ISLAMABAD, Jan 30: Finance ministers of the Economic Cooperation Organization (ECO) decided on Friday to set up an Istanbul-based ECO trade and development bank with an initial paid-up capital of SDR 60 million.

The ministers meeting, presided over by Finance Minister Shaukat Aziz, also agreed to set up a common grid system of the ECO states to pool electricity surpluses and shortages and to form a pressure group at the international financial institutions to influence their decisions in favour of member states.

"The meeting agreed that the head office of the bank would be established in Istanbul, and initially three countries - Pakistan, Iran, and Turkey - would pool resources to raise the capital of SDR 60 million," said a joint communique issued after the conclusion of the first ECO finance/economic ministers meeting here.

The joint communique said an ECO trade and development bank and an ECO reinsurance company should be established and operationalized as soon as possible and requested member states to consider subscribing to these two institutions.

"The meeting asked the sub-groups which are already working on these subjects to finalize their recommendations latest by June 30, 2004," it said. The ministers also agreed and proposed a special ECO fund for reconstruction projects in Afghanistan. For that purpose it was decided that financial experts from member states should finalize modalities for the establishment and subsequent operation of this fund.

The meeting underlined that the heads of the central banks of member states should meet on a regular basis and cooperate in exchanging information and experience in implementing their monetary and other macroeconomic policies.

The meeting also agreed to establish a high-level experts group to study and suggest a framework for cooperation in the areas of macroeconomic management, IFIs and global capital markets, promotion of banking, investment, transit and trade from legal and financial aspects, strengthening of ECO Supreme Audit Institution (ECOSAI), tax policy and administration, securities and capital market regulators and stock/commodity exchanges and explore the possibility of multiple listing of issues on each others exchanges, develop a database of ECO states on economic and social indicators, privatization of public enterprises, cost of economic adjustment and need for social safety nets, and the possibility of setting up a research centre for ECO economies.

It was also agreed that while recommending the framework, the experts group would keep in view the lessons learnt from other regional organizations such as the EU and Asean. The ECO secretariat will provide necessary support to the experts group.

The meeting also agreed to share experiences and impart training to each other in the fields of economy and finance and any member might extend technical assistance to relevant experts from the member states.

The meeting decided that the representatives of the ECO member states at the International Financial Institutions (IFIs) and organizations like the World Bank, IMF, ADB, and IDB should form a contact group for regular meetings on the sidelines of annual meetings of these institutions to evolve joint strategies from the ECO platform.

The meeting decided that the ECO countries should share information on transit trade and on the flows of trade within the ECO countries. It also agreed to check the institutionalized smuggling under the transit trade facilities.

The communique was handed over to the press at a joint press conference which was addressed by finance ministers of all the member states. Shaukat Aziz was accompanied by ECO Secretary-General Askhat Orazbay and finance ministers of Afghanistan, Iran, Turkey, Tajikistan, and Kyrgyzstan at the press conference.

Speaking on the occasion, Shaukat Aziz said the meeting also discussed a coordination plan to link the ECO countries through a road network and share energy resources through regional electric grids.

"The Asian Development Bank is already funding a number of road projects while the World Bank is evaluating the needs of the ECO power grid station," he added.

Responding to a question about implementation of points agreed in the conference and activation of the ECO, Iranian Finance Minister Tahmasb Mazaheri said the biggest challenge before the ECO was the implementation of its decisions.

Askhat Orazbay added that in view of rapid decentralization, globalization and emergence of regional blocs, it was important that the ECO should be activated on regional affairs and it should accord top-most importance to the economy of the region.

Responding to a question about common currency for the ECO, Ashraf Ghani Ahmadzai, Afghan Finance Minister, said it would take decades to reach the goal of common currency. He said the ECO should focus on current issues of transit trade, energy, tariffs, and most importantly arrest the menace of poverty in the member states.

"Realistically speaking regional cooperation is the key to our survival and it is the way of future." In reply to a question regarding imposition of import duties by Afghanistan, Mr Ghani said the Afghan government was bringing about fundamental reforms in the country's economy and tariff reforms was one of them along with exchange rate.

"We are going to have full market exchange rate by March 21, 2004, and with it we are going to introduce general tariffs i.e. 2.5 per cent, 5 per cent, 10 per cent and 16 per cent. Whereas for capital goods, it would be four per cent and for fuel it would be eight per cent."

He said a simple one-page document would be introduced to facilitate traders. The system would be introduced through a major overhaul of finance regulations, he added. Further, he said, the Afghan government had decided in principle to ban the import of right-hand driven vehicles in the country.