By: Ulviye FILIYEVA ERKEC
The analysts of the Eurasian Development Bank have published a report on the prospects and potential implications of Uzbekistan’s integration into the Eurasian Economic Union.
In the report published in the Podrobno.uz, it was stated by the estimations of Eurasian Development Bank (ADB) experts that the membership of Uzbekistan to the organization will strengthen Tashkent’s infrastructure investments and the flow of workers’ remittances and will increase exports significantly.
What is the Eurasian Economic Union (EAEU)?
Former President of Kazakhstan, Nursultan Nazarbayev, first expressed the idea of the Union of Eurasian States at Moscow State University during his first official visit to Russia on March 29, 1994. Then, Russia, Kazakhstan and Belarus signed the agreement for the Eurasian Economic Union with its headquarters in Astana on May 29, 2014. With the participation of Armenia in December 2014 and Kyrgyzstan in early months of 2015, the EAEU has transformed into a five-membered organization.
In the report prepared by the ADB’s experts, which is also included in the news of the Kapital.kz, those are highlighted: “Economic and institutional support that is given in the frame of the EAEU countries’ integration can serve as an incentive for the comprehensive development of Uzbekistan.” The EAEU itself will also benefit from this expansion, because Uzbekistan is seen as one of the key elements of economic integration in Central Asia.
The EAEU analysts state that Uzbekistan is attractive in terms of expanding business and providing foreign direct investment from the member states of the EAEU. Uzbekistan has significant natural resources, labor potential and well-established industrial infrastructure. Attracting investment will also contribute to increase labor productivity in Uzbekistan, both through the renewal of physical infrastructure and the introduction of new technologies. However, Tashkent is in no hurry to make this important decision. According to the experts, the advantages of Uzbekistan’s membership of the EAEU are listed below:
First, the potential annual volume of infrastructure investments from the EAEU to Uzbekistan could reach 1-1.5 billion dollars. This development will provide an additional 0.3-0.4% growth in the annual real Gross Domestic Product (GDP) of the country.
Secondly, an additional inflow of about 1.5-2 billion dollars per year will be recognized to Uzbekistan thanks to the access of the EAEU to the common labor market. An increase in money inflows will result in higher welfare of the population of Uzbekistan, which will have a positive effect on consumer demand. Labor migration to the EAEU member states will also contribute to alleviate the negative socio-economic consequences of unemployment and underemployment in Uzbekistan.
Third, expanding the intra-industry trade and industrial cooperation between Uzbekistan and the current EAEU member states will contribute to the country’s economic structure and diversification of the export items.
In the last period of 2020, Uzbekistan’s exports to the EAEU member states reached 3 billion dollars. Analysts suggest that this figure could increase significantly if Uzbekistan joins the EAEU.
When all factors are taken into account, the growth rate of the potential GDP of Uzbekistan after joining the EAEU could increase from current 5.5% to 6.9-7.2% per year.
When looking at the disadvantages of joining the organization, experts mention that it has some disadvantages for the economy of Uzbekistan, but the most emphasis of them is clearly on the advantages.
According to the experts, the development of Central Asia is not possible without Uzbekistan’s joining the EAEU, due to the geopolitical position of Uzbekistan in the region.
Analyzing the main indicators of the socio-economic development of Uzbekistan, experts have found that Uzbekistan’s GDP is 57.7 billion dollars (for comparison: Kyrgyzstan’s GDP is only 7.7 billion dollars) and the country has a big economy with 34.6 million populations. (By this indicator, Uzbekistan comes right after Russia among the all EAEU countries.)
The average growth rate of the Uzbekistan economy between 2011 and 2019 was 6.6%. At the same time, in terms of GDP per capita, Uzbekistan is lagging behind the most of the EAEU member countries. The GDP per capita of the country in terms of purchasing power parity (ppp) reached $7.4 thousand in 2020. According to this data, Uzbekistan surpasses Kyrgyzstan; however, it lags behind Russia and Kazakhstan by 3.5 times, Belarus 2.5 times, and Armenia almost 2 times.
As noted in the report, one of the reasons for the underdevelopment in income level is the low productivity of economic sectors in Uzbekistan. The increase in economic productivity is hampered by the lack of investment, technology and physical infrastructure.
At the end of last year, Uzbekistan joined the EAEU as an observer, and President Shevket Mirziyoyev took part in the organization’s virtual summit. Explaining the logic of rapprochement with the Union, the Uzbek leader said that such steps will allow us to start a qualitatively new phase of practical and multifaceted interaction, and to better understand the important processes taking place within the framework of the Union.
In the news report published in the ТАSS news agency, Russian Prime Minister Mikhail Mishustin’s statements on the subject were covered. Mishustin stated at the joint commission meeting at the level of the heads of government of the Russian Federation and Uzbekistan that Moscow welcomes the joining of Tashkent as an observer state in the EAEU. The Prime Minister also expressed his belief that “full participation in the EAEU will provide additional opportunities and tangible advantages for the growth of the economy of Uzbekistan.”
In the news in the Regnum, Russian Ambassador to Tashkent Oleg Malginov, also talked about Uzbekistan’s engagement in the EAEU: “Here, I would like to emphasize that Uzbekistan is not just an ‘observer’, it actively participates in the work and contributes constructively to the unification agenda.”
Taking the basis from the Russian newspaper Kommersant, in the article published in Podrobno.uz, the rumors that the United States and the European Union are deterring Uzbekistan from full participation in the EAEU and are threatening with the obstacles on its way to join the World Trade Organization are mentioned.
The newspaper took this rumor from the sources of the Russian state institutions, however, could not confirm this rumor from American and European sources. In any case, Moscow makes it clear that it will prefer Tashkent’s full integration into the EAEU in the future.