Measuring Closer Economic Cooperation in Indian Ocean Rim: Impressions from the Fields

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1 Latest Version Measuring Closer Economic Cooperation in Indian Ocean Rim: Impressions from the Fields Dr. Siswo Pramono, LL.M. Director General / Head of Policy Analysis and Development Agency Ministry of Foreign Affairs of the Republic of Indonesia Personal Opinion Draft, not to be quoted Work in Progress 1

2 Early A.D. 2

3 East Africa Trade Route: Extent of Islamic World 3

4 VOC Trade Network in 18 th Century 4

5 Diaspora, People to People Connectivity

6 How Big is IORA? 6

7 INDIAN OCEAN RIM ASSOCIATION Vast, Vibrant and Dynamic Region Diverse Economy Tremendous Potentials 21 IORA Member Countries South Africa Australia Bangladesh Kenya India Indonesia Iran Madagascar Malaysia Mauritius Mozambique Oman Seychelles Singapore Sri Lanka Tanzania Thailand United SArab Emirat Comoroos Yemen Somalia 7 Dialogue Partners United States United Kingdom Japan Egypt France China Germany 7

8 30.25% IORA IMPORTANT STATISTICS: POPULATION AND MARKET SIZE IORA 11.41% 8.29% 3.12% Intra IORA OTHERS 69.75% 88.59% Share of World Population, Aug % IORA Share of World Trade, 2016 IORA 11% OTHERS 91% OTHERS 89% Share of World Economy, 2016 Source: UNCTAD, World Bank, Processed by BPPK Inward Investment (FDI),

9 GDP of IORA Members (World Bank, 2016) COUNTRY GDP IN USD BILLIONS (2016) INDIA 2275 AUSTRALIA 1270 INDONESIA 943 IRAN 423 THAILAND 396 COUNTRY GDP IN USD BILLIONS (2016) SRI LANKA 83 OMAN 72 KENYA 69 TANZANIA 48 YEMEN 31 UNITED ARAB EMIRATES 383 MOZAMBIQUE 12 MALAYSIA 297 SINGAPORE 295 MAURITIUS 12 MADAGASCAR 10 SOMALIA 1 Categorized as Least Developed SOUTH AFRICA Countries, According to UN (2016) BANGLADESH 218 COMOROS SEYCHELLES 1

10 Percentage of Contribution (%) % Share of IORA to World Economy (GDP Current Price) Contribution of IORA (GDP current price) to GWP expanding from 5.3% in 1997 to 9.3% in 2016 Rise of share in GWP indicating dynamism of the region Source: UNCTAD, Processed by BPPK Year 10

11 IORA Sub Region s Growth Source: World Bank, processed by BPPK South Asia Africa South East Asia Middle East Oceania World On average IORA Sub Regions continue to grow above world output growth South Asia Robust growth performance Africa s economy is predicted to recover from downturn Middle East- High growth with greater degree of volatility South East Asia Economy is Picking up 11

12 Burundi Egypt SAARC Pakistan Afghanistan Bhutan Nepal Maldives COMESA Djibouti Eritrea Yemen Somalia Kenya Comoros Sri Lanka Bangladesh India IORA Mauritius GCC Qatar Saudi Arabia Kuwait Bahrain Australia Iran UAE South Africa Oman Singapore Indonesia Thailand Malaysia Ethiopia Libya Malawi Rwanda Madagascar Zimbabwe Seychelles Mozambique SADC Sudan Zambia Tanzania Swaziland Namibia RD Congo Angola Lesotho Uganda Botswana Western Europe ASEAN Philippines Brunei Darussalam Myanmar Viet Nam Lao PDR Cambodia Northeast Asia Economic Architecture of Regional and Transregional 12 Forum

13 How Open is IORA? 13

14 Percentage/Ratio IORA Countries Openness to Trade (Trade to GDP Ratio 2015) AE AU BD KM ID IN IR KE SL MG MZ MU MY OM SG SO SC TH TZ YE SA WO Source: UNCTAD, Processed by BPPK 14

15 Percentage Export to IORA Compared to Export to the World AU BD KM IN ID IR KE MG MY MU MZ OM SC SG SO SA SL TH AE TZ YE WO Source: UNCTAD, Processed by BPPK 15

16 Is IORA Ready for Closer Economic Cooperation? 16

17 (1.a) The Need to Narrow Economic Gap among IORA Member Countries 7 countries, 33% 5 countries, 24% High Income Upper Middle Income Lower Middle Income LDCs 4 countries, 19% 5 countries, 24% 17

18 IORA Member Countries: Classification by Income (1.b) Economic Qualification: Gdp In US$ Billion High Income Upper Middle Income Lower Middle Income (Lower Middle Income) (LDC) Low Income (LDC) Australia, 1270 Thailand, 396 India, 2275 Bangladesh, 218 Tanzania, 48 United Arab Emirates, 383 Iran, 423 Indonesia, 943 Yemen, 31 Madagascar, 10 Singapore, 295 South Africa, 291 Sri Lanka, 83 Mozambique, 12 Somalia, 1 Oman, 72 Malaysia, 297 Kenya, 69 Comoros, 1 Seychelles, 1 Mauritius, 12 18

19 Index (2.a) Progress of Innovation in Indian Ocean has been slow (2010 and 2015) Lots of Homework to be done Australia ranks 19 in and 21 in 2010 Singapore ranks 6 in 2015 and 3 in

20 (2.b) Global Innovation Score 2015 EU minus UK GCC plus Egypt SAARC East Asia KR HK SE FL IE DK NL DE LU African Union IORA minus Somalia, Seychelles, Comoros ASEAN minus Brunei, Laos, Myanmar 37.6 SADC SG

21 Index (3.a) Progress of Competitiveness in Indian Ocean (2010 and 2015) Better score than Innovation? Singapore ranks 2 in 2015 and 3 in

22 (3.b) Global Competitiveness Rankings 2015 EU minus UK 4.72 African Union 3.64 SADC 3.75 GCC plus Egypt 4.66 SAARC 3.9 IORA minus Somalia. Seychelles, Comoros &Yemen 4.34 JP 5.47 HK 5.46 TW 5.28 North East Asia plus HK and Taipei 5.21 ASEAN minus Myanmar & Brunei 4.58 SG

23 (4.a) Ranking of Ease of Doing Business in Indian Ocean is OK, but progress is slow (2010 and 2015) Lots, lots of homeworks to be done

24 (4.b) Average Overall DTF 2015 EU minus Malta & UK KR HK TW JP North East Asia plus HK and Taipei African Union GCC plus Egypt SAARC IORA minus Somalia ASEAN minus Myanmar SADC SG MY

25 (5.a) IORA Intra-regional Trade Complementarity Index (2013) INDEX IMPORTER EXPORTER AU BD KM IN ID IR KE MG MY MU MZ OM SC SG SO SA SL TZ TH AE YE Australia (AU) Bangladesh (BD) Comoros (KM) India (IN) Indonesia (ID) Iran (IR) Kenya (KE) Madagascar (MG) Malaysia (MY) Mauritius (MU) Mozambique (MZ) Oman (OM) Seychelles (SC) Singapore (SG) Somalia (SO) South Africa (SA) Sri Lanka (SL) Tanzania (TZ) Thailand (TH) UAE (AE) Yemen (YE)

26 (5.b) Export Complementarity O TRADE COMPLEMENTARITY INDEX (2013) > Source: UNCTAD, 2016; processed by BPPK 26

27 (5.c) Import Complementarity TRADE COMPLEMENTARITY INDEX (2013) > Source: UNCTAD, 2016; processed by BPPK 27

28 (5.d) IORA Complementarity? 0,8 Trade Complementarity Index and Connectivity 0,6 0,3 0,4 0,3 28

29 140 (6.a) Will Connectivity be a Challenge? Shipping Line Connectivity Index Source: World Bank 29

30 (6.b) Right Infrastructure for the Right Economy 98,7 47,6 46,2 63,2 44,3 106,8 122,7 30

31 (6.c) Container port throughput, annual, , Measure in TEU Australia 6,102, ,200, ,668, ,011, ,154, ,313, ,524, Bangladesh 1,091, ,182, ,356, ,431, ,435, ,500, ,655, Comoros India 7,672, ,014, ,752, ,284, ,279, ,883, ,655, Indonesia 7,404, ,255, ,482, ,966, ,638, ,273, ,900, Iran 2,000, ,206, ,592, ,740, ,111, ,924, ,163, Kenya 615, , , , , , ,010, Madagascar 143, , , , , , , Malaysia 16,093, ,922, ,267, ,139, ,873, ,168, ,718, Mauritius 454, , , , , , , Mozambique 241, , , , , , , Oman 3,427, ,768, ,893, ,632, ,167, ,930, ,620, Seychelles Singapore 30,891, ,592, ,178, ,727, ,498, ,516, ,832, Somalia South Africa 3,875, ,726, ,806, ,392, ,360, ,694, ,831, Sri Lanka 3,687, ,464, ,000, ,262, ,321, ,306, ,907, Thailand 6,726, ,897, ,648, ,171, ,468, ,702, ,283, UAE 14,756, ,425, ,176, ,548, ,120, ,336, ,900, Tanzania 363, , , , , , , Yemen 775, , , , , , ,079.39

32 (6.d) Right Infrastructure for the Right Economy 32

33 (7) Will Regional Groupings be Challenges to IORA Closer Economic Cooperation? South-East Asia South Asia South-East Asia ASEAN RCEP ASEAN-Plus South Asia Middle East East Africa SAARC BIMSTEC BBIN IORA Members has been actively engaged in their sub-regional trade as well as bilateral trade agreement Middle East East Africa GCC SACU SADC COMESA 33 Source: Mohanty, (RIS) 2017

34 How Does IORA Overcome Human Security Challenges? 34

35 Challenges of Humanitarian Crises: War and Disaster 35

36 Migration and Regionalism: Implication to Business APEC APEC IORA Source: National Geographic,

37 IORA 37

38 Finding Suitable Form of IORA Closer Economic Cooperation 38

39 Choice of PTA, FTA orcepa-iora Preferential Trade Agreements (PTA) Trade in Goods Trade in Goods Market Access Trade Facilitation and Custom IORA FreeTrade Agreements (FTA) Trade in Services Investment Comprehensive Economic Partnership Agreement (CEPA) Non-Tariff Measures Economic Cooperation dan Capacity Building Trade in Investment IPR Public Procurement Competition Policy 39

40 AFTA CEPT Product coverage Schedule of Tariff Reduction Quota and Non Tariff Barrier The RCEP Parameters Trade in goods Trade in services Investment Economic and technical cooperation Intellectual property Competition Dispute settlement TPP Trade in goods Customs and trade facilitation Sanitary and phytosanitary measures Technical barriers to trade Trade remedies Investment Services Electronic commerce Government procurement; Intellectual property Labor Environment Cooperation and Capacity Building Competitiveness and Business Facilitation Development SMEs Regulatory Coherence Transparency and Anti Corruption Administrative and Institutional Provisions Dispute Settlements 40

41 Field Research on IORA-CEPA Time Frame May August 2017 Number of Countries Targeted Name of Countries Reason for Targeting 8 Australia, Malaysia, Singapore, India, Iran, UAE, Mozambique, Mauritius Representing : Region, Economic Group Institutions Targeted Number of Countries Visited 7 Government Institutions, Think Tanks, Business Association, Companies 41

42 Field Research to IORA Member States Countries visited Countries Scheduled to be visited Source : BPPK SOMALIA 42

43 General impressions on the Questions RELATING TO CEPA No Questionnaires (Core Questions) Response (General Impression) 1 Is IORA known by the public? Public and business have little understanding about IORA 2 Is IORA CEPA feasible? All respondents consider discussion about IORA CEPA is too soon. Respondents prefer other form of closer economic cooperation, PTA, Trade Facilitation or Sector Cooperation Respondents convey their concern on economic gap among Does the existing legal infrastructure and economic member countries, and their readiness to engage in closer capacities support the establishment of CEPA or any economic cooperation. Singapore and Malaysia focus more on other regional economic cooperation mechanism? AEC and RCEP Is WTO membership a pre-requirement for CEPA? Note: Iran and Comoros are not parties to WTO The fact that IORA members are bound by different regional groupings, such as SACU, SAARC, COMESA, ECO, GCC, ASEAN of which any of them apply economic policy, will such differences be impeding the establishment of IORA s economic cooperation Respondents are divided on this issue. Respondents in Singapore consider WTO membership is instrumental. On the other hand, respondents in Iran consider Iran s nonmembership of WTO will complicate negotiation of FTA/CEPA, though it is not a fundamental issue. All respondents considered membership to regional groupings, particularly the grouping that involve customs union will complicate negotiation on trade liberalizations. 43

44 Impression from the Fields (1) There is a common view on: 1. The need of a more realistic approach towards closer economic cooperation within IORA 2. The expectation that research would be focused on promoting trade facilitation such as Free Trade Zone Cooperation 3. The need to explore sector cooperation such as mining (Australian respondents), cruise tourism (Iranian respondents), some aspects of blue economy 4. The need to focus more on capacity building to ease economic gaps 44

45 Impression from the Fields (2) 1. Negotiation on Trade Liberalization should be started only with member countries which are ready. 2. ASEAN Economic Community could be used as Model for Economic Integration within IORA. 3. Sector Cooperation can also be used as fundamental for Economic Integration, taking example of European Union. 45

46 Preliminary Proposal for IORA Closer Economic Cooperation Multi Speed and Multi Level Integration Economic Development Facilitation Capacity Building (for LDCs) Trade Facilitation Preferential Trade Agreement (member countries which are ready) Free Trade Agreement (member countries which are ready) Comprehensive Economic Partnership Agreement Sector Cooperation 46

47 IORA South Korea China RCEP Japan New Zealand Kenya Somalia Comoros Tanzania Mozambique Oman Iran UAE South Africa Mauritius IORA-CEPA Australia India Indonesia Malaysia Singapore Thailand ASEAN Lao Cambodia Brunei Darussalam Vietnam Philippines Myanmar Sri Lanka Seychelles Yemen Bangladesh Madagascar RCEP, ASEAN, IORA-CEPA 47

48 Thank You 48

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