Prospects of economic integration in ECO region

This Article was published in
All Voices (December 20, 2010)

By Dr Hussain Mohi-ud-Din Qadri

The main thrust of the work in the field of trade liberalization has been towards the reduction of tariffs and removal of non-tariff barriers in the ECO region. While trade does not obviate the need for large scale development investments, an open and equitable trading system can be a powerful driver of economic growth in the ECO region, especially when combined with adequate political support. Therefore, implementation of ECOTA and relevant trade facilitation programs rightly lies at the heart of the trade development in the region. The ECO countries strive to dismantle market access barriers and begin phasing out trade-barriers in the region in order to pave the way for free-trade area.

ECOTA was signed by five Member States during the 2nd Ministerial Meeting on Commerce/Foreign Trade, held in Islamabad, Pakistan on 17 July 2003. Since then, the ECO Secretariat is pursuing for its implementation in the region through urging Contracting Parties to expedite ratification process and approaching to non-signatory Member States to be Party to it as soon as possible. This agreement will enter into force after the date of receipt of the instrument of ratification, acceptance, or approval from five Contracting Parties. Amongst the Contracting Parties, so far, only Pakistan and Tajikistan have ratified the said Agreement. Some member states are negotiating on adopting a fast-track approach which foresees further reduction to the highest tariff slab from 15% to 10% within five years time instead of eight years.

The 1st High Level Expert Group (HLEG) meeting on Trade and Investment, held in Ankara, Turkey on January 13-15, 2004 recommended adopting a “Fast Track Approach to ECOTA”. Although, signing of the Protocol on fast-track was included in the agenda of the 3rd Ministerial Meeting on Commerce/Foreign Trade (July 7, 2005) held in Istanbul, Turkey, it could not be realized due to some reservations raised. The 4th HLEG meeting to be held on 9-10 November, in Kabul, will resolve controversial issues so that the Member States could sign the Protocol at the earliest.

The 3rd Ministerial Meeting on Commerce/Foreign Trade approved and signed a “Protocol for the annexes of ECOTA on (i) ECO Rules of Origin (ii) Anti-Dumping Measures, (iii) State Aid, and (iv) Intellectual Property Rights”. The said Protocol was signed by four Member States, i.e. Afghanistan, Iran, Pakistan, and Turkey. Moreover, Pakistan has already ratified the said Protocol. This achievement will facilitate signature/or ratification process of ECOTA with its annexes by the Member States.

TTA was signed in 1995 (except Afghanistan and Uzbekistan) and ratified by all the signatory member states. It is not fully implemented. Initially, in face of difficulties for new ECO member states to become a party and implement the TIR Convention, TAaimed to facilitate trade between two member states via transit through other member states. It is applicable to road, railway, sea, air or any combination of them. Goods transported under the Agreement are not subject to import/export duties and taxes. Guaranteeing Associations undertake to pay duties/taxes and default interest due under the customs law/regulations of the country in which an irregularity has been committed. Goods shall not be subject to examination through Customs en route. Customs offices will accept the validity of ECO Passage Document in order to avail facilities under the Agreement. Guaranteeing Associations will act as the guarantor of the transit system. Transit Trade Committee comprising of one representative from each signatory member state will monitor the implementation, make procedures, and resolve any disputes arising out of the operation. Guaranteeing Associations have been nominated (except by Azerbaijan and Turkmenistan). ECO Passage Document has been finalized (except Authorization for Natural and Legal Persons to utilize EPD). Technical standards of vehicles have been approved. ECO Road and Railway Maps have been prepared, to be approved by the member states.

Prospects and challenges for TTA are: (i) minimum conditions and requirements (i.e. authorization) for natural and legal persons to utilize EPD shall be adopted by the member sates; (ii)printing, distribution, and monitoring of EPD; (iii) establishment of a Regional Guarantee System which will ensure that all duties and taxes are covered either by the transport operator or by the national guarantee associations of the Member States; (iv) capacity building in Guaranteeing Associations; (v) activation TTC for monitoring the Agreement; (vi) collecting data on transit volume, clearance time and problems; (vii) involving freight forwarders and transporters and ECO Chambers in implementation of the Agreement.

Other physical and regulatory requirements can be summarized as: (i) improvement of facilities and infrastructure in border crossings ; (ii) alignment of working hours in border crossings; (iii) simplification of customs transit procedures; (iv) harmonization of technical requirements of vehicles; (v) reducing high and diverse transit charges; (vi) making transit rules and procedures transparent and stable. 8. Implementation of Transit Transport Framework Agreement (TTFA) which was singed in 1998 is other important issue. TTFA being in line with current developments that more and more ECO member states strive is ready to become a party to the TIR convention, in time, has gained an upper hand over TTA and now preference is given for its early implementation.

However TTA is not shelved until the TTFA enters fully into power. TTFA covers all modes of transportation including insurance and other related issues. The Secretariat has emphasized on the importance of the ratification of this agreement in several meetings as well as in its contacts with the relevant officials of the Member States. So far, five member countries namely Azerbaijan, Kazakhstan, Kyrgyzstan, Pakistan, and Tajikistan have ratified the agreement. Afghanistan unofficially has informed the Secretariat about ratification of TTFA in that country. In addition, the Secretariat has requested the Member States to introduce their nominees for Transit Transport Coordination Council (TTCC), which will monitor and follow implementation of TTFA. Azerbaijan has recently agreed to be the coordinator country for the implementation of TTFA.

Customs and Transit Trade cooperation also plays an important role in the economic cooperation among the ECO Member States. The 4th meeting of the ECO Council of Heads of Customs Administration (CHCA), held in Baku, Republic of Azerbaijan, on May 16-18, 2005 finalized the text of the draft Agreement on establishment and operation of the ECO Smuggling and Customs Offences Data Bank. The said Agreement was approved by the Member States and initially signed by Afghanistan, Pakistan, and Turkey during the 3rd Ministerial Meeting on Commerce and Foreign Trade. Recently, we have acknowledged the willingness of Kyrgyzstan to sign the said agreement. This Agreement would come into force upon signature/ratification of at least four ECO Member States. To this end, an action plan will be prepared in coordination with Turkey (host of Data Bank) leading to the operationalisation of the Data Bank.

The 4th meeting of ECO-CHCA also reviewed a UNDP Consultant report on simplification and harmonization of customs procedures and agreed to form a working group of experts to further consider actions on the recommendations of the Consultant. Cooperation with WCO within the framework of MOU signed between ECO and WCO, cooperation with ADB and customs cooperation among the ECO Member States were also reviewed during the said meeting. Member States were requested to provide their customs news/material to Islamic Republic of Iran Customs Administration (IRICA) on regular basis for publication in the ECO Customs Newsletter. The Council elected the Head of Turkish Customs Administration as its next Chairman and the First Deputy Chairman of State Customs Committee of Azerbaijan as its Vice-Chairman.

Exchange of updated data/information relating to trade and investment among the ECO Member States has gained special significance. In this regard, ECO has held several seminars. The 3rd ECO Seminar on Trade and Investment Information Networking held in Karachi, Pakistan on 31st January-01 February 2005 was the latest. In this Seminar, ECO Member States actively participated and agreed to designate fresh Focal Points on Trade and Investment for prompt exchange and presentation of relevant data/information through the interactive ECO Web portal (www.tradeeco.org), which was developed with financial assistance of UNDP. The said Web portal is being upgraded time-to-time taking into account the recommendations of ITC Expert who participated in the abovementioned Seminar. Moreover, utilization of ECO Feasibility Fund is being proposed to Council of the Permanent Representatives (CPR) for this purpose.

There is an urgent need to follow the effective implementation and further updating/expanding the scope of the agreement on simplification of visa procedures for the businesspersons of the Member States to further facilitate the contact and communication among the citizens of the Member States. In this regard, the CPR approved that the Islamic Republic of Iran, as a coordinator, to host the 1st Experts Group Meeting (EGM) to revise the Agreement on Simplification of Visa Procedures for the Businessmen of ECO Member States.

(The writer is a PhD candidate in Economics)