EDB: Short-term effects of Armenia’s accession to the Customs Union are expected to reach 4% of its GDP
St. Petersburg, 5 September 2013. Eurasian Development Bank’s (EDB) Centre for Integration Studies has come to a conclusion that Armenia’s choice of the Customs Union (CU) as its integration partner will produce a positive short-term economic effect of 4% GDP. Attracting large-scale targeted investments in the resolution of transport and power infrastructure problems will lay the foundation for long-term sustainable growth of the national economy. Evgeny Vinokurov, Director of the Centre for Integration Studies, stated this today.
In the first place, the country will obtain access to the large and protected CU market where it will have an opportunity to sell its products with high added value. The growth in exports will help resolve the balance of trade problem. Joining the Customs Union and the SES will result in a reduction in gas prices by approximately 30% (from the current $270 to $180) because of the exclusion of export duties. Another measure, which is important to the Armenian economy, is the possible abolishment of the export duty on rough diamonds, which is expected to improve the competitiveness of its lapidary enterprises in foreign markets.
The level of Armenia’s protection will increase significantly. Currently, its customs tariff is among the lowest in the WTO member states. Armenia does not use tariff quotas, 73% of its tariff lines are exempt from duties and almost all of the remaining tariff lines are subject to a 10% duty. Technical negotiations will be needed to settle WTO issues and the party in these negotiations will be the Customs Union already.
According to the Centre for Integration Studies’ Monitoring of Mutual Investments, direct investments of the Customs Union countries in Armenia reach US $2.1 billion or 40% of all FDI in the country. Russia accounts for the lion’s share of these. Investments are used to modernise backbone sectors: rail transport, gas transportation, the power sector, non-ferrous metallurgy, banking and insurance, satellite communications, the Internet and data transmission.
The country’s priorities include the creation of the North-South transport corridor. The emergence of a strong transport hub of international importance will help Armenia overcome the communications deadlock and establish a reliable transport connection between the Customs Union countries and the markets of Iran and South Asia. This project is of value to both Armenia and the Customs Union member states.
EDB experts believe that the construction, with the participation of the Customs Union, of new power facilities, the establishment of a rail link with Iran and the arrangement of rail traffic through Georgia will speed up the potential growth of Armenia’s GDP and contribute to the country’s sustainable growth.
“The country’s population favours accession,” says Evgeny Vinokurov. According to the EDB Integration Barometer 2013 (complete results of public opinion polls included in this research will be published later this month), 67% of Armenian citizens support the country’s possible joining the Customs Union and only 5% are categorically against this membership.
Additional Information
Eurasian Development Bank is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth and the expansion of mutual trade and other economic ties in its member states. EDB’s charter capital exceeds US $1.5 billion. The member states of the Bank are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, and the Republic of Tajikistan. Read more at https://www.eabr.org.