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CIS Region: A Study of India's Trade and Investment Potential


Occasional Paper No. 116

EXPORT-IMPORT BANK

OF

INDIA

EXIMBANK

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EXPORT-IMPORT BANK OF INDIA

OCCASIONAL PAPER NO. 116

CIS REGION: A STUDY OF INDIAS TRADE AND INVESTMENT POTENTIAL


This paper is based on the award winning entry for EXIM Bank International Economic Development Research Annual (IDERA) Award 2005 for the doctoral dissertation The Nature, Pattern and Impact of Japanese and U.S. Foreign Direct Investments in Indian Manufacturing submitted to Delhi School of Economics, University of Delhi, New Delhi by Dr. Rashmi Banga, Economist, UNCTAD-India Programme, New Delhi. The dissertation was written under the supervision of Professor Aditya Bhattacharjea and Professor Biswanath Goldar. The views expressed here are those of the author and do not necessarily reflect those of Export-Import Bank of India.

EXIM Banks Occasional Paper Series is an attempt to disseminate the findings of research studies carried out in the Bank. The results of research studies can interest exporters, policy makers, industrialists, export promotion agencies as well as researchers. However, views expressed do not necessarily reflect those of the Bank. While reasonable care has been taken to ensure authenticity of information and data, EXIM Bank accepts no responsibility for authenticity, accuracy or completeness of such items.

Export-Import Bank of India Published by Quest Publications January 2007

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CONTENTS

Page No. List of Tables List of Charts Executive Summary 1. 2. 3. 4. 5. 6. 7. 8. 9. Evolution and Objectives of the Commonwealth of Independent States (CIS) Brief Background and Recent Economic Performance of the CIS Region Financial Sector and Capital Markets Foreign Trade of the CIS Region Foreign Direct Investment and Investment Climate in the CIS Region Indias Trade and Investment Relations with the CIS Region Trade and Investment Potential with the CIS Region Exim India in the CIS Region Strategy and Recommendations to Enhance Bilateral Commercial Relations with the CIS Region 5 7 9 24 28 45 50 69 88 103 132 136

Annexures 1A: Indian Joint Ventures Approved in the CIS Region, 1996-2006 (October) 1B: Indian Wholly Owned Subsidiaries Approved in the CIS Region, 1996-2006 (October) 2A: Investment Promotion Agencies in the CIS Region 2B: Chambers of Commerce and Industry in the CIS Region 141 144 147 149

Project Team: Mr. David Sinate, Deputy General Manager, Research & Planning Group Mr. Priyanshu Tiwari, Manager, Research & Planning Group

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List of Tables
Table No. A 2.1 Title Pg. No.

CIS-GDP, Inflation & Current Account Balance CIS-GDP, Inflation & Current Account Balance

10 32 33 35 42 50 51 52 53 53 54 56 58 60 62 69 88 89 91 92 93 94 95 96 97 98 101

2.2A CIS-Select Economic Indicators, 2003-2006 2.2B CIS-Select Economic Indicators, 2003-2006 2.3 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 5.1 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 Foreign Exchange Reserves of CIS Countries Foreign Trade of CIS Countries, 2001-2006 Exports of CIS Countries, 2001-2006 Imports of CIS Countries, 2001-2006 Intra-CIS Trade, 1995-2004 Intra-CIS Trade Statistics, 2002-2005 Russia's Foreign Trade, 2001-2006 Ukraines Foreign Trade, 2001-2006 Kazakhstans Foreign Trade, 2001-2006 Uzbekistans Foreign Trade, 2001-2006 Belarus' Foreign Trade, 2001-2006 FDI Inflows in the CIS Countries India's Trade with CIS Countries, 2001-02 to 2005-06 India's Exports to CIS Countries, 2001-02 to 2005-06 Trends in Composition of India's Exports to CIS Countries India's Imports from CIS Countries, 2001-02 to 2005-06 Trends in Composition of India's Imports from CIS Countries India's Trade with Russia, 2001-02 to 2005-06 India's Trade with Ukraine, 2001-02 to 2005-06 India's Trade with Kazakhstan, 2001-02 to 2005-06 India's Trade with Uzbekistan, 2001-02 to 2005-06 India's Trade with Belarus, 2001-02 to 2005-06 India's Approved Investments in the CIS Region

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List of Charts
Chart No. A. 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 6.1 6.2 India's Trade with the CIS Region Exports of CIS Countries (% Share, 2005) Imports of CIS Countries (% Share, 2005) Russia's Major Exports (% Share) Russia's Major Imports (% Share) Ukraine's Major Exports (% Share) Ukraine's Major Imports (% Share) Kazakhstan's Major Exports (% Share) Kazakhstan's Major Imports (% Share) Uzbekistan's Major Exports (% Share) Uzbekistan's Major Imports (% Share) Belarus' Major Exports (% Share) Belarus' Major Imports (% Share) Composition of India's Exports to CIS (2005-06, % Share) Composition of India's Imports from CIS Countries (2005-06, % Share) Pg. No. 12 51 52 55 55 57 57 59 59 60 61 63 63 90 92

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EXECUTIVE SUMMARY

INTRODUCTION Besides being Indias traditional and important trading partners, Indias bilateral trade relations with the CIS region has witnessed an upturn in recent years, while the CIS region is also increasingly emerging as major destinations for Indias overseas investments. Sustained growth momentum in the CIS region in recent years, buoyant foreign trade and rise in foreign exchange reserves, coupled with sharp rise in FDI inflows into the region in recent years, would present opportunities to further enhance Indias bilateral trade and investment relations with the CIS region.
In light of these developments, the Study analyses, inter alia, recent economic performance of the CIS region, trade and investment flows, trends and structure of Indias trade and investment relations with the CIS region, and endeavors to identify potential areas for increased twoway flow of trade and investment between India and countries in the CIS region. The Study further outlines some strategy and

recommendations that, while building upon the opportunities identified, would serve to foster enhanced commercial relations between Indian and the CIS member countries.

ECONOMIC PERFORMANCE
Economic growth in the CIS region has registered robust growth in recent years, reflecting among others buoyant energy and metals prices and strong domestic demand. Real GDP growth for the region as a whole strengthened from 7.9% in 2003 to 8.4% in 2004. Strong growth momentum in the largest economies in the region, such as Russia, Ukraine, Belarus, Kazakhstan, has supported economic activity in other member countries. During 2005, growth momentum was sustained, although at a lower level of 6.5%. During 2006, reflecting high commodity prices and strong export growth, economic activity has picked up, supported by increased domestic demand in major countries such as Russia and Kazakhstan. For the region as a whole, real GDP growth

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is projected to strengthen to 6.8% in 2006 (Table-A).

FDI INFLOWS INTO CIS COUNTRIES


Total FDI inflows into the CIS region have been rising continuously from an average of US$ 4 bn during 1992-97 to reach a peak of US$ 27.2 bn in 2005. Four countries, Russia, Azerbaijan, Kazakhstan and Ukraine, in that

FOREIGN TRADE AND CURRENT ACCOUNT BALANCE


Reflecting increased earnings from oil and commodity exports, the current account surplus of the CIS region has risen from 6.3% of GDP

Table-A: CIS - GDP, INFLATION & CURRENT ACCOUNT BALANCE 2003 Real GDP Growth (%) Inflation (%) Current a/c balance (% of GDP) 7.9 12.0 6.3 2004 8.4 10.3 8.1 2005 6.5 12.3 8.8 2006 (p) 2007 (p) 6.8 9.6 10.1 6.5 9.3 9.4

SOURCE: IMF, World Economic Outlook Sept. 2006; p-projections

in 2003 to 8.1% in 2004, and further to 8.8% of GDP in 2005. For net energy exports such as Azerbaijan, Kazakhstan, Russia, Turkmenistan and Uzbekistan, the current account surplus was a high as 8.7% of GDP in 2004, which increased further to 10.0% of GDP in 2005. Total exports of the CIS region have risen from US$ 196 bn in 2003 to US$ 268 bn in 2004, and further to US$ 345 bn in 2005. Total imports have also risen from US$ 134 bn in 2003 to US$ 173 bn in 2004, and during 2005 stood at US$ 216 bn. The trade surplus of the region, which stood at US$48.3 bn in 2002, increased to US$ 128.3 bn in 2005.

order, together accounted for 95% of the total FDI inflows in 2005. While in the first three countries, FDI has been driven mainly by projects in natural resources (especially petroleum and natural gas), in Ukraine it has been more broad-based. Besides streamlining the investment climate with a view to creating an enabling environment, many of the CIS countries have set up investment and trade promotion agencies, which facilitate inflows of foreign investment and act as a one-stop-shop for investmentrelated activities. Among the CIS countries, overall FDI inflows in Russia have

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been driven by increased foreign investment into the oil and extraction industry, as also inflows into the trade and catering industry reflecting the keen interest of foreign investors to tap the growing consumer population and rising incomes. With around 85% of oil production from foreign investors, the importance of FDI in Kazakhstan can be gauged from the fact that investment by foreign oil companies into the country has been the main driver of rapid economic growth in recent years. In Azerbaijan, a combination of high oil prices and the construction of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline boosted FDI inflows. In Ukraine, FDI inflows have been into sectors such as wholesale and trade, food and agro-processing, mechanical engineering, transport and communications, chemicals and petrochemicals, and metal and metal processing. Multilateral Agencies Funded Projects in CIS Region Multilateral agencies such as the World Bank, the Asian Development Bank (ADB), and the European Bank for Reconstruction and Development (EBRD) are active in funding developmental projects in the CIS region. In Russia, the World Bank has 22 active projects, while in Ukraine there are 33 active projects in sectors such as energy and infrastructure projects, public sector projects, and social sector projects, In Kazakhstan, there are 28

investment projects in infrastructure sector, environment and agriculture, while in Uzbekistan, the World Bank has committed a total of US$ 639 mn during 1994 to 2006, in sectors such as industry and trade; water, sanitation and flood control; agriculture; law and public administration; finance; health and social services; transportation; and energy and mining. The World Banks support to Belarus comprises lending, technical assistance, and aid coordination initiatives, and the Bank have extended loans in areas such as social infrastructure, forestry development, institutional building, and rehabilitation. The World Bank is also active in other CIS countries in sectors covering natural resource management, structural adjustment credit programmes, highway projects and agricultural development, irrigation, education, technical assistance programmes, health, agricultural research, trade and transport facilitation, poverty alleviation, and rural finance. The Asian Development Bank is also active in funding developmental projects in the Central Asian members of the CIS, viz. Azerbaijan, Kazakhstan, Kyrgyz Republic, Tajikistan, and Uzbekistan, and the Bank has, as on endDecember 2005, approved around 62 projects in these countries, involving cumulative approved loans of US$ 2.28 bn. In the case of EBRD, as at December 31, 2005, the Bank

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had signed 50 investments in Russia, totalling almost 7.2 bn, while in Ukraine the Bank had signed around 21 projects totalling almost 2.2 bn. In Kazakhstan, the Banks net cumulative investment amounted to around over 1.3 bn, while EBRDs cumulative finance to Uzbekistan, as on December 31, 2005, amounted to 598.7 mn, and signed three projects for a combined 35.5 mn in 2005. In Belarus, EBRDs cumulative investment as at December 31, 2005, amounted to 198.8 mn. The EBRD is also active in funding developmental projects in the other CIS countries.

INDIAS TRADE AND INVESTMENT RELATIONS WITH THE CIS COUNTRIES Bilateral Trade Relations Indias total exports to the CIS region, after contracting from

US$ 976 mn in 2001-02 to U S $ 924 mn in 2002-03, due primarily to decline in exports to Russia which is Indias largest trading partner in the CIS region, thereafter picked up to amount to US$ 1.24 bn in 2005-06. Indias imports from the CIS region, on the other hand, have registered a continued rise from US$ 739 mn in 2001-02 to US$ 2.9 bn in 200506. Reflecting these trends, Indias total trade (exports plus imports) with the CIS region has increased more than two-fold from US$ 1.7 bn in 2001-02 to US$ 4.1 bn in 2005-06 (Chart-A). Further, Indias trade balance with the CIS region, which registered a surplus till 2002-03, moved into a deficit in 2003-04 and amounted to US$ 1.65 bn in 2005-06, due to the faster rise in imports as compared to the rise in exports to the region.

Chart-A : INDIA'S TRADE WITH THE CIS REGION, 2001-02 TO 2005-06 (US$ mn)

SOURCE: Ministry of Commerce & Industry, Govt. of India. NOTE: Data for imports do not include oil imports as country-wise breakup of oil imports is not available.

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Drugs, pharmaceuticals & fine chemicals are the largest export items, accounting for 31.8% of Indias total exports to the CIS in 2005-06, followed coffee, and machinery & instruments. Other important exports to the CIS region include transport equipments, tobacco unmanufactured, plastic & linoleum products, and readymades of cotton and accessories. As regards imports, iron and steel have emerged as the largest import items from the CIS region, with a share of 35.6% of total imports in 2005-06, followed manufactured fertilizers, non-ferrous metals, coal, silver, and newsprint. Russia continues to dominate Indias overall exports to the CIS region, although the country share in Indias total exports to the CIS region has declined from 84% in 2000-01 to 59% in 2005-06, while exports to other CIS members such as Ukraine, Kazakhstan, Kyrgyz Republic, Azerbaijan, Georgia, and Uzbekistan have risen. As regards imports from the CIS region, besides Russia and Ukraine, other countries such as Kazakhstan, Uzbekistan and Georgia have also emerged as important trading partners.

overseas investment approved in the CIS region amounted to US$ 3.01 bn, accounting for a significant share of 19.7% of total overseas investments approved (US$ 15.3 bn) during the period. In the case of Russia, in fact, the country has emerged as the largest destination for Indias overseas investment, accounting for 20% (US$ 2.83 bn) of the total overseas investments approved during the period. In view of the investment opportunities in the CIS region, a number of Indian companies have endeavoured to set up joint ventures (JVs) and wholly owned subsidiaries (WOS) in several sectors in these countries. Russia is the largest destination for Indias overseas investment among CIS countries, with the major sector being petroleum products, while other sectors include: drugs and pharmaceuticals; software development services; gems and jewellery; tea processing and labeling; leather and leather products; trading in medicines, spices and other food products; trading in textiles and leather goods, and warehouse operations. In Kazakhstan, Indian JVs are predominantly in drugs and pharmaceuticals, while WOS are mainly in engineering procurement and technical services, real estate development and construction, civil construction, engineering procurement and trading in tea. In

Indian Investments in the CIS Region The CIS region has also emerged as important destination for Indias overseas investments in recent years. During the period 1996 (April) to 2006 (February), Indias

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Uzbekistan, major sectors of Indian investments include oil and gas, drugs and pharmaceuticals, leather and products, manufacture of cotton and blended yarn, readymade garments, and hotels and restaurants. In Kyrgyz Republic, drugs and pharmaceuticals, hotels and restaurants, and petroleum products are major sectors of Indian investments, while in Moldova, Indian investments are primarily in the pharmaceuticals sector. Further, approved Indian investments in Azerbaijan and Ukraine are mainly in the pharmaceuticals sector, In Georgia, approvals for Indian investments are mainly in industrial explosives, detonating cord, and matches.

paperboard, iron ores and concentrates, rubber products, articles of leather and footwear, ceramic products. Ukraine machinery and transport equipment, chemicals and pharmaceutical products, iron and steel products, food and related products, perfumery and cosmetics, plastics and articles, cotton fabrics and manmade filaments, articles of apparel and clothing, precious and semi-precious stones, iron and aluminium ores, petroleum products, rubber articles, paper and paperboard, carpets and other floor covering, ceramic products. Kazakhstan machinery and transport equipment, chemicals and related products including pharmaceuticals, articles of iron and steel, food products, ores and minerals, petroleum products, paper and paperboard, plastics and rubber articles, unmanufactured tobacco, cosmetics and toiletries, paper and paperboard, ceramic products, furniture & parts. Uzbekistan food and food products, articles of iron and steel, plastics and articles, machinery & equipments, and parts (electrical & non-electrical), transport equipment, zinc ores and concentrates, pharmaceutical products, insecticides and herbicides, rubber pneumatic tyres, paper and paperboard, carpets and other floor coverings.

POTENTIAL AREAS FOR ENHANCING BILATERAL TRADE AND INVESTMENT RELATIONS Trade Potential
Based on import demand in the CIS region and Indias export capability, the potential items of export to the region could include the following: Russia machinery (electrical and non-electrical) and transport equipment, chemical and related products including pharmaceuticals, food and related products, articles of apparel and clothing, cotton and synthetic yarn, plastics and articles, rubber articles, paper and

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Belarus - Belarus is the fourth largest importer in the CIS region, after Russia, Ukraine and Kazakhstan. In line with Belarus import demand, potential items of exports would include: nonelectrical and electrical machinery, transport equipment, articles of iron and steel, chemicals and pharmaceutical products, plastics and articles, food and related products, rubber pneumatic tyres, raw hides and skins, paper and paperboard, woven cotton fabrics, and synthetic filament yarn. Other CIS Countries As regards other CIS countries, potential items of exports would broadly fall under the following categories: food and related products, articles of iron and steel, non-electrical and electrical machinery, transport equipments, petroleum products, plastics and rubber products, carpets and other textile floor covering, garments fabrics and made-ups, furniture and parts. Import Potential - There is also scope to source imports from the CIS countries. Principal items that can be imported from Russia could include mineral fuels, iron and steel, fertiliser, and paper and paperboard, while organic chemicals, and paper and paperboard could be sourced from Ukraine. India could import mineral fuels, inorganic chemicals, iron and steel, electrical machinery and natural or cultured pearls from

Kazakhstan. The items that hold import potential from Belarus are mineral fuels, fertiliser and plastics.

Potential Sectors for Investment


Besides trade, the CIS countries offer tremendous opportunities in terms of investment. Food processing, retailing, pharmaceuticals, information technology, textiles, infrastructure development present potential for investors. In Russia, potential sectors for investment would include energy sector, auto vehicles, pharmaceuticals, food processing, retailing, tourism, agri business. In Ukraine, focus could be on sectors such as agriculture and food processing, energy sector, telecommunications, healthcare, construction and retail, information technology, and financial services. Potential sectors for investment in Kazakhstan would include oil and gas, power generation and distribution, telecommunications equipments, medical equipment and supplies, pollution control equipment, agricultural machinery, food processing and packaging, construction and engineering services, and mining. In Uzbekistan, focus could be on sectors such as energy sector, IT sector, mining sector, food processing and packaging, textile machinery and equipment, and tourism infrastructure.

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In Belarus, the government is actively promoting investment in sectors such as updating of the telecommunications network, modernization of transport system as also transit transportation via Belarus, airline infrastructure facilities, road transport, food processing, packaging facilities, manufacture of equipment for soil cultivation, chemical plant protection, and biopharmaceuticals. In Armenia, sectors offering potential for investment would include jewellery and diamond processing, electronics, information technology, and light industry (carpet, footwear, textiles and clothing). In Azerbaijan, sectors which present investment opportunities are oil and gas equipment, chemical and petrochemical industry, electric transmission lines and distribution networks, agriculture and food processing, transportation infrastructure, machine-building, tourism, textiles and light industry, ferrous metallurgy, construction and financial services. In Georgia, the key sectors of economic activity and potential sectors for investment are energy, agriculture, trade, tourism, transport, as well as projects in the food processing and telecommunications industries. Sectors such as agribusiness (small-scale farm equipment, food and textile processing equipment, improved storage and packaging), mining equipment and technology,

electricity generation and maintenance of distribution systems, tourism infrastructure, IT sector, radio-electronic industry and silicon production, small and medium scale light manufacturing equipments offer investment potential in Kyrgyz Republic. In Moldova, the most promising sectors for investment include energy sector (modernization, gas pipelines, gas stations and distribution networks), tourism, IT sector, wine-making and food industry. In Tajikistan, investment opportunities are in mining and related equipment, medical and pharmaceutical supplies, textile machinery, telecommunications, oil and gas extraction equipment, ecotourism, agribusiness and related sectors (canning/food processing equipment, farm equipment). In Turkmenistan, in line with the governments priority, potential areas for investment would include oil and gas industry (exploration, development services and equipment), electrical energy (equipment and services), chemical & mining industry, transportation, communications (equipment and services), environmental technology and services, and healthcare and medical industry.

FOCUS CIS PROGRAMME


Considering the potential of the CIS region, an integrated Programme Focus: CIS has been launched by

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the Government of India with a view to significantly enhance Indias trade with countries of the CIS Region. The main objective of the programme is to increase mutual direct interactions among businessmen by identifying the areas of bilateral interest and investment. The first phase of the Focus CIS Programme had focused on Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, Uzbekistan, Azerbaijan and Ukraine. Subsequently, with effect from April 2004, the scope of the Focus CIS Programme was extended to the rest of the CIS countries, viz. Russian Federation, Armenia, Belarus, Georgia and Moldova, thereby covering all the 12 CIS countries. Under the Focus CIS Programme, Indias trade with the CIS region is envisaged to be enhanced through integrated efforts of the Government of India and various agencies like the India Trade Promotion Organisation (ITPO), Export Promotion Councils, Apex Chambers of Commerce and Industry, Indian Missions and Institutions such as the Export-Import Bank of India (Exim India), Export Credit Guarantee Corporation (ECGC).

support programmes to promote and facilitate Indias trade and investment relations with the CIS region. The Bank has four operative Lines of Credit (LOCs) of US$ 10 mn to Bank TuranAlem, Kazakhstan, which covers all the 12 member countries of the CIS, LOCs of US$ 25 mn to Vneshtorgbank (Bank for Foreign Trade), US$ 10 mn to Vnesheconombank, and US$ 10 mn to Absolut Bank, Russia. Further, Exim India is exploring LOCs to other countries in the CIS region. In the area of project and product exports, Indian companies have secured several contracts in the CIS region, across various sectors, with the support of Exim India. These contracts include supply of pharmaceutical products to Russia, power project / bauxite project in Azerbaijan, equipment project in Tajikistan, and procurement advisory and auditing services in Georgia and Armenia. Further, With a view to support Indian companies in their endeavour to globalise their operations, Exim India has supported joint ventures in the pharmaceuticals sector in Kazakhstan, Uzbekistan and Ukraine. To support Indias export to the 27 countries of operation of the European Bank for Reconstruction and Development (EBRD), Exim India has in place an arrangement with EBRD called the Export Credit Loan Arrangement Technique

EXIM INDIA IN THE CIS REGION Export-Import Bank of India (Exim India) operates a comprehensive range of financing, advisory and

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(ECLAT), which provides for mutual co-operation in co-financing and enhancement of export credit to CIS and Central & Eastern European regions. To support Indian consultants to take up projects in the CIS and Central & Eastern European regions, Exim India has an arrangement with the International Finance Corporation (IFC) under the latters Private Enterprise Partnership (PEP) programme, under which Indian consultants can execute short-term consultancy assignments for IFC sponsored projects in countries such as Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyz Republic, Russia, Tajikistan, Ukraine and Uzbekistan. In the area of institutional strengthening, export development and export capability creation in other countries, Exim India has rendered technical assistance to a number of institutions worldwide, including those in the CIS region, such as: export development project in Ukraine, and enterprise support fund in Armenia. In its endeavour to forge alliances and institutional linkages, Exim India has signed Memoranda of Understanding (MOUs) with a number of institutions in the CIS region, which include: Export-Import Bank of the Russian Federation, Russia; Vnesheconombank, Russia, Belvensheconombank Belarus, UZBEKINVEST National Export-

Import Insurance Company, Uzbekistan; and National Bank for Foreign Economic Activity, Uzbekistan. Exim India has taken the initiative of setting up of Global Procurement Consultants Ltd. (GPCL), in partnership with leading consultancy firms in India, for providing procurement related services to multilateral agencies such as World Bank and Asian Development Bank. GPCL has undertaken project audit assignments for World Bank in a number of countries in the CIS region, such as Armenia, Georgia, Kyrgyz Republic, Uzbekistan, and Russia. Further, Exim Indias equity holding in Agriculture Finance Corporation which offers consultancy support in development of agrotechnology; promoter-membership in Small Farmers Agri-Business Consortium (SFAC), an investment institution whose objectives includes promoting small and medium agribusiness ventures, place Exim India in a vantage position to share its expertise and support development related activities in the CIS member countries. Exim India also has in place an MOU with the Central Food Technological Research Institute (CFTRI), India, to promote small-scale food processing projects, and the publication titled Market Maker: Technology Aided Business Solutions (published in English, Russian, French languages)

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delineates project profiles in food processing sector based on CFTRI technologies. These are user friendly, simple to operate and maintain technologies, which could be appropriate for SME units in countries in the CIS region. With a view to promote active exchange of trade and investment related information, Exim India helps bring out a quarterly, bilingual (English and Russian) publication Indo-CIS Business for the benefit of Indian and CIS businessmen and investors. Further, Exim India has also brought out a research publication focusing on the five Central Asian Republics, viz. Kazakhstan, Tajikistan, Turkmenistan, Kyrgyz Republic and Uzbekistan, which are member countries of the CIS. Exim India has an active programme which offers a range of information, advisory and support services to Indian companies to enable more effective participation in projects funded by multilateral funding agencies such as the World Bank, ADB and EBRD. Further, Exim Indias Project Preparatory Services Overseas Programme (PPSO) provides finance for utilizing Indian consultancy inputs at preparatory stage for projects overseas. The focus of PPSO is on projects which have potential for ultimate funding by multilateral agencies as also projects in thrust countries / sectors which offer opportunities for Indian exporters. Leveraging upon its close

linkages developed with multilateral funding agencies, Exim India also intervenes on behalf of Indian companies to seek redressal in respect of multilateral tenders.

STRATEGY AND RECOMMENDATIONS


With potential existing to enhance bilateral trade and investment relations, broad strategy and recommendations to enhance twoway transfer of trade, investment and technology between India and countries in the CIS region would encompass the following: Wider Dissemination of Information : An important element of the strategy to boost bilateral trade and investment relations would be to effectively disseminate relevant information about the opportunities and potential existing in fostering commercial relations. Reciprocal visits by trade and industry delegations / economic missions would serve to increase awareness in the region about Indias economic reforms, strengths of Indian industry and export capabilities. These trade/economic missions could focus on specialized and industry specific fairs and exhibitions; organizing buyersellers-meets; joint venture facilitation; organising specialised Made in India exhibitions showcasing Indian expertise; and preparation of product catalogues

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in electronic form. These fairs and exhibitions would serve as ideal platform for actively marketing Exim Indias Lines of Credit (LOCs) to the CIS region. Relevant parties in India as well as counterparts in the CIS region could be apprised about the benefits of such credit lines as also about the ways of utilizing such credit lines. Domestic financial institutions in the CIS region could serve as ideal local facilitating agents in this direction. Close Linkages with Investment Promotion Agencies: To enhance investment relations, focus could be on building closer institutional linkages with key investment promotion agencies in the CIS region such as:

National Agency for Foreign Investments, Russia; State Agency for Foreign Investment (SAFI), Turkmenistan; Ukrainian Center for Foreign Investment, Ukraine; Foreign Investment Agency, Uzbekistan.

Such linkages would serve as important source of detailed information about existing potential areas for investment, investment regulations and incentives, as also prospective investment partners. Technology Transfer and Development : With restructuring and expansion of different sectors in the region, Indian companies could endeavour to emerge as key knowledge and technology partners as also suppliers of machinery and equipment in sectors such as textiles and clothing, pharmaceuticals, medical equipment, food processing, packaging. Besides catering to the local regional markets, such ventures could serve as export hubs to the expanded EU region. Cooperation in IT Sector : With India having emerged as a leading IT powerhouse, Indian IT firms could explore the opportunities in the CIS region, and focus on investing in subsidiaries or joint ventures in the areas of e-governance, financial services and

Armenian Development Agency, Armenia; Azerbaijan Investment Foundation Azerbaijan; Export and Promotion (Azerinvest),

Belarusian Foreign Investment Promotion Agency (BFIPA), Belarus; Georgian National Investment and Export Promotion Agency (GNIEPA), Georgia; Kazakhstan Investment Promotion Center (Kazinvest), Kazakhstan; National Agency for Attracting Investments (NAAI), Moldova;

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e-education. Indian companies could also share their expertise in providing and developing software programmes and services for banks and financial institutions in the region. Designing specialised e-learning courses on the web for providing technological assistance, manufacturing process know-how, troubleshooting and other technical areas also present opportunities. An interactive portal could be developed, hyper-linked with key industry/trade association and chambers in the region with facility for identification of project profiles, partner search, match making, etc. Cooperation in the Banking/ Financial Sector : Facilitating and promoting bilateral trade and investment relations would call for renewed efforts to put in place a proper mechanism for financial transaction between India and countries in the CIS region. Towards this end, the State Bank of India (SBI) has set up a Branch Office in Moscow, and a Representative Office in Tashkent, Uzbekistan. Indias leading private sector bank- ICICI Bank entered into WOS operations in Moscow, in 2005. In view of the potential for enhancing bilateral trade and investment relations, opening branches/representative offices in other countries in the region, and developing correspondent relations with select banks in the region

would serve to facilitate and promote commercial relations. Focus on Multilateral Funded Projects : Multilateral funding agencies such as the World Bank, Asian Development Bank, EBRD are active in funding development projects in the CIS region. These funded projects are mainly in areas such as energy and mining, agriculture, transportation, health and social services, law and justice, finance, industry and trade. Focus on these funded projects and increased participation by Indian project and services exporters in such projects would serve to enhance Indias commercial presence in the region countries. At the same time, efforts to participate in technical assistance in terms of project preparation and advisory services in such funded projects would support increased presence in the region. Further, institutions such as Exim India could co-invest with Indian companies in select projects, and encourage partnership with local entrepreneurs and local investment agencies. Such projects could subsequently attract investments from the multilateral funding agencies. Cooperation in Entertainment Industry : With Indian movies gaining popularity in many countries in the CIS region, Indian movie makers could consider

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selling their rights for screening movies in the CIS region, which could enhance distribution of Indian movies in the region. There is also potential for Indian movie makers to explore some of the countries in the CIS region for shooting films at fresh and new locations. In the past, most of the Indian movies shot abroad have been in places like Switzerland, USA, Italy, etc. However, some of the countryside in the CIS region could provide economical locations for shooting Indian movies. Focus on Privatisation / Acquisition of Hotels : Many of the hotels in the CIS region are up for privatization as there are few local groups interested in renovating these hotels. This could be an ideal opportunity for Indian hotel groups to acquire some hotels and renovate them. In some of the CIS countries, there are few hotels that could be rated as 5-star category and suitable for business / pleasure stay. At the same time, majority of the hotels require renovation and modernisation. Investment by way of Indian style Ayurveda / Wellness Centers : With increasing awareness and demand for Indian style Ayurveda and Wellness centers in the CIS region, Indian companies could therefore explore these opportunities. Along with acquisition of hotels in the CIS region, renovation of hotels could

be by way of investment in setting up Indian style Ayurveda / Wellness centers in such hotels to cater to the rising demand for such facilities in the CIS region. Further, imparting training to local practitioners would facilitate acceptability of such treatments / centers. Closer Economic and Trade Integration : There could be greater economic and trade integration with Russia and other CIS countries. A positive development in this direction has been the signing an MOU for setting up a joint study group to examine the feasibility of a comprehensive economic cooperation treaty (CECA) between India and Russia. As the two countries are large economies, experiencing rapid economic growth, there is immense potential for expanding trade and economic relations. Given the strong scientific and technological background of Russia and the new emerging expertise of India in science and technology, the two countries could work together on innovative new technologies in biotechnology, pharmaceuticals, and space exploration programmes and aircraft manufacture. Understanding Local Culture and Language : Although many of the CIS countries have started carrying out documentation work in their local languages, most CIS

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countries are still using the Russian language. In light of this, business organisations, trade bodies and universities could focus on training executives and students in Russian. Further, understanding the local cultures, business practices and habits would serve to facilitate business interactions and foster linkages with counterparts in the CIS region. Other Recommendations : Exporters can develop their own websites giving information about

the manufacturing facilities, product details & the features of the company to promote trade; Small and medium sized IT firms can be encouraged to focus on these countries and invest in subsidiaries or joint ventures to take up assignments in e-governance, financial services and e-education; India should increase direct flights to cover more cities in the CIS region and also increase the frequency of destinations to which flights are already operating.

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1. EVOLUTION AND OBJECTIVES OF THE COMMONWEALTH OF INDEPENDENT STATES (CIS)

The Commonwealth of Independent States (CIS) was established on December 8,1991, by the Minsk Agreement signed by the Heads of State of the Republic of Belarus, the Russian Federation and the Republic of Ukraine. The formal clause stating the dissolution of Soviet Union was included in the subsequent treaty signed in Almaty, Kazakhstan, by all the former Soviet Republics, except the Baltic States and Georgia. In December 1993, both Georgia and Azerbaijan joined the CIS. The CIS thus includes all the former Soviet Republics except the Baltic States. At present, the CIS unites Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan. The CIS sought to fill the institutional vacuum resulting from the disintegration of the Soviet Union and to ensure continued co-operation in trade and military policy and recognition of borders. The main organ of the CIS is the Council of the Heads of State, the supreme body of the organization. The

Council co-ordinates the co-operation of the executive authorities of the states in economic, social and other spheres. In September 1993, the Heads of the CIS States signed an Agreement on the creation of Economic Union with the purpose of forming common economic space based on free movement of goods, services, labour force and capital. The agreement aimed at elaborating co-ordinated monetary, tax, price, customs and economic policy; bringing together methods of regulating economic activity and creating favourable conditions for the development of direct production relations.

STRUCTURE OF CIS
Council of the Heads of States: This is the supreme body of the CIS that discusses and solves any principle questions of the Commonwealth connected with the common interests of the participant states. Council of the Heads of Governments: This Council coordinates co-operation of the

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executive authorities of the member states in economic, social and other spheres of their common interests. Inter-Parliamentary Assembly: The Assembly was established in March 1995 by the leaders of Supreme Soviets (parliaments) of the Commonwealth countries as a consultative institution to discuss problems of parliamentary cooperation and develop proposals by the parliaments of the CIS states. Economic Court: Economic Court functions with the aim of ensuring the meeting of economic commitments in the framework of the CIS. Its terms of reference include settlement of interstate economic controversy arising in meeting economic commitments envisaged by agreements and decisions of the Council of the Heads of States and the Council of the Heads of Governments of the CIS. Council of Foreign Ministers: It is the main executive body that ensures co-operation in the field of foreign policy activities of the member states of the CIS on matters of mutual interest, adopting decisions during the period between the meetings of the Council of the Heads of States, the Council of the Heads of Governments and by their orders.

Council of Defence Ministers: It is a body of the Council of the Heads of States responsible for military policy of the member states of the CIS. Economic Council: The Economic Council is the main executive body, which ensures implementation of the decisions of the Council of the Heads of States and the Council of the Heads of Governments of the CIS on realisation of the Agreement for creation of free trade zone as well as on other matters of socioeconomic co-operation. The Economic Council consists of the Deputy Heads of Governments of member states of the CIS. Executive Committee: The Executive Committee unites permanently functioning executive, administrative and co-ordinating bodies of the CIS, and organises the activities of the Council of the Heads of States, Council of the Heads of Governments, Council of Foreign Ministers of member states of the CIS, Economic Council and other bodies of the Commonwealth, among others. Interstate Bank: The most important function of the Interstate Bank is organisation and implementation of multilateral interstate settlements between central (national) banks in relation to trade and other transactions, as well as co-ordination of monetary policy of the member states.

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The Interstate Bank was established in accordance with the decision of the Heads of Governments in December 1991 for co-ordinating activities of statistical organisations of the CIS countries, developing and implementing a unified statistical methodology on the basis of mutual consultations, securing comparability and continuity of statistical elaboration, facilitating wide-scale information exchange in the framework of the CIS, organising seminars and employing other forms of rendering assistance to national statistical services.

qualitative restrictions and other obstacles);

Establishment and development of an effective system of mutual accountancy and payments in trade and other kinds of operations; Co-operation in the conduct of trade and economic policy for implementation of the Agreement on free trade in the field of industry, agriculture, transport, finances, investments, social sphere, as well as in development of fair competition etc.; Facilitating the intersectoral and intrasectoral co-operation and scientific and technical cooperation; Harmonisation and unification of legislation of the member countries to the Agreement to the extent that is necessary for a proper and effective functioning of the free trade zone.

Free Trade Zone of the CIS In 1993-94, the CIS countries took measures aimed at transition to multilateral regime of free trade on the basis of a corresponding agreement on establishment of a free trade zone. But the CIS countries failed to set up and agree on a multilateral list of exits from the free trade regime, stipulated by the Agreement.
A free trade zone is the first stage in building the CIS Economic Union. In the process of its formation the CIS countries need to pass through several stages. These include:

Elimination of obstacles for free movement of commodities and services (cancellation of customs duties/fees, as well as equivalent taxes and fees,

Specification of measures on establishment of a free trade zone can be found in: (i) The PlanSchedule of implementation of proposals on establishment and functioning of the free trade zone, adopted by the CIS Council of Heads of State on 21st June, 2000; and (ii) The Plan of measures for realisation of the Program of actions for development of the Commonwealth

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of Independent States for the period up till 2005, adopted by the CIS Council of Heads of Government on 20th June, 2000. Only four CIS countries (Kyrgyz Republic, Georgia, Moldova, and Armenia) have joined the WTO. The largest CIS economies - Russia, Ukraine, Kazakhstan and Belarus are currently working towards becoming WTO members.

CIS Unified Currency Space In July 2001, the Interstate Bank, the International Association of Exchanges of the CIS countries, MICEX (Moscow Interbank Currency Exchange) and MICEX Settlement Chamber signed an agreement of co-operation in the sphere of forming a unified currency space for members of the CIS.
The participants expressed their intention to promote more effective interaction between member

countries of the Commonwealth in the sphere of currency and finances on the basis of the project of integrated CIS currency market. The project was approved in April 2001 by the CIS Interstate Currency Committee. This project is aimed, in particular, at forming a unified trading system on the basis of the existing currency exchanges with the use of common technological and organisational standards, including the system of mutual quotations of national currencies and the unification of trading and settlement mechanisms. The implementation of this model will allow in future to increase the turnover and liquidity of the currency market for currencies with limited convertibility (CLC). This will make these currencies more attractive for settlements for foreign trade deals between the CIS countries and contribute to the investment attractiveness of the economies of the Commonwealth countries.

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2. BRIEF BACKGROUND AND RECENT ECONOMIC PERFORMANCE OF THE CIS REGION

This chapter presents a brief background of the CIS countries, highlights recent economic and sectoral performance, and foreign exchange reserves of CIS countries.

States. The WTO Working Party on the Accession of the Russian Federation, had its 30th meeting in March 2006, and bilateral market access negotiations on goods and services are in progress.

BRIEF BACKGROUND Russia


Russia stretches across vast expanses of Europe and Asia, and borders 15 countries. With an area of 17,075,200 sq. km., it is the largest country in the world, covering almost twice the territory of the next-largest country, Canada. Russia is richly endowed with natural resources, which are a potential source of great economic strength. Russia accounts for almost 11% of worlds oil production, 25% of natural gas, and one-fifth of global nickel and cobalt production. The country is also a leading producer of coal, iron ore, nonferrous metals, gold, platinum and diamonds. Russia has an association agreement with the European Union, proposes to join the World Trade Organisation, and currently receives MFN treatment from the United

Ukraine
Ukraine has a land area of 603,700 sq km, comparable in size to France. It borders Russia to the northeast, Belarus to the north, Poland, Slovakia and Hungary to the west, Romania and Moldova to the southwest and the Black Sea to the south. Ukraine is the worlds fifth-largest producer of iron ore and also possesses the worlds second-largest reserves of magnesium. It also possesses several potential oil and gas fields. Ukraine has signed Free Trade Agreements with each of the former Soviet republics except Tajikistan and is also a member of GUUAM. The GUUAM is a regional organisation that groups together Georgia, Ukraine, Uzbekistan, Azerbaijan and Moldova to deepen economic co-operation for the development of the east-west trade corridor and energy transport routes.

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Ukraine also has a partnership and co-operation agreement (PCA) with the European Union. As regards WTO membership, the 16th meeting on the WTO Working Party on accession was held in June 2006, and bilateral market access negotiations are in progress.

same countries and is intended to harmonise trade tariffs and create a Eurasian free trade zone. Bilateral market access negotiations are in progress with respect to WTO membership.

Uzbekistan
Uzbekistan borders Afghanistan, Kazakhstan, Kyrgyz Republic, Tajikistan and Turkmenistan, with a total area is 447,400 sq. km. Minerals and mining are important to Uzbekistans economy. Gold is Uzbekistans second most important foreign exchange earner. Uzbekistan has an abundance of natural gas, used both for domestic consumption and export, and significant reserves of copper, lead, zinc, tungsten, and uranium. Uzbekistan has applied for membership in the World Trade Organisation (WTO), and submitted its Memorandum of Trade Regime in November 1998. The Government has made a number of changes to its customs, IPR and tariff regimes to bring it into WTO compliance. The third meeting of the WTO Working Party took place in October 2005. As a member of the CIS, Uzbekistans exports to Russia enjoy duty-free status, giving Uzbekistan access to the large Russian market. The US has given Uzbekistan most favoured nation (MFN) status. In 1999, the EU ratified a partnership and cooperation agreement (PCA) with Uzbekistan. It has signed bilateral

Kazakhstan
On December 16, 1991, the Republic of Kazakhstan became the last of the former Soviet Republics to declare its independence. On August 30th, 1995, a new constitution was approved in a nation-wide referendum. The Republic of Kazakhstan is a huge country covering a total area is 2,717,300 sq. km and the total population in 2005 was 15.1 mn. Kazakhstan has the Caspian Sea regions largest recoverable crude oil reserves and claims most of the seas biggest known oil fields. Kazakhstans combined onshore and offshore proven hydrocarbon reserves have been estimated to be between 9 and 17.6 bn barrels. Economic growth in recent years has been propelled by Kazakhstans growing petroleum industry. Kazakhstan is a member of the Eurasian Economic Community (EAEC) along with Russia, Kyrgyz Republic, Belarus and Tajikistan. This organisation, which was established in 2001, is a successor to the Customs Union between the

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agreements with Georgia, Kyrgyz Republic, Moldova and Russia, and is also a member of GUUAM.

Belarus
The Republic of Belarus is a landlocked nation-state in Eastern Europe, which borders Latvia, Lithuania, Poland, Russia and Ukraine. Belarus covers an area of 207,600 sq km. Belarus has small deposits of oil, oil shale and coal. Its economy depends on supplying manufacturing goods like machinery and components to Russia. The fuel sector has become increasingly important in recent years, with the countrys two oil refineries making use of cheap crude supplies from Russia and record high export prices to expand production considerably. Belarus is a member of the Eurasian Economic Community (EAEC) along with Russia, Kazakhstan, Kyrgyz Republic and Tajikistan. It has signed bilateral agreements with Moldova, Russia and Ukraine. As regards WTO membership, bilateral market access negotiations are ongoing. The WTO Working Party last met in May 2005.

the east, and Iran and the Nakhichevan exclave of Azerbaijan to the south. Armenias mineral resources include marble, basalt, granite, molybdenum, perlite, lead, bauxite, zinc, copper, gold and silver. As a predominantly mountainous country, Armenia has little arable land and relies heavily on imports for its food. Armenia joined the WTO on February 5, 2003.

Azerbaijan
Azerbaijan lies at the crossroads of Europe and Southwest Asia with a coast on the Caspian Sea. It has borders with Russia in the north, Georgia in the northwest, Armenia in the west, southeast and southwest, and Iran in the south. Some 50% of the total land area is agricultural land and 2.5% is urban. Forests cover 13% of the country. The main mineral endowment is oil, of which Azerbaijan is one of the worlds oldest producers. Azerbaijan has been a member of the Council of Europe since 2001. The economy is largely based on industry. Industries include machine manufacture, petroleum and other mining, petroleum refining, textile production, and chemical processing. Agriculture accounts for one-third of Azerbaijans economy. As regards WTO membership, the latest meeting of the Working Party was held in March 2006.

Armenia
Armenia is a landlocked country in the southern Caucasus between the Black Sea and the Caspian Sea, bordered by Turkey to the west, Georgia to the north, Azerbaijan to

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Bilateral negotiations on market access are underway.

Georgia
The Republic of Georgia is a country to the east of the Black Sea, most of which is located in the South Caucasus. It shares borders with Russia in the north and Turkey, Armenia and Azerbaijan in the south. Georgia has substantial mineral water sources, with an estimated 2,300 springs. Georgia also has one of the richest manganese deposits in the world, located in Chiatura and Sachkhere, about 130 km west of Tbilisi. It has deposits of copper, gold and oil in relatively small quantities. Georgia joined the WTO on June 14, 2000.

vegetables (primarily tomatoes, cucumbers, onions and cabbages) and fruits, particularly apples and grapes. Grapes are Moldovas most important value-added crop and export product.

Turkmenistan
Turkmenistan is the second largest Central Asian country. It possesses the worlds fifth largest reserves of natural gas, and has substantial deposits of oil. The total area is 488,100 sq. km and the total population was 6.1 mn in 2005. Turkmenistan has taken a cautious approach to economic reform, hoping to use gas and cotton sales to sustain its economy.

Tajikistan
Tajikistan is nestled between Kyrgyz Republic and Uzbekistan to the north and west, China to the east, and Afghanistan to the south. The total area is 143,100 sq. km and the total population in 2005 was 6.8 mn. Tajikistan has rich deposits of minerals, including gold and silver, as well as huge hydroelectricity potential owing to dense network of rivers. Petroleum, uranium, mercury, brown coal, lead, zinc, antimony, tungsten are some other items also found there. Bilateral market access negotiations are underway for WTO membership, and the WTO Working Party held its latest meeting in October 2006.

Moldova
Moldova covers a total area of 33,700 sq km, is a landlocked country in Eastern Europe, located between Romania to the west and Ukraine to the east. Moldova has few raw minerals such as gypsum, limestone, sand and gravel used in the construction industry. Agriculture is the most important sector in Moldovas economy. Three-quarters of the countrys territory is agricultural land of which majority consists of highly fertile soil. Moldova is a member of WTO since July 26, 2001. The main crops are cereals, sugar beet, sunflowers, potatoes,

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Kyrgyz Republic
Kyrgyz Republic is located in Central Asia to the west of China. The border countries are China, Kazakhstan, Tajikistan and Uzbekistan .The total area is 198,500 sq. km and the total population in 2005 was 5.2 mn. The Kyrgyz Republic has gold, antimony, tin, uranium and polymetallic ores and limited reserves of hydrocarbon. Kyrgyz Republic joined the WTO on December 20, 1998.

momentum was sustained, although at a lower level of 6.5%. During 2006, reflecting high commodity prices and strong export growth, economic activity has picked up, supported by increased domestic demand in major countries such as Russia and Kazakhstan. For the region as a whole, real GDP growth is projected to strengthen to 6.8% in 2006 (Table 2.1). Reflecting increased earnings from oil and commodity exports, the current account surplus of the CIS region has risen from 6.3% of GDP in 2003 to 8.1% in 2004, and further to 8.8% of GDP in 2005. For net energy exports such as Azerbaijan, Kazakhstan, Russia, Turkmenistan and Uzbekistan, the current account surplus was a high as 8.7% of GDP in 2004, which increased further to 10.0% of GDP in 2005. Total exports of the CIS region have risen from US$ 196.1 bn in 2003 to US$ 267.9 bn in 2004, and further to US$ 344.7 bn in 2005. Total imports have also risen from US$ 133.5 bn in 2003 to US$ 172.8 bn in 2004, and during 2005 stood at US$ 216.4 bn.

ECONOMIC PERFORMANCE
Economic growth in the CIS region has registered robust growth in recent years, reflecting among others buoyant energy and metals prices and strong domestic demand. Real GDP growth for the region as a whole strengthened from 7.9% in 2003 to 8.4% in 2004. Strong growth momentum in the largest economies in the region, such as Russia, Ukraine, Belarus, Kazakhstan, has supported economic activity in other member countries. During 2005, growth

Table 2.1: CIS GDP, INFLATION & CURRENT ACCOUNT BALANCE 2003 Real GDP Growth (%) Inflation (%) Current a/c balance (% of GDP) 7.9 12.0 6.3 2004 8.4 10.3 8.1 2005 6.5 12.3 8.8 2006 (p) 6.8 9.6 10.1 2007 (p) 6.5 9.3 9.4

SOURCE: IMF, World Economic Outlook Sept. 2006; p-projections

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ECONOMIC GROWTH IN CIS MEMBER COUNTRIES


Table 2.2 (A): CIS SELECT ECONOMIC INDICATORS, 2003-2006
Year 2003 2004 2005 2006* 431.5 581.4 744.2 50.1 64.8 82.9 29.7 40.7 52.6 10.0 10.3 10.7 17.5 22.9 29.1 Russia Ukraine Kazakhstan Uzbekistan Belarus Armenia 2.8 3.6 5.0

Select macroeconomic indicators for the CIS countries is given are Table 2.2(A) and Table 2.2(B)

GDP (US$ bn)

Real GDP growth (%) 2003 2004 2005 2006* 2003 2004 2005 2006* 144.6 144.0 143.0

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7.3 7.2 6.4 6.5 13.7 10.9 12.6 9.7 47.4 47.0 46.7

9.6 12.1 2.6 5.0 5.2 9.0 13.5 9.3 6.4 6.9 7.6 8.5 15.0 15.0 15.1

9.3 9.6 9.4 8.3

4.2 7.7 7.0 7.2 14.8 8.8 21.0 19.3 25.6 25.9 26.2

7.0 11.4 9.3 7.0 28.4 18.1 10.3 7.9 9.8 9.8 9.8

13.9 10.1 13.9 7.5 4.7 7.0 0.6 3.0 3.0 3.0 3.0

Inflation (%)

Population (mn) 2003 2004 2005 2006*

Table 2.2 (A) Contd.

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Year Russia Ukraine Kazakhstan Uzbekistan Belarus Armenia

Table 2.2 (A) Contd.

Per Capita Income (US$) 2003 2004 2005 2006*

2974.4 4043.8 5324.9

1057.0 1378.7 1719.5

2053.3 2695.4 3690.8

390.6 397.7 415.4

1785.7 2336.7 2969.4

903.2 1193.5 1666.7

Current a/c. bal (US$ mn) 2003 2004 2005 2006* 35,845 59,920 84,249 105,993 2,891 6,804 2,531 -700 -273 500 -500 1500 862.8 937.0 1082 880

-424 -1043 469 -512

-189.5 -161.7 -204.2 -229.5


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Exchange rate, avg. (Local currency: US$1) 2003 2004 2005 2006* Rouble (Rb) Hryvnya (HRN) Tenge Rb Rb Rb Rb 30.69 28.81 28.28 27.80 HRN HRN HRN HRN 5.33 5.32 5.12 5.05 Tenge Tenge Tenge Tenge 149.6 136.0 132.9 125.4

Som 971.3 Som 1020.0 Som 1115.0 Som 1255.0 Som

BRb BRb BRb BRb

2051 2159 2154 2220 Belarusian Rubel (BRb)

Dram Dram Dram Dram

579 534 457 440 Dram

Local currency

* Data for 2006 are estimates SOURCE: International Monetary Fund (IMF), World Bank and Institute of International Finance (IIF).

Table 2.2 (B): CIS - SELECT ECONOMIC INDICATORS, 2003-2006 Year Azerbaijan Tajikistan Turkmenistan Georgia Moldova Kyrgyz Republic 1.9 2.2 2.4

GDP (US$ bn)

7.1 8.5 11.9


2003 2004 2005 2006*

1.6 2.1 2.2

5.2 6.1 7.2

4.0 5.4 7.1

2.0 2.6 3.1

Real GDP growth (%) 2003 2004 2005 2006* 2003 2004 2005 2006* 2003 2004 2005 8.3 8.3 8.4 6.6 6.7 6.8 6.0 6.0 6.1 2.2 6.7 9.7 8.7 16.4 7.1 7.7 7.8 5.6 5.9 10.7 9.0 4.8 5.7 8.3 9.6 4.3 4.3 4.3

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10.4 10.2 24.0 25.6

10.2 10.6 6.7 8.0

17.1 14.7 9.6 9.0

11.1 5.9 9.3 7.5

6.6 7.4 7.1 3.0 11.7 12.5 11.9 11.5 3.6 3.6 3.6

7.0 7.0 -0.6 5.0 3.7 4.1 4.3 5.7 5.0 5.1 5.2

Inflation (%)

Table 2.2 (B) Contd.

Population (mn)

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Year 2003 2004 2005 2006* 2003 2004 2005 2006* -2021 -2600 -600 -3700 -5 -57 -18.2 -73.9 92 -500 300 300 -374.8 -425.7 -800.0 -800.0 -130.4 -70.0 -285 -505 855.4 1024.1 1416.7 258.1 333.3 338.2 750.0 866.7 984.6 921.7 1180.6 1422.2 555.6 722.2 852.9 380.0 431.4 461.5 -99 -101 -191 -83 Azerbaijan Tajikistan Turkmenistan Georgia Moldova Kyrgyz Republic 2003 2004 2005 2006* Manat Somoni (S) Manat (Official rate is fixed at 5,200) Manat 0.98 Manat 0.98 Manat 0.95 Manat 0.91 S S S S 3.06 2.97 3.12 3.25 Manat Manat Manat Manat 10,034 10,379 10,870 11,175 Lari 2.15 Lari 1.92 Lari 1.81 Lari 1.79 Lari Lei Lei Lei Lei 13.94 12.33 12.60 13.00 Leu (Plural Lei) Som Som Som Som 43.65 42.65 41.01 41.44 Som

Table 2.2 (B) Contd.

Per Capita Income (US$)

Current a/c bal. (US$ mn)

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Exchange rate, avg. (Local currency: US$1)

Local Currency

* - Data for 2006 are estimates SOURCE: International Monetary Fund (IMF), World Bank and Institute of International Finance (IIF).

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Among the largest economies, economic activity in Russia slowed down with a real GDP growth of 6.4% in 2005, as compare to 7.2% in 2004, driven by a combination of lower output growth in the energy sector, economic uncertainties that undermined investments and an increasingly negative contribution from the external sector. During 2006, real GDP growth is estimated at 6.5% boosted by increased domestic demand. In Ukraine, slowdown in export demand combined with weak growth in investment led to a sharp deceleration in real GDP growth to 2.6% in 2005, down from a growth of 12.1% in 2004. Reflecting pick up in export, real GDP growth in 2006 is however expected strengthen up to 5.0%. In Kazakhstan, the boom in the oil and gas sector has driven economic growth in recent years. Real GDP growth was sustained at a robust 9.4% in 2005, as compared to 9.6% in 2004. Supported by industrial output growth of 10.0% and construction growth of 11.2%, transport and communication grew by 12.2%, while trade and other services expanded by 10.4%. In 2006, real GDP growth is expected to remain robust at 8.3% reflecting among others, increased domestic demand. In case of Uzbekistan, Real GDP growth rate increased from

4.2% in 2003 to 7.7% in 2004. This can be attributed to a growth in the industrial sector, and an expansion in the agricultural sector. In 2005, real GDP growth was maintained at 7.0%, and real GDP growth in 2006 is expected to sustained at 7.2%, supported by new investments in oil & gas sector and gold mining. In case of Belarus, real GDP growth stood at a robust 9.3% in 2005, reflecting strong Russian demand for Belarusian manufactured outputs. Domestic demand also remains an important driver of growth in Belarus, aided by government prioritising ambitious wage targets, however real GDP growth is forecasted to be 7.0% for the year 2006, due mainly to insufficient capital investment and weakening Russian demand. In Armenia, real GDP reached a robust growth of 13.9% during 2005, as compared to 10.1% in 2004. Investment by Russian and several western companies into the mining and non-ferrous metallurgy sectors resulted in a pick-up in the growth rate in industry. In case of Azerbaijan, after the sharp decline in output in the early nineties, rapid growth commenced in 1997, mainly owing to large-scale FDI into the oil and gas sector. Real GDP growth since 2000 has averaged over 10% per year, and stood at a robust 24.0% in 2005. During 2006, real GDP growth is

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expected to be sustained at strong 25.6%. Economic growth has been rapid in Georgia in the last few years, with real GDP growing by 5.9% in 2004 and increased to 9.3% in 2005. Strong growth in construction due to building of two oil pipelines, as also robust growth in the extraction and manufacturing sector have boosted economic activity, still the real GDP for 2006 is expected to be sustained at 7.5%. Moldovas real GDP growth in 2005 stood at 7.1%, as compared to 7.4% in the previous year, aided by a significantly improved agricultural performance and strong export performance due to Russias robust economic performance, which plays a key role in Moldavian exports. The economy of Tajikistan is diversifying away from dependence on aluminum and cotton. The real GDP growth slowed down to 6.7% in 2005 from 10.6% in previous year. However, reflecting strong growth in retail trade and industrial output, real GDP growth is projected to strengthen to 8.0% in 2006. In Turkmenistan, real GDP registered a lower growth of 9.6% in 2005 as compared to 14.7% in 2004. Due to strong performance of the hydrocarbons and cotton sectors, which are the main contributors to overall output. In Kyrgyz Republic, real GDP

growth after contracting sharply during 2005 is expected to strengthen during 2006 to reach the real GDP growth rate of 5.0%. The economic recovery was primarily due to increased output from the Kumtor gold mine, which is the single most important constituent of Kyrgyz Republics economy accounting for around 40% of industrial output and almost half of the countrys export revenue. From a decline in previous year, economic activity is expected to sharp turnaround in current year.

SECTORAL PERFORMANCE
In this section, recent sectoral performance of select economies in the CIS region, viz. Russia, Ukraine, Kazakhstan, Uzbekistan and Belarus, are highlighted.

Russia
Agricultural sector contributes around 5.6% to GDP. With over 45% of its total land area under forest cover, timber is one of the most important export items. Fish is another important export item with Russia accounting for 25% of the worlds production of fresh and frozen fish and about one third of global output of tinned fish. However, production of fish and other sea products has contracted in recent years. Industrys contribution to the GDP in 2005 was 38.0%. Russia inherited an industrial base that was energy intensive and oriented towards low

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value-added basic processing and defence. The government has made restructuring of the military-industrial complex a priority, with the objective of reviving hightechnology sub-sectors. Russias exceptionally rich natural resource endowments have made it a major source of most types of minerals, and in many cases the worlds leading producer and exporter. In particular, there are vast reserves of fuels and metal ores, including substantial deposits of gold-bearing ore. The country accounts for about 11% of world output of coal, 25% of gas, 20% of global nickel and cobalt production, 12% of worlds aluminum production and is a leading exporter of nonferrous metals. The country is also a leading producer of gold, iron ore, platinum and diamonds. The services sector contributed 56.4% to the GDP in 2005. Since 1995, the share of services in the GDP has been around 55-58%. Retailing was one of the sectors to be privatized, and is a principal area for new business launches as its units are relatively small and do not require significant capital investment. Retail trade is among the fastest growing sectors of the economy, with turnover up by an average of 9.3% a year in 2001-03.

down from 23.4% total GDP in 2001. The most significant step towards laying the groundwork for the sectors recovery was taken in December 1999, when a Presidential decree was issued to break up collectivised agricultural enterprises into private farms. This, combined with additional reforms in 2000 designed to reduce the Governments interference in the sector and support private sector lending to producers, helped to achieve Ukraines first year of positive agricultural sector growth in 2000. The break-up of collective farms fostered the emergence of a market for leased agricultural land and generated new businesses and joint ventures. In addition, the reforms helped to stimulate lending to agricultural producers and alongside a considerable reduction in the cost of credit. The industry sector contributed 40.0% of GDP in 2003. The industrial sectors expansion remained strong in 2004 at around 13.4%, helped by sustained domestic and external demand that boosted almost all parts of the manufacturing sector. The manufacturing sector accounts for more than 75% of total industrial production and has been the driving force behind Ukraines economic recovery. Low value-added manufacturing sectors, particularly metallurgy, have underlined the recovery in economic growth in recent years.

Ukraine
The agricultural sector currently accounts for less than 15% of GDP;

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Ukraine is the worlds fifth largest producer of iron ore and possesses the worlds second largest reserves of magnesium. Ukraine also possesses coal and several underexploited oil and gas fields whose production volumes satisfy only about one-tenth of total domestic needs, with the rest being imported. The construction industrys contribution fell from approximately 7% of GDP in the early 1990s to below 5% of GDP in recent years. After a weak performance in 2002, the sector registered a rebound in 2003 and 2004 due primarily to ongoing construction and engineering works in the oil and gas sector and in railway transport systems. A boom in housing construction has also contributed to the sectors recent expansion.

Investment by foreign oil companies into Kazakhstan has been the driver of economic growth in recent years. Key oil consortia in the country include:

Tengizchevroil (TCO) a consortium led by Chevron Texaco (US) to develop the giant Tengiz field in western Kazakhstan. Others in the consortium are ExxonMobil (US), LUKoil (Russia) and Kazmunaigaz; Karachaganak Petroleum Operation (KPO) led by BG (UK) and ENI (Italy), with ChevronTexaco and LUKoil, to develop the giant Karachaganak field in northwestern Kazakhstan; Agip Kazakhstan North Caspian Operating Company (Agip KCO) Agip KCO operates on behalf of a consortium comprising ENI, ExxonMobil, Inpex (Japan), Phillips Petroleum (UK) and Total (France), and is developing the newly discovered Kashagan field in the Caspian sea.

Kazakhstan
The contribution of industry to GDP was 30.9% in 2005. After a sharp contraction in production between 1990 and 1995, industrial production recovery subsequently fuelled by foreign investment in oil and metals. Industrial output, over half of which is accounted for by the oil and gas sector, remained strong in 2004. The oil sector is dominated by foreign investors. Around 85% of oil production is from foreign investors, with the remaining from the stateowned oil company, Kazmunaigaz.

The second largest industrial sector, as well as the second largest exporter and destination of foreign investment, is the metal industry. Kazakhstan accounted for 90% of the former Soviet Unions chrome reserves and half of its lead, tungsten, copper and zinc. In

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addition, it also possesses one-fifth of its coal. The main steel maker is Mittal Steel, which owns and runs the former Karaganda Mining and Metallurgical Kombinat. Although the agricultural sector employs at least 20% of the workforce, its share of GDP shrank from 34.9% in 1990 to 6.7% in 2005. Grain production dominates the sector followed by meat and wool. The trade and transport sectors contributed 12.8% and 12.1%, respectively, to GDP in 2005. The contribution of trade and catering has been around 15-17% since 1995, whereas the transport and communication sector has been contributing around 10-13% to the GDP since 1995. There has been important growth in services since 1991. Starting from a low base, the sector has grown virtually every year since independence.

and gas sector has been a priority recipient of investment under the import substitution program. Uzbekistan has eliminated most energy imports and is now a modest exporter of gas and refined oil products. The government plans to increase exports through investments in new fields. In addition, the sector is set to receive substantial new investment from foreign companies. The government is funneling credit towards traditional heavy industry, such as steel, rather than towards the labour intensive agro-industry. The government is also trying to develop the textile industry in order to increase the value-added of its exports. Uzbekistan is also among the worlds leading producers of gold. Industry sources estimate that Uzbekistan mined 86 tonnes of gold in 2003. Gold is also the countrys second largest export, accounting for around 10-20% of export earnings. The services sector (including trade) contributed 43.0 to the GDP in 2003, up from 34% in 1990. However, development of services outside the financial sector has been constrained. Trading in domestically produced food and imported goods in the bazaars is a major form of economic activity.

Uzbekistan
Agriculture contributed to around 33% of GDP in 2003. Uzbekistan is among the worlds ten leading producers and exporters of cotton. Weak global prices, poor harvests and excessive state control have contributed to a fall in cottons share in export earnings from 39% in 1998 to average about 21% in 2002-04. The industrial sector accounted for 22.0% of GDP in 2003, as compared to 33.0% in 1990. The oil

Belarus
The contribution of agriculture to GDP was 7.5% in 2005. Agricultural

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production dropped steadily throughout the 1990s. Although the sector recorded 1.8% growth in 2001, after growing by 8.9% in 2000, a lack of reforms in the agricultural sector remains a cause for concern and a significant drag on growth. In absence of restructuring or an end to widespread price controls, the sector continues to face constraints in attracting the investment needed to renew its stock of heavy machinery. In 2005, industry contributed 9% to the GDP and the sectors performance is closely tied to the Russian market. Reflecting this, restoration of Soviet supply lines has led to the revival of the sector in

the second half of the 1990s. These trade links with Russia are of key importance to the industrial sector. Services related to trade and transport have posted some growth in recent years owing to increased trade with Russia and Belarus location as a transit corridor between Russia and Europe. Transport and communications contributed 27.4% to GDP in 2005. The share of trade and catering was 9.7% of GDP in 2005.

FOREIGN EXCHANGE RESERVES Table 2.3 presents the level of foreign exchange reserves in the CIS countries during 2001 and 2005.

Table 2.3: FOREIGN EXCHANGE RESERVES OF CIS COUNTRIES (US$ mn) (EXCLUDING GOLD) 2001 Russia Ukraine Kazakhstan Uzbekistan Belarus Armenia Azerbaijan Tajikistan Turkmenistan Georgia Kyrgyz Republic Moldova 32,542 2,955 1,997 903 391 320.8 896.7 92.6 2,055 159.4 264 228.5 2002 44,054 4,241 2,555 850 619 425.0 721.5 89.5 2,346 197.6 289 268.9 2003 73,175 6,731 4,236 1,162 595 510.2 820.9 111.9 2,673 190.7 365 302.3 2004 120,809 9,302 8,473 1,564 749 575.9 1089.6 157.5 2,714 382.9 528 470.3 2005 175,891 19,110 6,084 1,475 1,137 755.0 1,220.0 162.8 3,314 473.2 570 597.5

SOURCE: IMF, World Bank, Institute of International Finance (IIF).

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Russia
Russias foreign exchange reserves decreased by nearly 35% from 1997 to 1999 as a result of capital outflows following several currency crashes in East Asia. The floating of the Rouble in August 1998 allowed the Russian Central Bank to avoid the complete depletion of its reserves. Foreign exchange reserves began to recover strongly thereafter due to high international oil prices. Forex reserves rose from US$ 24.3 bn in 2000 to an estimated US$ 175.9 bn at the end of 2005. Level of reserves in 2005 represented around 18 months of import cover.

Ukraine
Even before the currency crisis of 1998, Ukraines foreign exchange reserves had been consistently low, at only around one month of import cover. The financial turmoil coupled with the rising debt service obligations, reduced the level of reserves to just two weeks of import cover by early 1999. However since mid-2001, reserves have grown rapidly from under US$ 2 bn to a record US$ 9.3 bn at the end of 2004. At end-2005, reserves are estimated to have increased further to US$ 19.1 bn, representing about 6 months of import cover.

reserves picked up at the end of 1997 to US$ 1.7 bn, equivalent to 2.5 months of import cover. The economic crisis in the second half of 1998, however, forced the NBK (National Bank of Kazakhstan) to sell foreign exchange, pushing reserves down. Growing oil export volumes and rise in oil prices have helped reserves to recover substantially to US$ 8.4 bn in 2004, representing an import cover of 7.4 months. The government has also set up an oil windfall fund, the NFRK, to receive the hardcurrency income stemming from higher oil exports. This fund, however, is only to be used for budgetary support and not for import cover. At end-2005, reserves decreased further to US$ 6.1 bn, with an import cover of 4 months.

Uzbekistan
Uzbekistan does not publish data on foreign reserves. According to the IMF, the level of net reserves (gross reserves less IMF liabilities) at the end of 2001 was US$ 1.1 bn equivalent to 4.2 months of import cover. Reserves are estimated to have risen in recent years due to rapid rise in export receipts and healthy world gold prices. Foreign exchange reserves are estimated to be around US$ 1.5 bn at the end of 2005, representing an import cover of 4.7 months.

Kazakhstan
Kazakhstans foreign exchange

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Belarus
Belarus foreign exchange reserves had plunged to only two weeks of import cover in 1998 due to the currency crisis. But rose gradually between 1999-2003. This trend continued in 2004, when

foreign exchange reserves reached US$ 749 mn, helped mainly due to the Belarussian Roubles relative stability. In 2005, the level of reserves increased further to US$ 1.1 bn, representing an import cover of around 0.8 months.

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3. FINANCIAL SECTOR AND CAPITAL MARKETS

This chapter examines the financial sector and capital markets in select countries of the CIS. The chapter focuses on the role of Central Banks, the network of commercial banks and financial institutions, along with the capital markets.

In 2004, lending to the private sector grew by 48.6%, but the stock of corporate loans outstanding, at around 12% of GDP, is still much lower than in developed market economies. Although Russia still had around 1300 licensed banks in 2004, statecontrolled institutions, especially Sberbank and Vneshtorgbank dominate the sector. The Russian Central Bank have move to international accounting standards (IAS) from year 2005, an increase in minimum capital requirements to 5m (US$ 5.5 mn) by 2007 and planned improvements in the rules governing mergers and acquisitions (M&As) will finally bring about much-needed consolidation in the sector. Major banks have also announced IPO plans for 2006, which are- Vneshtorgbank (VTB), Gazprombank and Rosbank.

RUSSIA
The Central Bank of the Russian Federation (Bank of Russia) was founded on July 13, 1990. The banks functions include organising money circulation, monetary regulation, foreign economic activity and regulation of the activities of joint stock and cooperative banks.

Banking Sector
The banking sector in Russia enjoyed rapid growth during the 1990s due to massive foreign exchange speculation, and numerous opportunities for handling soft credits and state funds. By 2004, Russia had more than 2500 banks. The financial crisis of August 1998 seriously affected the sector. Since then, balance sheets have improved significantly, but bank lending has been slow to take off.

Foreign banks
Foreign banks activities have largely been limited to Moscow and St Petersburg, which have the most sophisticated domestic banks, and are heavily oriented towards servicing foreign clients. The

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Government is in favour of increasing the role of foreign banks in Russia. The further opening of the Russian banking sector to foreigners is a topic in the negotiations on Russias entry into the World Trade Organisation (WTO).

Capital Markets
The Russian stock market opened in 1991 and more than 100 were in operation by 1996. It has experienced periods of boom and crisis and after expanding steadily till 1997, share prices started decelerating before ending up in a financial crisis in 1998. However, the stock market has recovered from a slump and the blue chip rebounded in 1999, and in 200104 the Russian equity market was among the best performing in the world.

Bank fosters the stability of the banking system and, within its competence, price stability. The general principles of the monetary policy are geared to implementation of its main goals and tasks, to ensuring the stability of Ukraines monetary unit, price stability and to increase the efficiency of the banking system.

Banking Sector
The total capitalisation of the banking sector rose by roughly 30% annually in real terms in both 2003 and 2004, at the end of 2005 it equalled around HRN 16 bn (US$ 3 bn). Half of this capital is concentrated in the top 10 banks, with the ten largest banks claiming almost 54% of the sectors net assets and profits. As on May 2006, there were around 166 licensed banks. Starting from January 1, 1998, the banking system of Ukraine has transferred to the international accounting and statistics standards. Foreigners are permitted to participate fully in the domestic banking sector, although they must establish a resident office one-year before applying for a banking license. In August 2006, Out of 28 commercial banks, only 11 banks had 100% foreign capital. Foreign banks service both their multinational clients and Ukrainian blue chip companies. Since 1997, foreign banks such as Credit Lyonnais (France), Raiffeisenbank (Austria), ING

UKRAINE
The National Bank of Ukraine issues guidelines for the banking system as well as has an exclusive right to issue currency. The National Bank of Ukraine represents interests of Ukraine in relations with other countries central banks, international banks and other financial and credit institutions. The main function of the National Bank of Ukraine, as the countrys Central Bank, is to ensure the stability of the national currency - Hryvnya. The National

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(Netherlands), Kreditanstalt (Germany), and Citibank (USA) have established full subsidiaries. In December 2005 BNP-Paribas (France) purchased Ukrsibbank, the fifth largest bank in Ukraine. Apart from western banks, banks from neighbouring countries such as Russia (Alfa Bank, National Reserve Bank), and Poland (Kredyt Bank, PEKAO) are also entering the market.

Capital Markets
The capital market in Ukraine emerged in early 1990s and has remained small in terms of number of transactions and volume of total transactions and is characterised by low transparency and liquidity. There are 8 stock exchanges and 2 trading & information systems in Ukraine. The securities market has nevertheless still experienced rapid growth over the past two years. Total exchange turnover of the Ukrainian Stock Exchange in 2004 increased 33 times to 207.7 mn euros from 6.1 mn euros in 2003. Large Russian and Ukrainian companies dominate the securities market.

sphere of money circulation, credit, organisation of bank settlements and currency correlation promoting economic development of the Republic of Kazakhstan and its integration in the world economy. NBK takes into account the economic policy of the Government and promotes its realisation provided it does not contradict the accomplishment of its basic functions and carrying out of monetary, credit and exchange policies. NBK acts as a banker, financial adviser and agent of the Government of the Republic of Kazakhstan.

Banking Sector
The quality of the banking sector has improved since 1995 and all banks have to adopt international banking standards. As a result, the number of banks has come down from 130 in 1995 to 36 as of June 2005, of which 33 are in an NBKsponsored deposit insurance scheme. Three banks have come to dominate the sector: Kazkommertsbank, a privately owned commercial bank, TuranAlem Bank, a merger of stateowned banks dominating foreign exchange, and Halyk Bank, the state owned savings bank that is being gradually privatised.

KAZAKHSTAN
The National Bank of Kazakhstan (NBK) is the central bank of the country responsible for functioning of the monetary and credit sphere. Also, the National Bank of Kazakhstan is entrusted to develop and realise the state policy in the

Capital Markets
The Kazakhstan Stock Exchange (KASE) has been in operation since

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September 1997. Kazakhstan has a well-developed infrastructure for equity and debt trading with a network of brokerage firms. Professional and strong National Securities Commission, independent from the Government, created a proper regulatory framework and introduced enforcement mechanisms. Self-regulatory stock exchanges, a central depository, as well as registrars, custodians, and broker-dealer community form the institutional structure of the local securities market.

involved in a number of joint ventures with foreign banks

Foreign Investment in the Banking Sector


Foreign banks are permitted to form joint ventures or set up 100% owned subsidiaries. The major foreign banks present in the country are ABN-AMRO, an UzbekDutch venture, Uzprivatbank (Uzbekistan-Netherlands) and UTBank (Uzbekistan-Turkey). In addition, 16 foreign banks, including the State Bank of India, have representative offices in Tashkent.

UZBEKISTAN
Uzbekistans financial system, including equity and bond markets, securities firms, insurance and leasing companies, has emerged, but is at an early stage of development.

Capital Markets
Financial markets are still in the early stages of development in Uzbekistan and there is almost no foreign involvement. Employees and other insiders own most of the firms listed on the exchange. The Tashkent Stock Exchange trades stocks in over 4,000 companies and there are over 200 registered brokerage companies. The creation of over 50 Privatisation Investment Funds (PIFs) and 60 management companies fuelled widespread expectation that the liquidity of the market and the volume of transactions would increase. However, secondary trading has not picked up and remains mostly over the counter. Individual investors are only allowed to buy shares in the

Banking Sector
Responsibilities of the Central Bank of Uzbekistan (CBU) include control over money supply and circulation as well as licensing, regulating and supervising commercial banks. The largest bank is the state-owned National Bank of Uzbekistan (NBU), which controls 70% of the commercial bank loans portfolio and around 70% of Uzbekistans foreign exchange business. The NBU is a foreign trade and foreign exchange bank, but it also acquires most of the quality loans in Uzbekistan. The NBU is also

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investment funds, not in specific companies.

BELARUS
In 1991, Belarus moved away from the Soviet-style Government monopoly in banking and created an independent banking structure. The former Belarusian branch of Gosbank (the Soviet central bank) became the National Bank of Belarus (NBB), an independent central bank. The branches of the former USSR specialised banks Savings Bank, Agroprombank, Promstroibank and Vnesheconombank- were converted into specialised commercial banks. Belaagroprombank and Belarusbank are the two largest banks, which jointly account a majority of all banking sector assets.

According to the NBB, the total authorised capital of the commercial banking sector amounted to over BRb 3 trn as of April 2005. Commercial bank credits are over 20% of GDP, and total assets amounted to 31% of GDP in 2004.

The Securities Market


The securities market is underdeveloped. Government Treasury bills (GKOs) and shortterm commercial papers (KOs) issued by the central bank offer the only significant tradable securities. The Belarus Stock Exchange merged with the Minsk Currency Exchange in 1999 and is now the Belarus Currency and Stock Exchange (BCSE).

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4. FOREIGN TRADE OF THE CIS REGION

This chapter delineates the recent trends in total CIS trade, the value and composition of the trade and direction of the trade. Table 4.1 presents recent trends in total CIS trade during 2001 2006. Total exports of CIS countries have shown an increasing trend, from US$ 145.1 bn in 2001 to US$ 344.7 bn in 2005, and are estimated to rise further to US$ 409.7 bn in 2006. Total imports of the CIS

countries have also registered a sustained rise, from US$ 96.9 bn in 2001 to US$ 216.4 bn in 2005, and are estimated to rise further to US$ 260.5 bn in 2006. As a result, total trade of the CIS countries has more than doubled from US$ 242.0 bn in 2001 to an estimated US$ 670 bn in 2006. Trends in exports of individual CIS members during 2001 2006 are presented in Table 4.2.

Table 4.1: FOREIGN TRADE OF CIS COUNTRIES 2001-2006 (US$ mn) 2001 Exports Imports Trade Balance 145131 96875 48256 2002 154606 106352 48254 260958 2003 196136 133579 62557 329715 2004 267963 172855 95108 440818 2005 344704 216390 128314 561094 2006* 409669 260479 149190 670148

Trade Turnover 242006

SOURCE: IMF, World Bank, Institute of International Finance (IIF). * - Data for 2006 are estimates

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Table 4.2 presents the trends in imports of CIS members during 2001-2006.
Table 4.2: EXPORTS OF CIS COUNTRIES, 2001-2006 (US$ mn) Country 2001 2002 514 2305 7965 602 10027 498 660 107302 699 2856 18669 2510 154606 2003 696 2625 10073 831 13233 590 806 135930 906 3468 23739 3240 196136 2004 738 3743 13917 1093 20603 733 995 183452 1097 3870 33432 4290 267963 2005 981 6500 16095 1500 28300 686 1104 243600 1108 4900 35000 4930 344704 2006* 1056 11800 19612 1800 36900 781 1070 284300 1160 5400 40300 5490 409669

Armenia 353 Azerbaijan 2079 Belarus 7334 Georgia 496 Kazakhstan 8928 Kyrgyz Rep. 480 Moldova 567 Russia 101885 Tajikistan 652 Turkmenistan 2526 Ukraine 17091 Uzbekistan 2740 Total CIS 145131 Exports

SOURCE: IMF, World Bank, Institute of International Finance (IIF). *- Data for 2006 are estimates.

As can be seen from Chart 4.1, Russia dominates CIS trade, accounting for a dominant 71% of total CIS exports in 2005. Other

major exporters from CIS are Ukraine (10%), Kazakhstan (8%), Belarus (5%), Azerbaijan (2%).

Chart 4.1, EXPORTS OF CIS COUNTRIES (% SHARE, 2005)

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Table 4.3 presents the trends in imports of individual CIS members during 2001-2006.
Table 4.3: IMPORTS OF CIS COUNTRIES, 2001-2006 (US$ mn) Country Armenia Azerbaijan Belarus Georgia Kazakhstan Kyrgyz Republic Moldova Russia Tajikistan Turkmenistan Ukraine Uzbekistan Total CIS Imports 2001 773 1465 8141 1046 7945 441 880 53763 773 2201 16893 2554 96875 2002 883 1823 8879 1085 8040 553 1038 60965 823 2119 17959 2186 106352 2003 1130 2723 11329 1467 9554 724 1429 76070 1026 2502 23221 2405 133579 2004 1196 3582 15983 2009 13818 904 1753 96307 1232 3320 29691 3060 172855 2005 1566 4100 16623 2700 18000 1115 2295 125300 1431 3600 36200 3460 216390 2006* 1709 4600 21117 3300 22700 1230 2860 147500 1513 3900 45900 4150 260479

SOURCE: IMF, World Bank, Institute of International Finance (IIF) * - Data for 2006 are estimates

As in the case of imports, Russia dominates CIS imports, with a share of 57% of total CIS imports in 2005, followed by Ukraine (17%),

Kazakhstan (8%), Belarus (8%) and Azerbaijan, Turkmenistan and Uzbekistan (2% each) (Chart 4.2).

Chart 4.2 IMPORTS OF CIS COUNTRIES (% SHARE, 2005)

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INTRA-CIS TRADE Table 4.4 presents the trend in intra-CIS exports during the period 1995-2004. Intra-CIS exports, after declining from US$ 29.9 bn in 1995 to US$ 22.3 bn in 2001, increased

thereafter to amount to US$ 40.3 bn in 2004. In line with this trend, the share of intra-CIS exports (in total CIS exports) also declined from 27.6% in 1995 to 18.2% in 2001, but rose thereafter to 19.6% in 2003.

Table 4.4: INTRA - CIS TRADE, 1995-2004 1995 Intra - CIS Exports (US$ mn) Intra-CIS exports (as % of total CIS Exports) 29943 27.6 2000 27043 19.2 2001 22264 18.2 2002 28029 18.8 2003 36466 19.6 2004 40340 16.7

SOURCE: World Development Indicators 2006, World Bank

Table 4.5 presents each CIS member countrys exports to and imports from other CIS members during 2002 to 2005.
Table 4.5: INTRA-CIS TRADE STATISTICS, 2002-2005 (US$ mn) 2002 2003 2004 2005
Country Exports Imports Exports Imports Exports Imports Exports Imports

Armenia Azerbaijan Belarus Georgia Kazakhstan Kyrgyz Rep. Moldova Russia Tajikistan Turkmenistan Ukraine Uzbekistan

74 243 4384 169 2195 168 351 15607 188 1438 4377 637

174 651 6295 291 3045 323 409 10235 547 753 8968 837

102 295 5435 239 2981 201 424 20344 139 1446 6044 877

87 223 4473 134 2632 169 346 13837 212 500 4418 1039

218 445 5603 258 3307 257 340 10912 539 487 7765 882

258 773 8049 368 3933 410 593 13257 599 1228 11508 933

180 905 7058 409 4067 303 551 32594 178 10740

511 1446 11118 998 8134 686 916 18926 864 17030

SOURCE: Direction of Trade Statistics Yearbook, IMF- 2005 & CIS Inter State Statistical Committee-2006 *-: Figures are approximates, as data for some countries are not available.

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Russia holds a significant share in the intra-CIS trade. Russia contributed to 49% of the intra-CIS exports in 2001, and its share increased to 53% in 2003, but came down to 34% during 2004. Another major exporter within the block is Ukraine, whose share in intra-CIS exports stood at 25% in 2004. Belarus is another country, which contributes significantly in intra-CIS trade; its share of intra-CIS exports stood at 18% in 2004, which is a rise of 4% from previous year. Further, Kazakhstan accounted for 11% of intra-CIS exports in 2004, which increased its share by 4% from previous year.

as the rise in international prices of Russias main exports items (oil, gas and metals) in 1999-2000 led to a sharp rise in exports in 2000. In 2001, however, falling international commodities prices and the slowdown in the world economy hit export earnings, leading to a decline in exports from US$ 105 bn in 2000 to US$ 101.9 bn in 2001. Since 2002, Russias exports have registered a turnaround thereby registering sustained rise, from US$ 107.3 bn in 2002 to an estimated US$ 243.6 bn in 2005. High international prices of oil have primarily underlined the recent growth in Russias exports. As regards imports, after a slump in 1999 due to sharp fall in real incomes that followed the rouble crisis, Russias imports thereafter registered a rise on account of gradual appreciation of the rouble and recovery in real earnings boosted demand for imports. Imports rose 26.7% in 2004 to amount to US$ 96.3 bn in 2004, and

FOREIGN TRADE OF CIS COUNTRIES RUSSIA


Trends in Russias foreign trade during 2001 and 2006 are given in Table 4.6. The devaluation in 1998 as well

Table 4.6: RUSSIAS FOREIGN TRADE, 2001-2006 (US $ mn) 2001 Exports Imports Trade Balance 101885 53763 48122 2002 107302 60965 46337 168267 2003 135930 76070 59860 212000 2004 183452 96307 87145 279759 2005 243600 125300 118300 368900 2006* 284300 147500 136800 431800

Trade Turnover 155648

SOURCE: IMF, World Bank, International Institute of Finance (IIF). *- Estimates

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further to US$ 125.3 bn in 2005, reflecting robust domestic demand and strengthening rouble.

Composition of Trade
Chart 4.3 presents the major items in Russias exports basket. Oil, fuel & gas are the largest exports accounting for about 54.6% of the total in 2004. Metals are the second most important export product with a share of 15.8%, and these two product categories taken together accounted for more than

70% of total export earnings in 2004, making Russias trade balance vulnerable to swings in international prices. Higher value-added exports, such as machinery and equipment accounted for 6.8% of total exports, while chemicals had a share of 6%. As regards import items, machinery and equipment are the largest items, accounting for over 27.6% of total imports in 2004, followed by food and agricultural products (12.3%), chemicals (11.0%) and metals (4.9%) (Chart 4.4).

Chart 4.3: RUSSIAS MAJOR EXPORTS IN 2004 (% SHARE)

Chart 4.4: RUSSIAS MAJOR IMPORTS IN 2004 (% SHARE)

Others 55.8%

& Equipment 27.6%

Metals 4.9% Chemicals 11%

Food and products 12.3%

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Trading Partners
Non-CIS countries account for a large share of Russias exports. Netherlands, Germany, China and the US are major destinations of exports, with a share of 8.3%, 7.2%, 5.5% and 4.6%, respectively, of total exports in 2004. Among the CIS members, Ukraine is a major market, accounting for 5.8% of total exports in 2004. However, CIS markets remain important for exports in sectors such as machine building. As regards imports, the leading non-CIS trade partners are Germany (9.9% share in 2004), China (4.5%) and Japan (3.7%). Among the CIS members, Ukraine and Kazakhstan are important members, accounting for 5.8% and 3.3%, respectively, of total imports in 2004.

seen from the table, during 2001 2006 both exports and imports have registered consistent rise during the period. Total exports have risen from US$ 17.1 bn in 2001 to US$ 33.4 bn in 2004, and further to an estimated US$ 35.0 bn in 2005. Imports by Ukraine have also registered a similar trend, having risen from US$ 16.9 bn in 2001 to US$ 29.7 bn in 2004, and further to US$ 36.2 bn in 2005. Ukraine generally maintained a trade surplus, which turned into a deficit during 2005 due to increased imports of machinery and equipments, and chemicals.

Composition of Trade
The major items of Ukrainian exports are given in Chart 4.5. Ukrainian exporters still face difficulty in penetrating nontraditional markets with products other than low value-added primary and semi-finished products, such as steel, fertilizers, iron ore and

UKRAINE
The trade figures for Ukraine are tabulated in Table 4.7. As can be

Table 4.7: UKRAINES FOREIGN TRADE, 2001-2006 (US$ mn) 2001 Exports Imports Trade Balance Trade Turnover 17091 16893 198 33984 2002 18669 17959 710 36628 2003 23739 23221 518 46960 2004 33432 29691 3741 63123 2005 35000 36200 -1200 71200 2006* 40300 45900 -5600 86200

SOURCE: IMF, World Bank, IIF. * - Estimates

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Trading Partners
Ukraine still remains relatively dependent on its traditional markets in the former Soviet Union, and exports to other CIS member countries accounted for around a quarter of total exports in 2004. Russia is the leading export market, with a share of 18.0% of the total exports in 2004. The other major export destinations in 2004 were Germany (5.8%), Turkey (5.7%), Italy (5.0% and China (2.5%). Russia is also the leading source for Ukrainian imports accounting for 39.8% of total imports in 2004. Other major sources of imports in 2004 were Germany (9.2%), Turkmenistan (6.6%), Italy (2.7%) and the US (2.2%). This reflects the dependence of Ukraines energy intensive industrial sector on imported fuel, mostly from Russia and Turkmenistan.

despite higher export volumes and rising capital goods imports for oil projects, caused the trade surplus to fall to US$ 983 mn in 2001. The trade surplus increased thereafter to US$ 1.99 bn in 2002 and further to US$ 10.3 bn in 2005, underlined by the sharp rise in exports, due mainly to high oil export revenue on account of high world oil prices. Exports have risen from US$ 10.0 bn in 2002 to US$ 20.6 bn in 2004, and further to US$ 28.3 bn in 2005. On the imports front, import demand has been driven primarily by the surge in capital investment in recent years, with large-scale imports of machinery for projects in the oil sector. During 2004, total imports amounted to US$ 13.8 bn, rising further to US$ 18.0 bn in 2005.

Composition of Trade
Kazakhstan relies on two main commodities for the bulk of its export revenue: oil and base metals. As a result, fluctuations in the price of these items have a

KAZAKHSTAN
Table 4.8 presents the trends in Kazakhstans foreign trade during 2001-2006. Lower oil prices,

Table 4.8: KAZAKHSTANS FOREIGN TRADE 2001-2006 (US$ MN) 2001 Exports Imports Trade Balance Trade Turnover 8928 7945 983 16873 2002 10027 8040 1987 18067 2003 13233 9554 3679 22787 2004 20603 13818 6785 34421 2005 28300 18000 10300 46300 2006* 36900 22700 14200 59600

SOURCE: IMF, World Bank, IIF. * - Estimates

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strong impact on overall exports. In 2004, the share of oil & gas condensate in total exports was 56.8%, while base metal, which is second largest export item, accounted for 5.2% share. Other important export items include refined copper (5%), ferro alloys (4.1%) and natural gas (2.5%) (Chart 4.7).

As regards imports, capital and consumer goods dominate, as domestic producers cannot meet local demand. The largest import item was machinery and equipment with a share of 26.8% of total imports in 2004, followed by light vehicles with a share of 4.3%. Oil products, base metal pipes & sugar are other important import items (Chart 4.8).

Chart 4.7: KAZAKHSTANS MAJOR EXPORTS IN 2004 (% SHARE)

Chart 4.8: KAZAKHSTANS MAJOR IMPORTS IN 2004 (% SHARE)


Machinery & equipment 26.8% Others 59.9%

Light Vehicles 4.3% Oil Products 4.0% Base metal pipes 3.8% Sugar 1.2%

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Trading Partners
In recent years, the direction of exports has shifted away from the CIS countries (except Russia). Main export destinations in 2004 were Switzerland (18.7% of total exports), followed by Italy (15.5% of total), Russia (14.1% of total), China (9.8% of total) and France (7.3% of total). Imports from Russia accounted for 37.7% of total imports in 2004. Other major origins of import were Germany (8.2% of total), China (5.9%), Ukraine (5.7%) and the US (4.4% of total).

the trade surplus in recent years, rising from US$ 324 mn in 2002 to US$ 1.5 bn in 2005. Exports have risen from US$ 2.5 bn in 2002 to US$ 4.3 bn in 2004, and further to US$ 4.9 bn in 2005. Imports have also registered a rise during the period, from US$ 2.2 bn in 2002 to US$ 3.1 bn in 2004, and further to US$ 3.5 bn in 2005.

Composition of Trade
Cotton fiber remains the leading item of exports, although its share in total exports has declined from around 40% during the 1990s to around 20% in 2003 (Chart 4.9). Besides increase in domestic

UZBEKISTAN
High global prices for its main export commodities have boosted

Table 4.9: UZBEKISTANS FOREIGN TRADE, 2001-2006 (US$ mn) 2001 Exports Imports Trade Balance Trade Turnover 2740 2554 186 5294 2002 2510 2186 324 4696 2003 3240 2405 835 5645 2004 4290 3060 1230 7350 2005 4930 3460 1470 8390 2006* 5490 4150 1340 9640

SOURCE: IMF, World Bank, IIF. * - Estimates Chart 4.9: UZBEKISTANS MAJOR EXPORTS IN 2003 (% SHARE)

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processing facilities as also generally poor cotton harvests in recent years, the decline in the share of cotton fiber can also be attributable to increased exports of energy and metals. Energy exports constitute 9.8% of total exports, while machinery & equipment accounted for 9.6% of total exports in 2003. Although, data for gold have not been released since 1998, according to the IMF, it is a major export item averaging about 13% share in 2002-04. Uzbekistans major import items are given in Chart 4.10. Machinery & equipment are the largest import items whose share stood at 44.4% of total imports in 2003. Plastics &

Trading Partners
Bulk of Uzbekistans trade is with countries outside the CIS, although Russia remains the single largest trading partner. In 2003, Russia accounted for 22.4% of Uzbeks total exports, with Russia being an importer buyer of vehicles from Uzbekistan. Other major markets include China (9.3%), Ukraine (7.5%), Tajikistan (6.2%), Bangladesh (4.7%) and Turkey (4.6%). Most of Uzbeks cotton fiber exports are directed to non-CIS markets such as Iran, Bangladesh, South Korea, Vietnam and China. Energy exports are mainly to other CIS members. Russia is also the single largest

Chart 4.10: UZBEKISTANS MAJOR IMPORTS IN 2003 (% SHARE)

plastic goods had a share of 12.8%. Imports of foodstuffs (9.9% of total imports) are volatile and depend on the harvest, and dependency of Uzbekistan on energy imports has reduced due to importsubstituting industrialisation.

import market, accounting for 22.3% share of total imports in 2003. Other major origins for Uzbekistans imports were USA (11.4% of total), South Korea (11% of total), Germany (9.5% of total), China (6.5%) and Turkey (6.1%).

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Belarus
Trends in Belarus foreign trade for the period 2001-2006 have been presented in Table 4.10. Since the 1990s, import growth has outpaced that for exports, with the trade deficit increasing from US$ 807 mn in 2001 to US$ 2.1 bn in 2004. During 2005, the trade deficit declined to US$ 528 bn primarily due to the rise in exports to US$ 16.1 bn, while imports registered a lower growth of 3.9% to touch US$ 16.6 bn. The rise in exports in recent years has been mainly on account of continued strong demand in Russia and rising energy prices (Belarus is both an energy

consistently generates large trade deficits, owing to the country rising energy import requirements.

Composition of Trade Major export items of Belarus are given in Chart 4.11. Mineral products, particularly refined oil, are the largest export items, with a share of 27.5% of total exports in 2004. Refined oil exports are primarily directed to Western Europe, primarily the Netherlands and the UK. Other major export items include machinery and equipment, chemicals and rubber, metals, food and agricultural raw materials, and wood, pulp and paper.

Table 4.10: BELARUS FOREIGN TRADE, 2001-2006 (US$ mn) 2001 Exports Imports Trade Balance Trade Turnover 7334 8141 -807 15475 2002 7965 8879 -914 16844 2003 10073 11329 -1256 21402 2004 13917 15983 -2066 29900 2005 16095 16623 -528 32718 2006* 19612 21117 -1505 40729

SOURCE: IMF, World Bank, IIF. * - Estimates

importer & exporter). Rise in imports, on the other hand, has been due to the increase in domestic demand for imports due to the growing investment and consumption requirements. Trade with Russia and other CIS members

Reflecting Belarus dependence in energy imports, particularly from Russia, mineral products (mainly gas and crude oil) are the largest imports, accounting for 28.2% of total imports during 2004. Machinery and equipment are also important items,

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with a share of 24.6%, followed by metals, chemicals and rubber, food and agricultural raw materials and textiles (Chart 4.12).

equipment, textiles as well as foodstuffs. Other export markets in 2004 include the UK (8.3%), the Netherlands (6.7%), Poland (5.3%), Ukraine (3.9%) and Germany (3.7%). Russia is also the largest source for Belarus imports, with a share of 68.2% of total imports in 2004. Russia is a major source for imports of industrial sector inputs, mainly raw materials such as fuels, chemicals, and metals. Other important import sources include Germany (6.6%), Ukraine (3.3%), Poland (2.9%), Italy (1.8%) and the US (1.2%).

Trading Partners
Belarus foreign trade remains strongly focused on other CIS members, with Russia being the single largest trading partner. In 2004, Russia accounted for 47.0% of total exports from Belarus, and the country is of vital importance as a market for Belarusian goods, primarily machinery and

Chart 4.11: BELARUS MAJOR EXPORTS IN 2004 (% SHARE)


Wood, Pulp and Paper 6.6% Food & agricultural raw materials 8.5% Metals 8.8% Chemicals & rubber 15.3% Machinery & equipment 23.2% Others 10.1%

Mineral Products 27.5%

Chart 4.12: BELARUS MAJOR IMPORTS IN 2004 (% SHARE)


Food & agricultural raw materials 10.7% Textiles 3.6% Others 5.9% Mineral Products 28.2%

Chemicals & rubber 13.3% Metals 13.7%

Machinery & equipment 24.6%

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FOREIGN TRADE OF OTHER CIS COUNTRIES ARMENIA


Armenias exports have registered consistent rise from US$ 353 mn in 2001 to US$ 738 mn in 2004, and further to US$ 891 mn in 2005. Imports have also risen consistently from US$ 773 mn in 2001 to US$ 1.2 bn in 2004, and further to US$ 1.6 bn in 2005. Armenias major items of export in 2004 were precious and semiprecious metals and stones (processed) (42.5% of total exports) followed by base metals (19.5% of total exports). The other important export items were mineral products (11.7% of total exports) and prepared foodstuffs (9.7% of total). As regards imports, reflecting the dominance of diamond processing, precious or semi-precious metals and stones are the leading import items (22.5% of total imports in 2004) followed by mineral products (16.2% of total imports). Other major import items in 2004 were machinery and equipment (10.1% of total imports) and prepared foodstuffs (7.0% of total imports). Armenias main destination of exports is Belgium, accounting for 15.1% of Armenias total exports in 2004, followed by Israel with a share of 13.8%. Both Belgium and Israel are important markets for Armenias diamond exports. Other major destinations of export were Germany

(11.6% of total) and Russia (10.9% of total). Around 14% of Armenian imports in 2004 were from Russia and 8.1% were from Belgium. Russia supplies most of Armenias fuel requirements, including natural gas and oil, while Belgium is the leading supplier of diamonds to Armenia. The shares of the US and Israel stood at 7.5% and 7.4%, respectively.

AZERBAIJAN
Azerbaijan has a relatively open economy, with the composition of exports and imports heavily skewed towards the oil sector. Total exports have risen consistently from US$ 2.1 bn in 2001 to US$ 3.7 bn in 2004. In 2005, reflecting the sharp rise in oil prices, total exports registered a significant rise of 76% to touch US$ 6.5 bn. As regards imports, after a dip in 2001 to US$ 1.46 bn from US$ 1.54 bn in 2000, total imports picked up thereafter to US$ 1.8 bn in 2002 and further to US$ 4.1 bn in 2005. Oil products dominate exports, constituting 82.2% of total exports in 2004, followed by food products (4.3%), transport equipment (4.0%), metals (2.7%), and chemicals (2.1%). In the case of imports, capital goods dominate the import basket, with machinery and equipment accounting for 30.6% of total imports in 2004. Heavy imports of machinery and equipment have resulted from development of the countrys hydrocarbons sector. Other major

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import items were metals (17.4%), food products (11.8%), oil products (11.5%), and transport equipment (6.9%). Italy received 44.7% of Azerbaijans exports in 2004, followed by Russia with a share of 5.8%. Italy has been the largest export market since 1999, with bulk of Azerbaijans oil exports being directed to the country. The other major destinations of exports in 2004 were Georgia (5.2%), Turkey (5.1%) and Iran (4.2%). Reflecting the countrys dependence on gas supplies from other CIS members, particularly Russia, Kazakhstan and Turkmenistan, the source of imports is more diversified. In 2004, Russia accounted for 16.2% of total imports, followed by UK (12.0%), Kazakhstan (6.8%), Turkey (6.4%), and Germany (5.7%).

Baku-Tbilisi-Ceyhan (BTC) oil pipeline and the South Caucasus Gas Pipeline Project (SCP), and also due to the surge in demand for consumer goods. Metal exports dominate the export basket, with ferro alloys, copper & gold accounting for 14.8% of total exports in 2004, followed by ferrous waste & scrap, iron & steel (14.4%) and wine & mineral water (12.6%). Principal items of imports in 2004 were oil, gas & electricity (16.0%), automotives (6.3%), and tubes & pipes (4.3%). As regarding trading partners, Turkey was the leading destination of exports for Georgia accounting for 18.3 % of exports in the year 2004. The other important destinations of exports in the same year were Russia (16.1% of total), Armenia (8.4%), UK (4.9%) and Azerbaijan (3.9%). Russia was the main source of imports accounting for 14.0% of total imports in 2004, followed by Turkey (11.0%), UK (9.3%), Azerbaijan (8.5%) and Germany (8.2%).

GEORGIA
Georgias exports amounted to US $ 1.1 bn in 2004, an increase of 31.5 % over the previous year. Exports have benefited from high global metal prices and in increase in wine production. During 2005, exports increased further to US$ 1.5 bn. Imports also increased from US$ 1.5 bn in 2003 to US$ 2.0 bn in 2004, and further to US$ 2.7 bn in 2005, reflecting mainly the rise in oil prices and increased energy imports. Imports have also been boosted by rising capital goods imports for the construction of the

MOLDOVA
Reflecting Moldovas large energy import requirement and increasing strong import demand, imports far exceeds export earnings resulting in continued trade deficit. From US$ 313 mn in 2001, the trade deficit increased to US$ 758 mn in 2004, and further to US$ 1.19 bn

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in 2005. Exports increased from US$ 567 mn in 2001 to US$ 995 mn in 2004, and further to US$ 1.1 bn in 2005. Imports have also risen, from US$ 880 mn in 2001 to US$ 1.75 bn in 2004, and to US$ 2.3 bn in 2005. The strong import demand in recent years has been driven by recovering investment and massive inflows of remittances, fueling domestic consumption. Exports are dominated by agricultural goods and by the food and beverages sector, with the bulk of these exports being directed to the other CIS markets, particularly Russia. In 2004, food products accounted for 35.1% of total exports, while textiles accounted for a share of 17.4%. Other major items of export are vegetable products (12.2% of total exports), machinery and equipment (4.0% of total exports) and mineral products (3.1% of total exports). Russia received 35.9% of Moldovas export in 2004 while the share of Ukraine was 6.6%. The other major non-CIS destinations of export in 2004 were Italy (13.9% of total), Romania (10.1%) and Germany (7.3%). As regards imports, mineral products are the largest import items, with a share of 21.8% of total imports in 2004, followed by machinery and equipment with a share of 13.6%. Other major items of import include chemicals (9.1%), textiles (8.6%) and metal and metal products (6.3%).

Imports from Ukraine constituted 24.7% of Moldovas total imports in 2004 followed by Russia with a share of 12.0%. Non-CIS countries such as Romania (9.3%), Germany (8.5%) and Italy (7.5%) are other important import sources. TAJIKISTAN Tajikistans export structure is dominated by two items, viz. cotton and aluminium, with a combined share of around 80% in the last 10 years. Sharp rise in aluminium exports in recent years have boosted overall exports. Excessive reliance on cotton and aluminium exports, however, reflects the lack of export diversification of the countrys export basket, thereby rendering the countrys export earnings vulnerable to fluctuations in global commodity prices. Total exports have risen from US$ 652 mn in 2001 to US$ 1.09 bn in 2004. During 2005, exports rose marginally to US$ 1.11 bn due primarily to weak cotton harvests and low export prices. Imports amounted to US$ 1.43 bn in 2004, up from US$ 1.03 bn in 2003, and stood at US$ 1.43 bn in 2005. Aluminium accounted for 62.6% of total exports in 2004, followed by cotton fiber (17.7%) and electricity (6.6). As regards imports, alumina is the largest item with a share of 26.8% of total in total in 2004, followed by oil products (8.1%), electricity (7.9%) and natural gas

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(2.7%). Although Tajikistan is a major exporter of electricity, the country is a net importer of electricity, with Uzbekistan as the major supplier. Non-CIS countries are the leading export markets, with the Netherlands and Turkey accounting for 41.4% and 15.3%, respectively, of total exports in 2004, followed by Uzbekistan (7.2%), Latvia (7.1%) and Switzerland (6.9%). With the other CIS members supplying most of its food and energy requirements, Russia accounted for 24.2% of total imports in 2004, followed by Kazakhstan (15.2%), Uzbekistan (12.3%), Azerbaijan (6.3%), and the US (5.8%).

investment in priority development sectors, such as the hydrocarbons industry, textiles and electricity. Natural gas, and crude and refined oil are the largest export items, accounting for 57% and 26% of total exports, respectively, in 2001. Other items of export in the same year were cotton fiber and textiles with shares of 3% and 2%, respectively. The main destinations of exports in 2004 were Ukraine, which had a share of 46% of total exports, followed by Iran (18.5%), Turkey (4.5%), Italy (4.3%) and the UAE (3.5%). As regards imports, machinery and equipment, and food products account for around 75% of the countrys imports. Russia is the major supplier of technological and transport equipment, along with Ukraine. Turkey is also an important import source as companies from Turkey are heavily involved in the countrys construction sector, while the UAE is also active in the countrys hydrocarbons sector. In 2004, Ukraine and Russia accounted for 15.5% and 14.8%, respectively, of the total imports, followed by the US (10.0%), UAE (7.8%), and Turkey (7.3%).

TURKMENISTAN
Turkmenistans dependence of gas exports has contributed to fluctuation in the countrys trade surplus, and stable gas exports to Ukraine have enabled the country to maintain a trade surplus. From US$ 325 mn in 2001, trade surplus increased to US$ 550 mn in 2004, and further to US$ 1.3 bn in 2005. Total exports registered a 26% rise in 2005 amounted to US$ 4.9 bn, up from US$ 3.87 bn in 2004, reflecting mainly rising world energy and gas prices, which have driven growth in the countrys exports. Imports have also risen from US$ 2.5 bn in 2003 to US$ 3.32 bn in 2004, and further to US$ 3.6 bn in 2005. Capital goods have traditionally been the largest import items, reflecting extensive

KYRGYZ REPUBLIC
The Kyrgyz Republic has led the other Central Asian Republics in efforts to liberalise trade policies, and in 1998 became the first CIS country to join the WTO. The country is highly dependent on

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gold exports, which accounts for around 40% of total exports, with the bulk being exported to UAE, Switzerland and Germany. Given its considerable hydroelectricity generating potential, annual exports are about 2 bn kwh, with Russia, Kazakhstan and China serving as important markets. Total exports have risen from US$ 480 mn in 2001 to US$ 733 in 2004, before contracting to US$ 686 mn in 2005. Precious metals (gold) accounted for 40.5% of total exports in 2004, followed by mineral products (13.1%), textiles and fabrics (11.1%), food, beverages and tobacco (6.0%), building materials (5.3%), and machinery and equipment (4.9%). The main destinations for exports in 2004 included UAE (26.3%), Russia (19.2%), Switzerland

(14.2%), Kazakhstan (12.1%), and Canada (5.9%). Imports in recent years have registered a significant rise, from US$ 724 mn in 2003 to US$ 904 mn in 2004, and further to US$ 1.12 bn in 2005, reflecting primarily the countrys energy import dependence from other CIS members and high world energy prices. In 2004, mineral products accounted for 29% of total imports, followed by chemicals (12%), machinery and equipment (11.4%), food, beverages and tobacco (8.8%), vehicles and transport equipment (7.5%), and nonprecious metals (6.9%). Russia is the leading supplier, accounting for 31.2% of total imports in 2004, followed by Kazakhstan (21.6%), China (8.5%), Uzbekistan (5.5%), and US (4.7%).

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5. FOREIGN DIRECT INVESTMENT AND INVESTMENT CLIMATE IN THE CIS REGION

This chapter presents the trends in overall FDI inflows into the CIS region, and highlights the major sectors of investment and investment regulations in select CIS countries.

TRENDS IN FDI INFLOWS INTO CIS COUNTRIES Trends in FDI inflows into the CIS countries have been presented in Table 5.1. Total FDI inflows into the CIS region have been rising

continuously from an average of US$ 4 bn during 1992-97 to reach a peak of US$ 27.2 bn in 2005. Four countries, Russia, Ukraine, Kazakhstan and Azerbaijan, in that order, together accounted for 95% of the total FDI inflows in 2005. While in the first three countries, FDI has been driven by projects in natural resources (especially petroleum and natural gas); in Ukraine it has been more broad-based.

Table 5.1: FDI INFLOWS IN THE CIS COUNTRIES (US$ mn) 1992-97 Ann. Avg. 2001 Share in 2005 2005 FDI Stock, 2004* 1225 13876 2383 2320 25152 522 1129 132491 522 1360 17209 964 199153

2002

2003

2004

Armenia 18 88 144 157 217 220 0.8 Azerbaijan 419 227 1392 3285 3556 1680 6.2 Belarus 84 96 247 172 164 305 1.1 Georgia 62 110 165 340 499 450 1.7 Kazakhstan 909 2835 2590 2092 4113 1738 6.4 Kyrgyzstan 55 5 5 46 175 47 0.1 Moldova 35 146 132 78 154 225 0.8 Russia 2018 2469 3461 7958 15444 14600 53.6 Tajikistan 13 9 36 14 272 54 0.2 Turkmenistan 126 170 100 100 -15 62 0.2 Ukraine 328 792 693 1424 1715 7808 28.7 Uzbekistan 61 83 65 70 1 45 0.1 Total for CIS 4016 7030 9032 15736 26295 27234 100 SOURCE: UNCTAD, World Investment Report, various issues. *- Implies the share of each of the CIS countries in total FDI in CIS region.

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FDI INFLOWS IN SELECT CIS COUNTRIES Russia


According to UNCTADs World Investment Report 2006, FDI inflows into Russia have witnessed substantial increase in recent years. The Russian Federation alone, with its large natural and human resources, accounted for almost half of the inflows to the CIS region. Petroleum and natural gas extraction attracted large investments in 2003-2005. FDI inflows rose sharply from US$ 3.46 bn in 2002 to US$ 7.96 bn in 2003, and further to US$ 15.4 bn in 2004. During 2005, FDI inflows amounted to US$ 14.6 bn. The FDI inward stock in Russia in 2005 amounted to US$ 132.5 bn, accounting for as much as 66.5% of total FDI inward stock in CIS region. Fuel industry and trade & catering are the major recipients of FDI in Russia. According to data from the Federal Service for State Statistics, Russia, FDI inflows into the fuel industry, primarily in oil extraction, has risen significantly from a share of 5.7% of total FDI inflows in 2000 to 20.1% of total FDI inflows in 2004. Reflecting the interest of foreign investors to tap the rising consumer population and per capita incomes, share of FDI inflows into the retail and catering sector amounted to 32.1% of total FDI inflows in 2004, as compared

to 17.8% in 2000. Other major FDI recipient sectors in 2004 include: non-ferrous metallurgy (7.9%), ferrous metallurgy (7.5%), machine building and metal cutting (3.9%), communications (3.4%), pulp and paper industry (2.4%), and food industry (2.4%). Major investing countries in Russia include: Cyprus (16.8% of accumulated investments at end2004), Luxembourg (14.5%), Netherlands (14.6%), Germany (11.4%), UK (10.6%), USA (8.1%), France (4.7%) and Switzerland (2.1%).

Ukraine FDI inflows into Ukraine witnessed a significant pickup during 2002 and 2005; from US$ 693 mn in 2002 to US$ 1.42 bn in 2003 and further to US$ 7.8 bn in 2005. Ukraine accounted for 28.7% of total FDI inflows in the CIS region in 2005. As compared to other major FDI recipients in the CIS region, such as Russia, Kazakhstan, and Azerbaijan, FDI inflows into Ukraine are relatively well diversified. During 2004, domestic trade accounted for around 16% of FDI inflows, followed by food processing (14.6%), machine building (8.4%), and transportation and communications (7.3%).
Major investing countries in Ukraine include: USA (with a share of 13.8% of volume of direct investment as of January 1, 2005),

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Cyprus (12.4%), UK (10.7%), Germany (7.6%), Netherlands (6.6%), British Virgin Islands (6.5%), Russia (5.5%), Switzerland (4.9%), and Austria (4.1%).

Kazakhstan
Kazakhstan is the third largest FDI recipient in the CIS region, accounting for 6.4% of total FDI inflows into the region in 2005. Kazakhstan has attracted over 80% of all FDI into Central Asian region and about one-tenth of total FDI into the former communist bloc. From U$ 1.28 bn in 2000, FDI inflows increased sharply to US$ 2.84 bn in 2001. FDI inflows thereafter remained above US$ 2 bn during 2002 and 2003, before doubling to US$ 4.1 bn in 2004. In 2005, FDI inflows stood at US$ 1.7 bn. The countrys FDI inward stock in 2005 at US$ 25.2 bn is the second highest, after Russia, accounting for 12.6% of total FDI inward stock for the CIS region. According to data from the National Bank of Kazakhstan, the oil and gas sector (primarily extraction of crude and natural gas) is the major FDI recipient, accounting for around 63% of gross FDI inflows in 2004. The importance of FDI inflows into the sector can be gauged from the fact that investment by foreign oil companies into Kazakhstan has been the main driver of rapid economic growth in recent years. Around 85% of oil production is from foreign

investors, with the rest from the state-owned oil company, Kazmunaigaz. The sharp rise in FDI inflows in 2001 can be attributed among others to the completion of the Caspian Pipeline Consortium (CPC) oil exports pipeline and increased work at Karachaganak and Kashagan in the Caspian, while the jump in FDI in 2004 was fuelled by ongoing development of major offshore fields at the Kashagan offshore deposit. After the oil and gas sector, geological survey and exploration sector is the second leading FDI recipient, with a share of 20.7% of gross FDI inflows in 2004, followed by manufacture of basic metals (3.9%) and wholesale and retail trade (3.3%). USA is the largest investor in Kazakhstan with a share of 35.8% of gross FDI inflows during 2004. Other major investing countries include: Netherlands (21.5%), UK (11.2%), China (4.8%), Italy (3.8%), France (3.3%), and Switzerland (2.8%).

Azerbaijan
Azerbaijan has been among the most successful of the CIS member countries in attracting FDI. From US$ 227 mn in 2001, FDI inflows increased sharply to US$ 1.39 bn in 2002, and further to US$ 3.56 bn in 2004. During 2005, FDI inflows stood at US $ 1.68 bn.

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Reflecting this trend, the total FDI inward stock in 2005 at US$ 13.9 bn accounted for 7% of the regions total. Since 1995, over 85% of all investment in Azerbaijan has been financed from abroad, with more than 75% in the form of FDI. According to the State Statistical Committee, 90% of the FDI inflows in 2004 were directed towards the oil industry. A combination of high oil prices and the construction of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline boosted FDI inflows during 2004. Major investing countries in the country include: UK, USA, Norway, Turkey, France, Japan and UAE. Since 1995, investments in oil and gas have contributed most to GDP growth.

improved over the past few years, foreigners still encounter significant restrictions on ownership of real estate in some cities and regions in Russia. Around three-quarters of the Russian economy have been privatised, although many privatised enterprises continue to have significant state-held blocks of shares.

Limitation on foreign participation


Explicit restrictions on foreign direct investment in Russia have been limited to specific sectors so far. A 1998 law on the aerospace industry limits foreign ownership to 25% of an enterprises capital. Foreign ownership in the natural gas monopoly Gazprom is technically limited to 11% but use of joint ventures to purchase additional shares has allowed Gazprom to pursue its strategic partnership with the German company, Ruhrgas, without legal problems. A 1999 law permitted foreign-owned insurance companies to operate, but prohibits them from selling life or compulsory insurance, and sets a 15% ceiling on foreign charter capital in the entire insurance sector. A 1998 law limits foreign investment in the electric power giant Unified Energy Systems to 25 % or less. The GOR (Government of Russia) has limited foreign bank capital to 12% of total banking capital.

INVESTMENT CLIMATE IN SELECT CIS COUNTRIES Russia Openness to foreign investment


The 1999 Federal Law on Foreign Investments in the Russian Federation guarantees foreign investors rights equal to those enjoyed by Russian investors. The 1999 law includes a grandfather clause that protects certain large investments (over approximately US$ 41 mn) from unfavourable changes in tax or other legislation for a period of seven years. Although the situation has

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Conversion and transfer policies


Generally, any payment obligation that lasts longer than 90 days is a capital transaction. Current forex transactions include contracts in which settlements take place within 90 days and loans not exceeding 180 days. The CBR normally requires a license for any capital transaction. Licenses can take up to three months to obtain in cases involving transactions with offshore zones. Currency controls exist on all transactions that require Customs clearance, meaning that in Russia they apply to both import and export transactions.

Performance requirements and incentives


The current production sharing legislation, as amended in late 1998, requires 70% local content over the life of a project. An amended production sharing law, passed in 2001 by the Duma, mandates local content but leave the specific percentage to be negotiated for each production sharing agreement. The Russian auto decree, signed in early 1998, allows tariff breaks for large investments in the auto industry (where investment project reaches 50% domestic content levels within five years). Performance requirements are not generally imposed by Russian law, and are not widely included as part of private contracts. They have appeared in the agreements of large multinational companies investing in natural resources, and in production sharing legislation.

Restrictions on capital transactions


Remittances of investment returns generally are delayed no more than thirty days due to Central Bank processing. Currently, four general classes of transactions require CBR licenses: capital forex transactions (including investments and loans lasting more than 180 days made by foreign banks or non-residents); export transactions in which payments are delayed more than 90 days from the date Customs clears the goods; advance payment for imports more than 90 days between the payment and Customs clearance of the goods; and lease payments in foreign currency, unless both lessee and lessor are non-residents.

Bilateral Investment agreements


Russia inherited from the Soviet Union 14 bilateral investment treaties (BITs) with Austria, Belgium and Luxembourg, Great Britain, Germany, Italy, Spain, Canada, China, Korea, the Netherlands, Finland, France, and Switzerland. They were ratified in 1989-90 and came into force in 1991. Russia has since negotiated another 34 agreements, of which

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20 have been ratified - with Greece, Cuba, Romania, Denmark, Slovakia, Czech Republic, Vietnam, Kuwait, India, Hungary, Albania, Norway, Yugoslavia, Lebanon, Macedonia, the Philippines, Egypt, South Africa, Japan, and Moldova.

general guarantees against expropriation, unhindered transfer of profits and post-tax revenues, and a ten-year guarantee against changes in legislation that affect these basic protections. Ukraines Law on Ownership specifically recognises private ownership and includes Ukrainian residents, foreign individuals, and foreign legal entities among those entities able to own property in Ukraine. Foreign licensed banks may carry out all the same activities as domestic banks and there is no ceiling on their participation in the banking system. A May 2000 privatisation law radically changed the process of privatisation in Ukraine. The new program provided for cash-based privatisation via open tenders of large blocks of shares and controlling interests in strategically important enterprises. Additionally, this law banned earlier method of employee lease-buyout program, whereby employees leases were converted to ownership. No restrictions are placed on foreign participation in privatisation.

Ukraine Openness to foreign investment


Over the past few years, Ukraine has liberalized its markets, reduced regulation, eliminated most licensing requirements, eliminated most restrictions on foreign exchange and began the transformation of the agricultural sector from state-run farms to private agriculture. The major rules/laws affecting investment in Ukraine are the Law on Foreign Investment Regime (1996), the new civil code and a new commercial code, which went into effect from 1st January 2004. The Law on Foreign Investment, passed in April 1996, guarantees foreign investors equal treatment with local companies and provides potential privileges. The law permits exemption from customs duties for in-kind contributions of fixed assets imported into Ukraine from a companys charter fund. However, import duties must be paid if the enterprise sells, transfers, or otherwise disposes of the contributed property for any reason other than repatriation of foreign investment. The law also provides

Conversion and transfer policies


The April 1996 Foreign Investment Law guaranteed unrestricted transfer of profits, revenue, and other proceeds in foreign currency after payment of taxes and other

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mandatory payments. The National Bank of Ukraine (NBU), however, announced in November 2004, that foreign investment funds might only be brought into Ukraine via special commercial bank accounts, which must convert the hard currency into Hryvnia. Foreign investments, therefore, may only be conducted in Hryvnia. Likewise, the resolution stipulated that all payments to foreign investors must be made in Hryvnia to the investors bank accounts in Ukraine. While foreign investors may repatriate earnings, sale of proceeds in hard currency received by a purely Ukrainian company are subject to a 50 percent conversion requirement, and companies must obtain a license from the National Bank of Ukraine (NBU) for some operations. For hard currency being sent out of Ukraine, each transaction over $50,000 has to be approved by the NBU, and the NBU charges a fee to review the transaction.

stations), foreign shares cannot exceed 30%. Foreign investment in many other sectors and individual enterprises is limited by laws or regulations that list specific investment provisions or which require the Government to maintain majority stakes in strategic enterprises.

Performance requirements/ incentives


There are no known cases of performance requirements imposed on foreign investors other than those clearly spelled out in privatizations conducted via open tender. Foreign investors are exempt from customs duties for any in-kind contribution imported into Ukraine for the companys charter fund. Some restrictions apply and import duties must be paid if the enterprise sells, transfers, or otherwise disposes of the property.

Bilateral investment agreements


Ukraine has signed bilateral investment agreements with more than 40 countries other than fellow CIS members.

Limitation on foreign participation


Ukrainian legislation restricts foreign participation to 49% or less in the charter capital of enterprises in certain sectors, such as insurance, publishing, and broadcasting sectors, and foreigners are prohibited from participating in the manufacture of weapons and alcoholic spirits. In strategic enterprises (including TV and radio

Kazakhstan Openness to foreign investment


The Government of Kazakhstan (GOK) has made significant progress in creating a favourable investment climate since its

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independence in 1991. In recent years, the GOK has enacted four major legislations affecting foreign investment. These are: 1) The Law 2003; on Investment,

along with health and ethical issues. The law contains incentives and preferences based on governmentdetermined priority sectors. Several amendments have been introduced in the 2003 law that will eliminate five-year corporate income tax exemptions and replace them with a modified set of ten-year exemptions. Customs duties exemptions will be limited to equipment that is destined for use in production processes only in Kazakhstan.

2) The Law on Government Procurement, 1997; 3) The Tax Code of 2001; and 4) The Customs Code of 2003. These four laws provide for nonexpropriation, currency convertibility, guarantee of stability in the legal regime, transparent Government procurement, and incentives in certain priority sectors, including electrical infrastructure, telecommunications, light manufacturing, health and tourism. However, poor implementation of these laws and reforms remains the key obstacle to business in Kazakhstan. In January 2003, the new law On Investments was signed, superseding and consolidating past legislations governing foreign investment. The law establishes a single investment regime for domestic and foreign investors. It guarantees the stability of existing contracts, but notes that new ones will be subject to amendments in domestic legislation, certain provisions of international treaties, and domestic laws dealing with national and environmental security

Limitation on foreign participation


Although foreign capital is allowed to participate in most areas of the economy, there are some limitations on the participation of foreign capital in the services sector. The National Bank limits the total registered charter fund of all banks with foreign participation to 25% of the overall registered charter fund of all banks in Kazakhstan. The 1998 National Security Law limits foreign ownership of individual media companies to 20%. As per the Law on Insurance, the total registered charter fund of general insurance companies with foreign participation may not exceed 25% of the overall registered charter fund of all general insurance companies in Kazakhstan. In the life insurance sub-sector, this limit on foreign participation is set at 50% of

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the overall registered charter fund of all life insurance companies operating in Kazakhstan.

Transfers from residents in favour of non-residents for property, including real estate, transactions Repayments by residents of lending to non-residents for export-import transactions or any other loan for a period of more than 180 days.

Conversion and transfer policies


In July 1996, Kazakhstan adopted Article 8 of the IMF Articles of Agreement, which stipulates that Kazakhstan will not restrict current account transactions such as currency conversions or the repatriation of investment profits. In 1999, the Government and National Bank of Kazakhstan announced that the national currency would be allowed to float freely at market rates, thus abolishing the previous managed exchange rate system. For nonresidents, money transfers in currency associated with foreign investments, whether inside or outside the country, can take place without restriction. Inward capital flows are basically unrestricted. There are restrictions on capital movements when a non-resident sells or disposes of an interest in a resident company to another resident company. These are dealt with under the licensing arrangements of the National Bank. The following types of transactions are examples of capital movements from residents to nonresidents that are subject to licensing:

Performance requirements/ incentives


Performance requirements, to the extent that they are imposed, are the result of a contract between the individual investor and the State Agency for Investments, which is now part of the Ministry of Foreign Affairs. Typically, an investors obligations might include financial obligations, obligations to train local specialists, and contributions to social funds or needs. Performance requirements, in some cases, are central to investment or privatisation contracts. The Investment Law of 2003 includes investment incentives that allow for preferences based on government-determined priority activities and provides for investment tax preferences, customs duties exemptions, and in-kind grants to legal entities of the Republic of Kazakhstan only.

Bilateral Investment agreements


Kazakhstan has bilateral investment agreements in force with over

Investments of residents in the business of non-residents abroad

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three dozen countries, including the United States, Great Britain, Germany, France, Russia, Korea, Iran, China, and Turkey.

Uzbekistan Openness to foreign investment


The Government of Uzbekistan (GOU) actively seeks foreign investment in productive capacity, and provides significant tax benefits to such undertakings, particularly if the production in question is for import substitution or for export. The 1998 Law on Foreign Investment regulates foreign investment in the country. There are no official limits on foreign ownership or control of enterprises in Uzbekistan, though the GOU keeps a controlled share in a number of strategic industries (i.e. mining, agriculture, machinery manufacturing). A new Presidential decree announced that, starting July 1, 2005, subject to certain conditions being fulfilled, the economic enterprises, which attract direct private foreign investments shall be exempt from income taxes, property taxes, social infrastructure and territory improvement taxes, environment taxes, single taxes imposed on microfirms and small companies, as well as mandatory payments to the Republican road fund. The GOU seeks investment in

those fields the Government considers underdeveloped and wants to expand. The fields currently targeted are manufacturing, telecommunications, mineral extraction, oil and gas, textiles, apparel and food processing. The GOU is eager for foreign technology and aims to develop a manufacturing base for import substitution. There is no discrimination against foreign investors at the time of the initial investment. In fact, foreign investors often receive tax holidays and duty-free capital goods imports unavailable to local investors. One potentially significant benefit for foreign investors is the ten-year Guarantee, which claims to protect investors against adverse legislative or regulatory changes for the first ten years of their investment. The GOU has a privatisation program under which large companies are being developed for case-by-case privatisation, while many smaller ones are being privatised through a series of auctions, during which shares are offered to a number of private investment funds (PIFs). Foreigners are encouraged to purchase these shares, and a 1998 decree guarantees that proceeds from shares held for at least one year may be converted back into foreign exchange. The lack of a secondary market has impeded trading in these shares, however. In many privatised

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enterprises, the GOU retains a minority share of about 25% and workers own another 25%.

Limitation on foreign participation


In certain sectors, however, foreign ownership is restricted. For example, foreign banks may not operate in Uzbekistan except as partners in joint ventures with Uzbek firms, and foreign ownership of banks is limited to 50%. Banking and insurance firms with foreign participation are required to establish a charter capitalisation fund of $5 mn, whereas the GOU determines the size of the charter funds of Uzbek firms on a caseby-case basis.

criterion and whose projects are included in the National Investment Program receive a seven-year tax holiday. JVs with foreign ownership of 50% or more pay only a 20% tax on profits for a subsequent two-year period. If invested capital is over one-mn dollars, the rate is reduced to 16%. Generally, foreign ownership in JVs is not restricted.

Bilateral investment agreements


Uzbekistan has signed bilateral investment agreements with a total of 35 countries, including China, the Czech Republic, Egypt, Finland, France, Georgia, Germany, India, Indonesia, Israel, Italy, South Korea, Malaysia, the Netherlands, Pakistan, Poland, Russia, Saudi Arabia, Slovakia, Switzerland, Turkey, the United Kingdom, and the United States.

Performance requirements/ incentives


A Presidential Decree issued on March 27, 1998 sets the following requirements for a joint venture (JV) to be established as an enterprise with foreign investments entitled to certain tax privileges:

Belarus Openness to foreign investment


Belarus investment code came into force on October 9, 2001. Belarusian investment code is a single, comprehensive document, which replaced the multiple regulations on foreign investment. The main objective of adopting the code was to make business/ investment climate in Belarus friendlier, legalise new forms of foreign investment and boost domestic and foreign investment through Government support.

An authorised fund of US$ 150,000 or more; Foreign investment comprising at least 30% of the authorised fund; and A foreign juridical person as one of the parties to the enterprise. Joint ventures that meet the first

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According to the investment code, businesses with foreign investment are legal entities with foreign investment of no less than US$ 20,000. In Belarus, very little FDI has been derived from the privatisation program. There is a considerable potential for privatisation, as many firms that can be privatised remain in state hands.

Products/services necessary for implementing the project are supplied through tender bids.

Special benefit for foreign investors


Major benefits for enterprises with foreign investment over 30% in authorised fund:

Performance requirements/ incentives


The code guarantees property rights and the right to remit income abroad. Investment cannot be nationalised without complete and timely compensation, which should include interest payment calculated on the basis of libor rate starting from the date of nationalisation to the date of actual compensation payment. Investment projects are eligible for Government support in the form of tax and import tariff benefits, Governments guarantees and even Government funding. Such funding can be issued to private investors as a credit, provided they meet the following criteria:

Allowed to export without license and additional approvals, Can import items for own use at zero duty and without license, Exempted from profit tax for 3 years including the first profitable year, Hard currency revenue earned from export will be at its disposal after payment of taxes.

Bilateral investment agreements


Belarus has signed bilateral investment treaties (BITs) with Bulgaria, China, Finland, France, Germany, Iran, Italy, Netherlands, Poland, Romania, Sweden, Switzerland, Turkey, Ukraine, UK and US.

Private investors contribute at least 20% of the necessary funding; Due diligence conducted by the Government on an investment project results in a positive conclusion;

MULTILATERAL AGENCIES FUNDED PROJECTS IN CIS REGION


Multilateral agencies such as the World Bank, the Asian Development Bank (ADB), and the European Bank for Reconstruction

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and Development (EBRD) are active in funding development projects in the CIS region. This section presents a brief overview of the activities of these institutions in the CIS region.

WORLD BANK Russia


Since the Russian federation joined the World Bank (IBRD) in 1992, the Bank has approved up to US$ 14 bn in loans for 61 operations. Currently there are 22 active projects under implementation. The Banks strategy in Russia is to support the effective implementation of the Governments comprehensive reform program, to help mitigate risks to the sustainability of growth, and to extend the opportunities arising from the reform process more widely across the population. The lending programme emphasises improving business environment and enhancing competition by focussing on infrastructure, corporate governance and removing administrative barriers to business activity. The programme also focusses on public sector management as well as mitigating social and environmental risks. During 1993-2005, World Banks commitments in Russia total US$ 13 bn, with disbursement amounting to US$ 8.6 bn. The Bank has made substantial lending

to agriculture, law, education, transportation, health and energy sector in Russia. While much of the IBRD support is aimed at improving the policy environment and public institutions, IFC complements these efforts with direct support to the real sector.

Ukraine
The World Bank has been helping Ukraines transition to a marketbased economy since the country joined the Bank in 1992. The main focus of its assistance is Development policy (previously known as adjustment) lending, which is at the centre of the Banks program. The Development Policy Loan (DPL-1) of US$ 251 mn, approved on July 5, 2005, is the first in a planned series of three annual loans designed to help the government translate its objectives into a sequenced and prioritized program of actions. The DPL program seeks to integrate government and donor activities under three broad themes to improve public governance: (a) investment climate, (b) public administration and public finance management, and (c) social inclusion. It focuses on the medium-term institutional and policy changes needed to sustain growth and deepen integration in the global economy, and is consistent with and supportive of the EU-Ukraine Action Plan.

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Since the implementation of the World Bank programme in the country, 33 projects for a total amount of US$ 4.5 bn has been approved. In 2006, commitment to the country amounted to US$ 500 mn, bringing the overall level for active projects to over US$ 858 mn. As of June 2006, active portfolio of the World Bank in Ukraine by sectors includes: rural sector (US$ 345 mn), energy & mining (US$ 266 mn), general production (US$ 150 mn), education (US$ 86.6 mn), health, nutrition & population (US$ 60 mn), public sector governance (US$ 40 mn), water supply & sanitation (US$ 24 mn) and environmental policy (US$ 32 mn).

and private investors; Building the foundation for future competitiveness by investing in human capital and basic infrastructure; and Sustaining competitive growth through a focus on the environment Since 1992, total World Bank commitment to Kazakhstan amounted to more than US$ 2.0 bn for 28 projects. In 2006, commitment to Kazakhstan totaled US$ 130 mn, bringing the total overall commitments for active projects to US$ 648 mn. As on June 2006, active World Banks portfolio by sector in Kazakhstan includes: energy & mining (US$ 340 mn), rural sector (US$ 158.5 mn), transport (US$ 100 mn) and environment (US$ 45.7 mn).

Kazakhstan
Kazakhstan joined the World Bank in 1992. The accents in World Banks relationship with Kazakhstan are changing from major adjustment operations towards more focused investment loans and policy dialogue. Given the countrys reduced need for external financing, the Banks assistance has shifted toward more focused investment loans, policy dialogue, and knowledge transfer. The Banks Country Partnership Strategy with Kazakhstan, approved in September 2004, focuses on the following areas: Prudently managing oil revenues and increasing public sector efficiency; Strengthening the governments capacity to identify and reduce barriers to businesses

Uzbekistan
Uzbekistan joined the World Bank in 1992. The World Bank Group supports Uzbekistans economic transition with a program of lending, technical assistance, and analytical and policy advice designed to support implementation of the governments gradual reform strategy and mitigate the social impact of adjustment to the market economy. The Banks programme in Uzbekistan focuses on: Public policy reform; Private sector development; Investment in human capital; and investment in irrigation and drainage infrastructure.

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Since 1992, 14 lending operations have been approved, of which 7 are active. During 19942006, total World Banks commitments in Uzbekistan amounts to around US$ 639 mn.

Belarus
Belarus joined the World Bank in 1992. The Banks overall objective is to assist the country in implementing policies that foster economic growth and that translate into better lives for the people of Belarus. The World Bank strategy is focused on creating the foundations for long-term economic growth, with an emphasis on improving health, education, social safety nets, and the protection of the environment. The World Banks support to Belarus comprises lending, technical assistance, and aid coordination initiatives. In 2006, the World Bank approved a US$ 50 mn loan to Belarus for energy efficiency project targeted at people residing in Chernobyl affected areas. Since the inception of the programme, 5 projects for a total amount of US$ 243 mn have been approved.

adjustment credit programmes, highway projects and agricultural development. As on June 2006, active World Bank portfolio in Armenia amounted to around US$ 275 mn in sectors such as rural sector (US$ 92.8 mn), water supply & sanitation (US$ 43 mn), local production (US$ 25.2 mn), energy & mining (US$ 29 mn), public sector governance (US$ 21.6 mn), private sector governance (US$ 20 mn), health, nutrition and population (US$ 19 mn), education (US$ 19 mn) and environment (US$ 5.1 mn). In Georgia, World Bank supplemented portfolio of 19 projects are in areas of rural development & irrigation, community & municipal infrastructure, roads, energy, health, education and environment. As on June 2006, active World Banks portfolio are: rural sector (US$ 82.8 mn), energy & mining (US$ 40.6 mn), health, population and nutrition (US$ 36.8 mn), education (US$ 25.9 mn), transport (US$ 25 mn), urban development (US$ 19.4 mn), environment (US$ 14.4 mn), private sector development (US$ 15 mn) and public sector development (US$ 3 mn). In Moldova, funded projects are in the area of structural adjustment credit programme, trade and transport facilitation and energy, with the Bank to date having financed 28 investment & development policy

Other CIS Countries


The World Bank is also active in other CIS countries. In Armenia, World Bank funded projects are mainly in the area of natural resource management, structural

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operations for a total commitment of US$ 622.6 mn. Currently 21 projects are under implementation. World Bank has funded projects in Tajikistan in the areas of primary health care, poverty alleviation and technical assistance programmes and in the area of transport and technical assistance programmes, and to date 26 projects for a total amount of US$ 405 mn have been approved. In 2006, the Bank committed US$ 59 mn, bringing the total amount of commitment for active projects to US$ 182 mn. Currently 19 projects are active in Tajikistan. In Kyrgyz Republic, since 1992, the World Bank has approved credits for 38 projects for a total commitment of about US$ 776 mn. The IFC has also approved 8 investment loans for total commitments of approx US$ 18.5 mn. Total World Banks approval for active projects amounted to about US$ 244 mn in sector such as: rural sector (US$ 107.5 mn), energy & mining (US$ 35 mn), public sector governance (US$ 17.8 mn), urban development (US$ 15 mn), water supply & sanitation (US$ 15 mn), health & nutrition (US$ 15 mn),

financial sector (US$ 9 mn), education (US$ 15 mn), economic policy (US$ 5 mn). In Azerbaijan World Banks commitment during 2006 totalled US$ 300.8 mn, taking overall commitments for active projects to around US$ 580 mn, in sectors such as: transport (US$ 240 mn), rural sector (US$ 126.2 mn), health & sanitation (US$ 55mn), energy & mining (US$ 48 mn), governance (US$ 31 mn), financial sector (US$ 17.7 mn), education (US$ 19 mn), urban development (US$ 11.5 mn), local production (US$ 10 mn), environment (US$ 14.5 mn).

ASIAN DEVELOPMENT BANK


The Asian Development Bank (ADB) is also active in funding developmental projects in the Central Asian members of the CIS, viz. Azerbaijan, Kazakhstan, Kyrgyz Republic, Tajikistan, and Uzbekistan. ADBs operations in these countries in terms of loans approved and amount involved, and projects approved, as on endDecember 2005, are summarised below.

Azerbaijan Cumulative no. of loans approved Cumulative loans approved Cumulative projects approved

19 US$ 104 mn 3

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Kazakhstan Cumulative no. of loans approved Cumulative loans approved Cumulative projects approved Kyrgyz Republic Cumulative no. of loans approved Cumulative loans approved Cumulative projects approved Tajikistan Cumulative no. of loans approved Cumulative loans approved Cumulative projects approved Uzbekistan Cumulative no. of loans approved Cumulative loans approved Cumulative projects approved

12 US$ 501.6 mn 8

25 US$ 588.5 mn 19

18 US$ 273.84 mn 14

21 US$ 914.7 mn 18

EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT (EBRD) Russia


The European Bank for Reconstruction and Development (EBRD) has played an important role in many projects being undertaken in Russia. The EBRDs portfolio now covers a diverse range of industrial sectors with projects located in the majority of the Russian regions, utilising a wide variety of financial products. As at December 31, 2005, the EBRD had signed 50 projects in Russia. In

2005, EBRD once again used its investment to foster the development of the Russian private sector. In the manufacturing sector the EBRD became a partner in the Toyota Motor Corporations first Russian venture, investing 24 mn in the assembly plant being built outside St. Petersburg. EBRD also provided support for the first major investment in Russia by the worlds largest aluminium group, lending 25 mn for the refurbishment of two regional rolling mills bought by Alcoa. In 2005, the EBRD invested in 39 projects in Russia, totalling 1.1 bn. This brings the

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EBRDs total cumulative commitments in Russia to 7.2 bn and gross disbursement in 2005 amounted to 681 mn.

Ukraine
The EBRD proposes to remain strongly engaged in Ukraine, promoting private sector involvement and using the leverage afforded by priority public sector projects and high-level policy dialogue, to improve the investment climate. As at December 31, 2005, EBRD had signed 21 projects in Ukraine totaling almost 2.2 bn. EBRDs investments in Ukraine amounted to 528.8 mn in 2005 in support of transport, agribusiness, banking and the industrial sector - the best result since 2001. Provision of finance for small and medium businesses continued through EBRD credit lines to local Ukrainian banks. Going ahead, the Bank would continue to pursue a strategy of assisting the development of the private sector while supporting much needed public infrastructure projects and enhancing sectoral reforms in the transport, energy and municipal sectors.

building earning assets in the oil and gas sector and the development of the small and medium sized enterprise (SME) sector. There are also well-established and effective relationships between the Bank and the government for financings in the transport and municipal areas. The Banks net cumulative investment in Kazakhstan as at December 31, 2005, amounted to just over 1.3 bn. In 2005, the total volume of business of the EBRD in Kazakhstan was 279.6 mn, with private sector operations dominating the Banks portfolio in Kazakhstan. Major projects included a 42 mn loan to support telecommunications and a loan of 45 mn to fund the completion of a new power transmission lines that will allow the north of Kazakhstan to transmit its surplus power to the more heavily populated south of the company.

Azerbaijan
In the Caucasus region, EBRDs investment increased from 296 mn in 2004 to 350 mn in 2005. A large portion of this was devoted to Azerbaijan, which received 245.1 mn of EBRDs finance in 9 projects which were signed in 2005. However, in line with the new strategy for Azerbaijan, EBRD significantly increased the numbers and ranges of projects undertaken, which includes upgrading of the Baku-Samur Road project,

Kazakhstan
EBRD has played an important role in Kazakhstans development process. The EBRDs operations in Kazakhstan are focused on

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development of the Shah Deniz gas & oil fields and construction of the south Caucasus gas pipeline.

at December 31, 2005 amounts to


198 mn. In 2005, priority was

Uzbekistan
Being one of the largest investors in Uzbekistan, the EBRD has financed only private sector activities since July 2005. The EBRD supports market reforms and the development of private sector SME in the country. The Bank also focuses on infrastructure projects, which enhance cross-border cooperation, and local projects that have potential to achieve material transition impact and direct social benefits. EBRDs cumulative finance to Uzbekistan as on December 31, 2005 amounted to 598.7 mn. Projects funded are in sectors such as natural resources, power and energy, transport, agribusiness, infrastructure, general industry. In 2005, the Bank signed three projects for a combined 35.5 mn.

given to supporting small and micro-enterprises, while close monitoring of the existing project portfolio continues. In December 2004, the EBRD launched a framework for micro, small and medium-sized enterprises (SMEs) worth up to US$ 25 mn. The EBRD is exclusively investing in the private sector. In particular, the Bank is focusing its efforts on small business and the Turnaround Management Programme. It is also making selective investments in larger private enterprises and expanding the Trade Facilitation Programme to promote long-term institutional development and assist access to international markets. In 2005, EBRD has invested in 4 projects, amounted to 32.1 mn.

Georgia
In 2005, EBRD invested 87.2 mn in 9 projects. The cumulative investment in Georgia by EBRD reached a mark of 339.2 mn.

Belarus
EBRDs cumulative investment as

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6. INDIAS TRADE AND INVESTMENT RELATIONS WITH THE CIS REGION

TRENDS IN OVERALL INDO-CIS TRADE


Trends in Indias overall trade with the CIS region during the period 2001-02 to 2005-06 have been presented in Table 6.1. Indias total exports to the CIS region contracted from US$ 975.6 mn in 2001-02 to US$ 924 mn in 2002-03, due primarily to decline in exports to Russia which is Indias largest trading partner in the CIS region. Exports to CIS region thereafter, picked up and stood at US$ 1.24 bn in 2005-06. Indias imports from

the CIS region, on the other hand, have registered a continuous rise from US$ 739 mn in 2001-02 to US$ 2.9 bn in 2005-06. Reflecting this trend, Indias total trade (exports plus imports) with the CIS region has risen from US$ 1.72 bn in 2001-02 to US$ 4.1 bn in 200506. Indias trade balance with the CIS region, which registered a surplus till 2002-03, has moved into a deficit of US$ 225 mn in 2003-04, which increased further to US$ 1.6 bn in 2005-06, due to the faster rise in

Table 6.1: INDIAS TRADE WITH CIS COUNTRIES, 2001-02 TO 2005-06 (US$ mn) 2001-02 Exports Imports Trade Balance Trade Turnover 975.68 739.15 236.53 1714.83 2002-03 923.98 846.5 77.48 1770.48 2003-04 1039.28 1264.79 -225.51 2304.07 2004-05 1093.80 1959.40 -865.60 3053.20 2005-06 1237.60 2886.30 -1648.70 4123.90

SOURCE: Directorate General of Commercial Intelligence & Statistics (DGCIS), Ministry of Commerce & Industry (MOCI) NOTE: Data for imports do not include oil imports as country-wise break-up of oil imports is not available.

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imports as compared to the rise in exports to the CIS region.

Trends in Indias Exports to the CIS Countries


The value of Indias exports to all the CIS countries from 2001-02 to 2005-06 is shown in Table 6.2. A significant portion of Indias exports to the CIS region is to Russia. Indias exports to Russia accounted for 59% of Indias total exports to the CIS region in 2005-06 up from 57.3% in 2004-05. Ukraine is the

second largest export destination in the region, with a share 21% in 2005-06, followed by. Kazakhstans (7%), Georgia (3%), Kyrgyz Republic (2%), Azerbaijan (2% share), and Uzbekistan (2%). Drugs, pharmaceuticals & fine chemicals are the largest export items, accounting for 31.8% of Indias exports to the CIS in 2005-06 (Chart 6.1). The second major item of export is coffee, with a share of 6.7%. Tea with 6.0%, and machinery & instruments accounted for 5.7%

Table 6.2: INDIAS EXPORTS TO CIS COUNTRIES, 2001-02 TO 2005-06 (US$ mn) Exports to: Armenia Azerbaijan Kazakhstan Kyrgyz Republic Tajikistan Turkmenistan Uzbekistan Belarus Georgia Moldova Russia Ukraine Total Exports to CIS SOURCE: DGCIS, MOCI. 2001-02 1.32 10.71 45.86 11 1.23 4.37 6.56 2.16 8.37 1.88 800.9 81.32 975.68 2002-03 2.52 8.66 46.9 14.7 8.67 10.32 5.09 5.93 18.88 2.54 705.83 93.94 923.98 2003-04 3.54 12.31 75.01 38.30 4.48 19.26 15.18 6.51 34.11 4.38 715.64 110.56 1039.28 2004-05 7.24 30.78 81.38 49.55 6.59 15.25 21.34 10.6 26.78 5.60 631.00 207.64 1093.80 2005-06 7.18 28.49 89.4 27.77 6.2 18.56 23.75 12.02 33.53 5.41 729.78 255.55 1237.60

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during 2005-06. Other important exports to the CIS region include transport equipments, tobacco unmanufactured, plastic & linoleum products, and readymades of cotton and accessories. Table 6.3 presents trends in Indias exports of major items to CIS region. Analysis of trend would reveal that while export items such as drugs & pharmaceuticals, machinery & instruments, transport equipments, tobacco unmanufactured, plastic & linoleum products, and meat & preparations

have registered a rising trend, other major items such as tea, cotton readymade garments, and cotton yarn & fabrics have shown a declining trend. In the case of tea, exports to the CIS region has declined from US$ 128 mn in 2000-01 to US$ 75 mn in 2005-06, while in the case of cotton readymade garments, exports have declined significantly from US$ 217 mn to US$ 46 mn during the same period. Further, exports of cotton yarn & fabrics to the CIS region have also fallen from US$ 69 mn in 200001 to US$ 33 mn in 2005-06.

Chart 6.1: COMPOSITION OF INDIAS EXPORTS TO CIS (2005-06, % SHARE)

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Table 6.3: TRENDS IN COMPOSITION OF INDIAS EXPORTS TO CIS COUNTRIES (US$ mn) Commodities Drugs pharma. & fine chemicals Coffee Tea Machinery & instruments Transport equipments Tobacco unmanufactured Plastic & linoleum products Readymades of cotton & accessories Meat & preparations Cotton yarn fabrics madeups etc. 2000-01 147.50 63.97 127.70 24.73 4.46 27.68 27.12 2001-02 134.30 67.83 115.21 26.08 10.20 21.99 25.88 2002-03 162.64 51.50 78.08 37.99 20.11 29.12 21.15 2003-04 211.45 52.20 91.90 40.71 14.93 27.98 29.54 2004-05 300.92 49.72 82.97 53.84 29.79 40.67 41.43 2005-06 392.75 82.35 74.54 71.48 62.40 48.51 47.45

216.55 0.54

230.53 5.39

232.02 12.08

205.49 22.95

129.60 24.14

46.43 32.94

68.87

29.42

16.71

19.14

15.67

32.81

SOURCE: DGCIS, MOCI.

Trends in India's Imports from CIS Countries


As in the case of exports, Indias imports from the CIS region are also dominated by Russia, with a share of 70% in Indias total imports from the region in 2005-

06 (Table 6.4). Ukraine is the second largest import source with a share of 26% in 2005-06. Uzbekistan, Kazakhstan, Belarus and Georgia followed with a share of 1% each.

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Table 6.4: INDIAS IMPORTS FROM CIS COUNTRIES, 2001-02 TO 2005-06 (US$ mn) Imports from: Armenia Azerbaijan Kazakhstan Kyrgyz Republic Tajikistan Turkmenistan Uzbekistan Belarus Georgia Moldova Russia Ukraine Total Imports from CIS SOURCE: DGCIS, MOCI 2001-02 0.45 0.22 7.42 0.56 1.34 1.95 17.33 4.97 0.03 0.1 537.33 167.45 739.15 2002-03 0.16 1.74 12.76 0.47 0.08 5.42 20.6 7.12 6.76 1.78 594.15 195.46 846.5 2003-04 0.66 3.03 9.29 0.54 3.96 9.36 27.77 6.76 5.44 0.04 962.17 235.77 1264.79 2004-05 0.78 7.71 15.38 0.62 4.08 10.86 31.45 12.32 15.41 0.15 1322.20 538.44 1959.40 2005-06 2.08 5.86 25.78 1.19 5.89 12.35 25.97 37.87 16.26 0.21 1991.72 761.14 2886.30

The composition of Indias imports from CIS countries is given in Chart 6.2. Iron and steel have emerged as the largest import items from the CIS region, with a share of 36% of total imports in 2005-06.

Manufactured fertilizers are the second largest import item with a share of 21%. Other important items were non-ferrous metals (9%), coal, silver (5%), and newsprint (3%).

Chart 6.2:
COMPOSITION OF INDIAS IMPORTS FROM CIS COUNTRIES (2005-06, % SHARE)

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Trends in composition of Indias Imports from CIS countries


The trends in composition of Indias imports from CIS countries during last six years have been presented in Table 6.5. Imports of iron & steel, the largest item of import from the CIS region, have registered a significant 6-fold rise during 2000-01 and 2005-06. Other important items such as fertilizer manufactured, non-ferrous metals, silver, and synthetic and reclaimed

rubber have also registered sharp rise during the period. In contrast, import of primary steel pig iron based items, and raw cotton and waste have registered contraction during the period.

INDIAS TRADE WITH CIS MEMBERS Russia


Indias exports to Russia have been on a declining trend in recent years, as can be seen in

Table 6.5: TRENDS IN COMPOSITION OF INDIAS IMPORTS FROM CIS COUNTRIES (US$ mn) Commodity Iron & steel Fertiliser manufactured Non-ferrous metals Silver Newsprints Synthetic & reclaimed rubber Metaliferrous ores & metal scraps Coal coke & briquettes Primary steel pig iron based metals Cotton raw & waste 2000-01 162.05 107.10 62.48 9.70 64.19 17.00 12.22 6.27 19.92 20.59 2001-02 143.26 159.32 62.22 9.58 63.89 30.87 10.09 12.01 5.25 14.27 2002-03 193.12 106.02 83.91 9.35 63.28 37.67 9.10 16.03 7.40 6.77 2003-04 314.54 164.42 163.93 15.35 73.27 54.99 13.90 56.32 10.00 19.72 2004-05 580.36 333.48 186.37 74.99 91.20 65.54 24.95 153.28 37.92 16.81 2005-06 1023.10 619.33 262.88 148.46 98.28 79.91 77.34 14.49 12.12 20.09

SOURCE: DGCIS, MOCI

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Table 6.6. From US$ 800 mn in 2001-02, Indias exports to Russia declined to US$ 631 mn in 200405, before rising to US$ 729.8 mn in 2005-06. The increase in Indias exports to Russia during 2005-06 is mainly due to the rise in exports of drugs, pharmaceutical & fine chemicals (US$ 238 mn), coffee (US$ 67.4 mn), unmanufactured tobacco (US$ 39.3 mn), transport equipments (US$ 29.7 mn), cotton yarn, fabrics madeups (US$ 29.5 mn), machinery & instruments (US$ 28.8 mn) and plastic & linoleum products (US$ 28.8 mn).

mn), non-ferrous metals (US$ 240.4 mn) and silver (US$ 141.9 mn). Indias trade balance with Russia, which was in surplus in the previous years, has moved into a deficit of US$ 691.2 mn in 2004-05, which doubled to US$ 1261.4 mn in 200506, reflecting the sharp rise in imports. Drugs and pharmaceuticals are the largest exports to Russia, with a share of 32% in total Indian exports to Russia in 2005-06. Coffee is the second largest export items in 200506, with a share of 7% in total exports.

Table 6.6: INDIAS TRADE WITH RUSSIA, 2001-02 TO 2005-06 (US$ mn) 2001-02 Exports Imports Trade Balance Trade Turnover SOURCE: DGCIS, MOCI 800.9 537.33 263.57 1338.23 2002-03 705.83 594.15 111.68 1299.98 2003-04 715.64 962.17 -246.53 1677.81 2004-05 631.00 1322.20 -691.20 1953.20 2005-06 729.78 1991.72 -1261.94 2721.50

Indias imports from Russia, on the other has, have registered continuous rise. From US$ 1322.2 mn in 2004-05, imports from Russia increased to US$ 1991.7 mn in 200506. In 2005-06, Indias imports from Russia rose by 34% to touch around US$ 2.0 bn, due mainly to substantial rise in iron & steel (US$ 549.9 mn), fertilizers manufactured (US$ 484.8

As regards imports, iron and steel are the largest import items from Russia, with a share of 27.6% of total imports from Russia during 2005-06, an increase from its share of 26.4% in 2004-05. Fertilizer manufactured was the second largest import item in 2005-06 with a share of 24.4%. Non-ferrous metals and silver accounted for 12.1% and 7.0%,

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respectively, of total imports in 200506. Other important items of import were newsprints (6.5%), nonelectrical machinery (2.5%) and transport equipment (1.4%).

Ukraine Indias trade figures with Ukraine are given in Table 6.7. Ukraine is the second largest trading partner of India after Russia in the CIS region. Exports to Ukraine have witnessed a rising trend in recent years; from US$ 81.3 mn in 200102 to US$ 207.6 mn in 2004-05. In 2005-06, exports rose by 16% to touch US$ 255.6 mn, on account of substantial rise in exports of drugs and pharmaceuticals, transport equipments, plastic & linoleum products, coffee and tobacco. Indias imports from Ukraine have been also been on an uptrend since 2001-02. From US$ 167.5 mn in 2001-02, imports from the country have risen continuously to US$ 538.4 mn in

2004-05. In 2005-06, imports amounted to US$ 761.1 mn, a sharp rise of 40% over the previous years, due mainly to a substantial rise in imports of iron and steel, fertilizers, transport equipments and non-electrical machinery. India generally maintains a negative trade balance with Ukraine, which has risen from US$ 86 mn in 2001-02 to US$ 505.6 mn in 2005-06 due to the sharp rise in imports from Ukraine. Drugs and pharmaceuticals are the largest items of export to Ukraine with a share of 37.2% of total Indian exports to Ukraine in 2005-06. Transport equipments are the second largest export items, which increased its share from a marginal 0.02% in 2000-01 to 12% in 2005-06. Machinery and instruments (7.8%), plastic and linoleum products (6%), transport equipment (5.9%) and coffee (5.4%) were the other main export items in 2005-06.

Table 6.7: INDIAS TRADE WITH UKRAINE, 2001-02 TO 2005-06 (US$ mn) 2001-02 Exports Imports Trade Balance Trade Turnover SOURCE: DGCIS, MOCI 81.32 167.45 -86.13 248.77 2002-03 93.94 195.46 -101.52 289.4 2003-04 110.56 235.77 -125.21 346.33 2004-05 207.64 538.44 -330.80 746.0 2005-06 255.55 761.14 -505.59 1016.69

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As regards imports, iron and steel are the largest component of Indias imports from Ukraine. In 2005-06 its share was 58.6% of total imports. Fertilizers, inorganic & organic chemicals, transport equipment, gold, non-electrical equipments, and pulses are other major imports from Ukraine.

mn in 2001-02 to US$ 63.6 mn in 2005-06. Drugs, pharmaceutical & fine chemicals are the major items of export from India to Kazakhstan, with a share of 25.8% of total Indian exports to Kazakhstan in 2005-06. Tea is the second largest export items with a share of 24.7%, followed by machinery & instruments with a share of 15.7%. The other major export items include readymade garments cotton, leather garments, and manufacturers of metals. Iron and steel are the most important import items from Kazakhstan with a share of 53.8% of total imports in 2005-06, an increase from 49.6% share in total imports in 2004-05. Crude minerals followed with a share of 23.1% in 2005-06. Other major import items from Kazakhstan are silver, and metaliferrous ores & metal scraps.

Kazakhstan
Indias trade figures with Kazakhstan are given in Table 6.8. Indian exports to Kazakhstan have increased substantially from US$ 45.9 mn 2001-02 to US$ 89.4 mn in 2005-06. Imports from Kazakhstan on the other hand have displayed a fluctuating trend. In 2005-06, imports from Kazakhstan amounted to US$ 25.8 mn as compared to US$ 15.4 mn in the previous year. Bilateral trade balance has been in Indias favour, with Indias trade surplus with the country having risen from US$ 38.4

Table 6.8: INDIAS TRADE WITH KAZAKHSTAN, 2001-02 TO 2005-06 (US$ mn) 2001-02 Exports Imports Trade Balance Trade Turnover SOURCE: DGCIS, MOCI 45.86 7.42 38.44 53.28 2002-03 46.90 12.76 34.14 59.66 2003-04 75.01 9.29 65.72 84.30 2004-05 81.38 15.38 66.00 96.76 2005-06 89.40 25.78 63.62 115.18

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Uzbekistan
Indias exports to Uzbekistan, after registering a decline during 200203, picked up thereafter to US$ 23.8 mn in 2005-06. The recent pick up in total exports to Uzbekistan has been mainly due to increase in exports of drugs and pharmaceuticals, paper/wood products and machinery & instruments. Imports from Uzbekistan have been on the rise since 2001-02, from US$ 17.3 mn to US$ 31.5 mn in 2004-05. In 2005-06, total imports from Uzbekistan stood at US$ 25.9 mn. India generally maintains a trade deficit with the country, with the deficit having decreased from US$ 10.7 mn in 2001-02 to US$ 2.2 mn in 2005-06 (Table 6.9).

major export items are machinery and instruments, paper/wood products and inorganic/organic/agro chemicals. As regards imports, non-ferrous metals are the largest import items from Uzbekistan with a share of 64% of total Indian imports from Uzbekistan in 2005-06. Silver constitutes the second largest import item with a share of 15% in 200506. Pulses, synthetic and regenerated fibers, and raw silk are the other important imports from Uzbekistan.

Belarus
Indias exports to Belarus, after declining in 2001-02, have increased thereafter to amount to US$ 6.5 mn in 2003-04, and further

Table 6.9: INDIAS TRADE WITH UZBEKISTAN, 2001-02 TO 2005-06 (US$ mn) 2001-02 Exports Imports Trade Balance Trade Turnover SOURCE: DGCIS, MOCI 6.56 17.33 -10.77 23.89 2002-03 5.09 20.6 -15.51 25.69 2003-04 15.18 27.77 -12.59 42.95 2004-05 21.34 31.45 -10.11 52.79 2005-06 23.75 25.97 -2.22 49.72

Drugs and pharmaceuticals are the main items of exports with a share of 32% of total exports to Uzbekistan in 2005-06. Meat and preparations were the second highest export item in 2005-06 with a share of 21% in total exports. Other

to US$ 12.2 mn in 2005-06. Imports from Belarus have also increased from US$ 4.9 mn in 2001-02 to US$ 37.9 mn in 2005-06. India generally maintains a negative trade balance with Belarus, with the deficit risen from US$ 2.8 mn in

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2001-02 to US$ 25.7 mn in 200506 (Table 6.10). Drugs and pharmaceuticals the largest export items in 2005-06 with a share of 65% of total exports to Belarus. Machinery and instruments come next with a share of 8%, while that of tobacco unmanufactured was 2.1%. The other important items of export are electronic goods, tea, plastic and linoleum products, and processed minerals.

US$ 1.32 mn in 2001-02, exports increased to US$ 7.24 mn in 200405, and slightly down to US$ 7.18 mn in 2005-06. Indias main exports to Armenia in 2005-06 are gems and jewellery (US$ 3.1 mn), meat & preparation (US$ 1.2 mn) and transport equipment (US$ 1.1 mn). Indias imports from Armenia, after declining from US$ 0.53 mn in 2000-01 to US$ 0.16 mn in 200203, increased thereafter to US$ 0.78

Table 6.10: INDIAS TRADE WITH BELARUS, 2001-02 TO 2005-06 (US$ mn) 2001-02 Exports Imports Trade Balance Trade Turnover SOURCE: DGCIS, MOCI 2.16 4.97 -2.81 7.13 2002-03 5.93 7.12 -1.19 13.05 2003-04 6.51 6.76 -0.25 13.27 2004-05 10.60 12.32 -1.72 22.92 2005-06 12.20 37.87 -25.67 50.07

In imports, iron & steel had the largest share of 37.8% of total imports from Belarus in 2005-06. The second largest import item was textile yarn, fabric madeups articles with a share of 18%, followed by fertilizers with a share of 14% in 2005-06. Synthetic & regenerated fibers, inorganic chemicals and leather are other important items of import from Belarus.

mn in 2004-05, and further to US$ 2.1 mn in 2005-06. Main items of imports from Armenia are metaliferous ores & metal scrap (US$ 2.0 mn).

Azerbaijan
Indias exports to Azerbaijan increased from US$ 12.3 mn in 2003-04 to US$ 30.9 mn in 200405, and stood at US$ 28.5 mn in 2005-06. Indias major exports to Azerbaijan in 2005-06 are meat and preparations (US$ 10.7 mn) and drugs & pharmaceuticals (US$ 6.8 mn).

Armenia
Indias exports to Armenia have registered an increasing trend. From

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Indias imports from Azerbaijan increased from US$ 3.0 mn in 200304 to US$ 7.7 mn in 2004-05, but in 2005-06 decreased to the mark of US$ 5.9 mn. The main items of import from Azerbaijan are nonferrous metals and non-metallic mineral manufactures.

pharmaceuticals (US$ 3.5 mn), machinery & instruments (US$ 0.55 mn) and jute yarn (US$ 0.48 mn). Indias imports from Moldova have also increased from US$ 0.15 mn in 2004-05 to US$ 0.21 mn in 2005-06, with the main items being iron & steel (US$ 0.13 mn), and metaliferrous ores and metal scrap (US$ 0.07 mn).

Georgia
Indias exports to Georgia rose from US$ 26.8 mn in 2004-05 to US$ 33.5 mn in 2005-06. The main items of exports in 2005-06 are meat & preparation (US$ 16.0 mn, up from US$ 11.4 mn in 2004-05), gems and jewellery (US$ 5.2 mn), other ores and minerals (US$ 4.6 mn) and drugs and pharmaceuticals (US$ 1.8 mn). Imports from Georgia, on the other hand, have increased substantially from US$ 5.4 mn in 2003-04 to US$ 16.3 mn in 200506, mainly on account of a sharp rise in imports ores of metaliferrous and metal scrap. The main items of imports in 2005-06 are metaliferrous ores and metal scrap (US$ 13.9 mn), non-electrical machinery (US$ 0.6 mn) and electronic goods (US$ 0.48 mn)

Tajikistan
Indias exports to Tajikistan have risen from US$ 1.3 mn in 2001-02 to US$ 6.6 mn in 2004-05, and stood at US$ 6.2 mn in 2005-06. The major items of exports are readymade cotton garments (US$ 2.72 mn), machinery and instruments (US$ 1.12 mn), drugs and pharmaceuticals (US$ 0.64 mn), readymade woolen garments (US$ 0.37 mn), and plastic and linoleum products (US$ 0.28 mn). Imports from Tajikistan amounted to US$ 5.9 mn in 200506, a sharp rise from US$ 1.3 mn in 2001-02, with major import items being non-ferrous metals (US$ 2.0 mn) and raw cotton (US$ 1.97 mn).

Turkmenistan
Indias Exports to Turkmenistan have risen from US$ 4.4 mn in 2001-02 to US$ 18.6 mn in 200506, with the major export items being electronic goods (US$ 5.21 mn), drugs and pharmaceuticals (US$ 3.11 mn), cotton readymade

Moldova
Indias exports to Moldova have risen from US$ 1.9 mn in 2001-02 to US$ 5.6 mn in 2004-05, before contracting marginally to US$ 5.4 mn in 2005-06. The main items of exports in 2005-06 are drugs and

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garments (US$ 2.41 mn), and machinery & instruments (US$ 1.64 mn). Indias imports from Turkmenistan have also increased from US$ 1.95 mn in 2001-02 to US$ 12.4 mn in 2005-06. The major items of import are raw cotton (US$ 9.41 mn), and inorganic chemicals (US$ 0.87 mn).

Kyrgyz Republic
Indias exports to Kyrgyz Republic have risen from US$ 11.1 mn in 2001-02 to US$ 49.5 mn in 200405, but sharply decreased to US$ 27.8 mn in 2005-06. The major items of export are cotton readymade garments (US$ 9.3 mn), woolen readymade garments (US$ 9.5 mn), and drugs & pharmaceuticals (US$ 1.7 mn). Indias imports, on the other hand, have increased from US$ 0.6 mn in 2001-02 to US$ 1.2 mn in 2005-06. The major import items are electronic goods (US$ 0.21 mn) and electrical machinery (US$ 0.19 mn).

investments. During the period April 1996 to February 2006, Indias overseas investment approved in the CIS region amounted to US$ 3.01 bn, accounting for a significant share of 21.2% of total approved (US$ 14.4 bn) during the period. In the case of Russia, in fact, the country has emerged as the largest destination for Indias overseas investment, accounting for 20% (US$ 2.83 bn) of the total overseas investments approved during the period (Table 6.11). Kazakhstan has also emerged as an important destination for Indias overseas investment, with total investment approved in the country amounting to US$ 133.1 mn during the period. Indian Joint Ventures and Wholly Owned Subsidiaries in CIS Countries In view of the investment opportunities in the CIS region, a number of Indian companies have endeavoured to set up joint ventures (JVs) and wholly owned subsidiaries (WOS) in the CIS region, covering sectors, drugs & pharmaceutical, oil & gas, software development services, food products, hotels & restaurants and petroleum products. List of Indian joint ventures and wholly owned subsidiaries approved during the period 1996 (April) - 2006 (October) in the CIS countries is given in Annexure 1 (A&B).

INDIAS INVESTMENTS IN CIS COUTRIES


Along with the upturn in Indias exports to the CIS region witnessed in recent years, an important development in bilateral commercial relations has been increasing importance of the CIS region as destination of Indias overseas

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Table 6.11: INDIAS APPROVED OVERSEAS INVESTMENT IN CIS COUNTRIES Name of the country April 1996 to March 2002 1748.68 4.44 25.73 7.98 0.70 0.01 0.36 1787.90 2002-03 2003-04 2004-05 2005-06 as on Feb 2006 1.168 9.60 0.027 2.00 1.50 0.13 14.425 Total (US$ mn)

Russia Kazakhstan Uzbekistan Kyrgyzstan Moldova Ukraine Azerbaijan Tajikistan Georgia Total of Above

0.15 0.11 1.56 0.15 1.97

1.43 74.96 0.16 76.55

1076.17 44.00 0.18 2.75 3.75 3.96 2.05 0.041 1132.90

2827.60 133.11 27.65 12.88 5.25 4.66 2.06 0.401 0.13 3013.74

SOURCE: Ministry of Finance, Government of India.

Russia : In Russia, the leading sector of Indian investment is in the petroleum products sector, where ONGC Videsh Ltd. has received approval to set up joint ventures, with investment amounting to US$ 2810 mn. ICICI Bank has also started its WOS operation in 2005. Other areas/ sectors wherein Indian companies have received approval to set up JVs / WOS include: drugs and pharmaceuticals; software development services; gems and jewellery; tea processing and labeling; leather and leather products; trading in medicines,

spices and other food products; trading in textiles and leather goods, and warehouse operations. Kazakhstan : In Kazakhstan, Indian JVs are predominantly in drugs and pharmaceuticals, followed by insurance sector, while WOS are mainly in engineering procurement and technical services, real estate development and construction, civil construction, engineering procurement and trading in tea. Uzbekistan : In August 2006, GAIL (India) entered into JVs by signing an MOU for US$ 60 mn, for natural gas & oil exploration. Approved

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Indian JVs are in areas / sectors which include: drugs and pharmaceuticals, leather and products, matches and explosives, manufacture of cotton and blended yarn, while approved WOS are in areas / sectors such as readymade garments, leather and products, hotels and restaurants, drugs and pharmaceuticals. Kyrgyz Republic : In February 2006, BIOCON Ltd entered into JVs with Nobex Corp to start its manufacturing of bio-drugs. Besides drugs and pharmaceuticals, approved Indian JVs in Kyrgyz Republic are in areas / sectors such as polymer pipes and HDPE pipes, manufacturing of tin, tungsten and uranium, while WOS are mainly in

hotels and restaurants, petroleum products.

and

Moldova : In Moldova, Indian investments are primarily in the form of joint ventures in the pharmaceuticals sector. Other CIS Countries : Approved Indian investments in Ukraine, in terms of both JVS and WOS, are primarily in the pharmaceuticals sector, while in Azerbaijan Indian investments are in the form of JVs in pharmaceuticals. Further, in Georgia, recent approvals for Indian investments are mainly through JVs in industrial explosives and detonating cord, and matches and explosives.

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7. TRADE AND INVESTMENT POTENTIAL WITH THE CIS REGION

This chapter endeavours to identify sectors where potential exists to enhance bilateral commercial relation with countries in the CIS region. Potential areas have been identified in terms of export and import items, as also potential areas for enhancing Indian investments in the CIS region.

years, based on Indias share in global trade. 4. Commodities where India has been doing well in other markets.

Russia
Based on the above criteria, potential items of exports to Russia would include: machinery (electrical and non-electrical) and transport equipment, chemical and related products including pharmaceuticals, food and related products; articles of apparel and clothing, cotton and synthetic yarn, plastics and articles thereof, rubber articles, paper and paperboard. Machinery & transport equipment are the largest items in Russias import basket, accounting for around 27.6% (US$ 26.6 bn) of total imports in 2004. Despite the large imports by Russia, Indias exports of these items Russia are still marginal. In the case of machinery and instruments, which are Indias major exports, exports to Russia amounted to US$ 28.8 mn in 2005-06 accounting for a marginal 0.6% of India's total exports (US$ 4.8 bn). In the case

IDENTIFYING COMMODITIES WITH HIGH EXPORT POTENTIAL


For identifying the commodities where India has a high potential for export to CIS countries, the following criteria were applied: 1. Demand existing in the CIS market, based on commodity composition of the imports of CIS countries over the years and matching Indias export capability with their import demand. 2. Commodities where India has a comparative advantage in global exports, based on Indias share in global trade. 3. Commodities, whose exports to CIS countries have registered high growth rate in recent

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of transport equipment also, exports to Russia at US$ 29.7 mn in 200506 accounted for only 0.65% of Indias total exports (US$ 4.6 bn). In light of the large import demand in Russia and Indias export capability, potential items of export in this category would include:

transformers; accumulators (HS8501, 8504 & 8507);

Electrical ignition equipment (HS-8511); Electrical apparatus for line telephony (8517); Records, tapes & other recorded media (HS-8524); Transmission apparatus for radio telephony (HS-8525); Reception apparatus for television, and parts thereof (HS-8528 & 8529); Electrical switching apparatus (HS-8536); Insulated wires & cables (HS8544); carbon electrodes & brushes (HS-8545); Tractors; public transport motor vehicles; motor cars; motor vehicles for transport of goods; parts and accessories thereof (HS- 8701, 8702, 8703, 8704 & 8708);

Compression-ignition piston engine, and parts thereof (HS8408 and 8409); Pumps for liquids, and air or vacuum pumps (HS-8413 & 8414); Air conditioning machines; refrigerators and freezers (HS8415 & 8418); Machinery or laboratory equipment; centrifuges (HS8419 & 8421); Moving, grading & levelling machinery, and parts thereof (HS- 8430 & 8431); Printing machinery (HS-8443); Metal rolling mills (HS-8455); Automatic data processing machines (HS-8471); Machinery for sorting & screening; for working rubber or plastics (HS-8474 & 8477); Machines & mechanical appliances (HS-8479); Ball or roller bearings (HS8482); Transmission shafts (HS8483) Electric motors & generators;

Chemicals products including pharmaceuticals - Russias imports of these items amounted to US$ 10.3 bn in 2004, up from US$ 4.99 bn in 2000, and constitute major items in the countrys import basket. While Russia is an important market for Indias exports, accounting for 4.8% (US$ 237 mn) of Indias total exports of these items (US$ 4.87 bn) in 200506, potential exists to further enhance these exports to Russia, in light of the growing and large

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import demand in the country. Based on Indias export capability, potential export items under this category would include:

Artificial corundum (HS-2818); Chlorides & chloride oxides (HS-2827); Carbonates & peroxocarbonates (HS-2836); Acyclic alcohols (HS-2905); Saturated acyclic monocarboxylic acids (HS2915); Oxygen-function amino compounds (HS-2922); Heterocyclic compounds (HS2933); Provitamins & vitamins (HS2936); Antibiotics (HS-2941); Human & animal blood prepared for therapeutic uses (HS-3002); Medicaments (HS-3004). Insecticides, fungicides, herbicides (HS-3808); Compound plasticisers (HS3812).

agri-exports (US$ 10.2 bn in 200506), down from a share of 6.1% in 1999-2000. In light of Russias growing import demand, efforts need to focus on enhancing these exports to Russia. Towards this end, potential items of exports to Russia under this category would include:

Meat of bovine animals, frozen (HS-0202); Fish, fresh or chilled; & fish fillets (HS-0302& 0303); Onions, garlic, leeks (HS-0703); Grapes, fresh or dried (HS0806); Tea (HS-0902); Wheat & muslin (HS-1001); Rice (HS-1006); Animal or vegetables fats & oils (HS-1516); Cane or beet sugar; sugar confectionary (HS-1701 & 1704); Bread, pastry, cakes (HS-1905); Vegetables, fruits and nuts (HS2001); Jams, fruit jellies, marmalades (HS-2007); Extracts, essences & concentrates of coffee or tea (HS-2101); Undernutured ethyl alcohol (HS2208); Oilcakes and residues (HS2304); Unmanufactured tobacco; cigars & cheroots (HS-2401 & 2402).

Food and related products These items constitute major imports of Russia, amounting to US$ 15.0 bn in 2004, increasing from US$ 7.9 bn in 2000. As regards Indias exports of agri and allied products to Russia, they amounted to US$ 239 mn in 2005-06 accounting for 2.3% of Indias total

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Articles of apparel & clothing - Russias imports of textiles and clothing amounted to US$ 7.6 bn in 2004, increasing from US$ 3.9 bn in 2000. While these items are major exports in Indias exports basket, recent trends attest to declining share of Russia. Indias exports of readymade garments to Russia have declined sharply from US$ 333.7 mn in 2001-02 to US$ 21.2 mn in 2005-06, with a resultant decline in share in Indias total exports from 6.6% to 2.9% during the same period. Contraction in exports of readymade garments of cotton, manmade fibres and wool primarily contributed to the decline in overall exports to Russia. With a view, therefore, to enhance these exports, focus could be on potential items such as:

Bed linen, table linen, toilet linen, kitchen linen (HS- 6302).

Cotton and synthetic yarn Under this category, potential items of export to Russia would include:

Cotton, not carded or combed (HS-5201); Cotton yarn and woven fabrics (HS-5205, 5208 & 5209); Woven fabrics of synthetic filament yarn (HS-5407); Woven fabrics of synthetic staple fibres (HS-5512).

Plastics and articles Potential items of exports to Russia under this category would include:

Womens or girls suits, ensembles, jackets (HS-6104 & 6204); T-shirts, singlets or othet vests (HS-6109); Jerseys, pullovers, cardigans (HS-6110); Mens or boys overcoats, capes, cloaks (HS-6201); Womens or girls overcoats, capes, cloaks (HS-6202); Mens or boys suits, ensembles, jackets, blazers (HS6203); Mens or boys shirts (HS-6205); Shawls, mufflers, scarves (HS6214);

Polymers of ethylene, propylene, styrene, vinyl chloride (HS-3901, 3902, 3903, & 3904); Polyacetals, expoxide resins (HS-3907); Tubes, pipes and hoses (HS3917); Articles for conveyance or packing of goods (HS-3923).

Paper and paperboard Potential items of export to Russia under this category would include:

Paper & paperboard, coated & uncoated (HS-4802 & 4810); Cartons, boxes and cases (HS4819); Printed books, brochures, leaflets (HS-4901).

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Other Items Based on Russias import demand and Indias export capabilities, other potential items of export would include:

Medical and surgical instruments (HS-9018, 9022 & 9030); Furniture and parts thereof (HS-9403)

Iron ores & chromium ores, and concentrates (HS-2601 & 2610); Synthetic organic colouring matter (HS-3204); Printing ink, writing or drawing ink (HS-3215); Beauty or make-up preparations, and for use on the hair (HS-3304 & 3305); Rubber products, such as transmission belts (HS-4010); rubber pneumatic tyres (HS4011); Articles of leather, such as trunks & suitcases (HS-4202); leather articles of apparel & clothing (HS-4202 & 4203); Footwear, with outer soles of rubber, plastic or leather (HS6403 & 6404); Monumental or building stones (HS-6802); Ceramic products (HS-6908); Glass and glassware (HS-7005 & 7010); Unwrought Aluminium; bars/ rods; plates/sheets/ strips/ foils (HS-7601, 7604, 7606 & 7607); Tools & implements (HS-8205, 8207 & 8212); Articles of base metals (HS8302 & 8309);

Ukraine
Ukraine is the second largest importer, after Russia, in the CIS region, and also the second largest market for Indias exports in the region. Based on the import demand in Ukraine and Indias export capability, potential items of exports to Ukraine would include: machinery and transport equipment, chemicals and pharmaceutical products, iron and steel products, food and related products, perfumery and cosmetics, plastics and articles, cotton fabrics and manmade filaments, articles of apparel and clothing, precious and semi-precious stones, and aluminium and articles. Machinery and transport equipment This category constitutes major items in Ukraines import basket. In 2004, Ukraines imports of these items amounted to US$ 6.5 bn rising from US$ 2.4 bn in 2000. With the large import demand in Ukraine, potential items of export under this category would include the following:

Pumps for liquids, and air or vacuum pumps (HS-8413 & 8414); Air conditioning machines;

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refrigerators and freezers (HS8415 & 8418);

Ethers, ether-alcohols (HS-2909) Human & animal blood prepared for therapeutic uses (HS-3002); Medicaments (HS-3004). Insecticides, fungicides, herbicides (HS-3808);

Machinery or laboratory equipment; centrifuges (HS8419 & 8421); Dish washing machines (HS8422); Automatic data processing machines (HS-8471); Taps, cocks & valves (HS8481); Electric transformers (HS-8504); Electrical apparatus for line telephony (8517); Reception apparatus for television, and parts thereof (HS-8528 & 8529); Electrical switching apparatus (HS-8536); Tractors; Public transport motor vehicles; Motor cars; Motor vehicles for transport of goods; parts and accessories thereof (HS- 8701, 8702, 8703, 8704 & 8708);

Iron and steel products Ukraines imports of iron and steel products amounted to US$ 909 mn in 2004, rising from US$ 293 mn in 2000. Although Indias exports of primary and semi-finished iron and steel to Ukraine have risen from US$ 40,000 in 2002-03 to US$ 3.7 mn in 2005-06, scope exists to further enhance these exports to the country. Towards this end, potential exports items could include:

Pig iron (HS-7201); Ferro-alloys (HS-7202); Semi-finished products of iron or non-alloy steel (HS-7207); Flat-rolled products of iron or non-alloy steel (HS-7210); Structures (HS-7308); Screws, nuts and bolts (HS-7318).

Chemicals and pharmaceutical products Imports of chemicals and pharmaceutical products by Ukraine amounted to US$ 3.07 bn in 2004, rising from US$ 1.22 bn in 2000. These items are also important products in Indias exports basket to the country. To enhance exports to Ukraine, potential items of export would include:

Cyclic hydrocarbons (HS-2902);

Food and related products Food, beverages and related products are important items in Ukraines import basket, with imports having risen from US$ 882 mn in 2000 to US$ 1.92 bn in 2004. Based on Ukraines import demand and Indias export capability, potential items of

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exports under this category could include:

Meat of bovine animals, frozen (HS-0202); Citrus fruit, fresh or dried (HS0805); Coffee; tea (HS-0901 & 0902); Wheat & muslin (HS-1001); Wheat or muslin flour (HS1101); Animal or vegetables fats & oils (HS-1516); Prepared or preserved fish (HS1604); Cane or beet sugar (HS-1701); Bread, pastry, cakes (HS-1905); Extracts, essences & concentrates of coffee or tea (HS-2101); Undernutured ethyl alcohol (HS2208); Oilcakes and residues (HS2304); Unmanufactured tobacco; cigars & cheroots (HS-2401 & 2402).

Beauty or make-up preparations, and for use on the hair (HS-3304 & 3305); Preparations for oral or dental hygiene (HS-3306); Pre-shave, shaving or aftershave preparations (HS-3307).

Plastic and articles Indias exports of this category to Ukraine have risen from US$ 5.9 mn in 2002-03 to US$ 15.6 mn in 200506. To further enhance exports to Ukraine, in line with the import demand existing in the country, focus items could include:

Polymers of ethylene, propylene, styrene, vinyl chloride (HS-3901, 3902, 3903, & 3904); Polyacetals, expoxide resins (HS-3907); Tubes, pipes and hoses (HS3917); Floor covering of plastics (HS3818) Plates, sheets, foils, foil or strips of plastics (HS-3920 & 3921); Articles for conveyance or packing of goods (HS-3923).

Perfumery and cosmetics Indias exports of perfumery and cosmetic items to Ukraine have registered a rise in recent years; from US$ 0.61 mn in 2002-03 to US$ 2.5 mn in 2005-06. In line with the import demand in Ukraine, focus could be on the following items to further enhance these exports to the country:

Cotton fabrics and manmade filaments Under this category, in line with Ukraines import demand; focus could be on items such as:

Perfumes and toilet waters (HS3303);

Woven fabrics of cotton (HS5208 & 5209);

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Synthetic filament yarn (HS5402); Woven fabrics of synthetic filament yarn (HS-5407).

coverings (HS-5703);

Articles of apparel and clothing Under this category, focus could be on items such as:

Footwear with outer soles of rubber, plastics, rubber, and parts thereof (HS-6403 & 6406); Ceramic products, such as refractory bricks & blocks, and glazed ceramic flags (HS-6902 & 6908); Gems and jewellery, such as diamonds, whether or not worked (HS-7102), and articles of gems and jewellery and parts thereof (HS-7113); Copper wire, tubes & pipes (HS-7408 & 7411); Aluminium plates, sheets & strips, and foils (HS-7606 & 7607); Medical and surgical instruments & apparatus (HS9018); Furniture and parts thereof (HS-9403).

Jerseys, pullovers, cardigans (HS-6110); Panty hose, tights, stockings (HS-6115); Mens or boys suits, ensembles, jackets, blazers (HS6203); Womens or girls suits, jackets (HS-6204); Mens or boys shirts (HS-6205); Tracksuits, ski suits swimwear (HS-6211); and

Other Items - Other potential items of export to Ukraine could include:

Iron and aluminium ores, and concentrates) HS-2601 & 2606); Petroleum products (HS-2710 & 2713); Rubber articles, such as transmission belts, and rubber pneumatic tyres (HS-4010 & 4011); Paper and paper board, coated and uncoated (HS-4802 & 4810); Carpets and other floor

Kazakhstan
Potential items of exports to Kazakhstan would include: machinery and transport equipment, chemicals and related products including pharmaceuticals, articles of iron and steel, food products, ores and minerals, petroleum products, paper and paperboard, plastics and rubber articles. Machinery & transport equipment These items are the are the largest category in

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Kazakhstans import basket, accounting for as much as 27% in 2004, with an import value of US$ 3.7 bn. Russia, Germany, China, Ukraine, and US are the major sources of imports for Kazakhstan. Although machinery and transport equipment are major items in Indias export basket, exports to Kazakhstan are still marginal. During 2005-06, of the total US$ 4.8 bn Indian exports of machinery and instruments, only US$ 14.03 mn (0.29% of total) were exported to Kazakhstan. In the case of transport equipments, a marginal US$ 0.38 mn (0.0084%) of total exports of US$ 4.5 bn were exported to Kazakhstan. Towards enhancing these exports, focus could therefore be on the following items:

Transmission apparatus for radio telephony (HS-8525); Insulated wires & cables (HS8544); Public transport motor vehicles; Motor cars; Motor vehicles for transport of goods; parts and accessories thereof (HS- 8702, 8703, 8704 & 8708);

Pumps for liquids, and air or vacuum pumps (HS-8413 & 8414); Refrigerators and freezers (HS8418); Machinery or laboratory equipment; centrifuges (HS8419 & 8421); Automatic data processing machines, and parts and accessories (HS-8471 & 8473); Machines & mechanical appliances (HS-8479); Taps, cocks & valves (HS-8481); Electric transformers (HS-8504); Records, tapes & other recorded media (HS-8524);

Chemicals and related products, including pharmaceuticals also present potential for export to Kazakhstan. While chemicals and related products are among Indias major export items, exports to Kazakhstan are still marginal. During 2005-06, Indias exports of chemicals and related products to Kazakhstan amounted to US$ 22.5 mn, accounting for a marginal 0.21% of Indias total exports (US$ 10.7 bn), with the bulk accounted by drugs and pharmaceuticals. In other, therefore, to enhance presence in the Kazakhstan market, focus could be on items such as:

Carbonates / peroxycarbonates (HS-2836); Human and animal blood prepared for therapeutic uses (HS-3002) Medicaments (HS-3004); Insecticides, fungicides and herbicides (HS-3808).

Articles of iron and steel also present potential for exports to

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Kazakhstan. Potential items would include:


Ferro-alloys (HS-7202); Flat-rolled products of iron or non-alloy steel (HS-7208); Bars and rods of iron or nonalloy steel (HS-7214); Angles, shapes and sections of iron or non-alloy steel (HS7216); Tubes and pipes, and tube or pipe fittings ((HS-7304, 7305, 7306, 7307); Structures (HS-7308).

Food products Under the category of food products, potential items of export to Kazakhstan could include the following items:

active preparations (HS-3401 & 3402); plastics and articles, (such as polymers of ethylene HS-3901; polycetals HS-3907); tubes, pipes & hoses HS-3917; articles for conveyance or packing of goods HS-3923); rubber and articles (such as pneumatic tyres, and other vulcanised rubber articles HS4011 & 4016); paper and paperboard (HS- 4802, 4810 & 4811); ceramic products (such as refractory bricks & blocks, and glazed ceramic flags & paving HS-6902 & 6908); medical & surgical instruments and appliances (HS-9018); furniture & parts thereof (HS-9403)

Uzbekistan
Machinery and equipment are the largest items in Uzbekistans import basket, accounting for around 44.4% of the countrys total imports during 2003. Other major imports include chemical products and plastics (12.8%), and foodstuffs (9.9%). Russia, US, South Korea, Germany, China and Turkey are the leading sources for Uzbekistans imports. As regards Indias exports to Uzbekistan, they have picked up since 2003-04, due primarily to increased exports of ores and minerals, machinery, and pharmaceuticals. During 2005-06, drugs, pharmaceuticals & fine chemicals (US$ 10.6 mn) along with meat & preparations (US$ 2.9 mn) are the largest exported items.

Milk and cream, concentrated (HS-0402); Tea (HS-0902); Vegetable saps and extracts (HS-1302); Animal or vegetable oils and fractions thereof (HS-1516); Sugar and sugar confectionary (HS-1701 & 1704); Bread, pastry, cakes (HS-1905).

Other items - other potential export items to Kazakhstan would include: unmanufactured tobacco (HS-2401); lead ores and concentrates (HS-2607); petroleum products (HS-2710 & 2711); cosmetics and toiletries (HS-3304 & 3305); soaps & organic surface

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Based on Uzbekistans import demand, and Indias export capability, efforts to further enhance exports to Uzbekistan would entail focus on items such as: Machinery & equipment, and parts (electrical & nonelectrical) pumps for liquids (HS8413), air or vacuum pumps (HS8414), air conditioning machines (HS8415), machinery, plant or laboratory equipment (HS-8419), grading, levelling, scrapping machinery, and parts thereof (HS-8430 & 8431), textile spinning machinery (HS8445), automatic data processing machinery (HS-8471), transmission apparatus for radio-telephony (HS8525), insulated wire/cables (HS8544). Transport equipment (HS-8701), motor cars good transport vehicles parts and accessories vehicles (HS-8708). tractors (HS-8703), (HS-8704), of motor

and cream, concentrate (HS-0402), tea (HS0902), rice (1006), wheat and muslin flour (HS-1101), cane or beet sugar (HS-1701). Other items Other potential export items would include: zinc ores and concentrates (HS-2608), pharmaceutical products (HS-3002 & 3004), insecticides, fungicides, and herbicides (HS-3808), rubber pneumatic tyres (HS-4011), paper and paperboard, uncoated (HS4802), carpets and other floor coverings, knotted/woven/tufted (HS-5702 & 5703).

Belarus
Belarus is the fourth largest importer in the CIS region, after Russia, Ukraine and Kazakhstan. In 2006, Belarus accounted for around 8% of CIS total imports, with the major items of imports being mineral products, machinery and equipment, metals, chemicals and rubber, food and agricultural raw materials, and textiles. In line with Belarus import demand, potential items of exports would include: Machinery and transport equipments this category is the second largest, after oil imports, in Belarus import basket, accounting for around 25% of total imports in 2004. From US$ 1.4 bn in 2000, Belarus imports of these items increased to US$ 3.8 bn in 2004. In view of the large import demand in Belarus, potential export items

Articles of iron and steel flatrolled products of iron/non-alloy steel (HS-7208, 7209 & 7210), wire of iron/non-alloy steel (HS-7217), tubes and pipes, seamless (HS7304). Plastics and articles polymers of ethylene/vinyl chloride (HS-3901 & 3904), polyacetals (HS-3907), plates/sheets/foil and strip (HS3920), conveyance or packing materials (HS-3923). Food and food products milk

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under this category could include:

Non-electrical machinery compression-ignition combustion piston engines, and parts thereof (HS-8408 & 8409), pumps for liquids (HS8413), air or vacuum pumps (HS-8414), refrigerators, freezers (HS-8418), machinery, plant or laboratory equipment (HS-8419), centrifuges (HS8421), dish washing machines (HS-8422), automatic data processing machinery (HS8471), machinery for working rubber or plastics (HS-8477), taps, cocks, valves (HS-8481), ball or roller bearings (HS8482). Electrical machinery electric motors & generators, transformers, accumulators (HS8501, 8504 & 8507), electrical apparatus for line telephony (HS-8517), electrical transmission apparatus for radiotelephony (HS-8525), electrical switching apparatus (HS-8536), cathode or photo-cathode valves (HS-8540), insulated wire/cables (HS-8544), Transport equipment tractors (HS-8701), motor cars (HS-8703), good transport vehicles (HS-8704), parts and accessories of motor vehicles (HS-8708).

amounted to US$ 1.24 bn in 2004, accounting for around 8% of total imports. Potential exports items to the country under this category could include:

Pig iron (HS-7201), ferro-alloys (HS-7202), Flat-rolled products of iron or non-alloy steel (HS-7208, 7209 & 7210), Bars and rods of iron or nonalloy steel (HS-7214), Flat-rolled products of stainless steel, other alloy steel (HS-7219 & 7225), Bars and rods of other alloy steel (HS-7228), Tubes, pipes and hollow profiles, seamless, of iron (HS 7304, 7305 & 7306), Tubes, pipes and hollow profiles (HS 7306), Structures (HS 7308).

Chemicals and pharmaceutical products Belarus imports of chemicals and pharmaceutical products have risen from US$ 1.01 bn in 2000 to US$ 1.63 bn in 2004, thereby accounting for a significant 10.2% of total imports. Based on the imports demand in Belarus and Indias export capability, potential export items under this category could include:

Articles of iron and steel Belarus imports of iron and steel

Cyclic hydrocarbons (HS-2902), acyclic alcohols (HS-2905),

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Human and animal blood prepared for therapeutic uses (HS-3002), Medicaments (HS-3004), Synthetic organic colouring matter (HS-3203), Perfumery and cosmetics (HS3305), Insecticides, fungicides herbicides (HS-3808). &

Tea (HS-0902), wheat and muslin (HS-1001), Prepared or preserved fish (HS1604), Cane or beet sugar, and sugar confectionary (HS-1701 & 1704); Bread, pastry and cakes (HS1905), unmanufactured tobacco, cigars & cheroots (HS-2401 & 2402),

Plastics and articles Potential items of export under this category could include:

Polymers of ethylene and propylene (HS-3901 & 3902), Polymers of styrene and vinyl chloride (HS-3903 & 3904), polyacetals, polyethers and expoxide resins (HS-3907), Amino-resins, phenolic resins (HS-3909), Tubes, pipes, hoses and fittings (HS-3917), Plates, sheets, films and strips (HS-3920 & 3921), Articles for conveyance or packing of goods (HS-3923).

Other items Other potential items of export to Belarus could include:

Rubber pneumatic tyres (HS4011), Raw hides and skins (HS4104), Paper and paperboard, coated and uncoated (HS-4802 & 4810), Cartons, boxes, and registers, note books (HS-4819 & 4820), Woven cotton fabrics, and synthetic filament yarn (HS5208, 5209 and 5402), Synthetic staple fibres (HS5503), Footwear with outer soles of rubber, plastics, leather (HS6403), Copper wire (HS-7408), unwrought aluminium, bars, rods, plates, sheets, strips (HS7601, 7604, 7606 & 7607),

Food and related products Under this category, potential items of exports to Belarus could include:

Meat and edible offal of poultry (HS-0207), Fish fillets and other fish meat (HS-0304),

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Medical and surgical instruments (HS-9018), Furniture and parts (HS-9403).

EXPORT POTENTIAL IN OTHER CIS COUNTRIES Armenia


Based on Armenias import demand, potential items of exports to the country could include:

goods (HS-3923), rubber pneumatic tyres (HS-4011), brassieres, girdles (HS-6212), glazed ceramic flags and pavings (HS-6908), diamonds, whether worked or not (HS7102), aluminium plates and sheets (HS-7606), medical and surgical instruments (HS-9108).

Azerbaijan
Azerbaijans major imports include machinery and instruments including transport equipment, metals, food and related products, chemicals and petro-chemicals, plastics and mineral products. In line with the import demand in the country and Indias export capability, potential items of export to Azerbaijan could include the following:

Food products milk and cream concentrate (HS-0402), coffee (HS-0901), wheat and meslin (HS-1001), cane or beet sugar (HS-1701). Articles of iron and steel flat-rolled products or iron or non-alloy steel (HS-7210), tubes, pipes and hollow profiles (HS-7306). Non-electrical and electrical machinery automatic data processing machines (HS-8471), electrical apparatus for line telephony (HS-8517), reception apparatus for television. Transport equipments motor cars (HS-8703), motor vehicles for transportation of goods (HS-8704), and parts and accessories thereof (HS-8708). Other items such as cigars and cheroots (HS-2402), petroleum products (HS-2710 & 2711), pharmaceutical products (HS-3004), plastic articles for conveyance or packing of

Machinery and transport equipment air or vacuum pumps (HS-8413 & 8414); machinery or laboratory equipment (HS-8419), automatic data processing machines (HS-8471), machines & mechanical appliances (HS8479), taps, cocks & valves (HS-8481), electric transformers (HS-8504), electrical apparatus for line telephony (HS-8517); insulated wires & cables (HS8544), motor cars & motor vehicles for transport of goods; parts and accessories thereof (HS- 8703, 8704 & 8708), medical and surgical

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instruments or appliances (HS9018).

Articles of iron and steel flat-rolled products of iron or non-alloy steel (HS-7208 & 7210), bars and rods of iron or non-alloy steel (HS-7210), Angles, shapes and sections of iron or non-alloy steel (HS7216), tubes, pipes & hollow profiles (HS-7304, 7305 & 7306), tube or pipe fittings ((HS-7307), structures (HS7308), stranded wires, ropes & cables (HS-7312), table, kitchen or household articles (HS-7323). Food and related products - tea (HS-0902), wheat and meskin (HS-1101), cane or beet sugar, and sugar confectionary (HS-1701 & 1704), bread, pastry, cakes (HS-1905), oilcakes and other solid residues (HS-2304), unmanufactured tobacco (HS-2401), cigars and cheroots (HS-2402). Other Items cement (HS2523), aluminium ores and concentrates (HS-2606), pharmaceutical products (HS3002 & 3004), plastic tubes, pipes, hoses (HS-3917), plastic articles for conveyance or packing of goods (HS-3923), rubber pneumatic tyres (HS4011), garment fabrics and made-ups (HS-6210), footwear with outer sols of rubber, plastics or leather (HS-6404),

glazed ceramic flags and paving (HS-6908), furniture and parts thereof (HS-9403).

Georgia
Based on Georgias import basket and Indias export capability, potential items of exports to Georgia would include:

Food and related products wheat and meslin (1001), wheat or meslin flour (1101), cane or beet sugar and chemically pure sucrose (1701), cigars and cheroots (HS-2402). Pharmaceutical products human and animal blood prepared for therapeutic uses (HS-3002), and medicaments (HS-3003). Articles of iron and steel tubes and pipes, welded, riveted (HS-7305), and structures (HS-7308). Machinery and transport equipment steam turbines and other vapour turbines (HS8406), electrical apparatus for line telephony or line telegraphy (8517), transmission apparatus for radio-telephony etc (8525), insulated wires and cables (HS-8544), motor cars (8703) and parts and accessories of motor vehicles (HS-8708), medical and surgical instruments or appliances (HS9018).

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Other items petroleum products (HS-2710), pneumatic tyres of rubber (4011), glazed ceramic flags and paving (HS6908), bottles, flasks and jars (HS-7010), furniture and parts thereof (HS-9403).

Food and related products - wheat and meslin (1001), wheat or meslin flour (1101), seeds and fruits (HS-1209), cane or beet sugar (HS-1701), unmanufactured tobacco & cigars and cheroots (HS-2401 & 2402). Plastics and articles - plastic tubes, hoses, pipes (HS-3917), plastic articles for conveyance or packing of goods (HS-3923). Other Items petroleum products (HS-2710), cosmetics and perfumery (HS-3304 & 3305), polymers of ethylene (HS-3901), rubber pneumatic tyres (HS-4011), paper and paper board, coated & uncoated; & cellulose wadding (HS-4805, 4810 & 4811), woven fabrics of synthetic filament yarn, and other woven fabrics of synthetic staple fibres (HS-5407 & 5515), knitted and crocheted fabrics (HS-6001), textile made-up articles (HS6307), glazed ceramic flags and paving (HS-6908), bottles, flasks and jars (HS-7010), angles, shapes and sections of iron or non-alloy steel (HS7216), tubes, pipes, hollow profiles of iron and steel (HS7306), furniture and parts thereof (HS-9403).

Moldova
Potential items of export to Moldova could include chemicals and pharmaceuticals, machinery and instruments, transport equipment, food and related products, petroleum products, cosmetics and perfumery, paper and paperboard, woven fabrics, and plastics.

Chemicals and pharmaceuticals medicaments (HS-3004), insecticides, fungicides & herbicides (HS-3808). Machinery and instruments refrigerators and freezers (HS-8418), dish washing machines (HS-8422), automatic data processing machines (HS8471), electrical apparatus for line telephony (HS-8517), transmission apparatus for radiotelephony (HS-8525), medical and surgical instruments or appliances (HS-9018). Transport equipment tractors (HS-8701), motor vehicles for transport of goods (HS-8704), and parts and accessories thereof (HS-8708).

Tajikistan
Potential items of exports to

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Tajikistan could include:

Food products milk and cream, concentrate (HS-0402), tea (HS-0902), wheat and meslin (HS-1001), wheat or meslin flour (HS-1101), cane or beet sugar, and sugar confectionary (HS-1701 & 1704), bread, pastry, cakes (HS-1905). Chemicals and pharmaceutical products artificial corundum (HS-2818), medicaments (HS-3004), paint and varnishes (HS-3208), soaps & organic surface-active products (HS-3401). Machinery & transport equipments electrical apparatus for line telephony (HS-8517), tractors (HS-8701), motorcars and other motor vehicles (HS-8703). Other Items rubber pneumatic tyres (HS-4011), carpets and other textile floor covering, woven or tufted (HS5702 & 5703), aluminium plates, sheets and strips (HS7606), furniture and parts (HS9403).

items of export to the country could include:

Machinery and instruments - pumps for liquids, and air or vacuum pumps (HS-8413 & 8414), air-conditioning machines (HS-8415), machinery or laboratory equipment; centrifuges (HS-8419 & 8421), moving, grading & levelling machinery, and parts thereof (HS- 8430 & 8431), automatic data processing machines (HS8471), machinery for sorting & screening (HS-8474), taps, cocks & valves (HS-8481), transmission shafts (HS-8483), electric motors & generators; generating sets, transformers; accumulators (HS-8501, 8502 & 8504), reception apparatus for television (HS-8528), insulated wires & cables (HS-8544). Transport equipment tractors (HS-8701), motorcars and other motor vehicles (HS8703), motor vehicles for transport of goods (HS-8704) special purpose motor vehicles (HS-8705), parts and accessories thereof (HS-8708). Food and related products meat of bovine animals, frozen (HS-0202), tea (HS0902), animal or vegetable fats and oils (HS-1516), cane or beet sugar, and sugar confectionary (HS-1710 & 1704), bread, pastry, cakes

Turkmenistan
Turkmenistans major import items include machinery and transport equipment, building and other materials, consumer goods, food products and chemicals. Potential

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(HS-1905), cigars and cheroots (HS-2402).

Chemicals and pharmaceutical products medicaments (HS-3004), paints and varnishes (HS-3208), perfumery and cosmetics (HS3301 & 3305), soaps and organic surface-active products (HS-3401 & 3402), insecticides, fungicides & herbicides (HS3808). Plastics and articles tubes, pipes, hoses and fittings (HS3917), plates, sheets, foils (HS3920), articles for conveyance or packing of goods (HS-3923). Articles of iron and steel tubes, pipes and hollow profiles (HS-7304, 7305 & 7306), tubes and pipe fittings (HS-7307), structures (HS-7308). Other Items cement (HS2523), rubber pneumatic tyres (HS-4011), carpets and other textile floor covering, woven or tufted (HS-5702 & 5703), mens or boys suits and jackets (HS-6103), womens and girls blouses and shirts (HS-6206), aluminium structures (HS-7610), furniture and parts thereof (HS9403).

other important import items include machinery and equipment, chemicals, food, beverages and tobacco and textiles. Based on the import demand, potential items of export to the country could include:

Food and related products tea (HS-0902), wheat and meslin (HS-1001), cane or beet sugar, and sugar confectionary (HS-1710 & 1704), bread, pastry, cakes (HS-1905), cigars and cheroots (HS-2402). Chemicals and related products, including pharmaceuticals carbonates and peroxocarbonats (HS-2836), medicaments (HS3004), paints and varnishes (HS-3208), soaps and organic surface-active products (HS3401 & 3402). Articles of iron and steel flat-rolled products of iron or non-alloy steel, and bars and rods (HS-7210 & 7214), tubes, pipe and hollow profiles (HS7306), tubes and pipe fittings (HS-7307), structures (HS-7308). Machinery and equipment laboratory machinery or equipment (HS-8419), automatic data processing machines (HS-8471), machinery for sorting & screening (HS8474), transmission apparatus for radio-telephony (HS-8525),

Kyrgyz Republic
Besides mineral products (oil and gas), which are the major items in Kyrgyz Republics import basket,

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reception apparatus for television, and parts thereof (HS-8528 & 8529), insulated wires & cables (HS-8544), medical and surgical instruments and appliances (HS9018)..

Kazakhstan. The items that hold import potential from Belarus are mineral fuels, vehicles other than railways, fertiliser and plastics.

INVESTMENT POTENTIAL
Besides trade, the CIS countries offer tremendous opportunities in terms of investment. Food processing, retailing, pharmaceuticals, information technology, textiles, infrastructure development hold large potential for Indian investors.

Transport equipment public transport motor vehicles (HS-8702), motorcars and other motor vehicles (HS-8703), and parts and accessories thereof (HS-8708). Other items cement (HS2523), petroleum products (HS2710), polyacetals and expoxide resins (HS-3907), rubber pneumatic tyres (HS4011), worn clothing and other worn articles (HS-6309), glazed ceramic flags and paving (HS6908), furniture and parts (HS9403).

Russia
Besides being the largest FDI recipient in the CIS region, the countrys FDI inflows have also witnessed sharp rise in recent years due to increased foreign investors interest in the countrys oil and natural gas extraction industry. Besides the energy sector, potential sectors for investment in Russia would include:

COMMODITIES HAVING IMPORT POTENTIAL


There is also scope to source imports from the select CIS countries. Principal items that can be imported from Russia could include mineral fuels, iron and steel, fertiliser, and paper and paperboard, while organic chemicals, and paper and paperboard could be sourced from Ukraine. India can import mineral fuels, inorganic chemicals, iron and steel, electrical machinery and natural or cultured peals from

Auto vehicles Pharmaceuticals Food processing Retailing Tourism Agri business

Automobile sector - There exists potential for investment for the development of the automobile sector, with SUVs (Special Utility Vehicles) offering great potential.

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Car ownership is rapidly increasing in Russia. The Russian government supports projects, which create local jobs and also supports promotion of the automobile sector. Pharmaceuticals - Imported pharmaceuticals have increased their presence in the Russian market in recent years due to a number of factors, including high domestic demand for pharmaceuticals, intensive advertising by foreign companies, and Russian healthcare authorities actions toward streamlining the registration procedures for foreign pharmaceuticals. With Indias pharmaceutical sector ranking among the top in the world in terms of volume, and given the availability of well-developed research infrastructure in Russia, the Indian pharmaceutical conglomerates can work jointly with the Russian firms to cater to the demand in the Russian market. Food processing - When combined with catering and retail trade, food-processing sector represents Russias largest recipient of FDI. US companies such as Coca-Cola, Heinz and Mars, along with European manufacturers of consumer goods and beverages, have invested in Russias food processing sector. With imported food processing and packaging equipment accounting for only a small share of the market, there is room for increasing penetration in

this sector. Further, the Government also encourages investment in small and medium sized businesses. In view of this, India can aim at tapping the retailing sector in Russia. Retailing was one of the sectors to be privatised quickly after Russias independence. However, given that the country is undersupplied with modern retail outlets, there is potential for tapping this sector by India. Other sector Potential exist in retailing, tourism and agri business in Russia. The services sector contributed 56.4% to the GDP in 2005. Since 1995, the share of services in the GDP has been around 55-58%. Retailing was one of the sectors to be privatized, and is a principal area for new business launches as its units are relatively small and do not require significant capital investment. With over 45% of its total land area under forest cover, timber is one of the most important export items.

Ukraine
Robust growth in the economy in recent years, coupled with a new legal and tax regime, has increased trust by the foreign business community, leading thereby to increased FDI inflows in recent years; from US$ 595 mn in 2000 to US$ 1.4 bn in 2003, and further to US$ 1.7 bn in 2004. The location of Ukraine (centrally located

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between the enlarged EU and Russia), the diversity of natural resources and industries that it possess translate into an excellent potential destination for a wide array of industries Potential for investment exists in the following sectors

services are other potential areas for investment.

Kazakhstan
In Kazakhstan, Kazinvest, the official investment promotion agency, undertakes systematic search for potential investors, informing them about investment opportunities in the country, and providing them comprehensive assistance Potential sectors for investment in the country would include:

Food industry: agriculture and food processing - This sector not only provides a quick return on investments, it is also one of the upcoming industries. India could help in not only providing high quality seed and equipment, but also in teaching the local entrepreneurs about packaging and preserving methods. Energy sector: - Restructuring of the electric power industry, and development of new gas and oil fields will provide enhanced investment opportunities. Telecommunications - There are vast possibilities for investment in both the wire and wireless communications. Needed improvements in urban and regional telephone services, as well as in radio/ TV broadcasting, offer virtually untapped potentials for investors Health care, construction and retail, information technology and financial

Oil and gas sector: The Government of Kazakhstan continues to focus heavily on the hydrocarbons sector. With more than 2% of the worlds proven oil reserves, Kazakhstan in the second largest oil producer among the former Soviet Republics after Russia. Potential areas for investment in the sector would include oil exploration, processing, engineering and construction, transportation and storage, oil tools, well simulation, water injection and gas treatment packages, support infrastructure, environment technologies. Opportunities for investment also exist in oil and gas field equipment and machinery such as drilling and wellhead equipment, valves, pumps, motors, compressors, downstream engineering and

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services such as fabrication, welding,

drying and cleaning equipment, storage quality control systems.

Power generation: Transmission lines and distribution networks; Construction of new power plants, Modernization of substations, IT support, management and communications systems. Telecommunications equipment: With limited local production of equipment, potential areas for investment would include wireless communications, paging, trunk communications, telecommunications products and services in aviation, oil and gas, power generation, banking and mining. Medical equipment and supplies: With local production accounting for around 14% of estimated total market size of US$ 39.2 mn in 2003, potential exists for investment in the sector. Pollution control equipment: Industrial water and air filters; Urban water sanitation systems; Water treatment/analysis equipment; Solid waste recycling equipment. Agricultural machinery: Tractors; seeders, reapers, sprayers, cultivators, grain

Other sectors: Food processing and packaging; Construction and engineering services; mining.

Uzbekistan
Rich natural resources such as gold, gas and cotton offer attractive opportunities for investors. With a view to attract investment, the government has granted a host of incentives including tax holidays, duty-free capital goods imports and protection against expropriation. While there are no limits on foreign ownership or control of enterprises, the government keeps a controlling share in strategic industries, such as mining, agriculture, machinery manufacturing. Sectors, which present opportunities for investment in Uzbekistan, would include:

Energy sector: Reconstruction of power stations; construction of steam gas units; transmission equipments and services. IT sector: Development and deployment of information and communication technologies has become a priority of the government. Mining sector: The country is rich in mineral resources; it is leading global producer of gold and uranium.

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Food processing and packaging: High-tech packaging and processing equipment and technology. Textile machinery and equipment: Modern cotton processing facilities. Tourism infrastructure: The sector offers tremendous investment potential and is one of the priority sectors for development. Potential areas include construction of worldclass hotels, restoration of historic sites, improving internal transport links.

government is also investing in developing roads to boost transit transportation via Belarus. Food processing offers opportunities for foreign investment, with a number of western companies already active in Belarus. Other opportunities exist in research, production of baby food, improvement in packaging facilities and manufacture of equipment for soil cultivation and chemical plant protection. The biopharmaceutical industry includes one of the largest antibiotic factories in former Soviet Union and the worlds largest production facilities for the production of single cell protein from petroleum hydrocarbons. It also possesses the former Soviet Unions only plant for the preparation and packaging of porcine insulin. In addition, Belarus research capability is substantive and it has high-level containment facilities for the study of highly pathogenic diseases. There is scope for investment in this sector.

Belarus
In Belarus, the major sector attracting FDI inflows include food industry, machine building, metal working, chemicals, wood working, trade and public catering, and transportation. The Ministry of Communication involves foreign companies in joint development and updating of the telecommunications network. Western telecom companies like Deutsche telecom, US West, AT&T and British Telecom have considered opportunities to upgrade local and international switching systems. The Belarussian Ministry of Transport and Communication aims to reform the transport system, and plans to encourage foreign investment in the modernisation of the airlines infrastructure facilities. The

Armenia
The Armenian Development Agency (ADA) has been set up by the government to assist and advise foreign direct investors and buyers of Armenian products on all questions relating to doing business with Armenia. ADA serves as a central point of contact for the

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investment process. Sectors, which present potential for investment include:

Gems and jewellery Jewellery and diamond processing is a very attractive field for investment in Armenia based on the existence of skillful diamond cutters with competitive wage rates, modern equipment and tax privileges (no taxes on the import of raw materials and on the export of finished products) in Armenia. Armenias leading mineral exports consist of precious and semi-precious stones. Large proportions of these exports are polished diamonds, imported into Armenia in their rough state for finishing, thus taking advantage of Armenias skilled jewelers with competitive labor costs. Diamond processing is a predominant part of this sectors activities. Nevertheless, jewellery, including gold accessories, golden wristwatches, jewelry articles and processing of semiprecious stones are also important and have a long tradition in Armenia. Electronics: The electronics sector of Armenia is one of the most attractive areas for investment due to cost-effective labor force, good educational base, existence of efficient

production facilities, and relationships with scientific institutions in CIS countries, availability of greenfield locations, and tariff free access to other CIS markets.

Information technology: The Government of Armenia has proclaimed IT to be one of its priority sectors and actively facilitates its development. The Armenian software and IT services sector is one of the most successful and fastest growing industries in Armenia. Armenias competitive strengths in the software and IT services sector are based on a unique 50 year-old tradition of multigenerational IT skills. At its peak, in the beginning of the 1990s, the Armenian IT / electronics sector was supplying almost 30% of the computer-related equipment for the Soviet defense and space industries. Others: Armenia also offers opportunities to investors in light industry (carpet, footwear, textiles and clothing) due to cost effective labor, longestablished traditions and free access to the CIS market. The absence of tariffs and other related regulations is another strong argument in favor of investing in this sector of Armenias economy. Presently, the Armenian textile industry

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consists of three major sectors: clothing (15%); knitting (20%); and textile processing (65%). Knitted and clothing products, made in Armenia, are successfully establishing themselves in niche markets throughout the world.

operations control centers, pump stations, mainline block valves and tank farms.

Azerbaijan
The Azerbaijan Export and Investments Promotion Foundation Azerinvest aims to achieve balanced development of the economy of the country both from sectoral and regional perspectives and to implement measures necessary for the attraction and promotion of inflow of investments. The following sectors present potential investment opportunities.

Oil and gas equipment: Prospects are good for further expanding oil and gas and related machine-building sectors. Additional oil exploration, oil production, and construction of infrastructure for transporting oil and gas to international markets are currently planned, creating the opportunity to develop a thriving supply chain to the oil and gas sector. The start of the Baku-Ceyhan pipeline construction ensures further opportunities. The construction will require supervisory control and data acquisition systems, including leak detection,

Chemical and petrochemical industry: One of the governments priorities is to support the development of the oil and gas downstream sector, which will add value to Azerbaijans natural resources through further processing. Azerbaijans chemical and petrochemical industry is in need of modernization. There are a number of other opportunities resulting from the governments privatization program, such as the Azershina Plant (tires and other rubber goods), the Baku Iodine Plant (iodine and iodine-based products) and the Salyan Plastic Mass Processing Plant. Electricity: Energy losses amount to around 20 percent of the electricity that is generated because of the countrys poor distribution network. There is potential for investment in transmission lines and distribution networks; construction of new power plants, modernization of substations, IT support, management and communications systems. Agriculture is the second largest sector in the Azeri economy after oil and gas.

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Azerbaijan exports cotton, its most important cash crop, and produces most of the worlds caviar. Other major agricultural cash crops are grapes, tobacco, citrus fruits and vegetables. The country has the resources to be self-sufficient, but still imports 70 percent of its food requirements. Besides agricultural requirements involve fertilizers, equipment, seeds, machinery and crop protection products, there is also a pressing need for food processing and packaging equipment.

exists for investing in improving the rail network the government seeks investment to strengthen the efficiency of the oil tanker wagon fleet, and support the commercialization of the railway. Opportunities also exist for building cargo terminals and developing container services in the maritime transportation sector.

Transport: Azerbaijans location at the crossroads of east and west provides a tremendous advantage as a commercial gateway to the Caspian region, the Newly Independent States and beyond. To maximize this potential, however, the transport sector in Azerbaijan requires both institutional structuring and additional investment to upgrade infrastructure quality. The azeri government has prioritized overhaul of its roads which are currently in poor condition. Opportunities to improve the road system are opening up against the backdrop of additional initiatives supported by international financial institutions. Opportunity also

Machine building: Due to a lack of investment in new technologies and equipment, the machine-building sector is now producing at only a fraction of its capacity. One of the governments priorities is to support enterprises specializing in machine building for the automotive industry. Other areas having potential for investment include tourism, textiles and light industry, ferrous metallurgy, construction and financial services.

Georgia
The key sectors of economic activity and future sectors for foreign investment in Georgia are energy, agriculture, trade, tourism, transport, as well as significant projects in the food processing and telecommunications industries. The construction of the BakuTbilisi-Ceyhan oil pipeline and the

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Shah Deniz gas pipeline will offer opportunities for investors in the energy sector as well as related infrastructure industries. Georgia is mainly known as a transit country for Caspian oil and gas. Hence there is immense opportunity in the transport sector. There is very high interest in sea ports [Batumi and Poti], as they bring oil, and serve as gateway for transport corridor across Central Asia There are interests in hotels a growing interest in tourism. Georgia is a natural tourist destination and this can to be exploited

Tourism: With the geographic position and mountainous topography of the country, development of tourism infrastructure and facilities offers potential. Other sectors: IT sector; radio-electronic industry and silicon production; small and medium scale light manufacturing equipment.

Moldova The best opportunities for investment lie in the energy, tourism and other sectors being promoted by the government.

Kyrgyz Republic
In Kyrgyz Republic, FDI is directed mainly towards trade, industry, transportation, communications and financial sector. Joint ventures play active role in mining, petrochemical, hotel and food processing sectors. Sectors which present potential for investment would include:

Agribusiness: small scale farm equipment; food and textile processing equipment; improved storage and packaging. Mining sector: mining equipment and technology. Electricity generation: electric power equipment; upgradation of power plants; upgradation and maintenance of distribution systems.

Energy sector: The energy sector is in need of modernisation. The gas subsector requires the complete construction of gas pipelines, gas stations and distribution networks. The electrical subsector should be made compatible with those of other CIS countries, linking the national grid to the power systems of neighbouring countries. this provides opportunities for investments in electric power equipment; upgradation of power plants; upgradation and maintenance of distribution systems. Tourism: The location of Moldova, its climatic conditions and the natural recreational resources make it safe to say that soon tourism will become

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one of the most profitable branches of the national economy.

Medical and pharmaceutical supplies. Textile machinery Telecommunications. Oil and equipment. Eco-tourism Agribusiness and related sectors canning/food processing equipment, farm equipment. gas extraction

Other sectors: Other areas being promoted by the government are the field of information technologies, winemaking and food industry.

Tajikistan
The best investment opportunities are in agricultural sector, mining sector, and power generation. Tajikistan has substantial natural resources, including precious and rare metals, huge hydroelectricity and water resources, and much potential for development of ecotourism. In order to realize the potential in these sectors, the country will have to overcome constraints which are in the form of weaknesses of the regulatory system and administrative regime governing business. These weaknesses are major obstacles to attracting and accelerating FDI inflows and developing the countrys priority sectors. In this regard, the economy has to be more attractive to foreign investors with the implementation of necessary measures to reduce state interference in business, corruption, and to strengthen the judicial system. Potential sectors for investment in Tajikistan would include:

Turkmenistan
The government is keen to attract foreign investment to meet the countrys large requirements for capital and technology. The Ministry of Foreign Economic Relations has identified certain priority areas for attracting foreign investment and finance, which include: gas, communications, telecommunications, transportation, industry, irrigation, agriculture, textiles, and health. Potential areas/sectors for investment would include:

Oil and Gas Industry: Exploration; Development; Services and Equipment. Electrical Energy: Development; Equipment and Services. Chemical & Mining Industry: Development, Equipment and Services. Transportation: Infra-structure

Mining and related equipment.

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Construction; Distribution and Services.

Communications: Equipment and Services. Environmental technology and Services Healthcare and Medical Industry

FOCUS: CIS PROGRAMME


Considering the potential that the CIS region offers and our insignificant presence in that market, an integrated Programme Focus: CIS has been launched by the Government of India with a view to significantly enhance Indias trade with Countries of the CIS Region. The main objective will be to increase mutual direct interactions among businessmen by identifying the areas of bilateral interest and investment. The first phase of the Focus CIS Programme had focused on Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, Uzbekistan, Azerbaijan and Ukraine. Subsequently, with effect from April 2004, the scope of the Focus CIS Programme was extended to the rest of the CIS countries, viz. Russian Federation, Armenia, Belarus, Georgia and Moldova, thereby covering all the 12 CIS countries. Under the Focus CIS Programme, Indias trade with the CIS region is envisaged to be enhanced

through integrated efforts of the Government of India and various agencies like the India Trade Promotion Organisation (ITPO), Export Promotion Councils, Apex Chambers of Commerce and Industry, Indian Missions and Institutions such as the Export-Import Bank of India (Exim India), ECGC, etc. The programme shall aim to focus on the following major product groups, technology and service sectors for enhancing Indias exports to and bilateral trade & cooperation with Countries of the CIS Region:

Focus Product Groups


Plantation crops; RMG of various textile material; Drugs & Pharmaceuticals; Machinery and Instruments; Leather and its products; Cotton Yarn, Fabrics, and other textile items; Agriculture products; Plastic & Linoleum products; Cosmetics/toiletries; Ayurvedic/ Herbal products; Packaged edibles. Focus Technology/ Service Sectors: Telecom and Information Technology; Food Processing; Oil and Gas Sector; Professional Services; Construction and Related Engineering Services; Educational Services; Environmental Services; Health Related and Social Services; Tourism and Travel Related Services; Recreational, Cultural and Sporting Services; Other Business Generating Services.

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8. EXIM INDIA IN THE CIS REGION

Export-Import Bank of India (Exim India) operates a comprehensive range of financing, advisory and support programmes to promote and facilitate Indias trade and investment relations with the CIS region.

and US$ 10 mn to Vnesheconombank, Russia, and US$ 10 mn to Absolut Bank, Russia. Exim India is also exploring LOCs to other countries in the CIS region.

Project/Product Export Support A. FINANCING PROGRAMMES Lines of Credit


Exim India extends Lines of Credit (LOCs) to Governments, parastatal organizations, financial institutions, commercial banks and regional development banks to support export of eligible goods and services on deferred payment terms. In the CIS region, Exim India has an operative LOC of US$ 10 mn to Bank TuranAlem, Kazakhstan, which covers all the member countries of the Commonwealth of Independent States (CIS), viz. Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyz Republic, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan. Further, Exim Indias operative LOCs in the CIS region are: US$ 25 mn to Vneshtorgbank (Bank for Foreign Trade), Russia; Exim India extends both funded and non-funded facilities to Indian project exporters for overseas industrial turnkey projects, civil construction contracts, supplies as well as technical and consultancy service contracts. Towards this end, Indian companies have secured several contracts in the CIS region, across various sectors, with the support of Exim India. These contracts include supply of pharmaceutical products to Russia, power project / bauxite project in Azerbaijan, equipment project in Tajikistan, and procurement advisory and auditing services in Georgia and Armenia.

Finance for Joint Ventures Overseas


With a view to support Indian companies in their endeavour to globalise their operations, Exim India

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operates a programme to support overseas investment by Indian companies through joint ventures (JVs) / wholly owned subsidiaries (WOS). Such support include equity finance, and in select cases direct participation in equity along with Indian promoter, to set up such ventures overseas. Towards this end, Exim India has supported ventures in the pharmaceuticals sector in Kazakhstan, Uzbekistan and Ukraine in the CIS region.

financing with EBRD, in the 27 countries of EDRDs operations including CIS member countries.

C. WORKING ARRANGEMENT WITH THE INTERNATIONAL FINANCE CORPORATION


Exim India has set in place a number of consultancy support programmes to facilitate/promote utilization of Indian consultants to enable sharing of their experience and expertise by providing a range of technical assistance. The Bank has a long standing working relationship with the International Finance Corporation (IFC) (of the World Bank Group) to support various initiatives/project facilities promoted and sponsored by IFC to develop private sector enterprises in developing countries in Asia, Africa, South Pacific and Europe. To support Indian consultants for projects in Central and Eastern Europe, Exim India has an arrangement with IFC under the latters Private Enterprise Partnership (PEP) programme, under which Indian consultants can execute short-term consultancy assignments for IFC sponsored projects. Currently, the PEP implements projects in Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyz Republic, Russia, Tajikistan, Ukraine and Uzbekistan.

B. CO-FINANCING ARRANGEMENT WITH THE EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT (EBRD)
Exim India has entered into an arrangement with EBRD called the Export Credit Loan Arrangement technique (ECLAT), which provides for mutual co-operation in cofinancing and enhancement of export credit to Central and Eastern Europe and CIS countries. Although India is not a member country subscribing to the equity capital of EBRD, Exim India and EBRD signed a Framework Cooperation Agreement under ECLAT in 1995. The ECLAT system provides opportunities for Export Credit Agencies and commercial banks to strengthen their mutual cooperation and communications with EBRD. This positions Exim India to support Indian participation through co-

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D. EXIM INDIA AS A CONSULTANT


Exim India has evolved and successfully demonstrated its ability to share its experience and expertise in the fields of capacity creation, institutional strengthening, export development and export capability creation in other countries. The Bank has rendered technical assistance to a number of Institutions worldwide, including those in the CIS region, which include the following:

National Bank for Foreign Economic Activity, Uzbekistan.

F. EXIM INDIAS JOINT VENTURES


Exim India has taken the initiative of setting up of Global Procurement Consultants Ltd. (GPCL), in partnership with leading consultancy firms in India, for providing procurement related services to multilateral agencies such as World Bank, Asian Development Bank and African Development Bank. GPCL has undertaken projects in a number of countries in the CIS region, such as Armenia, Georgia, Kyrgyz Republic, Uzbekistan, and Russia. In collaboration with the International Finance Corporation (IFC) and West LB of Germany, Exim India has also set up Global Trade Finance Limited (GTF), which offers a range of structured foreign trade financing products and services such as forfaiting and factoring to SMEs in India. FIM Bank of Malta has since bought the share of West LB in the venture Further, Exim Indias equity holding in Agriculture Finance Corporation which offers consultancy support in development of agrotechnology; promoter-membership in Small Farmers Agri-Business Consortium (SFAC), an investment institution whose objectives includes promoting small and medium agri-

Export Development Project in Ukraine; Enterprise Support Fund in Armenia.

E. INSTITUTIONAL LINKAGES
Exim India has a wide network of alliances with financial institutions, trade and investment promotion agencies, and market promotion boards. In the CIS region, Exim India has signed Memoranda of Understanding (MOUs) with a number of institutions, which include:

Export-Import Bank of the Russian Federation, Russia; Vnesheconombank, Russia; Belvensheconombank, Belarus; UZBEKINVEST National Export-Import Insurance Company, Uzbekistan; and

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business ventures, places Exim India in a vantage position to share its expertise and support development related activities in the CIS member countries.

G. OTHER INITIATIVES

Exim India has in place an MOU with the Central Food Technological Research Institute (CFTRI), India, to promote small-scale food processing projects in the African region. Towards this end, Exim Indias publication titled Market Maker: Technology Aided Business Solutions (published in English, Russian, French, languages) delineates project profiles in food processing sector based on CFTRI technologies. These are user friendly, simple to operate and maintain technologies, which could be appropriate for SME units in countries in the CIS region. In order to promote active exchange of trade and investment related information, Exim India helps bring out a quarterly, bilingual (English and Russian) publication- Indo-CIS Business for the benefit of Indian and CIS businessmen and investors. Similar publications are also brought out by Exim India for Africa and Latin America.

With a view to identifying trade and investment potential with the Central Asian region, Exim India has brought out a research publication focusing on the five Central Asian Republics, viz. Kazakhstan, Tajikistan, Turkmenistan, Kyrgyz Republic and Uzbekistan, which are members countries of the CIS. Exim India has an active programme which offers a range of information, advisory and support services to Indian companies to enable more effective participation in projects funded by multilateral funding agencies such as the World Bank and Asian development Bank. Further, Exim Indias Project Preparatory Services Overseas Programme (PPSO) provides finance for utilizing Indian consultancy inputs at preparatory stage for projects overseas. The focus of PPSO is on projects which have potential for ultimate funding by multilateral agencies as also projects in thrust countries / sectors which offer opportunities for Indian exporters. Leveraging upon its close linkages developed with multilateral funding agencies, Exim India also intervenes on behalf of Indian companies to seek redressal in respect of multilateral tenders.

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9. STRATEGIES AND RECOMMENDATIONS TO ENHANCE COMMERCIAL RELATIONS WITH THE CIS REGION

As highlighted in the previous chapters, countries in the CIS region have witnessed increased economic activities in recent years, reflected in increased GDP growth as also rise in foreign trade. The analysis also traced recent trends in Indias trade and investment relations with countries in the CIS region, and identifies potential areas for boosting bilateral trade and investment relations. This concluding chapter delineates some broad strategies and recommendations that would build upon the analysis and findings of the previous chapters, and thereby serve to enhance two-way transfer of trade and investment between India and countries in the CIS region.

and the CIS countries offering opportunities in terms of joint ventures (JVs) / wholly owned subsidiaries (WOS), reciprocal visits by trade and industry delegations / economic missions would serve to increase awareness in the region about Indias economic reforms, strengths of Indian industry and export capabilities. These trade/ economic missions could focus on specialized and industry specific fairs and exhibitions; organizing buyer-sellers-meets; joint venture facilitation; organizing specialized Made in India exhibitions showcasing Indian expertise; and preparation of product catalogues in electronic form. These fairs and exhibitions would serve as ideal platform for actively marketing Exim Indias Lines of Credit (LOCs) to the region. Relevant parties in India as well as counterparts in the region could be apprised about the benefits of such credit lines as also about the ways of utilizing such credit lines. Domestic financial institutions in the CIS region could serve as ideal local facilitating agents in this direction.

A. WIDER DISSEMINATION OF INFORMATION


An important element of the strategy to boost bilateral trade and investment relations would be to effectively disseminate relevant information about the opportunities and potential existing in fostering commercial relations. With potential existing to increase Indias exports

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B. CLOSE LINKAGES WITH INVESTMENT PROMOTION AGENCIES.


The countries in the region offer tremendous opportunities for setting up JVs / WOS in different sectors based on local resource availability and attendant policy initiatives. These countries have also streamlined their investment regimes with a view to making them investor friendly and creating an enabling investment environment. A key element in this direction has been the specialized investment promotion agencies, which have been set up by respective governments to facilitate inflows of foreign investment and acting as a one-stop-shop for investment related activities. In light of the key role played by these agencies, focus could therefore be on building closer institutional linkages with these agencies:

Kazakhstan Investment Promotion Center (Kazinvest), Kazakhstan; National Agency for Attracting Investment (NAAI), Moldova; National Agency for Foreign Investment, Russia; State Agency for Foreign Investment (SAFI), Turkmenistan; Ukrainian Center for Foreign Investment Promotion, Ukraine; Foreign Investment Agency, Uzbekistan;

Such linkages would serve as important source of detailed information about existing potential areas for investment, investment regulations and incentives, as also prospective investment partners.

C. TECHNOLOGY TRANSFER AND DEVELOPMENT


With restructuring and expansion of different sectors in the region, Indian companies could endeavour to emerge as key knowledge and technology partners as also suppliers of machinery and equipment in sectors such as textiles and clothing, pharmaceuticals, medical equipment, food processing, packaging. Besides catering to the local regional markets, such ventures could serve as export hubs to the expanded EU region.

Armenian Development Agency, Armenia; Azerbaijan Investment Foundation Azerbaijan; Exports and Promotion (Azerinvest),

Belarusian Foreign Investment Promotion Agency (BFIPA), Belarus; Georgian National Investment and Export Promotion Agency (GNIEPA), Georgia;

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D. COOPERATION IN IT SECTOR
With India having emerged as a leading IT powerhouse, Indian IT firms could explore the opportunities in the CIS region, and focus on investing in subsidiaries or joint ventures in the areas of e-governance, financial services and e-education. Indian companies could also share their expertise in providing and developing software programmes and services for banks and financial institutions in the region. Designing specialized e-learning courses on the web for providing technological assistance, manufacturing process know-how, troubleshooting and other technical areas also present opportunities. An interactive portal could be developed, hyper-linked with key industry/trade association and chambers in the region with facility for identification of project profiles, partner search, match making, etc. The portal could, among others, provide information and advisory services on potential export markets / sectors, as well as investment opportunities in select sectors in the region, information on trade and investment incentives, latest amendments in trade and investment rules and regulations.

E. COOPERATION IN THE BANKING/FINANCIAL SECTOR


Facilitating and promoting bilateral trade and investment relations would call for renewed efforts to put in place a proper mechanism for financial transaction between India and countries in the CIS region. Towards this end, the State Bank of India (SBI) has set up a Branch Office in Moscow, and a Representative Office in Tashkent, Uzbekistan, while ICICI Bank has also recently opened its JV in Russia. In view of the potential for enhancing bilateral trade and investment relations, opening branches/representative offices in other countries in the region, and developing correspondent relations with select banks in the region would serve to facilitate and promote commercial relations.

F. INCREASED PARTICIPATION IN MULTILATERAL FUNDED PROJECTS


Multilateral funding agencies such as the World Bank, Asian Development Bank, EBRD are active in funding development projects in the CIS region. These funded projects are mainly in areas such as energy and mining, agriculture, transportation, health and social services, law and justice, finance, industry and trade. Focus

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on these funded projects and increased participation by Indian project and services exporters in such projects would serve to enhance Indias commercial presence in the region countries. At the same time, efforts to participate in technical assistance in terms of project preparation and advisory services in such funded projects would support increased presence in the region. Further, institutions such as Exim India could co-invest with select Indian companies in select projects, and encourage partnership with local entrepreneurs and local investment agencies. Such projects could subsequently attract investments from the multilateral funding agencies.

Switzerland, USA, Italy, etc. However, some of the countryside in the CIS region could provide economical locations for shooting Indian movies.

H. FOCUS ON PRIVATISATION / ACQUISITION OF HOTELS


Many of the hotels in the CIS region are up for privatization as there are few local groups interested in renovating these hotels. This could be an ideal opportunity for Indian hotel groups to acquire some hotels and renovate them. In some of the CIS countries, there are few hotels that could be rated as 5-star category and suitable for business / pleasure stay. At the same time, majority of the hotels require renovation and modernization.

G. COOPERATION IN ENTERTAINMENT INDUSTRY


Indian movies are gaining popularity in many countries in the CIS region. To enhance inroads into the CIS region, Indian movie makers could consider selling their rights for screening movies in the CIS region, which could enhance distribution of Indian movies in the region. There is also potential for Indian movie makers to explore some of the countries in the CIS region for shooting films at fresh and new locations. In the past, most of the Indian movies shot abroad have been in places like

I.

INVESTMENT BY WAY OF INDIAN STYLE AYURVEDA / WELLNESS CENTERS

There is an increasing demand for Indian style Ayurveda and Wellness centers in the CIS region. At the same time, tourists from the CIS region are also increasingly visiting such centers in India for Ayurveda treatments. Indian companies could therefore explore these opportunities. Along with acquisition of hotels in the CIS region, renovation of hotels could be by way of investment in setting

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up Indian style Ayurveda / Wellness centers in such hotels to cater to the rising demand for such facilities in the CIS region. Further, imparting training to local practitioners would facilitate acceptability of such treatments / centers.

K. UNDERSTANDING LOCAL CULTURE AND LANGUAGE


Although many of the CIS countries have started carrying out documentation work in their local languages, most CIS countries are still using the Russian language. In light of this, business organisations, trade bodies and universities could focus on training executives and students in Russian. Further, understanding the local cultures, business practices and habits would serve to facilitate business interactions and foster linkages with counterparts in the CIS region.

J.

CLOSER ECONOMIC AND TRADE INTEGRATION

There could be greater economic and trade integration with Russia and other CIS countries. A positive development in this direction has been the signing of an MOU for the setting up a joint study group to examine the feasibility of a comprehensive economic cooperation treaty (CECA) between India and Russia. As the two countries are large economies, experiencing rapid economic growth, there is immense potential for expanding trade and economic relations. Given the strong scientific and technological background of Russia and the new emerging expertise of India in science and technology, the two countries should work together on innovative new technologies in biotechnology, pharmaceuticals, space exploration programmes and aircraft manufacture.

L. OTHER RECOMMENDATIONS

Exporters can develop their own websites giving information about the manufacturing facilities, product details & the features of the company to promote trade. Small and medium sized IT firms can be encouraged to focus on these countries and invest in subsidiaries or joint ventures to take up assignments in e-governance, financial services and e-education India should increase direct flights to cover more cities in the CIS region and also increase the frequency of destinations to which flights are already operating.

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ANNEXURE 1A: INDIAN JOINT VENTURES APPROVED IN THE CIS REGION, 1996 (APRIL) 2006 (OCTOBER)

RUSSIA Name of Indian Party Field of Operation Indian Equity (US$ 000) 100.0 1600.0 18.6 100.0 21000.0 4950.0 1070000.0 83.0 57.1 1000 0.1 83.0 6.9 1741000.0 9.0 Year

Glenmark Pharmaceuticals Pvt Ltd Glenmark Pharmaceuticals Pvt Ltd Quipo Oil and Gas Infrastructures Ltd Medicom Solutions (P) Ltd. SBI & Canara Bank Plethico Pharmaceuticals Ltd. ONGC Videsh Ltd Super Auto Forge Ltd. FDC Ltd. Torrent Pharmaceuticals Ltd. Core Jewellery Pvt Ltd. Super Auto Forge Ltd Saraf Trading Corpn Pvt. Ltd. ONGC Videsh Ltd Lupin Laboratories UZBEKISTAN GAIL (India). Ultimate Fashion Maker Ltd Gufic Ltd

Drugs & Pharmaceuticals Drugs & Pharmaceuticals Oil drilling Drugs & Pharmaceuticals Banking Drugs & Pharmaceuticals Petroleum Products Software Development Services Drugs & pharmaceuticals Drugs & pharmaceuticals Gems & Jewellery Software Development Services Tea processing and blending Petroleum Products Pharmaceuticals

2006 2006 2006 2006 2005 2005 2005 2005 2005 2005 2005 2005 2004 2001 1998

Natural Gas & Oil. Leather and Leather Products Drugs & Pharmaceuticals

60000.0 32.0 308.0

2006 2003 2001

Annexure 1A Contd.

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Annexure 1A Contd. Name of Indian Party Field of Operation Indian Equity (US$ 000) 10500.0 250.0 550.0 300.0 292.0 2206.0 3960.0 6700.0 60.0 Year

Core Healthcare Ltd Gufic Ltd. Premier Explosive Ltd. Dr. Reddys Laboratories Ltd ACE Laboratories Ltd Ajanta Pharma Ltd Malwa Cotton Spinning Mills Ltd Core Healthcare Ltd Core Healthcare Ltd KYRGYZ REPUBLIC BIOCON Ltd. Plethico Pharmaceuticals Ltd. Plethico Pharmaceuticals Ltd. Mayo India Limited Rollsprint(Packaging) Ltd. Ajanta Pharma Ltd Jagson International ltd

Drugs & Pharmaceuticals Drugs & Pharmaceuticals Matches, explosives & fireworks Pharmaceutical Products Pharmaceutical Products Pharmaceutical Products Manufacture of Cotton and their Blended Yarns Pharmaceutical Products Drugs & Pharmaceuticals

2000 1999 1999 1998 1997 1997 1997 1997 1996

Drugs & Pharmaceuticals Drugs & Pharmaceuticals Drugs & pharmaceuticals Pharmaceutical Formulations Polymer Pipes & HDPE Pipes Pharmaceutical Products Manufacturing Tin, Tungsten & Uranium

840.0 2750.0 1000.0 561.0 459.0 1570.0 2347.0

2006 2005 2005 1998 1998 1997 1997

KAZAKHSTAN Plethico Pharmaceuticals Ltd. Plethico Pharmaceuticals Ltd. Ajanta Pharma Ltd Noida Medicare Centre Ltd Noida Medicare Centre Ltd GIC & LIC of India Ajanta Pharma Ltd Drugs & Pharmaceuticals Drugs & Pharmaceuticals Drugs & Pharmaceuticals Drugs & Pharmaceuticals Drugs & Pharmaceuticals Insurance Pharmaceutical Products 4950.0 3060.0 1000.0 25.0 25.0 285.3 3000.0 2005 2005 2002 2002 2003 2001 1997

Annexure 1A Contd.

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Annexure 1A Contd. Name of Indian Party Field of Operation Indian Equity (US$ 000) Year

UKRAINE Plethico Pharmaceuticals Ltd. Parental Drugs (I) Ltd TAJIKISTAN CHL Ltd Ajanta Pharma Ltd Ajanta Pharma Ltd MALDOVA Plethico Pharmaceuticals Ltd. Plethico Pharmaceuticals Ltd. GEORGIA Premier Explosives Ltd Premier Explosives Ltd Premier Explosives Ltd Premier Explosives Ltd. Premier Explosives Ltd. AZERBAIJAN Plethico Pharmaceuticals Ltd. Drugs & Pharmaceuticals 2050.0 2005 Manufacturing Manufacturing Manufacturing Industrial explosives and detonating cord Matches, explosives & fireworks 70.0 275.0 40.0 105.0 25.0 2006 2006 2006 2005 2005 Drugs & Pharmaceuticals Drugs & Pharmaceuticals 400.0 3750.0 2005 2005 Hotels & Restaurants Drugs & Pharmaceuticals Drugs & Pharmaceuticals 41.0 255.0 95.0 2004 2002 1997 Drugs & Pharmaceuticals Drugs 3960.0 552.0 2005 1996

SOURCE : India Investment Centre & Research Bank of India

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ANNEXURE 1B: INDIAN WHOLLY OWNED SUBSIDIARIES APPROVED IN THE CIS REGION, 1996 (APRL) 2006 (OCTOBER)

Name of Indian Party

Field of Operation

Indian Equity (US$ 000)

Year

RUSSIA Glenmark Pharmaceuticals Pvt Ltd Unique Pharmaceuticals Unique Pharmaceuticals Roha Dyechem Pvt. Ltd. ICICI Bank Super Tannery Ltd. MK Shah Exports Ltd Dr. Reddys Laboratories Ltd. Glenmark Pharmaceuticals Pvt Ltd N.K Industries Glenmark Pharmaceuticals Pvt Ltd M.K. Shah M.K. Shah Torrent Pharmaceuticals Adwyt International Ltd DCM Intl. Ltd State Trading Corporation of India Ltd Manufacturing Drugs & Pharmaceuticals Drugs & Pharmaceuticals Manufacturing Banking Leather and leather products Tea processing and blending Drugs & Pharmaceuticals Drugs & Pharmaceuticals Tea Drugs & Pharmaceuticals Tea Tea Trading in medicines, foods and other products Trading in rice, Spices an other food products Trading in textiles, leather goods etc Warehouse Operations 1100.0 10000.0 150.0 13.7 4400.0 10.7 0.50 1600.0 141.7 0.4 47.0 n.a. n.a. 160.0 100.0 900.0 1200.0 2006 2006 2006 2006 2005 2005 2004 2004 2002 2001 2001 2001 2000 1997 1997 1996 1996

Annexure 1B Contd.

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Annexure 1B Contd. Name of Indian Party Field of Operation Indian Equity (US$ 000) Year

UZBEKISTAN Ultimate Fashion Maker Ltd Ultimate Fashion Maker Ltd Ultimate Fashion Maker Ltd Ultimate Fashion Maker Ltd Ultimate Fashion Maker Ltd Ultimate Fashion Maker Ltd Ultimate Fashion Maker Ltd Ultimate Fashion Maker Ltd Ultimate Fashion Maker Ltd Ultimate Fashion Maker Ltd Ajanta Pharma Ltd Ajanta Pharma Ltd KYRGYZ REPUBLIC Barkat Fibers Ltd. Jagson International Jagson International UKRAINE Ajanta Pharma Ltd Core Healthcare Ltd KAZAKHSTAN Punj Lloyd Plethico Pharma Co. Plethico Pharma Co. Punj Lloyd Punj Lloyd Punj Lloyd Civil Construction Projects Pharmaceutical Products Pharmaceutical Products Engineering procurement and technical services Engineering procurement and technical services Engineering procurement and technical services 10000.0 760.0 330.0 600 (loan) 300.0 n.a. 2006 2005 2005 2005 2005 2004 Trading in Pharmaceuticals Pharmaceutical Products 50.0 100.0 1997 1997 Hotels and restaurants Petroleum Products Petroleum Products 150.0 n.a. 500.0 2003 2000 1998 Leather and leather products Readymade garments Leather and leather products Hotels and restaurants Readymade Garments Leather and leather products Hotels and restaurants Hotels & Restaurants Others Leather and Leather products Drugs Trading in Pharmaceuticals 30.2 35.0 35.0 96.0 33.0 202.0 21.0 217.0 70.0 1050.0 150.0 50.0 2005 2004 2004 2004 2003 2003 2003 2002 2002 2002 1998 1997

Annexure 1B Contd.

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Name of Indian Party

Field of Operation

Indian Equity (US$ 000) n.a. 83.8 n.a. n.a. 60.0

Year

Punj Lloyd Punj Lloyd Punj Lloyd Punj Lloyd Godfrey Phillips India Ltd GEORGIA Suzlon Energy Ltd Premier Explosives Ltd

Real Estate development and Construction Consultants Civil Construction projects Engineering procurement Trading in Tea

2003 2003 2003 2003 1997

Manufacturing Manufacturing

7272.2 70.0

2006 2006

SOURCE: India Investment Centre & Reserve Bank of India

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ANNEXURE 2A: INVESTMENT PROMOTION AGENCIES IN THE CIS REGION

S.No Country Name 01. Armenia

Address.

Web Address.

Armenian Development Agency 17 Charents str. Yerevan, 375025 Republic of Armenia Azerbaijan Export and Investment Promotion Foundation (Azerinvest) The Government House, 40, U.Hajibayov str., Baku, 1000 Azerbaijan. Belarusian Foreign Investment Promotion Agency (BFIPA) 7 Masherov Prospekt 220004, Minsk, Belarus Georgian National Investment and Export Promotion Agency (GNIEPA) Al. Kazbegi Ave. 42 (A) 0108 Tbilisi, Georgia

www.ada.am

02.

Azerbaijan

www.azerinvest.com

03.

Belarus

04.

Georgia

www.investingeorgia.org/en/

Annexure 2A Contd.

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Annexure 2A Contd. S.No Country Name 05. Kazakhstan Address. Web Address.

Kazakhstan Investment Promotion Center (Kazinvest) Koktem 3, 21 (National Bank building) Almaty, Kazakhstan National Agency for Attracting Investment (NAAI), 1 Piata Marii Adunari, Nationale Chisinau MD 2033 Moldova. National Agency for Foreign Investment (NAFI), Petrovka Street, 12 App. N 149, Moscow 107996 Russian Federation

www.kazinvest.kz/english

06.

Moldova

www.naai.moldova.md

07.

Russia

www.nafi.ru

08.

Turkmenistan State Agency for Foreign Investment (SAFI), 53 Azadi Street, Ashgabat, 74400 Turkmenistan. Ukraine Ukrainian Center for www.investukraine.org Foreign Investment Promotion, 28 Druzhby Narodiv Blvd. Kyiv, Ukraine 01103 Foreign Investment Agency, 75 Buyuk Ipak Yuli Str. 700077 Tashkent Uzbekistan. www.gov.uz

09.

10.

Uzbekistan

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ANNEXURE 2B: CHAMBER OF COMMERCE AND INDUSTRY IN THE CIS REGION

S.No Country Name 01. Armenia

Address.

Web Address.

Chamber of Commerce and Industry of the Republic of Armenia, 11 Khanjyan Str., Yerevan, 375010, Republic of Armenia Chamber of Commerce and Industry of Azerbaijan, 370001, Baku, Azerbaijan, Istiglaliyyat str., 31. Belarusian Chamber of Commerce and Industry 11, Communisticheskaya Street, 220029, Minsk Georgian Chamber of Commerce and Industry Chavchavadze ave. 11, 0179, Tbilisi, Georgia

www.armcci.am armcci@arminco.com

02.

Azerbaijan

www.chamber.com.az expo@chamber.baku.az

03.

Belarus

www.cci.by mbox@cci.by

04.

Georgia

www.gcci.ge info@gcci.ge

05.

Kazakhstan

Chamber of Commerce www.chamber.kz and Industry Astana akmcci@dan.kz 66 Auezov Street, Astana, Post Box # 1966, General Post Office Astana, Kazakhstan, 473000 Annexure 2B Contd.

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Annexure 2B Contd. S.No Country Name 06. Address. Web Address.

Kyrgyz Republic Chamber of Commerce and Industry of The Kyrgyz Republic 107, Kievskaya Str., BISHKEK 720001 Moldova Chamber of Commerce and Industry of the Republic of Moldova, MD-2004, Chisinau, 151 Stefan cel Mare Av Chamber of Commerce and Industry of The Russian Federation, 109012, Moscow, St. Ilyinka, 6. Chamber of Commerce and Industry of the Republic of Tajikistan, 21 Valamatzade str., Dushanbe, 734012, Republic of Tajikistan Chamber of Commerce and Industry of Turkmenistan, 17, Karryeva Str., Ashgabat 744000 Ukranian Chamber of Commerce and Industry 33, vul.Velyka Zhytomyrska, KYIV 01601, Ukraine Chamber of Commerce and Industry of Uzbekistan 6, Bukhara Street, Tashkent 700047, Uzbekistan

www.ihk-kg.de cci-kr@imfiko.bishkek.su

07.

camera@chamber.md

08.

Russia

http://eng.tpprf.ru tpprf@tpprf.ru

09.

Tajikistan

www.tpp.tojikiston.com/eng/

10.

Turkmenistan

asccitm@online.tm

11.

Ukraine

www.ucci.org.ua ucci@ucci.org.ua

12.

Uzbekistan

www.chamber.uz info@chamber.uz

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