KEY CHARACTERISTICS OF THE REGION

There are many historic, if somewhat vague and loose connections between the countries of the Indian Ocean including ancient economic linkages, cultural interchange, and the movement of peoples between Asia, Africa and Australia.

The region is extremely diverse, and contains a variety of subregions. There is considerable ethnic, cultural, political and religious diversity as well as economic disparity across the region.

A few figures may best illustrate the extent of economic differences in the region. National populations range from over 900 million in India to under 80 000 in the Seychelles and the Maldives. Economies range in size from about US $370 billion for Australia to US $144 billion for South Africa (the region's fourth-largest economy) to about US $2 billion for Madagascar. Per capita income levels range from US $35 000 in the United Arab Emirates to under US $250 in Mozambique, Tanzania, Madagascar and Bangladesh.

The region has the potential to play a far more significant role in the world economy than it has to date. The region includes, in addition to South Africa, India and Australia, the vibrant South-East Asian economies and significant markets in the Middle East. It is extremely well endowed with natural resources in the form of energy reserves and mineral wealth much of which has yet to be exploited.

The Indian Ocean region has over 31 per cent of the world's population, about 7 per cent of the world's GDP, and about 10 per cent of global exports and imports (albeit mainly confined to some ten of the region's countries).

Despite the history of informal co-operation, few attempts were made until very recently to draw together the countries of the region in co-operative efforts focused on economics and trade. There was no forum for the discussion of economic issues, the resolution of trade problems, or the fostering of habits of co-operation. This absence of a regional focus derived partly from Cold War strategic posturing, but also from the region's diversity.

Whatever the reasons, only about 20 per cent of the region's total trade is conducted among the countries of the Indian Ocean themselves. By contrast, the intratrade figure for the Asia-Pacific Economic Co-operation Forum (APEC) is approximately 73 per cent.

WHY A REGIONAL FOCUS ON THE INIDAN OCEAN RIM? ECONOMIC CONSIDERATIONS

The question must be asked: Why bother with any regional focus if we are considering such a disparate group of economies? Is there something a little forced in characterising Indian Ocean Littoral States as a meaningful `region'?

There is every reason to foster regional economic co-operation.

Firstly, South Africa's emergence as an important and welcome player on the global scene and India's giant steps on the path to an outward-looking economy have prompted a fresh look at the region.

Secondly, the region's prospects for sustained economic growth rates and the shift towards more open economies, coupled with a large and growing middle-class market (especially in India, South Africa and South-East Asia), make it increasingly attractive.

Thirdly, substantial non-trade intraregional linkages exist in the form of direct investments, technical collaboration, franchising, international subcontracting, joint ventures and other forms of strategic alliance. These linkages, although confined largely at this stage to the region's key economies, are well worth further exploration.

There is also growing evidence of increasing intraregional foreign investor confidence among the key regional economies:

South Africa is now viewed as a viable investment destination, particularly in view of its role as a springboard into Africa. Malaysia in particular has made significant investments in South Africa.



India has major overseas investments and collaboration with countries in Africa, the Middle East and Asia all set to increase as more Indian companies globalise their operations.



Companies owned and based in Singapore are also undertaking or extending regional investments and other economic collaboration.

Fourthly, regional approaches help to support bilateral diplomacy and trade relations. Until now, intra-Indian Ocean trade growth has been inhibited by the lack of economic co-operation, demonstrating the need for an effective regional organisation as a means of intensifying bilateral trading relations.

SECURITY

Security, as well as economic considerations, favour the enhancement of Indian Ocean regional co-operation.

`Security' represents an extremely comprehensive concept, far evolved from the traditional preoccupation with issues directly related to the military and defence realms.

This comprehensive approach acknowledges the existence of non-military threats to security, largely as a result of emerging broad trends which make the present such an interesting if confusing! time. These trends include:

an increasing concern with the well-being of citizens (relative to the almost exclusive focus in the past on the fortunes of nation-states), and



the increasingly influential role of non-state entities, such as international organisations and non-government organisations (NGOs).

The complex process of `globalisation' and particularly the telecommunications revolution, have made international boundaries increasingly porous, and thereby radically altered the way in which individuals, groups and businesses interact. Governments, interestingly enough, have generally been slower to exploit the opportunities offered by new telecommunications technologies. Deregulated international financial markets, in conjunction with improved telecommunications, have put business increasingly beyond the regulatory power of national governments. This development, in combination with increasing international consensus on the benefits of trade liberalisation and economic reform, has chipped away at the capacity of national governments to construct and enforce self-standing economic rules. This is reinforced by the proliferation of multilateral treaty regimes in an ever-broadening range of subject areas which further circumscribe the economic decision-making power of national governments.

These developments staring us all in the face are the subject of constant analysis.

One effect emerging clearly from the flux is that the relative power of national governments is declining. At the very moment when its capacity to influence domestic and international developments is under challenge, the state is faced with a daunting array of transnational problems of apparently increasing severity:

organised crime, especially money-laundering and drug-trafficking;


ethnic conflict, which has had greater fragmenting potential since the end of the Cold War;


environmental degradation;


refugee flows and illegal immigration; and


poverty, which is closely related to many of the problems mentioned above.

There is increasing recognition that these problems constitute security threats. It is becoming more difficult to sustain sharp distinctions between such categories as `economic', `security' and `social', and more necessary to acknowledge the role of non-military threats to security.

Particularly noteworthy is the linkage between economic co-operation and collective peace and security. This linkage implies a security dimension beyond a moral impetus in efforts towards ensuring economic development for all the peoples of the world. The traditional concerns of government of fostering the security and economic well-being of its own citizens now more than ever presuppose some concern with the welfare of the citizens of other countries.

The context of globalisation and the realignment of power among nation-states and other entities make it harder for governments to act in isolation, but imperative for them to act in concert, to counter such potentially destabilising transnational problems as those just listed.

Put more positively, the same backdrop also provides a very strong incentive for governments to work together, in co-operation with other players, such as business and academia, to foster economic growth and development, which are perhaps the most important components of efforts to address non-military security threats.

Co-operation on security concerns can involve collective security mechanisms, including peacekeeping, preventive diplomacy and confidence-building measures. But it can also encompass, for example, bilateral co-operation on maritime issues. Moreover, co-operation on what may appear to be purely economic or trade issues may help to deal with non-military threats by reducing poverty and by facilitating bilateral and regional consultation about problem areas.

As to the more conventional view of security, there has been a history of co-operative security efforts in the region that needs to be recognised and remembered if only for the lessons that might be drawn on in the future.

Among the first was an Indian Ocean Zone of Peace (IOZOP) proposal, introduced in the UN General Assembly by Sri Lanka in 1971. This was about the same time that Great Britain was finishing the withdrawal of its security assets `east of Suez'. In the same year, Malaysia floated its proposal for a Zone of Peace, Freedom and Neutrality (ZOPFAN).

In 1972, the UN formed the Ad Hoc Committee on the Indian Ocean. The main work of the committee was to prepare for an Indian Ocean conference which would negotiate an agreement to implement the IOZOP. Because of an inability on the part of committee members to resolve their fundamental disagreements, the conference was never held. Australia is one of four vice-chairs of the committee, a position it has held since the committee's inception. And, it is now the only so-called Western country that still participates.

Regional security initiatives with narrower memberships included the South East Asian Treaty Organisation (SEATO), the Central Treaty Organisation (CENTO) and the Joint Exercises off Trincomalee (JET). Though the last two fell victim to the 1965 Indo-Pakistan war, all three were dependent on the involvement of external powers.

There is a theme linking these well-intentioned, but doomed, enterprises the preoccupation of regional security planners, on both sides of the Cold War debate with the presence of or threat from external powers. Times have indeed changed: the main task of these same planners in the post-Cold War period is no longer managing external threats and global conflicts, but intra-regional and even intra-state conflicts.

In the Indian Ocean Region, consideration of any security questions must be approached thoughtfully and sensitively. But, hopefully, the kinds of transboundary issues which go beyond those specifically linked to military engagement involving pollution, environmental protection, illegal movement of people, criminal activity and drug smuggling can be addressed by the region in the not too distant future.

AUSTRALIA'S INTERESTS IN THE INDIAN OCEAN RIM

Australia has one of the largest economies and longest coastlines in the region. It is at the edge of the Indian Ocean. Like South Africa, Australia links the Indian Ocean to another great ocean.

Australia's commitment to the Indian Ocean Rim is predicated on two very practical goals. The first is to help realise the substantial economic potential of the region for the benefit of all including, naturally, Australia. The second is to supplement and enhance our bilateral relationships in the region. These two goals will have a positive impact on Australia's well-being (and `security').

As is well known, Australia's highest foreign and trade policy priority remains closer engagement with the Asia-Pacific region. However, this does not mean that the country is in any danger of neglecting the Indian Ocean Rim. In fact, the linkages between the two are mutually reinforcing, not mutually exclusive.

Australia's policy of closer engagement in the Indian Ocean region (the "look west" policy) was first promulgated in August 1994, and has since been endorsed by the new Australian government which came to power early in 1996. Australia's commitment to the Indian Ocean Rim has been demonstrated by our country's leading role in recent moves to promote and formalise regional co-operation.

THE INDIAN OCEAN RIM ASSOCIATION FOR REGIONAL CO-OPERATION (IOR-ARC)

Among recent initiatives to foster co-operation, there are two parallel processes under way that focus on regional co-operation.

The first stems from an intergovernment dialogue process which has been launched by Mauritius in Port Louis in March 1995. It then involved seven countries: Australia, India, Kenya, Mauritius, Oman, Singapore and South Africa. In September 1996, another meeting was held in Mauritius and the intergovernmental group was expanded to fourteen members. It now also includes Indonesia, Madagascar, Malaysia, Mozambique, Sri Lanka, Tanzania and Yemen.

The meeting in September 1996 saw the finalisation of a charter for the establishment of a new regional association: the Indian Ocean Rim Association for Regional Co-operation (IOR-ARC). The IOR-ARC Charter was adopted at a ministerial meeting, again in Mauritius, in March 1997.

First and foremost, the IOR-ARC is an outward-looking forum for economic dialogue and co-operation. Its Charter identifies as key objectives:

improved market access through trade liberalisation; and



the facilitation of freer and enhanced flows of goods, services and investments in the region.

Like Australia, South Africa was firmly focused on ensuring that IOR-ARC members committed themselves to global trade liberalisation, and ensuring that the negotiated IOR-ARC Charter contained no reference to preferential trading areas. With the primacy of trade liberalisation in the Charter, all founding members of the association have agreed that the IOR-ARC will not be a preferential trade bloc.

Significantly, the regional partners in the association are increasingly comfortable with the language and principles of open regionalism which are embodied in the IOR-ARC Charter and the interpretative statement attached to it.

Whatever happens will take place within an increasingly open and competitive global system of trade and investment. This open system can deliver real benefits to participants. The stunning economic success of East Asia in recent years, and particularly of South-East Asia, stands as compelling evidence of this.

The IOR-ARC Charter recognises this reality. `Open regionalism' means building a bridge from the Indian Ocean region to the rest of the world, not a wall separating the region from it.

Greater regional economic co-operation will be driven, for the most part, by progressive tariff reductions in developed and developing countries.

In the longer term, the association could consider adopting APEC's targets for tariff reduction as set out in the 1994 declaration that is, free trade and investment for developing economies by the year 2020, and for industrialised economies by the year 2010.

In the meantime, the Australian Government is convinced that the association's extensive programme of regional dialogue and practical co-operation will strengthen the momentum towards trade liberalisation.

The key message delivered by Australia at the ministerial meeting held in March 1997 concerned the central importance of the business community, and the need for governments to respond quickly and effectively to remove barriers to trade and investment identified by the business community. Australia believes this to be the most effective means of creating the enabling economic environment required to facilitate trade and investment.

Beyond its role as a forum for trade liberalisation, the IOR-ARC is also designed to set directions for economic and trade policy in the Indian Ocean region.

One of the first project proposals adopted by the association was a suggestion made by the representative of the Australian Chamber of Commerce and Industry (ACCI) for a study of other regional organisations, such as APEC, to see what lessons could be applied in the Indian Ocean region. The study is being co-ordinated by ACCI with assistance from the Australian Department of Foreign Affairs and Trade.

As for membership of the IOR-ARC, Australia has consistently advocated expansion of the `Mauritius process' to include all the major economies of the region. The association's Charter requires that the expansion of membership should be decided by all member states on a consensus basis.

Australia is a member of a working group which has been established to develop criteria and formulate recommendations on the membership issue and expects that an expanded IOR-ARC may become a reality within two years.

When the initiatives for Indian Ocean regional co-operation got under way a couple of years ago, there was some discussion of the appropriateness of regional consideration of security issues. In arguing against such consideration, a senior official of the Indian Ministry of External Affairs said that, "It is our firm belief that economic co-operation and the resultant growth and development of our Indian Ocean World will itself have a beneficent leavening influence on the political and security climate of the region."²

Australia's experience in other comparable regional forums, especially APEC, demonstrates that the very habit of consultation and the close personal relationships which develop over time between ministers and officials does a great deal to build regional trust and confidence.

To that extent, Australia believes that the IOR-ARC is a positive development for the security climate of the Indian Ocean Rim.

However, the association is not a forum for discussing security issues. In Australia's view, it would be counter-productive to bring these kinds of security considerations into the IOR-ARC at this formative stage. This view is shared by all participants in the association.

In time, the countries of the region may want to consider the introduction of some security issues, but it is not on the agenda for the foreseeable future.

The establishment of the IOR-ARC as an association based firmly upon the principles of open regionalism, represents a substantial achievement, which has been realised over a remarkably short time.

But we need to be realistic about what progress can be achieved in the near term. The differences in economic development among association members mean that they will be coming from different starting points and moving forward at different speeds. The important thing, however, is that there is agreement to move in the same direction and, as quickly as possible, towards the same goals.

NON-GOVERNMENT IOR BUSINESS AND RESEARCH NETWORKS

The second process which has been running parallel with the intergovernment process just described, is briefly explained below.

This process was initiated in Perth in June 1995. It involves two non-government Indian ocean networks: a research network and a consultative business network. These networks have been more inclusive than the intergovernment process, and involve some 23 Indian Ocean countries.

The research undertaken by the research network is co-ordinated by the Indian Ocean Centre at Curtin University in Perth.

The consultative business network has been chaired in turn by the Australian, Indian and South African Chambers of Business. It met most recently in Durban in March, and will next meet in Sri Lanka in December 1997. It is possible that the role of this business network will be reviewed in light of the business forum established within the IOR-ARC.

CONCLUSION

Australia gives full weight to the economic and strategic significance of the Indian Ocean Rim, and to the importance of regional co-operation in fulfilling the region's substantial economic potential. The IOR-ARC will serve in this regard not as a wall, but as a bridge.

This economic co-operation will assist the region's security climate, partly by facilitating prosperity, and partly by enhancing trust and habits of co-operation.

ENDNOTES

Edited version of a paper presented at a monthly seminar, Institute for Security Studies, Halfway House, 5 June 1997.



Mr Vinod Grover, Secretary West, Indian Ministry of External Affairs (from IFIOR keynote address, Perth, June 1995).