ANALYSIS OF SOCIOECONOMIC DEVELOPMENT IN REGIONAL ASSOCIATIONS OF CIS COUNTRIES (1991 AND 2000) AND STAGES OF THEIR FORMATION

Alexander ASKOLSKIY
Liudmila BEZZUBOVA


Alexander Askolskiy, Section head, Economic Analysis Department, CIS Executive Committee

Liudmila Bezzubova, Consultant, Economic Analysis Department, CIS Executive Committee


The ten-year record of the CIS has made it quite clear that interstate cooperation can only be motivated by economic (apart from military-political) interest, which enables each participant to realize its economic potentialities and to compensate the shortcomings of its own development and flaws in the location of the productive forces. A sustained balance of interests and economic expediency are the main conditions of reliable interstate association and development of integration processes.

The whole world today is in effect a patchwork of regional blocs whose members are linked together by common economic and geopolitical interests. That is why their capabilities are incomparable with those of individual countries.

The economic interests of the CIS states (both common and diverging) determine the forms of their cooperation, and also the different pace and intensity of integration.

The urge to reach a consensus simultaneously along many lines has induced some Commonwealth members to resort to other forms of cooperation and to set up bilateral and multilateral regional interstate groupings. So, four major economic objectives took shape in the course of their cooperation, and some CIS states joined forces for their achievement, setting up four regional associations in the territory of the CIS.

One of these is the Union State of Belarus and Russia. Its main economic purposes: to create a single economic space for ensuring socioeconomic development by pooling the material and intellectual potentials of the two countries and making use of market mechanisms in the economy, and to pursue a concerted social policy aimed at creating conditions for a dignified life and free development of the individual.

The second grouping is the Eurasian Economic Community (EurAsEC), an international organization set up by Belarus, Kazakhstan, Kyrgyzstan, Russia and Tajikistan. The impelling motive here was the need to bring closer together and unify the national legislations of the member states, to carry out measures aimed at increasing their aggregate economic potential, and to take concerted steps in restructuring their economies.

The third grouping is the Central Asian Economic Community (CAEC), which includes Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. Its main purpose is to keep deepening their economic integration and interaction step by step: free trade area - customs union - payments and currency unions - common market of goods, services and capital. Priority lines of integration: cooperation in the agroindustrial complex, the water and energy sector, transport, production cooperation, payments and settlements.

The fourth organization is GUUAM, which brings together Azerbaijan, Georgia, Moldova, Ukraine and Uzbekistan. Its main purposes: creation of favorable conditions for further economic growth in the member countries and for raising the prosperity of their peoples, development of a safe and effective Europe-Caucasus-Asia transport and communications corridor, and deepening of mutually advantageous trade relations on the principles of free trade.

The differing interests of these countries have led to different forms of cooperation between them, and also to a different pace and intensity of integration processes. Practice shows that many member states of regional groupings seek to address some of their economic tasks outside the framework of the respective groupings as well.

Since the establishment of the CIS, nearly all of its countries have been able to enter the international arena and take part in varying degree in the work of major international organizations.

Within the framework of the common CIS space, the regional economic associations have sought to create something in the nature of enhanced integration areas for the economic agents of their member states. Ultimately, upon the accomplishment of concrete regional tasks and given due economic interest on the part of their member states, these regional associations may be expected either to merge, to disband or to reach out beyond the CIS.

To some extent, this could be exemplified by the Shanghai Cooperation Organization (SCO): China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. The declaration on its establishment was signed in the summer of 2001, when Uzbekistan joined the Shanghai Five. One should note that all the CAEC countries are now members of the SCO.

Our analysis of socioeconomic development in the four regional associations of the CIS countries is based on a comparison of their economic potentials in 1999-2000 and ten years ago, in 1990-1991, when the member states of these associations were U.S.S.R. republics (as a rule, with fairly high development levels). Since the 1990-1991 period immediately preceded the formation of new independent states in the post-Soviet space, it may be regarded as a kind of starting point of their contemporary history.

In terms of territory and population, the EurAsEC is the largest of the four groupings. The total area of its member countries is 20,350.9 thou sq km (92% of CIS territory), and their population, according to 2000-2001 data, is over 180 million (64.5% of CIS population). Next comes the Union State of Belarus and Russia, with 17,283 thou sq km (78.2% of CIS territory) and over 155m people (55.3%, respectively). In both groupings, negative trends have been recorded in the size of the permanent population: in 10 years, it fell by 2.3% in the EurAsEC and by 2.4% in the Union State.

The CAEC and GUUAM economic associations are much smaller than the two largest ones: 3,516.8 thou and 1,242.7 thou sq km (15.9% and 5.6% of CIS territory), and over 50m and over 91m people (18% and 32.4% of CIS population), respectively. During the period under review, the population in the CAEC countries grew by 6.1%, and in the GUUAM countries, by 1.1%.

A point to note here is that population growth in CAEC and GUUAM has had a positive effect on population dynamics in the CIS, so that over the past 10 years the total number of its inhabitants has gone down by only 0.8%.

In the reviewed period, the number of employed persons in the economy fell in all the regional groupings: by 12.8% in the Union State, 13.3% in the EurAsEC, 6.2% in CAEC, and 8.9% in GUUAM, compared with 11.6% in the CIS as a whole. A relative increase in the number of employed persons as a share of the CIS total was recorded in CAEC and GUUAM: by 0.9 percentage points in both groupings (from 14.6% in 1991 to 15.5% on average in 1999-2000 in CAEC, and from 30.8% to 31.7% in GUUAM). In the Union State and the EurAsEC, this indicator was a negative one: 0.8 points and 1.3 points, respectively.

The employment indicator was, without doubt, adversely affected by unemployment, whose rate in 1999-2000 was highest in the GUUAM and CAEC countries: 3.4%-3.3% and 2.0%, respectively. The EurAsEC republics were in third place with 1.9%-1.7%, and the Union State, in fourth place with 1.7%-1.4%.

These figures are a quantitative indicator of efficiency in the use of the available labor power, the basic resource of the economy. Maintaining employment is one of the main purposes of economic policy. Creation of new jobs to reduce the unemployment rate is the most powerful reserve in raising the economic potential through better use of labor resources. This reserve, however, has yet to be duly tapped, and the key role in this process is to be played by the CAEC and GUUAM countries.

Among the main factors that shaped the situation in the national labor markets in the 1990s was not only a decline in the volume of national production and lower levels of investment and financial activity, but also the formation of a new, market structure of the national economies, the emergence of new economic entities, including nongovernmental forms of property, and the development of small business. In all the regional groupings there was a trend toward an increase in the number of employees in the service sector. The shift in the employment pattern in favor of that sector was due to a reduction in the share of industry and construction - in the Union State, the EurAsEC and GUUAM. At the same time, in the Union State, the EurAsEC and CAEC there was virtually no change in the share of agriculture, forestry and fishery, while in the GUUAM countries there was even a perceptible increase in the share of employment in these three sectors: from 25.5% in 1991 to 31.7% in 2000.

On the scale of the Commonwealth as a whole, the first place in the employment structure still belongs to the service sector, the second, to industry and construction, and the third, to agriculture, forestry and fishery, except that the lead of the service sector lengthened from 5.3 percentage points to 27.2 points (the highest indicator similar to that of the EurAsEC countries), while the share of industry and construction fell from 37.9% to 25.8%, and that of agriculture, forestry and fishery rose from 18.9% to 21.2%. In effect, all the processes at work in the regional associations of CIS countries have been reflected in the figures for the CIS as a whole.

One of the most negative phenomena in the economy of the CIS countries in the 1990s was a deep slump in investment activity, with problematic prospects for overcoming the effects of the investment crisis. On average for the CIS, gross accumulation as a share of GDP fell from one-third in 1991 to roughly one-fifth in 2000, with gross accumulation of fixed capital going down from one-quarter to under one-fifth. The quantity of obsolete manufacturing equipment has increased disastrously: in the early 1990s, its average service life in material production was already twice in excess of its normative life, and subsequently the situation continued to worsen. Like all the other CIS countries, the states joining regional groupings have had to go over to market relations with old production facilities.

According to statistics, fixed capital formation in the CIS in 1999 stood at only 29% of the 1991 level, and in 2000, at 33% (estimate).

The lower potential of the basic factors of production, especially capital (despite incipient economic growth in recent years), explains the low level of Commonwealth GDP: in 1999, it was 61.3% of the 1991 figure, and in 2000, 66%.

In three regional associations there was an increase in GDP as a share of total Commonwealth GDP: from 68.6% to 74.8% in the Union State, from 74.3% to 83.2% in the EurAsEC, and from 9.4% to 10.1% in CAEC. The share of the GUAM countries fell from 24.2% to 16.2%.

According to estimates for 2000, GDP per capita was $1,667.5 in the Union State, $1,542.9 in the EurAsEC countries, $675.6 in CAEC, and $601.8 in GUUAM. The estimate for the Commonwealth as a whole (without data for Turkmenistan) was $1,219.2.

In relative terms, an increase in GDP per capita was recorded only in the Union State (from 120.3% to 136.8% of the Commonwealth average) and in the EurAsEC (from 112.4% to 126.6%).

Industrial output in the regional associations as a share of the Commonwealth total increased from 67.9% to 76.7% in the Union State, from 73.2% to 82.7% in the EurAsEC, and from 8.3% to 9.4% in CAEC, while the share of the GUUAM countries went down from 25.9% to 17%. The same indicator estimated per capita increased in relative terms compared with the Commonwealth average from 119.2% to 136.1% in the Union State, from 110.1% to 125.9% in the EurAsEC, and from 49.1% to 51.8% in CAEC, going down in GUUAM from 80.6% in 1990 to 51.8% in 2000. In 1999, industrial output in the CIS as a whole came to 54% of the 1991 level, and in 2000, to 60%. So, one may say that the Union State and the EurAsEC, and also to some extent the CAEC countries have managed to maintain their industrial potential.

The decline in agricultural output in the CIS countries is less drastic than the decline in GDP or industrial output: in 1999, it reached 64% of the 1990 level, and in 2000, 72%. As analysis shows, agricultural output per capita in 2000 amounted to $221.0 in the Union State, $211.8 in the EurAsEC, $197.3 in CAEC, and $207.9 in GUUAM. In 1991-1999, farming area shrank in all the regional associations: by 15.5m ha (7%) in the Union State, by 119m ha (27.4%) in the EurAsEC, by 108.4m ha (46.1%) in CAEC, and by 6.3m ha (8.3%) in GUUAM. The reduction for the CIS as a whole was 119.3m ha (21.9%).

In terms of share in the total farming area of the CIS countries, the EurAsEC is still first, the Union State second, CAEC third, and GUUAM fourth. Plowed area has also been reduced: by 10.1m ha (7.4%) in the Union State, by 25.9m ha (14.8%) in the EurAsEC, by 15.9m ha (38.2%) in CAEC, by 0.4m ha (1%) in GUUAM, and by 26m ha (12%) in the CIS as a whole. The best potential here has been retained by GUUAM, whose share in total Commonwealth plowed area has gone up from 18.8% to 21.1%, so that this regional grouping has risen to third place, ranking behind the EurAsEC and the Union State.

The leader in grain production (both in total output and per capita) is still the EurAsEC. In 2000, its countries produced 83,922 thou tons of cereals (72.1% of total CIS output, without Turkmenistan). The Union State was second with 70,299 thou tons (60.4% of the CIS total), GUUAM third with 32,186 thou tons (27.6%), and CAEC fourth with 17,954 thou tons (15.4%). Relative indicators per capita for 1999-2000 show a more equal distribution of grain production than in 1991.

In 1999, the production of potatoes was highest in the EurAsEC: 41,727 thou tons (90.8% of the 1991 level), or 73.6% of total CIS output; in the Union State, the figure was 38,835 thou tons (89.7% of the 1991 level), or 68.5% of the CIS total (without Turkmenistan). GUUAM was third with 14,516 thou tons (92.9% of the 1991 level), or 25.6% of the CIS total. The lowest figures for potato output per capita were recorded in CAEC, despite a marginal increase in the reviewed period owing to an increase in production in 1999. One should bear in mind here that potatoes are not a traditional food in Central Asia in contrast to the Union State, some EurAsEC countries, Ukraine and Moldova.

In the production of vegetables, the 1991 level was surpassed by 20% in the EurAsEC (with output rising to 15,982 thou tons) and in the Union State (to 13,591 thou tons), while production in the other two regional groupings fell: to 9,303 thou tons in GUUAM (81.4% of the 1991 level) and to 5,071 thou tons in CAEC (95.1% of the 1991 level). The highest figures for vegetable consumption per capita, despite a significant reduction, are still recorded in CAEC and GUUAM.

In cotton, as estimates show, production in 2000 fell short of the 1991 level. According to our assessments, the CAEC countries, which lead in the production of this crop, harvested 4,446.8 thou tons in 2000 (76.5% of the 1991 level), GUUAM produced 3,856.1 thou tons (74.4%), and the EurAsEC, 704 thou tons (60.4%), while the Union State is not a cotton grower. Per capita indicators for cotton production are highest in CAEC, followed by GUUAM. The Commonwealth average for cotton production per capita in 2000 was 18.1 kg compared with 27.5 kg in 1991.

In the 1990s, cattle stock in the CIS countries was nearly halved. Thus, the reduction was 29.9m head (48.8%) for the Union State, 36.1m head (49.2%) for the EurAsEC, 6m head (34.7%) for CAEC, 14.8m head (45.2%) for GUUAM, and 50.9m head (47.7%) for the CIS as a whole (without Turkmenistan). Naturally, this has led to a decline in the production of meat (both in slaughter weight and processed), milk and wool.

Meat production in terms of slaughter weight by all kinds of farms in 2000 amounted to 5,018 thou tons (48.1% of the 1991 level) in the Union State, 5,873 thou tons (47.8%) in the EurAsEC, 1,337 thou tons (57.3%) in CAEC, 2,451 thou tons (47.9%) in GUUAM, and 8,384 thou tons (48%) in the Commonwealth as a whole (without Turkmenistan). Per capita production was down by one-half: to 32.4-32.5 kg in the Union State and the EurAsEC, and to 26.3-26.8 kg in CAEC and GUUAM. Industrial meat processing fell even more drastically. In 2000, it stood at 21.2% of the 1991 level in the Union State, 19.5% in the EurAsEC, 10.7% in CAEC, and 12% in GUUAM. Per capita, meat processing fell 4.6 times (to 9.06 kg) in the Union State, 5 times (to 8.19 kg) in the EurAsEC, 10 times (to 2.51 kg) in CAEC, and 8.4 times (to 3.95 kg) in GUUAM.

Milk production by all kinds of farms in 2000 fell 1.6 times in the Union State and GUUAM, 1.7 times in the EurAsEC, and 1.2 times in CAEC. The less drastic decline in cattle stock in the CAEC countries had an effect on milk production figures as well: in 1999-2000, that groupings share in the CIS total (without Turkmenistan) was 13.7%-14.4% against 11.2% in 1991. Per capita figures did not surpass the 1991 level in any of the regional groupings.

Wool production (in terms of physical volume) by all kinds of farms in the regional associations fell in 1999 compared with 1991 by 5.1 times in the Union State, 4.6 times in the EurAsEC, 3.4 times in CAEC, and 2.1 times in GUUAM. The largest amount of wool in 1999 was produced in the EurAsEC (75.8 thou tons), and the smallest, in GUUAM (34 thou tons). The highest per capita indicator was recorded in CAEC (1.01 kg), and the lowest, in the Union State (0.26 kg).

The potential of industries processing livestock products, which depends both on the production of processing equipment and on the availability of raw materials, has been badly impaired.

As regards the industrial processing of farm produce, one should note the successes achieved in the production of vegetable oil and granulated sugar in the Union State and the EurAsEC, which in 2000 surpassed the 1991 level by 1.2 and 1.1 times and by 1.8 and 1.6 times, respectively.

Retail trade (through all sales channels) in 2000 for the Commonwealth as a whole came to 76.1% of the 1991 level. The largest share in the CIS total was recorded in the EurAsEC (having increased by 9.7% to 83.2%), the Union State ranked second (an increase of 10.6% to 79%), CAEC third (by 5.7% to 16%), and GUUAM fourth (a reduction of 7.8% to 16%). A relative increase in retail trade per capita was recorded only in the Union State, where in 2000 it reached 140.5% of the Commonwealth average, whereas CAEC and GUUAM registered a decline.

Given the slump in production and innovation activity in the countries belonging to the regional associations, special importance attaches to foreign trade, whose overall volume has increased in all the regional associations. As before, the EurAsEC has the highest share in the overall foreign trade turnover of the CIS countries: in 2000, it reached 78.9%. The share of the Union State is somewhat smaller (71.1%), GUUAM has 18.6%, and CAEC, 10.7% (compared with 1994, its share went up by 1.6 percentage points).

In the 1990s, the role of trade with Far Abroad countries has markedly increased. The market outside the Commonwealth is attractive, first and foremost, from the standpoint of broader prospects for developing the export of competitive goods. Successful marketing of natural gas, oil and oil products, nuclear cycle products, and also ferrous and nonferrous metals, chemicals and other goods forming the basis of exports in many CIS countries is now feasible only in non-CIS markets. Besides, trade with Far Abroad countries is the main guaranteed source of supply of foreign exchange for the various states and for most large enterprises.

Thus, whereas in 1994 trade with Far Abroad countries predominated only in the two groups of independent states that are now members of the Union State and the EurAsEC, constituting 75% and 72.8%, respectively, of their total foreign trade turnover, in 2000 it already predominated in all the four regional groupings, constituting 76.5% in the Union State, 74.9% in the EurAsEC, 64.2% in CAEC, and 61% in GUUAM. Trade with Far Abroad countries is now in excess of $87bn in the EurAsEC countries and $83bn in the Union State, and is close to $11bn in GUUAM and to $6bn in CAEC.

The trends in mutual trade among the CIS countries are just the opposite. The first place in the volume of mutual trade with CIS countries also belongs to the EurAsEC: its turnover in 2000 was $42,475.4m, or 69.7% of the Commonwealth figure (without Turkmenistan). The Union State ranks second with $35,888.3m (58.9%), GUUAM is in third place with $15,585.5m (25.7%), and CAEC is fourth with $8,199.1m (13.5%).

In terms of mutual trade, the Union State, the EurAsEC and CAEC have now surpassed the 1994 level, while in GUUAM in 2000 such trade came to 84.4% of the level of 1994 (i.e., prior to the establishment of the regional associations).

Exports constitute the bulk of the foreign trade turnover of all the four regional associations. In 2000, exports amounted to 72.3% of the foreign trade turnover in the Union State, 71.3% in the EurAsEC, 59.7% in CAEC, and 51% in GUUAM. In 1994, this indicator for the countries that are now members of the regional associations was lower: 62.4%, 61.4%, 48.5% and 48.4%, respectively.

The first place in export volume in 2000 belonged to the EurAsEC, where the figure was $120,809.9m (83.9% of the Commonwealth total, without Turkmenistan), the second to the Union State, with $110,381.6m (76.7%), the third to GUUAM, with $20,384.1m (14.2%), and the fourth to CAEC, with $1,369m (9.5%). Most of the exports go to Far Abroad countries. In 2000, the 1994 level of such exports was surpassed 1.7 times in the Union State, 1.8 times in the EurAsEC, 3.5 times in CAEC, and 2.3 times in GUUAM. The largest volume of exports to Far Abroad countries in 2000 was recorded in the EurAsEC: $99,599.5m (86.5% of the CIS figure). In the Union State, it was $92,142.7m (80.1%), in GUUAM, $14,355.8m (12.5%), and in CAEC, $9,837.9m (8.5%).

In 1994-2000, exports within the Commonwealth increased 1.2 times in the Union State and the EurAsEC, and to 102.2% in CAEC. In GUUAM, despite a marginal relative increase in such exports in 1999-2000, overall they were down to 75.4% of the 1994 level.

In 2000, intra-CIS exports as a share of each regional groupings total exports stood at 29.6% in GUUAM, 28.2% in CAEC, 17.6% in the EurAsEC, and 16.5% in the Union State. This share fell in all the four regional associations: by 5.6 percentage points in the Union State, 6.3 points in the EurAsEC, 28.8 points in CAEC, and 26.8 points in GUUAM. Indicatively, for the two groups of countries that are now members of CAEC and GUUAM exports within the Commonwealth in 1994 constituted a preponderant part of their total exports: 57% and 56.4%, respectively.

In the overall foreign trade turnover of the regional associations, imports make up a much smaller share than exports. In 2000, they came to 27.7% of the foreign trade turnover in the Union State, 28.7% in the EurAsEC, 40.3%, in CAEC, and 49.0% in GUUAM. In 1994-2000, the share of imports fell by 9.9% in the Union State (from 37.6% in 1994), by 9.9% in the EurAsEC (from 38.6% in 1994), by 11.2% in CAEC (from 51.5% in 1994, when imports exceeded exports), and by 2.6% in GUUAM (from 51.6% in 1994, when imports were also higher than exports). In absolute terms, however, imports increased in all the regional associations.

As a result of the changes that have taken place during the period under review, the share of the leader - the EurAsEC - in the total volume of CIS imports has somewhat decreased: from 74.8% in 1994 to 68.7% in 2000. The figure for the Union State fell as well: from 67.7% in 1994 to 59.9% in 2000. At the same time, the share of GUUAM and CAEC in the total volume of CIS imports (without Turkmenistan) went up, respectively, from 24.5% in 1994 to 27.6% in 2000, and from 11.4% in 1994 to 13% in 2000. Total CIS imports in 1994 stood at over $63bn, and in 2000 they were up (for the Commonwealth as a whole, without Turkmenistan) to 114.8% of the 1994 figure, while the share of imports in the overall foreign trade turnover fell from 41.2% in 1994 to 33% in 2000.

More than half of the imports in each regional association come from Far Abroad countries. Thus, in 2000 the figure was 58.4% for the Union State, 56.3% for the EurAsEC, 52.9% for CAEC, and 50.7% for GUUAM. In GUUAM and CAEC, there was a substantial increase in the absolute volume of such imports from 1994 to 2000: to $9,926.8m (2.1 times) and to $4,884.6m (1.6 times), respectively. In the Union State, such imports fell to $24,733.5m (1.2 times), and in the EurAsEC, to $27,399.1m (1.1 times).

Despite a substantial decline in imports from Far Abroad countries both in absolute and relative terms, the leader here is still the EurAsEC, whose share in total CIS imports (without Turkmenistan) in 2000 was 70.8% (against 86.5% in 1994). It is followed by the Union State, with 63.9% (against 81.5% in 1994). The share of GUUAM jumped from 12.9% to 25.6%, and that of the CAEC countries rose from 8.4% to 12.6%.

As the above data make it clear, imports within the Commonwealth (for all the regional associations) now constitute under half of the total volume of imports. However, in 1994-2000 this indicator rose in absolute terms: to $21,265m in the EurAsEC (141.5% of the 1994 figure), to $17,649.4m in the Union State (142.2%), and to $4,344.0m in CAEC (108%); in GUUAM, the figure was down to $9,652.3m (by 7.8%).

For the Commonwealth as a whole (without Turkmenistan), despite a reduction in mutual trade between the CIS countries as a share of their total foreign trade turnover (in 2000 exports were down to 20.1% from 29.2% in 1994, and imports, respectively, to 54.7% from 58.3% in 1994), there was an increase in the absolute volumes both of intra-CIS imports (to 112.4% of the 1994 figure) and of intra-CIS exports (to 114.8%).

In 1994, the potential for the development of mutual trade within the regional grouping was largest for the countries that are now members of CAEC and the EurAsEC. For the CAEC countries, the share of such trade in the total foreign trade turnover of the regional grouping at the time was 15.6% (the highest indicator). For the EurAsEC countries it was 13.4%, for Russia and Belarus, 7.3%, and for the countries that are now members of GUUAM, 5.4%. By 2000, the 1994 potential was not only maintained but even enhanced in the EurAsEC (17.0%) and in the Union State (12.2%). In CAEC and GUUAM, the figures for 2000 were 6.9% and 3.1%, which is much lower than in 1994.

The internal markets of the regional associations constitute an ever greater part of the volume of the internal CIS market. Thus, whereas in 1994 their share in the CIS total (without Turkmenistan) was 34.3%, in 1999 it was 46.8%, and in 2000, 49.3%. The overlapping markets of the EurAsEC and the Union State account for the bulk of the total volume of regional markets.

In all the regional associations of the CIS, the member states are highly differentiated in terms of the share of trade cooperation with their association partners in the total volume of national exports and imports.

The development of mutual trade among the countries of the Commonwealth and regional associations is directly dependent on how soon the national economies recover from the crisis. Among the factors that could work in this direction is an end to the decline in national production in many CIS countries; a rise in effective demand; a phaseout of trade deficits; improvement in the quality of goods produced so as to bring them up to world standards; extension of preferential treatment to trade partners from the CIS compared with those from third countries; and reorientation of national tax policy from trade with non-CIS countries to mutual trade within the CIS.

National economic openness should go hand in hand with measures to upgrade the economic structure. Such a restructuring should be promoted by a reasonable strategy of foreign economic activity, and also by a smoothly running system of government support for export-oriented and import-substituting lines of production. One of the most immediate tasks facing the states today is to create conditions for channeling a part of the export earnings into the development of manufacturing. In view of the significant rise in oil prices, countries supplying energy resources have real opportunities for doing so.

As the above analysis shows, the potential of the regional groupings for trade cooperation has yet to be fully tapped. The prospects for such cooperation are due to the growing export interests within these groupings.

In an interview with Belarus journalists, CIS Executive Secretary and Chairman of the CIS Executive Committee Yuri Iarov voiced his opinion that a flexible mechanism for arranging interstate ties with due regard for the countries different degree of readiness for integration has been established within the Commonwealth. This means, he said, that each country is enabled to take part in integration processes to the extent and in the areas that are best in agreement with its state interests.1


1 INTERFAX, Minsk, 9 December, 1999.


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