Eurasian Economic Union Investment Potential

On the impact of Euro Asian Economic Union on attracting investment and developing the financial market of Uzbekistan 

The priority direction in the relations among countries within the Eurasian Economic Union (EAEU) is the formation of a single financial market for the EAEU.

The benefits of consolidating financial markets are obvious. These are, firstly, an increase in financing, secondly, diversification of investment flows and risk reduction, thirdly, cooperation in investment to expand country competitive advantages and etc. In particular, external aggregate financing of Eurasian Development Bank since its inception operations have already exceeded $ 3.4 billion. The total investment of the bank in the economies of the participating countries has reached 8.3 billion US dollars.

As of August 1, 2019, the bank’s current investment portfolio includes 96 projects in six bank member states for a total of about $ 4 billion. Only in 2019, funding was opened:

– investment program of the group of companies of JSC “AK Altinalmas” in the amount of $ 97.8 million for the construction of a gold recovery plant with a production capacity of 2.5 million tons of ore per year (Kazakhstan);

– working capital and investment program of JSC “Belaruskali” in the amount of 88.9 million euros (Belarus);

– procurement of raw materials, components, spare parts and components in the framework of investment projects of the international organization “Russian-Kyrgyz Development Fund” in the amount of 50 million US dollars (Kyrgyzstan);

– non-revolving targeted credit line for the implementation of microfinance support programs of OJSC “Ararat Bank” in the amount of $ 6 million (Armenia). 

Relations of Uzbekistan with EAEU countries are quite multilateral, have deep roots and are dynamically expanding in the process of reforms in Uzbekistan. In particular, 510 joint ventures with the participation of Kazakhstani capital are currently operating on the territory of the Republic, while in 2018 its number was 272, with the participation of Russian capital – 1042 and 901 respectively, with the participation of Belarus – 39 and 27. It should be expected if Uzbekistan joins to EAEU, this positive trend will continue.

A single market provides countries with a wider range of opportunities for building value chains and scaling up business activity.

There is a significant potential for mutual investments in those sectors where cross-border investment activity is currently low: it is the agro food complex, retail trade (food and industrial goods), construction of commercial and residential real estate, a tourist complex, information technology.

As a result, joining the EAEU provides additional opportunities for attracting investments. These are facilitated by:

– Free movement of capital within the Union, which activates participation of capital of other member states in the market of Uzbekistan;

– increase investment attractiveness of small and medium enterprises;

– the development of competitiveness and use of country advantages.

Besides, integration will allow coordinating activities on the implementation of fiscal policy in terms of reducing the budget deficit and inflation, diversifying the placement of financial assets (deposits, securities), which will reduce potential risks and increase the profitability of these instruments, expand access to financial instruments for providing guarantees and insurance risks.

This is especially important in the field of financial investments, development of the Uzbek capital market, without which it is impossible to deepen the processes of denationalization and privatization. In particular, President of our country Sh.M. Mirziyoyev drew attention to this at a meeting on development of national stock market on 10/07/2019.

Integration of banking systems will contribute to:

– Influx of financial resources, international best practices and knowledge in the field of banking;

– development of the domestic banking sector and strengthening of competitiveness in the domestic banking services market, which, in turn, will improve the quality and reduce cost of banking services; increase corporate governance; increase market leverage and banking controls.

At the same time, it is necessary to realize that joining EAEU will require the country’s managerial staff at all levels of high professionalism and patriotism, since any integration, except for the undoubted “advantages”, carries the risks of competitive confrontation, which requires adequate decision-making in a rapidly changing economic environment.

Mikhail Khamidulin,

Doctor of Economics,

Professor

Veröffentlicht von:

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Homepage: https://www.uzbekistan.de

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