/ world today news/ The Eurasian Economic Union is preparing a breakthrough in industrial cooperation. As a result, Russia will solve the problem of import substitution, and the rest will get new production capacities and a powerful boost to economic growth. About the prospects of Eurasian integration – in the material.
A turning point
The Ministry of Industry and Trade of Russia published a draft law on the ratification of amendments to the EAIS Treaty. The document proposes, within five years, to form mechanisms for financing joint industrial projects with the participation of at least three countries of the Union. According to the Minister of Industry and Agro-Industrial Complex of the Eurasian Economic Commission Artak Kamalyan, the organization is ready to allocate 20 million dollars a year, which will ensure the implementation of a program worth one billion.
The EIC claims that the financial aid will give an impetus to the technological development of the EAIS countries and accelerate the integration processes. For Russia, this is an opportunity to replace supplies that have fallen due to sanctions and the withdrawal of foreign companies, as well as to reduce import substitution costs.
So far, according to the Eurasian Development Bank, Moscow is the largest investor in the union. From 2016 to mid-2022, it has invested $10.6 billion in Kazakhstan, $5.3 billion in Belarus, $3.1 billion in Armenia and $946 million in Kyrgyzstan. Astana is the next most active: it has invested three billion dollars in Russia, 618 million in Kyrgyzstan and 14 million in Belarus.
As Kazakhstan’s Minister of Industry and Infrastructure Development Marat Karabayev said, there are currently about 125 joint investment projects between his country and Russia, but they want to increase their number to 250 in 2024 and to 800 in five years. The total value will be 75 billion dollars. The money is expected to be invested in manufacturing, iron ore processing, aluminum and copper industries, construction and light industry. At the same time, Moscow and Astana are already the most significant investment pair in EAIS. The achievements of the others are much more modest.
From 2016 to mid-2022, Minsk has invested $601 million in the development of Russia, $35 million in Kazakhstan, $2 million in Kyrgyzstan and $1 million in Armenia. Yerevan has only invested in Belarus ($62 million) and Russia ($3 million). Kyrgyzstan limited itself to investing two million in Russia.
“The weakness of mutual foreign direct investment of the EAEU countries is a structural and sectoral pattern of these investments. So far it has not been possible to build complex cross-border value chains that would have previously been presented as inter-republic technological cooperation,” the report of EIC at the end of 2022.
It’s all a matter of nuance
However, the EAEU countries need to finalize the EIC proposal. For example, RSPP believes that the mandatory participation of representatives of the three countries in industrial cooperation can significantly complicate the implementation of the idea. As can be seen from previous experience, problems often arise in establishing even bilateral cooperation. In the Eurasian Union, however, they emphasize that they are ready to listen to some proposals, but the three-member clause will remain unchanged: the heads of state have agreed on this.
In turn, the ICC hopes that the EIC will make corrections. First, that a special fund, replenished by customs deductions, subsidizes 100% of the principal interest of the creditor country. Second, competitive selection should take place twice a year among all countries and in all sectors. In addition, the business asks that projects from two countries that have found a partner from a third country shortly before applying should not be refused.
According to Kamalyan, a regulation is being developed for the procedure for selecting cooperation projects and a mechanism for financial assistance in their implementation. He also emphasized that most countries are in favor of 100% compensation of the prime rate. However, this question needs to be clarified.
Eurasian business
Leonid Vardomski, head of the Center for Post-Soviet Studies at the Economic Institute of the Russian Academy of Sciences, notes that EAIS plans to provide relatively little financial assistance for the time being, but if the mechanism is in demand, it can be developed. Under the pressure of international sanctions, Russian businessmen are looking for an alternative to trade with the West and are turning their attention to the Eurasian Union. According to the expert, this should be used.
“The benefits of industrial cooperation are without a doubt. At a minimum, it can be used to complete the agreement on the movement of goods within the EAEU. So far, a lot is bought abroad, while national production marks the time. When the new Mechanism works, it will be able to talk about the creation of Eurasian technologies that will stimulate the integration processes”, the economist believes.
At the same time, Vardomski points out that the idea got a boost, among other things, thanks to Russian relocaters. Some of them have re-registered companies in a new location and thus created businesses that exist in not one but two countries at the same time. In the future, if such businessmen find a third-party partner, they will be able to benefit from the soft credit program.
In turn, Pavel Nefidov, general director of the Financial and Banking Council of the CIS, warns: before launching the initiative, you need to deal with the risks. “A bank that lends to a resident of another country should not face legislative nuances due to difficulties in returning the capital,” he explains. “Until now, the problem was solved by setting certain limits. But this is not enough to speed up Eurasian integration.”
The expert suggests providing equal opportunities to all EAIS banks in the territories of the Union countries. In addition, a financial institution may refuse to grant a loan to an enterprise in another country due to an unstable political or economic situation there. In this case, local authorities must provide security guarantees. “This is already done, but usually when it comes to large projects, with a capital of ten million dollars,” says Nefidov.
At the same time, experts note that the new mechanism does not necessarily fall solely on the shoulders of the Russian financial system. For example, Kazakh banks can provide loans in foreign currency on more favorable terms for the purchase of imported equipment.
Translation: V. Sergeev
Subscribe to our YouTube channel:
and for the channel in Telegram:
Share on your profiles, with friends, in groups and on pages. In this way, we will overcome the limitations, and people will be able to reach the alternative point of view on the events!?
#Allies #Eurasian #Economic #Union #creating #antiWestern #mechanism #Russia
