Eastern Approaches

On May 29 2014, the leaders of Kazakhstan, Russia, and Belarus met in Astana to sign a treaty establishing the EEU, which came into reality on January 1st 2015. This historic treaty opened up borders to the free movement of trade, services, and capital. Months later, Armenia officially joined the Economic Union, and Kyrgyzstan is set to join in May 2015.

President Nursultan Nazarbayev first proposed the creation of such a union in 1994. The first step towards the establishment of a complete economic integration came in the form of a free trade zone, followed by the creation of the Customs Union in 2010.

The Customs Union’s contribution to the economic relations between Kazakhstan, Russia, and Belarus had immediate economic ramifications. In 2013, trade turnover between the three countries increased, reaching $64.1 billion. The structure of bilateral trade has also changed with the share of exported and imported raw materials declining while the volume of technologically advanced products,with high added value increased. A new single market for goods without tariffs emerged, giving Kazakhstan’s products greater access to an expanded market. The country witnessed the creation of new jobs, and the improvement of social services.

The recently established EEU lays the foundation for new opportunities by changing the market realities for all countries involved. The union covers a total area of 20.2 million sqkm, five times larger than the entire European Union and twice the size of China and the United States. The union also includes a population of over 170 million. The main contribution to the combined GDP (with GDP calculated according to purchasing power parity) of the EEU comes from Russia, with a $3.558 trillion GDP, followed by Kazakhstan with a $420 billion GDP, and Belarus at $171 billion. Armenia stands at $24 billion.

During the signing ceremony for the treaty, Russian President Vladimir Putin underlined the importance of the EEU by pointing out that the “union has immense natural resources, including energy resources. It accounts for 20% of global natural gas reserves and 15% of the world’s oil reserves. At the same time, the three states [Russia, Kazakhstan, Belarus] have developed industrial bases, vast labor resources, and a powerful intellectual and cultural potential. [The union’s] geographic location makes it possible to create transportation and logistics routes of not only regional, but also global significance and attract large-scale trade from Europe and Asia.”

The citizens of all member states will be allowed to travel, work, study, and recieve medical treatment in the participant countries. Tax regimes for EEU member state nationals who are residents in another member state will be equal to the local population and businesses. The Kazakhstan Ministry of Healthcare and Social Development reported that the number of foreign laborers in the country is expected to remain roughly the same as last year, despite the new legislation. In 2014, nearly 8,000 workers from Russia came to Kazakhstan, 560 from Belarus and 260 from Armenia. The 2014 quota for foreign labor was 63,000 people though only 29,000 registered. For 2015 the quota is slightly higher, at 63,900.

Dr. Yerzhan Mufilov, former Area General Manager for Kazakhstan, Central Asia and Mongolia at GSK commented that the impact of the EEU on the Health Care segment on the “production side [the EEU] will herald international standards, which will require higher quality products. It will also bring in better clinical practices, effective distribution practices, and Global Manufacturing Practice (GMP) standards.”