Naubet Bisenov in Almaty -

Kyrgyzstan's parliament has started debating the customs legislation governing the Customs Union (CU), at the same time as the country began gradually increasing customs duties on imported cars to fall in line with the rest of the bloc.

On September 23, parliament's Committee for Economic and Fiscal Policy started hearing amendments to the country's laws to bring them in line with CU regulations. The CU was set up by Kazakhstan, Russia and Belarus in 2010, and will be transformed into the Eurasian Economic Union (EEU) in 2015. Armenia and Kyrgyzstan hope to become full members by the end of this year or next year.

Economy Minister Temir Sariyev urged MPs to speed up the adoption of the amendments to facilitate the country's membership. "Our trade [with CU member states] is slowing down because we are not yet joining the Customs Union," Sariyev told the committee meeting, which involved government members, civil servants and business people. "They've shut the border and it's impossible to sell [all] goods [imported from third countries] on the domestic market," he said in remarks carried by Tazabek.kg.

The minister warned that the delay in membership would mean the loss of markets for Kyrgyz businesses, high unemployment, bankruptcies for small and medium-sized enterprises, and budget shortfalls.

Sariyev admitted that Kyrgyzstan's membership could lead to growth in food prices as a result of Kyrgyz farmers receiving unobstructed access to the CU markets, but it would not be sharp. "Our farmers will have an opportunity to sell their produce on the external markets where prices are higher... This will lead to a price hike on the domestic market," he said. "Those living in towns and working in the public sector will have difficulties. The government is preparing a programme to offer support to them to live through this period."

Despite 62% of Kyrgyz supporting the country's membership of the CU, according to polls, the government is concerned about any negative reaction from the population to membership. Sariyev noted that Kyrgyzstan was joining the bloc voluntarily and retained the right to quit the union. "If something contradicts the development of our country and hurts it, we have the full right to quit the Customs union," he reassured.

Meanwhile, on September 22 Kyrgyzstan increased customs duties and clearance fees on imported cars as part of a six-stage measure to bring customs duties on imported cars in line with the CU tariff over the next five years.

According to a September 2 government resolution, the lowest customs duty imposed on the cheapest cars (aged 11-12 years) went up by $0.1 to $0.4 per cubic centimetre of engine, increasing the duty by over 30%. The duty is expected to more than double in 2015, increasing to $0.9. Kyrgyzstan has differentiated rates of customs duties on imported cars depending on the size of engine and age of the car.

Before the increase, Bishkek used to impose duties on imported cars at $0.3 to $1.95 per cubic centimetre of engine. Duties on imported cars in the Customs Union range from €1.2 to €5.8 per cc of engine.

Kyrgyz businesses are trying to secure exemptions from the single CU tariff to continue importing goods from third countries at lower duties. On September 17, Prime Minister Dzhoomart Otorbayev urged the abandonment of these exemptions in order for the country to claim a bigger share of customs duties collected within the bloc. He said Kyrgyzstan now had 250 categories of goods that are not covered by the CU tariff against 5,000-6,000 in the past. "The fewer exceptions we ask for, the more customs duties we receive. Within the CU customs duties are collected in a common pool and are distributed among member states according to their [agreed] shares," the Kyrgyz prime minister explained.

At the moment, Russia claims 87.97% of all customs duties collected from goods imported to the CU member states, Kazakhstan accounts for 7.33% and Belarus 4.7%. After Armenia and Kyrgyzstan join the EEU, these shares will be reset to take into account the interests of the new members.