Recommendations

As international experience shows, the basis for effective foreign economic activity in the movement towards an open economy is the development of high technology export capabilities and full support of the national exporters. The positions of the countries in the world economy depend on their competitiveness. One of the most important tasks of the state is to create an enabling environment for competitive production at the firm level. The favorable actions for achieving this goal are the increase in aggregate demand, investments and innovation activities, development of scientific and technological capacity, increase in funding for basic and applied science, research and development, and education. The Government of Kazakhstan should support the projects and rules of Customs Union and with the direct help of Customs Union Republic of Kazakhstan should increase its economy. At present, the important role in strengthening the national economy through possibilities of external activity is played by free or special economic zones.

There are four major consequences which are expected from the combined impact of the removal of barriers and the subsequent boost to competition. If these issues will work it will be better for near future Kazakhstani economy.

* a significant reduction in costs through the reorganization of business and economies of scale

* improved efficiency within companies due to the downward pressure on costs due to more competitive markets

* new patterns of competition since real comparative advantages will play a determining role in market success

* increased innovation because new business products will be generated by the dynamics of the internal market.

These effects will be spread over differing time spans but the overall effect will be an increase in the competitiveness of business and the general economic welfare of the consumer.

The consumer will no longer be confronted with enormous price differences depending on their country of residence, as is the case in today's Community. Due to the reduction in costs, the level of this price will be on the downward journey. The consumer will also be faced with a wider choice as a result of market integration and increased competition leading to differentiating products as well as economies of scale.

Conclusion

The research of this work has reached to its logical end, results have obtained and critical conclusions are made. We have found the answers to the main issues and questions, which gave the result of achieving the main purpose of this Diploma Thesis, i.e. evaluating the role of agricultural sector of economy in the relationship among member states of Customs Union, and identifying perspectives of this relationship.

We have analyzed gathered data and summarized the results. The summary reflects the answers to the questions which were taken as the purpose of the research. We have reviewed the importance of creation of a single economic space that unifies economic legislation and lays down the foundation for a common currency. We have evaluated the current status of Customs Union, and its effect on whole economy of Kazakhstan ,especially, we have clarified the big influences on agricultural sector .We also have identified foreign policy implications of all three countries ( Russia, Kazakhstan, Belarus ) and projects related to this issue between them, basing on the data captured during this research.

The results show that it is difficult to forecast in great detail the tendencies of member - countries of Customs Union in the near future because of the existence of different interests. Also the Customs Union is known for us as a new birth regional organization and anybody can not say foreseeable future with totally confidence. The complexity of Customs Union’s actualization policy derived form its geological, economic, social characteristics, moreover the issues of protection environment have to be considered. Also the turbulences of the international politics, which can be witnessed, cause difficulties in making the forecasts on the issue.

However, formation of an open economy and integration into the world economic relations has definitely more positive sides rather than negative ones. The openness of the national economy has several advantages as

• Strengthening the role of external economic relations as a factor of economic growth and structural transformation;

• Expansion of participation of countries in the global division of labor;

• Bringing the level of production, technical equipment, cost and quality of products closer to world standards;

• Improving the competitiveness of national economy;

• Expansion and consolidation of forms of cooperation: the interweaving of capital, scientific and technical cooperation, production integration;

• The formation of market infrastructure;

• Possibility to become the biggest supplier of agricultural goods for not only neighboring countries but also for world markets.

Also, the land of Kazakhstan is very suitable for all types of agriculture. Today, Kazakhstan is the largest supplier of wheat and flour in the region. It is set to increase the exports of wheat from about 4.2m ones exported currently (which puts Kazakhstan among ten top exporters of wheat) to 12m ones by 2010. Russia is one of the major buyers of Kazakh grain – in 2006 it imported Kazakh grain worth of $162.6m, about 28.6% of total Kazakh export of this good. In fact, almost all CIS countries import Kazakh grain. Kyrgyzstan, Tajikistan and Uzbekistan are one of the major buyers of this good in Central Asia. Turkey, Iran, Yemen, India, Egypt and European countries are among those who purchase Kazakh grain. Kazakhstan has the most developed relations in export – import of agricultural products with other Central Asian countries. The largest agricultural trade is conducted in Kazakhstan- Uzbekistan pair. In addition to its grain export, Kazakhstan also serves as a transit(re-export) country for agricultural exports of three other Central Asian countries to Russia– that is one of the reasons for the huge figures in exports of vegetables and fruit from Kazakhstan to Russia ($68.9m in 2006).

According to the results of conducted research project, we found out the basic reasons of declining agricultural production after 1990 till early 2000. After the collapse of the Soviet Union the country was experiencing social and economic crisis and recession in production. The industrial infrastructure of Kazakhstani economy was lagged behind the developed world leading industrial and technical systems, there was a severe shortage of highly effective export-oriented industries, especially hi-tech manufacturing, the cost of manufactured goods was high. Domestic production was unable to withstand competition from foreign products. This has resulted in raw material and fuel export orientation and technological dependence on developed countries.

Following the word experience, we can conclude that the basic problem of formation of an open economy is the simultaneous liberalization or an other words, the trans-nationalization of production and trans-nationalization of finance and global spread of neo-liberalism of domestic and international economy while protecting the interests of national economy. In the former Soviet Union pace of external liberalization was much faster than internal reforms. The consequences of this process were inflating of the domestic market with foreign goods, mitigation of economic disproportions, but the domestic market became too open to the outside. Even the agricultural economy of Kazakhstan became closer to stop. Liberalization of export and import, export of capital from the country did not encourage investment, job creation and development of domestic production.

Nowadays, we can take the Customs Union as the panacea for distortion of Kazakhstan’s agriculture. Becoming one of the significant representative of Customs Union, Kazakhstan gains access to market of Russia and Belarus with more than 150 million population. It creates opportunities for domestic producers of Agricultural goods to export, will attract foreign direct investments, and will motivate establishment of joint ventures with Customs Union member countries’ companies and third countries’ firms. Russia takes advantage of access only to more 25 million population market of Kazakhstan and Belarus. Therefore, in terms of increasing market size Belarus and Kazakhstan gain more than Russia. Our country with its powerful economic potential will enable us to feel confident within the newly established Custom Union of Kazakhstan, Russia and Belarus. Despite some warnings, there will be more positive effects from the Customs Union than the negative ones for Kazakhstan. Thus, the elimination of customs barriers for the transit of goods and services within the customs area will stimulate economic activity and increase trade turnover. In addition, in the long run under a single economic space scientific-technical and production potential of enterprises producing products with high added value will be combined. This is a very important step towards the new industrialization of our countries. The investment climate of the three countries will change substantially, since foreign investors will have a new market with a population of more than 170 million people. Also, the creation of Single Customs Space of the three states will let to have 14-17 percent of GDP growth by 2015.

As we have defined, the top priority for Kazakhstan’s economic policy today is to solidity its positions in the regional economic and political relations. Kazakhstan is one of the top producers of agriculture products. Therefore, diversification of export routes is very significant issue for Kazakhstan.

The conducted analysis has appeared to be very helpful in evaluating the role of Customs Union in the relationship between three countries, and determining the importance of Kazakhstan-Russia-Belarus international relations projects that are being developed. But, however, the inability to collect primary data about the effect of Customs Union on the agriculture of Kazakhstan limited us from making more unbiased and extensive analysis, and as a result, the data provided in the research may have inaccuracies. Making inference based on the more extended analysis can be the suggestion for the future.

We must take into account the following principle – the political relations among member states, - Productivity: rising productivity is the prerequisite to a sustainable real income growth; -Price competitiveness; price competitiveness (assessed in particular with the real exchange rate) is one factor influencing the ability of a country’s firms to compete in the international market and thus create jobs. However, keeping exchange rate and wages at an artificially low level may also mean buying expensive imports with more cheap exports, and thus lower standard of living; - Innovation and technological specialization. Innovation fosters the new ideas, technologies, and processes that lead to an international specialization in high-growth sectors and a higher standard of living; -Attractiveness for investors (including, but not only, foreign ones). A better investment climate has a crucial effect on productivity and innovation. Our cooperation with Customs Union in economic as well as political sector has to contribute to independence of our country, increasing the well-being of our citizens and achieving the sustainable development.