ECO: PROSPECTS AND CONSTRAINTS 2


Mehmood-Ul-Hassan Khan

ECO

The 10th summit meeting of the Economic Cooperation Organisation (ECO) was held in Tehran. It stressed the need to establish a free trade area in ECO region by 2015. According to the ECO’s trade agreement all the member countries should lower trade duties to 15% on 80% of goods traded within eight years. ECO is an international organization composed of 10 countries namely, Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkey, Turkmenistan, and Uzbekistan.

President Asif Ali Zardari attended the meeting. He acknowledged the significance of regional cooperation as an essential mechanism to accelerate economic and social progress, development and stability in the region. He reaffirmed his commitment to ECOs goals and objectives as envisaged in the Izmir Treaty, the ECO vision 2015 and other basic documents as well as the declarations of the previous summit meetings.

Pakistan’s useful proposals

The President proposed different measure which can be useful to enhance trade and socio-economic cooperation among the ECO states. It included the creation of ECO free trade area, development of an ECO energy ring of pipelines and electricity grids, solid win-win trans-regional economic partnership, greater connectivity through road, rail, air and sea links, and forging of closer links with adjoining regions, particularly SCO and Saarc. He believed that by ensuring deeper integration, and leveraging our economic complementarities, the ECO can become the engine of growth for the world. Furthermore, he proposed various measures including activation of the ECO central bank to coordinate monetary policies and consider the development of a stimulus package for the region. He stressed the need to remove all trade barriers and currency swap arrangements must be put initiated.

Main personalities
Pakistan at the ECO summit was represented by President Asif Ali Zardari and also attended by President of Afghanistan Hamid Karzai, President of Azerbaijan Ilham Aliyev, Prime Minister of Kazakhstan Karim Massimov, Deputy Prime Minister of Kyrgyz Republic Babanov Omurbek, President of Tajikistan Emomali Rahmon, President of Turkey Abdullah Gul, President of Turkmenistan Gurbanguly Berdimuhamedov and Speaker of Senate of Uzbekistan Ilgizar Sobirov.

Joint Declaration

In its joint declaration the member countries called upon the contracting parties to ECO Trade Agreement (ECOTA) to take all possible measures to implement tariff concessions at the earliest so that free trade areas may be achieved. They acknowledged that security and stability were fundamental to economic progress and development, and stressed the need for continued co-operation in countering terrorism, narcotics and transitional organised crimes. In their joint declaration all the countries/states acknowledged that the global financial crisis was the outcome of weak standards, inefficient regulatory mechanism, improper use of available financial/banking resources, non-professional risk management practices/norms and inability of international financial institutions around the globe which required closer cooperation and consultation among member states. The ECO discussed in detail the global financial crisis and its implications for the economies of the ECO member states.

All the member states welcomed the operationalisation of the ECO trade, ECO projects and development bank as a milestone toward facilitation of trade in the region. The declaration called upon the member states for joining the bank and for early completion of remaining measures to set up the ECO reinsurance company. It also called for early ratification and implementation on the agreements on Promotion and Protection of Investment (APPI) and the Establishment of ECO Smuggling and Customs Offences Data Bank.

The member states welcomed the finalisation of the draft ECO Agreement on Mutual Administrative Assistance in Customs Matters and Additional Protocol on Simplification of Visa Procedures of Businessmen and Transit Drivers. The joint declaration stressed the members to help finalise agreements on prevention of corruption and money laundering, mutual recognition of standards and joint trade promotional activities. The joint declaration underlined the significance of transit transport infrastructure in the region and called for early implementation of regionally important railway projects.

Main project discussed

In the ECO meeting all the leaders noted the significance of road transport in the development of trade among member states and called for efforts aimed at alleviating the obstacles and impediments hampering international road transport activities in the region. In order to enhance the bilateral trade volumes many mega projects of railways were discussed which are given below.

(a) Van Lake in Turkey
(b) Baku-Tblisi-Kars Azerbaijan.
(c) Qazvin-Rasht-Astara Iran
(d) Astara Azerbaijan
(e) Rehabilitation of Quetta-Taftan railway Pakistan
(f) Kazakhstan-Turkmenistan-Iran railway,
(g) Capacity enhancement of Sarakhs Stations in Iran and Turkmenistan
(h) Construction of Railways from Khairaton and Shair Khan to Mazar-e-Sharif-Herat as well as Quetta-Chaman-Spin Boldak Kandhar-Herat
(i) Early inception of the feasibility study of both lines in the territory of Afghanistan.

It is hope that after their completion the trade volumes may be increased. The communication infrastructure would be enhanced which ultimately increase the levels of understanding and people-to-people interaction.

Energy cooperation

Energy is mantra of every country around the globe. The energy cooperation was discussed and different workable projects and means were also explored in the ECO meeting. The leaders showed their determination to pursue and encourage cooperation in energy sector as a priority through reinforcing the ECO energy cooperation strategy. Furthermore they emphasized the need of different regional policies and plans to support diversification of energy sources and markets. They talked about how to provide suitable environment for investment in energy sector projects and improved energy security. The leaders also considered energy subsidising policies in member states and making better use of new and renewable energy sources. The potential hydropower energy cooperation was also discussed. In this regards, Tajikistan offered to host the 2nd Energy and Petroleum Ministers Meeting in 2009 to review and enhance ECO energy cooperation.

Education and science

Education and science play very important role in the socio-economic growth of a country. Keeping in view, its importance all the leaders urged the need to cooperate in education and science fields. They welcomed the efforts aimed at operationalisation of the ECO science foundation and the ECO educational institute as well as the establishment of other ECO institutions. They urged all the member stales, to ratify ECO science foundation, ECO cultural institute and ECO educational institute charters. They welcomed the approval of establishment of the ECO Nanotechnology Network in Iran and called on member states and the secretariat for expeditious measures to implement it. In order to speed up the education and science cooperation they also welcomed the establishment of the ECO representative office for development of science and new technologies in Almaty.

Mechanism of Standardisation

Parameters of standardization play an important role in mutual cooperation and transfer of technology facilities. All leaders appreciated the adoption of the statute of the ECO regional institute for standardisation, conformity assessment, accreditation and metrology (RISCAM). They called on member states to sign the RISCAM protocols and take steps for its early implementation.

Food security

Due to many integrated reasons the agricultural productivity of the ECO is on the decline. All the member states tend to import edible items from the West due to which billions of dollars are being wasted. Food security is a emerging socio-economic issue and all the leaders discussed it and planed different ways. The Eco meeting underlined the significance of the ECO Regional Programme for Food Security (RPFS) and progress on the ECO-FAO technical cooperation programme for strengthening seed supply in the ECO region and welcomed the establishment of the ECO seed association in Turkey.

Container and passenger train

In the ECO meeting all the leaders thoroughly discussed and finalized the different mega projects searched out different ways to promote trade among the member states via logistic support. In its joint declaration all the member states appreciated the headway made towards regularising the ECO container and passenger train on Istanbul-Almaty route. It welcomed the extension of the route to the Chinese railways at Urumchi and called for enhanced cooperation between ECO and China in implementing transport projects, in particular revitalising the China-Middle East-Europe Corridor.

In its joint declaration all the member states reaffirmed their support to the planned ECO container train on Islamabad-Tehran-Istanbul route, and appreciated Iran for constructing 540-km railway between Kerman-Zahidan which would link up railways from Pakistan to Europe via Iran and Turkey. All the states welcomed the proposal of organising Bendar Abbas-Almaty regular train container as a priority project. They also noted with satisfaction the establishment of the ECO Logistic Providers Associations Federation (ECOLPAF) for facilitating greater involvement of the private sector in regional transport.

Maritime cooperation

Maritime infrastructures do play very important role in the regional and international trade, marketing and economy. Keeping in view its importance all the leaders discussed and planed to address the special needs of the landlocked member states of the ECO especially the Afghanistan and central Asian countries. All the leaders highly regarded Iran’s initiative to offer facilities, discounts and special arrangements to the landlocked member states in its main ports in the Persian Gulf and the Oman Sea.

Postal services

The meeting underlined the significance of technical cooperation in postal services and telecommunications and called for expert exchanges between member states in this regard. In the latest ECO meeting the leaders decided to enhancing interconnection of power systems of the member states for regional power trade and power management.

Memoranda of Understanding/Agreements

Different MOUs were signed and endorsed by all the member states which are given below as

(a) Memoranda of Understanding between the ECO and UN/ISDR the Shanghai Cooperation Organisation (SCO)
(b) The Conference on Interaction and Confidence Building Measures in Asia (CICA)
(c) International Road Transport Union (IRU) and the Universal Postal Union (UPU)
(d) Tripartite agreement between the ECO, IDB and UNESCAP on Transport Development
(e) MoU with the European Commission on the Fight Against Illicit Drug Trafficking and with IOM on Human Trafficking and Irregular Migration as well as the proposal to establish necessary co-ordination between ECO and other relevant international organisations/programmes including CARE, TRACECA and SPECA.

Health

In the latest ECO meeting they appreciated the ECO regional potential in the field of health and appreciated the expansion of cooperation in this area, and welcomed the proposal of the Azerbaijan to host the 1st ECO Health Ministers meeting in the second half of 2009. Uzbekistan, Turkey, Tajikistan, and even Turkmenistan have advanced medical sciences institutions which can be used for enhancing health facilities and education standards among the ECO states.

Management of natural disasters

Prevention is important than cure. Disaster management is must for securing lives and properties. The leaders underlined the need for regional cooperation in management of natural disasters and welcomed the establishment of a regional centre for the purpose in Mashhad, Iran, and called for effective programmes and projects for immediate response, emergency relief and rehabilitation. Turkey has advanced technologies and expertise in dealing with natural calamities which should be utilized.

Economics of ECO

The President Asif Ali Zardari said that the ECO has yet to realise its potential to the fullest measure and furthermore we have to fashion ECO to the specifications of our region and the demands of our times. According to the ECO data (2008 ) gross domestic product (GDP) of the member states of the organization has exceeded one trillion dollars in 2007-08. ECO members had an average economic growth rate of 5.6 percent. The ECO members’ international trade in 2007 surpassed $570 billion, whereas trade among the members in the same year was nearly $33 billion.
GDP GROWTH RATE (%)
Country 2000 2001 2002 2003 2004 2005 2006 2007 2008
Afghanistan NA -20 28.6 14.3 9.4 14.5 7.4 11.5 11
Azerbaijan 11.1 9.9 10.6 11.2 10.2 26.4 34.5 23.4 18.3
Iran 5.9 5.4 7.8 8 6.5 5.4 6.3 6.2 6.6
Kazakhstan 9.8 13.5 9.8 9.3 9.6 9.4 10.7 8.9 5.3
Kyrgyzstan 5.4 5.3 0 7 7 -0.2 3.1 5 4.3
Pakistan 3.91 2 3.1 4.7 7.5 8.6 6.6 7.2 5.6
Tajikistan 8.3 9.6 10.8 11 10.3 6.7 7 7 5
Turkey 7.4 -7.5 7.9 5.8 8.9 7.4 6.8 5.7 5.78
Turkmenistan 18.6 20.4 15.8 17.1 14.7 9.6 11.4 9 8
Uzbekistan 3.8 4.2 4 4.2 7.7 7 7.3 9.5 9

POPULATION (Thousand people)
Country 2000 2001 2002 2003 2004 2005 2006 2007est 2008est
Afghanistan n/a 21411 21798 22191 23178 23592 26090 27150 32700
Azerbaijan 8049 8111 8172 8234 8307 8392 8484.5 8581.3 8629.9
Iran 63663 65264 65540 66480 67477 68467 70496 71348 72200
Kazakhstan 14884 14858 14859 14909 15013 15147 15308 15484. 15571
Kyrgyzstan 4915 4955 4993 5039 5093 5144 5192 5254.5 5317
Pakistan 137500 140500 146000 146800 149700 152500 156770 165399 172800
Tajikistan 6188 6313 6441 6573 6710 6850 7063.8 6899.9 6736
Turkey 67420 68365 69302 70231 71152 72065 72974 73875 74800
Turkmenistan 5285 5505 5788 6120 6250 6544 6700 5200 4965
Uzbekistan 24650 24964 25272 25568 25864 26167 26540 26900 27372
ECO Region 353965 360247 368165 372145 378744 384868 395618.4 421091.4 406091.9
Source: ECO (2009 )

The ECO region is estimated to contain a third of the global energy resources. Its current primary energy production is around 25.71 quadrillion Btu about 6 percent of the World Primary Energy Production. Crude oil production is 6019 thousand barrels per day or 7.4 percent of the world total. Natural gas production is 9 trillion cubic feet or 9.2 percent of the global production. With some of the highest mountains and the fastest flowing rivers, the ECO region can produce enormous hydro-electric power. The total electricity generation is around 551 billion kilowatt hours which amounts to 3.3 percent of the world total.

TOTAL PRODUCTION OF ENERGY (thousand tons of oil equivalent)
Country 2000 2001 2002 2003 2004 2005
Afghanistan NA NA NA NA NA NA
Azerbaijan 1608 1631 1608 1830.5 1870 1946.9
Iran NA 240619 237981 272990 292073 317335
Kazakhstan 117298.2 118279.7 132303.2 141886.5 157301.9 NA
Kyrgyzstan 14931 13367 11922 14021 15141 14891
Pakistan 26497 27344 29075 31142 36782 40226
Tajikistan 14247 14382 15302 16509 16491 17087
Turkey 26047 24576 24259 23783 24332 26898
Turkmenistan 45968 50443 53645 58551 NA NA
Uzbekistan 4031.0 4125.3 4248.9 4192.5 4274.5 NA

Agriculture constitutes 23.4 percent of the regional GDP and employs 40 percent of the population. Pakistan, Turkmenistan and Uzbekistan jointly provide 40 percent of the world cotton supply. The region also enjoys advantage in producing cereals, rice, meat, livestock and dairy products. ECO is implementing a Plan of Action for Drought Management and pursuing a Regional Programme for Food Security. A wide variety of minerals are produced, ranging from lead, zinc, iron, coal, copper and tin to silver, gold and mercury. Industry contributes 27.6 percent to the regional GDP.

Iran’s integrated efforts

The ECO was founded in 1985 by Iran, Pakistan and Turkey to promote economic, technical and cultural cooperation. Iranian President Mahmoud Ahmedinejad played very important role in strengthening of ECO. Iran agreed on enhanced closer cooperation between Pakistan, Afghanistan and Iran by holding regular interactions between the three countries on regional issues and for increased mutual co-operation in all spheres including the fight against terrorism. Iranian President Mahmoud Ahmedinejad and Pakistani President Asif Ali Zardari have expressed their resolve to enhance bilateral ties, particularly in the energy, trade and economic fields, for the mutual benefit of two brotherly countries.

Iran has been one of the main supporters of regional socio-economic cooperation, geo-political and geo-strategic integration. Iran presented different workable arrangements/ideas for joint regional security doctrines. Iran also offered its energy expertise and natural resources (oil & gas) for all the ECO member countries and regional states too. It also suggested having common single currency as well as free trade zone in the ECO states. Iran supported the idea to have a unified monetary system within the ECO. According to Iran the strategic status, the human resources, and the enormous talent of the members of ECO is invaluable assets which must be used for the betterment of all the ECO countries. Iran stressed the need to secure their own interests by reenergizing and building new regional alliances that cater to each other’s economic and energy needs and help solve each other’s problems.

Constraints

(a) Currently, economies of the member states are not in a position of strength. Macro-economic indicators of Afghanistan, Tajikistan and even Pakistan are not in good shape. So, the idea for closer socio-economic integration, free trade zone, common currency and monetary systems among the ECO could not be materialized in the near future.
(b) Prevailing weak law and order situation and rising terrorism (Pakistan, Afghanistan) in many members states is one of the main hurdle in promoting mutual trade and socio-economic interaction.
(c) Weak infrastructure is another big obstacle in achieving ECO regional cooperation in many fields. Although Iran, Turkey and Pakistan are trying their levels best to boost the socio-economic cooperation but inherited poor infrastructures negating all the efforts. According to the central bank of Iran, Iran’s net exports to Afghanistan were barely more than US$500 million, compared to $7 million in imports. Similarly, Iran’s exports to Tajikistan for the same year stood at $128.4 million compared to $6.6 million imports from Tajikistan. Same is true with all the other member states.
(a) Low level of financial and banking cooperation discourages the easy and smooth flows of funds and business transactions. Moreover, there is not branch of Iran, Turkey, and any Central Asian member states banks in Pakistan.
(b) Low ratios of joint ventures and FDI among the member states
(c) Geo-political and geo-strategic hurdles. Political stability is up to the mark among the ECO states. Despite the few ECO member states all the countries are situated far away from each other.
(d) Water resources among the ECO members especially the Central Asian States should be settled amicably. All water resources of the Central Asian rivers are distributed within the scheme of complex utilization of water resources of the Syrdarya and Amudarya rivers” which agreed by all countries of the region. Uzbekistan, as the country with the largest population, consumes more than 50% of all water resources of the Central Asian rivers. Along with this more than 85% of water resources of the republic are formed outside of its territory in Tajikistan and Kyrgyzstan, and the main water reservoirs that regulate the flow of the Syrdarya and Amudarya rivers as well as large water facilities of the Republic of Uzbekistan are located on the territory of neighboring states. Therefore, Uzbekistan considers it expedient to resolve regional water problems on bilateral level and addresses its problems with Tajikistan and Kyrgyzstan in the same format. Issues of use of water resources of trans-boundary rivers in Central Asia must be resolved taking into account the interests of more than 50 million people living in all countries of the region. In this regards, any actions taken in trans-boundary rivers must not have a negative impact on existing environmental and water balance of the region. Existing international legal documents in the sphere of water management and environment, i.e. the UN Convention on the Protection and Use of Trans-boundary Watercourses and International Lakes of March 17, 1992 and the UN Convention on the Law of the Non-navigational Uses of International Watercourses adopted by the UN General Assembly on May 21, 1997 must become a basis for development of an effective system of joint use of the resources of trans-boundary rivers in Central Asia; Right of either party to implement projects using the resources of trans-boundary rivers, including hydro-engineering construction, is not denied but on the assumption of its thorough independent techno-economic and environmental impact assessment on the principles of transparency and full awareness of interested parties. There are to be given assurances that construction of installations will not have irreversible environmental impacts and does not disturb the established balance of the watercourse by all states located along the course of those rivers. In the case of damage, there must be taken all measures to eliminate or reduce such damage, and if necessary, to bring up the issue of compensation. Implementation of projects are to be carried out through constructive approach and compromise, that does not harm interests of other states concerned and guarantee the two most important conditions: first reduction of watercourse for downstream-located countries must not be allowed; second – environmental security of the region must not be violated. In its turn, Uzbekistan will continue to adopt progressive measures to ensure water and ecological balance in the region in order to maintain peace and stability strengthen security and sustainable development of Central Asia.

Prospects

(a) Turkmenistan-Afghanistan-Pakistan-India (TAPI). The project will also result in the economic prosperity, regional cooperation and above all smooth and easy availability of energy resources i.e. gas. The availability of gas (energy) will help economic growth, development and economically a stronger Pakistan, The middle beneficiary will be Afghanistan as it will be collecting transit fee estimated between $200m to $350m per year. In this regard, the President of Pakistan said that mega projects of regional significance, such as IP and TAP gas pipeline projects, should be launched to stimulate demand, create jobs and generate momentum for growth and prosperity.
(b) IPI gas pipeline. The IPI gas pipeline ($ 7.4 billion It would initially transport 60 million cubic metres of gas (2.2 billion cubic feet) daily to Pakistan and India, half for each country, but capacity would be raised later to 150 million cubic metres.
(c) Import of electricity from Central Asian Republics (CARs). Four countries Pakistan, Tajikistan, Kyrgyzstan and Afghanistan signed a resolution to proceed further with the Central Asia/South Asia Regional Electricity Market (Casarem), a project envisaging transmission of 1,300 MW from Tajikistan and Kyrgyzstan to Afghanistan and Pakistan; but further commitment to the project will be linked to the availability of finances.
(d) Import of 100mw of power for the Gwadar Port construction of the transmission line and feasibility study for 1,000 mw transmission line between Quetta and Zahidan between Pakistan and Iran by the end of 2009.
(e) Oil cooperation among the ECO member states. Supply of oil on deferred payments from Saudi Arabia and Iran to Pakistan would be extended. The states range from major energy exporters Azerbaijan, Iran and Kazakhstan through the rising natural gas states of Turkmenistan and Uzbekistan to the consumer states of Afghanistan, Kyrgyzstan, Pakistan, Tajikistan and Turkey. So the prospects are very high for energy cooperation among the ECO states
(f) Alternative energy cooperation must be extended. Finalization wind farm project between Pakistan and Iran would provide a ideal platform for other member states
(g) Joint textile production and marketing. Pakistan, Uzbekistan and Iran can play very important role

Concluding Remarks

ECO has entered a new era of mutual trust, cooperation and harmony. It has vast prospects and constraints too. Energy cooperation, trade and commerce activities, people-to-people interaction, educational collaboration, speeding of joint ventures should be our mantra to make the ECO a real power house. We share rich history, civilization and culture and our future heavily rest on modern highways, physical and virtual, that create common space. Political will is badly needed to make the ECO a success story rather than a mere debating forum.


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