Islamic Republic of Iran
                                  Statement By
                         H.E. Abdolhossein Vahaji
          Deputy Minister of Commerce fot International Affairs
                 at the opening session of the seminar
                                          on
                "The OIC FREE TRADE AREA AS A FIRST STEP FOR
                   THE ESTABLISHMENT OF AN ISLAMIC COMMON MARKET"

Mr. Chairman,     

  H.E. Dr. Hassan bin Abdulla Fakhro, the Minister of Industry & Commerce of the Kingdom of Bahrain
Distinguished Participants,

  At the outset, I would like to express my gratitude to the Government of the Kingdom of Bahrain and to you, Mr. Minister, for holding this seminar and for the warm hospitality extended to us. I would also like to thank ICDT for its efforts in co-organizing this event. It is my privilege to have the opportunity to speak at this important forum.

Mr. Chairman,

  In today's interdependent world, trade matters more than ever before. Countries that have intensified their links with the global economy through trade and investment have usually grown more rapidly over a sustained period, and have consequently experienced larger reductions in poverty. Unfortunately, many developing countries have been hindered in their efforts to participate effectively in the global economy by inadequate policies, institutions, and infrastructure on the one hand, and by a variety of developed country protectionist measures and other policies that restrict developing countries' exports, on the other.
  Under these circumstances, developing countries, including OIC members, should seek effective ways in order to ensure their active participation in the global economy and to reap benefits arising from it.
  Today, regional economic integration is seen as a fundamental vehicle for all countries, particularly developing ones, to secure a successful presence in the global market. Like many other developing countries, OIC members too are joining the mainstream of integration in the global economy and the drive to liberalize their economy and trade. In recent years, many Islamic countries have come to realize the importance of regional economic groupings among them, and have made remarkable efforts in this direction. According to figures published by SESRTCIC, the membership of the OIC countries in major economic groupings stands at 18, with some OIC countries participating in more than one regional bloc.

Mr. Chairman,

  The Islamic countries are blessed with enormous potential resources, including rich natural endowments, vast energy and mineral reserves and remarkable human resources. It is unfortunate, however, that the share of these countries in the world trade does not match their resources and capabilities. As such, in 2003 the Islamic Countries' trade totaled $1153.8 billion, representing 7.5% of the total world trade. In the same period, the value of exports among Muslim countries stood at $74.4 billion, or 12.2% of their total exports.
  For years, the issues of economic and commercial cooperation and the creation of an Islamic Common Market (ICM) have been on the agenda of the OIC and its affiliate institutions. It is obvious that the formation of this market will be a long and demanding process. But, the sublime teachings of Islam, as a source of inspiration, can further consolidate solidarity among the member countries and pave the way for the Islamic Common Market as an outstanding symbol of unity among Islamic countries.
  In order to attain the goal of the Islamic Common Market, the regional economic groups should start from lower levels of integration such as preferential trade agreements, free trade areas and Customs unions. Moving in this direction can help member countries work toward the shared goal of the Islamic Common Market, while taking into account their different degrees of development.
  We are glad to see that the Arab countries have created an Arab Free Trade Area which started on January 1st 2005; and hope that other Islamic countries can follow this example, too. In this connection, the Islamic countries will need to shift their focus more to the collective interests when such schemes are on the table, so that all countries can benefit in the long run from this type of trade arrangements.
  The prerequisite for a free trade area in the Islamic world to be followed by the Islamic Common Market is to operationalize the preferential trade agreement among Islamic states. The sooner this is achieved, the easier it will be to reach the subsequent goals.
Unfortunately, despite three meetings of the Trade Negotiation Committee under TPS/OIC, a suitable strategy to launch negotiations on tariff reductions is yet to be finalized. At the last meeting of the committee this past January in Antalya, a strategy was proposed which if approved and implemented, it will require the Islamic countries to lower their tariffs to within the range of 10% - 25% by 2015. This is while by that year most of the trade groupings are scheduled to have cut their tariffs to zero. It is more than obvious that if we are contented with this level of cooperation which is being pursued by the Trade Negotiation Committee, then firstly, the Islamic countries will lag behind in the forward march of the global economy; and the chances are that in coming years they will have to cope with some intractable problems in integrating in the global market and in their trade liberalization efforts.
  Secondly, such a strategy will considerably retard the achievement of free trade area and the formation of the Islamic Common Market as well. It will, at least, render the free trade area ineffective and futile. In practice, the Islamic countries will achieve a free trade area only years after a vast part of the world has been already transformed into a global free trade area.

Mr. Chairman,

  The Islamic Republic of Iran has always strived to enhance economic and commercial cooperation among OIC member countries, particularly in connection with the Islamic Common Market concept. The establishment of the Center of Advanced Research and Studies on Islamic Common Market (CARSICM), and sponsoring two international seminars on the Islamic Common Market (ICM) are among these initiatives. Furthermore, we actively participated in the first Expert Group Meeting (EGM) on ICM and also hosted the second EGM in Tehran.
  CARSICM has, to date, conducted remarkable research work on such topics as creation of the Islamic Common Market, identification of trade potentials among member countries, and feasibility studies on regional economic integration in the context of the OIC. These are available in English at the centers' website. During the expert discussions and working sessions, my colleagues will be pleased to provide necessary information in this respect.
  The Islamic Republic of Iran believes that the common interests of the Islamic countries and the developments in the global economy make it imperative for all OIC members to embrace economic and trade cooperation among themselves.
  To this end , and with the ultimate goal of realizing an Islamic Common Market, the initial steps, including a meaningful trade preferential system, should be taken with more vigor and at an accelerated pace. We hope that these efforts will bring increased economic viability to the member countries as well as further welfare and prosperity to the great Islamic Ummah; and that today's meetings will help all of us to share this belief.

Va Asslam Aleikom

                       Abstract of Dr. K.Yavari's paper
   The purpose of this paper is to estimate intra-trade potential for the TPS/OIC participating countries. Applying Drysdale "Trade Complementarity" and ITC/UNCTAD/WTO "Indicative Trade Potential" indices, It is demonstrated that that there exists a remarkable intra-trade potential for the TPS/OIC participating countries as a whole, indicating that these countries have correctly chosen to participate in TPS/OIC. Notwithstanding the fact that globalization and WTO has brought prosperity and growth for the whole world and for the WTO members of this group, this extra trade potential will not be materialized by WTO membership alone. Our results show that almost 80% of indicative trade potential of the TPS/OIC group, equivalent to $ 18.7 billion, has not been utilized and the participating countries have substantial degree of trade complementarity with each other and with the group at all non-oil product groups, manufactures, agricultures, and minerals. The paper strongly recommends that the participating countries should not underestimate the static and dynamic gains of the TPS/OIC and encourage other OIC member states to join in.