Whether a regional economic co-operation under an framework brings about expected economic gains cannot be judged from statistics alone. Attractive statistics for intra-regional trade and other trade-related indices such as intra-industry trade can be very deceptive. For the Indian Ocean Rim Association for Regional Co-operation (IORARC), the basic fundamentals that are essential for the functioning of open regionalism are not in place. Regional economic co-operation, after all is a dynamic process that requires a firm commitment from member countries. For IOR-ARC, it is argued that this component is also lacking and the sharing of the Indian Ocean waters alone is not adequate to provide a blueprint for effective regional economic co-operation. 1. Introduction The Indian Ocean Rim Association for Regional Co-operation (IOR-ARC) was one of the latest initiatives in the establishment of regional arrangements for economic co-operation. This initiative is based on the observation that many new economic groupings are being conceived what is now called the domino theory of regionalism (Baldwin 1995) - and motivated by the conviction that the process of co-operation on a regional basis would be beneficial. IOR-ARC was formed as some Indian Ocean region countries wanted to assert their space as a response to other mega trading blocs, in particular, the North American Free Trade Agreement (NAFTA) and Asia-Pacific Economic Co-operation Forum (APEC); and the need of Australia, India, and South Africa to play a leadership role in the global market. However, unlike most regional cooperation arrangements, IOR-ARC was formed on the basis of the APEC model where the concept of is emphasized. Open regionalism involves regional economic integration without discrimination against economies outside the region.1 In contrast, discriminatory regionalism involves preferential trading arrangements, free trade areas, and customs unions, where official trade barriers for members are lower than for non-members. The concept of open regionalism emerged from, and has helped, the practice of economic co-operation in the Asia-Pacific region (Garnaut 1994). Open regionalism was articulated by the first Pacific Economic Cooperation Council (PECC) - the precursor to APEC - in 1980 as an ideal for the future development of economic relations in the Asia-Pacific region. APEC embraced the concept in 1989 at its first inaugural meeting in 1989 (Bergsten 1997, and others). The second regional bloc to embrace this concept was the IOR-ARC. Unlike APEC, which took nearly three decades to materialize after the initial conception of Pacific economic co-operation and nearly a decade after the formation of PECC (see, for instance, Soesastro 1995), the IOR-ARC came into operation without any serious attempt to engage in economic co-operation in the past. An Indian Ocean Commission was formed by Mauritius and its neighbouring islands in 1984 for economic co-operation but it hardly managed to take off and is currently very close to the stage of natural disintegration (McDougall 1997). The IOR-ARC was officially formed in March 1997 with 14 member countries, namely, Australia, India, Indonesia, Kenya, Madagascar, Malaysia, Mauritius, Mozambique, Oman, Singapore, South Africa, Sri Lanka, Tanzania, and Yemen. Since this regional grouping covers a vast geographic area, different cultures, large distances (Rajan and Marwah 1997, p. 196), and involves countries at very different stages of trade liberalization (Sachs and Warner 1995, pp. 7295), it has been questioned whether economic co-operation in the IOR-ARC under the open regionalism framework would be meaningful in a practical sense. This article attempts to shed some light on this question. The rest of this article is organized as follows: Section 2 provides the background to IOR-ARC. The analytic basis of open regionalism is discussed next. …