New Op­por­tu­ni­ties

Be­larus, Kaza­khstan and Rus­sia have de­ter­mined the key area of busi­ness de­vel­op­ment in the Cus­toms Union and the Sin­gle Eco­nomic Space

Economy of Belarus - - CONTENTS - Olga KO­ZlOVICH

Be­larus, Kaza­khstan and Rus­sia have de­ter­mined the key area of busi­ness de­vel­op­ment in the Cus­toms Union

and the Sin­gle Eco­nomic Space

new op­por­tu­ni­ties for im­ple­ment­ing joint projects as well as ways to re­move bar­ri­ers that stand in the way of tighter busi­ness co­op­er­a­tion of the three coun­tries were dis­cussed at the con­fer­ence “from the Cus­toms Union to the Sin­gle Eco­nomic Space: busi­ness in­ter­ests” that took place in Moscow in July. at­tend­ing were the heads of govern­ment of Be­larus, Kaza­khstan and rus­sia. the prime min­is­ters ap­pre­ci­ated the busi­ness cli­mate im­prove­ment pro­pos­als voiced by busi­ness­men.

Es­sen­tial Dis­cus­sion

The dis­cus­sion about how ad­van­tages of the Cus­toms Union can be made more tan­gi­ble for busi­ness was pro­duc­tive. Par­tic­i­pants at the con­fer­ence re­marked that the treaties and agree­ments signed by the Cus­toms Union mem­ber states had con­sid­er­ably fa­cil­i­tated the trans­porta­tion of com­modi­ties. The ex­ist­ing bor­ders no longer sep­a­rate the three coun­tries from each other. The doc­u­ments had laid down a solid base for suc­cess­ful de­vel­op­ment of busi­ness co­op­er­a­tion.

In Novem­ber-de­cem­ber 2010 Be­larus, Kaza­khstan, and Rus­sia signed 17 treaties that made up the le­gal base of the Sin­gle Eco­nomic Space (SES). The num­ber in­cludes treaties on a co­or­di­nated macroe­co­nomic pol­icy, co­or­di­nated prin­ci­ples for currency man­age­ment, cre­ation of con­di­tions on fi­nan­cial mar­kets to en­able a free money flow, doc­u­ments on sin­gle prin­ci­ples and rules of com­pe­ti­tion. These doc­u­ments are meant to se­cure a free flow of com­modi­ties, ser­vices, cap­i­tal and work­force be­tween the three coun­tries. There are plans to sign about 30 new treaties in the near fu­ture to build upon the ex­ist­ing SES doc­u­ments.

It is sim­pler for Be­larus, Kaza­khstan, and Rus­sia to unite ef­forts to get in­te­grated into the global econ­omy, stressed Rus­sian Premier Vladimir Putin in his speech at the fo­rum. He re­marked that the Cus­toms Union mem­ber states had gone to con­sid­er­able length to cre­ate the sin­gle cus­toms ter­ri­tory and the Sin­gle Eco­nomic

Space that will be­come fully oper­a­tional in Jan­uary 2012. Cus­toms con­trol has been shifted to the ex­ter­nal bor­der of the Cus­toms Union this year.

“It is not a for­mal can­cel­la­tion of ad­min­is­tra­tive pro­ce­dures. For the first time since the So­viet Union col­lapse a step has been made to re­store nat­u­ral eco­nomic and trade ties in the post-so­viet space,” stressed Vladimir Putin.

Prime Min­is­ter of Be­larus Mikhail Myas­nikovich be­lieves that the Cus­toms Union and the eco­nomic as­so­ci­a­tions that will fol­low it will be needed at least be­cause there is trust and the un­der­stand­ing of the need to make cer­tain com­pro­mises in re­la­tions be­tween na­tions.

The G3 in­te­gra­tion has un­doubt­edly gen­er­ated tan­gi­ble pos­i­tive re­sults: in Jan­uary-april 2011 the trade turnover be­tween Be­larus, Rus­sia, and Kaza­khstan went up by 43%. It is a very good in­di­ca­tor, the prime min­is­ters of the three coun­tries be­lieve.

To­wards a Sin­gle Tax­a­tion Sys­tem

Many is­sues – in tax leg­is­la­tion, man­u­fac­tur­ing co­op­er­a­tion, de­vel­op­ment of trans­port in­fra­struc­ture - will have yet to be ad­dressed to al­low full use of the Cus­toms Union’s busi­ness po­ten­tial.

For in­stance, at the con­fer­ence Pres­i­dent of the Kun­yavsky Busi­ness Union of En­trepreneurs and Em­ploy­ers Ge­orgy Badei said that it was nec­es­sary to har­mo­nize laws within the G3 frame­work. For now leg­is­la­tions of the three coun­tries dif­fer in the con­tent of taxes, tax rates, and the for­ma­tion of the tax­able base. Ge­orgy Badei sug­gested that busi­ness as­so­ci­a­tions of the three coun­tries should fo­cus their at­ten­tion on co­op­er­a­tion with the govern­ment in or­der to re­solve the prob­lem. In his opinion, the tax leg­is­la­tion of Kaza­khstan should be used as a ref­er­ence point be­cause it is more lib­eral than those of Be­larus and Rus­sia.

“If we want to take the best, I sug­gest us­ing the Kazakh sys­tem and build­ing around it,” re­marked Ge­orgy Badei.

The Pres­i­dent of the Kun­yavsky Busi­ness Union also sug­gested re­vis- ing the so­cial tax that em­ploy­ers have to pay these days. For in­stance, in Be­larus the so­cial tax is set at 34% of the salary fund while in other coun­tries the fig­ure is much lower. VAT, other in­di­rect taxes also need close at­ten­tion, be­lieves Ge­orgy Badei. Ex­perts be­lieve that in the first few years af­ter Rus­sia in­tro­duced VAT based on the coun­try of desti­na­tion prin­ci­ple Be­larus’ reg­is­tered ex­port dropped by about 30%. Dif­fi­cul­ties with con­firm­ing ex­port de­liv­er­ies forced many Be­laru­sian busi­ness­men to open rep­re­sen­ta­tive of­fices in Rus­sia in or­der to con­firm the im­port of com­modi­ties from Be­larus. The pack­age of agree­ments signed as part of the Cus­toms Union re­lieved Be­laru­sian busi­ness­men from the need to set up rep­re­sen­ta­tive of­fices in Kaza­khstan in ad­di­tion to those in Rus­sia. Some of the prob­lems have been re­solved this way but there are still dif­fi­cul­ties with con­firm­ing the col­lec­tion of in­di­rect taxes.

Har­mo­niza­tion of the tax­a­tion sys­tems is a dif­fi­cult way to es­tab­lish, if pos­si­ble, min­i­mal tax rates, re­marked Dmitry Kiyko, Head of the Cen­tral Of­fice for Tax Pol­icy and Bud­get Rev­enues of the Be­laru­sian Fi­nance Min­istry. Each coun­try has com­piled its own list of ma­jor taxes, which are sub­ject to uni­fi­ca­tion, about 6-7 of them. Work is in progress to cre­ate the foun­da­tion of the new tax­a­tion leg­is­la­tion. Pe­cu­liar­i­ties of the three economies are taken into ac­count. It is the pe­cu­liar­i­ties that make the ad­vance to­wards sin­gle tax rates slow. The process will take a lot of time and will need close at­ten­tion. First of all, the pos­si­ble range of tax rates has to be worked out.

“The in­ter­est of the busi­ness com­mu­nity in min­i­miz­ing so­cial tax rate is un­der­stand­able how­ever it is nec­es­sary to take into ac­count the need to ob­serve so­cial jus­tice prin­ci­ples,” un­der­lined the rep­re­sen­ta­tive of the Be­laru­sian Fi­nance Min­istry.

Tran­sit With­out Bar­ri­ers

Rep­re­sen­ta­tives of the trans­porta­tion in­dus­try also men­tioned prob­lems that ex­ist in the Cus­toms Union.forin­stance,niko­lai­borovoi, Pres­i­dent of the Be­laru­sian as­so­ci­a­tion of in­ter­na­tional road car­ri­ers BAMAP, be­lieves that the three coun­tries do not use their tran­sit po­ten­tial in full. The need to en­able a sin­gle trans­port space is par­tic­u­larly vi­tal these days be­cause im­por­tant in­ter­na­tional mo­tor­ways and rail­roads cross the Cus­toms Union ter­ri­tory from east to west and from north to south. Their ca­pac­ity is only par­tially used be­cause Be­larus, Rus­sia and Kaza­khstan ac­count for only half of the pos­si­ble freight traf­fic.

Ac­cord­ing to Niko­lai Borovoi¸ the de­vel­op­ment of tran­sit op­por­tu­ni­ties is slowed down by sev­eral bar­ri­ers that greatly re­duce the com­pet­i­tive abil­ity of the tran­sit cor­ri­dors

of the three coun­tries. For in­stance, a truck can travel 280km per day on the av­er­age in the Cus­toms Union while in the Euro­pean Union the fig­ure stands at 800km.

“The slow ve­hi­cle speeds drags out the time re­quired for the ex­change of com­modi­ties,” said Niko­lai Borovoi. “We are work­ing so hard to find in­vest­ments to only put them on hold with trucks”.

Steps are taken to im­prove the sit­u­a­tion. In par­tic­u­lar, ef­forts are put into al­low­ing trucks to cross the Be­laru­sian-rus­sian bor­der as fast as pos­si­ble.

“It is a step for­ward and we should be con­sis­tent in go­ing forth,” stressed Niko­lai Borovoi.

Chair­man of the Be­laru­sian Cham­ber of Com­merce and In­dus­try Mikhail My­at­likov also voiced his views on how the ad­van­tages the Cus­toms Union of­fers can be made more tan­gi­ble for the busi­ness com­mu­nity. He sug­gested grant­ing spe­cial pro­tec­tion to the man­u­fac­tur­ers that try to use as many do­mes­tic com­po­nents as pos­si­ble. In his opinion, it is nec­es­sary to en­cour- age do­mes­tic pro­duc­tion, re­duce the share of im­ported com­po­nents in Be­laru­sian prod­ucts and make the tran­si­tion to the de­vel­op­ment and pro­duc­tion of own goods. It will al­low cre­at­ing new high-tech enterprises, additional jobs, se­cur­ing ex­tra tax rev­enues for the state bud­get.

“We strive to reach these goals and will pro­tect the man­u­fac­tur­ers that use this scheme. Forms of co­op­er­a­tion may vary and may in­clude joint ven­tures,” said Mikhail My­at­likov. In his words, these is­sues were raised be­fore the heads of govern­ment, min­istries and agen­cies of Be­larus, Rus­sia, and Kaza­khstan.

New Forms of Co­op­er­a­tion

In or­der to en­hance the com­pet­i­tive abil­ity of their economies, Be­larus, Kaza­khstan, and Rus­sia should make the tran­si­tion to new more ad­vanced forms of co­op­er­a­tion – transna­tional cor­po­ra­tions, Prime Min­is­ter of Be­larus Mikhail Myas­nikovich said at the con­fer- ence. It is these al­liances that can make the Cus­toms Union a global fo­cus of eco­nomic power in the fu­ture. The three coun­tries can join ef­forts to pro­mote their prod­ucts onto for­eign mar­kets more eas­ily.

The Be­laru­sian Premier in­vited busi­ness cir­cles of Rus­sia and Kaza­khstan to more ac­tively par­tic­i­pate in the pri­va­ti­za­tion of enterprises in Be­larus. He re­marked that the coun­try ex­pects in­vest­ments in the chem­i­cal in­dus­try most of all. Ac­cord­ing to Mikhail Myas­nikovich, large and small chem­i­cal in­dus­try projects are also promis­ing. Be­larus is also in­ter­ested in at­tract­ing in­vest­ments in phar­ma­ceu­ti­cal in­dus­try, de­vel­op­ment of mo­bile com­mu­ni­ca­tion, mi­cro­elec­tron­ics, me­tal­lurgy and me­chan­i­cal en­gi­neer­ing.

It is nec­es­sary to es­tab­lish in­te­gra­tion in the high-tech area, too, added Mikhail Myas­nikovich. The con­struc­tion of the Be­laru­sian nu­clear power plant is one of the most promis­ing projects in this area. Rus­sia will take part in the project.

The Be­laru­sian head of govern­ment also un­der­lined the im­por­tance of en­abling equal eco­nomic op­er­a­tion terms in the Cus­toms Union.

“We all know about the is­sues that have yet to be ad­dressed to en­able the sin­gle com­pet­i­tive space on the com­mon mar­ket, to do away with state pro­tec­tion­ism and un­fair forms of sub­si­dies to national man­u­fac­tur­ers,” said the Be­laru­sian Premier. “The fact that the govern­ment is in­volved in set­ting prices for cer­tain com­modi­ties in the Cus­toms Union these days re­sults in a colos­sal dis­par­ity of prices on the com­mon mar­ket and is in essence aimed at re­duc­ing the com­pet­i­tive abil­ity of com­modi­ties made by some coun­tries while sub­si­diz­ing the ex­port of other coun­tries”.

Mikhail Myas­nikovich be­lieves it is im­pos­si­ble to re­solve these prob­lems at once. How­ever, ef­forts should be put into reach­ing these goals in or­der to fix the dif­fer­ences in prices for fuel, en­ergy and other com­modi­ties.

“Cer­tainly, we have a ma­jor dis­par­ity of prices, for in­stance, prices for nat­u­ral gas. Over the last six years the nat­u­ral gas price Be­larus pays has in­creased by 350% while prices for Be­laru­sian exports to Rus­sia went up by only 22%. Truly equal con­di­tions are needed in or­der to en­able fair com­pe­ti­tion,” said Mikhail Myas­nikovich.

In turn, Prime Min­is­ter of Rus­sia Vladimir Putin re­marked that de­spite the is­sues that have yet to be ad­dressed, the Cus­toms Union mem­ber states have noth­ing to ar­gue about as far as the for­ma­tion of the Sin­gle Eco­nomic Space is con­cerned.

“We have dis­cussed what has to be done soon in or­der to make the Sin­gle Eco­nomic Space fully oper­a­tional as from 1 Jan­uary 2012 for the sake of deeper in­te­gra­tion of our coun­tries that will bring about a free flow of money, com­modi­ties, and work­force. We are close to en­abling these con­di­tions. In­trastate pro­ce­dures in our coun­tries are un­der­way. We have no con­tra­dic­tions re­gard­ing these con­di­tions to­day. Only tech­ni­cal­i­ties are left to be ad­dressed.

“As part of the G3 Be­larus, Kaza­khstan, and Rus­sia can of­fer top­ics for a fu­ture di­a­logue with the Euro­pean Union and other coun­tries and re­gions. The Cus­toms Union mem­ber states aim to set up a free trade zone with the Euro­pean Union in the fu­ture.

“Con­sul­ta­tions on set­ting up a free trade zone with the Euro­pean Free Trade As­so­ci­a­tion are un­der­way. There are plans to start ne­go­ti­a­tions on set­ting up such a zone with the Euro­pean Union in the fu­ture,” said the Rus­sian Premier. “It is not a sim­ple task but to­gether within the frame­work of the Sin­gle Eco­nomic Space we can do it much more ef­fec­tively and with greater ben­e­fits for each coun­try in com­par­i­son to each coun­try do­ing it alone”.

At the con­fer­ence the sides also came to terms on func­tions and op­er­a­tion terms of the Cus­toms Union. It was de­cided that the com­mis­sion will work on a per­ma­nent pro­fes­sional ba­sis. In the near fu­ture it will take over about 90 ex­tra func­tions.

The prime min­is­ters also talked over the es­tab­lish­ment of the EURASEC court that will start work­ing on 1 Jan­uary 2012.

The Cus­toms Union will en­ter a new de­vel­op­ment stage when it be­comes the Sin­gle Eco­nomic Space on 1 Jan­uary 2012. The stage pro­vides for cre­at­ing a Eurasian union that other CIS states may join. Ac­cord­ing to Vladimir Putin, “the East­ern al­ter­na­tive” to the Euro­pean Union may be­come a re­al­ity as early as 2013.

Pres­i­dents of Be­larus and Kaza­khstan,

Alexan­der Lukashenko and Nur­sul­tan

Nazarbayev con­firm the in­ter­est of their coun­tries

to de­velop mu­tu­ally ben­e­fi­cial co­op­er­a­tion within

the frame­work of the Cus­toms Union

The Ka­men­nyi Log bor­der check­point on the Be­laru­sianLithua­nian bor­der has been equipped within the frame­work of the joint EU/ UNHCR project on in­creas­ing ef­fi­ciency of sep­a­rat­ing and man­ag­ing mi­gra­tory flows on the state bor­der and in­side the Repub­lic of Be­larus (phase II)

Be­larus has pro­posed Rus­sia and Kaza­khstan

to cre­ate transna­tional al­liances in the Cus­toms Union. The cor­re­spond­ing pro­posal was an­nounced by Prime Min­is­ter of Be­larus Mikhail Myas­nikovich at the con­fer­ence

“From the Cus­toms Union to­wards the SES: busi­ness in­ter­ests” in Moscow on 12 July

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