| REPORT ON SEMINAR ON TRADE AND INVESTMENT ISSUES IN THE IOR-ARC
Maputo, Mozambique
26-27 March 1999
Conclusions and Recommendations
The Seminar on "Trade and Investment Issues in the IOR-ARC" was organised by the Indian Ocean Rim Academic Group (IORAG) in Hotel Rovuma Carlton, Maputo on 26-27 March 1999. It was attended by about 100 participants from the member countries. The annexed programme of the Seminar lists the details of paper contributors, Chairpersons and Rapporteurs.
The following topics were discussed in the 20 papers presented.
1. Macro-economic trends and policies as the foundation for trade and investment
2. Regulatory environment
3. Intra-regional trade patterns
4. Foreign investment policies
5. Private sector co-operation
6. Open regionalism and its relevance in the Indian Ocean - Lessons from APEC
7. Relevance of payment and clearance arrangements
8. Country studies
9. IORNET
The central focus of this seminar was to discuss how effective the Indian Ocean Rim Association for Regional Co-operation (IOR-ARC) can be in promoting overall economic development in the region.
The following two key questions stem from the fact that the concept of the open economy and export orientation took early root along the eastern rim of the IOR and showed economic dynamism:
- Can market forces significantly induce the IOR-ARC to become sufficiently dynamic?
- How do the governments in the IOR-14 (henceforth IOR), through various macroeconomic policies, facilitate the operation of market forces to achieve sustained and fruitful co-operation?
Given the heterogeneous characteristics of the IOR in terms of various macroeconomic indicators, economic dualism present in the region, and imperfect market structure, both theory and experience to date suggest that there is a large potential of benefits to be reaped through intra-IOR trade.
It was the movement towards economic liberalisation in the IOR in the 1990's that give significant impetus to the expansion of market-driven trade, which therefore provides a good rationale for current efforts to establish mechanisms for regional economic co-operation at various levels.
A study of the regulatory environment in the IOR identified the following three main barriers to trade:
- Restrictions on market access
- Restrictions on the movement of business personnel
- Lack of transparency in trade regulations.
The main conclusions and recommendations of Seminar are given below
1. Trade Liberalisation
Assuming that market oriented economic reforms are accelerated in the IOR countries, this grouping will be more successful when intra-IOR trade is characterised by high and increasing proportions of intra-industry trade (IIT), whereby resources are reallocated within firms in the same industries, as IIT involves lower adjustment costs and is more acceptable.
The growth prospects for such IIT will be enhanced by increasing amounts of FDI attracted by a favourable domestic environment for such investment in member countries.
It is rational to expect that the growth of such market-driven intra-IOR trade will initially take place around groupings of "core" countries distinguished by their intensity of trade within the region. In the IOR these include Australia, India, Singapore, Indonesia, Malaysia and South Africa.
Trends in key domestic variables will determine the capacity of each IOR economy to respond to the stimuli of economic reform and liberalisation. Current differences in these variables mean that responses to these stimuli will vary substantially across the IOR. Therefore a time bound framework for tariff reductions like in APEC may not be feasible for IOR-ARC. Given the situation, IOR-ARC should put emphasis on trade and investment facilitation, and economic and technical co-operation
2. Trade and Investment Facilitation
- Identification of sectors and industries for promotion of intra-industry trade eg, textiles, clothing and components
- Improvement of infrastructure (physical and social) : Transport, Ports (eg Salalah and Aden), Education and Health
- The maintenance of stable macro-economic policies
- Good governance
- Reduction of transaction costs, including clearing and payment arrangements
- Encouragement of SME , including provision of finance
- Organisation of Trade Fairs, Exhibitions and Investors Fora
- More intensive use of IORNET, including an upgraded database of trade and investment
3. Other suggestions and recommendations
Among the other suggestions and recommendations that emanated from the Seminar were:
- Setting up of an Eminent Persons Group along the lines of APEC
- Holding of workshop on trade and sustainable development
- Organisation of relevant training programmes
- A further study of potential Growth Triangles and their linkages
- Holding of workshops for top management in private sector to learn from case studies of successful and unsuccessful exporting firms in the region, especially from the SE Asian member countries
- Encourages more active participation by all members in the approved IOR projects
- Undertaking of analytical and empirical studies to identify areas for investment co-operation.
- Monitoring the process of trade liberalisation and facilitation
- Encouraging the setting up of Free Zones around ports eg Aden, Durban and Salalah
- Strengthening the IOR-ARC Pilot Co-ordination Mechanism and its linkage with IORAG and IORBF
It was also acknowledged that several countries of the IOR are also members of other regional economic groupings whose objectives were more restrictive than those in the Charter of open regionalism of the IOR-ARC. Therefore inter-regional objectives would also have to be respected along the way towards achieving the WTO consistent aims of IOR-ARC.
Maputo
28 March 1999 |
