vol. 3 no. 2 april 2006 asian cooperation for world

NEW ASIA MONITOR April 2006 1

Vol. 3 No. 2 April 2006

A Q u a r t e r l y f r o m R I S

Feature ArticleOur great countries India and Singaporehave long standing traditional ties for

centuries in trade, commerce and mutualknowledge sharing and transfer. Knowledgeand skills empower individuals, institutions,companies thereby empowering the societyand the nation at large. Both the countriesare now marching towards a strong economyin our region.

The world has a few developed countriesand many developing countries. Developedcountries have to market their products in acompetitive way to other countries to remainas a developed country. The developingcountries too have to market their products toother countries in a competitive way to gettransformed into a developed country.Competitiveness is the common driving factorbetween the two types of nations. It has threedimensions: quality of the product, costeffectiveness and availability of the productjust-in-time in the market. Indeed, thisdynamics of competitiveness in marketing ofproducts by developing and developedcountries is the “Law of Development.” Thereis a relationship between the core competenceand the competitiveness of the country. Globalcompetitiveness for any nation is indeed a bigchallenge. For achieving such a competitiveedge for a nation, it is essential to have a vision.

A national society captures the mainoccupation of its people. History of mankindrecords multiple societies in every nationstarting from agricultural society, industrialsociety and information society leading toknowledge society. The uniqueness ofknowledge society is enriching theinformation society with innovation andvalue addition of products. The knowledgealso enables value addition to the other threesocieties. In knowledge society, knowledge isthe primary production resource instead ofcapital or labour.

Knowledge can create a comprehensivewealth for the nation and also improve thequality of life, in the form of better health,

Asian Cooperation for WorldKnowledge Platform

Dr. A.P. J. Abdul Kalam, Hon'ble President of India

education, infrastructure, and other societalneeds. The ability to create and maintain aknowledge society infrastructure, develop theknowledge workers, and enhance theirproductivity through the creation, growth,and utilization of new knowledge will bethe key factor in deciding the prosperity ofthis knowledge society.

I am visiting Singapore, Philippines andKorea. All the three nations along with Indiacan have a common vision to use knowledgeas a vehicle to propel them to becomeleading economies of the world. In theknowledge economy, networking betweenpartners boosts the power of al lparticipating partners. In other words, ifthese four nations, join to work asnetworked knowledge partners, ourcombined strength will not be just that of4 nations but it would be four squared(42), or 16. This is because knowledgemultiplies when added. Hence, as part ofthe vision of our four nations becomingleading economies of the new world order,I propose the first mission to create a ‘WorldKnowledge Platform’ to faci l i tateknowledge creation, knowledgedissemination, knowledge sharing andknowledge reuse leading to coordinateddesign and delivery of complex systems inthe knowledge domain. These systemswould be directed towards those thatimprove the quality of life of our peopleand at the same time would reach theworld market and improve our nation’swealth. In short, the Knowledge Platformwould be launch pad for many innovationsthat are waiting to be unearthed only by thecombined power of all the four nations. Inessence, the World Knowledge Platform isindeed an integrated capability of multiplecore competence of partner countries.

We may form initially an Asianconsortium for the vertical missions of theWorld Knowledge Platform in the field oftele-education, tele-medicine and e-governance for global business opportunitiesamong the nations, with the public, privatepartnership. These missions with the Indiaand Singapore Comprehensive EconomicCooperation Agreement will have to becarried out using the Knowledge TechnologyPlatform.

The CECA signed between India andSingapore in 2005 has facilitated trade andinvestments for increased businessopportunities in both of our countries. Thebilateral trade, which is 7 billion dollarpresently, is expected to reach 15 billiondollars for Singapore and 30 billion dollarswith the whole of ASEAN countries. Thiseconomic cooperation will facilitateindustries from both countries to come closerforming joint ventures and strategic alliancesfor capturing sizeable global market share.

Singapore on its part also has a verystrong presence in India. There is theeagerness from both the Governments tocooperate and collaborate. We should ensurethat the complimentary strengths of boththe nations and their industrial base shouldbe used to serve not only the local needs butalso the needs of the entire world, atleast in afew chosen areas. The brand India and thebrand Singapore must cohesively join tocreate an enviable brand Indo-Singapore.

For success in all the missions, we needcreative leaders. I am sure creative leadershipspearheads all the institutions and the futureaspiring institutions. For a prosperous anddeveloped nation, the important thrust willbe on creative leaders and innovativeorganisations that can create wealth throughdedicated management system.(Excerpted from the Singapore Lecture delivered at RaffleConvention Centre, Singapore, 1 February 2006)

(The full speech is available at http://www.presidentofindia.nic.in/scripts/fvlatest1.jsp?id=45)

2 NEW ASIA MONITOR April 2006

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NEWS

China for Closer Trade Ties in Asia

India and China agreed toexamine the possibility of inkinga regional trade agreement alongwith an investment protectionpact, apart from deciding to putin place a CEOs Forum tofaci l itate in-depth exchangesbetween the two countries at thebusiness level.

As a part of their mutual effortsto strengthen economic ties andenhance bilateral trade to $50billion by 2010, the two Asian giantsdecided to set up six task forcesrelated to WTO harmonisation ofstandards, Rules of Origin, non-tariff barriers, agriculture andreconciliation of trade at the seventhmeeting of the India-China JointEconomic Group.

Commerce Minister KamalNath said that trade between Indiaand China was growing at the rateof 30-40 per cent and was poised toincrease from $15 billion at presentto $20 billion by 2007, a year ahead

India and China Agree to StudyRegional Trade Agreement

of the 2008 target. This wouldpropel China into the position ofIndia’s largest trading partner,overtaking the U.S. The twocountries agreed to set up a groupto look into the broad contours ofa regional trade pact. A CEOsForum would be formed within thenext three months to facilitatebusiness relationships, he said.

On the other hand, ChineseCommerce Minister, Bo Xilai,noted that the $ 20-billion two-way trade target would beachieved in 2006 itself and hopedthat it would significantly surgefurther in the next few years totouch $ 50 billion by 2010. Mr.Bo revealed that India and Chinahad also reached a “consensus ona Bilateral Investment ProtectionAgreement and have alreadyinitiated the draft pact.”

(Excerpted from The Hindu, 17 March2006)

© The Hindu.

Chinese Commerce MinisterBo Xilai called for closerintegration of Asian nations inbilateral trade and economiccooperation at the Asia Society’s16th Asian Corporate conferencesession on ‘China-India BilateralEconomic Cooperation,’ on March19, 2006

Taking a cue that India’semergence into a web ofpartnerships with countries of theregion through free trade andeconomic cooperation agreements,Mr. Xilai cited the growingeconomic links between China andAsia, wherein China has become thelargest market for Korea, followedby Japan, India, Thailand, thePhilippines, Indonesia, Malaysiaand lastly for Singapore.

Mr. Xilai said that closercooperation between the twocountries would set the tone for thebeginning of Asian century and citedthe six-fold growth in Sino-Indiantrade increased to $ 18.7 billion in2005. He underscored India’seconomic growth in recent yearsand mentioned two distinctadvantages compared to China, asits familiarity with the English

Asian Bond Market Tops Agenda atACD Forum

Rise of India,Rise of India,Rise of India,Rise of India,Rise of India,China willChina willChina willChina willChina will

Benefit WestBenefit WestBenefit WestBenefit WestBenefit WestClyde Prestowitz, founder of

the Economic Strategy Institute, aWashington D.C. based think tank,said that the economic rise of Chinaand India should not be seen as athreat by the US and other richnations but instead be welcomed.The integration of China and Indiainto the global economy couldbenefit developed countries byproviding cheap services andmanufacturing and creatingmarkets, he further said.

Trying to hold them back byimpeding their exports will likelyfail, said Prestowitz. “Efforts toblock imports from China or Indiaare not going to work,” he said.“We can benefit from trade withdeveloping nations, but this all hasto be handled by the leaders of allthese countries in a sensible way.”

He said that while the twocountries face daunting difficulties,they are already making hugestrides, with China heavily involvedin high-tech manufacturing andIndia offering services ranging fromcheap health care to variousbusinesses over the telephone.

Prestowitz noted that about 10per cent of both Chinese and Indiansare considered “highly skilled,”however, they both face hugeproblems, from political uncertaintyto poor infrastructure, rural povertyand corruption. He also said, “Weneed to help these countries meetthese daunting challenges, and if wedo we can benefit.”

(Excerpted from The Financial Express, 28March 2006)

© The Financial Express.

language and a two-child norm wasbeing followed, unlike the one-childnorm in China.

The Minister emphasized thatChina could learn from Indianexperience in informationtechnology and softwaredevelopment, manufacturing sector,education and services sectordevelopment, even as India sought

Asian countries agreed tocooperate to encourage the potentialfor strong growth in the regional bondmarket, at the ACD seminar inBangkok, which drew high-levelrepresentation from 28 countries andterritories, including the 10-memberASEAN, China, Japan, South Korea,India, Hong Kong and Qatar.

It also had presentation onplans for the development of theAsian bond market with the keymessage that Asian countriesshould attempt to harness thepotential of the Asian bond marketas a vehicle to mobilise publicsavings for investment.

The forum cited as an exampleof cooperation in the jointdevelopment of financial marketsThailand’s efforts to have its EXIMBank act as a guarantor for the Laogovernment to issue baht-denominated bonds to raise fundsfor power projects.

While the global bond market

expanded eight per cent last year,the forum heard that the bondmarket in a number of Asiancountries grew at 40 per cent. Lastyear, Thailand’s market forsovereign and corporate bondsexpanded by 30 per cent, whereasJapan and South Korea saw 20 percent growth over the same period.

(Excerpted from etna.mcot.net, 26 March2006)

© etna.mcot.net

to benchmark China’s achievementsin infrastructure development.

The Minister said China didn'tenjoy cutting edge in themanufacturing sector and wouldcontinue to learn the best practicesfrom other countries, including India.

(Excerpted from The Hindu, 20 March 2006)

© The Hindu.

Linking Asian Content

To establish links among the content industries in the differentcountries in Asia, the Asian Content Industry Seminar was held inTokyo in October, 2005. The seminar included a ministerial-levelmeeting coincided with the Tokyo International Film Festival whichdrew high level representation from Ministers and experts from theASEAN member states along with China, the Republic of Korea,India and Japan. The participating members shared the presentstatus of the content industry along with the challenges and theremedies they have undertaken in their respective countries.

Cross-border distribution of Japanese and Asian movies andtelevision programs have already expanded and expected to furtherrise. A Ministerial Joint Statement was adopted for promotinginternational collaboration, development and exchange of humanresources, the expansion of the content market and trade, the investmentenvironment and information sharing to further strengthen and linkthe Asian content industry.

(Excerpted from the Asia Pacific Perspectives, Vol 3, No.9, January 2006)

© Asia Pacific Perspectives.


President of India, Dr. A.P. JAbdul Kalam in his address to jointsession of the Philippines Congress,said that “future of business” wouldbe Asia. “Increasingly, the Westerncountries and other leading businessgroups in the Western economy arefocusing on Asian countries,” thePresident said. “There are tworeasons for this. One is thetremendous market that this regionpossesses with an economic ascendphase. The second is the availabilityof knowledge-based human capital.With the Western markets gettingsaturated, this region provides ahuge opportunity to businesses toexpand their market share,” he said.

In this, regional businessescould compete and get their duemarket share. “One of the best waysto do it is to set up a good e-businessinfrastructure. The ASEAN businesscommunity can make this region aneconomically developed [one] with

[a] robust e-business framework.”This would lead to “increased

information-sharing, educationprogrammes and knowledgeconnectivity among the regionalpartners. It can also result inrealizing technology upliftment,business development, jointventures, free trade zone,employment generation and overallprosperity of the region.”

India with its core competencein ICT, space technology, largehuman capital and heritage couldbe a partner in this ASEAN e-business network, the Presidentsaid. Chalking out a roadmap forDelhi–Manila cooperation, Mr.Kalam proposed to offer assistancein preparing medicines at affordableprices through joint ventures andmarket development.

(Excerpted from The Hindu, 7 February2006)

© The Hindu.

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NEWSAsia will be the Future of Business:

President of IndiaIndia has decided to sign a

comprehensive economic pact withthe six-nation Gulf CooperationCouncil next year that covers trade,investment and services as part of itseffort to forge closer ties with Asia.

Addressing the second India-GCC industrial conference, theCommerce and Industry Minister,Kamal Nath, said that both sidesare holding talks that would lead toCECA by early 2007. He pointedout that the new arrangementwould go beyond signing a FTAagreement, as it would cover servicesand investments as well.

India, GCC to Sign ComprehensiveEconomic Pact

Flushed with funds followingthe surge in oil prices, GCC countriesare looking at profitable investmentsin Asia, including India. Seeking todiversify their economies beyond oil,the GCC countries were looking atIndian investments in informationtechnology, biotechnology, small-scale industry and pharmaceuticals.India, on its part required foreigninvestments in power,telecommunications, roads, portsand housing that exceeds $150billion, Mr. Kamal Nath said.

(Excerpted from The Hindu, 26 March 2006)© The Hindu.

India and Australia signed atrade and economic cooperationagreement to boost business ties ina big way in view of the long termplans for a free trade area coveringall of Asia and extending tillAustralia and New Zealand.

The new pact – Trade andEconomic Framework Agreementaims at enhancing cooperation in fieldsof energy, mining, infrastructure, foodand beverages, textiles, clothing,footwear, agriculture andbiotechnology. In the services sector,the agenda covers education, tourism,entertainment, informationtechnology, communication andmanagement of sports events. It alsocovers defence cooperation, customsand quarantine.

Commerce and IndustryMinister, Mr. Kamal Nath said atthe Australia-India Business Forumthat two way trade between Indiaand Australia stood at over $4billion with an annual growth rateof 20 percent and India is rankedas Australia’s sixth largest exportmarket. Referring to regional tradeagreements, Mr. Nath said India wason the verge of entering into FTAwith ASEAN countries and Thailandwith in the next few months.

According to the Commerceand Industry Ministry, theAustralia-India Business Forummeeting is also expected to workfor strengthening of relationsbetween the corporate of bothcountries and this new initiative

FTA in Sight as India, AustraliaSign Pact

would support further expansionof bilateral economic andcommercial ties.

(Excerpted from The Economic Times, 7March 2006)

© The Economic Times.

India and China should StrengthenTies with ASEAN, Japan and Korea

China, IndiaLead in Tech

ManufacturingAccording to the Eurocom

Worldwide Fifth Annual ITConfidence Survey in associationwith its Indian partner, IPAN, theoutlook for the technology sectorjobs in the West is very positive. Lowcost locations such as China and Indiaare edging past Europe and the USto lead as technology manufacturingcenters. Over the next three years,China is expected to record thehighest growth in IT manufacturingjobs followed by India.

Of the firms surveyed, 76 percent believed that India and Chinawill take a lead in the ITmanufacturing space. Seventeenper cent of those surveyed said thatIndia will record the highest growthin the jobs front whereas 71 percent were of the opinion thatChina will take the lead. TheEurocom study predicts acontinuing growth of technologymanufacturing jobs in low labourcost centres, especially China.

(Excerpted from The Economic Times, 29March 2006)© The Economic Times.

and we have to improve step by step,we have to endeavour for a commonmarket,” he further added.

Kuroda said India and Chinashould strengthen trade ties withASEAN, Japan and Korea as theseeconomies are growing faster andcompliment each other. ADB feelsthat a single Asian currency alongthe lines of euro is still a far cry asAsian countries would have to firstestablish a common market andimprove regional infrastructure.

“In Asia, economies arediverse, historical, social, politicalinstitutions are so different. Even ifthere is a common currencyventuring in South Asia, East Asiaor Asia as a whole, that would beseveral decades away,” he said.

It is realistic that Asia shouldhave single common market, as thiswas the basic idea of the EAS. “Theyaim at a common economiccommunity in Asia comprising 10ASEAN countries and India, China,Japan, South Korea, Australia andNew Zealand,” Kuroda said.

(Excerpted from the zeenews.com, 27 March2006)

© zeenews.com

ADB President HaruhikoKuroda wants India’s economicinfrastructure to be upgraded andthe economic reforms accelerated toachieve higher economic growth. Hefeels India can benefit from acommon Asian market as economicintegration is going to accelerategrowth and reduce income disparitywithin country.

Indian economy has beengrowing fast and infrastructure andcommunication network has to bereally sufficient. However, it wouldrequire substantial effort to reducetrade barriers and harmonise customduties. Indian economy has thepotential to sustain high growth ratefor the next 10-20 years and can evenfurther accelerate it providedeconomic reforms continued andinfrastructure further improved, hesaid.

Applauding the government formoves on deregulation andprivatisation, ADB President saidfurther economic reforms will begood for India if the economy has togrow by 9-10 per cent. “We have tohave long term objectives, ambitiousideas. But we have to be realistic


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NEWS

Sectors for Indo-Vietnam TradeIdentified

India and Vietnam haveidentified sectors such as informationtechnology, biotechnology, education,iron and steel, automobile and autoancillaries, food processing and marineproducts processing as areas forgreater Indo-Vietnamese economiccooperation. A Protocol of Co-operation was also signed in Ho-chi-minh City on March 3, 2006between the Indian Chamber ofCommerce and the VietnamChamber of Commerce and Industry.In 2005, bilateral trade between thetwo countries stood at $696.50million.

The Protocol of Exchange isaimed at promoting economicexchange in the areas of trade andinvestment to facilitate the exchangeof economic data and informationthat would support the enhancementof business and trade between thetwo countries. The two chambershave agreed to provide informationand cooperate with each other withregard to symposiums, conventions

and important events held by therespective organisations.

Members of the Indianbusiness delegation that visitedVietnam revealed that Vietnamattracts foreign direct investment of$5 billion annually and withrestructuring of the economy, itoffers huge opportunities for Indiancompanies engaged in IT, IT servicesand education. Vietnam is an ideallocation for steel companies thatwant to leverage on “splitintegration” and service the ASEANmarket. Steel companies can takesemi-finished products to Vietnamand complete the finishing workthere before selling the finishedproducts in the huge ASEANmarket. Likewise, West Bengalcould be a base for manufacture offorgings and automobile parts thatcould be used by the two wheelerindustry in Vietnam.

(Excerpted from The Hindu Business Line,8 March 2006)

© The Hindu Business Line.

China, India canUsher in a TrueAsian Century

Chinese Premier Wen Jiabaostated that Sino-Indian strategicrelations have reached a ‘historicalstage,’ and predicted their ‘fraternalfriendship’ could usher-in a ‘trueAsian century.’

“It is when China and India arereally strong enough and fully bringout their vitality that it will usher in anew true Asian century,” Wen said atthe end of the National People’sCongress (NPC), China’s Parliament.

Wen recalled that the twocountries reached a strategicpartnership for peace and prosperity,signed a political principle guidingthe settlement of the border issueand worked out a five-year plan forChina-India trade and economicdevelopment.

“Now China-India relationshave entered a new historical stage,”Wen said, hoping the China-India“fraternal friendship will becomevibrant and strong” and remain inthe hearts of the two oriental states.Noting that 2006 marks the ‘Yearof Friendship’ between China andIndia, “cultural exchanges will behigh on the agenda,” Wen said,

(Excerpted from The Indian Express, 14March 2006)

© The Indian Express.

Mr. Lim Hng Kiang, SingaporeMinister for Trade and Industryspeaking at the American Chamberof Commerce in Singapore, said thatSingapore will leverage on its “corestrengths” and its traditional linkageswith China, India and the ASEAN toride on the emergence of the “NewAsia.” These core strengths includepolitical stability, efficient systems andinfrastructure, good protection ofintellectual property, tripartitecooperation as well as reputation forquality, Mr. Lim said.

“Notably, the rise of China and

Singapore to Ride on Emergence of “New Asia”India are affecting global trade andinvestment flows fundamentally,”Lim said, adding that bilateral tradebetween Singapore and China hasseen an annual growth of some 30percent since 1999.

“In 1999, China was our eighthlargest trading partner with a share of4.3 percent. By 2005, it has sinceclimbed steadily in terms ofimportance to the fourth position witha share of 9.4 percent,” Lim noted.

As for India, Lim said thatcompanies from the two countrieshave been increasing business in

each other’s market, and Singaporewould like to serve as a springboardfor international investors who wishto invest in India.

Lim also noted that ASEANmember countries, which includeBrunei, Cambodia, Indonesia, Laos,Malaysia, Myanmar, the Philippines,Singapore, Thailand and Vietnam, aredeepening economic integration,hoping to realize the ASEANEconomic Community in 2015.

(Excerpted from the People’s Daily Online,10 February 2006)

© People’s Daily Online .

India, South Korea to ConcludeEconomic Agreements by 2007

Asian VirtualUniversity Grid

Addressing the students ofNational University of Singapore,Dr. A.P.J. Abdul Kalam, Presidentof India has suggested that India andSingapore "consider" taking theinitiative to create an "Asian VirtualUniversity Grid."

He said that Universities inIndia, Singapore and other Asiancountries "can have networkedr e s e a r c h - a n d - d e v e l o p m e n tcooperation based on their corecompetencies."


© The Hindu.

India and South Korea took amajor step towards advancing bilateraleconomic relations by agreeing toconclude a Comprehensive EconomicPartnership Agreement (CEPA) bythe end of 2007, covering trade in

goods and services, measures for tradefacilitation, promotion andliberalization of economic flows,among other issues.

The two sides agreed to set upa Joint Task Force to oversee themodalities of operationalising CEPAbefore 2007.

Addressing the Chambers ofCommerce, President of India, Dr.A.P.J Abdul Kalam said that asregional trading arrangementsbecome important building blocksof multilateralism in an increasinglyglobalised world, it was hearteningto see that the trend towards a pan-Asian framework for cooperation isbecoming increasingly morepronounced.


© The Hindu.

ADB Plans Major Energy Efficiency InitiativeADB has decided to launch a major energy efficiency initiative of US$1 billion to help growing

economies of Asia to meet their energy demands efficiently and minimize the impact on the environment.Given the exponential growth in demand, energy is going to be a major challenge in the coming years.

ADB President Mr. Haruhiko Kuroda said, “A crisis in the energy sector will have an impact on the sector aswell as the economy and environment.” Energy efficiency programme would be one of the measures plannedfor promoting energy efficiency under the Kyoto protocol. He also said that water was another area ofconcern that needed to be addressed.

Almost 75 percent of the available water was being consumed by farm production, which had to bebrought down to improve the situation. “But, advances in agricultural technology are yet to come outwith ways to reduce water consumption,” he said adding that the ADB would double its efforts forpromoting initiatives on water conservation.

(Excerpted from The Hindu Business Line, 10 March 2006)© The Hindu Business Line.


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NEWSIndia for pan-Asian Trade

Agreement

India and the ESCAP have identified four new areas of cooperationand decided to cooperate in the field of disaster management, infrastructurefinancing, setting up of an India-ESCAP Cooperation Fund and enhancedIndian participation in the Asia Pacific Technology Transfer Centre.

India has agreed to sponsor a study to be undertaken by the RIS andthe ICRIER to strengthen regional mechanisms and instruments for long-term infrastructure financing in the Asia-Pacific region. The agreement wasannounced after a meeting between the Secretary General of ESCAP Dr.Kim Hak-Su and Minister of State for Commerce Mr. Jairam Ramesh.

ESCAP has estimated that in the four major sectors - transport,information communication technology, energy and water - the infrastructuralrequirement in the region could be between US$ 220 billion to US$ 500billion per year. In the study of possibilities in the infrastructural investmentsector they agreed that India could play a leading role.

(Excerpted from The Hindu, 13 February 2006)

© The Hindu.

India, ESCAP Identify New Areas ofCooperation

Finance Minister of India, Mr.P Chidambaram, at a meeting withAsian leaders and the ADB PresidentH Kuroda at the World EconomicForum said that India had alreadysigned framework agreement for freetrade with ASEAN last year, andoutlined the need for acomprehensive economic treatythat takes care of investment andother financial matters.

The Minister expressed India’sdesire for expanding the proposedCECA with ASEAN to a pan-Asianpact covering six more countriesincluding Japan, China, Korea,Australia and New Zealand, aimingat a common economic communityin East Asia.

ASEAN and China havealready finalised the framework fora free trade pact to be fully

operational in 2010, a similaragreement with Korea is in theprocess too. A bloc that comprisesASEAN and the three Asiancountries, viz. China, Japan and Koreawould cover 86 per cent of East Asiantrade. Among ASEAN countries, 99per cent of trade is already tariff-free.On the possibility of FTA withChina, the Minister said that, astrade with China is growing very fast,so some time in the future there couldbe a FTA with China.

He also said there was a needto develop an Asian bond marketwhere Asian nations could invest asignificant portion of theirburgeoning forex reserves as well asthe need for Asian Monetary Fund.

(Excerpted from The Financial Express, 28January 2006)


Asia Brimming with ConfidenceSingapore Prime Minister Lee

Hsien Loong stated that Asia“brims with confidence anddynamism,” as it is “powered by thetwin engines of China and India.”Mr. Lee also said that the overalleconomic environment in Asiastayed favourable during the last yearas in 2005 the external trade grewby 14 percent, through theexpanding FTAs and particularly the

CECA signed between India andSingapore.

Singapore while movingforward by developing ties withRussia and some West Asiancountries and the ASEAN has beennow building up links with majoreconomic partners like China, Indiaand Japan.

(Excerpted from The Hindu, 2 January 2006)© The Hindu.

Former President of thePhilippines and Chairman of BoaoForum for Asia FV Ramos exhortedthe Asian people and their leadersto work unitedly to fire Asia’sgrowth engine to expand the size ofthe economic pie and close the gapbetween the rich and the poor.

Unveiling his ‘Vision of anIntegrated Asia in the 21st Century:Prospects and Hurdles,’ at a speciallecture organised by FICCI, MrRamos said, “The centre of gravity

Gravity of World CommerceGravity of World CommerceGravity of World CommerceGravity of World CommerceGravity of World CommerceShifted to ASEAN, SAARCShifted to ASEAN, SAARCShifted to ASEAN, SAARCShifted to ASEAN, SAARCShifted to ASEAN, SAARC

of world commerce has shifted tothe Indian Ocean, South ChinaSeas and the Pacific Ocean, carrying52 percent of the global output.We need to think out increasing thesize of the pie, and sharing itequitably.” He said ASEAN andSAARC were the key buildingblocks for the integration of theentire Asia-Pacific region.

(Excerpted from The Financial Express, 21January 2006)


Japan-India Trade Pact SoonWork on the India-Japan

comprehensive economicpartnership agreement (CEPA) ison the fast-track.

The India-Japan joint studygroup, which is expected to submitthe report by June 2006, may vouchfor a comprehensive agreementwhich would include facilitation oftrade, investment and relaxation ofvisa norms.

In fact, the submission ofIndia-Korea joint study groupreport and the beginning of finalrounds of negotiations for aneconomic partnership pact have alsoinfluenced Japan to acceleratepreparations for the India-Japanagreement.

Significantly, if Republic ofKorea inks a CEPA with India soon,it will give the Northeast Asian

giant an edge over Japan. Already,Korean top leadership has calledupon Indian businesses to look atKorea as a base for venturing intoNortheast Asian market. Also, theissue of visa-on-arrival at Koreandestinations for visiting Indianbusinessmen is being seriouslyconsidered.

According to the officials atthe Japanese embassy, Korea willhave some competitive advantage ifthe India-Korea agreement takesplace much ahead of an India-Japanpact. “Korea may then have someadvantages. But that will only befor a limited period. After all, Japanand India too will have anagreement,” said the official.

(Excerpted from The Economic Times, 15January 2006)


Singapore has emerged as thethird largest source of FDI to Indiaduring the first nine months of2005, compared to Rs. 263 croresinvested in 2004, Singaporeinvested nearly Rs. 1,100 crores in2005, surpassing inflows from theUK, Japan, Germany and theNetherlands. The increase in FDIfrom Singapore has been driven bythe signing of the CECA agreementas well as part of that country’sstrategy to diversify its investments.The sectors that Singaporecompanies are looking at closelyinclude real estate, logistics, financeand banking and food processing.

According to the OxusResearch and Investments,“Singapore has been diversifyingoutside China for sometime andclearly India is an attractive and

CECA Led Increase in FDI fromSingapore in India

profitable destination. A strong Indianpresence in Singapore also helps toput India on the investors’ radar.”The recent signing of the CECA hasalso helped build confidence amongcompanies in Singapore.

Singapore has joined the race toenter some of the lucrative sectorssuch as real estate. Late last year, theGovernment of Singapore InvestmentCooperation – one of the world’slargest investment funds – made thefirst of its realty investments in a Rs.250-crore township project inChennai. Other Singapore bigwigs likeAscendas, which holds 90 per cent inthe International Tech Park inBangalore, too plan to up theirinvestments.

(Excerpted from The Economic Times, 10January 2006)



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OPINIONSIndia’s New Priorities, Asia’sNew RealitiesDr Manmohan Singh,Hon'ble Prime Minister of India

The reality of Asia’s significance in theglobal economy today cannot be

brushed aside. The economic balance isdefinitely and decisively shifting to Asia as halfthe growth in world output now comes fromAsia. In agriculture, manufacturing and services,Asia is a globally competitive region. In globalfinance, Asia now funds almost the entirecurrent account deficit of the rest of the world.The time has now come for financial marketsand the global financial architecture takecognizance of this shift in balance and reformthe architecture in the best global interest.

Just as Asia, India too has changed,since 1991, we did not anticipate thatwithin a decade India would be “driving”global business. Companies and countriesthat made good use of Indian talentbenefited and remained competitive.Graduating out of Y2K, the Indian ITindustry offered a range of services thathave found a growing market worldwide.Indian enterprise and talent are drivingglobal business in a wide range of sectorsacross the world. This has given Indianbusiness a new sense of confidence. Ourtariffs have come down, but our share ofworld trade has gone up!

Certainly, our own experience ofrecording higher growth in a more openeconomy has helped. But I must also paytribute to East Asia and South East Asia forboosting our confidence. The success ofmember countries of ASEAN, of the Republicof Korea and of China, have all shaped ourthinking. When we first set the target ofbringing India’s tariffs down to “ASEAN levels,”it was not just an exercise in tariff liberalizationbut an attempt to benchmark our economicperformance against some of the bestperformers in our neighborhood. And thisbenchmarking has helped.

India’s “Look East Policy,” was notmerely an external economic policy, it wasalso a strategic shift in India’s vision of theworld and India’s place in the evolving globaleconomy. Our trade with Asia has increasedexponentially in the past decade. Today theEast Asian Community of nations hasovertaken Europe and the Americas as thelargest bloc among our trading partners. Thisis Asia’s “new reality” and it is shaping India’s“new priorities.” Together these will drive“global business.”

Our policies relating to investment,taxation, foreign trade, FDI, banking,finance and capital markets have evolved tomake Indian industry and enterprise morecompetitive globally. Sector specific mega-investment regions with investments of uptoUS$ 10 billion in each location are beingpromoted, beginning with chemicals andpetrochemicals, and the necessary policyframework for this is being evolved. Theentire energy sector including petroleum,natural gas, power and captive coal miningoffer exciting opportunities.

India is a vibrant marketplace. Ourentrepreneurs are investing overseassuccessfully. Businesses from abroad, includingfrom many Asian countries find India aproductive and profitable business destination.The process of engagement in the Asian regionhas truly taken off. We are linking India into aweb of partnerships with the countries of theregion through free trade and economiccooperation agreements. This web ofengagements may herald an eventual free tradearea in Asia covering all major Asian economiesand possibly extending to Australia and NewZealand. This Pan Asian FTA could be thefuture of Asia and will open up new growthavenues for our own economy.(Excerpted from the opening keynote address deliveredat the 16th Asian Corporate Conference, 18 March 2006,Mumbai, India)

India, an Integral Part ofAsian CommunityGoh Chok Tong, Senior Minister ofthe Republic of Singapore

In Asia, the vision of an Asian communityis taking shape, and India is an integral

part of this community. The concept planand foundation for the common home isregional integration which Asians aredesigning and building. South Asia,Southeast Asia and Northeast Asia areincreasingly being linked together by tradeand investment flows, growing web of FTAsand regional processes. The Renaissance ofChina and India, is forcing a competitive

dynamic throughout the region andaccelerating the integration process.

ASEAN and India should worktogether to shape the common home we arebuilding in Asia and I call this the ASEAN-India Connect, that encompasses theburgeoning strategic and economicpartnership developing between India andASEAN. It is an important beam in theregional architecture.

Prime Minister Manmohan Singh hasset an ambitious and achievable target ofdoubling ASEAN-India trade to US$30billion by 2007. Experience has shown thatwhen ASEAN and China started to integratetheir economies, trade grew by leaps andbounds. Today, this trade is worth US$90billion. The benefits from ASEAN-Chinaeconomic relations indicate what can beachieved for India and ASEAN.

India has a deep pool of intellectual talentand technological capability and is strong inservices and has carved a niche for itself as theworld’s back office and a global software centre.ASEAN has abundant natural resources andalready woven into global manufacturingnetworks and it can also provide useful linksfor India’s economic dealings with other Asiancountries like China, Japan and Korea.Therefore India and ASEAN should leverageon each other’s comparative advantages todevelop new products and services for globalmarkets. There is clearly great potential for andbenefit in ASEAN-India Connect. Howeverthey should maintain the momentum of reformand liberalisation, and changing mindsets.

There are signs India is already makingthe mindset change. One important stepIndia has taken is to embark on an activeFTA policy, signalling its intention to growby leveraging on external economies andopening itself to competition. CECA canalso act as a building block for India’scomprehensive economic integration withASEAN. The benefits from CECA showthe potential benefits that can be reapedfrom an ASEAN-India FTA.(Excerpted from the keynote address delivered at the CIIPartnership Summit 2006, 20 January 2006, Kolkata,India)

Vision for a New AsiaWe feel confident that in the next few years, we may see the rise of a Pan-Asian Free

Trade Area covering all major Asian economies, including India, Korea, China, Japan,ASEAN and possibly extending to Australia and New Zealand. This could be the thirdpole of the world economy after the European Union and the North American Free TradeArea and will open up new growth avenues for all our own economies.

— President of India Dr APJ Abdul Kalam’s Address at the Major Business Chambers ofKorea, Seoul, 7 February 2006, Korea


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OPINIONSTowards Deeper AsianEconomic Integration:Progress and ProspectsHaruhiko Kuroda, President, ADB

Asia, the most diverse region of the world,become a formidable player in the global

economy and is heading towards deeperintegration. Since the early 1990s, mostcountries in Asia have pursued regionalcooperation in a variety of ways. Asia’sgreatest challenge, therefore, is to spreadgrowth more equitably across and withinborders to ensure that all citizens have theopportunity to participate in, contribute to,and benefit from the region’s economic andsocial development. Regional cooperationand integration will play an important rolein meeting these challenges.

ADB’s strategy for regional cooperationand integration rests on four key pillars, cross-border infrastructure and associatedsoftware, money and finance, trade andinvestment, and regional public goods.Through the ADB-supported GMSprogram, countries that share the MekongRiver are building a series of economiccorridors reaching east to west, north tosouth and south to south. South Asiancountries are also promoting cooperation,with various initiatives under the SAARCand BIMSTEC. India through its “LookEast” policy has been actively forgingcooperation with the ASEAN and the CECArecently signed between India andSingapore.

East Asia’s rapid emergence as a globalproduction and service platform has increasedeconomic interdependence. We now have anexplosion of new trade and investmentinitiatives. Many refer to this as a “spaghettibowl” or “Asian noodle” effect, because thesenew initiatives often overlap and vary in scope.

Going forward, East Asia alone will needa trillion dollars for infrastructure—a levelof investment far beyond the capacity ofgovernments. It is ironic that Asia’s massiveneeds for infrastructure investment go unmetwhile excess savings find their way to theglobal capital markets. One reason for this isthat Asian savings are not being efficientlyput to work by the region’s financial system.Market infrastructure is underdeveloped inmany respects, and investor concerns includeefficient pricing and liquidity. These issuesneed to be ensured that more of Asia’s savingsremain in the region, Asia can also make asignificant contribution to correcting globalimbalances.

The region also needs to broaden tradeand investment initiatives to reduce thespaghetti bowl effect and ensure that Asianregionalism contributes to strengthening theglobal economic system. The consolidationof the various trade agreements in East Asiainto a single FTA and making various sub-regional initiatives into region-widecooperation agreements would also maximizethe potential for creating greater trade andinvestment opportunities.

Regional monetary and financialcooperation no doubt contributes to globalfinancial stability. And, deepening monetaryand exchange rate policy coordination wouldbe especially beneficial to the highly export-oriented and deeply interdependenteconomies of East Asia.

For this process, ADB is developing theAsian Currency Unit to monitor both thecollective movement of Asian currenciesagainst major external currencies, such as theUS dollar and the euro, and the individualmovement of each Asian currency againstthe regional average presented by ACU –thereby assisting monetary authorities in theirexchange rate policy formulation. (Excerpted from the keynote speech delivered at the AsiaBusiness Conference, 11 February 2006, HarvardUniversity Business School, Boston, USA)

India and China in Asia’sQuest for Energy SecurityMani Shankar Aiyar,the then Minister of Petroleum &Natural Gas and Panchayati Raj

The overarching aim of state policy inboth India and China is the eradication

of poverty. This requires attaining high ratesof growth, however, that necessitate highlevels of energy consumption. Thus energysecurity becomes the key to povertyeradication.

Countries are unevenly endowed withenergy sources. In China, the sustained highgrowth rates made it more and moreimperative that sources of energy supply befound everywhere around the globe toensure the uninterrupted supply of theenergy required to sustain growth. Equally,in India, increasingly it is being recognisedthat shortage of energy can disrupt our entiredevelopment effort. Hence the high prioritybeing given in both the domestic and theexternal dimension to ensuring the country’senergy security.

It is, therefore, hardly surprising thatalmost everywhere in the world that an Indian

goes in quest of energy, chances are that hewill run into a Chinese engaged in the samehunt. But the fact is that aggressive biddingby either party only pushes up the price ofthe asset to the advantage of the seller andthe disadvantage of both bidders.

We look upon China not as a strategiccompetitor but as a strategic partner. Ourcooperation in energy is based on equalcooperation, mutual benefit, mutual respectand enhanced understanding. For theproblem of energy security is by no meanspeculiar to the Asia giants, India and China.Many of the smaller countries of Asia rangingfrom Turkey to Pakistan, Afghanistan, SriLanka, and Nepal, and on to Thailand, Laosand Cambodia, and extending north-east toJapan and the Koreas - share with India andChina, as net Asian importers, the need toensure the security, stability and sustainabilityof oil and gas supplies. At the same time, itneeds to be recognised that many Asiancountries are major exporters of energy.Indeed, Asia is the fount of oil and gas in the21st century. And as for south-east Asia, evenas the region houses many net importers, sodoes it house very significant suppliers suchas Myanmar, Malaysia, Indonesia, PapuaNew Guinea and Vietnam.

Thus the energy-short countries of Asiaare located cheek-by-jowl in the immediatevicinity of their energy-abundant Asiancousins. We can bring together the energy-surplus and energy-deficit countries of Asiaon to a common platform of Asian energysecurity.

China and India have an excellentrecord of regional cooperation in Asia.Together, we can set an agenda for Asianenergy cooperation. Now, the AsianResurgence depends on energy cooperation.The 21st century will indeed be the Asiancentury only if Asian countries - buyers andsellers - join hands together in a continent-wide bid at bringing Asia together andkeeping Asia together.(Excerpted from the speech delivered to a select gatheringof Chinese Oil Company Executives and Experts, 13January 2006, Beijing)

China-India Cooperationand Asian EconomicCommunityShyam Saran,Foreign Secretary of India

Our relationship with China is a keycomponent of our ‘Look East’ policy.

There is a strong consensus in India onimproving and developing our relations with



OPINIONSChina. Together with China, we have takena number of positive measures to improvethe quality of our relations across a wide rangeof areas, without allowing the existingdifferences to affect the overall developmentof our ties.

Today India and China are engaged ina positive way to expand their commonalitieswith extensive dealings in bilateral, regionaland multilateral forums. The simultaneousemergence of India and China as Asian andglobal powers in fact makes it imperative forthem to be sensitive to each other’s interestsand aspirations. We in India believe that thereis enough space and opportunity in Asia andbeyond for the two countries to grow.

Besides the emergence of India andChina as two economic powerhouses in thisregion, there is Japan which will retain aninfluential role in Asia’s political andeconomic future. With ASEAN as well, ourpartnership is steadily expanding anddeepening. We believe that ASEAN holdsthe potential to become the fulcrum ofeconomic integration in our region.

The future of Asia is in reality the sumof the success of each of these componentsand the strength of their inter-linkages. Thekey to ensuring long-term security and stableequilibrium in Asia lies in the collective abilityof Asian countries to build mutual economicstakes in one another. It is with thisconviction that we espouse a vision of anAsian Economic Community.

The recently concluded East AsiaSummit has laid the foundations for acooperative architecture in Asia on anunprecedented scale and we hope, willpotentially launch the process towards thepossible creation of an East AsianCommunity. We would be happy to workclosely with China towards progressiverealization of such an East Asian Communityand eventually, a larger Asian EconomicCommunity.

We are confident of our capacity andcapability as a nation to respond successfullyto these newly emerging challenges andopportunities. We also remain confident thatIndia would continue its journey towards adestiny that was eloquently articulated byPandit Nehru in 1947, a destiny in whichIndia ‘attains her rightful place in the worldand makes her full and willing contributionto the promotion of world peace and welfareof mankind.’(Excerpted from the concluding part of address deliveredat the Shanghai Institute of International Studies on the‘Present Dimensions of India’s Foreign Policy,’ 27January 2006).

Give Asia a Break onCurrenciesFrancesco Guerrera, FinancialCorrespondent, The Financial Times

By stockpiling dollars and recycling theminto US government bonds, Asian central

banks have set a timebomb underneath theworld economy. According to this view, anexplosion will occur, when Asiangovernments stop buying treasuries, thusremoving a large source of funding for theballooning US current account deficit.

On the internal front, Asia’s over relianceon the foreign dollar could cause horribleconvulsions within the region’s economies asthe undervalued domestic exchange ratescreate domestic imbalances. Nobody isdisputing that Asian central banks’ voraciousappetite for foreign reserves has been thedefining characteristic of global financialflows in the past half decade or so.

After taking to foreign exchangebuying, the region’s central banks nowcontrol 64 per cent of world reserves,compared to 46 per cent 10 years ago. Theirgrab for dollars and euros accounted for morethan three quarters of the near doubling inglobal foreign exchange reserves between2002-05, and eight of the world’s top 10reserve holders are Asian central banks.

The way to avoid the repeat of such atraumatic event is to accumulate reserves – acourse of action that was repeatedly advocatedby international institutions at the time.

Economists can argue that Asian centralbanks do not need so much reserves to protecttheir currencies, especially after the vastimprovement in their economic and tradesituation. It would take a brave speculator totake on the People’s Bank of China, whosereserves amount to 38 per cent of gross domesticproduct. But it is short-sighted as foreignreserves in Asia have been used by governmentsfor other “social” purposes.

It is true to say that undervalued currenciesand excessive reserves create inflationarypressure and asset bubbles but neither has sofar been very pronounced. Frankly, that is asmall price to pay to prevent another financialcrisis. As for the “global imbalances”, the oneeffect of aggressive US Treasuries buying byAsian central banks has been to lower yields onshort-term bonds – no bad thing for individualor corporate borrowers.

The message to foreign “experts”preaching to Asian central banks should reallybe: “give us a break and build more windows.”(Excerpted from the Financial Times, 25/26 March 2006)

© The Financial Times.

East Asia: Many Clubs,Little ProgressHadi Soesastro, Executive Directorand Senior Economist,Centre for Strategic andInternational Studies, Jakarta

Despite the modest achievements at EAS,the leaders would still have us believe

that the EAS can play a significant role incommunity-building. However, theprospects look bleak for the EAS emergingas a driving force for Asian integration.

Renewed interest in regionalcooperation and integration coincided withthe establishment of ASEAN+3 at the endof 1997. By 2004, however, concerns aboutASEAN+3’s waning momentum spurredMalaysia to assert regional leadership byresurrecting the EAS. Malaysia’s move wasimmediately backed by an enthusiasticChina, which caught other ASEAN+3members off guard. A rift within the EastAsian economic integration movementbecame immediately apparent, promptingseveral countries to begin to form a coalitionto oppose the EAS proposal.

Japan, could not accept China’sgrowing influence in the region and becameworried that Beijing would manipulate theintegration process by dominating the EAS.Indonesia, has an interest in ASEAN gainingclout, thought ASEAN was not sufficientlyconsolidated to be an effective driver ofASEAN+3, so Jakarta also initially opposedthe EAS.

Having sensed that its EAS proposalwas only garnering half-hearted supportamong the region’s governments, Malaysiaproposed a compromise: ASEAN+3 shouldbe maintained but the EAS developed inparallel. That the Asian economic integrationmovement has thus far been ASEAN-driven,however, is simply because ASEAN is theleast objectionable regional player to take thelead. Singapore proposed India, andIndonesia and Japan suggested membershipfor Australia and New Zealand. For Indonesiaand Singapore, the expansion ofmembership helps differentiate EAS fromASEAN+3, and they also believe that itwould be beneficial for the East Asian regionto deepen relations with the three countriesthat are in East Asia’s immediateneighborhood.

India, Australia and New Zealand couldbring fresh air to the East Asian process.These countries were not invited into thetent simply as counterweights to China.


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OPINIONSWith the inclusion of Australia, India, andNew Zealand in the EAS, it is indeed hardto argue for a geographic definition.ASEAN has been comfortable workingwith both China and Japan. Ultimately,this has created the image of an EAS thatwants to promote community-building inthe region but at the same time erect afence around one of their own, namelyChina. In the immediate future, not muchcan be expected from the EAS. Leaders inChina and Japan must show theirstatesmanship. The US is watching thedevelopments in East Asia with someinterest.

The Kuala Lumpur Declaration on theEAS reflects that they are all prepared to beengaged in a forum for dialogue, not onlyon economic issues but also on political andstrategic issues. They want the summit to be“an open, inclusive, transparent, andoutward-looking forum.” India’s PrimeMinister Manmohan Singh talked aboutEAS as a first step towards an East AsianCommunity, which will evolve into an AsianEconomic Community.

The next steps for EAS and regionalcooperation would be that first, ASEANmust formulate a clear strategy as it is in thedriver seat of both ASEAN+3 and EAS.(Excerpted from the Far Eastern Economic ReviewJanuary/February 2006)

© Far Eastern Economic Review.

It’s Time for an AsianEnergy ForumM K Venu,The Economic Times

India and China signed an MoU on broadcooperation between the two countries in

the area of energy. Coming as it did on theback of an unprecedented joint acquisitionof a Syrian oil field by India’s ONGC and aChinese oil company, everyone wanted toknow what was the India-China MoU allabout.

It was revealed that India and Chinadriving an Asian energy cooperation as thelargest buyers of oil and gas in future.However, India and China doing anythingtogether — even nominally — will be viewedwith a sense of awe by the west. Energy isthe single most important issue on whichthe US would not want to see India gettingclose to China.

The president of China’s biggest oilgiant, CNPC passionately advocated that asbig consumers of oil and gas, India andChina must not raise the cost of energy

through mindless competition. They mustcooperate to optimise their respective energyproduction and consumption strategies.Strategists even suggested that energycooperation between the two countries couldbe dovetailed into some of the existing sub-regional economic and security groupings inAsia.

A suggestion was made that energycooperation could be made part of either theexisting Shanghai Cooperation Organisation,in which energy-surplus Russia is an importantmember, or the East-Asian Summit process.The point made was that energy cooperationcould be incorporated into one of the manyevolving sub-regional architecture in the largerAsian region.

Mr Aiyar addresses a strong case for anAsian Energy Forum, which will eventuallyact as a trigger for stitching up a larger Asianeconomic community. Many thinkersbelieve that if India and China, with nearlyover 70 percent of the world’s primeconsuming population, were to grow at 8percent plus over the next two decades, theywill necessarily have to institutionaliseresource sharing within the evolving sub-regional architecture in Asia.(Excerpted from The Economic Times, 24 January 2006)


India’s Coming Eclipse ofChinaHugo Restall, Editor,Far Eastern Economic Review

Economic comparisons of India and Chinainevitably start with the two nations’

obvious strengths. India’s presence in theservice sector, particularly IT- enabled servicesand China’s ability in attracting foreign directinvestment, and it’s openness to trade for alarge developing country appears to havebright futures.

But in fact their strengths are symptomsof underlying weaknesses. Indian capital andtalent is drawn to the IT sector largelybecause it is one of the few new fields whichhave not yet been stifled by governmentregulation. Likewise, China’s dependence onFDI stems from the weakness of the country’sbanks and capital markets. With a savingsrate of more than 40 percent of GDP, thereis plenty of capital around, but few domesticinstitutions to allocate it efficiently. Rather,the consensus view of their strengths aregoing to change dramatically as they addressthese weaknesses.

Today India and China are racing at

breakneck speed, with as little as onepercentage point difference in their growthrates. China embarked on its economic reformprogram 13 years before India, it currentlylead in per capita GDP. But India’s challengesare more conventional for a developingcountry, and more easily addressed. China,by contrast, faces several perilous transitionswhich will slow its growth. As a result, Indiais set to steal the spotlight as leader of thedeveloping world.

China’s growth is driven by levels ofsavings and investment the world has neverseen in a market economy. Mobilization ofcapital, labor and raw materials provides thebulk of its growth, not productivity gains.In fact, given the amount of investment, thebiggest surprise of China’s growth is howslow it remains. During their high growthphases, both Japan and Korea grew fasterthan China today, with a lower level ofinvestment.

China pulled in some US$60 billion ofFDI in 2005, while India attracted anestimated US$ 5 billion. And a large portionof China’s FDI, is really domestic capitalleaving and then reentering the country, socalled “round-tripping,” in order to receivethe preferential treatment given to foreign-invested enterprises. Even so, China remainsa bigger destination for investments bymultinational companies. Many argue thatwhy does China treat foreign businessmenbetter than its own people? The one answeris politics. Further, the foreign-invested sectorof China’s economy have brought inmanagement and production techniquesperfected elsewhere and combined themwith cheap Chinese labour.

China is not developing world-famousbrands because its big companies are notnimble or savvy enough. By handicappingits own entrepreneurs, China has so farlargely confined itself to being an assemblycenter for the world’s multinationals.

India’s approach has been almost exactlythe opposite of China’s as it nurtured its ownentrepreneurs and held multinationals atarm’s length. Its largest private firms are about10 times the size of China’s. Success in theIT sector has been the catalyst, showingIndians that they can be worldbeaters. Indiahas a huge advantage in its financialinstitutions and capital markets.

As a result, Indian companies use capitalmore efficiently to reap the benefits of higherlevels of investment as FDI and portfolioinvestment increases in the coming years.Demographically, India is a young country.Finally, India is attractive to multinationals



OPINIONSbecause it has a commitment to the rule oflaw and protecting intellectual property.

Nevertheless, the incremental stepsbeing made show that these changes arewithin reach. For more than a decade, Chinahas been the darling of the global businesscommunity, which fawns over its“miraculous” growth. Now India is poisednot only to shine, but even to eclipse China.(Excerpted from the Far Eastern Economic Review, March2006)

© Far Eastern Economic Review.

GCC-India FTA Talks GiveFillip to ‘Asian Community’N. Janardhan, Editor, Gulf in theMedia at the Gulf Research Center,Dubai

The regional economic diversificationplan gets a boost with the Gulf

Cooperation Council (GCC) and Indiawhich signed a framework agreement foreconomic cooperation in August 2004,announcing final negotiations for a free tradeagreement starting January 2006 to thrashout niggling issues like rules of origin anddifferential tariffs.

India too has embarked on an economicdiplomacy mission with negotiations on aFTA with the members of the ASEAN,affirming commitment for a SAFTA andstretching it to the GCC. On the anvil areFTAs with South Korea and Israel, economicengagement with the BIMSTEC countries,a proposed CECA with Mauritius and aunilateral tariff preference scheme for the leastdeveloped African countries.

The push for GCC-India FTA talkscome amid Indian Prime MinisterManmohan Singh’s statement that “...ourneighbors should have a greater stake inour economic growth and should benefitfrom it... The Gulf region is a part of ournatural economic hinterland...” WithIndia’s economy forecasted to expandabout seven percent during the currentfiscal year, India’s proposal for an ‘AsianCommunity’ implies creating an arc ofadvantage to rival the EU.

Energy and oil are forcing Asia to firstlook toward the Gulf. The GCC countriesaccount for 45 percent of the world’srecoverable oil reserves and 20 percent ofthe natural gas resources. Asia imports morecrude oil than any other region in the worldand it is the single most important marketfor the GCC producers.

Beyond oil, as part of the new ‘LookEast’ policy, the GCC Chambers of

Let it Flow, The Asian Wall Street Journal, 30 March 2006.

Together on the Bridge to ‘arc of prosperity,’ Economic Times, 21 March 2006.

India Calls for Joint Efforts to Promote Energy Security, (G-8), The Hindu, 18 March 2006.

As Rice Visits Asia, a China Subtext Looms, The International Herald Tribune, 13 March2006.

New World Relationships, Khaleej Times, 10 March 2006.

Matching Kyushu’s Hardware with India’s Software, The Hindu Business Line, 10 March2006.

A Perilous Collision Between Nationalism and Globalisation, Philip Stephens, TheFinancial Times, 3 March 2006.

Powerhouse China Should Not be a Threat, David Hale, The Australiannews.com, 1 March2006.

The Flight to Asian Cities needs Managing Not Curbing, Victor Mallet, The Financial Times,28 February 2006.

China Seeks to Promote a Harmonious World, Gong li, China Daily, 21 February 2006.

East Asia Needs Genuine Regional Integration, Kak Soo Shin, The Asahi Shimbun, 16February 2006.

Meet the Man who Is Bringing Asia Together, William Pesek Jr., Bloomberg.com, 15 February2006.

ASEAN a Rising Power, China View, 11 February 2006.

Asian Development Bank Calls for Unified East Asia Trade Pact, Daily Times, 9 February2006.

India Sees South Korea as Key Element in Look East Policy, Webindia, 8 February 2006.

Dragon Dumping Products in India Through FTA Route, Economic Times, 4 February 2006.

Free-Trade Skeptics: Wrong Again, Arvind Panagariya, Economic Times, 25 January 2006.

Take Your Partners: China, India and the Oil Market, The Economist, 21 January 2006.

RTAs can Build Upon WTO Rules, says UK Trade Minister, Hindu Business Line, 20 January2006.

India for Asian Version of IEA, Business Standard, 14 January 2006.

Korea Saw Rapid FTA Progress in 2005, The Korea Herald, 13 January 2006.

Further Readings

Commerce and Industry cal led forprioritizing economic cooperation withAsian countries. The impact of the GCCgranting the “dialogue partner” status toIndia, the first from the developing worldis indicative of the dynamic change.

As a group, the GCC is India’s secondlargest trading partner and the largest singleorigin of imports into India and the secondlargest destination for exports from India.Bilateral trade rose to nearly $20 billion in2004, excluding energy imports by Indiaworth approximately another $20 billion.When the FTA is formalized, India willbecome only the third country after Japanand the US to sign a FTA with the GCC.Both parties stand to benefit from a FTA asit will remove restrictive duties and pushdown the tariffs on goods being tradedbetween them.

With the GCC-India trade showing aremarkable surge in the last few years, speedyand successful FTA negotiations would leadto a more intensive economic engagementbetween the two. Leading up to the finaltalks, a joint commerce and trade committeehas defined the contours of a FTA byfocusing on exploring opportunities in areasof oil and gas, petrochemicals, fertilizers,power, metals and pharmaceuticals,knowledge-based products, education,health, banking, avoidance of doubletaxation, a treaty to promote and protectinvestment and infrastructure. There is alsotremendous scope in areas such as tourism,biotechnology and higher education, as wellas getting India’s expertise in the SMEs andIT sector.(Excerpted from the Arab News, 5 January 2005)

© Arab News.


India’s Tryst with AsiaK.KesavapanyAsian Institute of TransportDevelopment, 2006The present book analysesthat India and East Asia, asthe fastest growingeconomies have a commoncause to pursue. They facesimilar issues, which can besolved only with acommon approach. In thiscontext, sensing the criticality of the presenthistorical movement and China’s role ofdefiantly holding to its cause, the author drawsspecial attention to China’s self-perception. Thebook presents in detail about the forces thatare driving towards tripolarity.(Eminent Persons Lecture Series – 9)

China and India: TowardsGlobal Economic Supremacy?Rita Dulci Rahman & Jose Miguel AndreuAcademic Foundation, 2006ISBN: 81-7188-424-5China and India, currentlythe two most widelydiscussed countries of Asia,are considered to be thewings of Asian economictake off. The first one is acountry with plenty ofeconomic opportunities forthe developed countries, who try to maximiseexports to China and invest massively in it.With a certain delay, India has recently begunto attract attention, mainly due to the shootingup of its exports of IT services, while its currenteconomic position seems to be as promising asthat of China in the first half of the ’90s.

After portraying the economic andpolitical evolution of China and India anexercise that enables to detect the unsolvedproblems of these two countries, the authorsdiscuss not only the economic bottlenecksthey have, but also the internal and externalpolitical problems which China and Indiawill have to address in order to emerge asglobal powers.

Asian Economy and Finance: APost-Crisis PerspectiveDilip K. DasSpringer, 2005ISBN: 0387233814The Asian economy has changed markedlysince the economic and financial crisis of

1997-1998 and iscontinuing to evolve.Asian economies need tochange with thedemands of time anddevise their post crisisdevelopment strategy.Asia’s growth model, thatserved it so well for fourdecades, is overdue forrenewal so that it can re-strengthen its bondswith the ever-evolving regional and globaleconomic reality.

The book is comprehensive and coverslarge areas of Asian macro-economy andfinance. The noteworthy areas of focusinclude global and intra-regional trade andinvestment, as well as f inancial andmonetary aspects. In-depth discussionshave been provided on regional integrationthrough expanding trade, financial flows,regional production networks, andfinancial and monetary cooperation. Intaking a contemporary or post-crisis viewof the Asian economy, this book offers thenewest knowledge related to relevant themeson the Asian economies as well as the latestconcepts.

ASEAN-China Relations:Realities and ProspectsEditors - Saw Swee-Hock, Sheng Lijunand Chin Kin WahISEAS, 2005ISBN: 981-230-342-1This book is a compilationof all the papers presentedin the ASEAN-ChinaForum organized by theISEAS in June 2004 inSingapore. The paperspresented by the reputedexperts and scholars fromChina and ASEAN countries in this forumexplored the realities of the relationshipbetween ASEAN countries and China whichhave rapidly developed during the pastdecades. Apart from the existence of somedifferences, these countries have more incommon than before. However, ASEAN andChina have established a promising strategicpartnership ensuring peace, stability,cooperation as well as prosperity for theregion.

This book address a very wide range ofpotentially convergent and divergent issuesand the possible trajectories of thedevelopment of ASEAN-China relations.

Roadmap to an ASEANEconomic CommunityEditor - Denis HewISEAS, 2005ISBN: 981-230-347-2ASEAN Roundtable2003 on ‘Roadmap to anASEAN EconomicCommunity’ was organizedin Singapore with anobjective to review majordevelopments in ASEANand to explore new directions for ASEANeconomic cooperation in the light of therapidly changing global environment as wellas in terms of the emerging domesticeconomic situation and needs.

This book reflects the main findings thatemerged from the ASEAN Roundtable 2003.The book identifies new strategies and policiesthat would contribute towards realizing theASEAN Economic Community by 2020. Italso states that there are roadmaps for the fasttrack integration of eleven priority sectors, asthese sectors accounted for more than 50percent of intra-ASEAN trade.

Asia’s Giants: Comparing Chinaand IndiaEditors - Edward Friedman, Bruce GilleyPalgrave Macmillan, 2005ISBN: 1403971102This edited volumereconsiders theconventional wisdom,which argues thatcomparative performance(in economic, social,political, as well asdiplomatic arenas) of Chinahas been superior to that of India. The bookbrings together ‘new paradigms’ for evaluatingthe comparative performance of two countries.The essays show that if not outright wrong,conventional wisdom has proven to be overlysimplified. The book brings out the complexityand richness of the India-China comparison.

Asia’s Debt Capital MarketsProspects and Strategies forDevelopmentSeries: The Milken Institute Series onFinancial Innovation and EconomicGrowth, Vol. 6, Editors - Barth, JamesR.; Yago, Glenn, Springer, 2006ISBN: 0-387-25089-1This volume comprises studies by leadingresearch scholars in the United States and Asia

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RESOURCES


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The New Asia Monitor is a quarterly of the New Asia Forum launched by RIS. It seeks todisseminate the news, viewpoints and information about resources among the policy circlesand think-tanks to promote the cause of regional economic integration. The informationcontained has been compiled from various sources, as cited, purely for educational anddissemination, and not commercial, purposes. The copyrights of the material included remainwith the original sources. The New Asia Monitor is available free from RIS or can be downloadedfrom www.newasiaforum.org.

Associate Editor: Beena Pandey

New Asia ForumRIS has been supporting the process ofregional economic integration in Asia withits studies and research. Besides itspioneering contribution to the process ofeconomic integration in South Asia, it hasbeen supporting the ASEAN-Indiaeconomic partnership. It has beendeveloping proposals of a broader pan-Asian economic integration as a part of aresearch programme supported by theSasakawa Peace Foundation. As its mostrecent initiative, the RIS has set up aNew Asia Forum as a dedicated networkof think-tanks in Asia devoted to assistthis process of regional integration andthus help in building a New Asia withideas. The Forum has a dedicated website www.newasiaforum.org as the melting pot for all therelevant information and resources on the subject.

Feedback and contributions are invited from all concerned. Interested readers may join theforum and send relevant material for publications.

RISRIS is an autonomous policy think-tank, based in New Delhi, and specialised in trade anddevelopment issues. Its work programme focuses on multilateral trade negotiations, regionaleconomic integration in Asia, new technologies and development, and South-South cooperationin general, among other issues. The work of RIS is published in the form of research Reports,books, discussion papers and journals. For more information about RIS and its work programme,please visit its website: www.ris.org.in.

urces resources resources resources resources resources resources resources resources resources resources resources resources resources resources resources resources resources resources resources resources resources resourcesurces • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resourcesurces • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resourcesurces • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resourcesurces • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resourcesurces • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resourcesurces • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resourcesurces • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resourcesurces • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resourcesurces • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resourcesurces • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resourcesurces • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources • resources

RESOURCESon Asia’s debt capitalmarkets. They assess therisks and opportunities,and strategies fordeveloping these markets.The authors adopt am u l t i d i s c i p l i n a r yapproach, encompassingeconomics, finance andlaw, in the context of market practices forpromoting well-functioning securities markets.

Making Sense of Chindia:Reflections on China and IndiaJairam RameshIndia Research Press, 2005ISBN: 81-87943-95-5This book presents acomprehensive overviewof current and futuregeopolitical interactionsbetween India and Chinaand provides for new waysof looking at old problems.The series of articles insecond section addressesthe huge potential for trade and other forms ofeconomic exchange that exists between the twocountries. The last section address continuingsecurity concerns, the issue of democracy inChina, and the ongoing battle against HIV/AIDS in the context of two complementary,competitive, and fast-growing economies.

Japan and an Asian EconomicCommunityMasanori KondoUntil recently, most Japanese considered thegaining momentum of Asian economicintegration in the frame of ASEAN+3. India'shigh economic growth rate and its populationbeing predicted to overtake China in Asia isleading many to rethink the importance ofIndia to Asian economic integration. In orderto find a political and economic counterbalanceto China, the Japanese government has alsoput effort in vitalizing the Japan-Indiarelationship. India following its ‘Look East’policy has been successful in improving itseconomic relations with Korea, China andJapan. However, Japanese businesses are behindother countries towards investing in India.While there are indeed many unique difficultiesinvolved in entering the Indian market, themassive consumer potential of the populationcombined with a skilled and numerouslabour pool allows many South Korean andAmerican firms to attain great success there.(RIS Discussion Paper No.106, 2006)

Emergence of China and Indiain the New Millennium: Will itFacilitate Market Access forLDCs and DevelopingCountries?S.K.Mohanty and Sachin ChaturvediChina and India have emerged as highlydynamic economies in recent years. In theAsian region their growth and economicexpansion has generated its owncomplementarities. The paper has empiricallyshown that surge in the exports of these twocountries have significantly contributed totheir overall economic growth. Towards this

end, both the countries have relied on LDCsand developing countries for their importsand on markets of industrialised economiesfor exports. The import dependence of Indiaand China is mostly on the industrialintermediate sector, which is critical for theirexports. It is advantageous for LDCs anddeveloping countries to closely tie up withthese growing economies to get in to theirfast expanding markets, but the process isnot automatic. Developing countries,particularly LDCs, have to adopt long termstrategies to concretise their economicrelationship with these two countries tosecure persistent market access.(RIS Discussion Paper No. 101, 2005)

vol. 3 no. 2 april 2006 asian cooperation for world

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