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by U. E. Perera

An oil platform in search of “black gold” in the Indian Ocean

The Indian Ocean takes the third place among oceans in the world. In economic terms, it carries half of the world's container ships and a one-third of the bulk cargo traffic. Two-thirds of the world's oil shipment is also carried out through this route. The region is also closely inter-connected together by strategic trade routes and commands control of the major sea lanes.

Further, the Indian Ocean Rim constitutes between a quarter and a third of the world population (close to two billion); which makes it a massive market. It is definitely rich in strategic and precious metals, metals and other natural resources, like valuable marine resources ranging from fisheries to raw material and energy for industries.

It has abundant agricultural wealth in terms of the variety and mass of arable land. Human resources in the region are unlimited and it has significant technological capabilities.

Taking into consideration of the vast potential of natural and human resources and technological capabilities in the countries of the Indian Ocean, a meeting of Experts on the Indian Ocean Rim Initiative was held from 29-31 March 1995, at the Grand Bay International Conference Centre in Mauritius.

The Government of Mauritius invited six countries of the Indian Ocean, to participate in this meeting. The main objectives of the meeting were to:

(a) enable the participating countries to air their views on the initiative and build consensus on the various issues relating to the concept of the Indian Ocean Rim;

(b) identify areas of cooperation which would be mutually beneficial to the member countries; and

(c) chart out a course of action, define an agenda and examine a possible structure for the Indian Ocean Rim Initiative.

Seven countries of the Indian Ocean Rim, namely Australia, India, Kenya, Mauritius, the Sultanate of Oman, Singapore and South Africa participated in the inaugural meeting. These countries represented the four sub-regions constituting the Indian Ocean, namely Africa, Asia, Australia and Middle-East.

All delegations, with the exception of Kenya, Oman and Singapore comprised government officials, private sector representatives and members of academia.

In consequent to these developments and various other deliberations that took place on various forums in the region, The Indian Ocean Rim Association for Regional Cooperation (IORARC) was launched in Mauritius on 6-7 March 1997.

Again the Council of Ministers of this organization met in 1999 in Mozambique and in Oman in 2001. Sri Lanka chaired and hosted the Fourth (4th) IOR-ARC Council of Ministers Meeting and other related meetings from 7-13 October 2003.

Realizing the need to provide continuous direction and orientation for IOR-ARC, the last meeting of the Council of Ministers took a decision that the Council should meet annually, while the duration of the Chair remain for two years.

Membership of the organization has gone up gradually as the work of the organization has attracted non-members. There are 18 members in the organization now, including Australia, Bangladesh, India, Indonesia, Iran, Kenya, Madagascar, Malaysia, Mauritius, Mozambique, Oman, Singapore, South Africa, Sri Lanka, Tanzania, Thailand, UAE and Yemen. There are five dialogue partners-They are China, Egypt, France, Japan and United Kingdom. Indian Ocean Tourism Organization has been granted an Observer Status.

IOR-ARC has a unique feature as it has cemented a strong foundation by linking its activities with government, business and academic sectors. The Indian Ocean Rim Academic Group (IORAG), the Indian Ocean Rim Business Forum (IORBF) and the Working Group on Trade and Investment (WGTI) report to the Committee of Senior Officials (CSO) who in turn reports to the Council of Ministers (COM).

The main objectives of the IOR-ARC are:

(1) To promote sustainable growth and balanced development of the region and member states;

(2) To focus on those areas of economic cooperation which provides maximum opportunities to develop shared interests and reap mutual benefits; and

(3) To promote liberalization, remove impediments and lower barriers towards a freer and enhanced flow of goods, services, investment and technology within the Indian Ocean.

The Charter of the IOR-ARC declares that it seeks to build and expand understanding and mutually beneficial cooperation through a consensus based, evolutionary and non-intrusive approach. There are no laws and binding contracts. Compliance with consensus based decision remains without any rigid institutional structure to specify any rules and regulations.

In 1990, intra-IOR-ARC trade turnover (as a grouping) constituted 17.4 percent of this grouping's global trade (turnover), it increased to 22.02 percent in 1999. The South East Asian economic crisis of 1997-99, must have reduced to some extent the importance of intra IOR-ARC trade as a proportion of their world trade performance in 1997-99.

However, with the end of the deep economic crisis and revival of economic growth in sensitive areas, the scenario for resumption of growth in intra-IOR-AR trade (and the percentage of intra-IOR-ARC-18 trade to the grouping's trade with the world) must have improved. This can be verified when new data and new statistical figures are available.

The statistics available with us indicate that IR-ARC countries usually have been able to attract around 10.0 percent of global inflows of Foreign Direct Investments. India has shown a better performance in attracting FDI inflows in its post 1991 economic period (remarkably in 1995).

Australia, Malaysia and Singapore are the leading sources of FDI outflows from IOR-ARC member countries. At the same time new data available with us indicate that South Africa, Indonesia, Thailand and India are rapidly emerging as new sources of FDI outflows in the IOR-ARC region.

Singapore has emerged as the leading exporter of FDI from the IOR-ARC grouping. FDI outflows from Singapore has risen from US $ 652 million in 1980 to a peak level of US $ 6.2 billion in 1995. US $ 30.1 billion was Australia's contribution in FDI outflows in 1990.

South Africa is the only significant source of outward FDI's among the African member countries of IOR-ARC.

There is a tremendous scope for absorbing much larger inflows of FDI in developing and especially in the less-developed countries of the IOR-ARC group.

According to leading economists of the region, the key areas where such inflows can be mutually and profitably absorbed are agriculture and agro processing, setting up of small and medium size enterprises, tourism, fisheries, labour-intensive manufactures for export, human resource development, different fields of science and technology, management and computer education.

However, in developing and less developed countries in the region priority should be given to upgrade and expand infra-structure facilities (power, telecommunications, ports, airports, railways, roads etc) of their respective countries.

The political leaders of these countries should carry-out sound economic policies to stimulate, encourage and expand INTRA-IOR-ARC INVESTMENTS.

There is an urgent need to set up sectorial joint business councils within the IOR-ARC group of countries in the fields of pharmaceuticals, tourism, telecommunications and textiles.

Further, the private sector should consider putting into place a mechanism that would bring together specialized institutions that could work out programmes for the business sector, facilitates exchanges of technology among membership countries and encourage cooperation between institutions.

The prospect of greater production possibilities led many countries around our globe to establish preferential trading arrangements on a regional basis.

The Latin American Free Trade Area, the Central American Common Market, the Andean Pact, the Caribbean Community (CARICOM), the Economic Community of West African States and other such groupings in East Africa, in the Arab World, the Amazon and Mekong River Basin were some of the examples of regional integration in the Third World.

The main objectives of these regional groupings were to foster greater cooperation and to integrate their economies, to increase South-South trade, to evolve common trade policies, to establish uniform rules for foreign investors, to coordinate industrial planning at the regional level and to reap maximum benefits from economies of scale.

However, many of these regional blocs established in the first wave of regionalism have either scaled down their regional goals or have simply ceased to function. The reasons for the demise of many of them are both economic and political.

Moreover, military conflicts and ideological divergences made cooperation at the economic level more difficult. The political will and commitment which initially characterized the integration efforts inevitably faded, resulting in the collapse of several such associations.

However, it is the paramount duty of the political leadership of this region to learn a bitter lesson from past experiences and take precautionary measures to safeguard IOR-ARC from hurdles and unexpected impediments.

When the world lending organizations such as the World Bank and IMF have failed to intensify sustainable economic growth in own countries, regional economic organizations such as IOR-ARC should be safeguarded and developed for own survival and economic prosperity.

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