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The EEC Chairman: We need to create powerful modern clusters in the EAEU countries In August 2016, Kyrgyzstan celebrated the first anniversary of accession to the Eurasian Economic Union. The Alliance, new for Eurasia, aims to unite the economies of the member countries, to increase the economic potential of the region. Business Eurasia talks with the Chairman of the Eurasian Economic Commission Tigran Sargsyan on the development of the Union and Kyrgyzstan in it.​ The EEC Chairman: We need to create powerful modern clusters in the EAEU countries In August 2016, Kyrgyzstan celebrated the first anniversary of accession to the Eurasian Economic Union. The Alliance, new for Eurasia, aims to unite the economies of the member countries, to increase the economic potential of the region. Business Eurasia talks with the Chairman of the Eurasian Economic Commission Tigran Sargsyan on the development of the Union and Kyrgyzstan in it. - Mr. Sargsyan, thank you for this opportunity to talk with you. In February, you took the post of the Chairman of the Eurasian Economic Commission. The Eurasian Economic Union has been in existence for a year and a half. The term is small, but the first results can be summarized. In your opinion, what are the most important ones? - First of all I would like to say that during this time the Eurasian Economic Commission, together with the countries of the Eurasian Economic Union (EAEU), has done everything possible to achieve the main objective - ensuring the stable development of the economies of the Member States of the Union in order to improve the living standards of the population. In 2015, together with the formation of the Eurasian Economic Union, the common market of services was launched. Now it includes 43 sectors that in total make up more than 25 per cent of the GDP of each Member State. We are working on liberalization of other 21 sectors. Within the framework of the common market of services, their providers are granted the maximum level of freedom. Last year, the common labour market started its operation in the EAEU. Thanks to it, the residents of the Member States of the Union have equal rights in employment in any of the countries and pay income tax at the same rate as residents. People were given the right for social insurance and health care in any country of the Union. The common laws provide for mutual recognition of diplomas in the absolute majority of specialties. This significantly increases the mobility of highly qualified specialists. This year, the countries have also come close to adopting a common pension legislation. After signing the Pension Agreement, citizens of the EAEU countries will be able to receive pensions for the period of their employment from the State of the Union where they worked. We have developed dozens of modern, internationally compliant regulations that are necessary to launch the common markets of medicines and medical products. We hope that in the full format they will start operating at the end of this year. In addition, the work is under way on establishment of the common electric power and energy market, oil, oil products and gas markets. - In 2016, the post-Soviet space is commemorating 25-anniversary of establishment of the great association - the Commonwealth of Independent States. Of course, it's more political rather than an economic formation. Political analysts note that the Commonwealth has failed as an institution. And the main reason is the multi-directional political systems of the CIS countries. Can, in your opinion, the EAEU have the same fate? - I wouldn't give such estimates of the CIS. It is in the first place. Secondly, the Eurasian Union is primarily an economic formation created on the basis of mutual economic interest of the Member States of the Union. Therefore, the subject of discussion for us is first and foremost the issues underlying the plane of the economy. And here we all have roughly the same the interests - a decent standard of living and a healthy economy. We should further understand that in order to solve purely economic issues political solutions are also required. But we must not mix up economics and politics. Ultimately, I do not see any prerequisites to the failure of the Eurasian Union. - This year, Kyrgyzstan has commemorated the first anniversary of its accession to the Eurasian Economic Union. At the Summit of the Heads of the States in Sochi, the results of our country’s development were called high. Can you explain, why? - This is due primarily to the fact that we see that the work we have done really gives real results. To name just a few examples. Firstly, opening of customs borders significantly reduced the time needed for delivery of goods to the markets of the other Union countries. This allowed manufacturers to significantly increase product exports. Additional benefit is the fact that the EAEU successfully implements a simplified procedure for customs declaration for vehicles registered in the EAEU Member States. The EAEU creates favourable conditions for the development of trade industries and agroindustrial complex of Kyrgyzstan. According to the EEC, the agricultural production in the Kyrgyz Republic increased by 2.9% in January through June 2016 as compared to the same period of 2015. The majority of the population is likely to feel these results later. And now only economists, Eurasian leaders and entrepreneurs see them. I don't quite agree with your assertion that the ordinary citizens of Kyrgyzstan do not feel the positive effects of the integration in the EAEU. New conditions have essentially changed the legal status of labour migrants from Kyrgystan. Now, the citizens of the Republic have equal rights with residents of the other Member States for employment; there is no quota agreement with employers. There is no need to obtain additional permits. For example, in Russia, the citizens of the Republic do not have to pass exams in Russian language, History and Legal Basics of the Russian Federation. Also important is the fact that the citizens of Kyrgyzstan coming to other countries of the Union for employment, are exempt from the obligation to register with public authorities within 30 days from the date of entry. In the future, they will only need to register for the duration of the employment contract. Thus, there is no need any more to periodically leave the employment country and then re-enter again to prolong the stay. Today, workers from Kyrgyzstan in Russia pay income tax from the first day of work at the same rate as residents: 13 percent, instead of 30. Their children have the right to attend pre-school institutions and obtain education in accordance with the Russian laws. Kyrgyzstan will also receive new positive economic effects from integration projects, which will be launched soon. In particular, this year it is planned to adopt the EAEU Customs Code. Entrepreneurs will have the common set of rules. This document envisages a number of innovations which will considerably save resources of businesses - customs formalities will be simplified, customs procedures will become less time-consuming, which equals the minimized communication with officials and, therefore, an improved business climate. - Kyrgyzstan, according to the integration partners, has met their expectations. However, our country still has a lot of problems. Skeptics suggest that they were associated with accession to the EAEU. This is transit of agricultural products, outflow of labour force from the garment industry, dominance of products of the EAEU Member States. How long, in your opinion, could such period continue? - In general, dispute with skeptics is usually a fruitless task. All the countries of the Eurasian Economic Union have their share of problems. Just like any country in the world. It is connected with the processes and trends in the world economy. In the first half of 2016, the EAEU Member States demonstrated positive dynamics of individual macroeconomic indicators. For example, agricultural production for the first half increased by 2.7 percent, turnover rose by 1.2 per cent. At the end of the last year, the labour market was characterized by a decline in the unemployment rate for the Union up to 5.7%, which is better than the EU (9.4%) and similar to the United States (5.3%). In fact, this means that the integration helped defusing the economic crisis in the countries of the Eurasian Economic Union, mitigated unfavourable external environment and external shocks in the world economy. - The President of the Kyrgyz Republic and his team have done a lot for the development of Kyrgyzstan within the Eurasian integration, and for our country's contribution to the development of the EAEU itself. In the EEC, Kyrgyzstan is represented by two Ministers - in charge of customs cooperation, energy and infrastructure. Are these positions reserved for the Ministers from Kyrgyzstan due to some features of the national economy of our country? - Appointments to key positions in the Eurasian Economic Commission are agreed between the countries in the light of the proposals of the Governments. The Ministers that represent Kyrgyzstan in the Commission hold key positions: Adamkul Zhunusov supervises the energy and infrastructure sector, Mukai Kadyrkulov - customs cooperation. - During the accession of Kyrgyzstan to the EAEU, specialization of the EAEU countries on production was discussed. Experts noted that not the unification of the economy, but its narrow focus would prove beneficial. For example, Kyrgyzstan was recommended to focus on garment production and tourism. How realistic do you think is such arrangement of future markets, as the EAEU countries have different levels of economic development? - The economies are really uneven, but this does not prevent each country from developing any of industries especially successfully. A certain specialization in the EAEU is inevitable, at least on the basis of geography and resources available. No country, even the largest and most well-developed, can be competitive at a high level in all areas. Moreover, unification is not fruitful. How can we increase volumes of mutual trade, if all the Union countries produce the same products? Note that we do not talk here, for example, of basic foodstuffs - each country of the Union thinks about its own food security. The EAEU Member States first and foremost should not compete among themselves in the development of the most advanced innovative industries, digital technologies, which require huge financial and material costs. That's where combining efforts would be the most reasonable solution. In my opinion, it is better to create powerful modern clusters, industries and businesses, in each country with the help of other members of the Union, that will be able to compete with the goods and services of third countries and take their niche in the global market. - Tigran Surenovich, the Eurasian integration is often seen as an attempt to revive the Soviet Union. Over 25 years of independent history each Member State of the Union has gone its own way and formed its own pattern. However, could the economic integration be followed by the political one, which will lead to the unification of the countries into a single state? - It is important to understand that the Eurasian Economic Union is not a neo-imperialist project. Obviously due to the fact that it would be apparently farfetched. The notion that each country of the Union in the post-Soviet space has gone its own way is not questioned. Each of them will continue their own political way. Being a Member of the Eurasian Economic Union. We are talking about economic integration, nothing more. - Some scientists at one time wrote about creating an integral Eurasian state. In this connection, I would like to ask, how do you see the future of the Eurasian integration and the role of Kyrgyzstan in it? - Key integration issues between the countries of the Eurasian Economic Union are governed from January 2015 by the Treaty on the EAEU. This document outlines the three main objectives of the Union: creating conditions for stable development of the economies of the Member States in order to improve the living standards of the population; formation and development of a common market for goods, services, capital and labour; overall modernization, cooperation and enhancing the competitiveness of national economies. By 2019, in accordance with the Treaty on the EAEU, a common electric power market will be launched, by 2025 - the common gas, oil and oil products market. By 2025, the common financial market will also be established in the Eurasian space. Integration in the Union is strengthened in all areas. And the role of Kyrgyzstan in it can definitely be regarded as high. It is a role of an equal and respected partner. - And the last question. In honour of the 25 anniversary of independence, which is celebrated by both Armenia and Kyrgyzstan in 2016, what would you wish the peoples of these two Eurasian States? - 25 years ago independence was gained not only by Armenia and Kyrgyzstan, but the other States of the Eurasian Economic Union - Belarus, Kazakhstan. And Russia also became  in substance a new country with a radically changed state priorities and objectives. For each of our countries, a quarter of a century of independence is a great holiday. I sincerely would like to wish prosperity for our wonderful, hard-working, talented peoples!