The European Union and Kazakhstan

The European Union and Kazakhstan

The Eurasian Continent is the host to both Kazakhstan and the European Union. Indeed Kazakhstan consisting of territory to both the East and the West of the Ural Mountains, is geographically in both Asia and Europe. As a newly independent state relations on a practical level rapidly developed between the European Union and Kazakhstan. These relations were formalised in the Partnership and Cooperation Agreement which came into effect in July 1999. The Partnership and Cooperation agreement provides the framework for the relations between the European Union and Kazakhstan and within the context of this formal framework practical activities in trade, investment, cultural, technical assistance and other activities develop. This article will comment on the Partnership and Cooperation Agreement and on specific sectors where the relations between the European Union and Kazakhstan are taking practical form.

What is the Partnership and Cooperation Agreement with Kazakhstan?

The Partnership and Cooperation Agreement (PCA) is a treaty between Kazakhstan on the one side and the European Community and its Member States on the other side. The PCA was concluded and initialled on 20 May 1994. President Nazarbayev of Kazakhstan and President Jacques Santer of the European Commission signed the PCA on 23 January 1995. After ratification by Parliaments of the 15 Member States of the EU, the Parliament of Kazakhstan, the European Parliament, the PCA entered into force on 1 July 1999. The PCA replaced and expanded upon an Agreement on Trade and Economic and Commercial Cooperation signed on 1989 between the European Commission and the Soviet Union. The PCA is a treaty providing the framework for mutual cooperation between Kazakhstan and the EU. It provides for a framework for political dialogue, commercial cooperation as well as cooperation in the legislative and institutional field, energy and scientific field and also social, financial and technological fields. The PCA will remain in effect for an initial period of ten years. It covers the following areas of cooperation: political dialogue, trade in goods, provisions affecting business and investment, including labour conditions and operation of companies, cross-border supply of services, payment of capital, intellectual, industrial, commercial property protection and economic cooperation in many areas. More in detail the PCA means the following in terms of trade :

· EU companies that invest in Kazakhstan receive a treatment at least as well as any Kazakhstan or third nation company. Likewise any Kazakhstan company which has invested in EU markets receive treatment at least as favourable as European companies;

· Elimination of trade quotas and Most Favoured Nation treatment at borders;

· Neither EU governments nor the Government of Kazakhstan will stop current payments for goods and services being made nor block direct capital movements from the EU to Kazakhstan and vice-versa;

· Owners of intellectual property can expect to have equivalent legal protection of their rights in EU and Kazakhstan jurisdictions within 5 years;

The PCA incorporates internationally agreed norms regarding human rights and democracy, both as the basis for the relationship between Kazakhstan and the EU. The EU presents within the agreement its assistance to Kazakhstan in its process of democratisation. In addition, it aims to bring Kazakhstan legislation closer to European legislative standards as well as to promote trade and investment and market economy mmarised the PCA aims to assist Kazakhstan in its transition to a democratic regime and open market economy and to develop its relations with Europe. For its effective implementation the PCA provides for annual EU-Kazakhstan bilateral meetings at ministerial level (Cooperation Council), senior civil servant level (Cooperation Committee) and between members of the European Parliament and of the Kazakhstan Parliament (Parliamentary Cooperation Committee). A subcommittee on trade and investment at civil servant level was subsequently established. Agreements between the European Union and Kazakhstan While the PCA provides the overall framework for cooperation, specific agreements have been negotiated between the European Union and Kazakhstan on areas of mutual interest. To date agreements have been negotiated on the Steel Trade, on Trade in Textiles, on Nuclear Safety and on Nuclear Fusion.

EU and Kazakhstan Trade and Investment Relations

Kazakhstan is moving slowly from relying on trade with the former Soviet Union countries towards boosting its trade with other countries, including the member states of the EU. The EU as a whole is the second trade partner of Kazakhstan after the CIS. and great importance to the development of its trade terms with Kazakhstan in a context of free market economy. Accession to WTO is a priority of the Kazakhstan government, reflecting its desire to participate in global trade on equal terms. The European Union encourages Kazakhstan accession to WTO and continues to take measures to encourage EU trade and investments in Kazakhstan, in particular by supporting economic and legislative reforms through technical assistance. Signs of growing trade between the EU and Kazakhstan are positive. Now Kazakhstan is the largest trade partner of the EU in Central Asia, and the EU is the second trade partner of Kazakhstan after the CIS countries. European countries have benefited from the diversification of economic linkages, enabling some European companies to see Kazakhstan and Central Asia as a new market for their products. In view of this growing and already substantive trade the PCA has been a welcome tool to further improve the economic links between Kazakhstan and EU. Foreign direct investment will play a key role in the long term development of Kazakhstan. With growing knowledge of the potential of Kazakhstan there is an increasing level of investment by European private enterprise in Kazakhstan. Initially concentrating on the oil, gas and mineral sector this investment activity is now branching out into the other sectors of the economy.

Tacis in Kazakhstan

Tacis is one of the EU's most important external assistance programmes, supporting the Newly Independent States, neighbours and fellow Europeans, as they strive to complete the difficult transition to independent, democratic, market economies. When Tacis was launched, technical assistance was a stand-alone activity, but now the programme is but one part of complex and fast-evolving relationships with the 13 countries concerned. While real results have been achieved over the years, the programme now aims to respond to the priorities of the deeper political relationship, with the expectation that each project should contribute in some way towards meeting the objectives set out jointly.

The main element of Tacis support aims at transferring know how and expertise to organisations in the partner countries. This may be done through organised formal training, or through cooperation or twinning between organisations, as well as by experts from the EU working in the partner countries. As a provider of technical support to Kazakhstan, Tacis coordinates its activities with institutions such as the World Bank, IMF and EBRD, the principal international lenders of finance to Kazakhstan. Finally, Tacis funding may now, in specific cases, be used as investment capital, for example for new small businesses in the partner countries.

Apart from providing technical assistance to individual partner countries the European Union has assisted the Newly Independent States in developing initiatives to deal with common problems that are best solved by joint action

Every four years the European Commission and the Government of Kazakhstan prepare a strategic document, the Indicative Programme, identifying the sectors of future co-operation. On a bi-annual basis both partners agree an Action Programme which determines the individual projects that will support the sector objectives of the Indicative Programmes.

More than 120 million Euro has been provided for Kazakhstan under the Tacis Programme from 1992 until 2000. The main part of the Tacis budget goes to the national Action Programme. Over 50 % of Tacis funds for Kazakhstan are aimed at supporting the emergence of a market economy. Assistance was given to the Banking sector, SME development and policy advice to the relevant ministries. Most recently Tacis has been developing macro-economic forecasting and planning models within the Ministry of Economy and has been training the staff of the various ministries involved in economic policy making in the latest macro-economic policy tools. Assistance to the restructuring of larger enterprises has been provided through the Almaty Post-privatisation centre.

Because investment in the agricultural sector is urgently required, particularly in the processing and packaging of local produce, Tacis has supported the government in the transformation and privatisation process, and has focused on key issues in the food chain from the farm to the consumer, with emphasis on the core activities of milk, meat, other fresh produce and animal feed. Tacis also did projects in the field of telecommunications and energy.

Last but not least Human Resources Development has been at the heart of several Tacis projects in Kazakhstan. The KIMEP MBA programme in Kazakhstan is a flagship Tacis project and has proved to be successful through its highly valued MBA graduates. The Academy of Diplomacy is another example of Tacis support for building up internationally recognised academic institutions.

As good governance is a priority for the EU, support was given to the ongoing Public Administration Reform in restructuring the public administration to a professional civil service based on merit.

About 25 % of Tacis funding is allocated to the Small Project Programmes (SPPs). These facilities or framework programmes meet a specific type of assistance need. The selected programmes are smaller in size and offer greater flexibility and can be cross-cutting various sectors of co-operation. These SPPs take in most of the cases the form of partnerships between universities, cities, companies,...

In the Tacis framework, two well-know interstate programs are the INOGATE (Interstate Oil and Gas Transport to Europe) and TRACECA (Transport Corridor Europe-Caucasus - Central Asia) projects, so-called interstate programs. With these programs the EU supports the establishment of a proper transport infrastructure - a modern "Silk Road" - connecting the countries of the region to Europe and Asia as well as to each other. In the framework of TRACECA, the EU is supporting the development of new routes over land, sea and air. In Kazakhstan the port of Aktau has received considerable support.

Through TRACECA and INOGATE the EU hopes to fasten economic recovery and thus dampen many of the existing inter-ethnic and territorial conflicts. This modern silk road should open Central Asia countries to the outside world, promote business investment and secure democracy transfer to the region.

In 2000, the TACIS programme enters a new phase, renewing our commitment to assist the partner countries up to the end of 2006. Much has changed since Tacis was launched in 1991, and we are now moving much more towards dialogue with our partners in planning Tacis activities. Naturally as the new enlargement approaches, the EU's relationship with those countries on its borders will change. We need to encourage close relationships and cooperation between neighbouring countries across our projected eastern borders. And above all we need to replace the suspicions of old with trusting partnerships on which both sides can truly count.

EU & Kazakhstan : a relationship of mutual interest

In the first half of the nineties, Central Asia its peoples, its potential and its problems still appeared remote. However during the second half of the nineties, European societies became aware of Central Asia in terms of its economic potential, particularly in the area of oil and gas and also its emerging problems particularly issues such as illegal immigration and the growing problem of drug trafficking.

Through the recently developed Action Plan aimed a combating drug trafficking, the EU will step up a drive to help the Central Asian countries combat the smuggling of narcotics along new routes from Afghanistan, source of much of the opium and heroin reaching European cities.

Demographic change, migration pressures and potential refugee flows are playing another important in role in the actual and future relationship between the EU and Kazakhstan. Major population growth in South Asia, Iran and China is likely to impact Central Asia, its resources and its societies, and in turn affect Russia. Europe therefore is concerned.

In this regard, EU's actions in Kazakhstan need to be looked at from a regional perspective and not as an isolated country. The EU supports sound relations with Russia, China and neighbouring Central Asian countries as essential.. Besides preservation of environment, development of communications and transportation infrastructures are also key areas to assist Kazakhstan in achieving a critical level of development that ensures stability.

Kazakhstan has a wealth of natural resources including oil, natural gas, gold, uranium, copper and many other minerals. The oil and gas reserves in and around the Caspian Sea have attracted significant foreign investment recently. The European Union seeks to work with the Kazakhstan Government in creating an environment in which European and Kazakhstan interests can benefit from these reserves and develop Kazakhstan reserves.

The European Union will be a long term partner for Kazakhstan in strengthening trade and cultural ties between them, and also in assisting Kazakhstan in its efforts to develop democratic transparency and free-market mechanisms, so that Kazakhstan can play its full role in the 21st century.