On September 25, the Gaidar Readings - “Networking of the Eurasian Economic Union and “One Belt-One Way” Initiatives” – were held in Bishkek, Kyrgyz Republic.
The venue: the Conference-Hall at the Park Hotel Bishkek, Orozbekov Street, 87.
Sponsors: the Gaidar Institute, the Yegor Gaidar Fund; the Ministry of Economy of the Kyrgyz Republic; the National Institute for Strategic Research of the Kyrgyz Republic.
The Readings were opened by Dzhoomart Оtorbayev, Former Prime Minister of the Kyrgyz Republic. The welcome address was delivered by Аrtem Novikov, Minister of Economy of theKyrgyz Republic, Valery Latypov, Trade Commissioner if the Russian Federation in the Kyrgyz Republic, Sergei Prikhodko, Executive Director of the Gaidar Institute, Biliang Hu, Professor of the Peking University, Director of the Institute of Emerging Markets.
Within the frameworks of the first session: “The Issues and Challenges of Expansion of the Eurasian Integration” held under moderation of Sergei Prikhodko, Executive Director of the Gaidar Institute the following speakers took the floor: Talaibek Koichumanov, Secretary of the Council on Business and Initiatives under the Government of the Kyrgyz Republic and Pan Chinzhong, Professor of the Qinhua University, Deputy Director of the Institute of Emerging Markets.
Аlexei Vedev, Head of the RANEPA's Center for Structural Research, Leading Researcher of the Gaidar Institute delivered a report: “Sustainable Growth Prospects for the RF Economy”. According to Alexei Vedev, selection of the scenario of implementation of the monetary policy suggests selection of the economic growth model based on expansion either of consumption or investments. The selection of the option is complicated by factors which are beyond monetary policy instruments. In case of an option where economic growth is stimulated through expansion of the domestic consumption (by means of promotion of consumption and lending), there is a real risk of a substantial portion of growth in domestic demand being covered by imports, particularly, in a situation where the rouble exchange rate is appreciating. So, in the past 15 years (2001–2016) out of Rb 100 of domestic demand growth Rb 53–Rb 57 were covered by appreciation of prices on goods and services, while Rb 22– Rb 25, by the imports. Only one rouble in Rb 5 of domestic demand growth was covered by growth in output of Russian enterprises.
On the contrary, if savings are stimulated there is a risk of investment activities remaining at a low level, so, domestic savings will be “needless” for the Russian real and banking sectors. Economic growth model based on investments suggests not only growth in savings, but also promotion of investment activities through upgrading of the business climate and financial stability, introduction of tax privileges, participation of the state and other factors. In addition, the efficiency of the economic policy is getting down if institutional limitations are applied.
In the second part of the morning session, Sergei Drobyshevsky, Academic Director of the Gaidar Institute delivered a report: “New Normality in the Global Economy and Its Effect on Development of the Eurasian Economic Union”. According to him, in the past decade the pattern of the global economy has undergone certain changes: the shares of the EU and the US in the global GDP (at current USD prices) started to decrease. So, from 2007 till 2016 the shares of the EU in the global GDP (at current USD prices) fell from 30.8% to 21.7%, while the share of the US diminished, too, but not that significantly (from 25.1% to 23.9%). At the same time, the share of China largely increased from 6.2% to 14.9%. The share of member-states of the Eurasian Economic Union in the global GDP went down from 2.5% in 2007 to 2% in 2016.
Also, Sergei Drobyshevsky outlines factors of long-term stagnation in the global economy:
• demography: reduction of the growth rates of the able-bodied population, low birth rate and life expectancy growth;
• human capital: stabilization of the level of education in developed countries and decrease in the R&D sector’s efficiency;
• inequality in distribution of incomes: inequality in education among the better-off and worse-off strata of the population, rather low income growth rates of the middle class and a low consumption trend with the rich;
• state debt: problems related to state debt stability, reduction of state investments and expenditures on education;
• technological process: uncertainty over the prospects of growth rates of the scientific and technological progress;
• international trade: slowdown of growth rates of the international trade in the past few years; rise in protectionism and completion of formation of global logistics chain;
• international capital flows: reduction of interest rates in developed countries as a result of accumulation of reserves by developing countries.
In her report: “The Unified Customs Regulation in the European Union”, Galina Balandina, Senior Researcher of the RANEPA touched upon the specifics of the legislation of the Eurasian Economic Union, as well as the customs regulation: codification of international customs agreements and upgrading of customs administration.
The speakers at the morning session were also the following: Sanzhar Umetaliyev, Deputy Head of the Central Office of the Government of the Kyrgyz Republic and Representative of the Kyrgyz Republic in the Eurasian Economic Union, Biliang Hu, Professor of the Peking University and the Director of the Institute of Emerging Markets, Аlmaz Sazbakov, Deputy Minister of Economy of the Kyrgyz Republic and Seppo Remes, Honorary Professor of the Turku University who delivered a report: “The Experience of the European Union as Applied to the Eurasian Integration”.
Within the frameworks of the day session of the Gaidar Readings: “Networking of the Eurasian Economic Union with the “One Belt - One Way” Initiative” under moderation of Biliang Hu, reports were delivered by Shan Le, President of Silk Road Financing Corporation, Nikolai Chuikov, Head of the Economy and Investments Department of the Central Office of the Kyrgyz Government, Homgato Chin, President of the Peking Henchan financial corporation, Nuradil Baidoletov, Deputy Director of the Institute for Strategic Research, Huchun Lin, Manager of the Shenzhin360 company.
Аlexander Knobel, Director of the Institute of International Economy and Finance of the All-Russian Academy of Foreign Trade delivered a report: “The Eurasian Integration as a Source of Economic Development” in which it was stressed that redistributive sentiments prevailed over creative ones. Alexander Knobel cited the example of oil and gas transfers in the Eurasian Economic Union.
According to him, receipt of a resource rent with export duties being in force will mean one way or another losses for the Russian budget from functioning of the Eurasian Economic Union and involvement in it of new participants.
A. Knobel believes it would be expedient in the period till 2025 when in compliance with the agreement on the Eurasian Economic Union the common oil and gas market starts functioning to withdraw completely rents from the oil and gas sector by means of the severance tax, having increased revenues from that tax in such a way that the modification in question simultaneously with setting of export duties to zero would be neutral for the oil and gas sector. The above measure may contribute to higher motivation to reduce nontariff barriers.
Further reduction of trade barriers in the Eurasian Economic Union will yield substantial advantages to member-states, primarily, small countries.
Despite differences, there is explicit common interest to promote integration in the Eurasian Economic Union with partners from far abroad countries, as well. The member-states of the Eurasian Economic Union benefit from the integration to different extent. So, Armenia, Belarus and Kyrgyzstan benefit more from uneven distribution of gains resulting from reduction of domestic barriers, while Russia and Kazakhstan are less interested in it. At the same time, Russia and Kazakhstan will take greater advantage from uneven distribution of gains from the integration with third countries (primarily China and Asian-Pacific Region countries and to a smaller but substantial extent with the EU), while Armenia, Belarus and Kyrgyzstan are less interested in that due to the specifics of their export pattern and orientation on the Russian market.
Also, Alexander Knobel pointed out that there are problems related to formation of an unanimous negotiating position on a foreign track due to a lack of redistribution mechanisms so different groups of industries may have either advantage or disadvantage from the foreign/domestic integration.