Regional Economic Groupings of The Oic Countries

Journal of Economic Cooperation 21, 2 (2000) 67-114
REGIONAL ECONOMIC GROUPINGS OF THE OIC

COUNTRIES
SESRTCIC
The present survey starts with a review of various forms of regional economic
groupings and discusses the economic and commercial gains that may be made
from such integration schemes. It then examines different aspects of regional
economic groupings involving the OIC countries, including establishment,
objectives, and institutional structure, among others, and evaluates the
progress achieved by those groupings in reaching their objectives. Finally, it
emphasises the need for new regional arrangements amongst the OIC Member
Countries.
1. INTRODUCTION
Economic regionalisation can be viewed as one of the major instruments

of promoting international trade activities among countries through
removal of barriers to mutual trade in goods and services by means of
free trade areas, customs unions and other preferential trade
arrangements. Further linkages may be stimulated through freer
international exchanges of capital and labour.
When two or more countries come together to form a regional trade

grouping, that will have two types of effects. The first is the trade
creating effect, which will increase the national income in the
participating countries. The second will be the trade diversion effect,
meaning a resulting change in the direction of trade activities in favour
of the member countries and against the non-members. This actually
implies disadvantages and losses on the part of the non-member
countries. For this reason, the formation of a trade bloc is a very
important issue not only for the signatory countries but also for the non-
member countries.
68 Journal of Economic Cooperation
Within the framework of the globalisation efforts conducted under,

first, the General Agreement on Tariffs and Trade (GATT), and second,
the World Trade Organisation (WTO), the utmost importance was given
to the principle of non-discrimination at the international and national
levels. The first principle is known as the most-favoured-nation (MFN)
clause and requires that any trade concession extended to a country must
be automatically and immediately applied to all other GATT/WTO
members. The second principle requires all the members to treat
imported goods in the same manner as domestic products. Additionally,
customs duties must be the only tools to protect domestic goods.
Although these two very basic principles were agreed under the
GATT/WTO, there are, indeed, some effective exceptions to these rules.
One exemption from the most-favoured-nation clause is the case of free
trade areas and customs unions. Only in these economic groupings is
‘discrimination’ made permissible against the non-member countries.
Another exception to the principle of non-discrimination is the

special status of the developing countries. Trade preferences extended to
the developing countries are also excluded from the MFN clause. In
other words, preferential treatment extended to the developing countries
will not be granted compulsorily to the other countries.
Although trade liberalisation efforts at the global level are

accelerating even day by day, regional economic groupings (REG) or
regional trade blocs are also gaining momentum as indispensable forms
of increasing trade amongst the countries, developed or developing, to
satisfy their growth and development aspirations.
At the level of the developed countries, the European Union (EU),

the North American Free Trade Agreement (NAFTA) and the Asia-
Pacific Economic Co-operation (APEC) have created huge economic
blocs. These three blocs are very important in terms of both their
weights in the world trade and economy and their inherent tendencies
towards further enlargement and deepening.
The OIC member countries have also established and/or joined many
regional economic co-operation schemes. Some are formed with other
OIC countries. Others include non-OIC partners.
Regional Economic Groupings of the OIC Countries 69
The present survey aims to evaluate the regional economic groupings

of the OIC countries to shed some light on the level of integration efforts
amongst the OIC member states.
1.1. Forms of Regional Economic Groupings
Regional economic groupings aim at creating a larger economic unit

from smaller national economies. For this purpose, they aim to remove
trade barriers and establish closer co-ordination and co-operation among
the countries involved.
Depending upon the level of integration, regional economic

groupings may be classified into six major groups as follows:
1. Preferential trade areas;

2. Free trade areas;
3. Customs unions;
4. Common markets;
5. Monetary unions;
6. Economic unions.
A preferential trade area is the weakest form of economic grouping.

The member countries reduce customs tariffs in some product
categories. They apply a preferential treatment to some groups of goods
from the member countries as compared to the rest of the world. Higher
tariffs would remain in place for all remaining product categories.
In free trade areas, participants aim mainly to expand trade activities

among themselves. For this purpose, they eliminate customs tariffs on
the products they produce themselves. However, they maintain their own
external tariff on imports from third parties. For this reason, free trade
areas are criticised on the ground that import products from third
countries may penetrate into the grouping through the customs of the
Member State with the lowest tariff and may then be re-exported to the
other participants. In order to prevent such trade, free trade areas
generally develop very elaborate rules of origin.
A customs union, on the other hand, is a higher form of free trade

area, and eliminates the deficiency mentioned above. In a customs union,
the participants not only agree to abolish or reduce tariffs between
themselves, they also set a common external tariff policy against third
parties. In this manner, the member countries, on the one hand, secure
the free or privileged flow of tradable goods amongst themselves, and on
the other hand, they form a discriminatory trade bloc against the non-
member countries. In this case, the main concern becomes the co-
ordination of the trade policies amongst the member countries instead of
developing elaborate rules of origin.
A common market allows a free flow of not only the goods but also
the services and the factors of production such as capital, labour,
entrepreneurship, etc., across countries. It also establishes a common
external tariff policy against third parties. However, such a scheme
necessitates the co-ordination of commercial and industrial policies.
Citizens of a common market can work and invest in any member
country without any restriction.
A monetary union establishes a central monetary authority, which

will determine monetary policy for all the participating countries. That
authority issues a common currency to be circulated among the member
countries. The EU members have concentrated their efforts on reaching
that stage of integration. In this context, they introduced the single
European currency (the Euro) on 1st January 1999. At this stage, the
Euro is being used as a unit of account in bank operations. The Euro
notes and coins will be circulated together with the national currencies
starting from 1st January 2002. The Euro will completely replace the
national currencies after 1st July 2002.
In an economic union, the participants will maintain free trade in

goods and services, set common external tariffs among members, allow
the free mobility of capital and labour. Additionally, they also agree to
harmonise their national economic policies, and act as a single economic
unit. The European Union (EU) is also a very good example of such an
integration scheme. In the EU, the integration efforts extended even to
the harmonisation of social policies.
1.2. Gains from Regional Economic Groupings
As we have mentioned earlier, when countries form a regional economic

grouping, two types of effect may arise: trade diversion and trade
creation. Trade diversion is the resulting shift in the direction of trade in

favour of the member countries and against third parties. On the other
hand, trade creation will induce economic activity in the region and give
an impetus to income creation.
Formation of a regional economic grouping will, first of all, enlarge

the volume of demand for commodities produced in the region. As a
result, when any investment decision is to be taken, entrepreneurs will
consider the whole region and invest in large-scale production units.
This fact will have two effects. First, it may increase efficiency and
competitiveness through economies of scale in production of goods
already being produced in the region. Secondly, it may also make
possible the production of new commodities within the region. These
two results are the direct effects of economic groupings. These will bring
about more income creation within the region.
Due to the expansion of the market, trade and income creation will
result in increased exports, increased trade exchanges, more investment,
more output, higher rate of employment, new business opportunities,
new goods produced in the region. Foreign trade structure and
production possibilities will change. Expanded exports will improve the
balance of payments, and that, in turn, may decrease the debt burden on
the economies. A greater market may induce foreign capital from third
parties. Structural changes will improve the quality and quantity of the
products in the region. Specialisation and better division of labour would
increase production, productivity and economic growth. Larger markets
for commodities and factors of production will give an impetus to
technological changes. The overall benefits will be reflected on the
increased output, income and welfare of the people.
2. REGIONAL ECONOMIC GROUPINGS OF THE OIC

COUNTRIES
Table 1 shows at a glance the membership of the OIC Countries in these

regional economic groupings.
Table 1: Regional Economic Groupings of the OIC Countries

A U C C E E I M W A C G A B C E E S
E D O B C C O R A M A C S S I A C A
C E M I C O C U E U E C E E S E O A
A E A W M U A C C R
C S S A U N C
A S
Sub-Saharan Africa
Benin * * *
Burkina Faso * * *
Cameroon * * *
Chad * * *
Comoros * * * *
Djibouti * *
Gabon * * *
Gambia * *
Guinea * * *
Guinea-Bissau * *
Mali * * *
Mauritania * * * *
Mozambique * *
Niger * * *
Nigeria * *
Senegal * * *
Sierra Leone * * *
Somalia * *
Sudan * * *
Togo * * *
Uganda * * *
Middle East, North Africa
Algeria * *
Bahrain *
Egypt * *
Iraq *
Jordan *
Kuwait * *
Lebanon
Libyan A. Jamahiriya * * *
Morocco *
Oman *
Palestine *
Qatar *
Saudi Arabia *
Syria *
Tunisia * *
United Arab Emirates * *
Yemen *
Asia and Europe

Albania *
Afghanistan *
Azerbaijan * * *
Bangladesh *
Brunei * *
Indonesia * *
Iran *
Kazakhstan * *
Kyrghyz Rep. * *
Malaysia * *
Maldives *
Pakistan * *
Tajikistan * *
Turkey * *
Turkmenistan * *
Uzbekistan * *
Notes:
AEC: African Economic Community.
UDEAC: Central African Customs and Economic Union.
COMESA: Common Market for Eastern and Southern Africa.
CBI: Cross-Border Initiative.
ECCAS: Economic Community of Central African States.
ECOWAS: Economic Community of West African States.
IOC: Indian Ocean Commission.
MRU: Mano River Union.
WAEMU: West African Economic and Monetary Union.
AMU: Arab Maghreb Union.
CAEU: Council of Arab Economic Unity.
GCC: Gulf Co-operation Council.
ASEAN: Association of South East Asian Nations.
BSEC: Black Sea Economic Co-operation.
CIS: Commonwealth of Independent States.
EAEC: East Asian Economic Caucus.
ECO: Economic Co-operation Organisation.
SAARC: South Asian Association for Regional Co-operation.
2.1. African Economic Community (AEC)
The AEC was established at the end of the 27th Session of the
Organisation of African Unity (OAU) held in Abuja, Nigeria, on 3 June
1991, on adoption of the Treaty Establishing the African Economic
Community or Abuja Treaty. The Treaty came into force on 12 May
1994 after its ratification by the two-thirds of the OUA members. It is
composed of the members of the OAU1.
1 Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon,

Cape Verde, Central Africa Republic, Chad, Comoros, Congo, Cote
d'Ivoire, Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon,
Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Libya,
The objectives of the Community can be summarised as follows:
(a) To promote economic, social and cultural development and the

integration of African economies in order to increase economic self-
reliance and promote an endogenous and self-sustained development.
(b) To establish, on a continental scale, a framework for the

development, mobilisation and utilisation of the human and material
resources of Africa in order to achieve a self-reliant development.
(c) To promote co-operation in all fields of human endeavour in order to

raise the standard of living of African peoples, and maintain and
enhance economic stability, foster close and peaceful relations
among Member States and contribute to the progress, development
and the economic integration of the Continent.
(d) To co-ordinate and harmonise policies among existing and future

economic communities in order to foster the gradual establishment
of the Community.
The Community shall be established gradually in six stages of

variable duration over a transitional period not exceeding thirty-four
years. At each stage, specific activities shall be assigned and
implemented as follows:
(a) First Stage: Strengthening of existing regional economic

communities within a period not exceeding five years.
(b) Second Stage will be completed within a period not exceeding eight
years:
(i) Stabilisation of tariffs and other barriers, and internal taxes;
Madagascar, Malawi, Mali, Mauritania, Mauritius, Mozambique,

Namibia, Niger, Nigeria, Rwanda, Sao Tome and Principe, Senegal,
Seychelles, Sierra Leone, Somalia, South Africa, Sudan, Swaziland, Togo,
Tunisia, Uganda, Tanzania, Zaire, Zambia, Zimbabwe (OIC Countries are
in bold).
(ii) Strengthening of sectoral integration at the regional and

continental levels in all areas of activity particularly in the fields
of trade, agriculture, money and finance, transport and
communications, industry and energy; and
(iii) Co-ordination and harmonisation of activities among the

economic communities.
(c) Third Stage: Establishment of a Free Trade Area within a period not
exceeding ten years.
(d) Fourth Stage: Co-ordination and harmonisation of tariff and non-

tariff systems among the various regional economic communities
with a view to establishing a Customs Union at the continental level
by means of adopting a common external tariff within a period not
exceeding two years.
(a) Fifth Stage: Establishment of an African Common Market within a

period not exceeding four years through:
(i) The adoption of a common policy in several areas such as

agriculture, transport and communications, industry, energy and
scientific research;
(ii) The harmonisation of monetary, financial and fiscal policies;
(iii) The free movement of persons.
(a) Sixth Stage: Consolidation and strengthening of the African

Common Market within a period not exceeding five years through,
inter alia:
(i) The free movement of people, goods, capital and services;
(ii) The integration of all the sectors, namely economic, political,

social and cultural; establishment of a single domestic market and
a Pan-African Economic and Monetary Union;
(iii) The establishment of a single African Central Bank and the

creation of a single African Currency; and
(iv) The implementation of the final stage for the setting up of the
structure of the Pan-African Parliament and election of its
members by continental universal suffrage.
Progress and Development
The Economic and Social Commission (ECOSOC) is the major organ of

the Community. Article 7 of the Treaty determines its functions. The
Commission held its first ministerial session in November 1996, in
Abidjan, Ivory Coast, for the purpose of setting in motion the
administrative and technical requirements for launching the effective
implementation of the AEC Treaty. Among other things, the first
ministerial session of ECOSOC approved the text of the Protocol on
Relations between the African Economic Community and the Regional
Economic Communities (RECs) and adopted the work programme for
the period 1997-2000 for the establishment of the AEC.
On the other hand, the African Economic Community Summit held

its inaugural session in Harare, Zimbabwe, on 3 June 1997. The 33rd
Assembly of Heads of State and Government of the OAU transformed
itself into the Assembly of the AEC. The Assembly received the reports
on the implementation of the AEC, by the chairmen of the different
regional economic communities, such as COMESA, ECCAS,
ECOWAS, etc. One of the major decisions of the Assembly was the
approval of the Protocol on Relations between the AEC and the regional
economic communities (RECs).
2.2. Central African Customs and Economic Union (UDEAC)
The UDEAC (Union Douanière et Economique de l’Afrique Centrale)

was established on signature of Brazzaville Treaty in Brazzaville,
Congo, on 8 December 1964. Its members are Cameroon, Central
African Republic, Chad, Congo, Equatorial Guinea and Gabon. It
entered into force on 1 January 1966. The UDEAC replaced Equatorial
Customs Union, set up on 23 June 1959. The Central African Republic,
Chad and Congo withdrew in April 1968 to form together the Union of
Central African States (UEAC). The Central African Republic
subsequently rejoined UDEAC in December 1968. The Brazzaville
Treaty was revised and signed by Cameroon, the Central African
Republic, Congo, and Gabon in Yaoundé, Cameroon, on 8 December

1974. Chad also rejoined the Union after the Meeting of the Heads of
State in Brazzaville from 17-19 December 1987.
The UDEAC aims to establish a union among the Member States to

achieve the goal of gradual and progressive establishment of a Central
African Common Market. It also aims to participate in the creation of a
single African Common Market and the consolidation of African unity.
In order to achieve these objectives, it aims to establish a common
customs tariff with respect to third parties, to eliminate impediments to
trade amongst the members, to encourage free movement of goods,
services, capital and property. It also aims to improve the living
standards of the population, harmonise the policies of industrialisation
and co-ordinate their development programmes.
Quantitative restrictions amongst the member countries are being

eliminated. A common external tariff with four rates (5 per cent, 10 per
cent, 20 per cent and 30 per cent) is being implemented. A preferential
tariff equal to 20 per cent of the common external tariffs is to be applied
to the Member States.
Against the efforts aiming to increase the intra-UDEAC trade

exchanges, intra-regional trade is still as low as 3 per cent.
The UDEAC has a common legislation for investment policy.

However, the common investment legislation has not attracted more
foreign investment to the region as a whole.
The Community’s development bank, BDEAC, was created to

mobilise internal and external resources for productive investment and
regional projects, mainly in agriculture and industry, and to promote a
more balanced development. However, its functions are restricted by
lack of enough funds.
The members of the UDEAC are also members of the Franc Zone,
with the common central bank, BEAC (Banque Centrale des Etats de
l’Afrique Centrale). The UDEAC countries signed a treaty establishing
the Economic and Monetary Community of Central Africa (CEMAC) in
March 1994 in order to promote the process of sub-regional integration
within the framework of an Economic and Monetary Union.
2.3. Common Market for Eastern and Southern Africa (COMESA)
It was established on 8 December 1994, on ratification of the Treaty

establishing the Common Market for Eastern and Southern Africa
(COMESA). The treaty was signed in Kampala, Uganda, on 5 November
1993. This treaty replaced the former Preferential Trade Area for Eastern
and Southern African States (PTA) set up in Lusaka, Zambia, on 22
December 1981. The COMESA members are Angola, Burundi,
Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Lesotho, Madagascar,
Malawi, Mauritius, Mozambique, Namibia, Rwanda, Sudan,
Swaziland, Tanzania, Uganda, Zaire, Zambia, and Zimbabwe.
Seychelles and Somalia are in the process of membership. It has also
been referred to as African Common Market.
Objectives
The ultimate objective is to set up the African Economic Community

through the implementation of the provisions of the Treaty establishing
the African Economic Community (Abuja Treaty). This treaty aims to
establish the African Economic Community gradually in six stages of
variable duration over a transitional period not exceeding thirty-four
years (for more information you may see the section on AEC). Under the
Abuja Treaty, the COMESA will negotiate, together with other REGs,
the formation of the Community.
On the other hand, its basic objectives, as determined by the

COMESA Treaty, are:
(a) To attain sustainable growth and development of the Member States

by promoting a more balanced and harmonious development of its
production and marketing structures;
(b) To promote joint development in all fields of economic activity and

the joint adoption of macroeconomic policies and programmes; to
raise the standard of living of its peoples, and to foster closer
relations among its Member States;
(c) To co-operate in the creation of an enabling environment for foreign,

cross-border and domestic investment, including the joint promotion
of research and adaptation of science and technology for

development;
(d) To co-operate in the promotion of peace, security and stability

among the Member States in order to enhance economic
development in the region;
(e) To co-operate in strengthening the relations between the Common

Market and the rest of the world and the adoption of common
positions in international fora; and
(f) To contribute towards the establishment, progress and the realisation

of the objectives of the African Economic Community.
In order to achieve these goals, the COMESA aims to deepen and

broaden the integration process among its Member States through the
adoption of more comprehensive trade liberalisation measures like the
elimination of tariff and non-tariff barriers. It further aims to secure free
movement of capital, labour, and other factors of production through the
elimination of controls on the movement of goods and individuals. It
also recognises the right of establishment throughout the region without
any restriction. It also aims to harmonise tax rates, including value added
tax and excise duties, etc., and conditions regarding industrial co-
operation, particularly on company laws, intellectual property rights and
investment laws in order to create a more favourable investment climate
for the entire COMESA region. At the monetary level, the COMESA
aims to establish a payments union starting with the COMESA Clearing
House. At a later stage, it will develop into a Monetary Union by
adoption of a single currency.
Progress and Development
The COMESA has achieved a lot in the areas of trade, customs,

transport, economic development, finance and technical co-operation.
Impressive progress has also been made in the productive sectors, such
as agriculture, industry, etc.
In the COMESA, tariff reform called for an initial set of tariff cuts
ranging from 10 to 70 per cent with respect to the product items. These
initial cuts were to be followed by 10 per cent tariff reductions every two
years between 1988 and 1996. A further 50 per cent would be reduced in
two steps: 20 per cent in 1998 and 30 per cent in 2000. NTBs were to be
eliminated during that period as well. To ease intra-community flow of
merchandise trade, the Road Customs Transit Declaration (RCTD) was
introduced to stop the need to buy separate insurance in every country. In
1988, checks denominated in UAPTA (PTA Unit of Account) were
issued in order to facilitate intra-regional transactions.
Such trade facilitation and trade liberalisation measures resulted in a

sharp increase in intra-community trade from US$ 834 million in 1985
to US$ 1.7 billion in 1994. In nine years, it was more than doubled or in
other words, it represents an annual growth rate of 8.2 per cent. It is also
indicated that intra-COMESA trade can increase to about US$ 4 billion
annually. Such a fruitful development occurred mainly due to the
reduced transport costs which is, in turn, obtained as a result of traffic
facilitation measures. Studies indicate that transport costs have been
reduced by a factor of about 25 per cent.
The COMESA has also reached an agreement to implement a

Common External Tariff (CET) by the year 2004. The Common
External Tariff will be 0%, 5%, 15% and 30% on capital goods, raw
materials, intermediate goods and final products, respectively.
In order to increase the trade exchanges between the participating

countries, the COMESA developed a mechanism of “Automated System
for Customs Data and Management (ASYCUDA)”. This project basically
aims to simplify and harmonise the customs procedures and documents,
and to standardise the collection of reliable, accurate and up-to-date trade
statistics. It will assist the business community to clear goods faster from
customs areas. The project also aims to modernise customs administration.
The ASYCUDA is being implemented in 13 COMESA countries

(Burundi, Comoros, Eritrea, Ethiopia, Madagascar, Mauritius, Namibia,
Rwanda, Sudan, Tanzania, Uganda, Zaire, and Zimbabwe). Malawi,
Swaziland and Zambia also applied for the system.
The COMESA developed a Monetary Harmonisation Programme

(MHP). This programme is to be implemented in four phases, from 1991
to 2025. At the final phase, a full monetary union will be established

with the introduction of a single currency issued by a common monetary
authority. The Programme also envisages full harmonisation of
economic, fiscal and monetary policies of Member States, and full
integration of the financial structures of Member States.
Within the framework of this Programme, most countries have now

fully liberalised their exchange rate systems in which the market
determines the cross-rates. Exceptional countries are Eritrea, Ethiopia
and the countries that belong to the Common Monetary Area, which peg
their exchange rates to the South African Rand.
The COMESA countries followed tight monetary policies and they

were relatively successful in maintaining price stability and competitive
exchange rates. They also managed to acquire reasonable fiscal balances
through reducing public expenditure, restructuring their tax systems, and
following privatisation programmes.
The COMESA has established several important institutions,

including the Eastern and Southern African Trade and Development
Bank, the COMESA Clearing House, the COMESA Re-insurance
Company and the COMESA Leather and Leather Products Institute.
The Eastern and Southern African Trade and Development Bank

(formerly PTA Bank) provides trade and project financing to public and
private investors in the Member States. Current members of the Bank
are Burundi, Comoros, Djibouti, Ethiopia, Eritrea, Kenya, Malawi,
Mauritius, Rwanda, Sudan, Tanzania, Uganda, Zambia, Zimbabwe and
the African Development Bank.
The Bank has, over the years, been very active in promoting
investments and providing trade-financing facilities. The Bank’s
cumulative trade finance activities between 1992-1996 stood at US$ 345
million and the cumulative project approvals between 1995-1996,
totalled around US$ 148 million.
The bank’s trade financing facilities are short-term, ranging from a

few days to one year. The minimum facility limit is US$ 250,000 and the
maximum limit is US$ 50 million. Financing instruments used by the
bank include pre- and post-shipment advances, bill discounting, loan

syndication, letters of credit confirmations, the gold loan and the
structured pre-shipment finance facility. The Bank finances the projects
in the area of agriculture, mining, manufacturing, tourism, transport and
energy.
In the Bank’s project lending operations, the priority is given to the

projects which are export-oriented, depend on local resources for their
inputs and comply with environmental protection standards. The priority
sectors are manufacturing, agro-industries, tourism, mining and
infrastructure. The main financial instruments used for providing project
finance are direct loan finance, lines of credit, minority equity
participation and loan guarantees.
Recently, decisions have been taken to make the COMESA Clearing

House more responsive to the current needs of the Member States,
especially the private sector. Among other things, the COMESA Dollar
was introduced to replace the UAPTA as the new Unit of Account of the
COMESA Clearing House.
The COMESA Re-Insurance Company (ZEP-RE) was established in

1992 with 17 signatory Member States (with 21 shareholders in these
Member States). The objectives of ZEP-RE are to assist with the
development of the insurance and re-insurance industry in the region.
Since its inception, it has been able to reach to a reasonable share of

the regional insurance business. It is now doing business in some
nineteen (19) countries. The authorised capital stock of ZEP-RE is US$
27.28 million which is divided into one half paid in shares and the other
half in callable shares. Some Member States have not yet taken up
shares allocated for them. Out of the total expected value of paid up
shares of US$ 13.64 million, the paid up share capital currently stands at
US$ 6.4 million. Two additional Member States acceded to the ZEP-RE
Agreement in August 1996.
Transport and communications play a key role in increasing levels of

intra-regional trade. Now, being aware of this fact, the COMESA aims
to address the regulatory and policy aspects of transport and
communications to make the movement of goods, services and people
between countries in the region easier and cheaper. With a legal

framework and suitable environment in this area, private sector business
can operate more effectively within the COMESA region.
The COMESA, recognising the need to promote investment in the

region, also tries to facilitate cross-border investments through bilateral
agreements, and to identify specific projects that have the potential to
induce economic growth and development in two or more Member States.
The COMESA countries have achieved a lot in increasing economic

co-operation and co-ordination amongst themselves, in implementing
the agreed economic and monetary programmes to maintain economic
stability in the region and in preparing themselves for higher stages of
economic integration. However, they are still heavily dependent on
donor financing through balance of payments support and programme
financing, and on revenues from limited export products and/or markets.
Their economies are also very vulnerable to economic shocks, both
endogenous and/or exogenous, which can cause long-term setbacks.
2.4. Cross-Border Initiative (CBI)
The CBI was established in 1993. Its members are Burundi, Comoros,
Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles,
Swaziland, Tanzania, Uganda, Zambia, and Zimbabwe. It is open to the
countries of East and Southern Africa and the Indian Ocean. The
members of the other REGs in the region like COMESA, IOC, etc., can
participate in the CBI.
It aims to facilitate private investment, trade, payments and factor

mobility between the participating countries. In so doing, it hopes to
move towards increased economic integration. It also supports the
integration objectives of the COMESA and the IOC. It aims to remove
intra-regional trade barriers, particularly the non-tariff barriers (NTB), to
lower the tariffs on trade of goods and services at least to the level of the
member with the lowest tariffs, to liberalise administration and other
controls relating to investment activities within the region.
Right from the outset, the focus was on the participation of the
private sector in the whole process. The private sector defines the factors
hindering cross-border economic activity. This active participation of the

private sector keeps the proposed packages practical. Involvement of the
local businessmen and public officials to discuss problems and possible
solutions in the technical working groups allows the development of
consensus at the national level among key economic agents and
decision-makers in the participating countries.
At the regional level, CBI has undertaken an intensive dialogue with

regional and pan-African organisations. It is noteworthy that the CBI
developed intense relations with the OAU in particular. This outcome
reflects their close involvement in the process as well as the pressures
for realism and pragmatism exerted on the process by the private sector.
A small Steering Committee (SC) administers the whole process and

incorporates reactions and inputs from all parties.
2.5. Economic Community of Central African States (ECCAS)
Economic Community of Central African States (ECCAS) was

established in Libreville, Gabon in December 1981, during the
Conference of the Heads of State of Economic Community of the Great
Lakes Countries. Its foundations were based on the recommendations of
the Lagos Meeting of the Organisation of African Unity (OAU) in 1981
within the framework of the Lagos Plan of Action in 1980. The treaty
establishing the ECCAS was adopted on 18 October 1983, Libreville,
Gabon and entered into force on 18 December 1984. Its members are
Angola, Burundi, Cameroon, Central African Republic, Chad, Congo,
Equatorial Guinea, Gabon, Rwanda, Sao Tome and Principe, and Zaire.
It basically aims to promote and reinforce harmonious co-operation

and balanced, self-maintained development in all areas of economic,
social, cultural, scientific and technical activity in order to:
• Realise collective autonomy;
• Raise the living standards of the people;
• Increase and maintain economic stability;
• Reinforce close and peaceful relations among member states; and
• Contribute to the development of the African Continent.
On the other hand, the ECCAS specifically aims to eliminate

customs duties and similar taxes, and to abolish other non-tariff barriers
to trade exchanges amongst the participating countries. It also aims to

establish a common commercial policy with respect to third countries.
Ultimately, it desires to secure the free movement of persons, goods,
services, capital and the right of establishment. Similarly, the ECCAS
also aims to harmonise the national policies with respect to the industry,
transport and communications, energy, agriculture, natural resources,
trade, currency, finance, human resources, tourism, education and
culture, and science and technology.
The ECCAS succeeded in prohibiting the use of non-tariff barriers in

intra-community trade. In order to ease the payments problems amongst
themselves, its Member States set up a clearing house in February 1989.
Legislation on road transport is being harmonised. The ECCAS also
agreed to interconnect telecommunication networks amongst the
participating countries within the framework of the Pan African
Telecommunications Network (PANAFTEL). Co-ordinating and
expanding efforts are continuing at the regional level in Central Africa.
Within the framework of the ECCAS, many projects are being
undertaken. Some are related to the implementation of the Sub-Regional
Drug Control Master Plan for Central Africa.
2.6. Economic Community of West African States (ECOWAS)
The treaty establishing the ECOWAS, known as Treaty of Lagos, was

signed in Lagos, Nigeria, on 28 May 1975. The founding members were
Benin, Burkina Faso, Gambia, Ghana, Guinea, Guinea-Bissau, Ivory
Coast, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra
Leone, and Togo. Cape Verde joined in 1977. In May 1990, the member
countries agreed to rationalise sub-regional institutions in West Africa
within the framework of the ECOWAS. In other words, the ECOWAS
will become the only economic co-operation organisation in West Africa
region.
Basically, the ECOWAS aims to promote economic co-operation

and development in the region. It also aims to harmonise fiscal and
monetary policies among Member States and to undertake joint
development projects. As a result of these processes, it expects to
contribute to the progress and development of Africa. It also aims to
improve relations amongst its members, to contribute to the economic
and political stability in the region and to increase the living standards of
the people in the region. These goals are to be achieved through the
promotion of co-operation and development in all fields of economic
activity, particularly, in intra-regional trade, money and finance,
industry, transportation and communications infrastructures, energy,
natural resources, agriculture, and regional and rural development
projects. The Community pursues the physical integration of its Member
States through the development and modernisation of regional highway
and telecommunication networks. As an ultimate goal, the ECOWAS
intends to create an economic and monetary union.
Within the framework of ECOWAS, the member countries agreed to

establish a common market within a period of 15 years ending in 1989.
They decided not to increase the customs duties on imports of goods
from another Member State from 28 May 1979. The ECOWAS also
agreed to eliminate non-tariff barriers by 1995. Furthermore, a protocol
on freer labour mobility was signed in 1979, but it has not been
implemented yet. They also agreed to harmonise their customs
documents and procedures. A free trade area has been in operation for
raw agricultural goods since May 1981. In the case of industrial goods,
customs duties and similar charges and taxes on imports originating
from the member countries are to be reduced in six stages spread over
six years in relatively more developed members, such as Ghana, Ivory
Coast, Nigeria, and Senegal. In other members, this process was to be
completed in eight stages over eight years. Furthermore, Member States
will also eliminate all the non-tariff barriers in intra-communal trade.
In 1995, intra-regional trade remained under six per cent of the total
trade due to the widespread use of safeguard measures and homogeneous
economic structures of the participating countries.
A three-stage programme has almost been completed for establishing

the free movement of West Africans in the Community, and the right of
residence and establishment.
Member States have committed themselves to the co-ordination and

harmonisation of national economic and financial policies in order to
enhance the effectiveness of national structural adjustment and economic
reform programmes.
Additionally, the Community implements sectoral programmes in

the fields of agriculture, industry, energy and health. These programmes
include the seed production and cattle breeding centres, agricultural
research programme, fishing agreements, co-ordination of desertification
control programmes, rural water supply schemes, regional master plan
for industrial development, inter-connection of national electric grids,
regional pipeline for the distribution of natural gas, co-operation in
health matters, establishment of the West African Health Organisation
(WAHO), establishment of equivalence for degrees and diplomas, etc.
In the Treaty, particular emphasis was placed on promoting the

involvement and participation of the private sector in the development
and integration of the economies of the region. The Community
encouraged the establishment and functioning of private enterprises and
institutions in the region such as a privately-owned regional commercial
bank (ECOBANK), the Federation of West African Manufacturers
Associations, the Federation of West African Chambers of Commerce,
the West African Journalists Association, the West African Youth
Union, the West African Women’s Association, the West African Road
Transporters Union, etc.
One of the principal objectives of the Treaty of Lagos is the creation

of an economic and monetary union, to be achieved in stages. The
Community’s monetary programme has the medium-term objective of
achieving regional convertibility of the national currencies and, in the
longer term, the creation of a single monetary zone. Following the
adoption of “ECOWAS Monetary Co-operation Programme” in July
1997, studies are proceeding on the formation of a single monetary zone.
The ECOWAS Exchange Rate System (EERS) will be set up along with
a credit guarantee scheme.
2.7. Indian Ocean Commission (IOC)
The Indian Ocean Commission (IOC) was established by the Ministers

of Foreign Affairs of Madagascar, Mauritius, and Seychelles in Port
Louis, Mauritius, on 21 December 1982.
The founding agreement, General Co-operation Agreement, was

signed in Victoria, Seychelles, on 10 January 1984. Then, on 7 January
1986, Comoros and France (for Reunion) joined the IOC. An additional
Protocol to the General Co-operation Agreement was adopted in
Victoria, Seychelles, on 14 April 1989.
The objectives of the IOC are:

• To strengthen links among the people of the South West Indian
Ocean;
• To increase their quality of life by promoting co-operation in
economic, commercial, and industrial areas.
Successes have been achieved in sectoral co-operation in fishing,

transport, communication, and information. In the 1990s, some projects
in these fields were undertaken, such as a programme on tuna fishing, a
regional tourism development project, a maritime transport project,
protection and management of environmental resources, reinforcement
of meteorological services, etc. The IOC envisages a reduction in tariffs
among the member countries. The IOC also organises an annual trade
fair.
2.8. Mano River Union (MRU)
The Mano River Union (MRU) was established as a customs union

between the governments of Liberia and Sierra Leone with the signing
of the Mano River Declaration in Malema on 3 October 1973. The
agreement was open to the other states in the West African region. Later,
Guinea joined the Union in 1980.
The Union aims to expand trade, encourage productive capacity,

harmonise tariffs and trade regulations, promote joint development
projects, secure a fair distribution of benefits from economic co-operation.
A Common External Tariff was set up between Liberia and Sierra

Leone in April 1977. The trade between Liberia and Sierra Leone was
liberalised for goods of local origin starting on 1 May 1981, as the initial
stage towards a customs union. Guinea has later joined the trade
liberalisation scheme.
In addition to the establishment of a customs union, the Union has

also promoted economic co-operation and development in various fields.
An industrial development programme has been put into implementation

to improve the industrial base and to increase the industrial production.
The programme would design, in a more rational manner, the location of
industrial projects amongst the Member States.
In the field of agricultural development, a land-resource survey

project, covering the Mano River Basin was completed and on the basis
of the results of this survey, an integrated agricultural master plan was
also prepared comprising agricultural development, irrigation and hydro-
electricity schemes. The Union supports co-operation amongst the
Member States in the fields of forestry, fisheries, and marketing of
agricultural goods. In this respect, policies, rules and regulations are
harmonised to facilitate the marketing and to increase the
competitiveness of the local agricultural products.
The Union has also improved transport infrastructures amongst the

members. The Mano River Bridge between Liberia and Sierra Leone
was opened in February 1976. High quality roads are planned to link
Freetown (Sierra Leone), Monrovia (Liberia) and Conakry (Guinea).
2.9. West African Economic and Monetary Union (WAEMU)
Following an Agreement signed on 10 January 1994 by the governments

of the seven member countries, the West African Economic and
Monetary Union (WAEMU) was established on 1 August 1994. It
replaced the earlier West African Monetary Union (WAMU) and West
African Economic Community (WAEC or CEAO). Its members are
Benin, Burkina Faso, Ivory Coast, Mali, Niger, Senegal, and Togo.
The WAEMU’s basic objectives are to:
a) Strengthen competition in the economic and financial activities of

Member States in the context of an open, competitive market and a
streamlined, harmonised legal framework;
b) Ensure the convergence of the economic performance and policies of

Member States by instituting multilateral surveillance procedures;
c) Create a common market among Member States based on

i. the free flow of persons, goods, services, and capital;

ii. the right of establishment of persons exercising an
independent or wage-earning activity; and
iii. a common external tariff and a common trade policy;
a) Establish the co-ordination of national sectoral policies by

implementing joint action and, where possible, establishing common
policies, especially in the following areas: human resources, urban
and rural development, transportation and telecommunications,
environment, agriculture, energy, industry, and mining;
b) Harmonise the laws of Member States to the extent necessary for the
proper functioning of the common market, particularly their tax
systems.
The WAEMU basically aims to make the economic and financial

activities of the Member States more competitive in the context of an
open market based on free competition. It also aims to harmonise
economic policies including national sectoral policies, tax systems and
to create a common market. The member countries have already
experienced an existing monetary union through the Banque Centrale
des Etats de l’Afrique de l’Ouest (BCEAO). This experience will be
reinforced with a common market. The establishment of a common
market necessitates the co-ordination of macroeconomic policy in the
Member States, fiscal convergence, harmonisation of budget procedures
and related legislation, and business law.
Recently, the WAEMU countries acquired structural reforms,

including the devaluation of the CFA franc. As a result of these
developments, economic performance strengthened significantly since
1994. In the region, the growth rate moved from an average of 0.5 per
cent during the period 1990-93 to 5.5 per cent in 1997, which also
represents a positive rate of growth per capita. Budget deficits fell from
an average of 6.7 per cent of GDP to 1.8 per cent. Similarly, current
account deficits, on average, decreased from 7.8 per cent of GDP to 5.2
per cent during the same period. After the initial devaluation-induced
price increases between 1994 and 1995, inflation rates declined
considerably, reaching, on average, 4 per cent in 1997.
Despite these positive results, a major problem remains unsolved in

these countries. That is, the lack of necessary funds for financing basic
development projects that can accelerate the pattern of growth. Financial

markets in these countries are not deep enough to provide such funds.
Savings are inadequate. Investment activity is far from being
satisfactory. Economic growth is not yet high enough to achieve
significant reductions in poverty.
Tariffs could not be abolished completely, because the WAEMU

countries still remain and, unfortunately, will remain dependent on
external trade taxes for budgetary revenue. Since economic activity is
low, the tax base is still narrow.
The population of the WAEMU is equal to about two-thirds of

Nigeria’s population. Additionally, its real GDP is equal to almost 90
per cent of Nigeria’s GDP. Nevertheless, a single market will
undoubtedly help the countries of the WAEMU to overcome the
disadvantages of their small economic size, and help them prepare to
compete internationally and to integrate their economies into the world
market. Furthermore, it may attract more foreign direct investment to
accelerate the economic development of the region.
2.10. Arab Maghreb Union (AMU)
AMU was established at the end of the Summit Conference of five

countries in the region, met in Marrakesh, Morocco, on 17 February
1989. Members are Algeria, Libyan A. J., Mauritania, Morocco and
Tunisia, all of which are also members of the OIC. The Maghreb
Region with 76.0 million people and a total income of $123.6 billion in
1998 shows a considerable potential. The region’s exports amount to
$32.7 billion and the imports to $33.5 billion in 1998. The principal
export products are crude petroleum, petroleum products and liquefied
petroleum gas (LPG) in the case of Algeria and Libya, food, beverages,
crude and manufactured fertilisers and inorganic chemicals in Morocco,
Iron ore in Mauritania, and textiles, men and women clothes, leather
goods and footwear in Tunisia.
The AMU aims to strengthen economic and cultural relations, to

ensure regional stability and to increase trade exchanges amongst the
countries in the region. It desires to create a Maghreb Economic Space in
which the free movement of citizens, goods, services and energy
products within the region is foreseen. It also aims to create a customs

union. It puts forward the broad economic strategy to be followed,
namely the development of agriculture, industry, commerce, food
security, and the setting up of joint projects. The agreement allows
bilateral arrangements between the participating countries. The
agreement also provides for the possibility for other Arab and African
countries to join the Union at a later stage.
Since 1989, the member countries have signed many multilateral

agreements covering diverse economic, social, and cultural areas.
However, only five of them have been ratified by all members of the
union. These include agreements on trade and tariffs (covering all
industrial products); trade in agricultural products, investment
guarantees; avoidance of double taxation; and phytosanitary standards.
In its 1991 meeting, the AMU agreed on a four-stage economic

integration process. The announced deadlines were the end of 1992 for
the establishment of a free trade area, the end of 1995 for a customs
union and the end of 2000 for a common market. There was no set
deadline for the stage of monetary union.
In December 1991, the Governors of the Central Banks of the AMU

signed a multilateral agreement to help facilitate inter-bank payments
within the region. The agreement sets unified modalities of payments
between the central banks, and provides for monthly settlement of
balances between the countries without interest. The unit of account is
the SDR and the settlement currency is chosen by the creditor country.
The Agreement went into effect in April 1992.
The AMU's Secretariat was established in Rabat in 1992. The

highest body of the union is the Council of Heads of State. Unanimity is
needed for the decisions. A Council of Foreign Affairs Ministers also
meets regularly to prepare for the sessions of the Council of Heads of
State. The Ministers also examine the proposals formulated by
subordinate committees and specialised ministerial commissions. These
specialised commissions are working in such areas as economic and
financial affairs, basic infrastructure, human resources and food security.
Several working groups have also been created to address some
technical issues. A Follow-up Committee follows the implementation of
resolutions adopted by the Council of Heads of State.
However, since its inception, the Union remained stagnant until

recent years. The member countries are now discussing plans to revive
the AMU. Especially, the private sector in the region is pushing for its
revival. Members of the Union have also close relations with the EU.
The EU is the main customer of the region. Morocco and Tunisia have
signed association agreements with the EU, aiming to bring them into a
free trade area by 2010. Algeria is also negotiating a similar agreement
with the EU. The agreements are part of the Euro-Mediterranean
initiative, which is also designed to promote economic ties with the Arab
countries and to increase the region’s exports to the EU.
2.11. Council of Arab Economic Unity (CAEU)
The Council of Arab Economic Unity (CAEU) was established in Cairo,

Egypt, on 3 June 1957. Its members are Egypt, Iraq, Jordan, Kuwait,
Libyan A. J., Mauritania, Palestine, Somalia, Sudan, Syria, the
U.A.E., and Yemen. The CAEU prepared the Agreement on Arab
Economic Unity that entered into force on 30 May 1964.
The CAEU aims to provide a flexible framework for achieving

closer economic integration in stages among members through free
movement of goods, persons and capital.
The Arab Central Bureau of Statistics and Documentation was

established in 1975. The Arab Monetary Fund was also established on
27 April 1976. The CAEU has also set up a number of joint ventures,
unions and federations in different fields of economic activity. Joint
companies, unions and federations encourage closer co-operation in
production and marketing of agricultural, fishing, and industrial
products, and of natural resources and transport.
The CAEU agreed to establish an Arab Common Market (ACM)

based on a resolution adopted in August 1964. The Council supervised
its implementation. Because the CAEU aimed to provide a flexible
framework for economic integration, only some CAEU members
participated in the ACM. Egypt, Iraq, Jordan, Libyan A. J.,
Mauritania, Syria, and Yemen joined the Arab Common Market.
Within the framework of the ACM, customs duties and other taxes
on trade between the member countries were to be eliminated in annual
stages and the process was to be completed in 1971. The second stage
was the establishment of a full customs union. All restrictions on trade
between the member countries, including quotas and the restrictions on
residence, employment and transport were to be abolished. In practice,
however, the trading of products could not be liberated from these
restrictions.
Between 1978 and 1989, the Council undertook the following

measures to develop the ACM:
a) Flexible membership conditions were introduced for the least

developed Arab States.
b) Setting up of a fund was approved to compensate the least developed

members for financial losses that may occur as a result of joining the
ACM.
c) Legal, technical and administrative preparations were adopted for

unification of tariffs levied on products imported from non-member
countries.
d) A Committee of Ministerial Deputies was formed to deal with the

problems to be faced in the application of market rules and to
promote the organisation’s activities.
e) A unified customs legislation and an integrated programme that aims

to enhance trade exchanges between Member States and to expand
members’ productive capacity were adopted.
In 1995, the Council also approved a Five-year Work Plan,

including, among others, the following measures:
a) The co-ordination of measures leading to a customs union subject to

a unified administration, market and community studies;
b) The unification of statistical terminology and methods of data

collection;
c) Studies for the formation of new joint Arab companies and

federations;
d) The formulation of specific programmes for agricultural and

industrial co-ordination and for improving road and railway
networks.
2.12. Gulf Co-operation Council (GCC)
Six Gulf States signed the Charter of the Gulf Co-operation Council
(GCC) on 25 May 1981: Bahrain, Kuwait, Oman, Qatar, Saudi
Arabia, and the United Arab Emirates. The GCC basically aims to
secure stability in the region through economic and political co-
operation, and co-ordination of commercial, monetary, financial, and
economic policies. It intends to create an economic common market in
the region by through the free movement of goods, services and factors
of production.
The objectives of the Gulf Co-operation Council are:

a) To maintain co-ordination, integration and interconnection between
Member States in all fields in order to achieve unity between them;
b) To deepen and strengthen relations, links and scopes of co-operation
prevailing between their peoples in various fields;
c) To formulate similar regulations in various fields including, inter
alia, economic and financial affairs, agriculture, industry, commerce,
customs and communications, education and culture, social and
health affairs, information and tourism, and legislative and
administrative affairs;
d) To stimulate scientific and technological progress in various fields,
and to establish scientific research centres and implement common
projects,
e) To encourage co-operation by the private sector;
f) To consolidate economic activities among member countries in
agriculture, commerce, industry, mining, and general investment.
The GCC aims to achieve unified customs policies, rules,

regulations, and procedures amongst the members. Especially, in the
field of petroleum industry, it aims to co-ordinate the policies in all
phases of production, refining, marketing, pricing, etc., and to develop
production and use of natural gas and alternative sources of energy.

Furthermore, it desires to realise equal treatment and non-discrimination
of the nationals of the Member States in employment, right of
establishment, property, and capital transfers.
The Unified Economic Agreement (UEA) became operational from

1 March 1983, in accordance with the decision taken at the Third
Session of the Supreme Council met in Bahrain in November 1982. The
Agreement covers the areas of trade exchange, movement of capital and
citizens, exercise of economic activities, co-ordination of development,
technical co-operation, transport and communication, financial and
monetary co-operation. The agreement also encourages the
establishment of joint ventures in agriculture, industry and services
areas.
The Agreement exempted agricultural, animal, industrial, and natural

resource products of domestic origin from customs duties and other
charges having equivalent effect. The Agreement also aims to achieve a
common external tariff and trade policy, and co-ordination of
development policies. It introduced new regulations allowing the free
movement of workers and vehicles between Member States.
In 1982, the GCC Heads of State approved the formation of a Gulf

Investment Corporation to be based in Kuwait. The Corporation was set
up to finance specific projects within the GCC framework and
authorised to participate in, provide loans for, and undertake joint
development projects in member and other Arab countries.
In 1986, a schedule of common minimum customs duties between 4

and 20 per cent was levied on foreign imports. In May 1992, the GCC
Trade Ministers announced the objective of establishing a GCC
Common Market by 2000. At the Meeting of the Supreme Council, held
in December 1992, the GCC officials were mandated to formulate a plan
for the introduction of common external tariffs, to be presented to the
Council in December 1993. The tax on tobacco products was
standardised at a rate of 50 per cent effective from March 1993. In April
1994, the Ministers of Finance agreed to pursue a gradual approach to
unify customs tariffs, which was to be achieved according to a schedule
over two to three years.
In February 1987, the Governors of the Central Banks and Monetary

Authorities of the Member States agreed, in principle, to co-ordinate
their rates of exchange. The Supreme Council approved this agreement
in November 1987. In April 1993, the GCC Governors agreed to
establish a Joint Banking Supervisory Committee, in order to set out
rules for the GCC banks’ operations in other Member States.
Regarding the sectoral developments, in 1982 a Ministerial Committee

was formed to co-ordinate trade development in the region. The GCC
Commercial Arbitration Centre was created in December 1993 to settle
trade disputes between the GCC citizens with each other and between
them and foreigners. In 1985, the Supreme Council endorsed a common
industrial strategy for the GCC States. And in the same year, the Supreme
Council endorsed a Unified Agricultural Policy for GCC countries.
In the energy sector, the Ministers adopted a petroleum security plan

to safeguard individual members against a failure in their production and
to form stocks of petroleum products. In December 1987, the Supreme
Council adopted a plan that allowed a Member State to borrow
petroleum from other members, in order to fulfil its export obligations.
In November 1982, the Saudi Arabian Standards and Measures

Organisation was transformed into a regional body, namely the Gulf
Standards Organisation, serving all the GCC Member Countries.
In December 1992, the Patent Office of the Co-operation Council for

the Arab States of the Gulf was created to implement the patent
regulations in the GCC region.
The Supreme Council is the GCC’s highest authority and is composed

of the Heads of Member States. Its presidency is rotated annually on the
basis of the alphabetical order. The Supreme Council provides policy
direction, reviews reports and recommendations submitted by subsidiary
bodies, appoints the Secretary General and approves the budget of the
Secretariat General, and approves the Rules of Procedure of the
Commission for Settlement of Disputes. Resolutions are passed on the
basis of unanimity for substantive matters and majority for procedural
matters. The Supreme Council meets annually, and in Extraordinary
Session if requested by any member and seconded by another member.
The Commission for Settlement of Disputes is formed separately for

every case based on the nature of the dispute. The Commission submits
its recommendations to the Supreme Council for consideration.
The Ministerial Council is composed of Foreign Ministers. Its

Chairman is rotated every year. The state that hosts the summit assumes
the chairmanship for the year. The Ministerial Council proposes policies,
prepares recommendations, and projects aimed at developing co-
operation between Member States and co-ordinates activities between
Member States in all fields. The Ministerial Council meets every three
months.
The Secretary General is appointed by the Supreme Council for a

three-year term, renewable only once. The General Secretariat is
composed of the Office of the Secretary General, Directorates of
Political Affairs, Economic Affairs, Military Affairs, Environmental and
Human Resources, Legal Affairs, Financial and Administrative Affairs,
and an Information Centre.
2.13. Association of South East Asian Nations (ASEAN)
It was established at the meeting of the Foreign Ministers of the five

founding Member States, Indonesia, Malaysia, Philippines, Singapore,
and Thailand, with the signing of the Bangkok Declaration on 8 August
1967. Brunei Darussalam joined the ASEAN on 8 January 1984 and
Vietnam on 28 July 1995.
The Bangkok Declaration united the ASEAN Member Countries in a

joint effort to promote economic co-operation and the welfare of the
people in the region. The Bangkok Declaration set out guidelines for
ASEAN’s activities and defined the aims of the organisation. The main
objectives of the Association are the following:
a) To accelerate economic growth, social progress and cultural

development in the region through joint endeavours in the spirit of
equality and partnership in order to strengthen the foundation for a
prosperous and peaceful community of South East Asian Nations;
b) To promote regional peace and stability through abiding respect for

justice and the rule of law on the relationship among countries of the
region and adherence to the principles of the United Nations Charter;
c) To promote active collaboration and mutual assistance on matters of
common interest in the economic, social, cultural, technical,
scientific and administrative fields;
d) To provide assistance to each other in the form of training and
research facilities in the educational, professional, technical and
administrative spheres;
e) To collaborate more effectively for the greater utilisation of their
agriculture and industries, the expansion of their trade, including the
study of the problems of international commodity trade, the
improvement of their transportation and communications facilities
and the raising of the living standards of their peoples;
f) To promote South East Asian studies; and
g) To maintain close and beneficial co-operation with existing
international and regional organisations with similar aims and
purposes, and explore all avenues for even closer co-operation
among themselves.
The First Summit Meeting was held in Bali, Indonesia, in February

1976, during which, the five Member Countries signed the Treaty of
Amity and Co-operation in Southeast Asia and the Declaration of the
ASEAN Concord. Both documents signified the ASEAN's aims to
ensure regional peace and stability and to foster economic and social
growth through improved co-operation. At this meeting, a small
permanent secretariat was also established in Jakarta to provide
administrative support and to help in co-ordination of the ASEAN
activities.
The Second Summit Meeting was held in Kuala Lumpur, Malaysia,

in August 1977 to commemorate the Tenth Anniversary of ASEAN and
to assess the progress made in the implementation of the decisions taken
at the Bali Summit.
The Third Summit Meeting took place in Manila, Philippines, in

December 1987. The main concentration of this Summit was on
economic co-operation. The Member Countries signed the Manila
Declaration and set up the ASEAN Plan of Action. The Protocol
Amending the Treaty of Amity and Co-operation in Southeast Asia was

also signed to enable countries outside the ASEAN region to accede to
the Association.
The Fourth Summit was held in Singapore in January 1992. The

ASEAN Heads of Government signed the Singapore Declaration of
1992, the Framework Agreement on Enhancing ASEAN Economic Co-
operation and the Agreement on the Common Effective Preferential
Tariff (CEPT) Scheme for the ASEAN Free Trade Area. One of the
major outcomes of this Summit is the decision to set up the ASEAN
Free Trade Area (AFTA) within 15 years. The Fourth Summit also
enhanced the role of the Secretary General of ASEAN and enlarged the
functions of the ASEAN Secretariat to carry out its new mandate.
The Fifth Summit held in Bangkok, Thailand, in December 1995,

adopted an Agenda for Greater ASEAN Economic Integration. The
Summit decided to accelerate and deepen tariff reductions under AFTA,
made greater commitments in trade facilitation and launched new
initiatives in services, intellectual property, industrial co-operation and
investment. At the Bangkok Summit, the ASEAN Leaders met for the
first time with their counterparts from Cambodia, Laos, and Myanmar,
neighbouring countries in the region.
In the area of trade, the ASEAN members concluded a trade co-

operation agreement amongst themselves in February 1977. The scheme,
known as the Preferential Trading Arrangement (PTA), provides for
various measures to stimulate and promote the foreign trade of the
member countries. Under the scheme, members agreed to provide a
fifty-per cent tariff cut for the import products originating from the other
member countries. The scheme covers more than 14,000 items.
Furthermore, in line with the decision taken in the Fourth Summit

Conference (in January 1992) to establish the AFTA, Member States
decided to launch a Common Effective Preferential Tariff (CEPT)
scheme on 1 January 1993. However, the starting date for
implementation was moved forward from January 1993 to January 1994.
The CEPT comprises all manufactured products, including capital
goods, processed agricultural products and those products falling outside
the definition of agricultural products as determined in the Agreement.
All these products will be subject to the schedule of tariff reduction, if at

least 40 per cent of its content originates from any Member State.
The CEPT scheme is to be achieved by 2009, in 15 years after the

start of the phasing down of tariffs. The reduction from current tariff
rates to 20 per cent will be done within a period of 5 to 8 years. An
average of 25 per cent of the tariffs is covered in the programme of tariff
reduction with effect from 1994. According to the present schedule,
roughly 88 per cent of these tariff lines will reach the target level of zero
to 5 per cent tariff by 2003. The target tariff rates will be reached by the
year 2009.
However, if any Member State would like to reduce its tariffs to the
target levels of zero to 5 per cent before the deadline, they could easily
do so without any restriction. Quantitative restrictions and other non-
tariff barriers are to be phased out over five years from the date of initial
reductions on an item.
In the area of industry, ASEAN members developed some schemes

to promote industrial production. The first one was signed in Kuala
Lumpur on 6 March 1980. The Agreement on ASEAN Industrial
Projects (AIP) aims to establish large-scale regional industrial projects to
meet the region’s basic needs and ensure more efficient use of its
resources. Projects currently in operation under the scheme are the Urea
Fertiliser Projects in Indonesia and Malaysia.
Secondly, the Agreement on ASEAN Industrial Complementation

(AIC), adopted on 18 June 1981 provides for privileges for specified
industrial products. The AIC intends to enable the manufacture of
different products within an industry or industries in the ASEAN
countries and their subsequent exchange. A complementation
programme is currently being implemented in the automotive industry
on a brand-to-brand basis.
Another scheme, known as Basic Agreement on ASEAN Industrial

Joint Venture (BAAIJV), was introduced on 7 November 1983. The
AIJV Programme aims to promote industrial joint ventures in the region
through the effective consolidation of markets by granting AIJV

products preferred access to the markets of participating countries.
Furthermore, the ASEAN Economic Ministers signed the ASEAN

Industrial Co-operation (AICO) Scheme Agreement in Singapore on 27
April 1996. The Scheme is the latest industrial co-operation programme
of the ASEAN to promote the sharing of industrial activities between the
ASEAN companies. It is based on the principles and concepts of the
CEPT Scheme for AFTA. The Scheme minimises tariff dissimilarities
and brings the immediate benefits of the CEPT tariff rates in the range of
zero to five per cent to the qualified participating companies.
In the area of banking and finance, in 1987, the heads of government

agreed to accelerate regional co-operation in this field and adopted some
measures to increase the role of ASEAN currencies in regional trade.
They also worked on the avoidance of double taxation and determined
measures to improve the efficiency of tax and customs administrations.
An ASEAN Reinsurance Corporation was established in 1988. In

order to attract greater financial flows in the region, an ASEAN Plan of
Action for the Promotion of Foreign Direct Investment was launched.
On 7 March 1980, the ASEAN signed an economic co-operation

agreement with the European Union (European Economic Community at
that date), to increase trade and economic links between the two regional
groups. The consultations still continue between these two REGs.
Another agreement on economic co-operation was also signed with
Canada on 25 September 1981. The Agreement provides for industrial
and commercial co-operation, and transfer of technology.
Japan played a major role in the economic development of the

ASEAN countries. The Japanese development assistance particularly
went to the region. In addition to that, the private sector also invested
heavily in the ASEAN region. American companies also contributed a
lot to the development of the region. These investments transferred new
technologies to the region. As a result, productivity and competitiveness
increased in the ASEAN countries. Thus, the ASEAN countries were
able to realise very strong economic growth and development.
2.14. Black Sea Economic Co-operation (BSEC)
The Black Sea Economic Co-operation (BSEC) is composed of eleven

Member States: Albania, Armenia, Azerbaijan, Bulgaria, Georgia,
Greece, Moldova, Romania, Russian Federation, Turkey, and Ukraine.
On 25 June 1992, their heads of state or government signed in Istanbul
the Summit Declaration establishing the BSEC. The BSEC represents a
region of some 350 million people with very rich natural resources,
particularly crude petroleum and natural gas.
The BSEC is open to other interested states through membership or

as observers. This also applies to international organisations and
companies wishing to contribute and benefit from this process. In this
context, Austria, Egypt, Israel, Italy, Poland, Slovak Republic and
Tunisia were granted observer status in the BSEC.
It basically aims to develop a comprehensive multilateral and

bilateral economic co-operation in various fields and to enhance the
movement of goods, services, labour and capital.
Working groups have been established covering areas such as

organisational matters, exchange of statistical data and economic
information, banking and finance, trade and industrial co-operation,
transport and communications, agriculture and agro-industries, and free
travel for businessmen of the participating states.
A permanent International Secretariat was set up in Istanbul, and the

Black Sea Trade and Development Bank in Thessaloniki, Greece and the
BSEC Co-ordination Centre for the exchange of statistical data and
economic information in Ankara, Turkey. In this way, the BSEC created
the necessary institutional and financial infrastructure to realise the
objectives stated in the Summit Declaration.
The BSEC is mainly based on private initiative. It thus envisages the

creation of an environment in which the private sector may play a major
role. In this context, the business communities of the BSEC member
countries set up the BSEC Council in Istanbul in December 1992. It will
be responsible for developing proposals, programmes and projects in
various fields of co-operation.
Furthermore, the BSEC Parliamentary Assembly was founded in

February 1993 to increase co-operation among the participating
countries. It may be helpful for the implementation of the decisions
taken in the BSEC. The participating countries also signed the
“Convention on Cultural, Scientific and Information Co-operation” to
increase co-operation in the areas of culture and science.
The Second Summit Meeting of the Heads of State or Government,

held in Bucharest on 30 June 1995, identified some concrete projects for
the expansion of industry and trade opportunities in the Black Sea
region. In the field of telecommunications, a network was established to
connect Azerbaijan, Georgia and Turkey.
Regarding statistical data and economic information, the BSEC

established a special unit within the State Institute of Statistics of
Turkey. The Unit provides necessary reliable statistical data in
accordance with accepted international standards, which may be of great
importance for increased co-operation.
The BSEC assigns great importance to environmental issues. The

Meeting of the Working Group on Environmental Protection mainly
focused on the prevention of further pollution in the Black Sea and
worked out the measures that should be taken urgently for protecting this
sea from further degradation.
In addition to the Summit Meetings, the Meeting of Foreign

Ministers of the participating countries is also a decision-making body of
the BSEC. The Foreign Ministers meet, in principle, at least once every
six months. The Ministers may set up working groups for topics to be
studied. In accordance with the Rules of Procedure, the BSEC takes
decisions by consensus or majority vote. As for the financing of the
BSEC activities, the Participating States reached at the beginning of
1994 a tentative agreement on the scale of contributions to the budget of
the BSEC Permanent International Secretariat.
2.15. Commonwealth of Independent States (CIS)
The Commonwealth of Independent States (CIS) was established in

Visculi, Belarus, on 8 December 1991 amongst Belarus, Ukraine, and
Russia. The other countries of the former Soviet Union joined excluding
the Baltic States of Estonia, Latvia and Lithuania. Its members are
Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, the Kyrgyz
Republic, Moldova, Russian Federation, Tajikistan, Turkmenistan,
Ukraine, and Uzbekistan.
The CIS aims to direct joint efforts towards the phased deepening of
integration among the participants, in order to create in the long term a
community of integrated states. The CIS integration will cover the fields
of economy, science, education, culture, the social sphere within the
framework of the principles of the parties’ sovereignty, equality and
mutual advantage, of the inviolability of the existing state borders, and
of not interfering in one another’s internal affairs.
In the field of economic co-operation the members of the CIS aim to

realise the following:
• Implementation of economic reforms, ensuring equally favourable
conditions for free economic activity;
• Implementation of a co-ordinated pricing policy, ruling out price
discrimination against the parties’ economic players and application
of free prices prevailing in their internal markets;
• Creation of a single customs territory;
• Co-ordination of structural policies with the intention of creating
industrial and agrarian economic complexes and making maximum
use of the advantages of the rational division of labour;
• Joint elaboration and implementation of a system of measures for
state support for the development of production sharing and for the
encouragement of producing capital investment, including the
subsidising of targeted programmes and projects;
• Co-ordination of policies in the monetary-credit and currency-
finance spheres and creation of an effective payments system.
The CIS aims to realise gradual deepening of economic integration

through the establishment of a free trade zone and a customs union.
Customs procedures will be harmonised and legal provisions and
policies for interstate contracts, investments, and joint ventures will be
co-ordinated.
During the initial stage, the parties will try to realise a substantial
decrease in inflation, stabilisation of the exchange rates of the national
currencies and total convertibility of national currencies. The central
banks of the parties shall create an inter-bank union.
The Treaty envisages the coexistence of the countries belonging to

the ruble area together with the countries with national currencies.
Regarding national currencies, the treaty calls for limiting exchange rate
fluctuations between currencies. The treaty also provides for the
harmonisation of national monetary and fiscal policies.
During the later stages, the parties shall implement a transition to

common standards and practices in regulating banking activity. The
parties will consider introducing a single currency depending upon the
degree of integration to be achieved.
The implementation deadlines were not specified in the Treaty.

Several supplementary agreements are being negotiated. Almost all the
CIS members introduced national currencies to be used alongside with
the ruble. Belarus, Russia and Ukraine signed a pact to set up a United
Trade Zone that is open to the other CIS members.
2.16. East Asian Economic Caucus (EAEC)
Malaysia proposed the formation of an East Asian Economic Caucus

(EAEC) in 1990 amongst Brunei, China, Hong Kong, Indonesia, Japan,
Republic of Korea, Malaysia, Philippines, Singapore, Taiwan, and
Thailand.
Its objectives were to expand regional co-operation, to co-ordinate

positions of the Member States on economic issues of interest to the
region and to represent members’ view in multilateral negotiating
forums.
The ASEAN would be at the core of the EAEC together with the
other countries in the region. The proposal on the establishment of the
EAEC was put on the agenda of the ASEAN Summit Meeting in
Singapore in January 1992. However, the ASEAN leaders agreed to
suspend it and decided to launch the ASEAN Free Trade Area (AFTA)
instead.
2.17. Economic Co-operation Organisation (ECO)
The ECO replaced the earlier organisation of Regional Co-operation for

Development (RCD), established by Iran, Pakistan, and Turkey in
Ankara on 21 July 1964. The RCD existed until 1979. Then it was re-
established under its present name in January 1985. The basic Charter of
the Organisation, known as the Treaty of Izmir, was amended by the
Ministerial Conference in Islamabad, Pakistan, in June 1990. The ECO
became operational on 11 January 1991. After the collapse of the Soviet
Union, Afghanistan, Azerbaijan, Kazakhstan, the Kyrgyz Republic,
Tajikistan, Turkmenistan, and Uzbekistan joined the Organisation in
November 1992. The Treaty of Izmir was revised and signed at the
Extraordinary Meeting of the ECO Council of Ministers in Izmir,
Turkey, on 14 September 1996.
The objectives of the Organisation are:

a) To expand mutual trade and promote conditions for sustained
economic growth in the region;
b) To take measures towards progressive removal of barriers within
ECO region and expansion of intra- and inter-regional trade;
c) To pursue increased economic co-operation in order to secure greater
role and contribution of ECO region to the growth of world trade and
removal of iniquitous trading policies resulting in adverse terms of
trade for the developing countries, particularly to the Member States;
d) To provide gradual and smooth integration of the economies of the
Member States with the world economy;
e) To promote active regional collaboration and mutual assistance in
economic, social, cultural, technical and scientific fields;
f) To accelerate development of transport and communications
infrastructures linking the Member States with each other and with
the outside world;
g) To promote integration of public and private sector activities with
emphasis on economic liberalisation and privatisation towards
increased participation of the private sector in the regional economic
development through joint ventures and investments;
h) To develop joint programmes for human resource development in

ECO region;
i) To intensify mobilisation and utilisation of the ECO region’s natural
resources, in particular energy resources;
j) To enhance efforts for effective utilisation of the agricultural and
industrial potentials of the ECO region;
k) To develop regional co-operation to eradicate drug abuse; and
l) To facilitate co-operation in the fields of ecological and
environmental protection within the region.
In 1992, a Protocol on Preferential Tariff Agreements involving a 10

per cent reduction on specific tariff lines was signed amongst the
founding members of ECO. It constituted the first step towards eventual
elimination of trade barriers in the region. The agreement was initially
for four years, but it would be automatically extended for further periods
of two years.
The ECO activities are conducted through eight technical

committees which consider and evolve projects and programmes in the
fields of economic and commercial co-operation; transport and
communications; agriculture; energy; infrastructure and public works;
narcotics and educational, scientific and cultural matters.
Among other projects, the establishment of a regional trade and

development bank and formation of a shipping company and a
reinsurance company are still being considered. Particularly, the ECO
Trade and Development Bank is an important instrument for promotion
of intra-regional trade and financing of the concrete projects in the
region.
Other activities of the ECO include an agreement in 1995 on

simplification of visa procedures for the businessmen of ECO countries,
preparation of an Energy Master Plan which arranges transit facilitation
for energy, oil and gas pipelines, and inter-connection of electricity
networks of ECO Member States.
The region is very rich in terms of energy resources. Utilisation of

the highly rich potential of the region has the utmost importance for the
countries of the region. However, the region’s energy potential should be
carried to the international markets through a network of modern roads,

railways, natural gas and oil pipelines. Such a network is particularly
important from the point of view of the land-locked Central Asian
members of the ECO. When these transportation problems are solved,
Central Asian Republics will have an easy access to the international
markets and start reaping the benefits. The overall effect will be the
expansion of the trade exchanges amongst the ECO members.
2.18. South Asian Association for Regional Co-operation (SAARC)
The South Asian Association for Regional Co-operation (SAARC) was

established at the First Meeting of the Heads of State and Government in
Dhaka, Bangladesh, on 8 December 1985, amongst Bangladesh,
Bhutan, Maldives, Nepal, Pakistan, and Sri Lanka.
The objectives of the SAARC are as follows:

a) To promote the welfare of the peoples of South Asia and to improve
their quality of life;
b) To accelerate economic growth, social progress and cultural
development in the region and to provide all individuals the
opportunity to live in dignity and to realise their full potentials;
c) To promote and strengthen collective self-reliance among the
countries of South Asia;
d) To contribute to mutual trust, understanding and appreciation of one
another’s problems;
e) To promote active collaboration and mutual assistance in the
economic, social, cultural, technical and scientific fields;
f) To strengthen co-operation with other developing countries;
g) To strengthen co-operation among themselves in international
forums on matters of common interests; and
h) To co-operate with international and regional organisations with
similar aims and purposes.
The SAARC countries are committed to a step-by-step trade

liberalisation in such a manner that all countries in the region share the
benefits of trade expansion equitably.
The Integrated Programme of Action (IPA) is the key component of

the SAARC operations. It involves assessment of the needs of member
countries, potential areas of co-operation and identification of

programmes, institutional and financing arrangements. The IPA covers
12 agreed areas of co-operation: agriculture, including forestry,
communications, education, environment, meteorology, health and
population, prevention of drug traffic and drug abuse, rural development,
science and technology, tourism, transport, women in development.
In July 1992, a decision was reached to draft an agreement for the

South Asian Preferential Trading Arrangement (SAPTA). The draft
agreement was submitted to the SAARC Standing Committee in
December 1992 and signed by foreign ministers in Dhaka on 11 April
1993. It entered into force on 7 December 1995. The SAPTA aims to
remove para-tariff and non-tariff barriers to trade exchanges in the
region, to deepen the tariff cuts and to expand the list of products to be
included in intra-SAARC preferential trade. Negotiations still continue
to finalise schedules of concessions and to expand them further. SAPTA
is considered to be a step to create a South Asian Free Trade Area
(SAFTA), which is still at the discussion stage.
Poverty alleviation is also one of the major issues addressed within

the framework of SAARC. In 1991, the Sixth SAARC Summit held in
Colombo decided to establish an Independent South Asian Commission
on Poverty Alleviation (ISACPA).
3. CONCLUSION
In the 1990s, many countries have pursued the objective of trade

liberalisation. Trade liberalisation efforts were undertaken within the
framework of the GATT and its successor, the WTO. GATT and WTO
agreements commit all member nations to reduce trade barriers
simultaneously. This process is referred to as a multilateral approach to
trade liberalisation, or, in other words, globalisation.
However, for a variety of reasons it often makes sense for countries

to co-ordinate their economic policies. Co-ordination can generate
benefits that are not possible otherwise as we have seen above. If
countries co-operate and eliminate tariffs against each other, then they
are likely to benefit more than they do when they attempt to secure
short-term advantages by setting tariffs. Benefits also accrue to countries
that liberalise labour and capital movements across borders and co-
ordinate monetary and fiscal policies and resource allocation towards
agriculture, industry and other sectors.
Furthermore, rapid technological progress necessitated the

enlargement of the domestic markets. Massive production and severe
competition changed the nature and extent of economic activity in the
world. Market size and specialisation became important determinants of
national and international economic and financial performance. In such a
setting, national boundaries constitute a limitation on the size of the
market and, therefore, on the scope of specialisation.
For this reason, while the global liberalisation efforts were

continuing within the framework of the WTO, regionalisation efforts
also gained momentum amongst the developed countries and the
developing countries as well. Smaller countries came together to form
greater economic regions in which they might develop more efficient
production structures.
The regional economic formations created amongst the industrial

countries have enormous effects on the world economy and on the
economies of the developing countries. Because of known historical ties
and geographical proximity, the developments in the EU are most
important for the majority of the OIC countries.
The EU’s membership is expanding rapidly and intra-regional trade

is growing more than trade with countries outside the Union. The
principle of non-discrimination and open competition under the WTO is
being eroded in the EU’s preferential arrangements with the third
countries.
In the Asian bloc, on the other hand, Japan can control the Asian
markets. Japan can manipulate regional investments and specialisation in
such a way as to discourage free entry of firms and products from
outside.
The US activities in the Western Hemisphere also raise concerns for

protectionism. Trade conflicts between the US and the EU, the US and
Japan, and the US and China have become very common events, almost
of daily nature.
The polarisation between the EU, Japan and the US poses the
question of whether regionalism leads to trade wars and regional
protectionism, or whether these trade blocs would facilitate the world
trading system under the auspices of the WTO. In either case, the basic
fact is that competition in such areas as trade of goods and services will
be on a much higher scale.
Additionally, the major economic blocs, the EU, NAFTA and APEC,
started to concentrate on not only the issues of trade facilitation and
liberalisation but also on comparatively new issues such as trade in
services, investment opportunities, intellectual property rights, labour
standards, protection of environment, technological standards, co-
ordination of monetary, financial, fiscal and economic policies, etc.
These resemble the major discussion topics of the multilateral
negotiations within the framework of the WTO. However, these blocs
are increasingly providing opportunities far beyond the liberalisation
process within the context of the WTO. Private-sector interest in
enhancing market access and in strengthening investment opportunities
has provided a further impetus to the search for new trading
arrangements and the enlargement of the old ones.
Liberalisation at the regional level combined with a protectionism

against third countries may prepare regional firms and industries
eventually to compete beyond the region, at the global level. For this
reason, it is not surprising that the recent policy issues within the major
economic blocs and the agenda of the multilateral negotiations under the
umbrella of the WTO are similar.
The growth of regionalisation and especially the EU raise a number

of issues and problems for the OIC countries. The OIC community, no
doubt, is and will be affected by the developments relating to the growth
of these regional economic blocs. The OIC countries cannot be
indifferent to these schemes which cover virtually all their major export
markets, including Europe and North America. The main impact of the
growth of these schemes will be on the trade of goods and services,
investment and technology transfer. The creation of regional schemes
implies, by definition, that members receive preferential access to one

another's markets. Hence, non-members must suffer a relative erosion in
market access. How important such an erosion would be for specific
non-members depends upon a number of complex factors.
All of these developments necessitate closer co-operation and

collaboration among the OIC Countries, especially that the majority of
them strive for greater access to the newly polarised markets as their
traditional links. One important modality in this direction has been the
establishment (or reactivating) of regional integration schemes.
The new initiatives amongst the OIC countries may, first of all,
emphasise co-operation more in terms of project-oriented arrangements
rather than focusing on more structured and multi-faceted integration
schemes like free trade areas, customs unions, and common markets.
Secondly, the partners in these new arrangements will be given more
freedom in taking liberalisation measures at their own pace. Thirdly, the
arrangements may also allow more opportunities to be negotiated at
bilateral levels with the interested partners in line with common
interests. Fourthly, these co-operation agreements may assign priority to
physical infrastructure, such as transport and communications, as well as
support areas like training, research, and technology. Fifthly, the private
sector must be encouraged and supported by the necessary measures to
facilitate and to promote trade exchanges amongst the OIC member
countries. Furthermore, all the barriers to trade may be eliminated
gradually on a step-by-step approach.
All of these developments should not undermine the potential

contribution that the new Plan of Action to Strengthen Economic and
Commercial Co-operation among the OIC Member Countries could
make, if implemented thoroughly. This plan both in terms of its scope
(10 sectors) and modalities of implementation (concrete projects and co-
operation schemes) is well structured to reach the assigned targets.
Furthermore, unlike the 1981 Plan, this document places great emphasis
on the principle of voluntary participation, and stresses the role that the
existing and to-be-established sub-regional integration schemes can play
in the eventual formation of community-wide schemes through
appropriate linkages among the former. Consequently, provided that the
political will of the member countries could be fully secured, the new
OIC Plan of Action would not only serve as an effective instrument for
achieving a closely inter-linked Islamic economic community that will
evolve as an important grouping in the world economy, but it would also
be the principal vehicle for the realisation of the full economic potentials
of the member countries.

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Journal of Economic Cooperation 21, 2 (2000) 67-114

REGIONAL ECONOMIC GROUPINGS OF THE OIC

Economic regionalisation can be viewed as one of the major instruments

When two or more countries come together to form a regional trade

Within the framework of the globalisation efforts conducted under,

Another exception to the principle of non-discrimination is the

Although trade liberalisation efforts at the global level are

At the level of the developed countries, the European Union (EU),

The present survey aims to evaluate the regional economic groupings

1.1. Forms of Regional Economic Groupings

Regional economic groupings aim at creating a larger economic unit

Depending upon the level of integration, regional economic

1. Preferential trade areas;

A preferential trade area is the weakest form of economic grouping.

In free trade areas, participants aim mainly to expand trade activities

A customs union, on the other hand, is a higher form of free trade

A monetary union establishes a central monetary authority, which

In an economic union, the participants will maintain free trade in

1.2. Gains from Regional Economic Groupings

As we have mentioned earlier, when countries form a regional economic

creation. Trade diversion is the resulting shift in the direction of trade in

Formation of a regional economic grouping will, first of all, enlarge

2. REGIONAL ECONOMIC GROUPINGS OF THE OIC

Table 1 shows at a glance the membership of the OIC Countries in these

Table 1: Regional Economic Groupings of the OIC Countries

Asia and Europe

2.1. African Economic Community (AEC)

1 Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon,

The objectives of the Community can be summarised as follows:

(a) To promote economic, social and cultural development and the

(b) To establish, on a continental scale, a framework for the

(c) To promote co-operation in all fields of human endeavour in order to

(d) To co-ordinate and harmonise policies among existing and future

The Community shall be established gradually in six stages of

(a) First Stage: Strengthening of existing regional economic

(i) Stabilisation of tariffs and other barriers, and internal taxes;

Madagascar, Malawi, Mali, Mauritania, Mauritius, Mozambique,

(ii) Strengthening of sectoral integration at the regional and

(iii) Co-ordination and harmonisation of activities among the

(d) Fourth Stage: Co-ordination and harmonisation of tariff and non-

(a) Fifth Stage: Establishment of an African Common Market within a

(i) The adoption of a common policy in several areas such as

(ii) The harmonisation of monetary, financial and fiscal policies;

(iii) The free movement of persons.

(a) Sixth Stage: Consolidation and strengthening of the African

(i) The free movement of people, goods, capital and services;

(ii) The integration of all the sectors, namely economic, political,

(iii) The establishment of a single African Central Bank and the

Progress and Development

The Economic and Social Commission (ECOSOC) is the major organ of

On the other hand, the African Economic Community Summit held

2.2. Central African Customs and Economic Union (UDEAC)

The UDEAC (Union Douanière et Economique de l’Afrique Centrale)

Republic, Congo, and Gabon in Yaoundé, Cameroon, on 8 December

The UDEAC aims to establish a union among the Member States to

Quantitative restrictions amongst the member countries are being

Against the efforts aiming to increase the intra-UDEAC trade

The UDEAC has a common legislation for investment policy.

The Community’s development bank, BDEAC, was created to