29.01.2020 Author: Dmitry Bokarev

Uzbekistan Prepares to Join EAEU

TASH

The Eurasian Economic Union (EAEU) officially began operating on January 1, 2015 (its members are Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia). In January 2020, it marked its fifth anniversary. It has an impressive list of achievements to its name: numerous customs barriers have been removed within the Eurasian Economic Space, all five countries have become desirable target markets for each other, and citizens of the Customs Union can now buy products from other EAEU countries for about 20% cheaper on average. Russia’s trade with Armenia increased by $700 million, and trade with Kyrgyzstan grew by $500 million, reaching $18 billion annually. Belarus is breaking records: its trade with Russia has reached $34 billion, and Belarusian products have a 15% market share in Russia. The Eurasian Development Bank (EDB) is also carrying out interesting work, which allocated funds to finance 23 large integration projects in 2019 alone. Industry in EAEU member states received $1.3 billion worth of investment from the Bank in 2019.

These achievements are attracting other countries. On November 29, 2019, for example, Hungary and Moldova expressed that they would like to join the EAEU. It happened during the annual Eurasian Economic Integration Conference held last year.

There is another Eurasian state which would not mind joining the EAEU, if the statements the Republic of Uzbekistan has been making are anything to go by, and the EAEU would be happy to welcome Uzbekistan. This is one of the most successful post-Soviet states, and the fourth most economically developed state in the Commonwealth of Independent States (CIS). Uzbekistan’s population of over 33.7 million people is the third largest among the CIS countries, and it has the largest population out of all the former Soviet republics of Central Asia. Both production and consumption are growing rapidly in Uzbekistan, and the country therefore needs a good target market, and has an interesting market of its own to offer.

There has been talk that Uzbekistan could soon join the EAEU for a long time. The country has developed rather friendly relations with its member states. Uzbekistan cooperates with all the EAEU members within the CIS and the Shanghai Cooperation Organization (SCO). The President of the Republic of Uzbekistan, Shavkat Mirziyoyev, who came to power in late 2016, is furthering closer relations with each of these countries, and led by Mirziyoyev, it is looking more and more likely that Uzbekistan could join the EAEU. In 2019, about 70% of the country’s foreign trade was with the EAEU countries. Uzbekistan’s trade with Russia has grown significantly: from January to September 2019, it was 10% greater than the same period in 2018, and exceeded $4 billion.

According to the official statements made by Uzbekistan’s leadership, joining the Eurasian Economic Union would strengthen the country’s economy and its international relations. Uzbekistan would gain free access to the Eurasian Economic Space and become a part of it. It would also gain access to ports in EAEU countries and their railway system. Uzbekistan is landlocked, and therefore must export and import its goods through the territory of neighboring states, and by doing so it loses more money on transit and time is wasted at customs. Uzbekistan transports large volumes of cargo by rail on EAEU territory through Kazakhstan and Russia. By becoming a member of the EAEU, Uzbekistan would be able to do this at a much lower cost and with fewer delays.

The EAEU has access to the Pacific Ocean, the Black Sea, Caspian Sea and Baltic Sea, as well as the Arctic Ocean. The EAEU also has access to long transport corridors over land, such as the Western Europe-Western China Highway, the Beijing-Astana (Nur-Sultan)-Moscow-Berlin railway, the International North–South Transport Corridor, and others. By entering the EAEU, Uzbekistan will be able to use continental transport arteries and numerous ports on favorable terms. All of this will make it far easier for the country to interact with the global market.

It is worth noting that the EAEU has free trade agreements with a number of non-member states: Vietnam, Iran, Singapore, etc. As a member of the Union, Uzbekistan will be able to trade with these countries on the same terms. Taxes on Uzbek exports to EAEU countries will be reduced, and the demand for them will increase.

It should also be recalled that, although Uzbekistan has had a considerable amount of economic success, a sizable percentage of its population works abroad, primarily in the Russian Federation and Kazakhstan. Once the Republic of Uzbekistan joins the EAEU, it will be easier for its citizens to cross the borders between member states, and they will receive more legal rights on the territory of these countries. Some of the benefits for citizens of Uzbekistan working in other EAEU countries will include not have to pay more taxes than citizens of EAEU countries, being able to receive free medical care in these countries as well as in Uzbekistan, and the years spent working in other EAEU states will be taken into account when their pensions are calculated. It is also important that higher education certification from an institution of higher education in any EAEU country is recognized in all other EAEU countries.

On top of all this, Uzbekistan is interested in the EDB, as it wants to attract the bank’s funding for a number of its projects.

However, it is fundamentally important for Uzbekistan to protect its own market and domestic producers from foreign competitors, and therefore it intends to integrate with the EAEU gradually and carefully.

In August 2019, the media reported that for the time being, Uzbekistan is planning on obtaining observer-state status in the EAEU.

In early October 2019, Chairperson of the Federal Council of the Russian Federation Valentina Matviyenko paid a visit to Uzbekistan, who said that President Mirziyoyev is looking into the question of how Uzbekistan could join the EAEU. It has been reported that there is a special working group of EAEU member-state representatives who are assessing the risks and benefits Uzbekistan can expect upon joining the Eurasian Economic Union.

In August 2019, Uzbekistan’s Ministry of Economy also published a draft concept of integrated socio-economic development for the Republic of Uzbekistan up to 2030. The document states that Uzbekistan intends to sign a free trade agreement with the EAEU by the end of 2021, but the question of full accession to the Eurasian Economic Union will be answered at a later stage.

Despite all the obvious advantages that the EAEU could hold for Uzbekistan, there are still certain obstacles in the way, holding the country back from integrating, and these are related to external factors. At the end of October 2019, American-Uzbekistan Chamber of Commerce hosted a business forum in Washington. Speaking at the event, US Secretary of Commerce Wilbur Ross, clearly acting in line with Washington’s policy to deter Central Asian states from proactively integrating with Russia, said that joining the EAEU could complicate the World Trade Organization accession process for Uzbekistan.

Nevertheless, that apparently will not stop Uzbekistan from joining the EAEU. In December 2019, Uzbekistan’s officials made a number of statements in support of this move.

For instance, Uzbekistan’s Finance Minister Djamshid Kuchkarov said that Tashkent intends to pursue greater integration with the global economy in general, and that, in his personal opinion, joining the EAEU would have more advantages for Uzbekistan than disadvantages.

Erkin Halbutaev, Deputy Chairman of the Committee on Issues of Innovative Development, Information Policy and Information Technologies of the Legislative Chamber of the Republic of Uzbekistan, said the fact that Uzbekistan is located far from the international shipping lanes, has a significant impact on the country’s economy, and joining the EAEU would reduce the cost of transporting Uzbekistan’s goods by 30%.

Lastly, Uzbekistan’s Deputy Foreign Minister Ilkhom Nematov has come out in favor of joining the EAEU as soon as possible. In his opinion, Uzbekistan needs the EAEU as a target market and as a destination for labor migrants, which is especially important given the high growth rate of Uzbekistan’s population.

Considering Uzbekistan’s geographical location and its interest in the benefits the EAEU could hold in terms of transportation, Uzbekistan is likely to join the EAEU, despite all of the problems with the WTO that are being discussed in Washington. The long-standing cultural ties the Republic of Uzbekistan has with EAEU member states also plays a role, along with the fact that Russia and Kazakhstan are the top destinations for labor migrants from Uzbekistan. At the same time, the activation of the discussion on joining the Eurasian Economic Union, kick-started in the Republic of Uzbekistan in December 2019, could be an indication that this is going to happen far sooner than proposed in the draft development concept published by the Ministry of Economy.

Dmitry Bokarev, political observer, exclusively for the online magazine “New Eastern Outlook“.


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