SOUTHEAST ASIA AND THE ECONOMIC COOPERATION IN THE INDAIN OCEAN REGION

Abstract

Not only has the world witnessed the emergence of several new economic groupings, but there has been a flurry of activity to strengthen the existing ones. The newly formed Indian Ocean Rim Initiative (IORI) has been recently added to the list. As this new economic cooperation is under-studied - in any case it is relatively "young" - it is the objective of this paper to give an exploratory account of the problems of and the prospects for economic cooperation in the Indian Ocean Region (IOR). It is hoped that this would provide the necessary background for more in-depth studies on the IORI in the future.

Given the space constraint, this academic exercise only explores the problems and possibility of enhancing economic cooperation of ASEAN 4 with Australia, India and South Africa. The rationale behind the I0RI is the favourable developments that have taken place in the world as well as in the IOR. The factors cited are the end of Cold War; India's globalization drive; the full acceptance of the post-apartheid South Africa by the world community; and the Australia's "Look West" policy, all of which have improved the prospects for the IORI. Nonetheless, the skepticism about its usefulness in the IOR and the logistics of accommodating these ethnically, politically and economically diverse IOR countries in the process pose serious challenges to the IORI and may serve to undermine its progress (Chapter 1). The intensity of the intra-IOR economic linkages given in Chapter 2 is in itself telling. Without the benefit of the IORI, intra-I OR merchandise trade in 1994 was already 22.1 % of the IOR's global trade. Furthermore, the IORI has the potential to become a significant player in the world economy as it possesses over 13% of the world's GDP (on a PPP basis) and about 11 % of global trade-although its significance pales in comparison to APEC's. Chapter 3 analyses the intra-ASEAN trade and explains why ASEAN cannot be used as a model for regionalism elsewhere, including the IORI. The last section of the chapter analyses the role that the ASEAN 4 could play in the IOR cooperation. Chapters 4, 5 and 6 then introduce the economic scene of Australia, India and South Africa respectively. An examination of the bilateral economic relations between ASEAN 4 and these countries is also covered in these chapters. In essence, merchandise trade, commodity composition and intra-industry trade are amplified with figures, while the trade in services and investments have to be discussed in qualitative fashion. Key findings in this paper include the following. First, the IORI may have a role in hastening the process of economic interaction and interdependence among the IOR countries. Furthermore, the IORI would provide greater opportunities for intra-industry trade within the IOR. Secondly, it is pragmatic for a handful of key members to take the lead so as to establish the norms of cooperation before other members come on board. Their common attitude towards economic issues also goes a long way to helping hold the balance of centre of gravity in the IORI. Thirdly the key members, viz. Australia, ASEAN 4, India and South Africa, have specific roles in the IORI by virtue of their experience in the global economy, their credibility, and their expertise in certain industries and technologies. Being a member of other regional forums, they could help develop linkages between the IOR countries and other regional forums' key members such as Japan. In return, these key members can benefit from the IORI through improved access to the third markets, among other things. All in all, it is hoped that the IORI would be the springboard to further enhance the economic cooperation within the IOR and raise their profile in the global economy. Members in the IORI should also seek to explore the emerging opportunities and achievable benefits presented by the new IORI.