Eurasian Integration Yearbook 2012

Customs Unionand the Single Economic Spacetextiles, steel, nonferrous metals, research, agricultural equipment, furniture,paper, and several other categories of product). This limited the possibility ofprotection for its agricultural sector and opened up almost all consumer servicesto non-residents. In addition, Kyrgyzstan has committed itself to joining theWTO agreement on government procurement, and some other optional WTOrelatedarrangements.As a result, Kyrgyzstan received preferential treatment for its goods in tradewith more than 140 countries of the WTO, which theoretically expanded themarket. However, such trade preferences are beneficial primarily for finishedproducts. Creating equal conditions for domestic and imported goods inthe domestic market actually had a negative impact on the development ofindustry in Kyrgyzstan. The openness of the country’s agricultural market toforeign producers has also adversely affected the insufficiently competitivelocal producers.For more than half of commonly traded commodities, Kyrgyzstan has establishedrates of import customs duties lower than those that are expected to be agreedupon within the WTO-related agreements of the CU member states. The mainobjectives pursued by Kyrgyzstan when joining the WTO – developing exportpotential, enhancing the competitiveness of domestic producers, and improvingthe country’s structure of production and position in the international divisionof labour – have not been achieved so far. The country cannot effectively takeadvantage of the preferential conditions offered by WTO members, since mostof its exports, especially in manufacturing, are not competitive.When joining the WTO, Kyrgyzstan assumed that local businesses wouldevolve and integrate into global technological chains, but in practice this hasnot happened. Even the export of raw materials, primarily antimony, tin andrare earth elements, is not competitive because of the high cost when comparedto neighbouring China, where these products are cheaper.It should be noted that contemporary multinational companies have sufficientcapacity to provide the necessary industrial cooperation in certain areas,even without participation in the WTO. Even before Kyrgyzstan’s entry intothe WTO, Kyrgyz enterprises that matched the requirements of multinationalcompanies were acquired and incorporated into their structures, for example,the gold mining companies in the Kumtor region.One reason for Kyrgyzstan’s entry to the WTO was belief in the inevitableincrease in investment by creating a transparent economic environment,complying with global trade rules, and participating in the global tradingsystem. However, the authorities did not take into account that developingcountries have traditionally been perceived as places with limited opportunitiesfor investment. Economic theory suggests that a country with a relativelyunfavourable investment climate would receive foreign investment only insofar64 EDB Eurasian Integration Yearbook 2012