Integration success relies on keeping up with the times

Single Economic Space requires efforts from all members

By Timofey Kostolevsky

Since early 2012, the Customs Union partners of Belarus, Russia and Kazakhstan have been enjoying life in the new Single Economic Space. The process of integration is now completely settled but there are many small obstacles yet to overcome. Naturally, our newly open market will bring tougher competition for enterprises, encouraging Belarus towards a more liberal economic policy.

In January, a package of 17 international agreements relating to the Single Economic Space became operational, allowing free movement for commodities, services, capital and labour. The Eurasian Economic Commission is to govern integration within the Single Economic Space and the Customs Union (as decided at the Summit, held in December 2011). A gradual shift of Customs Union members towards a Single Economic Space is also envisaged — following WTO norms and principles. A Eurasian Economic Union is the ultimate goal.

“Conditions of economic activity are drastically changing, as Single Economic Space agreements come into force,” explains Professor Georgy Grits, of the Belarusian State University’s Institute of Continuous Education. “However, a transitory period is envisaged — similar to that dealing with Russia’s joining of the WTO.” Of principal importance to Belarus is the use of non-tariff methods to support national manufacturers; this would be impossible without co-ordination with other SES members. Equal conditions are to be gradually established for legal entities — regardless of whether they are privately owned or state run, national or foreign. “Tougher competition will allow the launch of major reforms regarding trade, and liberalisation as a whole,” believes Prof. Grits.

Most Belarusian producers need to promptly alter their approach, as many still tend to rely on state support; the major share of GDP in Belarus originates from state run enterprises while, in Russia and Kazakhstan, private companies play a much bigger role. Efficiency rises dramatically when the safety net of state subsidy is removed. However, Belarusian private businesses seem to be wary of the new open market, despite simplified conditions for exports. Of course, competition is now stronger, so domestic businesses need to tighten their reigns, to ensure that they are working efficiently. As the Chairman of the Minsk Capital Association of Entrepreneurs and Employers, Vladimir Karyagin, explains, “The major challenge for us this year is to strengthen mobility, competitiveness and internationalisation of businesses. Much will depend on actions adopted jointly with the Government.”

Under the new Single Economic Space, not only services and commodities but capital and workers may move freely. During the economic crisis of 2011, some Belarusian entrepreneurs began registering their businesses in Russia and Kazakhstan; however, the new union eradicates differences. Enterprises can now be set up in one country while working in another, operating under equal conditions. “On registering their business in Russia and Kazakhstan, our entrepreneurs gain access to their credit-financial systems. Firms should take advantage of the new situation, working anywhere possible,” adds Mr. Karyagin.

Naturally, a transitory period is to be expected, with some issues still to be resolved regarding equality. State bodies and legal entities need to react swiftly to the new situation so that, by January 1st, 2013, our three countries’ macroeconomic figures are synchronised — including in their level of inflation. No one should lag behind.

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