The proposed ECO Trade & Development Bank will begin with a paid up capital of $ 100 million



Feb 16 - 22, 2004





The two-day conference of the Economic Cooperation Organization (ECO) Finance Ministers in Islamabad last week took many vital decisions of far-reaching consequences for the region and make the organization more effective and dynamic.

The joint communiqué issued at the conclusion of the conference unfolded elaborate plans of action not only for making the organization more dynamic in real terms but also for speedy implementation of specific proposals. The decision taken included establishment of an ECO Trade & Development Bank at Islamabad and an ECO Reinsurance Company for catering to the insurance needs of the region. The ECO which replaces the 3 countries (Pakistan, Iran and Turkey) Regional Cooperation for Development (RCD) now has added membership of Afghanistan and Central Asian Republics who joined the organization in 1982 after dismemberment of Soviet Union.

The proposed ECO Trade & Development Bank will begin with a paid up capital of $ 100 million to be subscribed equally by the 3 founder members of the organization namely Pakistan, Iran and Turkey. The rest of the members would subsequently participate in the equity capital. The proposal for a joint bank for the ECO countries was initiated a few years ago but like several other proposals and schemes had remained in the cold storage so far. The ECO finance ministers meeting apparently focused attention mainly on the policies of the member countries in the financial sector covering central banking and monetary policies, macro economic reforms, development of capital markets, promotion of banking, insurance and investment, taxation policies, etc. it was decided that the heads of the central banks of each member country would hold regular joint meetings with a view to sharing the experience and knowledge in the field of monetary policy reforms and other aspects of the financial sector. At the same time these meetings would also take into account developments in the capital market of each country, including implementation of reforms in the corporate sector. It was suggested that multiple listings of shares and securities of each member country should be promoted in the stock exchanges of the countries of the region. Sharing of the experience in the process of privatization of public sector enterprises was also identified as an important sector for cooperation.

The other issues decided at the meeting compassed cooperation for the establishment of a common grid with a view to identifying and cooling surplus and deficit energy resources in each country and thereby to evolve ways and means to achieve the exchange of these resources through bilateral and multilateral agreements. The development of the communication sector, especially construction of roads to link each member country particularly for the promotion of regional trade, was also emphasized in the joint communiqué. The creation of a fund for supporting the reconstruction programme in Afghanistan was accorded high priority.

An important step proposed at the meeting was creation of a High Level Experts Group comprising senior officials of ministries of finance and economic affairs of each member government. This group would be entrusted with the task of making in-depth study and suggesting closer cooperation between the member governments country in the pursuit of macro economic policies, including monetary management and other affairs in the financial sector. Additionally, it was decided that the officials of each member country serving as representatives at the international financial institutions like the World Bank, IMF and the Asian Development Bank would henceforth cooperate with each other to act as pressure groups at these institutions to serve the common cause of the ECO members.

These are undoubtedly important decisions to achieve laudable objectives of the organization to have a common goal of coherent policy pursuits to upgrade and enhance cooperation amongst member states, but as the Iranian Finance Minister rightly pointed out, the biggest challenge facing the ECO was the lack of implementation of a series of wide ranging decisions taken at the earlier meetings. Last year in August a conference of Trade Ministers of ECO countries was held in Islamabad and a trade agreement was signed which was described as a milestone in promoting regional trade between Pakistan, Iran, Turkey, Afghanistan and the Central Asian States. The signing of the Regional Trade Agreement providing for a uniform tariff of 15 per cent for inter-ECO trade was described as a historic event as this would facilitate liberalized market access and increase volume of regional trade. The agreement also aims at removing non-tariff barriers and initiating effective steps to identify goods and services that may be traded between the ECO countries. The reduction in tariff would however, be implemented in a phased manner over the next eight year. At the same time, it has also been decided that about 80 per cent of the goods normally covered under customs tariff, would be brought within the agreed regime of 15 per cent duty. Not much progress has been made in this regard so far. In August 2002 the ministers for agriculture of the ECO countries held a conference in Islamabad and took vital decisions. The Islamabad declaration issued after 3 day conference was described as the beginning of a "Long needed effort adding yet another dimension to regional development in our part of the world. The ECO has infact awakened to the urgency of developing its tremendous agriculture potential." The Islamabad Declaration issued inter alia, said, "We take note that the ECO region has a common vision about agriculture, which can be summed up as achieving a sustainable agriculture development in accordance with resource endowments and comparative advantages."

It is further declared "we take note of the importance of prioritization of the activities to be pursued by the ECO member states for effective cooperation in agriculture sector. In addition to the specific priorities identified through the joint ECO-FAO efforts we specify various priorities, indicating the member States who volunteered to coordinate, drought management (Iran), water management (Pakistan), trade promotion (Turkey), development of post harvesting and processing industry (Turkey), conversation in genetic resources, development of an ECO strategy for agriculture cooperation and exchange of information through website."