Indonesian President Joko Widodo emphasized that the area around the Indian Ocean is the future of the world economy. He made this statement at the Indian Ocean Rim Association (IORA) summit in the Jakarta Convention Center on Monday (06/03). This region, which has a 2.7 billion population in total (around 35 percent of the world population), already sees 70 percent of world trade go through the area and hence the Indian Ocean forms a key trade route, especially for the distribution of oil and gas.
The IORA is an international organization, consisting of coastal states bordering the Indian Ocean, that aims to promote co-operation and closer interaction among its 21-member nations. At the summit in Jakarta some 300 businessmen, and various government officials (including presidents, vice presidents and prime ministers), from IORA member states gather for dialogue.
Total trade among the IORA nations reached USD $777 billion in 2015, up 300 percent from the 1994 figure. However, currently the IORA region only controls 10 percent of world GDP and 13 percent of global foreign direct investment (FDI), hence there should be ample room for further growth.
However, Widodo also stated that due to the enormous size of the Indian Ocean as well as some of the coastal states that are member of the IORA, there occur major challenges. Widodo has plenty of experience with this at home: Indonesia is the world's largest archipelago and due to its sheer size and multitude of internal variety (in terms of, for example, cultures, religions or educational backgrounds) there emerge big challenges for governance or economic policy implementation across the country. Besides, the variety in size, IORA members also differ in terms of welfare. Some countries (Singapore and Australia) are advanced, while others are emerging markets or poor markets.
On the other hand, a challenging environment always brings opportunities and therefore governments and businesses need to detect these opportunities and capitalize on them. According to Widodo one of the key opportunities for IORA members is to strengthen the maritime sector through better cooperation.
The summit will also give birth to the "Jakarta Concord", an initiative of Indonesia, that aims to enhance peaceful and stable relations among IORA member nations with three key topics of focus: (1) empowerment of women, (2) developing the "blue economy" (maritime-based economy), and (3) the promotion of democracy (this also includes the combat against terrorism).
Indonesian Trade Minister Enggartiasto Lukita said Indonesia can benefit from enhancing trade ties with several of the IORA member nations (particularly Bangladesh, Kenya, Mozambique, Iran, UEA, and South Africa) because most of these nations are developing nations and therefore their GDP growth and inflation tend to be significantly higher compared to advanced nations. However, currently it remains difficult to export Indonesian products to some of these countries due to high import tariffs, he said. It will require government-to-government talk and agreement to lower these tariffs and make Indonesian exports more competitive.
Indonesian Industry Minister Airlangga Hartarto said Indonesia will need to focus on infrastructure development and maritime connectivity in order to tap the potential that is offered by IORA. Hartarto mentioned shipping (and shipping equipment), seafood processing, petrochemical, automotive components, and coal gasification as industries that offer great potential.
IORA, established in 1997, has the following members: Australia, Bangladesh, Comoros, India, Indonesia, Iran, Kenya, Madagascar, Malaysia, Mauritius, Mozambique, Oman, Seychelles, Singapore, Somalai, South Africa, Sri Lanka, Tanzania, Thailand, UAE and Yemen, as well as seven dialogue partners: USA, United Kingdom, Japan, Germany, Egypt, China and France. Indonesia was selected to chair the organization in the 2015-2017 period.