EBRD

Transition Report 2012 INTEGRATION ACROSS BORDERS

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Chapter 4

Cross-border value-added chains

A key benefit of regional economic integration is that it makes it easier for producers to join international supply chains.33

This potential advantage has not been sufficiently exploited within the Eurasian Economic Community, where the structure of exports suggests that regional production chains with vertical specialisation have yet to evolve. If such chains were evident, there would be a greater share of (intermediary) goods exported within the bloc, although not necessarily to other countries, than has been the case to date (see Chart 4.7).

Source: International Trade Centre and authors’ calculations.
Note: Based on classification lines with recorded trade flows of at least US$ 1 million.

Another indication that regional production chains are comparatively undeveloped is the relatively low share of FDI sources from other countries within the Common Economic Space, with the exception of flows from Russia to Belarus. Belarus and Russia account for less than 5 per cent of Kazakhstan’s FDI; for Russia the corresponding figure from Belarus and Kazakhstan is less than 0.5 per cent. There has been no discernible rise in the share of inward FDI coming from within the Common Economic Space following the formation of the Customs Union (see Chart 4.8).

Source: Central banks of Belarus, Kazakhstan and Russia and authors’ calculations.
Note: Where available, data from the central bank of the destination country are used.

Source: Central banks of Belarus, Kazakhstan and Russia and authors’ calculations.
Note: Where available, data from the central bank of the destination country are used.

In contrast, Russia accounts for around three-quarters of FDI into Belarus (see Chart 4.9), indicating deeper potential for integration through production chains.34 Although Russia’s contribution to Belarus’s total inward FDI has fluctuated with no clear trend, the absolute value of cross-border flows has been growing rapidly. This suggests that Russian FDI has complemented, rather than crowded out, investment from other countries, such as Austria, Germany, Italy and, more recently, Latvia and Poland.35 Also consistent with these

stronger FDI links is the higher proportion of Belarusian goods that are solely exported within the Customs Union (around 30 per cent of processed and durable and capital goods in terms of numbers of product lines, although this accounts for only 2-5 per cent of the overall volume). 


33 See, for instance, Baldwin (2011).

34 Based on central bank data. 

35 See Akulava (2011) for an overview of FDI in Belarus.

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