Gohar Barseghyan, Member of the Board – Minister in Charge of Industry and
Agroindustrial Complex of the EEC
Industrial production in the Eurasian Economic Union is demonstrating positive growth. Growth for 2023 was 3.7%, and this positive trend continued this year. In the first four months of 2024, the industrial production index increased by 5.2%. Furthermore, this growth was recorded in all member states of the Union. Armenia demonstrated the strongest performance with a 26.1% increase, followed by Belarus with a 7.7% increase and Russia with a 5.2% increase.
Manufacturing is leading the way in terms of output growth, with an increase of 8.6% in January-April of this year.
At December meeting of the Supreme Eurasian Economic Council, the heads of states of the EAEU signed the Declaration on the further development of economic processes within the EAEU until 2030 and for the period up to 2045, entitled «The Eurasian Economic Way».
Among the priorities of the strategic document was the EAEU’s aspiration to become a self-sufficient and harmoniously developed macro-region, an economic, technological and intellectual leader. The real sector serves as a foundation for economic integration of the Union member states with key integration processes built around it.
In the context of global economy challenges industry has become the primary driver of economic growth in the Union. In this regard, the Declaration assigned a special role to the further development of industrial cooperation within the EAEU.
Setting up cooperation projects that create value-added chains using the potential of all member stat es is one of the strategic directions of Eurasian integration.
The Eurasian Economic Commission pays great attention to the development of industrial cooperation between member states as one of the tools for implementing industrial partnership and achieving the goals of in dustrial policy within the Union, as stipulated in the Treaty on the EAEU. One of the most significant outcomes of the joint efforts of the Eurasian Economic Commission and member states in the current phase of Eurasian integration is the establishment of a financial mechanism to support cooperation projects within the EAEU. This signifies a new level of the integration in the real sector of economy.
Agroindustrial Complex of the EEC
Industrial production in the Eurasian Economic Union is demonstrating positive growth. Growth for 2023 was 3.7%, and this positive trend continued this year. In the first four months of 2024, the industrial production index increased by 5.2%. Furthermore, this growth was recorded in all member states of the Union. Armenia demonstrated the strongest performance with a 26.1% increase, followed by Belarus with a 7.7% increase and Russia with a 5.2% increase.
Manufacturing is leading the way in terms of output growth, with an increase of 8.6% in January-April of this year.
At December meeting of the Supreme Eurasian Economic Council, the heads of states of the EAEU signed the Declaration on the further development of economic processes within the EAEU until 2030 and for the period up to 2045, entitled «The Eurasian Economic Way».
Among the priorities of the strategic document was the EAEU’s aspiration to become a self-sufficient and harmoniously developed macro-region, an economic, technological and intellectual leader. The real sector serves as a foundation for economic integration of the Union member states with key integration processes built around it.
In the context of global economy challenges industry has become the primary driver of economic growth in the Union. In this regard, the Declaration assigned a special role to the further development of industrial cooperation within the EAEU.
Setting up cooperation projects that create value-added chains using the potential of all member stat es is one of the strategic directions of Eurasian integration.
The Eurasian Economic Commission pays great attention to the development of industrial cooperation between member states as one of the tools for implementing industrial partnership and achieving the goals of in dustrial policy within the Union, as stipulated in the Treaty on the EAEU. One of the most significant outcomes of the joint efforts of the Eurasian Economic Commission and member states in the current phase of Eurasian integration is the establishment of a financial mechanism to support cooperation projects within the EAEU. This signifies a new level of the integration in the real sector of economy.
On June 7, 2024, they completed ratification of the Protocol on Amendments to the Treaty on the EAEU with regard to the provision of financial assistance to cooperation projects, signed by the heads of the Member States. The necessary regulatory framework for the implementation of the mechanism came into force.
The issue of financing industrial cooperation is subject to the special supervision of the governments of the Eurasian Economic Union member states. The key coordinated decisions in this area are the result of joint work between the Eurasian Economic Commission and the EAEU member states.
They have been clearly defined mechanisms and forms of financing. They also approved a list of financial organizations participating in the financial support mechanism. It comprises 63 banks, 8 development institutions and one international organization (the Eurasian Development Bank).
The Eurasian Economic Commission was authorized to finance cooperation projects, and we initiated the implementation of a new supranational mechanism to support industrial cooperation without delay.
The legal basis for cooperation in the Eurasian Economic Commission has already been established, and together with member states, the search for significant multilateral integration projects in industry is underway.
The launch of these projects will form the basis for a pilot project to develop industrial cooperation. The specifications of the new supranational mechanism should be reviewed in more detail. The principal objective of this mechanism is to provide supranational support to entrepreneurs of the EAEU countries in the setup of new joint production and cooperation chains, as well as in modernization of existing production capacities. The implementation of the mechanism is intended to promote technologic development and establish new production models in the member states, extend trade and economic relations between them and third countries, and increase mutual investments in order to achieve sustainable economic growth of the EAEU member states.
In accordance with the decision of the Heads of State of the Union, subsidizing the interest rates on loans and credits granted by financial organizations for the implementation of industrial projects will be a support measure. The source of funding will be the budget of the EAEU. The Heads of Governments have agreed on unprecedented conditions for the project – compensation in the amount of 100 per cent of the key interest rate of the central (national) bank of the member state.
This tool has been developed as a pilot project, and the corresponding system of preferential loans for projects within the EAEU will operate for 5 years. Furthermore, to guarantee equal opportunities and access to resources for market participants from all EAEU member states, particularly for medium and small enterprises in the regions, the maximum subsidized amount for one project per year has been set at 350 million rubles.
The decision of the Eurasian Intergovermental Council, as we see, defines the subsidy currency as the Russian ruble, while the lending currency is the currency of any member state. These are highly favourable conditions, particularly when viewed in the context of the prevailing key rates, considering the level of current key interest rates which currently stand at 14.75% in the Republic of Kazakhstan and 16% in the Russian Federation.
The issue of financing industrial cooperation is subject to the special supervision of the governments of the Eurasian Economic Union member states. The key coordinated decisions in this area are the result of joint work between the Eurasian Economic Commission and the EAEU member states.
They have been clearly defined mechanisms and forms of financing. They also approved a list of financial organizations participating in the financial support mechanism. It comprises 63 banks, 8 development institutions and one international organization (the Eurasian Development Bank).
The Eurasian Economic Commission was authorized to finance cooperation projects, and we initiated the implementation of a new supranational mechanism to support industrial cooperation without delay.
The legal basis for cooperation in the Eurasian Economic Commission has already been established, and together with member states, the search for significant multilateral integration projects in industry is underway.
The launch of these projects will form the basis for a pilot project to develop industrial cooperation. The specifications of the new supranational mechanism should be reviewed in more detail. The principal objective of this mechanism is to provide supranational support to entrepreneurs of the EAEU countries in the setup of new joint production and cooperation chains, as well as in modernization of existing production capacities. The implementation of the mechanism is intended to promote technologic development and establish new production models in the member states, extend trade and economic relations between them and third countries, and increase mutual investments in order to achieve sustainable economic growth of the EAEU member states.
In accordance with the decision of the Heads of State of the Union, subsidizing the interest rates on loans and credits granted by financial organizations for the implementation of industrial projects will be a support measure. The source of funding will be the budget of the EAEU. The Heads of Governments have agreed on unprecedented conditions for the project – compensation in the amount of 100 per cent of the key interest rate of the central (national) bank of the member state.
This tool has been developed as a pilot project, and the corresponding system of preferential loans for projects within the EAEU will operate for 5 years. Furthermore, to guarantee equal opportunities and access to resources for market participants from all EAEU member states, particularly for medium and small enterprises in the regions, the maximum subsidized amount for one project per year has been set at 350 million rubles.
The decision of the Eurasian Intergovermental Council, as we see, defines the subsidy currency as the Russian ruble, while the lending currency is the currency of any member state. These are highly favourable conditions, particularly when viewed in the context of the prevailing key rates, considering the level of current key interest rates which currently stand at 14.75% in the Republic of Kazakhstan and 16% in the Russian Federation.
Even when compared to the national preferential support measures full compensation of the key rate for local currency financing provides favourable conditions for entrepreneurs. At the same time, the requirements for potential projects are transparent and very clear.
This has been a key paradigm for all countries participating in the development of the mechanism. The first and probably most important requirement is the participation of at least three Member States: the principal borrower and legal entities from two other states. The forms of such participation may vary. The primary requirement is the provision of materials and components with a minimum quantitative threshold for participation of at least 5%. Participation may also have a form of supplying technological equipment and software, providing engineering and construction services and undertaking design and survey activities.
Along with this mechanism, a property contribution is included as a format of participation by one of the parties. In the essence, the mechanism offers approximately 10 main options for «project assembly».
The second requirement is that the products manufactured and supplied under the project must have their place of origin in the EAEU countries. The delivery of any material, components and equipment must be new supranational mechanism to support industrial cooperation in the EAEU: unprecedented conditions for preferential loans for projects have been created accompanied by relevant documentation confirming compliance with the rules for identification of the country of origin, namely an ST-1 certificate used within the CIS, or Decision No.
105 of the Council of the Eurasian Economic Commission dated November 23, 2020, «On approval of the rules for identification of the country of origin of certain types of goods for the purposes of state (municipal) procurement».
It should be noted that this approach does not imply that the entire technological chain should be built exclusively on a domestic basis. Unfortunately, in the modern system of international business distribution, as well as ownership and application of technologies, this is not always possible.
It is important that the manufactured products have a domestic certificate of origin. Otherwise, the financial support mechanism sets out a number of fairly standard requirements for financial organizations and businesses. The sequence of business steps to obtain financing is clear and objectively simple.
First of all, the business determines what kind of production facilities it plans to modify or create, and what amount of credit funds should be raised for the project. This can be either a separate workshop at an enterprise or a new production line. Then the possibilities of their participation in the project are agreed with partners from the EAEU.
The project must be profitable and feasible. In fact, the entire economic expertise of the project is the competence of the bank. Once the assessment is complete, the bank forwards the application to the Eurasian Economic Commission, which checks it for compliance with the criteria and presents it to the Advisory Committee on Industry for review.
This has been a key paradigm for all countries participating in the development of the mechanism. The first and probably most important requirement is the participation of at least three Member States: the principal borrower and legal entities from two other states. The forms of such participation may vary. The primary requirement is the provision of materials and components with a minimum quantitative threshold for participation of at least 5%. Participation may also have a form of supplying technological equipment and software, providing engineering and construction services and undertaking design and survey activities.
Along with this mechanism, a property contribution is included as a format of participation by one of the parties. In the essence, the mechanism offers approximately 10 main options for «project assembly».
The second requirement is that the products manufactured and supplied under the project must have their place of origin in the EAEU countries. The delivery of any material, components and equipment must be new supranational mechanism to support industrial cooperation in the EAEU: unprecedented conditions for preferential loans for projects have been created accompanied by relevant documentation confirming compliance with the rules for identification of the country of origin, namely an ST-1 certificate used within the CIS, or Decision No.
105 of the Council of the Eurasian Economic Commission dated November 23, 2020, «On approval of the rules for identification of the country of origin of certain types of goods for the purposes of state (municipal) procurement».
It should be noted that this approach does not imply that the entire technological chain should be built exclusively on a domestic basis. Unfortunately, in the modern system of international business distribution, as well as ownership and application of technologies, this is not always possible.
It is important that the manufactured products have a domestic certificate of origin. Otherwise, the financial support mechanism sets out a number of fairly standard requirements for financial organizations and businesses. The sequence of business steps to obtain financing is clear and objectively simple.
First of all, the business determines what kind of production facilities it plans to modify or create, and what amount of credit funds should be raised for the project. This can be either a separate workshop at an enterprise or a new production line. Then the possibilities of their participation in the project are agreed with partners from the EAEU.
The project must be profitable and feasible. In fact, the entire economic expertise of the project is the competence of the bank. Once the assessment is complete, the bank forwards the application to the Eurasian Economic Commission, which checks it for compliance with the criteria and presents it to the Advisory Committee on Industry for review.
The members of the committee are representatives of the states bodies of the Union countries, as well as representatives of the EAEU Business Council. After consideration of the Advisory Committee on Industry, the application is submitted in turn to the Board and the Council of the Eurasian Economic Commission, which consists of five representatives of the member states at the level of deputy prime ministers.
If the project is approved by the Council of the Eurasian Economic Commission, a loan agreement is signed between the company and the financial institution, and a grant agreement is made between the financial institution and the Eurasian Economic Commission.
We expect that Member States with smaller economies will be particularly interested in the established supranational support mechanism. It is clear that the capabilities of enterprises in such countries differ from those of industrial giants in terms of manufacturing technological equipment for the supply of industrial products within the framework of cooperation chains. Nevertheless, there are already successful examples of cooperation in the industrial sector, in particular, Armenia’s collaboration with EAEU partners.
A notable example of cooperation is the assembly of Belorussian elevator equipment in Armenia. Since 2023, RafelGrig CJSC has started assembling the equipment of Mogilevliftmash OJSC. The Armenian side has also mastered the production of relay equipment for the elevator industry, which is installed on the incoming lift equipment. To date, the company has installed 1,630 lifts in Armenia. Furthermore, RafelGrig CJSC is currently carrying out trial deliveries of controllers to Mogilevliftmash OJSC for installation on Belorussian lifts exported to third countries.
If the project is approved by the Council of the Eurasian Economic Commission, a loan agreement is signed between the company and the financial institution, and a grant agreement is made between the financial institution and the Eurasian Economic Commission.
We expect that Member States with smaller economies will be particularly interested in the established supranational support mechanism. It is clear that the capabilities of enterprises in such countries differ from those of industrial giants in terms of manufacturing technological equipment for the supply of industrial products within the framework of cooperation chains. Nevertheless, there are already successful examples of cooperation in the industrial sector, in particular, Armenia’s collaboration with EAEU partners.
A notable example of cooperation is the assembly of Belorussian elevator equipment in Armenia. Since 2023, RafelGrig CJSC has started assembling the equipment of Mogilevliftmash OJSC. The Armenian side has also mastered the production of relay equipment for the elevator industry, which is installed on the incoming lift equipment. To date, the company has installed 1,630 lifts in Armenia. Furthermore, RafelGrig CJSC is currently carrying out trial deliveries of controllers to Mogilevliftmash OJSC for installation on Belorussian lifts exported to third countries.