1 Chief Editor Dr Siswo Pramono, LL.M, Policy Analysis and Development Agency (PADA), Ministry of Foreign Affairs of the Republic of Indonesia The Prospect of IORA Comprehensive Economic Partnership Agreement (CEPA) 2017 Center for Policy Analysis and Development Asia Pacific and Africa Region Ministry of Foreign Affaris of The Republic of Indonesia
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1
Chief Editor
Dr Siswo Pramono, LL.M, Policy Analysis and Development Agency (PADA),
Ministry of Foreign Affairs of the Republic of Indonesia
The Prospect of IORA Comprehensive Economic Partnership Agreement (CEPA)
2017
Center for Policy Analysis and Development Asia Pacific and Africa Region Ministry of Foreign Affaris of The Republic of Indonesia
2
Published by Center of Policy Analysis and Development Agency on
Asia Pacific and Africa Regions, Ministry of Foreign Affairs of the
Figure 80. Proposed process to IORA Comprehensive Economic Partnership .................................. 109
11
P R E F A C E
The Sixth Bi-annual meeting of the Committee of Senior Officials
(CSO) in Yogyakarta, Indonesia, on 22-23 May 2016, identified that
economic cooperation opportunities need to be further explored
through the possibility of establishing an IORA Comprehensive
Economic Partnership Agreement (IORA-CEPA). This idea was
further discussed during the 22nd Indian Ocean Rim Business
Forum (IORBF), on 13 of October 2016 in Jakarta.
The idea of IORA – CEPA has so far been a subject of discussion
among IORA member countries. The fact shows that IORA member
countries are so diverse in terms of economic structure and
development and that of socio cultural background. It then comes to the question: Is the idea of
establishing an IORA-CEPA feasible? How are the views of the IORA countries about the idea?
Our study of the “Prospect of the Establishment of an IORA Comprehensive Economic Partnership
Agreement (CEPA)” was aimed to find the answer and impression from the field by collecting primary
data from the credible counterparts and stakeholders such as government officials and business circles
in eight IORA member countries. These countries are India, Malaysia, Iran, Mozambique, Singapore,
Australia, United Arab Emirates and Mauritius. The study resulted in deeply understanding the views
and position of the respective IORA member countries on the prospect of the establishment of IORA
CEPA.
I wish this study could provide us first hand information on the IORA-CEPA viewed from the angle of its
prospects and challenges.
Jakarta, December 2017
Dr. Siswo Pramono,LL.M Director-General/Head of
Policy Analysis and Development Agency
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Section 1: Introduction
INTRODUCTION
The Indian Ocean region is the third largest of the world's oceanic divisions, covering 70,560,000 Km2 (27,240,000 sq mi), approximately 20% of the water on the earth's surface. The region carries a strategic importance as a lifeline of global trade, energy and many other global economic activities. According to one estimate, annually, more than 80 per cent of global seaborne trade, including crude oil, passes through the Indian Ocean. In terms of shipping lines and container traffic, about 100,000 ships transit through the Indian Ocean and its adjacent waterways. The Indian Ocean is also considered to be the world’s most important energy and trade line belt. Annually, more than 66 per cent of the international seaborne oil trade passes through the region and nearly 40 per cent of the global offshore oil production is operated in the region.
Indian Ocean Rim Association (IORA) is the only regional association linking most countries surrounding the Indian Ocean. It was officially established by the signing of IORA Charter in Mauritius on 6 of March 1997. The Association currently consists of 21 member countries, including Australia, Bangladesh, the Comoros, India, Indonesia, Islamic Republic of Iran, Kenya, Madagascar, Malaysia, Mauritius, Mozambique, Sultanate of Oman, Seychelles, Singapore, Somalia, South Africa, Sri Lanka, Tanzania, Thailand, the United Arab Emirates and Yemen. IORA has also seven dialogue partners: China, Egypt, France, Germany, Japan, the United Kingdom and the United States of America.
The objective of IORA mainly is to promote the sustained growth and balanced economic development in the vast Indian Ocean region as well as in the member countries, as it stipulated in chapter three (3) of the IORA Charter. However, after 20 years of its existence, IORA is still facing challenges in strengthening economic cooperation and enhancing economic development.
According to a research, conducted by Chair of Indian Ocean Studies – (CIOS), the trade and investment flows within IORA are still low and there is not a single trading arrangement among the member countries of IORA, particularly among Asia, Africa and Gulf countries. Economic structures and development of IORA member countries remain so diverse. Based on the World Bank’s data in 2015, it can be seen that most of IORA member countries with more advanced economic development are in the eastern part of the Indian Ocean, while the less developed economies are in the western part of the Indian Ocean. The data shows that, for instance, India and Australia are high-income countries with GDP of USD around 2 trillion and USD 1.3 trillion, while Somalia and Comoros are low-income countries with GDP of USD 6 billion and USD 600 million.
It is undeniable that IORA needs a breakthrough strategy to overcome those challenges, to encourage and strengthened economic cooperation, not only in trade and investment but also in enhancing economic development and reducing development gap among IORA member countries.
In line with such efforts to overcome those challenges, the establishment of IORA Comprehensive Economic Partnership Agreement (CEPA) is one of the thoughts having been rolling within IORA countries. The idea and the concept paper of the IORA - CEPA has been firstly introduced and discussed at the Sixth Bi-annual meeting of the Committee of Senior Officials (CSO) in Yogyakarta, Indonesia, on 22-23 May 2016 and echoed at the meeting of the 22nd Indian Ocean Rim Business Forum (IORBF), on 13 of October 2016 in Jakarta, Indonesia. It has received positive response from the forum and approved by representatives of IORA member states to further explore economic cooperation
opportunities available in IORA as well as in the region. However, on the other hand, the idea of IORA – CEPA remains a debatable discourse in other forums, such as the Indian Ocean Rim Academic Group – IORAG (academia forum) and the Council of (Foreign) Ministers - COM (government forum) of IORA.
The establishment of IORA - CEPA is expected not only to boost real economic cooperation within IORA, but also to reduce economic development gap in the Indian Ocean region. In the context of regional architecture, IORA, as a core entity in the Indian Ocean region, is expected to be a driving force in strengthening economic cooperation and development in the Indian Ocean region. Furthermore, in the context of trans-regional architecture, IORA could engage the Indian Ocean region with surrounding regions by developing closer ties with the existing regional forum, such as ASEAN and GCC.
Considering the facts that IORA member countries are very diverse, not only in terms of economic structures and development, but also in socio cultural background, then the question is: can this idea be transformed into reality? How exactly the views of the IORA countries about the idea? Within this context, this study on the feasibility of establishing the CEPA – IORA is conducted.
Research Focus
This research will focus on identifying the possibility of establishing the IORA – CEPA, its opportunities and challenges.
Research Questions :
This study attempts to address any issues and questions regarding the feasibility of establishing the IORA-CEPA. As consequences, the study also looks at the models; prerequisites as well as readiness of IORA’s member countries in establishing the IORA-CEPA.
Method of Research :
The research would be quantitative and qualitative. Information and field data collection were carried out by : (i) Field visit studies to obtain primary data in IORA member countries, such as Australia, Singapore, Malaysia, Thailand, India, UAE, Iran, Mauritius, Kenya and South Africa. The field visit is expected to collect data and information of IORA’s member countries on the prospects of the establishment of CEPA - IORA; (ii) library studies; (iii) discussion and consultation with experts through Focus Group Discussion (FGD); Expert Group Meeting (PKA); and (iv) partnerships with the Indonesian Embassies in IORA member countries. The Research would be policy oriented and features practical aspects while remaining based on academic principles.
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Section 2:
Chapter II
Measuring Economic Cooperation in Indian Ocean Rim:
An Illustrated Sketch about Regional Architecture
IORA is to Promote a Robust Economic Cooperation
While political and socio-cultural areas also represent important focus for Indian Ocean Rim
Association (IORA) cooperation, the IORA Charter stipulates that the association was
established primarily to help develop the economy of the vast Indian Ocean rim community.
History Matters: An Indonesian Perspective
For Indonesia, connectivity with Indian subcontinent begins in the 1st century. The earlier
cultural linkage, as depicted in the book Pustaka Rājya-Rājya i Bhumi Nusāntara (1682),
was between the Kingdom of Salakanagara in Java and various political entities of India.
Nusantara is the indigenous name of what is known now as Indonesia archipelago. Ties with
India had even increased during the reign of later kingdoms in the 4th century, such as
Tarumanagara of West Java and Kutai of East Kalimantan. Trade between Kingdoms in
Indonesia with those in Indian Ocean was then boosted with the birth of the Empire of
Srivijaya (7th – 13th century), which was centered in South Sumatera; and the Empire of
Majapahit (13th – 16th century), which was centered in East Java. From Indian Ocean, trade
expanded to Europe.
As depicted in Figure 1, since the 1st century, trade connectivity has been intensified even
further by kingdoms in the Western coast of the Indian subcontinent with the Roman Empire.
A trade road from India to Europe evolved; starting from the western part of Indian Ocean
went north through the Red Sea to reach Egypt, crossing the Isthmus of Suez (the Canal
then, has not yet existed), and reach Mediterranean Sea. The main commodities of this
and precious stones. Inter-regional exchanges based on trade complementarily began to
flourish.
With the increase of trade, another strategic sea-route developed in Indian Ocean,
connecting Indonesian archipelago with the eastern coast of Africa. As depicted in Figure 2,
Figure 1.: Source Young, Gery Keith (2001) Rome’s Eastern Trade: International Commerce and Imperial Policy
15
this sea-route, known as the Cinnamon Route, was developed by the Nusantara seafarers.
The Cinnamon Route, then, has two segments. The short segment, connecting Nusantara
with India, was served with Single Outrigger Canoes. The longer segment, connecting
Nusantara with Africa, was served with Double Outrigger Canoes.
It is worth noting, that double outrigger canoes were typical Austronesian canoes, which
were used and widely produced in Nusantara. As such, the canoes were products of home-
grown industry in Nusantara. The relief in Borobudur temple, Central Java, illustrated the
technical details of such a traditional canoe. Borobudur temple was an ancient monument,
built by Shailendra Dynasty from 8th to 9th century.
Exploring the past, would help one understand the future. In 2003, a group of Indonesian
shipbuilders undertook a daring scientific experiment to understand the characteristic of
Austronesian canoes. They reconstructed a “Borobudur canoe” by employing traditional
method. The double outrigger canoe was named Samudera Raksa. Upon the completion of
the canoe, the shipbuilder team then embarked on a daring, but successful expedition from
Jakarta to Ghana. The journey took about 6 months. As such, it is proven that in the 1st
century, Indonesian seafarers already had the capacity to trade, using their own-made
vessels, across Indian Ocean. And, in so doing, the Indonesian seafarers had also helped
develop an effective trade route known as Cinnamon Route. The following Figure 3 and 4
show the technical details of Austronesian canoe as illustrated in the relief of the Borobudur
temple (Right) and the reconstructed double outrigger canoe “Samudera Raksa”, sailing the
Cinnamon Route in Indian Ocean (Left).
Figure 2: Source: http://1.bp.blogspot.com/-occGgqNAEI/Vcfsomc6k0I/AAAAAAAAGRI/_c04odHsuo4/s1600/cinnamon-spice-trade-route.jpg. Accessed on 12 February 2017
Figure 4.: The Canoe “Samudera Raksa” was built using the information relief in Borobudur Temple.
Figure 3.: The Technical Details of Austronesian Canoe as Illustrated in the Relief in the Borobudur Temple
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Maritime connectivity in Indian Ocean was robustly developed with the dawn of the Islamic
trade. More maritime routes have even been developed since 1500, connecting Indonesian
archipelago with northern and eastern parts of Africa. For instance, there are ample of
evidences on the existing trade between the Sultanates of Cirebon in West Java with Africa.
Such a trade was proven by the existence of earthenware from Kenya and rifles from Egypt,
in the Cirebon sultanate.
Islamic Kingdoms aside, the 18th century marked the dawn of modern shipping industry,
connecting Batavia of Dutch East Indies, Galle of Sri Lanka, to Amsterdam, through Cape
Town. The shipping industry was mostly developed by the Vereenigde Oost-Indische
Compagnie (VOC). The following Table 1 summarizes the earlier trade complementarity
among sub-regions of Indian Ocean, as depicted in Figure 6. This earlier traditional trade
exchange will, in the future, develop into a more sophisticated Trade Complementarity Index
(TCI), as we know it today.
Another legacy of colonial power, is the existing palm oil industry in Indonesia and Malaysia.
In 1848, Dutch imported oil palms from Mauritius and introduced the palm in Sumatra. The
Dutch government then developed oil palm plantations in the east coast of Sumatra and
Aceh. Since 1911, the Dutch government of East Indies was already the world’s main palm
oil supplier, with expanding market in Europe and Indian Ocean rims.
An old adage stipulated that “ship follows the trade”. Market expansion in the Indian Ocean
has induced the development of trade connectivity and new routes of navigation as depicted
in Figure 6.These new routes were known as VOC sea lanes, and many of them are still
functional until today.
As such, countries in Indian Ocean have been engaging in a robust regional trade in the last
2 millennia. As such, history provides strategic lesson learned for the region to move
forward, and create a trade regime in Indian Ocean that all countries would benefit from it.
As reiterated in the beginning of this article, people-to-people connectivity makes up the cultural bond among peoples of Indian Ocean. Diaspora would play important role as a cultural glue of the diverse region. Figure 7 shows the extent of Chinese, Indian, and Indonesian diasporas in the Indian Ocean region
.
Decolonized Indian Ocean Rim
Throughout history, the people of Indian Ocean, have – unconsciously perhaps – developed,
in a gradual and “natural” manner, a homegrown regional architecture. In the words of 2016
Yogyakarta Message: “IORA needs to continue its people-centered dialogue approach
towards a regional architecture that is open, transparent, inclusive, and evolutionary”. As
such, the Indian Ocean architecture has been sustained by three pillars: economic, socio-
cultural, and political ties. This is particularly true with the dawn of the decolonization in Asia
Table 1: It is timely and important for
the region to devise a socio-cultural
mechanism to harness the cultural
reach of the region, of which
diaspora would become a base for
regional cohesion and business.
After discussing various aspects of
economy, and supplanting it with
discussion on political as well as
socio-cultural ties, it is time to end
this article by figuring out the likely
regional architecture in the Indian
Ocean.
Tabel 1.: Commodity Trade Complementarity in Indian Ocean
18
and Africa, as enshrined in the Dasasila Bandung of 1955. That Indian Ocean has been
freed from the yoke of colonialization, means that the modalities (infrastructure, knowledge,
and otherwise) of the colonial past will be used as part of the common effort to build the
region anew.
It has been committed in the last 20 years, and as mandated by the IORA Charter, that
countries of Indian Ocean rim will cooperate to promote economic development as well as
political stability in this most promising region. Since the Indian Ocean community has been
walking together in the same path of history in the last 2 millennia, all seemed to have
shared conviction that the economic objectives can be attained.
In this context, owing to the objectives of IORA as described in the beginning of this paper,
namely to promote a robust economic cooperation, this paper will explore various economic
parameters to measure the possibility to sketch a regional architecture to help attain such
objectives.
Other Parameters: Political Stability and Security
All of the economic parameters (GDP, Global Innovation Index, Global Competitiveness
Index, Ease of Doing Business, and Trade Complementarity Index) should not be discussed
in a vacuum. None economic parameters, political and otherwise, matter. Figure 8 represent
new displacement of person associated with political conflicts and natural disasters. A
country, with devastating political conflicts (wars, political violence, etc), or a devastating
natural disasters, is unlikely to have a sustainable economic development. Thus, IORA, as
the only regional organization in the Indian Ocean rim, should be able to provide the region
with an effective mechanism, to deal, at best, with
these calamities.
Figure 8.: Source: http://www.internal-displacement.org/globalreport2016/. Accessed on 12 February 2017.
Another important aspect of maintaining security and stability in the India Ocean rim is an
effective dispute mechanism. Since the blue economy looms high in the IORA’s agenda,
there is then a pressing need for the region to have effective legal mechanism to anticipate
Figure 8 indicates that the latent
security threats in ASEAN and
Southern Asia are dominated by
natural disasters, as represented by
blue circles. A study done in the
region concludes that the main
threats for the eastern part of Indian
Ocean towards the Pacific are
cyclones, earthquakes, and tsunami.
Whereas, the main threats in the
western part of Indian Ocean are
wars and political violence of various
degrees. The Gulf of Aden is also
marred with piracy, in particular off
Somalian waters. As such, IORA, too,
should develop an effective
mechanism to deal with these kinds
of threats. Security and stability is a
conditio sine quanon for sustainable
economic development.
19
the possible dispute relating to the exploration and exploitation of the natural resources,
living and non-living, in the Indian Ocean, including the seabed.
So far, all members of IORA but Iran and UAE are parties to UNCLOS. Iran and UAE
nevertheless accept UNCLOS as part of widely accepted international customary laws.
Countries with high level trade in Indian Ocean, such as India, Singapore, Malaysia,
Thailand, and Indonesia, have in a time in their history resorted in legal mechanisms,
including the use of UNCLOS, to settle disputes with other countries, and consistently
respected the Court’s decisions. These good practices should become precedence in the
dispute settlement in the Indian Ocean context.
Indian Ocean as We Know it Today: A Contemporary Sketch
It is important to keep the objectives of IORA in mind. Among the main objectives, as stipulated in the IORA Charter, is “…to promote the sustained growth and balanced development of the region...”. Thus, the difficult challenge that the community of the Indian Ocean need to address is the question of development gaps.
The development gaps can be detected by mapping out the economic capacity of the
respective IORA member countries. GDP is a good starting point to assess such an
economic mapping.
The following Table 2 provides information on the GDP of the respected member of IORA.
One should realize how diverse the region and how complex the economic qualification for
every member countries are.
For instance, Indonesia is a member of G20, but at the same time also qualified as a lower
middle income economy. Whereas, Bangladesh which is also a lower middle income
economy, but, at the same time, is also classified as Least Developed Countries (LDC).
This is the diversity. Four IORA members, namely India, Australia, Indonesia, and South
Africa are members of G20. Those who are qualified as High Income Economies based
World Bank definition are Australia, United Arab Emirates, Singapore, Oman, and
Seychelles.
The region also hosts Upper Middle Income economies such as, Thailand, Iran, South
Africa, Malaysia, and Mauritius. Those who are classified as Lower Middle Income
economies include India (also member of G20), Indonesia (also member of G20),
Bangladesh, Sri Lanka, Kenya, and Yemen.
As illustrated in Figure 9, one of the
encouraging developments in the
IORA region is the promotion of
Asia’s legal cultures in the Indian
Ocean context. Since economic
cooperation, and hence
competition, in IORA would involve
the strategic waters of Indian Ocean,
then UNCLOS should be the main
reference for dispute settlement.
Figure 9.: Developed by BPPK
20
There are also members of IORA who are classified, based on UN definition (2015), as LDC,
and, based on World Bank classification (2016), as Low Income Economies as well, such as
Tanzania, Mozambique, Madagascar, Somalia, and Comoros.
As illustrated in Figure 10, most of the larger economies happened to be located in the
eastern part of the Indian Ocean, while the smaller economies are located in the western
part of the Indian Ocean. In this regard, the content of Table 2 has been visualized in Figure
10, to ease readers in grabbing the economic gaps among Indian Ocean countries. As Such,
the region should pay more attention to this complexity in figuring out the kind of economic
cooperation in the region. “One size fits all” approach will not work but instead, a more
integrative approach is expected.
List of IORA Member Countries’ GDP
Countries GDP (in billions)
India (G20) (Lower Middle Income)
2073
Australia (G20) (High Income) 1339
Indonesia (G20) (Lower Middle Income)
862
Thailand (Upper Middle Income)
395
Iran (Upper Middle Income) 386
United Arab Emirates (High Income)
370
South Africa (G20) (Upper Middle Income)
312
Malaysia (Upper Middle Income)
296
Singapore (High Income) 292
Bangladesh (Lower Middle Income) (LDC)
195
Sri Lanka (Lower Middle 82
Figure 10.: Source World Bank 2015 for GDP.
21
Income)
Oman (High Income) 70
Kenya (Lower Middle Income) 63
Tanzania (Low Income) (LDC) 45
Yemen (Lower Middle Income) (LDC)
37
Mozambique (Low Income) (LDC)
15
Mauritius (Upper Middle Income)
11
Madagascar (Low Income) (LDC)
10
Somalia (Low Income) (LDC) 6
Seychelles (High Income) 1
Comoros (Low Income) (LDC) 0,6
Tabel 2 list of IORA
Assuring the Sustained Growth: Innovation as a Key Factor
Sustained growth throughout the Indian Ocean Rim will help promote balanced
development. Innovation is an important way to sustain growth. This following box illustrates
the linkage between innovation and economic growth.
Thus, innovation is of paramount important to sustain, and improve, the growth of the Indian
Ocean economy. This article measures the state of innovation in the Indian Ocean economy,
based on the Global Innovation Index Report 2016, as provided jointly by Cornell University,
INSEAD, and the World Intellectual Property Organization.
As depicted in Figure 11, the conceptual framework for measurement of innovation index is
to observe, in an integrated way, all innovation factors that can propel economic growth.
Those calculated include: the overall Global Innovation Index (GII), the Input Sub-Indices
(i.e. Institutions, Human Capital and Research, Infrastructure, and Market Sophistication),
Output Sub-Indices (i.e. Knowledge and Technology Outputs and Creative Outputs), and
Innovation Efficiency Ratio.
Source : World Bank 2015 for GDP. World Bank
2016 for Economy Classification based on Income
Group. UN 2015 for Least Developed Countries
Qualification
Figure 11.: Source: Global Innovation Index Report 2016 as provided jointly by Cornell University, INSEAD, and the World Intellectual Property Organization. (http://data.worldbank.org/region/least-developed-countries:-un-classification. Accessed on 12
The task of this paper is to observe the development of innovation, as a factor that drives
growth, among the IORA member countries. The method is by comparing the innovation
score of 2010, with the one of 2015. Thus, one can infer whether innovation in the Indian
Ocean is progressing or regressing.
In other words, for the Indian Ocean region, this
article observes the change of score (i.e. increasing
or decreasing) of individual countries to see the
potential economic progress in the region.
In terms of the Global Innovation Index (GII) rankings, about one-third (6) of the IORA
member countries are above the median line (top 64) of GII rankings (which is positive). The
following Figure 12 helps visualize the rank of IORA members in the GII. The larger the
circle, the better the rank. Singapore, which ranked number 6 in the world, would represent
the Champion of innovative economy in IORA.
Country Year Overall Score Rank
Australia DB2015 53.07 19
Australia DB2010 49.85 21
Bangladesh DB2015 22.86 117
Bangladesh DB2010 28.05 97
Comoros DB2015 n/a
Comoros DB2010 n/a
India DB2015 33.61 66
India DB2010 34.52 62
Indonesia DB2015 29.07 88
Indonesia DB2010 27.78 91
Iran, Islamic Rep DB2015 30.52 78
Iran, Islamic Rep DB2010 28.41 95
Kenya DB2015 30.36 80
Kenya DB2010 29.15 89
Madagascar DB2015 24.79 111
Madagascar DB2010 25.41 113
Malaysia DB2015 43.36 35
Malaysia DB2010 44.05 31
Mauritius DB2015 35.86 53
Mauritius DB2010 36.47 53
Mozambique DB2015 29.84 84
Mozambique DB2010 n/a
Oman DB2015 32.21 73
Oman DB2010 35.51 57
Seychelles DB2015 n/a
Seychelles DB2010 n/a
Singapore DB2015 59.16 6
Singapore DB2010 59.64 3
South Africa DB2015 35.85 54
South Africa DB2010 35.22 59
Sri Lanka DB2015 28.92 91
Sri Lanka DB2010 30.36 82
Tanzania DB2015 26.35 105
Tanzania DB2010 26.88 104
Thailand DB2015 36.51 52
Thailand DB2010 37.63 48
United Arab Emirates DB2015 39.35 41
United Arab Emirates DB2010 41.99 34
Yemen, Rep DB2015 14.55 128
Yemen, Rep DB2010 20.72 123
As earlier discussed,. Tabel 3 depicts the change of score by comparing the database of 2010 with 2015 The result is that some countries experienced positive changes (increased) in the overall innovation score. These countries include, Australia (from 49.85 to 53.07), Indonesia (from 27.78 to 29.07), Iran (from 28.41 to 30.52), Kenya (from 29.15 to 30.36), and South Africa (from 35.22 to 35.85). The shaded blue color represents countries with increase in innovation score. The rest of IORA members experienced mostly, less than one point decrease in the innovation score. Countries with such a slight decrease are India, Madagascar, Malaysia, Mauritius, Singapore, and Tanzania. Thus, the result is rather encouraging. The shaded red color represents countries with decrease in innovation score. The shaded yellow color indicates that data is not available.
23
To describe the progress of innovation in Indian Ocean, the following Figure 13 illustrates
countries with increasing numbers of GII score against the backdrop of their respective
visualized ranks. As such, among countries with the best performance in the region, in
terms of GII points increase, are Australia (Rank 19; 3.22 points increase), Iran (Rank 78;
2.11 points increase), Indonesia (Rank 88; 1.29 points increase), Kenya (Rank 80; 1.21
points increase), and South Africa (Rank 54; 0.63 points increase). What is interesting if one
observe the Figure 10 is that, the increase of innovation, albeit moderate, is rather equally
distributed across the vast Indian Ocean region, from Australia to South Africa.
It is now time to view the regional innovation score (average) of IORA in the global context.
As depicted in Figure 14, this study calculates the following average regional score:
Northeast Asia averages 54.48, European Union averages 49.24, ASEAN averages 37.6,
GCC averages 34.54, and IORA averages 33.68. So, IORA is the least developed in terms
of innovation. Based on geographical proximity, and also cultural-historical ties, as discussed
in the beginning of this paper, it is thus proposed that IORA is to work closely together with
ASEAN, GCC, and Northeast Asian economies.
To describe the progress of innovation in
Indian Ocean, the following Figure 13
illustrates countries with increasing
numbers of GII score against the backdrop
of their respective visualized ranks. As
such, among countries with the best
performance in the region, in terms of GII
points increase, are Australia (Rank 19;
3.22 points increase), Iran (Rank 78; 2.11
points increase), Indonesia (Rank 88; 1.29
points increase), Kenya (Rank 80; 1.21
points increase), and South Africa (Rank
54; 0.63 points increase). What is
interesting if one observe the Figure 10 is
that, the increase of innovation, albeit
moderate, is rather equally distributed
across the vast Indian Ocean region, from
Australia to South Africa.
Figure 12. Source:Global Innovation Index Report 2016 as provided jointly by Cornell University, INSEAD, and the World Intellectual Property Organization. Modified by BPPK
Figure 13.: Source: Global Innovation Index Report 2016 as provided jointly by Cornell University, INSEAD, and the World Intellectual Property Organization. Modified by BPPK
24
From Innovation to Competitiveness:
What is competitiveness? Why is it matter for economic development?
This paper starts with definition of competitiveness as shown in the following box.
Figure 15 explains the concept even further. The conceptual framework of Global
Competitiveness Index (GCI) employs relevant data from various respected institutions, such
as Monetary Fund (IMF), the World Bank, and United Nations’ specialized agencies. About
114 indicators are grouped into 12 pillars that are compiled into three sub-indexes. As shown
in Figure 15, pillars within Basic Requirement Sub-Index include institutions, infrastructure,
macroeconomic environment, and health and primary education. Pillars within Efficiency
Enhancers Sub-Index include higher education and training, goods market efficiency, labor
market efficiency, financial market development, technological readiness, and market size.
Pillars within Innovation and sophistication Factors Sub-Index include, business
sophistication and innovation. Pillars within Basic Requirement Sub-Index are key for factor-
driven economies. Pillars within Efficiency Enhancers Sub-Index are key for efficiency-driven
economies. Last but not least, pillars within Innovation and Sophistication Factors Sub-Index
are key for innovation-driven economies. (Source: Global Competitiveness Report 2016-
2017. Klaus Schwab. World Economic Forum)
Figure 14.: Source Global Innovation Index Report 2016 as provided jointly by Cornell University, INSEAD, and the World Intellectual Property Organization. Modified by BPPK
Figure 15.: Source: Global Competitiveness Report 2016-2017. Klaus Schwab. World Economic Forum
25
Country Year Overall Score Rank
Australia DB2015 5.15 21
Australia DB2010 5.11 16
Bangladesh DB2015 3.76 107
Bangladesh DB2010 3.64 107
Comoros DB2015 n/a n/a
Comoros DB2010 n/a n/a
India DB2015 4.31 55
India DB2010 4.33 51
Indonesia DB2015 4.52 37
Indonesia DB2010 4.43 44
Iran, Islamic Rep DB2015 4.09 74
Iran, Islamic Rep DB2010 4.14 69
Kenya DB2015 3.85 99
Kenya DB2010 3.65 106
Madagascar DB2015 3.32 130
Madagascar DB2010 3.46 124
Malaysia DB2015 5.23 18
Malaysia DB2010 4.88 26
Mauritius DB2015 4.43 46
Mauritius DB2010 4.32 55
Mozambique DB2015 3.20 133
Mozambique DB2010 3.32 131
Oman DB2015 4.25 62
Oman DB2010 4.61 34
Seychelles DB2015 n/a n/a
Seychelles DB2010 n/a n/a
Singapore DB2015 5.68 2
Singapore DB2010 5.48 3
South Africa DB2015 4.39 49
South Africa DB2010 4.32 54
Sri Lanka DB2015 4.21 68
Sri Lanka DB2010 4.25 42
Tanzania DB2015 3.57 120
Tanzania DB2010 3.56 113
Thailand DB2015 4.64 32
Thailand DB2010 4.51 38
United Arab Emirates DB2015 5.24 17
United Arab Emirates DB2010 4.89 25
Yemen, Rep DB2015 n/a n/a
Yemen, Rep DB2010 n/a n/a
Using the GCI’s framework, the
competitiveness of individual
members of IORA is assessed. Table 4
depicts the change of score by
comparing the database of 2010 with
2015. The result is that some countries
experienced positive changes
(increased) in the overall
competitiveness score. These
countries include,
United Arab Emirates (from 4.89 to
5.24), Malaysia (from 4.88 to 5.23),
Singapore (5.48 to 5.68), Kenya (from
3.65 to 3.85), Bangladesh (from 3.64
to 3.76), Mauritius (from 4.32 to 4.43),
Indonesia (from 4.43 to 4.52), South
Africa (from 4.32 to 4.39), Thailand
(from 4.51 to 4.64), Australia (from
5.11 to 5.15), Tanzania (from 3.56 to
3.57).
As such, this is a good news. One can
notice that there are more shaded
blue colors than the red ones. More
than half of IORA members
experienced positive changes in their
overall competitiveness score. Among
those with significant positive changes
in the score include United Arab
Emirates, Malaysia, Singapore, and
Kenya. The rest (less than half) of IORA
members experienced mostly slight
decrease in their competitiveness
score. These countries need more
effective capacity building program
and trade facilitations.
Tabel 4.: Source: Global Competitiveness Report 2016-2017. Klaus Schwab. World Economic Forum.Modified by BPPK
26
In terms of the GCI rankings, more than half (11) of the IORA member countries are above
the median line (top 69) of GCI rankings (which is positive). The following Figure 16 helps
visualize the rank of IORA members in the GCI. The larger the circle, the better the rank.
Singapore, which ranked number 2 in the world, would again represent the Champion of
competitive economy in IORA.
The data shows a positive development on the increasing competitiveness in Indian Ocean
region. More than half of IORA members experienced positive changes in their
competitiveness; and more than that, it is encouraging to learn that the increase in
competitiveness is equally distributed in the region, from Australia to South Africa.
To describe the progress of competitiveness in Indian Ocean, the following Figure 17
illustrates countries with increasing numbers of GCI score against the backdrop of their
respective visualized ranks.
As such, among countries with the best performance in the region, in terms of GCI points
increase, are United Arab Emirates (rank 17; 0.35 points increase), Malaysia (rank 18; 0.35
In terms of the Ease of Doing Business rankings, half (10) of the IORA member countries
are above the median line (top 95) of Ease of Doing Business rankings (which is positive).
The following Figure 21 helps visualize the rank of IORA members in the Ease of Doing
Business. If we link Figure 17 with Table 5, then one can infer that despite the fact that many
IORA members experienced slight decrease in the ease of doing business score, but half of
them at least, still ranked above the median line. Singapore, which ranked number 2 in the
world, would again represent the Champion of Ease of Doing Business in IORA.
Economy Year
Overall
DTF
Australia DB2015 79.94
Australia DB2010 80.80
Bangladesh DB2015 40.67
Bangladesh DB2010 45.32
Comoros DB2015 45.68
Comoros DB2010 44.96
India DB2015 52.87
India DB2010 48.77
Indonesia DB2015 56.68
Indonesia DB2010 56.84
Iran, Islamic Rep DB2015 56.27
Iran, Islamic Rep DB2010 56.78
Kenya DB2015 54.17
Kenya DB2010 57.46
Madagascar DB2015 43.97
Madagascar DB2010 45.53
Malaysia DB2015 78.64
Malaysia DB2010 74.61
Mauritius DB2015 72.41
Mauritius DB2010 73.35
Mozambique DB2015 53.64
Mozambique DB2010 52.73
Oman DB2015 64.09
Oman DB2010 65.53
Seychelles DB2015 57.98
Seychelles DB2010 62.24
Singapore DB2015 85.08
Singapore DB2010 89.77
South Africa DB2015 63.97
South Africa DB2010 67.53
Sri Lanka DB2015 56.82
Sri Lanka DB2010 56.90
Tanzania DB2015 50.14
Tanzania DB2010 52.62
Thailand DB2015 72.20
Thailand DB2010 73.03
United Arab EmiratesDB2015 74.25
United Arab EmiratesDB2010 70.80
Yemen, Rep DB2015 44.28
Yemen, Rep DB2010 56.72
Using the Distance to Frontier (DTF) framework, the ease of doing business of individual members of IORA is assessed. Tabel 5.depicts the change of overall DTF scores by comparing the database of 2010 with 2015. The result is that some countries experienced positive changes (increase) in the overall DTF score. These countries include, India (from 48.77 to 52.87), Malaysia (from 74.61 to 78.64), United Arab Emirates (from 70.80 to 74.25), Mozambique (from 52.73 to 53.64), and Comoros (from 44.96 to 45.68). But, from Table 5, one can observe that the shaded red colors are dominating the regional data on ease in doing business. Thus, we found a “mixed” result in here. The shaded red colors represent countries with decreasing score of ease of doing business (even though some of these countries experience only a “slight” decrease in their score). This indicates that ease of doing business remains an issue for IORA.As such, Ease of Doing Business is an area that IORA needs to work to together to improve the regional economic performance. While, five countries improved their overall DTF score, six countries experienced less than one point decrease. Many member countries
Figure 20. Source: World Bank. http://www.doingbusiness.org/data/exploretopics/starting-a-business/frontier. Accessed on 4 February 2017. Modified by BPPK
30
It is now time to view the regional DTF score (average) of IORA in the global context. As
illustrated in Figure 22, this study calculates the following average regional score: Northeast
Asia averages 77.12, European Union averages 75.44, GCC averages 63.90, ASEAN
averages 63.60 and IORA averages 60.19. Thus, if compared with other region, IORA
represents the least developed in ease of doing business. Based on geographical proximity,
and also cultural-historical ties, as discussed in the beginning of this paper, it is thus
proposed that IORA is to work closely together with ASEAN, GCC, and Northeast Asian
economies. More cooperation is needed to improve IORA performance in ease of doing
business.
What is trade complementary? As discussed earlier in this paper, the colonial powers helped shape trade complementary in Indian Ocean region (see Table 1). Until today, TCI remains an important economic indicator in observing the economic progress of IORA The following box explain the basic idea of Trade Complementary Index (TCI).
EXPORTER AU BD KM IN ID IR KE MG MY MU MZ OM SC SG SO ZA LK TH AE TZ YE
Figure 22 .Source: World Bank. http://www.doingbusiness.org/data/exploretopics/starting-a-business/frontier. Accessed on 4 February 2017. Modified by BPPKFigure 22.
Figure 23. Source: Trade Complimentarity Index, UNCTAD. Modified by BPPK
Tabel 6. Source: Trade Complimentarity Index, UNCTAD. Modified by BPPK
31
Table 6 indicates the degree of complementarity of the export profile of particular region with
the global import. In the TCI framework, no complementarity (and hence, no export) will be
represented by 0 (zero) while the maximum complementarity will be represented by 1 (one).
Thus, the higher the number (close to 1) the better the complementarity. No one, though,
seems to have reached this perfect number.
, ASEAN has a complementarity index of 0,7, which is the highest in Indian Ocean. Whereas
Southern Asia ranked below ASEAN, with 0,6 followed by GCC with 0,4, Eastern Africa with
0,3 and Southern part of Africa with 0,4. Australia, has a complementary index of 0,3.
East Asia (minus Japan) has TCI of 0,6, if Japan is to be added, then Japan alone has a TCI
of 0,5.
Southern Asia (TCI 0,6), ASEAN (TCI 0,7) and East Asia (TCI 0,6) form an ideal inter-
regional linkage sustain by better connectivity. ASEAN and East Asia, as robust economic
regions with higher TCI, have attracted major investment on infrastructure.
The table shows that most of the major harbors with the size of 500 million tons are
concentrated in the regions of East Asia and ASEAN. Smaller harbors at the size of 100
million tons are also concentrated on the Indian Ocean Region, in particular in the part of
Southern Asia. As such, the good levels of TCI in Southern Asia, ASEAN and East Asia
have induced the accelerated development of maritime infrastructure. At the end, this
infrastructure will promote further the increasing connectivity and trade in the regions.
Figure 21 captures the main exporting countries as represented by proportional white circles.
The larger the circle, the higher the TCI score of the commensurate exporting country. Thus,
it is clearly indicated that India, Thailand, Malaysia, and Singapore, and to a lesser degree,
United Arab Emirates and Indonesia, play important roles as exporting countries of the
region which enjoy a favorable degree of trade complementary in e is yet to be developed.
These countries are the potential “forerunner” in the region, if IORA will form an Indian
Ocean FTA, or even an Indian Ocean CEPA.
Figure 24 visualizes the recorded higher (green line), high (blue line), and moderate (red
line) individual TCIs in IORA region. The white circles with characters on it, indicate the
exporting countries. The chart gives impression that the exporting countries, with various
degree of TCIs vis-à-vis the importing partners, are concentrated in ASEAN (Singapore,
Malaysia, Thailand, and Indonesia) and Southern Asia (India and Iran). United Arab
Emirates and South Africa also represent important exporting countries of their respective
as Australia, United Arab Emirates and Sudan. Currently, investments are done in countries
that provide tax benefits such as Singapore, the Netherlands, Mauritius, and the British
Virgin Islands. Indian companies are common to invest in the foreign sector mainly through
mergers and acquisitions transactions (M & A).
With the increase in M & A activities, the company will gain immediate access to newer
markets and wider and better technologies, which enable them to increase their customers
and achieve global reach. According to the Reserve Bank of India (RBI), India's Outward
Foreign Direct Investment (OFDI), loan and guarantee issuance reached USD 867.53 million
in February 2017 and USD 1.81 billion in January 2017. The prospect of foreign investment
in India is positively valued, with the developments of the industry and markets such as
infrastructure, agriculture, pharmaceutical and others in Africa can increase its revenue. In
addition, India saw an opportunity to make cooperation with the Latin American region by
sea and air, with investments in the mining sector, oil, and pharmaceuticals.
Infrastructure
In the infrastructure sector, from 2000-2017 FDI in construction such as housing and
infrastructure has reached 24.3 billion. The Ministry of Transport Road and Highways has
reported road infrastructure investment of USD 3.17 trillion while the Ministry of Shipping is
also on an investment in highway construction totaled to 12 billion USD. The Indian
government is expected to invest highly in infrastructure, especially in roads, renewable
energy and urban transport before the elections in 2019. Minister for Transport sets target
for national highways in 2016-2017 for a total of 15,000 km.
Tourism
India’s tourism is quite interesting and has significant potential. This is due to India’s
richness in culture and history, two major factors that become the main attractions for
tourists. Further, India also has a lot of biodiversity and areas of natural beauty. These
indicators show potential to be a source of income for the country. Travelers are presented
with options on several activities for adventure, health, food, culture and others.
Foreign tourists visit in India is increasing each year. In May 2017, foreign tourists increased
by 19.9% while the tourists who use e-tourist visas increased by 55.3% in the same month.
With the increase in the number of tourists, the number of foreign exchange income also
increase of around 32%. India's tourism and hospitality sector are in the top ten sectors in
attracting FDI. The E-visa scheme is making the flow of tourists to India more inviting, and by
2030 India is predicted to enter the top 5 global business market.
The launch of several marketing initiatives by the Government of India as Incredible India
and Athiti Devo Bhava has given a boost focused on the growth of tourism. The Indian
government has also released a new visa category - medical visa or visa-M, to encourage
medical tourism in the country.
The total contribution of travel and tourism sector of India is expected to increase the GDP of
136.3 billion USD in 2015 to 275.2 billion USD in 2025. Travel and tourism are the third
largest foreign exchange earner for India. Amounting to USD 1.76 billion earned from foreign
exchange through tourism during the month of September 2016. The Government has also
made serious efforts to increase investment in the tourism sector.
38
In the hotel and tourism sector, 100% FDI allowed through the automatic lanes. Five-year
Tax-free has been offered for 2, 3 and 4-stars hotel that are located around the UNESCO
World Heritage sites (except Delhi and Mumbai). Investment in the tourism sector is
estimated to reach USD 12.4 billion in the Five-Year Plan to 12; of these, private investment
is expected to reach USD 9.2 billion.
Figure 30. Tourism and Hospitality Service Direct Contribution
Energy
Energy entered into India’s core industry and became a major commodity in both import and export spectrum, consequently playing an important role in economic policy. India is expected to become one of the biggest contributors as consumers on non-OECD oil globally. Total oil imports rose 4.24% annually. India's oil consumption grew 8.3% year-on-year to 212.7 million tonnes in 2016, as opposed to global growth of 1.5%, making it the third largest oil-consuming nation in the world.
India is an importer of Liquefied Natural Gas (LNG), the fourth largest after Japan, South
Korea and China, and accounts for 5.8% of total global trade. The country's gas production
is expected to reach 90 Billion Cubic Meters (bcm) in 2040 from 23.09 bcm in the years
2016-2017. Gas pipeline infrastructure in this country reaches 16240.4 km in November
2016. The oil and gas company owned country (ONGC) dominate the segment upstream
(exploration and production), and produced approximately 1,847 thousand metric tons (TMT)
of crude oil, to oil output 2,939 MT in April 2017. The company also accounted for 57% of
domestic crude oil production in the country in 2016-2017.
39
Fishery
Fishery plays an important role in the economy and also acts as food security. India’s
coastline is over 8,000 km with EEZ of over 2 million square meters, thus made fishery a
significant sector. In 2017 alone, fishery has accounted for 1.07% of total GDP. Further sea
fishing production increased from 520,000 tons in 1950 to 3.15 million tonnes in 2007. Most
of the catch consisted of sardines, shrimp followed penaeid and non -penaeid, mackerel,
croakers, cuttlefish and others.
India promotes Freshwater Fisheries And Aquaculture Development Agencies (FFDAs) and
39 of Brackishwater Fisheries Development Agency (BFDA). The annual carp seed
production reached 25 billion and approximately 12 billion shrimps. High-value ornamental
fish farming is becoming increasingly important along with the cultivation of fish as food. With
more than 2.4 lakh fishing crafts operating in the coast, small ports total of 62 and 1511
landing center serves to meet the needs of more than 3.9 million fishermen.
Fish product is currently emerging as the largest group in the Indian agricultural exports, with
10.51 lakh tonnes in terms of quantity. It accounted for about 10% of the total exports of the
country and nearly 20% of agricultural exports. More than 50 species of fish and shellfish
products are exported to 75 countries worldwide.
Market access
In promoting international trade, the Government of India initiated market access initiative
(MAI), aiming for a sustainable export promotion. This is done through an approach named
focus product-focus country, as one way to develop the market and a more specific product
and is accepted in the market. Although it has opened access to its domestic market, India is
still relatively lagging behind its neighbors, namely China, as showed by the following table.
Pakistan; robust export growth to advanced countries, in particular, the USA and Euro zone
notably Germany, Belgium, Italy and Hungary; and greater demand from emerging markets
such as Mexico and countries in South Asia.
Figure 32. Malaysia Trade Performance
Weak global economic growth affect economic activity in the country of Malaysia which
adopts an open economy. The ringgit strengthened versus Rupiah value but decreased
compared with regional currencies in 2016. The downward trend in Ringgit value is not
expected to result in an economic crisis because Malaysia's reserves is large enough and
has a low reliance on foreign funding.
Connectivity
Figure 33 . Malaysia’s Connectivity Achievement.
Malaysia has great connectivity, through land, sea and air. The good connectivity level is
assisted by the British colonial legacy and served as a basis in building since the first
transport system was established for the benefit of the economic and trade distribution
channels. Currently the intra-city connectivity in major cities, such as Penang, Kuala Lumpur,
Ipoh, Seremban, Malacca, Johor, Pekan and Kuala Terengganu, already provide access to
all parts of the region including remote areas in the region of Peninsular Malaysia.
In East Malaysia, namely the State of Sabah and Sarawak, the connectivity between cities is
deemed good enough compared to the distribution of small populations in both regions. All
43
towns and big villages are connected by road, while remote areas are accessible by air.
River transportation plays an important role in building connectivity, especially along the
Baram River to Mulu, connecting villages like Long Panai and Long Traban. And, the
majestic Sarawak River provides a lifeline for shipping heavy items from top to bottom which
covers an area of Kuching-Samarahan, and serves as a tourist attraction. Transport stream,
such as the Kinabatangan River, plays an important role in connectivity, as well as track
logging in Sabah and Sarawak.
Although connectivity in East Malaysia is not as complete as in Peninsular Malaysia but
given area and population distribution between Peninsular Malaysia, Sabah and Sarawak,
the area has connectivity land, air and water are pretty good.
Malaysia is keen to develop good connectivity projects in Peninsular Malaysia or Sabah,
Sarawak. Among them is the toll road improvement projects that have been implemented
since 1992, which until now has been built 157.166 km of highways both in Peninsular
Malaysia, Sabah and Sarawak. One part of the toll road project is the North - South
Expressway within 846 km and connects seven states and several major cities in Malaysia
like Johor Bahru, Kuala Lumpur, Ipoh and Alor Setar. Toll lanes is successfully connecting
industrial areas and ports in Malaysia and became the main line of 81% of the population on
the peninsula with a 89% level of GDP.
Figure 34. Malaysia Connectivity Map. Source: Presentation from the Ministry of Transport of Malaysia on Malaysia: Key Logistics and Transport System (Road and Rail) at the Seminar on the Development of Integrated Transport and Logistics System in the A
44
In addition to the expansion of the motorway, the Malaysian government is also conducting
an increase access to the railway line. Currently, railways and public transport services are
operated by Keretapi Tanah Melayu Berhad (KTMB) with a range of 2,262 km of track.
KTMB railroads serving the Johor Bahru - Padang Besar and Johor Bahru - Tumpat. KTMB
also has a total of 11 terminal facilities in the form of dry-ports, inland container terminals,
seaport and freight terminals. Especially for the track Johor Bahru - Padang Besar (804 km)
is one of the circuit paths Singapore - Kunming Rail Link Network.
Since 2008, Malaysia completing railway projects Electrified Double Track Project between
Ipoh to Padang Besar. The project aims to improve the efficiency KMTB profit turnaround
rolling stock/existing carriage with a higher frequency levels. Another thing to be expected is
an increase in rail passengers, especially on a track Ipoh - Padang Besar.
Figure 35. KTMB Railway NetworkInvestments
In 2016, Malaysia recorded a total investment throughout the year to RM 150.8 trillion, which
is divided into the manufacturing sector, the service sector and some other sectors. 74.8
percent of this total is 25.2 percent of domestic investment and foreign investment. States
that have contributed the largest investment in Malaysia is the People's Republic of China,
Japan, Netherlands, Singapore, and the UK.
Figure 36 Figure 36. Malaysia’s Major Investors
45
Associated with the investment, the Malaysian government has set the Ninth Malaysian Plan
as the distribution of development programs and investment in the whole region of Malaysia.
f The Ninth Malaysian Plan program has set five economic corridors per region, namely the
Northern Corridor Economic Region (Pulau Pinang, Perlis, Kedah), East Coast Economic
Region (Pahang, Kelantan, Terengganu), Iskandar Malaysia (Johor), Sarawak Corridor of
Renewable Energy (Sarawak) and the Sabah Development Corridor (Sabah).
Ease of Doing Business & Innovation Index
Malaysia dropped one notch to No.24 in the World Bank's annual ease of doing business
ranking. Malaysia in 2017 implemented reforms in certain areas of doing business, such as
strengthening access to credit, protecting minority investors and improving trade across
borders. Malaysia made starting a business more difficult by requiring that companies with
an annual revenue of more than RM 500,000 (SGD 160,900) register as a GST tax payer. In
terms of innovation index, Malaysia ranked 8th in Asia and 37th worldwide, according to the
Global Innovation Index (GII) 2017 report released by Cornell University. Malaysia was
among the top 10 economies in Asia, behind Singapore, South Korea, Japan, Hong Kong,
New Zealand and Australia, and that the country was among the middle-income economies
that were the closest to the top 25 this year.
Malaysia and IORA
Dissemination of information and public engagement is very important for IORA in
establishing construction of CEPA. IORA needs branding and image building as a forum for
international economic cooperation. IORA is still not widely known by the people of its
member states. It is very important as the appeal of the private sector and the business
community to get involved and help promote economic growth within the framework of CEPA
IORA. There must also be political will and a high leadership from countries of advanced
economies as a driver of IORA CEPA development. Malaysia welcomes the development
IORA CEPA, however, there is still a consideration of Malaysia's current focus on some
regional economic cooperation framework that is currently being warmly discussed as the
ASEAN Economic Community and the Trans Pacific Partnership.
C. Australia
Australia is the country with the largest GDP in the region and ranks 15th largest GDP in the
world after Russia and Spain. But since 2014 the economic growth in Australia has
decreased due to declining investment coming in, other than that Australia relies heavily on
exports in the mining sector but the price of iron ore and coal decreased quite dramatically.
Based on data from Australia's GDP in 2016 amounted to 1204.62 billion USD decreased
140.76 than the previous year(Trading Economics).As for the GDP per capita of GDP per
capita PPP 55670.90 and 44414.00.
46
Figure 37 . Australia’s GDP Performance Source: Trading Economics accessed https://tradingeconomics.com/australia/gdp, accessed on 25 September 2017
Australia is liberal in its economic policy, and it is becoming one of the core essence of the
Australian government in trade for economic reform. According to Australians, a strong
economy is formed through prosperity, security, peace and stability of the country. Australia
has a very open market with minimal restrictions on the import of goods and services. This
has increased productivity, stimulated growth and make the economy more flexible and
dynamic.
Australia's trade is dominated by iron, ore, coal, gold, wheat and crude oil. In addition to the
services sector such as tourism and education, other contributors to state revenue is the
education sector with a high number of students mainly from Asia studying in Australia.
Australia's main export destinations are China (USD 55.1 billion), Japan (USD 18.9 billion),
South Korea (USD 11.2 billion), the US (USD 8.26 billion) and the UK (USD 7,41 billion).
Figure 38. Australia Main Trade Partners.
China is an important partner in trade relations with Australia, China is the main destination
of exports and imports for Australia. This is highly because Australia's resource advantages
in the field of mining, specifically coal, iron, and ore exports to China. China are also the
main contributors’ of tourism in Australia with annual increases each year. As for agriculture
Australia secured 6.1 billion USD of foreign exchange of agricultural exports. The value of
trade with China is greater than with the US which are close allies of Australia, moreover
during the protectionist policies of President Trump. The strong economic relationship
between Australia and China, have the latter encourage Australia be heavily engage in the
initiative of "One Belt One Road” proposal from China to help strengthen regional
cooperation. This is an opportunity for Australians wanting to expand its cooperation with the
47
countries in Asia, especially the Southeast Asia region. Apart from China, Australia has also
approached Indonesia due to the country’s geographical proximity, Indonesia is important to
because it is regarded as Australia's entrance into the Southeast Asian market.2
Figure 39. Australia’s Export Partners.
Australia sees Free Trade Agreements (FTA), both bilateral and multilateral as an economic
solution to maintain market access. FTA accounted for 67% of total perdangangan Australia.
Here are some FTA Australia has done:.
a. ASEAN Australia New Zealand Free Trade Agreement (AANZFTA)
b. Australia-Chile FTA
c. Australia-China FTA
d. Environmental Goods Agreement
e. Australia-European FTA
f. Union-AustraliaFTA Honkong
g. Australia-India Comprehensive Economic Cooperation Agreement (CECA)
h. Indonesia-Australia Comprehensive Economic Partnership Agreement (he- CEPA)
i. Japan-Australia Comprehensive Economic Partnership Agreement
j. Korea-Australia FTA
k. Malaysia-Australia FTA
l. Australia-New Zealand Closer Economic Relations Trade Agreement
m. Pacific Agreement on Closer Economic Relations (PACER) Plus
n. Pacific Alliances Free Trade Agreement
o. Peru-Australia FTA
p. Regional Comprehensive Economic Partnership
q. Singapore -Australia FTA
r. Thailand-Australia FTA
s. Trade in Services Agreement
t. Trans-Pacific Partnership (TPP)
u. United State-Australia FTA
2 Australia Overview. 2017. OECD Economic Surveys
48
Investment
Investment became one of Australia's economic driver for innovation, employment,
productivity and diversifying the economy to expand in order to support growth. Australian
policy-related investments is tailored to the national interest based on a case by case where
this approach is considered to maximize the flow of investments.
In 2016 the flow of incoming investment in Australia amounted to 26 billion USD, of which
the largest investment of the United States (USD 860.9 billion), the UK (USD 515.5 billion),
Belgium (USD 270.1 billion) and Japan (USD 213, 5 billion). The level of FDI increased by
15% to 35% of the total GDP.
However, there was a shift where in 2015-2016 the largest investment into Australia came
from China. Incoming investors also dominated the field of development. Chinese interest to
real estate grew by 31% from 2014 to 2015, the increase in Chinese investment is supported
by the rising value of the Chinese investor approval by 6% in the same year.
Figure 40. Australia’s Investment by Sector
As for the Australian investment all together, incoming investments, since 1986 was
dominated by the United States, Britain and New Zealand. From 1983 until 2013 these
investments increased by 5% to these countries.
49
Figure 41. Share of Foreign Investment in Australia
Figure 42. Share of Australia Investment Abroad
To increase investment inflows Australia made amendment which began to be applied in
July 2017 by reducing the requirements, the regulatory burden to investors and to change
the fee framework to increase transparency and efficiency. Some of the major changes
include:(i) Streamlining and simplifying the commercial fee framework; (ii) Introducing a new
business exemption certificate; (iii) Introducing two new Residential Exemption Certificates;
(iv) amending the treatment of residential land used for commercial purposes; (v) Narrow the
scope of the 'low threshold' non-commercial vacant land definition.[1] Approval of investment
proposals in Australia in 2015-2016 decreased from 44% to 35%. This is because the
increase in the number of approvals for new dwellings (which are usually not subject to the
approval requirements) combined with a decrease in approvals for dwellings has been set
(which is usually subject to the approval requirements).
50
Australia and IORA
For Australia IORA is starting to become a priority agenda particulalry when India became
chairman in 2011. Australia and other IORA member countries are actively conducting public
awareness campaigns, this is due to the fact that IORA is still not so well known among the
Australian general public, and low awareness of the Australian community.This is a
challenge in itself for Australia to further increase public awareness of the existence of IORA,
especially to businesses, which is considered to be one of the main actors enhance
economic cooperation in IORA.
Australia focus on IORA is in the interests of blue economy in the Indian Ocean region,
maritime security and the increase role of women in the activities of SMEs as a driver of
economic actors (women empowerment). Meanwhile, economic cooperation, such as trade
and investment is a higher priority for Australia than economic cooperation/trade
agreements. Other priorities for Australia are the existing investments framework that it has
with partner countries such as the member countries of ASEAN, Japan and other East Asian
countries.
In relations to Australias economy, the security of Australia in the Indian Ocean becomes
important to support the sector areas of IORA cooperation. Maritime security such as
terrorism, piracy, natural disasters in the Indian Ocean rim should be a concern for member
countries to increase cooperation as mentioned in the Declaration on Preventing and
countering Terrorism and Violent Extremism in the Indian Ocean.
For Australia, IORA should focus on programs and initiatives already existing or sectors with
strong institutions. IORA Secretariat would need to be increased as a role of facilitator rather
than an originator of the areas of cooperation initiatives. Post-chairmanship of Australia in
IORA, the country has commited to improve cooperation through IORA which is constantly
developing, some of the efforts made by Australia among others are its active annual
contribution, establishing a special fund for IORA towards strengthening bodies, and also the
IORA Secretariat.
IORA-CEPA
From the field study, one result that was identified was that stakeholders, viewed idea of the
establishment of CEPA IORA as less feasible with several considerations (i) lack of
ownership of IORA member countries; (ii) the diversity of the country's economic level
member is uneven to be formed in a integrated economy; (iii) inadequate regional
infrastructure, particularly ports and shipping facility limitations in some member states
IORA; (iv) the bureaucracy to form a CEPA, which require long negotiations because of the
need for an agreement among member countries.
Furthermore, the Australian government is still focused on finalizing FTAs with several
partner countries on a bilateral basis. This illustrates a preference of Australia is towards a
comprehensive economic cooperation more on a bilateral basis.
However, the discourse of CEPA can continue to be discussed and tabled at each meeting
in IORA. This is because the IORA CEPA discourse is also a good initiative to support (legal
basis) and facilitate economic cooperation in IORA. In this regard there needs to be country
initiators to lead talks in the formation of IORA-CEPA, namely those who are able and willing
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to provide the resources and contributions in developing the proposal. The countries that are
expected to take the leadership in IORA includes Australia, Indonesia and India.
In this regard, Indonesia took the leadership role as the Chair IORA and successfully
organized the IORA Leaders' Summit in Jakarta, March 7, 2017 which resulted in the
Jakarta Concord and IORA Jakarta Plan of Action.
The result of the meeting was seen as progress to encourage the leaders of member states
towards their commitment in IORA. Nevertheless, IORA is still regarded as an organization
with a low sense of ownership by the member states, thus, often commitments are made
without concrete follow-up.
With many FTAs already established among some IORA member countries, one can say
that half of an imagined IORA-CEPA is in this sense is already established, these already
agreed FTAs can support facilitation of trade and investment as well act as a legal umbrella
for comprehensive trade in the Indian Ocean rim. In this regard, IORA can focus on
developing trade blocks that already exist in the region rather than start lengthy negotiations
CEPA formation.
Some sectors that take priority in the establishment of an IORA CEPA from a business
perspective include: (i) customs and trade facilitation; (ii) sanitary and phytosanitary
measures; (iii) technical barriers to trade; (iv) cooperation and capacity building for
developing countries and LDCs; and (v) competitiveness and business facilitation; and (vi)
regulatory coherence. For the business community, trade and investment facilitation will
provide benefits and ease of doing business if a IORA CEPA is formed.
To encourage economic cooperation in IORA, capacity building, confidence building
measures and the facilitation in the movement of people, through easy visa and access for
businesses IORA members is needed. To that extent, the issue of the establishment of the
IORA business travel card, should be a priority to be implemented, as stipulated in the IORA
Action Plan 2017-2021.
In regards to the status of several of IORA member countries that are WTO members, the
Australian side holds that it might be an obstacle to regional economic grouping, but by no
means will it hinder policy harmonization in the establishment of CEPA.
A. Singapure
Singapore is one of the economic powerhouse in Asia with the service sector accounted for
70% of the total GDP of Singapore. The main driving sectors are wholesale and retail trade,
financial and business services, and insurance. Other sectors that are also contributing to
the economy are industry, agriculture, construction, electronics, biomedical, petroleum and
petrochemicals, precision engineering are now also potentially driver of the economic
sectors. In 2016, Singapore with a population ofo 5.6 million people, had a GDP of USD297
billion. As a trading hub in the region, Singapore continue to develop the services sector as
one of the main sectors driving the economy of the State.
Trading
Singapore is a liberal trade policy. High tariffs imposed only on alcohol, tobacco, petroleum
products and motor vehicles. Singapore's main export commodities, for 2016, including
machinery and electrical equipment, computers, mineral fuels, including oil, while
Singapore's main trading partners are China, Hong Kong, Malaysia, Indonesia, the
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European Union and the United States. In 2016, trade with China reached 13.6% of China's
total foreign trade followed degan European Union (11%), USA (8.5%) and Hong Kong
(7.2%) [4].
Singapore is also actively shaping the framework of strategic cooperation with its trading
partners, through free trade agreements (FTA). Bilateral FTAs are considered effective,
among others, China, India, Japan, South Korea, New Zealand, Panama, Peru, Australia,
Costa Rica, Jordan, USA, and Turkey. While negotiations are ongoing for the FTA with
Canada, Mexico, Pakistan and Ukraine. With China, through the China-Singapore Free
Trade Agreement, more than 85% of Singapore's exports to China are not subject to tariffs
(zero-tariff access). Export commodities were exempted from the tariff in question include
petrochemicals, processed foods and electronic and electrical products [5].
Singapore is currently also intensively developing cooperation with Africa. This year, the
Singapore government has opened a liaison office in Nairobi, Kenya. Opening an office in
Kenya to facilitate the expansion of Singapore's business in the east African region,
complementing the other two offices located in Accra (West Africa) and Johannesburg
(South Africa). Since 2005, bilateral trade between Singapore and Africa grew 5.2%
annually, and up to now there are about 60 Singaporean company that operates in more
than 50 countries in Africa.
Investment
Singapore is listed as one of the largest investing country in Southeast Asia. The Investment
Coordinating Board (BKPM) recorded five countries with the largest contribution of
investment in Indonesia in January-September 2016, and Singapore was still leading as the
largest investor in Indonesia. Singapore is still in first place, followed by Japan and China,
and Hong Kong and the Netherlands.
Singapore has an open investment regime with few restrictions in the financial services
sector, professional services and media. This investment character puts Singapore as
second on the list of the World Bank's Ease of Doing Business 2017 Report Global
Competivenss; it also positions Singapore as the most competitive economy globally. The
Singapore government is very committed free market access but at the same time takes a
leading role in planning economic development through the corporate government-linked
corporations and network.
In general, the legal framework and government policies related to investment are highly
profitable for foreign investors. Foreign investors are not required to have joint ventures or
hand over management control to the interests of local investors in Singapore. Although in
general, Singapore's investment can be open and straightforward, however these loose
policies exclude government control over sectors such as telecommunications, broadcasting,
domestic news media, financial services and accounting, airports and palebuhan and
ownership of property.
In contrast, local investors are also encouraged to expand overseas. Under the International
Enterprise Singapore, domestic investors can obtain information about potential markets,
business contacts and financial support and grants to companies who are ready to go-
international. IE has a large global reach and representative offices in major trading partners
of Singapore such as China, India and also nine member countries of ASEAN. The main
foreign investors in Singapore is the United States, Japan, the British Virgin Islands, the
Cayman Islands, the Netherlands and the United Kingdom. While Singapore businesses are
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invested in China, the Cayman Islands, Hong Kong, Indonesia, Malaysia, and the British
Virgin Islands. Figure 43. FDI in Singapore and Singapore’s Investment in 5 partnering countries (2015)
Banking
Singapore is one of the main financial centers in the world and is a financial hub in
Southeast Asia. A stable political environment and strong economy with favorable tax
policies followed by a good reputation of integrity, have contribute significantly to
Singapore's status as an international finance center. It is the third largest in Asia, after
Japan and Hong Kong. Financial institutions in Singapore provide many facilities and
services ranging from consumer banking, asset management, investment banking and
insurance services. The Monetary Authority of Singapore (MAS) acts as Singapore's central
bank that sets monetary policy, regulates banks and financial institutions and issues
currency.
Singapore’s banking system is advanced and is supported by; the liberalization of the
domestic banking market, which strengthens local banks at the regional level through
merger and acquisition, foreign banks in Singapore also help the country a regional and
globally platform in international banking services. This prompted the competitive level and
subsequently the increase of innovation on a reasonable level. Banking services and
facilitation are advanced and satisfying for corporate and investment services, these are
prime banking services that the banking sector in Singapore are equipped with besides to
the traditional function of lending and deposit-taking. Banks in Singapore also support and
facilitate the needs of SMEs. The country also has a strict policy related to confidentiality of
draft tax policy.
Technology
The transformation of Singapore from a developing trading post in the region into one of the
most advanced ports in the world is due to the development of modern infrastructure and
rapid technology adoption. Singapore is well connected with the world through top-class
airports, ports and telecommunications infrastructure.
Changi International Airport
Changi International Airport is Singapore's national airport and air cargo terminal. The success of Changi International Airport has put Singapore on the map as a center of regional aviation. It serves 80 airlines with destinations to more than 180 cities in more than 50
In general, Iran's trade profile (including oil) as follows:
- EXPORT :
o Total Value of Exports : USD 130.544 billion.
o Number of products : 2452
o Total partners : 149
- IMPORT:
o The total value of Imports : USD 68.319 billion.
o Number of products : 3805
o Total partners : 123
Featured Products Export Value in (USD)
oils Petroleum 84,381,572.02
Propane, liquefied 1,958,292.74
Petroleum gases 1,891,183.57
Polyethylene 1,660,571.05
Methanol 1,317,982.65
Main Products Import Value (in USD)
Ingots, iron 2,843,711.55
Maize seed 1,290,246.15
rlld Flatprod 1,261,512.19
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Semi-milled 975,359.00
Oil-cake 844,824.53
Produk Unggulan Ekspor Nilai dalam (USD)
Petroleum oils 84,381,572.02
Propane, liquefied 1,958,292.74
Petroleum gases 1,891,183.57
Polyethylene 1,660,571.05
Methanol 1,317,982.65
Global economic sanctions has made Iran be more economically independent and no longer
rely on oil. Under economic trade sanctions, Iran’s total trade reached about USD 100 billion
and by the lifting of economic sanctions, it is expected that the Iran’s total trade could reach
about US$ 250 billion. Within IORA, India is the major trading partner and Iran’s trading
volume with IORA countries is less than 20% of total Iranian trade.
Regarding to the issue of the World Trade Organization (WTO) membership, Iran is not a
WTO member country. However, Iran is one of the biggest economies out of the WTO. In
terms of foreign trade negotiations, although Iran is not a member of the WTO, Iran
continues to use the principles applied in the WTO. In this regards, Iran has a PTA with the
Economic Cooperation Organization (ECO), which consists of ten (10) member countries in
South and Central Asia regions and Iran has Trade Cooperation Agreement (TCA) with the
European Union (EU). Nowadays, Iran is negotiating PTA with various countries, including
Indonesia. At the same time, Iran is also seeking to become member of the WTO and
expecting support from WTO member countries, including Indonesia.
Iran’s Global Innovation Index
In the year 2016, Iran has improved significantly in the Global Innovation Index (GII), ranking 78th out of 128 countries, compared to a rank of 106 out of 141 in 2015.
In the year 2017, Iran, with a score of 32.09 out of 100, ranks 75th among 127 countries listed in the World Intellectual Property Organization’s latest Global Innovation Index report published on the WIPO website. In a section on Regional innovation leaders, Iran was placed second after India in the Central and Southern Asia region.
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Tabel 8 . Global innovation index 2017
Country/
Economy
Score
(0–100)
Rank Income Rank Region Rank
Peru 32.90 70 UM 19 LCN 8
Brunei
Darussalam
32.89 71 HI 46 SEAO 12
Morocco 32.72 72 LM 7 NAWA 11
Philippines 32.48 73 LM 8 SEAO 13
Tunisia 32.30 74 LM 9 NAWA 12
Iran, Islamic
Rep
32.09 75 UM 20 CSA 2
Argentina 32.00 76 UM 20 LCN 9
Oman 31.83 77 HI 47 NAWA 13
Note: World Bank Income Group Classification (July 2016):
LI = low income; LM = lower-middle income; UM = upper-middle income; and HI = high income. Regions are based on the
United Nations Classification: EUR = Europe;
NAC = Northern America; LCN = Latin America and the Caribbean; CSA = Central and Southern Asia; SEAO = South East
Asia, East Asia, and Oceania; NAWA = Northern Africa and Western Asia; SSF = Sub-Saharan Africa.
Global Innovation Index 2017 rankings
Iran’s Competitiveness Index
Tabel 9 . Iran’s Competitiveness Index 2017
Iran Business Last Previous Highest Lowest Unit
Industrial
Production 11.30 12.80 102.82 -61.29 percent
Internet
Speed 4703.97 4135.53 4703.97 462.38 KBps
IP Addresses 6878918.00 7179821.00 7634376.00 175430.00 IP
Steel
Production 1980.00 2230.00 2230.00 166.00
Thousand
Tonnes
Ease of Doing
Business 124.00 120.00 152.00 117.00
Corruption
Index 29.00 27.00 30.00 18.00 Points
(Source : Trading Economic)
Iran moves up seven ranks in the World Economic Forum (WEF) report in its global competitiveness among 137 nations, to jump from 76 in 2016 to 69 in 2017.
Among the thirteen countries of the Middle East and North African region, Iran ranks eighth. The details of the report indicate that the country is doing well in some pillars of competitiveness, such as its market size (rand 19) and its macroeconomic framework (rank 44); but, it needs to make improvements in other areas, such as its labor market performance (rank 130) and financial markets (rank 128).
Iran's rank improvement on this index could be attributed to the JCPOA nuclear agreement, which has created hope for a clear future in economic exchanges and cooperation between Iran and western countries.
Comparing Iran's global competitiveness ranking for this year with the previous five years shows that it has had a significant leap forward both in terms of numbers and scope and is now in a better position. The World Economic Forum report gives countries between 1 and 7 points in its competitiveness report. Iran received a score of 4.27 this year, the highest since 2010.
The WEF assesses a country’s competitiveness by its ability to provide prosperity for its citizens and the economic well-being of the country. This in turn improves with the economic investments made in the country. (Source : Persia Digest)
Iran’s Ease of doing business index
Iran is ranked 124 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of Iran deteriorated to 124 in 2017 from 120 in 2016. Ease of Doing Business in Iran averaged 134.70 from 2008 until 2017, reaching an all time high of 152 in 2012 and a record low of 117 in 2015.
Actual
(2017)
Previous
(2016)
Highest
(2012)
Lowest
(2015) Dates Unit Frequency
124.00 120.00 152.00 117.00 2008 - 2017
Yearly
Tabel 10. Iran’s trend in Ease of Doing Business Iran and IORA
IORA is not yet well known among the people of Iran. It is only few of certain circles of
Iranian people are aware of IORA, such as relevant government officials, academics and
observers of international relations.
Iran sees IORA as an important and strategic association of countries in the Indian Ocean
region, both from the economic and political and security point of views. Iran's commitment
to IORA cooperation is quite strong, even one of IORA’s cooperation center is located in
Tehran, namely the IORA Regional Center for Science and Technology Transfer (RCSTT).
As a focal point of IORA’s science and technology cooperation, Iran is very active in
developing and strengthening cooperation, not only among IORA’s member countries, but
also with dialog partners, such as with Germany and French, in renewable energy and the
automotive sector.
Iran underlines the tangible benefits for IORA’s economic cooperation, particularly for the
people of the member countries. Therefore, Iran stressed more in realistic approach for
economic cooperation, such as trade facilitation, based on the six priority areas of IORA
cooperation.
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In the view of political and security aspect, Iran sees geo-political issue among countries in
the region could be an obstacle towards strengthening economic cooperation under IORA.
Therefore, IORA is very strategic in the efforts to maintain the security and stability in the
region, which is expected to promote cooperation in the region and beyond.
Iran and IORA - CEPA:
Regarding to the issue of establishing IORA-CEPA, most of relevant stakeholders in Iran are
of the views that the IORA-CEPA is still in the far future of IORA cooperation. Beside there
are not yet a single trading arrangement among member states of IORA, such as a PTA,
complicated long negotiation process toward the establishment of IORA CEPA is a major
concern.
Iran sees that IORA member countries are not ready for economic cooperation in the form of
CEPA. Considering vast disparities on economic development among IORA’s member
countries, IORA needs to focus on more realistic approach as basic foundation in
strengthening IORA’s economic cooperation, before moving further into CEPA.
Therefore, Iran underlines on a more concrete targets in strengthening IORA’s economic
cooperation, through a gradual mechanism, such as trade facilitation. Trade facilitation could
include cooperation on eliminating tariffs and non tariff barriers, cooperation in banking,
transportation as well as custom procedures.
In the context of IORA’s economic integration process, it can start with sectoral cooperation.
IORA can obtain lessons learned from the European Union economic integration. In this
context, IORA can start economic integration process with PTA through gradual mechanism,
where member countries that are ready can join at the first stage.
Iran’s challenges towards establishing PTA/FTA/CEPA include:
Iranian economy is still inward-looking, in particular for non-oil and the gas sector;
The State/Government’s role in the Iranian economy is still dominant and strong. It is
estimated that government shares 85% of total Iran’s GDP;
The role of private sector is weak due to tight regulations. The share of private sector to
Iran's economy is only 15% of GDP;
There is no internal consensus making. Not all relevant government sectors/ministries
agree with trade liberalization;
Rigid export-import rules of business, such as red tapes and government intervention;
Banking issues, such as foreign funding/financial transfers.
A.United Arab Emirates
The United Arab Emirates (UAE) was formed on the 2 December 1971; it was established as
a federation of seven emirates making up the government. The Federal Supreme Council is
the highest legislative and executive institutions in the country.
One Emir is elected President of the UAE. The seven Emir’s are Abu Dhabi, Ajman, Dubai,
Fujairah, Rasal-Khaimah, Sharjah and Ummal-Quwain. Abu Dhabi is the state capital and
with Dubai are the two commercial and cultural center, of the UAE. The official religion of the
state is Islam and its official language is Arabic. In general, people of UAE are not so familiar
or have even heard of IORA. The organization is rarely under media coverage in the country.
The UAE society is more familiar with the GCC(Gulf Cooperation Council),which is almost
Given the wide scope, the FTA's approval is a major prerequisite in negotiating for CEPA
implementation. Thus, the discourse on the formation of IORA-CEPA must go through
measurable stages and long negotiations. Negotiations to establish the CEPA between the
two countries clearly require in-depth review and lengthy negotiations, especially if CEPA will
be conducted within the regional scope. Seeking harmonization for many economic interests
and capabilities has a risk of degrading the quality of the CEPA cooperation later on.
Sectoral
Taking the European Union (EU) as a prime example, the EU economic integration began with the European Coal and Steel Community (ECSC), this is evidence that regional economic integration can be started from sectoral cooperation in a certain region. The main reason the ECSC was established by six European countries, Belgium, France, West Germany, Italy, the Netherlands and Luxembourg, after the Second World War was in order to regulate the production of coal and steel. From the results of the field study, a number of proposals surfaced for IORA economic cooperation. First focuses on sectoral cooperation before stepping into a trade liberalization and economic integration process. The consideration towards a preferred sectoral cooperation is due to the economic disparities that are too steep and with the low trade complementarity among the member states. Such disparities definitely have an effect on the readiness of each member in any discussion of trade liberalization. Furthermore the low level of connectivity, especially countries in Africa, will have an impact on the effectiveness of a trade liberalization policy. Tabel 23. List of countries by income in 2016 (in US $ billion)
High Income Upper Middle
Income Lower Middle
Income (Lower Middle Income)
(LDCs) Low Income
(LDC),
Australia, in 1270
Thailand,396, India 2275 Bangladesh,218 Tanzania, 48
UAE,383, Iran 423 Indonesia, 943 Yemen, 31 Madagascar, 10
Singapore, 295 South Africa,291,
Sri Lanka 83 Mozambique, 12 Somalia, one
of Oman, 72 Malaysia, 297 Kenya, 69 Comoros,1,
Seychelles 1 Mauritius, 12 Source: World Bank
Based on the categories of income, IORA member countries are divided into the category of high income, upper middle, income, lower middle income and LDCs. Seven of the 21-member IORA still are listed as LDCs which will eventually require special treatment in the implementation of trade liberalization.
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Figure 53. Percentage of countries by income category
table and graph shows the disparity of income between countries IORA high enough. Differences in terms of the size of the economy, including countries in the category of LDCs, will make economic integration among countries IORA less attractive given the small potential trade creation which is likely to be generated. In addition, low trade complementarity among member countries will also lead to potential trade diversion. Among the members of IORA, the exporting countries of India, Malaysia, Singapore and Thailand, has a trade complementarity that is quite good and significant with other member countries. Furthermore, member states have mapped the areas that are considered important towards enhancing cooperation within the framework of IORA. With the first IORA Summit in Jakarta on the 5-7 March 2017, the Summit produced the Jakarta Concord and the IORA Action Plan from the year 2017-2021. The summit agreed on cooperation in priority areas such as (1) the safety and maritime security, (2) the facilitation of trade and investment, (3) management of fisheries, (4) disaster risk management, (5) academic cooperation, science and technology, (6) tourism and culture, (7) the blue economy, and (8) women's economic empowerment. Sectoral cooperation is expected to bring increased networking among IORA member countries, which in turn will be a solid foundation for the economic integration process. The ASEAN integration process is a perfect example of bottom-up process driven by the private sector to encourage economic integration in Southeast Asia. Thus the private sector plays a very important to be a pillar in economic integration. The results of the field study conducted indicated that a number of stakeholders, especially the private sector, wanted a more realistic approach to economic cooperation among IORA member countries. Promotion of sectoral cooperation and facilitation of trade is regarded as a very realistic first step. A number of proposals in sectoral cooperation and trade facilitation were raised, namely: cooperation blue economy, tourism, mining, capacity building, and the Free Trade Zone Cooperation. Cooperation within the framework of trade facilitation will be further discussed with a APEC model / trade facilitation.
Blue / Ocean Economy
Blue Economy has become a major agenda of IORA. IORA member countries adopted the Jakarta Concord on blue economy as guidance in developing and implementing the blue economy approach to support sustainable development and provide socio-economic benefits to coastal communities in the Indian Ocean Region.
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In a global sense, the blue economy has also received significant international attention. The 2030 United Nations Sustainable Development Goals stressed on the blue sustainable economic development and the use of marine resources as a key element in future development. Through a systematic approach, the blue economy is expected to drive sustainable growth while maintaining environmental sustainability. More than three billion people rely on marine and coastal biodiversity as a source of their livelihood. Specifically marine economy provides jobs, directly and indirectly for more than 200 million people worldwide. Statistics of the Organization for Economic Cooperation and Development (OECD) show that as of 2030, value added contribution to global sea commodities will double, reaching more than USD 3 trillion, covering fisheries aquaculture, fish processing and port activities.
Meanwhile, the Indian Ocean has a very comprehensive resource that needs to be explored and exploited for the benefit of our society. The number of fishing in the Indian Ocean totals to about 13 million tons per year. But that number only represents 13% of total global fishing. On the other hand, more than 40% of fishermen in the world live in this region. Many marine economic sectors have potential that could be the foundation an IORA sectoral cooperation, these include: fisheries, fishery product processing, tourism, shipping, shipbuilding, mining, and energy. Development of these sectors would have to focus on the aspects of sustainability, standardization, certification and technological development. Nevertheless, it should realize also that concern a country's marine economy will largely depend on considerations of the geographical position, connectivity/seaports, the demographic that is related to the number of people living in coastal areas, and strategic considerations including a search of sustainable natural resources. Therefore, cooperation must be based on a common platform to ensure the resilience of the sea, the sustainability of marine resources, and maritime security. In Iran, the fisheries and the aqua culture sector is capable of absorbing more than 200 thousand workers. The volume of fish caught Iran is about 1 million tons of which 600 thousand tons comes from fishing and 400 thousand tons of aquaculture. Iran is currently increasing the capacity of the fisheries by focusing on the development of fishing methods. Meanwhile for Indonesia, the marine economy is able to contribute 22% to the national GDP. This is below the potential of the marine economy in Indonesia where from 11 marine sectors, it has the potential of delivering US $ 1.2 trillion per year. With about 140 million of the 250 million of the Indonesian population live in coastal areas, the maritime economy has the potential to provide employment for 40 million people or one third of the total workforce in Indonesia. On the other hand, Africa as a continent, had been more focused on the terrestrial environment in developing the it’s economy and forget the very significant resources provided by the marine environment that each country has. However, it has undergone many changes since the adoption of the African Union in 2063 and the 2050 African Integrated Maritime Strategy (AIMS), in which both documents emphasize on the development of marine economy. In October 2014, South African President Jacob Zuma launched a project named Operation Phakisa (meaning"HurryUp"),which focuses on the marine economy. For Australia, the blue economy is predicted to grow to $ 100 billion by 2025. However, Australia recognizes the need to act to safeguard the sustainability of the marine economy.
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Many potential sectoral cooperation that can be explored by placing the sea as a common platform. Transfer of knowledge and skills regarding methods of fishing such as longline methods and catch processing can potential sectoral cooperation for strengthening the marine economy. In addition, a number of IORA countries such as Indonesia, have excelled in the development of seaweed. The development of this industry can be transmitted to other countries such as Mauritius that invites Indonesia to jointly develop seaweed. A number of other IORA countries have advantages in terms of technology development. During the field study, Mauritius proposes the use of Deep Water Ocean Application. The Mauritius Research Council has conducted research to develop Deep Project Water Ocean Application that is planned to be used as a form of air conditioning. This project is very important for IORA member countries to learn from Mauritius in developing storage coolers for fish catches (cool storage) and for other purposes. Mauritius is also developing renewable energies such as wave and wind power. And also the development of non-fossil energy sources that can promote economic growth through the utilization of renewable energy and supporting sustainable development. In the development of marine economy IORA, member countries that are advanced in the implementation of the blue economy are encouraged to share experiences and strategies towards state measures based sustainable marine economy. In addition, Member States encourage the exchange of emergency information such as a tsunami warning center in the Indian Ocean region, works for profiling disaster vulnerability of countries in the Indian Ocean region, sharing information and experiences related to mitigation and adaptation towards climate change to address environmental vulnerabilities. However, the main challenge for the development of marine economy is the issue of funding. It is a crucial part in transforming ideas into efforts of marine economic development/action. Learning from the experience of ASEAN in the development of the Master Plan on ASEAN Connectivity, the development of the Blue Economy Master Plan can be the first step in concrete terms to identify and prioritize projects and areas of cooperation that are tangible, especially in fishing and aqua culture, maritime and connectivity ports, marine tourism, and human resource development. It is expected that the master plan for the Blue Economy can help IORA in convincing institutional lenders to fund projects within the framework of IORA Blue Economy Master Plan.
Tourism
Tourism is the world's largest industry with a share of 10% of the world GDP in 2015. The level of tourist arrivals continued to increase by 4.4% or a total of 1,184 million. This sector generates $1.5 trillion in the form of export earnings. The World Tourism Organization expects growth in tourist arrivals will reach 1.8 billion travellers in 2030. Travel and tourism contributed US $ 7.2 trillion to global GDP. The statistics one tourism as a form of employment shows that one out of 11 jobs is related to the tourism sector. Tourism is one of the key sectors for poverty reduction through employment and business opportunities. In IORA member countries, tourism is a very important industry to support national economic growth. In 2015, the total tourist arrivals in IORA countries reached 135 million, representing only 1.12% of the total tourist arrivals in the world. This shows that IORA countries still lag behind other countries in the world in the tourism sector. In Iran, tourism became the third largest industry that grew 4.3% annually, contributing to Iran's economy which amounted to US$6 billion. Meanwhile, for Mauritius, tourism contributed 7.5% of total GDP in 2015. In Mauritius, tourism is still a source of employment and is very important, while the number of jobs that are directly related to the tourism
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industry reached 30,000, while jobs are indirectly related to the tourism sector as much as 100,000. Cooperation in marine tourism is also a potential sector that IORA can develop. Indian Ocean region has a huge potential for the development of the tourism sector with a wealth of natural and cultural richness. Cooperation can take the form of tourism, cruise tourism and travel packages. Each IORA member countries offer something unique which may be beneficial for the development of tour packages along the circumference of the Indian Ocean. In the case of cruise tourism, member states should improve port infrastructure capable of facilitating the transit of cruise vessels. Meanwhile, for the development of travel packages (multi-destination tourism), needs much creativity and innovation so that the uniqueness of each country can be hallmarks of the program in addition to offering sea travel destinations such as beaches and diving. As a pilot project that can be carried out in tourism cooperation among the countries that have connectivity support is tourism sector cooperation in beach tourism with an emphasis on the cultural uniqueness of each country and the history of relations between the countries on the Indian Ocean rim. Cooperation in the development of the tourism sector, multi-destination tourism, is in need for connectivity support. In addition to sea connectivity to support cruise tourism, also need to increase water connectivity to support the mobility of people / tourists. Besides, the need collective awareness about sustainable tourism destination management is paramount important. It is realized that tourism provides tremendous economic benefits, but it needs to be considered regarding the excesses inflicted on the environment and socio-culture of the tourist destinations. The role of the business community is very important in sectoral cooperation approach. Although it is very gradual, the sectoral approach is to be able to provide a solid structure for building economic integration. Planning sectoral cooperation should be conducted in an inclusive manner in which the need to empower local communities, women, as well as Micro Small and Medium Enterprises (SMEs). However, the goal of economic integration is to establish a common market, the unification of the macroeconomic policy, harmonizing the implementation of sectoral policies, creating a relationship of interdependence which in turn can increase peace and security for shared prosperity in the region.
APEC Model / Trade Facilitation
Initiative is very important economic integration to be built through existing institutions. But at the same time, it is necessary to also develop economic cooperation and regional integration that emphasizes on coordination and harmonization of macroeconomic policies, reduction in trade tariffs and elimination of non-tariff barriers, and facilitation of movement of capital, freedom of movement of labor, and improvement of business climate. Attention to the issue of development should also be emphasized, particularly those related to gender mainstreaming, health, education, population and protection of the environment. The levels of economic progress with the pace of development vary among member countries will be accommodated through the 'multi-speed / variable geometry approach' where this is consistent with efforts to expand participation of regional stakeholders in integration.
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In trade facilitation, great attention is given to the most countries that have cut tariffs and liberalize their trade quotas. These concerns are also linked to fast growth in global the value chain . In trade facilitation, it should be underlined the importance of providing both infrastructure, hard infrastructure and soft infrasstructure. Hard infrastructure such as ports, airports, roads and railway lines, for example is very critical in linking one country to another. Meanwhile, the development of trade-related soft infrastructures as important as hard infrastructure, such as border management, and logistics management. Learning from the experience of APEC, cooperation was built with the aim of integrating the Asia Pacific region and ensure the movement of goods, services and people can travel easily between APEC member countries. Member countries facilitate this movement through faster customs procedures, better business climate, and adjusting regulations and standards in the region. After more than 25 years, APEC provides a real contribution to the Asia Pacific region which is seen them from the high economic growth, with real GDP nearly doubled, which only amounted to USD 15 billion in 1989 to $ 30 trillion in 2012. Meanwhile, average of income per capita of population of the Asia-Pacific region increased by 36%, so as to lift millions of people from poverty and create a middle class that is increasingly growing. With APEC, Asia-Pacific region is getting closer to reducing barriers to trade and harmonize regulations to boost trade. Between 1989 and 2012, the total trade in the APEC region have increased trade by 61/2 times with 2/3 of trade going on between the member countries. APEC initiative to synchronize the regulatory system in the region is key for economic integration in the Asia-Pacific region. The products can be easily exported only with the adoption of common standards across economies / countries, rather than using different rules. Harmonization of regulations, including regulations related to the digital economy into the common standards. As one form of trade facilitation, APEC using innovations in information technology to create new ways of doing business. Digital economy members of APEC is also possible to centralize the import-export process, speeding up the time required for goods to cross the border. Known as the single window, virtual system that linked all government agencies involved in the import-export process, enabling companies to incorporate documents electronically. APEC has made cross-border business travel easier. Since 1999, the APEC Business Travel Card (ABTC) allows pre-approved business travellers to enjoy the service out into the country members of APEC to be more easily and quickly through a special lane for APEC in various major airport, and multiple short-term entry to 19 APEC members countries. As a result, the total costs associated with immigration for APEC card holders fell 38%, or a savings of $ 3.7 million in 2011 and 2012. APEC makes business in the region become more efficient. APEC Launches Ease of Doing Business Action Plan in 2009, with the aim of making the business is cheaper, easier and faster. Between 2009 and 2013, members of APEC improve the ease of doing business in Asia-Pacific at 11.3 percent for all initiatives, including starting a business, getting credit, or apply for permits. For example, construction permits issued faster 18.7 percent from 169 days to 134 days in the last four years.
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In addition, APEC also boosts competitiveness and the ability of Small and Medium Enterprises participation in the global market. APEC has launched a variety of initiatives to help the development of SMEs in the region. In 2005, innovation Center of SMEs in APEC was established in Korea to help improve the competitiveness of SMEs in the region through business consulting. Between 2009 and 2012, as many as 96 companies in 7 countries of APEC receive business consulting assistance to improve management and manufacturing practices. Initiative of APEC Start-up Accelerator (ASA) was launched in 2012 to promote entrepreneurship and innovation to connect start-ups in the area with angel / venture capital funding and also with successful entrepreneurs who act as mentors. Through APEC SME Working Group, APEC also help small-scale producers in rural areas to connect to the global market through the project One Village, One Product. Since its inception in 2011, APEC has undertaken various activities in an effort to improve business ethics, especially in the health sector. In 2014, APEC initiative has produced a code of conduct adopted and implemented by some 60 biopharmaceutical and medical devices industry associations and its related companies in 19 countries in Asia-Pacific, which represents more than 14,000 companies. Meanwhile, to improve SME resilience to natural disasters, APEC has made the training of more than 250 experts to assist SMEs for sustainable business planning and minimize disruption due to natural disasters. APEC also works to ensure an inclusive economy in the region. APEC builds a project linking the micro businesses owned by women to be able to access to global markets. APEC Digital Opportunity Center was established in 2004 to provide computer training to rural and urban communities that are considered vulnerable. With more than 100 centers in the 10-member APEC offers training in information technology, the APEC Digital Opportunity Center (ADOC) focuses on transforming the digital divide into a digital opportunity. Funded by a multi-year project under the Energy Working Group, APEC helps urban planners to develop a low-carbon urban planning. The cities reduces the carbon footprint by adopting a carbon emission reduction targets and energy saving initiatives and the use of renewable energy. APEC also support smart electricity grids that enable clean energy sources that can be connected to the existing structure and can be distributed to people in rural areas. In 2014, APEC members are committed to taking concrete steps toward regional economic integration by agreeing on a roadmap for the Free Trade Area in the Asia-Pacific
Proposed Trade Facilitation in IORA
IORA can take the model of APEC in approach trade liberalization and economic integration, among other thing, it focuses on trade facilitation. From the results of the field study, several activities were deemed capable of providing an effective impact among other things cooperation free trade and industrial zone, increased connectivity, business travel card, and the creation of e-information platforms. In terms of increased connectivity and trade facilitation, Iran offered cooperation between free trade and industrial zone (FTIZ) to promote increased trade between countries IORA. FTIZ offered by Iran in particular for IORA countries is Chabahar Free Trade and Industrial Zone. In this regard, Iran IORA encourages countries to sign the Declaration of Chabahar. Chabahar Free Trade Zone has the potential to be utilized by IORA countries in penetrating into Central Asia and even Europe. FTIZ is located adjacent to the Port of Chabahar. This
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port has a very strategic position for facing directly into the Indian Ocean. The port was developed with the cooperation of Iran with Afghanistan and India. Figure 54. Free Trade Zone in Iran
Figure 55. Connectivity Sea in Iran
It cannot be ruled out the possibility that the same mechanism with FTIZ Chabahar can be implemented by other member states that have the potential to be a hub for IORA to penetrate markets other parts of the world. Thus the increased connectivity and trade facilitation is not only intended for market development within IORA in the region, but also to the global market.
Meanwhile, stakeholders from business circles are very pragmatic in looking at the possibility of closer cooperation in the context of CEPA IORA. They see the main obstacle in improving cooperation with the countries IORA to include a lack of information about business opportunities, weak business networking, connectivity, and there are still obstacles in the movement of people.
To deal with these obstacles, the proposed solutions include creating e-platform for sharing good information related to business opportunities, the regulations in each country IORA, and business contacts.
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In addition to the need for facilities / to ease visa, including the issuance of IORA business travel card, which is able to ensure the smooth movement of people to support the improvement of business relations at IORA. However, a number of countries realize their reservations towards such a scheme in view of the concerns the utilization of these facilities by people who are considered to be unauthorized.
Capacity building is also a concern IORA countries. Interest of all stakeholders in the country conducted a field study emphasized the importance of capacity building to bridge the development gap especially LDCs with other IORA members. Capacity building is also intended to improve the ease of doing business in the country IORA. Stakeholders suggested an entity which is a public private platform in each member state. The platform in question is a form of commitment of member states to improve the climate for investment and trade. Furthermore, given that most businesses in IORA are SMEs so properly for IORA to give special attention to SMEs that can make a difference in the lives of people in the IORA countries. Related to this, the support for market access and innovative funding mechanisms are needed to encourage the growth of sustainable marine economy, including in the field of renewable energy, sustainable aquaculture, ecotourism, biotechnology and construction of coastal infrastructure.
Bilateral Cooperation within IORA
Bilateral cooperation among IORA member countries will also determine the success of regional integration. The high bilateral economic cooperation will show the level of interdependency. However, bilateral PTA / FTA / CEPA have the potential to be obstacles to regional economic integration, if not managed properly.
Appropriate Cooperation
Economic integration within the framework of the fundamental challenges facing IORA include: (a) the disparity in levels of economic development, including 7 LDCs among member states, (b) a number of countries have small size economy, and (c) low trade complementarity, on the other hand, regional economic integration is expected to provide an opportunity for market expansion, economies of scale,and diversification of the economic base. To obtain the formula / modalities of economic integration, according to IORA, a number of fundamental things that need to be taken into consideration, among others: Share of population of countries IORA (potential market), intra-IORA (interdependence), the contribution IORA the world economy (trends economic growth), and the level of investment (private sector confidence to invest). Share of population IORA countries reached more than 30% of the total world population. This number represents a potential market for trade and investment development of intra IORA.
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Figure 56. Comparison of the total population IORA countries and the World
Despite the huge market potential, based on data as of August 2017, intra-IORA only reached 3.12% compared to 11.41% of total trade with the world IORA countries.
Figure 57 . Export to IORA compared to Export to the whole world (Percent)
On the other hand, the contribution to the world economy of IORA is only 9%. Compared with the total population reaching 30% IORA, the contribution is relatively small. Figure 58. Contributions IORA the world economy
Although the contribution is not proportional to the potential that exists, however, in the last 10 years IORA contribution to the world economy showed a gradual increase from 5.2 percent at the beginning of standing to 9.3% in 2016.
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Figure 59. Contributions economy among IORA countries in the last 10 years (GDP Current Price)
One important note is that growth in IORA sub-region is above average of the world’s growth. Among those sub-regions, South Asia records the highest economic growth and projected to continue to lead the economic growth within IORA. Figure 60 . Economic growth in IORA subregion
Nonetheless, a more integrated economy will likely to be vulnerable to economic shocks, in terms that such shocks occur in of the subregion, which will affect the whole region, as shown during the 2009 economic crises. Meanwhile, in investment sector, the total of world’s foreign direct investment to IORA member states accounted only 11%; indicating the lack of trust among businesses to invest in IORA.
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Figure 61 Figure 61. Inward investment to IORA member states, 2016
Also, the low inward investment also affected by the low rate of innovation progress, progress of competitiveness and rate of ease of doing business, that still far from expectation. Figure 62: Progress of Innovation in Indian Ocean is still relatively low (2010 and 2015)
Among IORA member states, Singapore and Australia have the highest progress of innovation while other countries recorded less progress. The low rating could be one of the indicators that the productivity level is also low, thus correlated with low production efficiency.
Figure 63. Global Innovation Score 2015
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Strong innovation is essential to boost economic growth. IORA (excluding Somalia, Seychelles and Comoros) scores 33.68, while Singapore has the highest Global Innovation Score with 59.16. Regionalism around IORA has low score, namely South Asian Association for Regional Cooperation (SAARC) with 26..07 and Southern African Development Community with 29.19. Figure 64. Progress of Competitiveness In Indian Ocean (2010 and 2015)
The development of competitiveness shows quite encouraging progress in which most member countries show improvement. This can provide a good foundation for economic integration. On the other hand, economic integration will also have an effect in the improvement of competitiveness.
Figure 65. Global Competitiveness Rankings 2015
Although still lagging behind East Asia and Western Europe, however, IORA's global competitiveness ranking is only slightly behind compared to ASEAN (minus Myanmar and
Brunei).
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Figure 66. Ranking of Ease of Doing Business di IORA (2010 and 2015)
On the other hand, the ease of doing business ranking of IORA countries tends to decrease. Of the 20 IORA countries (minus Somalia), most of the 2015 rankings decreased compared to 2010. This development is worrisome considering the ease of doing business is fundamental to the economic progress of a country.
Figure 67. Average Overall DTF 2015
Distance to Frontier IORA region also shows the backwardness compared to East Asia and EU region. Meanwhile, from the trade side, there are still indicators showing trade barriers, such as lack of openness to trade, low complementarity and connectivity trade.
In IORA there is a high disparity in openness to trade. There are countries that apply trade barriers (tariff and non-tariff) to protect national industries. On the other hand, there are countries with small populations but high trade values due to their dependence on trade to meet democratic needs, or to promote economic growth (in terms of trade-hub countries). Countries with dependence on imports tend to apply trade liberalization by lowering export and import tariffs. Openness to Trade data shows countries that are expected to be supporters of trade liberalization based on the level of openness to trade.
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Figure 68. Level of openness to trade
Sumber: UNCTAD
Nevertheless, there are other considerations besides openness to trade that influence attitudes and decision making related to trade liberalization in IORA region, such as foreign policy orientation. Trade complementarity can also be a consideration for possible trade liberalization in IORA.
Figure 69 . Export Complementarity IORA member states, 2013
India is the country with the highest complement of exports compared to other IORA member countries. The export complementarity is uneven in IORA. Such inequality will affect the integration process whereby countries will benefit from the integration process and there are countries that will feel disadvantaged. The same is applied to import complementarities.
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Figure 70. Import Complementarity IORA member states, 2013
The low level of trade complementarity will have a negative impact on the integration process since the level of dependency among member countries is still low.
Figure 71 . IORA Trade Complementarity Index and Connectivity
Figure 72 . Shipping Line Connectivity Index 2016
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The low level of trade complementarity is exacerbated by the lack of connectivity, especially for IORA countries in the African continent. The imbalance of connectivity will reduce the benefits of economic integration gained by countries with low connectivity levels.
Figure 73 . Shipping Line Connectivity Index 2016
Figure 74. Container port throughput, annual, 2008-2014, in TEU
Figure 75. Right Infrastructure for the Right Economy
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Connectivity linkages, trade and economic complementarity, largely determine the process of economic integration and the future of IORA. Therefore, IORA needs to establish the connectivity of the IORA countries.
In addition to the indicators mentioned above, a number of things that could be factors inhibiting the process of economic integration in the region of IORA include: 1. Lack of political will to build supra-national institutions and to implement agreements and mandates. Each IORA country has priority interests so that not all member countries have a focus on economic integration within IORA. From the results of field studies, most stakeholders in the surveyed countries see the public as yet unaware of the IORA. This is related to the lack of direct implications of IORA in the economy of society / business actors. Thus IORA has not been too popular for domestic constituents in some member countries. 2. High dependence on tariffs as a source of fiscal revenue. A number of IORA countries still apply high tariffs on imports and exports. The high tariff adoption considers protecting local products and also as a source of state income derived from tariffs / taxes. 3. A very ambitious target with an unrealistic time frame to reach the target. This will lead to unrealistic expectations. In the field study, stakeholders expect realistic targets in the development of closer trade and economic cooperation with IORA countries. 4. Weak regional structures. This can be seen from the weakness of industrial structure and the absence of intra-industry linkages. World investment rate to IORA countries is also only 11%. 5. Overlapping membership in other regional organizations will be able to duplicate the mandate and structure, leading to inefficient use of resources. IORA member countries are bound by other regionalisms as well as a number of free trade agreements and Custom Union. Figure 76. Overlapping membership in other regional organizations
6. Unsuitable mechanism for sharing costs and benefits in regional arrangements, which can undermine member commitment to regional cooperation. Given the fact that member countries have different levels of economy will impact on different levels of commitment and contribution to economic integration. Considering that, some IORA countries should be able to emerge as leaders in promoting regional cooperation.
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7. Endemic political instability, where in some cases, can lead to civil conflict. The IORA region has different threats to human security characteristics between the eastern and western regions of IORA. The Eastern Region faces more threats from natural disasters. While in the west, threats to human security tend to stem from conflict, especially internal conflict. Differences in perceptions of these threats will affect the level of confidence in regional countries. Figure 77. Perception on security threat
8. It is undeniable that migration plays an important role in promoting the process of regionalism and economic integration. The existence of diaspora can be one of the factors of increasing the proximity of economic relations. National Geographic data 2015 shows that unlike APEC, migrations from IORA countries mostly go to non-IORA countries (especially to Europe). On the other hand, the migration that occurs in APEC has a tendency among APEC members. Figure 78. Migration IORA vs APEC
9. IORA member countries, particularly in the West Indian Ocean region, are still regarded as countries with high levels of risk. This may undermine private sector interest in capitalizing on such economic integration.
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Figure 79. Risk Assessment
By considering aforesaid matters, the closer form of economic cooperation that can be done by IORA can use the following pattern: 1. Closer economic integration IORA can be done gradually through multi-speed and multi-level integration. Economic integration is done first by member countries that are ready and fully equipped (multispeed) while preparing other members. Thus the level of integration will have several levels (multilevel). Related to that, the early stages of integration can be done through economic development facilitation, trade facilitation and sector cooperation. These three forms of cooperation must be jointly undertaken to provide a foundation for strengthening the economic structure of each member country. 2. To reduce the economic gap among member countries, especially LDCs, the capacity building to LDCs countries can bridge the economic gap between IORA members. 3. In addition, preferential trade may also apply to LDCs countries. The application of preffential tariff is based on the ability and willingness of each member. 4. Free trade Arrangement and Comprehensive Economic Partnership Agreement implemented based on variable geometry approach in IORA CEPA integration process. This approach is considered appropriate given the IORA member countries vary greatly in terms of economy, level of development, political system and government, culture, and interests. This approach allows for multispeed and multilevel integration. 5. Economic integration cooperation is carried out between blocked countries (block-by-block) so as to provide opportunities for other members to peer-to-peer learning.
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Figure 80. Proposed process to IORA Comprehensive Economic Partnership
Furthermore, from the results of the field study, there is an idea to apply 'new approaches' in developing IORA economic frameworks. In a 'traditional' way, economic integration begins with sectoral cooperation, then proceeds to integration phases like Preferential Trade Arrangement (PTA), Free Trade Arrangement (FTA), and evolves into CEPA. On the other hand, the new approach offered is to build partnership cooperation through CEPA mechanism, then followed by PTA and FTA. Economic integration is possible to depart from the umbrella agreement in the form of IORA CEPA before entering into the discussion of tariff reduction. The 'new approach' is considered to shorten the process compared to the traditional approach. However, it is emphasized that the CEPA to be established must have a workable realistic structure. The CEPA discussions with the 'new approach' will first rule out the discussion of tariff barriers and should focus more on cooperation: (1) trade facilitation, (2) trade in services, (3) investment, (4) economic / development cooperation, and (5) dispute settlement mechanism. Tariff barriers will be discussed at the end of the process of economic integration. The packaging of the IORA CEPA framework proposal will also determine whether or not the mechanisms are accepted by member countries. IORA needs to focus on projects that have multiplier effects. The community needs to be given an understanding of the benefits that can be obtained from IORA CEPA through the development of partnership cooperation in trade, investment and services. Going forward, IORA must synergize the efforts of economic integration with regional initiatives such as the Belt and Road Initiative and the Asia Africa Growth Corridor. IORA should also be able to capitalize relations with its dialogue partners, one of which is to strengthen capacity building programs.
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Section 5:
CONCLUSION
The economic development data of IORA countries illustrates considerable economic and
development gap between IORA member countries. Therefore, the establishment and
implementation of appropriate strategies in an effort to strengthen economic cooperation
become a necessity. Based on the reflection of the economic relations in the area of the
Indian Ocean (Chapter II); Regional Mapping (Chapter III) and finding the right model of
increasing economic cooperation in IORA (Chapter IV), it can be concluded several
important points as follows:
IORA needs to search for new breakthrough strategies to enhance economic cooperation
and promote development, specifically in efforts to achieve the main objective of IORA as
mentioned in chapter 3 (three) of The IORA Charter. The economic findings and the
developments of the IORA member countries illustrate the current gaps in the economy
among the members. Therefore the idea and implementation of the appropriate strategy to
strengthen economic cooperation is imperative.
In this era of globalization, an effort of strengthening economic cooperation under IORA is
heavily influenced by the current regional cooperation in the region. Enhancing regional
cooperation will eventually help improve global economic cooperation. IORA as a core
regional cooperation in the Indian Ocean could further act to link other regional cooperation
that have been established, such as ASEAN and GCC.
In the effort to strengthen economic cooperation, IORA could engage and learn from the
other existed economic cooperation forum, such as ASEAN, which the economic
cooperation agreement mechanism was gradually implemented in the region. ASEAN
started with the top economies first, before embracing other members.
The economic potential within IORA is seen as robust and able to push towards
strengthening a more intensive economic cooperation. In doing so, IORA needs to highlight
some of the main economic aspects that can be a force in efforts of strengthening economic
cooperation, among these are Innovation; Competitiveness (of products and services); the
ease of doing business and Trade Complementarity.
In the context of IORA, studies on the development of the four aspects of the economy
(Innovation; Competitiveness of products and services; the Ease of Doing Business and
Trade Complementarity) between 2010 - 2015 show very poor results. In regards of
Innovation, data shows that most of the countries of IORA are still below the line of the
average global Innovation Index. In terms of Competitiveness, data shows that IORA has the
lowest value when compared with other areas. In the Ease of Doing Business, studies show
that the development of these aspects in IORA are still low when compared with the other
areas. While on the complementary aspect of trade among IORA countries, the data vary
between countries, both export and import.
The concept paper of strengthening economic cooperation through IORA Comprehensive
Economic Partnership Agreement (IORA - CEPA) which proposed by IORA Secretariat was
firstly presented at the IORA 6th Bi-Anual Committee of Senior Officials (CSO) in Yogyakarta
on 22-23 May 2016. The concept paper which was further discussed at the 22nd meeting of
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the Indian Ocean Business Forum(IORBF), on 13 October 2016 in Jakarta, earned a various
responses from IORA member countries. CEPA is the concept of economic cooperation with
a wider scope than the concept of Free Trade (Free Trade Area - FTA). In addition to the
free trade and tariffs sectors, CEPA also covers other economic issues such as technical
cooperation, settlement of disputes, copyright (intellectual property rights) and others. The
idea of CEPA is a true comprehensive concept that still in process.
Most IORA member countries consider that strengthening of economic cooperation through
IORA - CEPA is still far to be realized, given the complicated and the number of issues that
must be synchronized to reach an agreement on the concept of CEPA. Some countries tend
to view that the facilitation and cooperation in real sectors as more logical choices to
strengthen economic cooperation at the early stage, such as facilitating free trade zone and
investment. These member countries are Iran, Malaysia, Singapore, the United Arab
Emirates, Mozambique, Australia and India, while Mauritius supports the concept of CEPA to
improve and strengthen economic cooperation IORA.
it is time for IORA to find a right concept of collaboration that can be used as a breakthrough
strategy in strengthening economic cooperation in the region. Some of these options include
Preferential Trade Agreement (PTA); Free Trade Area (FTA) such as the ASEAN Free Trade
Area (AFTA); or a CEPA agreement, similar to the Regional Comprehensive Economic
Partnership (RCEP) involving all ASEAN members and six (6) ASEAN dialogue partners or
the Trans-Pacific Partnership (TPP).
Recommendation
Noting the rapid changes of the dynamic world, IORA needs to anticipate issues in the
region and prepare for the future of IORA’s economic cooperation.
To be able to compete on a global level, IORA member countries need to increase the
capacity of the four main economic aspects, such as Innovation; Competitiveness (of
products and services); Ease of Doing Business; and Trade Complementarity. IORA should
encourage member countries to increase national capacity in those aspects. IORA need to
consider the proposed CEPA cooperation concept, particularly in relation with economic
cooperation objectives as stipulated in the IORA Charter.
Taking into consideration the diverse economic of member countries, IORA need to find
more realistic and suitable models of cooperation, as of the most member countries see the
concept of IORA - CEPA is still far to be realized.
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COST AND BENEFIT OF INDIAN OCEAN RIM ASSOCIATION (IORA)
TRADE COOPERATION FOR INDONESIA
Aziza Rahmaniar Salam & Ridho Meyrandhoyo
Middle Researcher and Policy Analyst at
the Center for Assessment of International Trade Cooperation
Agency for Assessment and Development of Trade
Ministry of Trade of the Republic of Indonesia
Policy Issues:
1. Indian Ocean Rim Association – IORA, formerly known as the Indian Ocean Rim Association for Regional Cooperation (IOR-ARC), is an intra-regional organization in the India Ocean region, established in March 1997 in Mauritius. IORA was established based on at least four pillars, namely the economic, maritime security and safety, education, and cultural pillars. The main objective of its establishment is to promote sustainable and balanced economic growth of all member countries and to create a strong foundation for regional economic cooperation through trade facilitation and eliminate trade barriers.
2. In the Jakarta (IORA) Concord declaration, signed at the IORA Summit in Indonesia in 2017, the
leaders agreed to enhance trade and investment cooperation through IORA intra-trade in goods, services, investments and flow of technology cooperation. The agreement signed by IORA’s state leaders has led to a speculation of an IORA economic integration. Since most of the IORA member countries are African, Middle East, and West Asian countries with limited economic bilateral cooperation with Indonesia, it is expected that this cooperation can further improve Indonesia’s market access to those countries.
3. Against this background, Indonesia needs to conduct an internal study on the costs and
benefits of the IORA trade cooperation for Indonesia.
Trade Performances of Indonesia and the World and Indonesia and the IORA Member
Countries
4. The main exports of Indonesia to the world are still dominated by natural products and its processed products, such as CPO, coal, natural gas and rubber. CPO recorded the highest export trend (216%) during the last five years, while jewelry recorded the most negative export trend and decreased by 24%. Indonesia’s main export destination is the United States with total export amounted to USD 15.7 billion in 2016 or 11.8% of the total share of Indonesia's exports to the world. This is followed by PRC with the export value of USD 15.1 billion or 11.4% of all shares of Indonesian exports. In addition to these two countries, Indonesia also exports to Japan, India, Singapore, Malaysia, South Korea, Philippines, Thailand, and the Netherlands.
5. In line with Indonesia’s export to the world, Indonesia's export to IORA member countries is
also dominated by CPO, which shares 7,7% of Indonesia's total export, even though the trend has been negative for the last 5 years. In 2012 Indonesian CPO export to IORA has reached USD 4.26 billion, while in 2016 it dropped 24% to USD 3.23 billion.
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6. Other Indonesian products exported to IORA member countries are coal, jewelry, chemicals and tin. Minerals fuel and oils (HS 27) are the commodities with the largest share of Indonesia’s export to IORA (22%). Meanwhile, the commodity with the greatest increase in exports were jewelry (HS 7113.19). In 2012, Indonesian jewelry export to IORA member countries has reached USD 27.3 million. In 2016, this number increased sharply to USD 1.2 billion.
7. Indonesia’s main imports from IORA member countries are minerals fuel and oils with 14%
share of all Indonesia’s import from IORA. However, the trend of the exports was negative over the last 5 years. In 2012, Indonesia imported minerals fuel and oils for USD 13.2 billion, while in 2016 it fell to USD 5.7 billion or decreased by 56%.
8. Indonesia’s main export destination to IORA member countries is Singapore which accounted
for 27% of Indonesia’s total exports to all IORA member countries. Besides Singapore, other largest Indonesia’s export destinations are India (24%), Malaysia (16%), Thailand (13%) and Australia (8%). Meanwhile, the other 15 member countries of IORA only contribute 12% of Indonesian exports.
9. Within the IORA member countries, Indonesia has the largest trade surplus with India,
amounting to USD 7.2 billion, followed by Bangladesh to USD 1.1 billion, and South Africa to USD 437 million.
10. The economic integration in the Southeast Asian and African regions are diverse, and some of
its members are intersect with IORA. There are various regional economic cooperation in Southeast Asia and Africa, including the IORA. Some IORA member countries are also members in other regional economic cooperation. For instance, while being a member in IORA, South Africa is also a member in Southern Africa Customs Union (SACU). Similarly, Oman is also a member in the Gulf Cooperation Council (GCC). Therefore, if South Africa and Oman make a trade cooperation with IORA in the form of PTA, FTA, or CEPA, it must also consider their commitment with SACU and GCC.
Costs and Benefits Analysis of the IORA Trade Cooperation to the Macro and Sectoral Economics
11. The analysis is conducted by using Computable General Equilibrium (CGE) model, with 2 (two) simulations, namely the 50% Tariff Reduction (Sim 1) and the 100% Tariff Reduction (Sim 2) with the following results:
11.1. Impact on Macro Economy
Benefits
The simulation of 50% and 100% tariff reductions showed positive impact to the real GDP of both Indonesia and IORA. In the 50% tariff reduction simulation, there is an increase of real GDP by 0,035%. Meanwhile, the Indonesian GDP will increase at the highest level of 0,075% when the 100% tariff reduction is applied.
The 50% tariff reduction increases Indonesia’s welfare by USD 2.1 billion and IORA’s welfare by USD 1.3 billion. The 100% tariff reduction simulation will increase Indonesia’s welfare ups to the highest level by USD 5.6 billion. However, the same reduction will decrease IORA’s welfare by USD 53 million.
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The 50% tariff reduction will increase both Indonesia’s and IORA’s investmet by 2% and 0.04% respectively. Meanwhile, the 100% tariff reduction will increase Indonesia and IORA’s investment by 0.83% and 0.03%.
Cost
In the 50% tariff reduction simulation, Indonesia will experience a trade balance deficit by USD 1.2 billion, while IORA will have a trade deficit up to USD 743.9 million. In the 100% tariff reduction simulation, Indonesia will experience trade balance deficit up to USD 2.8 billion and IORA will experience deficit by USD 1.8 billion.
Tabel 24 . Simulation Result 1 and 2 on Indonesia Macro Economy and IORA
Country Real GDP (%)
Balance of Trade (USD Million)
Welfare (USD Million)
Investment (%)
SIM 1 SIM2 SIM1 SIM2 SIM1 SIM2 SIM1 SIM2
Indonesia 0.035 0.075 -1215.760 -2897.252 2147.610 5662.500 2.06186 0.83563
In both 50% (Sim 1) and 100% (Sim 2) tariff reduction simulations, Indonesian export will experience an increase in the several main sectors/products, such as grains and crops sector; mining and extraction; processed food; textiles and wearing apparel; light manufacturing and heavy manufacturing. The most significant positive export performance was shown by the food processed sector, reaching 69,3% (Sim 1) and 192,7% (Sim 2).
Whitin the intra IORA’s regional trade, both the 50% and 100% tariff reduction simulations have resulted to the increases on Indonesian imports. Sectors that experienced the highest increase in imports are processed food, grains and crops and livestock and meat products. However, the increase in imports does not necessarily considered as a negative impact, because these products could be used as intermediate goods that can be useful in increasing exports in the near future.
Costs
In both 50% and 100% tariff reduction simulations, the costs to the Indonesia’s sectoral economics are the decreases of exports in livestock and meat products as well as services sector, such as utilities and construction; transport and communication and other services.
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Tabel 25. Simulation Results 1 and 2 on Sectoral Export Performance (%)
Sectors SIM1 SIM2
IORA ROW IORA ROW
GrainsCrops 23.470 -12.270 43.38892 -29.31252
MeatLstk -10.180 -12.010 -26.1136 -28.86074
Extraction 5.700 -2.220 11.06551 -5.11658
ProcFood 69.350 -6.050 192.7959 -15.23651
TextWapp 18.420 -6.090 35.2312 -15.51493
LightMnfc 19.180 -6.850 36.80025 -17.10557
HeavyMnfc 4.390 -6.510 4.57608 -16.26911
Util_Cons -5.390 -5.430 -13.6756 -13.67698
TransComm -5.310 -5.300 -13.4834 -13.3447
Other Services -5.590 -5.610 -14.0634 -14.00175
` Source: GTAP output
Tabel 26. Simulation Results 1 and 2 On Sectoral Import Performance (%)
Sectors SIM1 SIM2
IORA ROW IORA ROW
GrainsCrops 17.670 5.600 46.81393 17.58951
MeatLstk 14.040 -1.750 34.64585 -1.03339
Extraction 4.950 -1.430 8.82769 -4.03901
ProcFood 19.410 1.940 49.06773 7.33479
TextWapp 10.030 -0.130 21.52444 -0.35099
LightMnfc 10.670 1.580 24.82172 4.7815
HeavyMnfc 7.830 -0.830 17.32244 -1.06469
Util_Cons 3.340 3.320 9.08148 8.82623
TransComm 2.770 2.720 7.65508 7.28733
Other Services 2.650 2.660 7.25926 7.04262
Source: GTAP output
12. Based on the result of the above mentioned simulation, the most moderate and possible option to be implemented by Indonesia is Simulation 1 (50% tariff reduction). The reason is because Simulation 1 has less trade balance deficit impact and provides greater increase in the investment rather than Simulation 2 (100% tariff reduction).
Indonesia Cooperation with IORA, AAGC and OBOR
13. Within the IORA, Indonesia has had free trade agreements with 9 countries, namely Malaysia, Singapore, and Thailand through AFTA (ASEAN Free Trade Area) cooperation, Australia (through AANZF, IACEPA, and RCEP), India (through ASEAN-India and RCEP), Iran (through Indonesia – Iran PTA). Currently, Indonesia is exploring the possibility of bilateral trade cooperation Preferential Trade Agreement (PTA) with South Africa, Sri Lanka, and Bangladesh in the near future.
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14. Aside from IORA, it is also important for Indonesia to consider the rapid development of the Asia-Africa Growth Corridor (AAGC). The AAGC is an infrastructure development concept, initiated by India and Japan, to compete with One Belt One Road (OBOR), initiated by China, which at the same time, it has broaden the geopolitical influence of those countries in Asia and Africa regions.
15. On the one hand. the idea of AAGC is to connect Africa with India and other countries in Southeast Asia and Oceania by creating a new maritime corridor. The idea of AAGC has 4 principles which are: (a) development and cooperation projects; (b) improving the quality of infrastructure and connectivity; (c) capacity building and skills; and (d) people-to-people partnerships.
16. On the other hand, OBOR is a development strategy initiated by China, aimed at establishing maritime connectivity to contribute prosperity in the region. OBOR is also China’s strategy to have a bigger role globally with China-based trading networks. OBOR’s basic idea includes a wide range of trade regions, including Asia, East Africa, Middle East and Europe.
17. Although no membership has been specified in the AAGC, it is anticipated that the AAGC would have a positive multiplier impact on IORA. The reason is, it has broader scope of cooperation to be run, especially for economic growth, investment, and infrastructure development. On the other hand, OBOR iniative could also be used as a roadmap to achieve IORA objectives, such as maritime connectivity and infrastructure development.
18. Although Indonesia has had regional free trade agreements, such as ASEAN+6 and currently is in the process of completing bilateral agreements with several IORA member countries, it still needs to take into account its strategic position towards the AAGC, OBOR, and IORA cooperation. Through these three cooperation, Indonesia has great potential to become maritime axis and logistics center of the world, especially in the Pacific Ocean and Indian Ocean regions.
Conclusions and Recommendations
19. Assuming that IORA becomes a free trade area in the future, the best benefit that will be obtained by both Indonesia and IORA is by applying the 50% tariff reduction, where there will be an increase in real GDP and welfare. Even though it has relatively lower increase on the real GDP and welfare compared to 100% tariff reduction, the 50% tariff reduction provides lower trade balance deficits and higher investment increase for Indonesia.
20. The cost to the economy of Indonesia and IORA member countries as shown by the simulations is the trade balance deficit. However, it does not mean that Indonesia should withdraw from the scheme of trade agreement, because it will loose greater opportunity to gain market access and other trade schemes.
21. Since, there is still a substantial income gap between IORA member countries, the establishment of trade scheme and cooperation should consider the economic level of each individual member countries so that all IORA member countries could get the optimal benefit of the potential trade cooperation. The economic cooperation aspects should be throughly considered.
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22. It is also important to be noted that some of IORA member countries, such as South Africa and Oman, has established custom union with Southern African Customs Union (SACU) and Gulf Cooperation Council (GCC). Therefore, these countries have an internal free trade agreement with the same external custom tariff. In this regards, it should be a special provision governing the IORA members who are incorporated in other custom union.
23. Based on the result of the analysis and economic situation of IORA member countries, the most appropriate trade cooperation for IORA is the Free Trade Agreement Plus (FTA+) Scheme. This scheme includes cooperation in the field of trade in goods, services, and the element of economic cooperation. In terms of trade in goods, tariff reduction scheme should be implemented gradually through several stages, starting from 50% tariff reduction, by taking into account the economic situation of each IORA member countries.
24. Considering the intersect areas and interconnected fields of cooperation among IORA’s, AAGC and OBOR, it is also important for Indonesia to follow the development of both AAGC and OBOR. So, Indonesia could be consistent in implementing policies that are relevant to the aims of Indonesian maritime axis, AAGC, OBOR and at the end to the IORA’s objective as well.
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Editors
Board of Editors
Chief Editors
Dr. Siswo Pramono, LL.M Director General/Head of Policy Development and Analysis Agency Ministry of Foreign Affairs, Republic of Indonesia
Chair of Committee
Dr. Arifi Saiman, MA. Director of Centre of Policy Development and Analysis on Asia-Pacific and African Regions
PLE Priatna Mangantar Simon Hutagalung, M.A. Iwa Mulyana, SH, LL.M Sigit Aris Prasetyo, M.Hum. Cecilia Axel Toumahu, M. PACS Eva K. Situmorang, S. Hum Arindya Anindita, MPSS Sthevia Idira Putri, MIS Sri Nirmala SH, Mkn Wahyu Riadi, M.Si Suryani, S.IP
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Facilitators
H.E. Amb. Y. Kristiarto S. Legowo
H.E. Amb. Sidharto Reza Suryodipuro
H.E. Amb. Octavian Alimudin
H.E. Amb. Rusdi Kirana
H.E. Amb. Tito Dos Santos Baptista
H.E. Amb. Husin Bagis
H.E. Amb. Ngurah Swajaya
Arzaf Fachrezy Firman
Yayan Ganda Hayat Mulyana
Saut Siringoringo
Firdaus Dahlan
Ambassador of the Republic of Indonesia in
Canbera
Ambassador of the Republic of Indonesia in
New Delhi
Ambassador of the Republic of Indonesia in
Tehran
Ambassador of the Republic of Indonesia in
Kuala Lumpur
Ambassador of the Republic of Indonesia in
Maputo
Ambassador of the Republic of Indonesia in
Abu Dhabi
Ambassador of the Republic of Indonesia in
Singapura
Consul General of the Republic of Indonesia
in Dubai
Consul General of the Republic of Indonesia
in Sydney
Consul General of the Republic of Indonesia
in Mumbai
Director of IORA Secretariat, Mauritius
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ABTC APEC Business Travel Card AEC ASEAN Economic Community AFTA ASEAN Free Trade Area AGOA African Growth Oppurtunity Act APEC Asia-Pacific Economic Forum ASEAN Association of Southeast Asian Nations ATM Automatic Teller Machine BC Before Christ BCM Billion Cubic Meter BFDA Brackishwater Fisheries Development Agency BIS Bureau of Indian Standards BKPM Badan Koordinasi Penanaman Modal BPPK Badan Pengkajian dan Pengembangan Kebijakan CEPA Comprehensive Economic Partnership Agreement CEPT Common Effective Preferential Tariff CIOS Chair of Indian Ocean Studies CIF Cost, Insurance, and Freight COM Council of Ministers COMESA Common Market for Eastern and Southern Africa CSA Central and Southern Asia CSO Committee of Senior Official DTF Distance to Frontier DIFC Dubai International Financial Corporation DIPP Department of Industrial Policy and Promotion ECI Economic Complexity Index ECO Economic Cooperation Organization
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EEZ Economic Exclusive Zone EU European Union FDI Foreign Direct Investment FFDA Freshwater Fisheries And Aquaculture Development Agencies FIPB Foreign Investment Promotion Board FTA Free Trade Area FTIZ Free Trade And Industrial Zone G20 Group of 20 GATT General Agreement on Tariffs and Trade GCC Gulf Cooperation Council GCI Global Competitiveness Index GDP Gross Domestic Products GII Global Innovation GSP Generalized System of Preferences GST Goods and Services Tax HDI Human Development Index HI High Income IA-CEPA India Australia-Comprehensive Economic Partnership Agreement IMF Internasional Monetary Fund INSEAD Institut Européen d'Administration des Affaires IORA Indian Ocean Rim Association IORAG Indian Ocean Rim Academic Group IORBF Indian Ocean Rim Business Forum IPR Intellectual Property Rights JCPOA Joint Comprehensive Plan of Action KLIA Kuala Lumpur International Airport KTMB Keretapi Tanah Melayu Berhad LCN
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Latin America and Carribean LDC Least Developed Countries LM Low Middle Income LNG Liquid Natural Gas LPG Liquid Petroleum Gas M&A Mergers and Acquisitions transactions MAS Monetary Authority of Singapore MT Metric Ton NAWA Northern Africa and Western Asia NBFC Non-Banking Finance Company OECD Organisation for Economic Co-operation and Development OFDI Outward Foreign Direct Investment ONGC Oil and Gas Company-owned Country PACER Pacific Agreement on Closer Economic Relations PPP Purchasing Power Parity PTA Preferential Trade Area RBI Reserve Bank of India RCEP Regional Comprehensive Economic Partnership RCSTT Regional Center for Science and Technology Transfer RM Ringgit Malaysia SAARC South Asian Association for Regional Cooperation SADC Southern African Development Community SDG Sustainable Development Goals SEAO Southeast Asia and Oceania SGD Singapore Dollar SME Small Medium Enterprises TCA Trade Cooperation Agreement TCI
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Trade Complementarity Index TEU Twenty-foot Equivalent Unit TMT Thousand Metric Ton TPP Trans Pacific Partnership UAE United Arab Emirates UM Upper Middle Income UN CHARTER United Nations Charter UNCLOS United Nations Covention on the Law of the Sea UNCTAD United Nations Conference on Trade and Development UNESCO United Nations Educational, Scientific and Cultural Organization UK United Kingdom USA United States of America USD United States Dollar VOC Verenigde Oost-Indische Compagnie WEF World Economic Forum WIPO World Inteleectual Property Organization WTO World Trade Organization