23.11.2010

Customs approves evil

By Nur Kaliev

Customs Union of Russia, Kazakhstan and Belorussia, which turned into the latest Kazakh conspiracy-smelling cliché in local press, is moving forwards, stumbling confidently. It seems that the fourth power, absolutely lacking of any political influence, has stopped attempts to sort out/impact the blatant wrongness of this whole invention, smugly represented as an “economical alliance of the future” and scarcely a salvation of our oil-spilled economy. Journos’ attempts to establish a resemblance of logical links within participant states’ advantages and interests of their people, are, strictly speaking, failed. However, those customs “vicissitudes” are surely a nuisance to inquisitive readers: dull interest to this topic is easily explainable and is in the fact that the effects of this Union would be hardly feelable to people now and in the closest time – too different are spreads of particular political figures, too unfair is customs pie cutting, too fresh are the memories of Perestroyka’s bastard child – the CIS. As it is, there are much more factors against the Customs Union, and they are much more solid than what’s said above. However, we’re going to talk about one of the specific and the most visible effect of CU on us, people. About cars.

2010 11 23The attention to this sector is explained by the fact, that the automobile is proverbially clear, quite expensive and particularly personal property – in many cases the second by significance after an apartment. Besides, it has quality that no other affordable goods can offer – it can give a freedom of unrestricted mobility. The one which is usually deprived firstly from convicts. That’s why the notorious Kazakh mentality, normally suffering any moral violence upon itself, is boiling up as soon as business concern cars. It’s hard to recall any similar event such as mass strike on Almaty New Square, when rumours about ban on exploitation of right-hand drive cars. Then the car owners showed their fangs to state authorities and exposed themselves as a political force to be left alone. Even hardly beloved Vladimir Shkolnik has been softening his formulae to ban the import; which is rather menaningless and groundless measure as such as exploitation ban.

The CU puts the same problem, but from a different, less sensitive angle: we’ve been offered to change our cars on new ones complying with the rules of the game among trinity of its participants. Guess no one must be explained that on this field Russia gets an absolute pie from the Union. Amidst 30-35% growth on customs processing rates of cars imported from EU and US, the cars made within CU (formally complying to several requirements which will be described below) is actually equal to bread crusts, it is natural that carefully calculating would lean to the second option. In such a contingency two of this market’s sectors will blow out – used cars and new ones built outside CU and their dealers; and in their turn two new ones (which are almost one) will be established – cheap Russian made cars and new dealers. Let’s have a closer look on each of these issues and what they’d brought.

On common people side

In recent years the most favourite car over the aftermarket wasn’t Mazda 626, as many think, and not Mercedes W124 or Opel Vectra. It was Toyota Land Cruiser – huge and untidy off-roader so dear to hearts of road savage. Mainly it has been imported from US, which is basically the country it was designed for. The process of making money out of Land Cruisers is virtually the same as for any other car if a bit more advantageous – a cheapest option is bought (the condition doesn’t play major role), moved to Kazakhstan, a little prepped and sold. For example, you can buy one ten-year old in the States for $9-10 grand; transportation costs less than two; customs rate was around 7-8 thousand dollars. As the result the price for it in Kazakhstan is around 18-20 thousand dollars with prices for an ultimate purchaser exceeding $30 grand in much arguable condition. The cream de la cream for more or less expensive cars is varying depending on brand, year, colour and other less important factors. This what it was like before Customs Union.

Now then the customs rate can be two-three times more than a car’s initial price, which is unsuitable in any case whether for grey dealers or buyers. Is it bad? Theoretically no – the flow of old unsafe gear into the country is much lower, less headaches and dangers for the final buyers. Concerning CO2 rates and threats to the environment, which is usually the main point of our narrow-minded authorities, then almost all of now-imported cars are complying to two similar standards – LEV-ULEV-LEV II for American market since ’94 and Euro 2-3-4 for European since 1996, thus approved by law as safe. At that, what’s the point of Kazakh legislation to compel EU specifications, but absolutely not in the field of rights and freedom of its citizens, as OSCE regulations appointing.

Aside from that, it limits and/or vanquishes question of choice for the widest category of people. For instance, the lack of qualification forces very many citizens to be self-employed in cabbing. Or to small farmers to carry their hand-grown products to markets. Strictly speaking – for people that don’t use internet. With small cars in $3-7 thousand built in 1990—2000 on their agenda. CU is leaving them outboard, forcing to buy cars for the same money, but making choice over what’s left on the market. As the result, the constantly renewing cars population, which were coming to us in still-good condition will change to population of dying and really polluting oil-burners.

And what’s funny – the state in its sole customs blast is continuously repeating its well-learned mantra – “we are on common people side”, but in this case simply throwing the least socially protected social layer over the board. Their profits are obviously aren’t able to pay treasury, but making no harm either as there’s no one to give them a job. Basically the same but in lesser degree is concerning the social brew, which are local authoritative dreamers like to call middle class.

Business support

The problems which are expected to bring much troubles to local car dealership along with their assets are not so vital but covered in press much more widely. Especially wide in those which have nothing against making some money, telling people how Kazakh business is suffering. Thus, the same customs rates (up 20% from 10%) concerning them as well.

Let’s imagine a simple, highly approximate situation. The price of customs processed basic Toyota Camry for a dealer before Customs Union was $24 to $26 thousand with end price around $30, 000. Now though the price will go up to around $33,000 for a dealer, who must manage to get at least minimal profit. As the result the end price for the customer will grow up by $4-5,000. Moreover that the difference is, mildly speaking, huge, but also it will feature customers’ shock, which can stop buying anything at all in the end. As many authorities considering, it will solve another problem as well – as dealers’ excess profits gone the market will become fair and transparent. The more so that particular dealers should have been shot up for their piggish low quality of service. But.

Not only dealers are making money. Some sell oil and natural resources with impunity, other fairly pushing dope to youth. Both will not listen of splits less than 300%. On this background dealer’s 20% of profit looks ridiculous. Do you know how much a common 45 tenge pack of noodles costs to a Chinese person to make, import and process and deliver, completely legally? 17 tenge no less, as at November 2010. How’s that hanging on to you?

The “white” dealers have made attempts to pluses of their existence – creating and organizing working places, tax payments, and the necessity of developing the market. The state’s position is simple – “hell no, if you couldn’t manage it, then your place will be taken”. And if you don’t like this than build factories yourself. And we’ll support you as luxuriously as we support all the rest of domestic producers.

Back to the future

These days words “Russian” and “manufacturer” by no means should be perceived as synonymous of maker of ancient and horrible beasts like Ladas. Opposite, all the major players from all over the world are placing their production lines today in Russia. So Kazakh consumers shouldn’t be worry about anything. The question of car import in Kazakhstan has been solved long ago, and 21 contenders, which can proudly supply locals, were already chosen. The requirements are simple – one must make at least 25,000 pieces per year, place a part of production within CU and to assemble cars from more than one piece. The thing is that on Russian territory there are no production lines except for notorious soviet era factories – all cars are being imported in Russia and assembled from nodes and components, then sold. In this case — to us. Belorussia is buying only Russian vehicles under the Union State of Russia and Belarus.

Theoretically everything is fine – we get new, specially prepared and adjusted automobiles for such brands as Toyota, VW, Renault, Chevrolet, Ford, Fiat and other by lower prices than it was before. Given that such things as package, options, different engines are gone. All the advantages to us are covering the lower quality of assembly and the fact that the majority of those cars are nothing else but renewed but off-market models of at least 20th century and not complying with our new emission standards.

There are only a few “but”. All these factories except for our awkward “Asia Auto” and no less useless but a bit more successful Belarusian JV ZAO UNISON, are located in Russia. Ergo, the bigger share of money paid by us will quietly float to Russian and used for the good of theirs, not ours, economy. Anв our money is really needed to Russians since their market capacity, given its size, wouldn’t be harmed by another 2-3% of gross volume. Even looking at the figures, than 3% of market growth at one and a half million units sold for two quarters of 2010, compared with our pitiful 20% and around 5,000 units.

Well and good. But quality of service will grow in closest times, since local dealers, which have virtually no protective mechanisms from their Russian colleagues, both legally and professionally, will be simply eaten by the latter. Since nothing is regulating or preventing, and the government even supports Russian expansion on our market. What’s the difference who’s paying taxes. Much more competitive northern neighbours will expanding and developing our market without leaving a chance to local dark and narrow business.

There’s no need to think and calculate to understand that after CU coming in full power, the same destiny awaits for many other sectors of our economy. I finely understand that my optimistic views on Customs Union and some of cheerful irony wouldn’t be everyone’s cup of tea, but look at it yourself. Kazakhstan could be selling us as well, so difficult and cheap asset, to so close and so dear Russia, and become the biggest and most powerful hydrocarbons operator in the world. What an achievement that would be!

9 comments

  1. Alexander

    А автору не приходит в голову, что производство автомобилей можно развивать и в Казахстане.Ведь при едином экономическом пространстве нет никакой разницы где это делать. Но тогда все выгоды, которые получает Россия -империя зла — может получить Казахстан?

  2. Торчок

    Интересно, ну очень мутно написано... Не находите. господа?

  3. Anonymous

    Мутный сайт потомушта

  4. Anonymous

    Очень сильный и очень ключевой абзац: «Деньги делают не только дилеры. Кое-кто безнаказанно продает нефть и полезные ископаемые, другие честно «толкают» героин молодежи. И те и другие и слушать не будут о «наварах» менее 300%. На этом фоне жалкие 20% «сливок» для дилера выглядят просто смешно. А знаете ли вы, во сколько обходится китайцу изготовить, привезти и растаможить обыкновенный 45-тенговый «Бич-пакет», причем вполне легально? До того, как его погрузят в машину и отвезут в магазин? 17 тенге, по состоянию на начало ноября 2010. Как вам такой навар?»

  5. Anonymous

    Для Alexander

    Наивный чел. Если делать мощную сборку в РК. то на кгонвейер все арвно надосатвить русского забулдыгу. а их счас нет. нынешняя молодежь на конвейер не хочет вставать. Китайсев завозить? Они все поняли что лутче в нефтянке...В общем — жопа. Да и казахи сами не горят желанием вставать на конвейре. им бы лутче так деньги выискивать

  6. Anonymous

    А давайте узбеков на конвейер. Они ж собирают свою дэушку; )))

  7. Anonymous

    Нет уш. Везде пусть аульные работают. Под присмотром. Надо пристраивать аульную молодежь.

  8. Хочу все знать!

    «Деньги делают не только дилеры. Кое-кто безнаказанно продает нефть и полезные ископаемые,другие честно «толкают» героин молодежи» . —

    Такое ощущение что в редакции одни интересующиеся(нарко),какая ни тема все переводят на эту тему.

  9. You are really good at presenting the news as a professional journalist.