New Zealand needs to do more to take advantage of the growing opportunities in the Indian Ocean economy, writes Kevin Jenkins.
The idea of a “land of opportunity” was coined about the American West in a 1931 book titled “Epic of America”, reflecting a dream of better, fuller and richer lives for everyone. Aotearoa has an ocean of opportunity to our west.
An article in the April 2019 issue of the Journal of Asian Economic Integration suggests the Indian Ocean economy will be about 20% of global GDP by 2025, and GDP per person will almost double.
And Goldman Sachs have predicted India will have the largest economy in the world by 2050.
Despite this, trade between Aotearoa and Indian Ocean countries is low. We need to change that dynamic.
Nations surrounding the Indian Ocean offer huge, largely untapped trade opportunities for New Zealand.
History tells us that the Indian Ocean was often the crossroads of world trade. This was disrupted by the expansion of the European powers, but after 500 years, geography and demography are re-asserting themselves.
The world population is levelling off, but the last great expansion is likely to be around the Indian Ocean. About 2 billion people, 30 percent of the world population, live around it today. By 2050 it could be over 5 billion.
Africa’s population is projected to grow from 1.1 billion to 2.5 billion (Ethiopia will grow from 100 million to 230 million), Arab states will grow from 260 million to 400 million, and South Asia from about 1.8 billion to about 2.3 billion.
The region is rich in natural resources, and, of course, in human capital too. Regional trade went from US$302 billion in 2003 to US$1.2 trillion in 2012, and growth continues to exceed the global average. One indicator is container traffic, which was 46 million TEUs in 2000, 166 million TEUs in 2017, and will probably exceed 190 million TEUs by 2020.
Indian-New Zealand exports and imports increased from 2015 to 2019 (end June) by about 40%. That sounds impressive, but they are from a low base (both from about $0.5 billion to $0.7 billion), with volume minor from our perspective and negligible from India’s perspective. Also, the largest category by far is travel services.
Of course, New Zealand is pushing for free trade with India and other countries in the region through RCEP as part of our agenda for global free trade, and collaborating to grow trade is the focus of the India NZ Business Council Summit in Auckland on 14 October. The underlying facts of demography, resources, geography and trade routes show the importance of this effort starkly.
New Zealand should take advantage of the opportunities in the Indian Ocean economy, says Kevin Jenkins.
China’s Belt and Road initiative is just one high-profile infrastructure programme, and there is the well-documented thickening of defence relationships.
Focusing on trade though, in New Zealand we hear a lot about APEC, and the web of Asia-Pacific regional bodies. Aside from RCEP, we hear little or nothing about the growing web of regional bodies centred on the Indian Ocean.
The Indian Ocean Rim Association (IORA) was launched in 1997 after Nelson Mandela visited India. Its members include 22 littoral states, and 7 dialogue partners, including the US, the UK, France and China. It also includes Australia, but not New Zealand.
Its role includes promoting sustainable growth and freer flow of goods and services. Like APEC, it has a growing number of related bodies, such as the Indian Ocean Rim Business Forum, and new maritime agreements.
In 2015 IORA adopted the Blue Economy Declaration, seeking to sustainably harness marine resources to drive innovation and growth.
There is debate about how effective these new bodies will be. But the real point is that they have emerged and are evolving because of the underlying drivers of demography, resources, geography and trade routes.
The Americans pivoted west and now prefer “Indo-Pacific” to “Asia-Pacific”. The Australians are deeply engaged in IORA, and Otago University economist Andrew Coleman even muses about how Western Australia may come to equal eastern Australia in coming decades as the movement of people and goods and services around the Indian Ocean accelerates.
Our pivot to China in the early 2000s bought great wealth to New Zealand. We need to go again and get involved in the fast-growing Indian Ocean world. We need to look west.
Kevin Jenkins is a founder of www.martinjenkins.co.nz, and works at the intersection of business, innovation and regulation. He will be speaking at the India NZ Business Council Summit in Auckland on October 14. Views expressed in this article are personal to the author.
- Asia Media Centre
