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Work is being completed on the establishment of unified operation modes in trading with countries and on re export of commodities.

Apart from bilateral agreements, the Customs: Union also relies on a number of multilateral agreements and conventions adopted by the CIS
Countries, including The Foundations of Customs Legislation, A Unified
Methodology for the Customs Statistics on Foreign Trade, On the Movement of
CIS Countries' Citizens Through Their Territories Without Visas, On
Guarantees for the Rights of Individuals Belonging to National Minorities,
On the Establishment of a Unified System of Air Defense of CIS Member
States, and On Legal Aid and Legal Relations in Civil, Family, and Criminal
Cases.

Thus the main principle on which the Customs Union is founded is the existence of a unified customs territory and a uniform mechanism for regulating the economy, based on unified legislation.

Toward the end of 1995, significant changes occurred in the trade and economic relations of Kazakhstan and Russia. The agreement was revised on trade and economic relations; the emphasis was made on the development of direct links between producers, which resulted in a considerable increase in the exchange of products. In 1995, trade between Kazakhstan and Russia amounted to $319 billion, or 54 percent of the total volume of the republic’s trades, an increase of 55.4 percent on the same period in the previous year. Exports amounted to $2.1 billion, which made up 42 percent of the total volume of Kazakhstan export; exceeding the 1994 figures by a factor of 1.5. Imports reached the $1.8 billion mark, or 49 percent of all imports, exceeding the 1994 imports by 66 percent.

Work on the formation of the Customs Union can thus be seen as one of the main achievements in the field of economic integration of Kazakhstan and Russia. A breakthrough was achieved in the establishment of a common market. The three countries established a unified customs zone and eliminated controls at their internal borders. Close businesslike links were established between the customs services.

The Customs Union brings tangible results to each of its members. The overall volume of trade between the CIS countries outside the Customs Union continued to fall, while the lifting of custom barriers enabled Kazakhstan,
Russia, and Byelorussia to considerably increase commodity circulation.

In October 1995, the heads of the governments of Russia, Kazakhstan, and Byelorussia issued a joint appeal to the governments of CIS member states to join the triple union. Running somewhat ahead of the story, let us note that in March 1996 Kyrgyzstan joined the customs union.

At the same time progress in the development of bilateral economic relations is checked by a number of problems, notably by chronic nonpayment of mutual debts. Kazakhstan's debt for electric power received from Russia grew almost threefold in 1995. In turn, Russia owed a large sum to
Kazakhstan for the coal from Ekibastuz.

Serious possibilities are sometimes missed for successful cooperation between enterprises in the fuel and energy complex, in metallurgy, and other branches of the economy of Kazakhstan and Russia. Close production links became established between the Orskneftegazsintez JSC and the
Aktyubinskneft JSC, which form the Orenburg JSC. Early in 1995, the management of these associations conducted mutual consultations and decided that a joint oil company must be set up.

In Russia, the formation of financial-industrial groups went on at an increasing pace. The results of their work in 1995 show that integration of industrial and banking capital had a positive impact on economic development.

Further effective economic cooperation between Kazaklistan and Russia calls for systematic analysis and work on a mechanism of control over the implementation of bilateral Kazaklistani-Russian treaties and agreements.

The following tasks should in our view be singled out in the field of economic cooperation between Kazaklistan and Russia that are of mutual interest and call for coordinated decisions of the governments: a) Stabilization of export of raw materials and subsequent increase in it as a basis for the growth of currency earnings for the modernization of production; b) Diversification of exports; c) Additional currency and investment resources for restructuring the economy; d) Support for active trading policy on CIS countries' potential markets; e) Moderate protectionism in relation to newly created import-replacing production lines.

Under these conditions the two countries will have to solve new problems in economic integration in the framework of the Customs Union and in the system of world economic links, in searching for additional financial resources necessary for the implementation of economic restructuring and their balanced growth, in defending the interests of the domestic market from unfavorable conditions in the world economy and from, foreign competition at the stage of stabilization of their economies.

In choosing a promising export and import specialization, Kazakhstan and Russia should give preference to commodities that are least susceptible to market fluctuations. To achieve this, it is necessary to conduct regular analysis and forecasting of the situation on the markets for the principal import and export commodities, favoring long-term agreements on their purchase/selling over one-off deals.

In the medium-term perspective, transition should be effected from restrictive policies to encouragement, consistently facilitating the formation of a progressive, structure of exports and creating a corresponding system of its state support.

Analysis of export/import operations of foreign trade companies and enterprises shows that, in the absence of combined controls over exports and currency and of an obligatory norm of currency sales, 1 all export earnings reach the republic. According to Kazakhstan specialists calculations, some $0.6-0.8 billion end up on the accounts of Kazakhstan enterprises in the countries of near and far abroad. According to Russian experts, corresponding figures for Russia range from $5 to $17 billion. In this connection, one of the main tasks of management of foreign trade activities of the two states is the setting up of systems of customs control over export and import contracts and banking control over currency earnings, investments, and other commodities.

In future, it is advisable to step up coordination of information systems of control over repatriation of currency earnings by the customs bodies and the banking system, which will permit a concentration of efforts on securing maximum currency earnings from exports.

It is advisable to restrict the decisive role of the state in foreign economic activity to internationally recognized standards, to be implemented in accordance with the rules and norms of the World Trade
Organization.

It is also advisable, in a situation of considerable reduction of the share of state property, to export and import commodities in state interests only within the framework of intergovernmental agreements, which must not include any privileges or tax or duty exemptions. For this purpose, the possibility is created for domestic purchases on a competitive basis.

The state policy of selective protection in relation to promising exporting industries and conquering foreign markets gradually becomes one of the main priorities of economic policy as a whole; it is called, upon to prepare the implementation of a really proactive export policy, without which it is impossible to ensure either the payment of foreign debts, or internal financial stabilization, or investment activity and employment.

Another important task is the achievement of favorable trading procedures-in relations with foreign countries and their trade and economic groups, organizations, and unions, as well as the lifting of existing discriminatory restrictions, and prevention of new ones, with regard to the member states of the customs union.

To solve this task, plans are made to work consistently and purposefully toward the entry of Kazakhstan and Russia in the World Trade
Organization, to harmonize our countries' legislative systems with international norms and principles, and to implement the agreement on partnership and cooperation with the European Union and agreements with other countries.

Formation of new economic relations with states of the near abroad will require a longer that previously believed period of time and a gradual and coordinated advance toward generally accepted international norms of organization.

The future economic policy of Kazakhstan in relation to Russia and the countries of the near abroad must have the following goals development and rationalization of cooperative economic links in terms of minimizing expenditure and increasing competitiveness;

— The utilization of transit communications serving the export/import commodity flows from Customs Union members to third countries;

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