Economic Co-operation Organisation (ECO) is unlikely to be a Free Trade Area (FTA) by 2015 as envisioned by the charter of the Organisation as tariff issues are far from settled because Iran and Turkey have taken a strong position against each other.
ECO consists of 9 Muslim countries namely Afghanistan, Azerbaijan, Iran, Kazakhstan, Pakistan, Tajikistan, Turkey, Turkmenistan and Uzbekistan. According to the tariff reduction modality awaiting implementation under the ECO Trade Agreement (ECOTA), member states are required to reduce tariffs and bring them down to a maximum of 15 percent over 8 years with the exception of Afghanistan which has been granted 15 years for implementation.
The tariff lines are classified into three lists, ie positive, sensitive list and negative lists. The positive list consists of all goods actually traded among the contracting parties at the date of entry into force of the agreement. The negative list covers products which shall remain outside the purview of ECOTA. The sensitive list would cover the products that are not allowed for importation in the territory of a contracting party.
During the second meeting of Co-operation Council on ECOTA held on April 20-21, in Tehran, the member countries deliberated on the ECOTA lists submitted by the members. However, in view of differences among the contracting parties on the interpretation of relevant articles of the agreement, the council observed that consensus has to develop on the format of ECOTA lists before exchange and finalisation for tariff implementation.
The issue of entry into force of the agreement was also discussed in the meeting. Pakistan, Turkey and Tajikistan argued that the agreement had entered into force on the 30th day after the 5th instrument of ratification was deposited by Iran with the ECO Secretariat in March 2008. However, Iran did not agree and informed the meeting that the agreement had not yet entered into force as Tajikistan had not yet ratified the annexes to the agreement. It was, therefore, decided that these issues will be discussed in the next Co-operation Council (CC) meeting.
The sources said Pakistan believes that robust implementation of the ECO Trade Agreement (ECOTA) would be a major step towards minimising barriers to trade and ultimately establishing a Free Trade Area in the ECO region by 2015. Being the Co-ordinating country for ECOTA, Pakistan may play a proactive role in persuading the Member Countries to fulfil their obligations under the Agreement and to sort out their differences on the format of Offer Lists for the early implementation of ECOTA.
During the 4th ECO Ministerial Meeting scheduled in Kabul on 13th July, 2011, Pakistan requested Iran and Turkey to show flexibility in their respective positions. Pakistan also urged Iran and Tajikistan to submit their complete ECOTA lists without further delay.
The articles of agreement of ECO Reinsurance Company have been signed by Pakistan, Iran and Turkey on February 10, 2010. The Company is to be based in Karachi. The main purpose of the Company is to supplement existing reinsurance services in the region and promote the growth of national and regional underwriting and retention capacities, minimise the outflow of foreign exchange from the region and support economic development in the region. The Company is a tripartite venture among the three contracting parties. However, only Pakistan has so far ratified its articles of agreements.
The major objectives of the ECO Trade and Development Bank includes mobilising and utilising the financial, natural and human resources of the member States with a view to capitalising on the region's economic potential. The headquarters of the Bank are in Turkey.
The Bank is the financial arm of the Organisation and has commenced operations with a representative office in Karachi. It has a subscribed capital of 300 million SDR (Special Drawing Rights). Pakistan, Iran and Turkey have equal contribution. The ECO Transit Transport Framework Agreement (TTFA) signed by all the member states except Uzbekistan, and ratified by eight member states (all except Turkmenistan and Uzbekistan) entered into force in May 2006. The agreement addressed all issues relating to transport and transit trade in a comprehensive manner.
The ECO fund for implementation of the TTFA has already been established with contribution of $100,000 from the ECO Feasibility study and general purposes fund. The joint ECO secretariat and Islamic Development Bank (IDB) regional project for the implementation of TTFA worth $512,000 is in its final stages of implementation.
An ECO truck caravan comprising all ECO member states except Kyrgyzstan and Uzbekistan was launched from Quetta (with the inaugural ceremony held in Islamabad on 30th September 2010). This initiative was launched under the Transit Transport Framework Agreement (TTFA).
The Member States allocated US $150,000 as an exceptional case from the Feasibility and General Purpose Fund (FGPF) for the Caravan. Islamabad - Tehran - Istanbul (ITI) container train was started from Islamabad on August 14, 2009. Regular operation of the ITI train has begun on monthly basis from October 2010.