The Indian Ocean is often at the centre of geopolitical conflicts, but it can also be central to the global economy. In a new research paper, Ganeshan Wignaraja and others at the Sri Lanka-based Lakshman Kadirgamar Institute of International Relations and Strategic Studies analysed the region’s economies to show how they could become an engine for global economic growth.
The Indian Ocean’s waters reach 28 countries, together accounting for about 35% of the world’s population and 19% of the gross domestic product. And given this connection, the Indian Ocean has emerged as an important trading channel. The region also hosts 23 of the world’s busiest ports and accounts for 13% of world trade. A significant proportion of this trade is among countries in the region (30% of all exports and 25% of imports). However, this is still lower compared with other regions, such as the European Union and NAFTA. Nevertheless, the authors are optimistic about the region’s future.
With increased trade and economic growth, they predict that the region’s economy will account for about 22% of world GDP by 2025 and 16% of global trade. However, these projections are susceptible to potential obstacles.
The authors highlight gaps in port infrastructure and customs procedures, which can act as barriers to trade. Regional governance is also weak. Currently, there is a network of 11 regional institutions, including the Indian Ocean Rim Association, which covers the majority of Indian Ocean economies, but, according to the authors, they suffer from limited powers and inadequate resources. To ensure that the Indian Ocean economy delivers on its potential, the authors suggest that policymakers invest in port development, reduce barriers to trade, strengthen regional governance and establish an Indian Ocean Development Fund to help developing countries participate in trade.
Also read: Is the Indian Ocean Economy a New Global Growth Pole?