhstan and Russia in the formation of trade policies and their impact on the market of this country is different. Kazakhstan is actively involved in shaping the export flows from Kyrgyzstan, and this trend is strengthened; and Russia participates in import flows to Kyrgyzstan, and the trend continues to diminish. Therefore, Kazakhstan’s share in exports from Kyrgyzstan grew from 8.4% in 2009 to 18.8% in 2013. The share of the Russian Federation, respectively, decreased from 11.1% to 7.6%.
Structural and socio-economic problems of Kyrgyzstan, in our view, can have no significant impact on the economic situation in the EEU due to insufficient size of the economy and trade turnover OfKyrgyzstan with the countries of the EEU. Thus, the share of Kyrgyzstan in the total turnover of the EEU-5 is equal to 0.7% (exports - 0.3%, imports -1.4%), in total GDP - 0.3%. However, there are some problems, a negative influence of which on the processes of Kyrgyzstan integration into the regional market of EEU should be impartially assessed. In our opinion, this is the problem of forming of, as described below, under the EEU:
- A single product market and the impact of re-exports through Kyrgyzstan. The main reexport items through Kyrgyzstan are vehicles, parts and consumer goods from China and some other countries (Turkey, Korea, and India). After 2008, the volume of re-exports steadily declined, which was connected with the crisis of 2008-2009, then due to the formation of the Customs Union in 2010. Supply of petroleum products occupied a special place in re-export, in particular, of the Russian oil products to Tajikistan and Afghanistan;
- A single labour market and the impact of labour migration flow from Kyrgyzstan. The peak of population outflow from the Kyrgyz Republic took place in the 90s, followed by the official services recorded a negative migration outflow. Labour migration has the particular importance in the economy OfKyrgyzstan. According to various studies, about 1 million people from Kyrgyzstan are currently working abroad.
The largest number of migrant workers (80%) goes to work in Russia, more than 90% of cross-border transfers of individuals to Kyrgyzstan pass through Russian money transfer system. The problem for Kazakhstan, which has a common border with Kyrgyzstan, stretching over 1200 km, may be to prevent the re-export of duty-free goods from China. However, the above problems of forming a single product market and labour market in the framework of the EEU relate more to the Russian Federation.
Kazakhstan and Kyrgyzstan in the Eurasian Integration Project
The structure of foreign trade of Kyrgyzstan in the framework of the EEU is formed in the process of commodity exchange with Russia and Kazakhstan, which accounted for 97.6% of total exports from Kyrgyzstan to the countries of EEU-4 and 95.6% of imports from the EEU- 4.
The main exports of Kyrgyzstan in the EEU include textiles and textile products (23.9%), mineral products (16.4%), herbal products (14.8%). In total, the share of the three major groups of goods exported from Kyrgyzstan to EEU market is 55.1%. The structure of Kyrgyzstan imports from Russia and Republic of Kazakhstan account for 50.4% of mineral products.
However, in our opinion, the specificity of the formation of export-import trade flows between the countries of the EEU (Kazakhstan and Russia) and the Kyrgyz Republic reflects the negative foreign trade balance (the difference between exports and imports) in the context of individual product groups. This should consider the positive trade balance of the Republic OfKazakhstan and the Russian Federation. The negative balance of foreign trade in the context of individual commodity groups is characterized on the one hand, by the lack of development of the individual commodity markets, on the other hand by the competitiveness of this commodity group in the market of the partner country.
The negative balance of foreign trade of Russia and Kyrgyzstan by product groups is formed mainly by imports of the product group as textiles and textile products from Kyrgyzstan. This gives reason to talk about underdevelopment of textile market in Russia and the relative competitiveness of textile products from Kyrgyzstan in the Russian commodity market, although the magnitude of the negative balance of the Russian Federation trade with Kyrgyzstan in the context of this commodity group decreased (from -160.4 million dollars in the year 2011, to -11.1 million dollars in the year 2013).
Kazakhstan is the largest trading partner of Kyrgyzstan on a wide range of goods, but mostly it refers to goods exported from Kyrgyzstan: textiles and textile articles (28.6% of the exports OfKyrgyzstan in the year 2013), vegetable products (19.2%), food animal products (6.1%), chemical industry (7.6%), articles of stone, plaster, asbestos, mica (7.9%). The main imports from Kazakhstan to Kyrgyzstan make up the two main product groups, which account for 49.4% of total imports of the RK - herbal products (wheat and cereal products) and mineral products (coal and petroleum products). In addition, a significant share of Kyrgyzstan’s imports from Kazakhstan is food products and beverages (18.6%), base metals and products made of them (10.1%).
Commodity exchange of Kyrgyzstan and Kazakhstan has a more diversified structure than with Russia. Kazakhstan market exercises the need for different groups of goods, including those produced in the process industries of Kyrgyzstan and competitive in the commodity market OfKazakhstan. The basis of the formation for the foreign trade negative balance of Kazakhstan and Kyrgyzstan in the context of individual product groups, composes of the dominant imports of such goods as clothing and textiles (-107.2 million dollars), live animals and animal products (-22.2 million dollars), articles of stone, plaster, cement, asbestos, mica (-24.7 million dollars), machinery, electrical equipment (-7.3 million dollars), ground, air and water transport (-19.1 million dollars) from Kyrgyzstan.
Due to the small share of Kyrgyzstan in the foreign trade OfKazakhstan (less than 1%); the supply of these product groups cannot have a significant impact on the formation of the trade balance between Kazakhstan and Kyrgyzstan at present and in the future. In our opinion, on the contrary, we should pay attention to the possibility of economic cooperation in the textile industry, livestock and other industries, the demand for products which increases in the commodity market OfKazakhstan. It will create the preconditions for economic growth of Kyrgyzstan, integration in EEU commodity markets, the alignment of the structural and socio-economic imbalances, which ultimately have a positive impact on the economic stability of the Eurasian integration space in Central Asia.
In general, foreign trade relations of Kazakhstan in Central Asia (including Kyrgyzstan), in spite of the low proportion of the region’s foreign trade of the republic is developing dynamically than in the CIS region. If the share of CIS countries in imports and exports OfKazakhstan from 2005-2014 decreased respectively from 14.6 to 12.5% and from 44.6 to 42.3%, the proportion of CA, conversely, increased from 2.3 to 3.5%, and 2.3 to 3.8% , respectively. Kyrgyzstan’s share in the trade turnover of Kazakhstan for the period also rose, albeit slightly (in exports from 0.8 to 0.9%; in imports from 0.7 to 0.9%).* Given this trend, Kazakhstan should be interested in implementation of the existing conditions of foreign trade dynamic development in the region of Central Asia and development of Central Asian vector of cooperation with the countries of the region and Kyrgyzstan in particular. To do this, Kazakhstan needs to reverse the trends associated with the weakening of investment cooperation in Eurasia (EEU) and the Central Asian markets.
Despite the fact that the inflow of FDI in the Kyrgyz economy since the mid-1990s was stimulated by the openness of the economy and specially established liberal regulations for entering the domestic market for foreign businesses, the presence of common problems in the former Soviet Union led to a sharp decline in FDI inflows from the CIS countries, including Kazakhstan. CA share in FDI outflows from Kazakhstan to Kyrgyzstan continues to decline. To date, the share of Kazakhstan’s FDI in Kyrgyzstan decreased from 13.5% in 2005 to 0.5% in 2014. The share of FDI from Kazakhstan to the countries of EEU-4 and CA also decreased from 43.7 to 4.3% and from 16 to 1.7%, respectively.
Attractive spheres to foreign investors are investing in the processing industry of Kyrgyzstan. Kazakhstani investment in the processing industry OfKyrgyzstan under the EEU will realize the measures, which aimed at establishment of the Common Economic Space (CES) and the common internal market by 2025 as provided by the Treaty on EEU. It is especially important for Kyrgyzstan to take part in the gradual formation of common markets in key sectors of the EEU economy:
- Electric power industry. The EEU agreed to launch the common electricity market in 2019;
- Oil sector. By 1 January 2025 at most, common markets of oil and gas should be run in the EEU space.
The specifics of the situation for Kazakhstan connected with the entry of Kyrgyzstan in the EEU, implies the unlocking the potential of trade cooperation in the Central Asian regional market; the strengthening of the integration process with the participation of Central Asian states in the Eurasian integration project; creating the preconditions for regional economic stability of Central Asia and the EEU, since:
- Firstly, Kyrgyzstan is one of the main water distributing states in Central Asian;
- Secondly, the membership of Kyrgyzstan in the EEU expands integration opportunities for participation OfTajikistan in the Union. According to experts, it will help solve the problem of free movement of labour migrants from Tajikistan to Russia, imports of key products from Russia and Kazakhstan;
- Thirdly, in the framework of the EEU Kazakhstan and Kyrgyzstan are able to coordinate efforts for establishment of transport corridors and the regulating of trade flows in Central Asia, as well as expanding the trade and economic relations with other countries on the EEU market in the region and in the format of the CIS free trade area.
In our view, the development of vertical integration ties in Central Asia with the countries of the region (between enterprises - consumers and businesses - suppliers, between adjacent links of the technological and distribution value chains) is of fundamental importance in the Kazakhstan at the moment. The development of horizontal integration ties is characteristic for Kazakhstani and Russian enterprises of mineral complex, producing similar products.
It is critical to involve Kyrgyzstan and the Central Asian countries to the formation of industrial markets in some segments of the economy related to crop production, animal husbandry, food, textile and metallurgical industries, as well as the production of electric power, which represents a high infrastructural importance for the economy of Central Asia. Kazakhstan could also engage investment opportunities for the establishment of a common transport and logistics infrastructure in the region, which is especially important in the conditions of large-scale infrastructure projects within formation of the “Silk Road” from China through Central Asia.
Thus, the market economy of Kyrgyzstan is formed under the influence of globalization and regionalization processes, and the key factors that determine its current state became the WTO membership and participation in integration projects in the post-Soviet space of CIS countries.
Kyrgyzstan’s participation in the globalization processes has led to an increase in exports to the world market of steel products, in particular non-monetary gold and the faster growth ofimports from WTO countries, primarily from China. The features of the Kyrgyz economy development in conditions of globalization are the preservation of the regional cooperation capacity in the CIS, including the countries of Central Asia and the EEU.
Regionalization processes in Kyrgyzstan related to the integration processes in Eurasia in the framework of international organizations of the CIS and the Shanghai Cooperation Organization, and trends and economic relations with the three main trade partners - Russia, Kazakhstan, and China, define the prospects of integration cooperation.
Accession to the EEU determined the main vector of Kyrgyzstan economic and trade cooperation in the Eurasian region in the medium and long term. However, China has a greater influence on the formation of Kyrgyzstan trade policies at present and in the near term, given the strategy of cooperation with the countries of Central Asia in the framework of the Chinese concept of “One zone - one way”, as well as investment opportunities and initiatives of People’ Republic of China in the region.
We opine that, the prospects of cooperation with Kyrgyzstan in the framework of the EEU are determined not only by the Treaty on the EEU, but the concept of integration of Central Asia countries in the EEU as the fragments of a single regional space. The absence of such a concept by Russia and Kazakhstan at the moment could mean the growth of trade and investment pressure of China and the inability of EEU to enter into competition with China’s integration projects.
The membership of Kyrgyzstan in the EEU is of fundamental importance for the economic stability of the EEU market, as it helps to create a prerequisite for the promotion of the project of Eurasian integration in the region and the Central Asian market; deepening of the integration processes within the CIS free trade area; expanding of opportunities for combining of the economic potentials of the EEU and SCO, and also has a positive effect on the formation of the macroeconomic dynamics of the EEU, as well as resource and infrastructure policy. High share of the countries of the CIS and EEU in the trade turnover of the Kyrgyzstan provides the background of the Kyrgyzstan’s integration cooperation potential as to the countries of the CIS and EEU.
Structural and socio-economic problems of Kyrgyzstan, in our opinion, are unable to be irreversible, or have any significant negative impact on the economic situation in the EEU due to insufficient size of the economy and trade turnover of Kyrgyzstan with the countries of the EEU. However, there are some problems to be considered in view of their negative impact; these are the problem of a single product market forming under EEU and the impact of reexports through Kyrgyzstan, as well as a single labour market and the impact of labour migration flows from Kyrgyzstan. These problems affect all countries of the EEU, but the Russian Federation largely. Overall, the accession of Kyrgyzstan to the EEU can dramatically affect the change in the state of the commodity market and the labour market in the EEU (and in the countries of the EEU) in view of stabilization of the existing level of labour migrants flows and the current dynamics of the turnover, as well as the implementation of measures to control the movement of trade flows within the EEU.
Kazakhstan has the strong trade and economic ties with Kyrgyzstan in the CIS, and is the largest partner in the wide range of goods. In this regard, it should consider the following measures while the forming of trade cooperation policy with Kyrgyzstan:
- Take into account the specifics of exportimport trade flows formation between Kazakhstan and Kyrgyzstan, which reflects a negative balance of foreign trade in the context of individual commodity groups, produced in Kyrgyzstan, such as textiles and livestock products, in order to encourage inflows to Kazakhstan;
- Pay attention to the possibility of expanding the economic cooperation in the textile industry, livestock, and other industries, the demand for products of which increases in the commodity market OfKazakhstan.
Given the small share of Kyrgyzstan in the foreign trade of Kazakhstan, expansion of goods supplies, which are produced in Kyrgyzstan, cannot have a material adverse effect on the formation of trade surplus OfKazakhstan. It will create conditions for Kyrgyzstan to incorporate into EEU commodity markets, to align the structural and socio-economic disparities, to create new jobs, which will ultimately have a positive impact on the economic stability of the Eurasian integration space and space in Central Asia.
Kazakhstan’s foreign trade relations with Kyrgyzstan and other Central Asian countries are developing dynamically than in the CIS region. For the implementation of the existing preconditions on the dynamic development of trade in the region and the development of the Central Asian vector of cooperation within the framework of trade and investment policy in Kazakhstan it should:
- Change investment trends prevailing in respect of the Central Asian region (weakening of investment cooperation in the regional market);
- Direct Kazakhstani investments in processing industry of Kyrgyzstan, that under the EEU will realize the measures which aimed at establishment of the Common Economic Space (CES) and the common internal market by 2025 as provided by the Treaty on EEU;
- Stimulate the participation of Kyrgyzstan in the gradual formation of common markets in key sectors of the EEU economy, especially in the electric power industry and the oil sector;
- Involve Kyrgyzstan and the Central Asian countries in the formation of industrial markets in some segments of the economy related to the production of food, textile and metallurgical industries, as well as the production of electric power, which represents a high infrastructural importance for the economy of Central Asia;
- Use the investment opportunities of Kazakhstan for the establishment of a common transport and logistics infrastructure in Central Asia
Kyrgyzstan and prospects of EEU expansion for Kazakhstan
Dariya Mukhamedzhanova - Principal Researcher of KISR, Ph.D. in Economics
Kyrgyzstan’s entry into the EEU signifies a new stage in the development of the Eurasian integration space, which is associated with the formation of its new economic borders in Central Asia. The article analyzes the main trends in the economic development of Kyrgyzstan in the context of globalization and regionalization, development problems of EEU considering Kyrgyzstan’s entry into the Union, as well as the opportunities and prospects of EEU expansion for Kazakhstan.