Cross-Border Trade along STKEC: Recent Trends, Challenges and Opportunities - PowerPoint Presentation

1. Cross-Border Trade along STKEC: Recent Trends, Challenges and OpportunitiesRoman MogilevskiiADB ConsultantADB WorkshopTashkent, Uzbekistan5-6 December 2019

2. OutlineCurrent situation and trends in trade of Kazakhstan, Tajikistan and UzbekistanTrade outcome indicatorsTrade regimeBarriers to trade in the regionTrade opportunitiesConclusions and recommendations

3. General Trends in Trade of Kazakhstan, Tajikistan and UzbekistanVolatile dynamicsExports depend much on international energy and metals prices – the need for export diversificationImports partially financed by migrants’ remittances

4. Trade of STKEC Cities and OblastsSughd oblast is very important for both exports and imports of TajikistanTashkent city and oblast supply more than 20% of Uzbekistan’s exports and receive half of the country’s importsShymkent and Turkestan oblast play a minor role in trade of Kazakhstan

5. STKEC Cities and Oblasts’ Direction and Composition of TradeTrade with STKED countries is important for Sughd, Shymkent and TurkestanThe region exports mostly energy, metals, cotton and few manufactured products (fertilizers, flour, textiles)

6. Intraregional Trade2018 intraregional trade turnover was USD327 mil. or 8.3% of total turnover of trade between STKED countries or 0.3% of total trade turnover of these countriesRelatively small share of manufactured goods

7. Informal TradeSome trade flows important for the region are not reflected in official statistics

8. Transit TradeThe corridor serves major flows of goods produced or consumed in other parts of Tajikistan and UzbekistanKazakhstan and many other countries’ exports to Afghanistan pass through the STKEC regionTransit trade in the region in 2018 is estimated at USD26.3 billion, including: - USD22.8 billion of trade with non-STKEC countries, and - USD3.5 billion of trade between Tajikistan and Uzbekistan and non-STKEC parts of Kazakhstan

9. Trade Outcome IndicatorsTrade intensity indices are high – the countries are important trade partners to each other (natural for neighbors)Trade complimentarity indices between STKEC countries are in the range of 20-30% – relatively low complimentarity, the countries produce similar goodsRevealed comparative advantages of these countries concentrate on their traditional exports: energy products, metals and ores, raw agricultural produce, some textiles and chemical goodsExport sophistication indicators are low, the export shares of hi-tech goods are around 1% of total exports

10. Trade in ServicesExports of services are important for Tajikistan and Uzbekistan, imports – for Kazakhstan and UzbekistanTrade in services between STKEC countries is small so far – 3.7% of these countries’ total turnover of service trade

11. Trade RegimeWTO membership: Kazakhstan (2015), Tajikistan (2013)All three countries are members of the CIS Free Trade Area – no import tariffs in bilateral trade (with some exemptions)Major changes ahead: - some special arrangements of CIS FTA for Uzbekistan expire in 2020 - possible WTO accession for Uzbekistan - possible EAEU accession for Tajikistan and Uzbekistan - harmonizing membership in different trade agreements is a non-trivial task

12. Barriers to Trade along STKECVery high costs of trade between three countries – 80-120% of the costs of goods (World Bank/UNESCAP estimates) compare to 20-50% in Europe and 30-50% in ASEANImport tariffs are not major issueTrade diversion caused by some regional trade agreements (the case of external and internal railway tariffs in EAEU)Infrastructure – automobile roads and railways, border crossing points, quality testing and certificationBorder crossing procedures – major progress, but still long way to goStructural issues – asymmetric trade flows, lack of economies of scale, business practices

13. Opportunities for Trade Diversification and ExpansionDiversification of export products and markets – goal in all three countries - the role of private sector - domestic competition as a pre-condition for international competitivenessUsing neighbors as a laboratory for export product development – reciprocity assumedProvision of regional public goods as a way to address common structural issues in tradeBased on current trends, the trade turnover between Kazakhstan, Tajikistan and Uzbekistan is expected to increase from USD3.9 billion in 2018 to USD9.9 billion in 2030

14. ConclusionsExports of the STKEC countries stagnated for the last several yearsExports are still concentrated on relatively few, mostly primary, goodsTrade within STKEC is smallTransit trade is very importantTrade in services in the region is underdevelopedKey barriers to intraregional trade relate to infrastructure and the structure of economies rather than to narrowly-understood trade policyThe region has a very big potential for trade expansion and sophistication

15. RecommendationsMaintain free trade regime in the regionProvide regional public goods aimed at export expansion/diversification - joint network of quality certification facilities (e.g. legislation and labs) - joint development of standards and certification for organic produce - joint professional education and business development programmes for prospective export sectors (e.g. tourism)Promote intraregional trade in servicesDevelop transport and border-crossing infrastructure important for intraregional and transit trade (including passenger traffic)

16. Thank You