Indian Ocean region targets increased integration

Indian Ocean region targets increased integration

As Bali hosts the Council of Ministers meeting of the Indian Ocean Rim Association (IORA) Thursday, a multilateral organisation, the blue economies, which focus on existing local production and consumption systems, are on the go to enhance the grouping's regional cooperation.

The pan-Indian Ocean region awaits to see the final IORA Concord, scheduled to be adopted in March next year, which will provide a code of conduct to strengthen regional cooperation.

Without binding commitments and compliance required from the 21 IORA member countries, the concord can enhance their respective geo-economic gravity and strengthen their global outreach. And there are several reasons to believe this.

Most importantly, there exists huge potential for cooperation in intra-regional trade and in the development of regional value chains across distinct sectors. The IORA countries differ in terms of natural endowments, economic structures and the level of economic development. All these variations provide trade opportunities such as commodity exports and imports among the member countries.

For instance, Thailand's exports of rubber and rice responds well to Kenya's needs to import such commodities. Intra-regional trade in the pan-Indian Ocean region has witnessed a mix of growth trajectory as well as a declining trend. From US$218.9 billion in 2004, the regional export increased to $619.24 billion in 2011 and then went down to $472.8 billion in 2015, according to the Geneva-based International Trade Centre.

Enhanced cooperation in trading service exports such as education, consultancy, hospitality and tourism and logistics can immensely benefit the region. The IORA countries need to explore and leverage the advantages accruing from several factors such as maritime connectivity and cultural cohesiveness to improve business ties.

Promoting intra-industry trade and developing competitive advantages can help small and medium enterprises (SMEs) in the region. For instance, Vietnam, Thailand, India and Indonesia can develop a footwear chain to enable their SMEs to have a stake in the production of competitive products to cater to regional and global markets. Meanwhile, the IORA countries need to identify and overcome their supply-side constraints such as inadequate export infrastructures or a lack of credit.

IORA countries can reduce trade cost by adopting innovative trade facilitation and connectivity measures. They can consider implementing the Trade Facilitation Agreement (TFA), which was concluded in Bali in 2013, or simplifying or harmonising their customs procedures. By simplifying the procedures, most member countries would be able to increase their World Bank's "doing business" rankings as well. For instance, as per the bank's "Doing Business Report 2016", Madagascar, an IORA member, upgraded its port infrastructure to reduce the time for documentary compliance at the border, improving on the parameter of "trading across borders".

Unfortunately, despite sharing the ocean, most IORA countries are yet to attain a good score in the Liner Shipping Connectivity Index of the United Nations Conference on Trade and Development. The degree of connectivity by shipping networks of most IORA countries is low, except Singapore which gets the best regional score and Malaysia.

Therefore, extending the participation of low-scoring countries in the global value chain can potentially improve their geo-economic gravity as well as the much solicited regional connectivity.

The regional geopolitical architecture of IORA is complex and subject to strategic maneuvering by external powers who are now seeing themselves as stakeholders.

As the United States is leading the Trans-Pacific Partnership, while China and some Asean countries having competing claims in the South China Sea, the IORA can play a re-balancing act by positioning itself as the epicentre of both geo-economic growth and social sustainability.


Faisal Ahmed is associate professor of international business at FORE School of Management, New Delhi, India. Views are personal.

Faisal Ahmed

Associate professor of international business at FORE School of Management

Faisal Ahmed is associate professor of international business at FORE School of Management, New Delhi, India. Views are personal.

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