The ECO Experience: A Comparative Understanding of Regional Integration in

West and Central Asia

Javad Foronda Heydarian University of the Philippines,

Diliman

Outline of Presentation

I. Research Question/Theoretical Puzzle II. Origins of the ECOIII. A comparative analysis of regional integration

economic integration (ECO as compared to ASEAN and EU)

IV. Opportunities and Challenges V. Conclusions

Research QuestionsA.) What are the main drivers behind regional

integration in West and Central Asia, especially in the case of ECO?

B.) How does the ECO compare with the ASEAN and EU in terms of regional economic integration?

C.) What are ECO’s specific areas of institutional strength and vulnerability?

Methodology

• Qualitative analysis focusing on:I. Interplay of domestic and broader regional

and international forces, which influence, shape, and drive integration

II. Institutional characteristics of identified regional bodies

III. The nexus between geo-political and economic variables in the overall dynamics/process of integration

Origins of the Economic Cooperation Organization

I. The CTO (Cold War Era)

II. The RCD: the triangular alliance among Turkey, Iran, and Pakistan (1964)

III. The ECO: post-revolution Iran, Turkey, and Pakistan (1985)

IV. Entry of Post-Soviet States (1991)

Observation• Dynamic interaction between domestic and international forces

1.) Domestically: while, the big-3 (B3) had individual strategic and economic reasons to re-establish their triangular ‘partnership’, post-Soviet states were desperate to stabilize their domestic political situation

2.) Internationally: post-Cold War uncertainties, and the intensification of economic globalization in the late-1980s and early 1990s (proliferation of trade blocs, IFI’s role, and economic restructuring in transition-economies).

* Defensive Integration

3.) Despite significant changes in the domestic political system, especially in the case of Iran, prior attempts at regional integration have somehow created a ‘path-dependency’

Institutional Characteristics and Objectives: Comparative Apparoch

I. Dimensions of Regional Organizations (Lin and Pidufala, 2009)

Dimensions of Regional Integration (Lin and Pidufala, 2009)

Institutional Objectives and Characteristics

II. Depth of Integration (cuyvers 2002)

a.) ECO: Planning to become an FTA or Costumes Union (2015) – no significant sectoral integration yet

b.) ASEAN: from an FTA (2002) to a Market Union (2015) – began with sectoral integration

c.) EU: from Common Market to Economic Union (potential move towards a fiscal union amidst the sovereign debt crisis) – from sectoral integration to monetary union

Institutional focus and objectives

III. ECO’s institutional focus (Isik, 2007)

a.) Trade Liberalizationb.) Trade Facilitationc.) Projects and Program for regional development

* No security-strategic forum: unlike the ASEAN and the EU (i.e. ARF and OSCE)

Challenges• Lack of significant progress on intra-regional trade (6% in

ECO vs. 25% in ASEAN and 68% in EU)

• Weak macro-economic convergence (development gap and divergent indicators)

• Absence of necessary supranational institutions and mechanisms to facilitate deeper integration (e.g.. Structural/cohesion funds, an independent central bank, or empowered secretariat)

• Spaghetti Bowl Effect – overlapping memberships (Turkey, a pivotal state, is considering EU membership too)

ECO countries macroeconomic indicators

Strength• Facilitating geo-strategic cooperation among non-Arab Muslim

countries:

I. Regional security- Strategic vacuum- Conflict-management- Emerging complex interdependence

I. Energy corridors- geo-economics- Synergistic partnership between resource-rich and transit

countries- Emerging trans-continental pipeline projects

Stages of Integration: Intergovernmentalist approach

Implications: theoretical and practical

• EU: primacy of economics; pooling of sovereignty

• ASEAN: higher emphasis on economics; but no decisive move to the third phase yet

• ECO: primacy of geo-politics; dominance of national interests in inter-state bargaining

* ‘Reversed’ Spill-Over effect: instrumentalization of economic cooperation for strategic ends (i.e. Iran-Turkey relations)

• Expectation: ECO has lower probability for deep regional integration

Conclusions

• Comparatively, the ECO is at an earlier phase of integration, but econometric models show policy-induced growth in intra-regional trade (Achakzai, 2010)

• Formation of an FTA or a Customs Union is the most feasible form of economic integration in the medium to long-run.

• Operationally, the ECO is more of a platform for strategic coordination and political dialogue, although its mandate is primarily economic and cultural

• Predominance of national interest calculations in absence of empowered independent supranational bodies (significance of domestic political players in deepening integration efforts)