«Our states have a significant potential for increasing the national production of a wide range of industrial products»
– Ms. Barseghyan, how do you assess the current state of affairs in the industry and the agro-industrial complex of ‘five states’ and what is the situation with the food security?
– I’ll start with the positive. In the context of the global instability in the world economy, industrial production in
the states of the Eurasian Economic Union is showing positive dynamics. In 2023, in the Union as a whole, compared to the previous year, it increased by 3.7%. Moreover, the production growth was recorded in all member states. The best results were shown by Belarus – by 7.7%, Kazakhstan – by 4.3% and Armenia – by 4.1%.
We also saw an increase in production volumes in the manufacturing industry – by 7.4% at the end of last year.
Moreover, the growth was also recorded in all member states. The leaders are again Belarus – by 9.1%, Russia – by 7.5% and Armenia – by 6.7%. I would like to note that the positive production dynamics were noted in 20 out of 21 manufacturing sectors.
The confident growth rates are demonstrated by the electro-optical industry (32.7% increase), the production of finished metal products (27.4% increase), the production of other vehicles and equipment (25.9% increase), the furniture industry (21.4% increase ), the production of the electrical equipment (19.4% increase), the automotive industry (16.6% increase).
The only industry that demonstrated a decrease in the production volumes was the pulp and paper industry – a 1.5% decrease.
The issues of the food security and uninterrupted supply of high-quality and safe food products to the population of the Union states not only have not lost their relevance, but have also become especially sensitive in the unstable economic conditions. The gross agricultural production over the past three years (2020-2023) increased by 7.8%. In 2023, more than 51 million tons of milk were produced in the member states, which is 5.5% higher than in 2020; the grain and potato harvests increased by 3%, amounting to 169 and 30 million tons, respectively.
Taking this into account, the Union fully covers the domestic needs for grain, pork, poultry, sugar, milk, vegetable oils and eggs through its own production. In 2023, the self-sufficiency rate reached 93%. There is only a shortage of fruits and berries, and less than half (49%) of the population’s demand is being met. However, in recent years this figure has been steadily increasing (+1.4 percentage points by 2020).
Implementing the initiatives of the heads of state and heads of government of the member states, as well as the provisions of the Declaration on the further development of economic processes within the Union until 2030 and for the period until 2045, the Commission will continue to pay special attention to the issues of ensuring food security and accessibility of food to the population.
– What prospects do you see for the development of the real sector of the economy of the states of the Eurasian Economic Union?
– The Commission pays great attention to the development of industrial cooperation between the states of our integration association. The results of the analysis carried out in 2023 indicate that the most promising sectors for the development of the industrial cooperation include such industries as the automotive industry, the pharmaceuticals, and the electron-optical industry, in which it is advisable to focus on organizing production of the relevant spare parts, components and other component base, including the second and third levels.
This is due to the fact that in these industries the cooperation potential is either at an average level or below average, but there is a high dependence on the import of intermediate goods from third countries, i.e. precisely on the supply of imported materials and components.
In the development of these industries, the strengthening of the scientific and technical cooperation of the member states is also of great importance due to the fact that these industries place high demands on the availability of the modern technologies and the introduction of the advanced innovative solutions that ensure the production of the competitive products that are not inferior in quality and price characteristics to the global analogues.
In addition, in the current situation, our states have a significant potential for increasing national production of a wide range of industrial products. Therefore, in the automotive industry, growth opportunities lie in the production of the passenger cars, with an estimated increase of 7% by 2025, in the chemical industry – the production of the potash fertilizers (an increase of 5%), in metallurgy – the production of the rolled ferrous metals (an increase of 6%), in special mechanical engineering –the production of the grain harvesters (an increase of 7%), in the production of the electrical equipment – the television receivers (an increase of 9%).
In order to develop cooperation in the above-mentioned sectors, the Commission has set up sectoral expert groups, whose work is used to develop sectoral recommendation sand to discuss ways of implementing a range of other integration measures. The development of industrial cooperation in the aforementioned sectors can be effectively implemented through the development of promising interstate programs and projects that provide for the development of the new technologies and the involvement of the participants from all states of the Union, the creation of the appropriate Eurasian technology platforms, the use of a cooperative financing mechanism and the use of other tools to stimulate the Eurasian industrial integration provided for by the Main Directions.
Such measures will significantly increase the interest of the business entities and the industry groups (unions, associations, holdings, etc.) in the development of the cooperation within the Union.
– Against the backdrop of the unprecedented sanctions pressure on some states of the Union, the import substitution is becoming the most important issue. Can you please outline the situation in import dependent industries such as agricultural machinery, aircraft and seed production? What are our overall prospects for overcoming the dependence on imports?
– Indeed, today the dependence of a number of the industrial sectors on imports is still extremely high, and the importance of the production of the similar domestic ‘Eurasian’ goods is obvious. One of the main priorities of industrial cooperation among EAEU member states is to create and develop sector-specific localized production. The new economic conditions provide additional opportunities for this.
In terms of the import substitution potential in the EAEU the leaders are the machinery and the equipment industries, the automotive industry, the production of computers, the electronics and optics and the chemical products, which together account for more than 60% of the total import substitution potential.
The issues of realizing the potential of the import substitution are also the subject of consideration by the specialized expert working groups created at the Commission’s site. Currently, we have adopted regulations at various levels for over 20 areas of work.
For example, there has been some progress in the import substitution of the aviation components after the adoption of an industry road map in the field of the aircraft manufacturing by the Eurasian Intergovernmental Council in February 2022. There are already visible results in intensifying the cooperation between the enterprises of the United Aircraft Corporation and the enterprises of the states of our Union on an expanded range of the aircraft components. In addition, the contracts for the manufacture of parts and assembly units were concluded, and the design documentation was exchanged.
Another tool for developing projects in the field of the import substitution is the EAEU Industrialization Map. This is a database that allows business and the EAEU member states to cooperate and replace imports. Currently, the EAEU Industrialization Map presents 158 large and significant investment projects in 32 industries.
Among them are the aviation, the automotive, the metallurgical industries, the light industry, the production of mineral products, the pharmaceutical, the medical, the chemical industries, the agriculture, the forestry, the special engineering, the energy, the transport construction and others. The review and coordination of the project implementation is carried out by the Commission on Cooperation and Import Substitution in Priority and HighTech Industries within the EAEU.
The import substitution in the production of the microelectronic products is now one of the main tasks on the agenda, and therefore the Commission is paying an increased attention to it. The Board of the Commission reviewed a report on the state of the market for microelectronic products in the EAEU and adopted a recommendation on the development of cooperation between our states in the field of the microelectronics production.
In terms of the agricultural engineering, I note that the need for the grain harvesters in the EAEU is almost completely met by the local manufacturers, and therefore imports from third states are insignificant – no more than 10% of the domestic consumption. Although domestic production of tractor equipment exceeds consumption by a quarter, imports from third-party states remain at a fairly high level, accounting for about a third of domestic consumption.
At the same time, over the past year there was a significant reorientation of the logistics supply chains. Сertain types of the agricultural and the automotive equipment from the European countries and the U.S. has been replaced by the products from partner states, in particular from China, as well as from the national manufacturers. Our enterprises have an enormous potential for further increasing the production of the import-substituting products.
In this regard, the mechanism we are implementing to support the industrial cooperation by subsidizing part of the interest rate on a loan from the Commission’s budget is especially relevant. A difficult task that may not be accomplished in the near future is the complete substitution of imported vegetable growing equipment. For example, in the EAEU countries there is still no mass production of the agricultural machinery for the viticulture and the beet harvesting, and the development of such machines requires significant resources, so imports in these segments will be in demand.
It is important to note that the import substitution is a process that requires time and joint efforts on the part of states, businesses and scientific institutions. The transition from the import dependence to the production of our own goods and services not only ensures the economic sovereignty, but also helps reduce the vulnerability of the Eurasian region to the external economic factors.
It should be noted that the agro-industrial production of the Union states depends on the import of a fairly wide range of the products necessary for the development of the industry – the seeds of corn, sunflower, sugar beets, vegetables, fruits and berries, young animals and hatching eggs for the poultry farming, the purebred cattle.
Among the imported items are the fertilizers, the feed, the plant protection products, the veterinary drugs, the agricultural machinery and the equipment.
In general, in past years, the volume of imports of the resources for the agricultural sector reached $6 billion, including the seeds – about $1 billion. The current restrictions on the supply of the material and the technical resources from third states confirm the need to expand our own competencies in the resource and technological support for the agricultural production. This work is facilitated by the existing significant scientific and production potential of the EAEU states.
The development of the high-tech production in the agricultural sector has been identified as one of the most important tasks in the Union. The Commission and the states of the Union are forming a common market for the agricultural plant seeds, unifying the legislation of the member states in the areas of testing the varieties and the seed production, increasing the efficiency of the livestock breeding and developing a common market for the breeding products.
Today, the member states mutually recognize the documents on seed quality. The Commission approved the corresponding list of the national documents and the composition of the mandatory information that must be contained in such documents. A unified methodological basis for determining seed quality has been formed.
Documents have been adopted to unify testing procedures for agricultural plant varieties within the EAEU, as well as to establish requirements for seed categories, packaging, and labelling. This has contributed to a 1.5-fold increase in the volume of the mutual trade in seeds and planting the material for the agricultural plants over the past three years.
In the livestock breeding, the work is underway to introduce the advanced technologies for predicting the breeding value of animals, improving the quality parameters of products, creating a genomic selection system in the member states and forming the reference populations of the breeding animals.
– In 2018, the EAEU adopted the Concept of creating the conditions for the digital transformation of industry and the formation of a single digital space. Since then, the Union has been actively implementing the unified digital platforms, which makes it possible to increase the efficiency of the cooperation between the EAEU member states. At what stage is the process of the digital modernization of the industry and agriculture in the states of the Union? Have further directions for the development of information and communication technologies in the industry and the agro-industrial complex been determined?
– The digitalization is the most important direction in the development of the real sector of the economy of the five states. We are creating various digital platforms – trade, logistics and production, including an emphasis on cross-border and international connections. The creation of a modern digital platform that ensures cross-border interaction of the allied businesses, with the partners from third states, is precisely the basis of the Concept you mentioned.
A list of more than 20 digital services that can become the basis for the creation of the EAEU Industry Portal has already been compiled. We are currently conducting a series of consultations with commercial IT companies and developers of the digital platforms and services to solve the cooperation issues.
For example, the ‘Investprojects’ digital service, created jointly with an industrial partner, already brings together more than 30 thousand ‘active’ investment projects in the states of the Union, which allows businesses to find the possible directions for the supply of the raw materials, equipment and components, and banks – the projects for financing .
Another digital service, the ‘Technology Exchange’, includes more than a thousand technology companies and innovation centers of our states, and in the future may become the key to creating a unified scientific, technological and innovation space of the EAEU.
Yet another service, the ‘Production Cooperation and Sales’, was created to search for the technology partners. We plan that it will unite more than 100 thousand manufacturing and trading companies engaged in the foreign economic activity. If we talk about the immediate prospects, the plans include the creation of an EAEU Industry Portal with a set of the digital services for the businesses in our states.
At the present stage, the agriculture, like any other industry, cannot develop effectively without the introduction of the digital technologies that help optimize costs, increase the productivity, increase forecasting and monitoring capabilities, and save labor costs.
The use of the technological solutions in the production processes of the small and medium-sized businesses is especially relevant. The Commission issued a recommendation to stimulate the use of precision farming technologies in the EAEU member states. The use of such technologies will increase the productivity of the agricultural crops, which will, as a result, have a positive impact on the Union’s level of provision with its own products.
– In the context of the growing geopolitical tensions and the destruction of the supply chains, the development of the industrial cooperation and joint promotion of manufactured goods – not only within the Union, but also outside its borders – are of particular relevance in the EAEU. What tools exist to stimulate the cooperation between our states and in which sectors is cooperation most in demand and effective? How is the export potential of the Eurasian Economic Union being realized in general now?
– On December 25 last year, the heads of state of the Eurasian Economic Union signed an important strategic document – the Declaration on the further development of the economic processes within the EAEU until 2030 and for the period until 2045, ‘The Eurasian Economic Path’. The key priority of this document is the EAEU’s desire to become a selfsufficient and harmoniously developed macro-region, possessing the economic, technological and intellectual leadership and attractive for other states to join.
The main goal of the industrial development of the EAEU is the implementation of the potential for effective and mutually beneficial cooperation between the member states, with the aim of ensuring the sustainable industrial development, increasing the competitiveness and innovative activity of the member states on the path to achieving the technological sovereignty.
To implement these initiatives, another strategic document will be adopted this fall, defining the format of our cooperation for the next five years – the Main Directions of Industrial Cooperation until 2030. The new industrial strategy provides for the use of such cooperation instruments as joint interstate programs and projects, as well as a mechanism for the financial assistance to joint the cooperation projects within the EAEU.
As for interstate programs, we have adopted a document regulating the procedure for their development, financing and implementation. An interstate program on space has been developed and already adopted, and programs on distributed energy and supercomputers are in progress. Another tool for developing cooperation in the industrial sector is the mechanism of financial assistance for joint cooperation projects within the EAEU, which the Commission developed in collaboration with the ‘five’ experts.
Thanks to the new mechanism, integration initiatives of business in our countries received real financial support from the Commission’s budget.
In the context of economic restrictions imposed on individual countries of the Union and the reorientation of logistics cooperation chains, one of the key issues for manufacturers is the issue of increasing industrial exports by the EAEU states and expanding its geography.
In 2023, compared to 2022, exports of manufacturing products of the member states as a whole across the EAEU to the countries of the Asian region increased by almost 10%, including to Oman – by almost 75%, to the UAE – by 42%, to China – by 18%. This indicates a reorientation of export logistics chains by the EAEU states. The promising states for the development of cooperation and export are China, Uzbekistan, Turkey, India, UAE, Brazil, Vietnam, Indonesia, and African states.
In December 2023, Free Trade Agreement between the EAEU member states and the Islamic Republic of Iran was signed, which significantly expands our export capabilities. In particular, a dutyfree trade regime will be established for products of the metallurgical, chemical and woodworking industries, aircraft and shipbuilding, mechanical engineering, railway equipment and other products of the industrial sector.
In order to form cooperative chains for the development of import-substituting and high-tech projects, the information resource Map of the Development of the Union’s Agricultural Industry has been created.
The map contains more than 170 projects being implemented and planned in the states of the Union worth about
$15.5 billion. Current projects in the agroindustrial complex include the construction of greenhouse complexes, pork and poultry production facilities, modern crop processing enterprises, and trade and logistics complexes.
Despite the changed situation and sanctions imposed against individual states of the Union, the export of agricultural products of the EAEU is increasing. For these products, the EAEU states moved from a net importer to a net exporter status. Member states supply their products to more than 150 states around the world.
I would like to note that the geography of exports itself has changed somewhat, both the role of traditional trading partners has increased, and supplies to other friendly states have increased. In general, the EAEU member states are ready to further increase agricultural exports with the countries of the Middle East, Southeast Asia, Africa and everyone interested in the further development of trade and economic cooperation with the EAEU.
– You mentioned a new tool for financial support of cooperative projects in industry. As far as I know, this mechanism should start working this year. How will this new tool function and contribute to the process of technological development of states, will it help business?
– Financing will be provided by the Commission from the Union budget by subsidizing the interest rate on loans and borrowings issued by financial organizations in the amount of 100% of the key (discount) rate of central/national banks.
This can be the national currency of any EAEU member state. The new mechanism is aimed at expanding economic ties between industrial enterprises of the EAEU through the creation of new and modernization of existing production facilities, as well as the formation of new cooperation chains.
Today this is a pilot project designed for five years. The program budget for the current year will be about 1.8-2 billion rubles, which will allow us to subsidize projects with a total cost of up to 15-16 billion rubles. The regulatory framework for the implementation of the new mechanism has already been created. The Regulations on the selection of joint cooperation projects were approved, as well as the list of banks participating in the implementation of the mechanism.
The mechanism will be launched after the completion of ratification of the Protocol on Amendments to the Treaty on the EAEU, which vest the Commission with new powers.
One of the main conditions for participation in the funding program is a co-production involving three or more member states. There are two annual periods for submitting applications for subsidies – until April 1 and until October 1. Thus, the acceptance of applications is already open, and, taking this opportunity, I invite all companies and banks interested in developing cooperation with partners in the EAEU to contact us at the Commission.
Detailed information about the conditions for participation in the program is available on our official website.
I would like to emphasize that the launch of a new financing mechanism is a landmark event for us. This is the first supranational instrument of financial support for the real sector of the economy, which allows us to reach a new level of cooperation.
It will contribute to the further technological development of the EAEU states, provide small and medium-sized enterprises with access to new technologies and give a powerful impetus to the development of integration processes in the Eurasian space as a whole.
– Since 2014, the Eurasian Economic Commission has been actively interacting with the United Nations Industrial Development Organization. Please tell us how you interact with the Russian UNIDO office? What are the current priority areas for cooperation between member states and UNIDO? What significant projects are already being implemented and what are the prospects for further cooperation in the field of industry and agriculture?
– The United Nations Industrial Development Organization (UNIDO) is a specialized agency in the UN system whose main goal is to promote the acceleration of industrial development in the world. The UNIDO Russia Center is part of UNIDO’s global network of investment and technology promotion offices. In Vienna in 2014, the Commission and UNIDO signed a Joint Statement on Cooperation. This document defines promising areas of our interaction, including entrepreneurship, investment, technological services, innovation, knowledge exchange and technology transfer, environment and energy efficiency, trade capacity building and others.
The interaction between the EEC and UNIDO is carried out on an ongoing basis. Representatives of the organization participate in events held by the industrial bloc of the Commission, including within the framework of the Eurasian Economic Forum.
In 2015, the first draft of the Main Directions of Industrial Cooperation passed the UNIDO examination.
In 2020, the Commission contributed to the launch in the Republic of Belarus of the UNIDO project ‘Using the technological potential of the Fourth Industrial Revolution for smart manufacturing, inclusive and sustainable industrial development in the Republic of Belarus’. Today the project is already at the completion stage.
We monitor the implementation of UNIDO projects in member states. Our states are actively using UNIDO technical assistance tools to implement digital solutions, develop strategies and tools for industrial development, increase the competitiveness of export-oriented sectors, and develop a green economy. Thus, in Armenia, UNIDO provides support to small and medium-sized enterprises in the clothing and footwear industries and promotes the positioning of Armenian goods in foreign markets as high-quality designer products.
In 2023, the ‘Global Innovation Program for Clean Technologies’ project was launched in Kazakhstan as part of a joint program of UNIDO and the Global Environment Facility. The goal of the Program is to promote innovation in the field of environmentally friendly technologies and entrepreneurship for the low-carbon development of Kazakhstan through the development of an innovation platform and clean technology accelerator over three years.
The Kyrgyz Republic-UNIDO partnership program focuses on modernizing the building materials, textile and apparel industries, as well as developing agroprocessing value chains with a focus on food and beverages. Recently, we have intensified our relations with the Russian office of UNIDO.
Last year, we agreed with the head of the UNIDO Center for International Industrial Cooperation in the Russian Federation to join the work on the preparation and expert support of cooperation projects within the framework of the new mechanism for financing industrial cooperation in the EAEU.
We hope that UNIDO’s knowledge and experience will contribute to solving the problems of increasing sustainability of industrial development and deepening industrial and technical cooperation within the EAEU.