Customs Union takes effect today

    By Yelena Kalinina, Anar Kuanyshbekova and Timur Nazarov
    The Customs Union or free-trade zone between Kazakhstan and Russia takes effect today.
    Kazakhstan’s entrepreneurs have prepared for tariff-free competition with Russian corporations -- but not all of them welcome the idea, according to
    “The Russians and Belarusians will export products superior to ours. Duty-free, they will cost (less than what) we charge here”, said Amir Safarov, owner of a furniture workshop in an Almaty suburb. “What are we to do now -- go out of business?”
    Originally, Belarus was supposed to join the Customs Union as well. But its entry remains in doubt because of a dispute with Russia over energy prices.
    Today marks the lifting of non-tariff regulatory barriers between Kazakhstan and Russia, such as veterinary and sanitary requirements, licensing, technical regulations and customs clearance, said Zhanar Aitzhanova, Kazakhstan’s minister of economic development and trade.
    The government has said it expects the Customs Union to benefit Kazakhstani businesses and consumers. Some are skeptical, however.
    Gorkhmaz Allahverdiyev, a dairy plant owner fr om Pavlodar, said he is worried about Kazakhstan companies being able to sell products in the Russian market.
    “I don’t think our produce will sell well in Russia — but the Russians, who have better equipment and technology, will have a competitive advantage in the Kazakhstani market,” he said.
    Muratbai Khairushev, head of the Mangistau Oblast branch of the Independent Association of Entrepreneurs, also worries.
    With the growing prices of equipment, “production will become more expensive, and so will the end product,” he said.
    Yersain Alimbayev, head of the seaport division of the Mangistau Customs Control Department, disagreed. Kazakhstani businesses will have an incentive to produce better goods, while getting access to new markets, he said.
    A lot of Kazakhstan products will be competitive in Russia, contended Ruslan Sultanov, general director of the Ministry of Economic Development and Trade’s Trade Policy Center. Those products include “pipes, X-ray equipment, condensers, spare farm equipment parts, crankshafts, and food products,” he said.
    The new trade regime will eliminate barriers that used to plague Kazakhstani exporters trying to sell to Russia, Sultanov said.
    One such barrier involved rail-car transportation, according to Universal Logistics technology director Dauren Bimov.
    Kazakhstan companies exporting goods to Russia could keep their rail cars on Russian soil for only 90 days, he said, and the return of the cars was strictly controlled.
    In contrast, Russian rail cars were allowed to stay for three years in Kazakhstan “and haul freight in this country while awaiting profitable back orders,” he said.
    The new Customs Union will impose the same 90-day lim it on Russian rail cars, he said.
    “Today, (Kazakhstan imports) light-industry goods without declarations, certificates or invoices and charges a customs duty amounting to 0.60 of a euro per kilogram of merchandise,” said Lyubov Khudova, president of the Light Industry Association. “With our market so open to imports, the textile industry in Kazakhstan meets only 8% of domestic demand,” she said. “We are prepared to compete and raise domestic production to the 30% level by 2014”.
    Kuanyshbek Alenov, a board member of the National Union of Entrepreneurs and Employers, said the Customs Union will create more choices for consumers in Kazakhstani markets, but added that businesses must adapt.
    “Owners of large businesses will find it easier to work with decreased transportation costs within the Customs Union countries. Medium-sized and small businesses are not so enthusiastic, though,” he said. “To stay afloat, they will have to modernize production, enlarge the range of products, improve quality and offer new services, which is not always possible.”
    In 2009, Kazakhstan’s imports from Russia accounted for 31% of the total or $8.9 billion. Imports from Belarus were only 1.3% of the total.
    Kazakshstan’s exports to Russia accounted for only 8% of Russia’s total or $3.5 billion. Kazakhstan’s exports to Belarus were meager, accounting for only 0.1% of the country’s total.