‘Trade in ECO region can increase 8-fold’
ISLAMABAD: A recent study conducted by the Pakistan Institute of Development Economics (PIDE) has shown that trade in the Economic Cooperation Organisation (ECO) region can increase by a factor of eight folds as a result of a potential free trade agreement among the ECO member countries.
According to PIDE viewpoint, the study conducted for the ECO Secretariat argues that the ECO provides an important platform for the member countries to enhance their growth prospects through greater trade and investment in the region, and suggests measures to bolster regional economic cooperation in the ECO.
Geographical proximity, shared social and cultural characteristics, and diversity in economic structures all combine to make up a strong case for promoting regional economic integration in the ECO region. The ECO region with average per capita gross domestic product (GDP) of $3578 and a combined population of 417 million is well endowed with natural resources like oil and gas, gold, uranium, and iron. The member countries have diverse production structures with Turkey, Iran and Pakistan having strong manufacturing and services sectors and the Central Asian Republics in the process of transformation from centrally planned economies to market based systems. Liberal trade policies can result in trade creation among the member countries entailing several benefits including lower prices, more product variety and quality, and improved incentives for innovation. The benefits of regional economic integration can go far beyond trade creation. For example, a greater level of economic integration can be instrumental in locking-in trade policy reforms allowing the countries to enhance their policy credibility. Also, increased economic ties in the region may create mutual stake holding in the region, reduce the risk of conflict, and thus enhance regional security.
The PIDE viewpoint emphasises that the potential for greater trade and investment ties in the region cannot be realized unless supportive measures are adopted to establish trade regimes that are open and responsive to the needs of intra-regional trade and investment. First and foremost, there is a need to further liberalize trade through reduction in tariff and non-tariff barriers. Whereas many countries including Pakistan have already carried out trade policy reforms to liberalise their trade regimes, some ECO members continue to impose high tariffs and non-tariff barriers. Besides a liberal tariff regime, there is a need to improve trade facilitation mechanisms in many ECO member countries especially Uzbekistan, Tajikistan, Turkmenistan, and Kyrgyzstan. It is generally believed that doing business in these countries is difficult because of the cumbersome and complex bureaucratic requirements imposed on international trade transactions as well as inefficient trade and transport infrastructure. Trade facilitation is universally accepted as a means of improving the efficiency of international trade and economic development. Trade facilitation is an issue that is linked to a number of critical areas with far reaching implications for competitiveness and economic efficiency. Despite efforts to streamline the customs procedures, the clearance of consignments remains a problem due to weaknesses in customs administration and cumbersome regulatory procedures.
According to the PIDE viewpoint, the ECO region offers a win-win situation for the member countries to enhance their development and growth prospects through greater intra-regional trade and investment. Pakistan is a key strategic partner in the ECO region and it can and must use its influence to move the process of regional economic integration forward. In particular, Pakistan should push for the full implementation of ECOTA that will set the stage for an eventual free trade agreement in the region. Also, there is a need to facilitate business-to-business contacts in the ECO region. The importance of advisory services, market intelligence, and export promotion in helping private businesses to sell their products in the regional markets cannot be overemphasised. The government can also help in international trade fairs, and overseas market visits to provide exposure to regional markets. At the institutional level, Pakistan needs to work closely with the
ECO Secretariat to help set up a joint commission on economic and technological cooperation in the ECO region. The commission may serve as an umbrella to oversee all initiatives of regional economic cooperation including trade in goods and services, mutual investment, technical collaboration, and cross-border trade in energy. Finally, and perhaps most importantly, a greater level of economic integration in the ECO region can be instrumental in the restoration of regional peace and security that is so vital for the economic development and prosperity of Pakistan.