KZBlog

The Customs Union which is likely to come into force in January of 2010 between Belarus, Kazakhstan and Russia has not been getting a lot of press in Kazakhstan. Lukashenko, President of Belarus recently made some interesting comments on the Union, criticizing the fact that there has been no good analysis on whether or not the union will help the Belorussian economy or what exact effects it will have on both the economy and foreign policy , and also expressing discontent that a lot details are not sorted out in the agreement–with only promises to work it out later.

While in Kazakhstan, the press has been relatively silent over details of the Union, rumor has it that all policies and import duties will be set to the Russian standard. Many government officials are privately expressing concern that this union will give much larger benefits to Russia than to Kazakhstan by adopting policies that are good for Russia. One serious issue if the Russian duties are enforced, is that Russian import duties are generally much higher than Kazakhstani duties. So prices of many imported goods, from cars to gold to jewels to furniture, will sky-rocket (Russian import duties on cars are over 100%, meaning your popular Land Cruiser will go from $64 000, minimun price to around $100 000). This will of course force Kazakhstani to buy domestic or Russian goods. While proponents of the union point out that this will be good for domestic producers, and I agree that Kazakhstan producers should be helped, in many areas there simply are no local producers with competitive quality products. So it looks like prices will go up and Kazakhs will be buying a lot more Russian goods.

According to Interfax-Kazakhstan, prices will rise but the Minister of the Economy, Bakhyt Sultanov is optimistic:

He sited some data provided by the Economy Ministry, which showed that higher import costs “will only have a slight effect on the inflation” in Kazakhstan. “It will only increase by approximately 0.5-0.7 percent points. However, the rise in the inflation will level out if we reduce imports replacing them with the domestic products,” the minister said.

“Today the customs duties account for about 2% of the import costs (94.4 billion tenge of customs duties on all imported goods totaling 4,626 billion tenge in 2008). After our import duties double to be in line with the customs duties of the Customs Union, the import costs will rise by 2%,” Bakhyt Sultanov explained.

I have a feeling that the Minister is playing with figures, citing averages over specifics. Of course in all likelihood the things that the normal Kazakh buys will not be affected too much–especially as we are already buying food and household goods from local and Russian companies. But the middle class will probably be severely affected. And in general it is depressing to think that yet again, prices will go up.

I would love to hear from readers. Do you have more information on this Customs Union? And what do you think about it?