February 22, 2020
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'Switch On The Engine Of South Asian Growth'

Speech by the External Affairs Minister of India at the SAARC Chamber of Commerce and Industry Symposium on Regional Cooperation, Islamabad

'Switch On The Engine Of South Asian Growth'

President, SAARC Chamber of Commerce and Industry; eminent scholars who have gathered here to participate in this symposium on ‘Regional Cooperation’; leaders of business and industry of the SAARC countries, ladies and gentlemen,

I am extremely happy to be here in Islamabad today and to address this distinguished gathering on the eve of the SAARC Summit. ‘Regional Cooperation’ is a topic particularly relevant to our current situation in South Asia. I understand that you have been engaged in day long deliberations on topics such as SAFTA, poverty alleviation and the myriad possibilities for regional cooperation that exist within the region. I am certain that leaders of the SAARC countries will find the fruits of your deliberations extremely useful. I congratulate the SCCI on having taken this initiative.

Friends, according to a recent forecast by the ADB, South Asia is set to maintain its economic growth performance provided there is no major political instability. Its estimate for the economic growth of the region is a robust 5.8% for 2003 and over 6% for 2004. Clearly, the above has been achieved in an atmosphere of mistrust and tensions in South Asia. Just imagine how much more could be achieved if through trust and confidence building, we ensured political stability and gave ourselves an added boost through regional cooperation.

Our expectation in India is that we will grow at a rate of over 7% this financial year. In fact, in the second quarter of 2003, we have achieved a growth rate of 8.4% and our leading industry association, the Confederation of Indian Industry has forecast 9% for the third quarter of the fiscal year 2003-2004. This growth is not a flash in the pan. It is sustainable growth that we have achieved as a result of painstaking economic reforms implemented over the last decade and more.

Since we launched our reforms in early 1990s, India has recorded an average annual growth rate of over 6%. It is now the world’s fourth largest economy on the basis of Purchasing Power Parity. Our external reserves have exceeded USD 100 billion and are today the sixth largest in the world. Our foreign trade is growing at double-digit rates. We are rapidly reducing our external debt. There is strong business confidence and a ‘feel good’ factor across our economy, buoyed by recent successes notched up by our services as well as manufacturing sector. Our reserves of food stock stands at over 30 million tonnes. Starting from scratch a few years ago, Indian software exports have reached USD 10 billion per annum. Our determined thrust for infrastructure modernization emphasizes building of roads, ports, increase in power generation etc. The Indian economy comprises a strong and growing middle class of 300 million people with rapidly increasing purchasing power.

The central message, which India therefore brings to the SAARC Summit, is that we must set aside all our suspicions of each other wherever they exist and switch on the engine of South Asian growth in order to travel on the road to prosperity. This task brooks no further delay.

In the globalised world of today, collective regional endeavour is an expression of enlightened self-interest for any country. If only we would permit regional stability and cooperation to empower the poor of our countries, the extraordinary productive energies of the one and a half billion people of this region will be set free for the grand march of our economic and social development.

There is today consensus that the enhancement of public good requires coordinated multilateral action and belief in overlapping fortunes. Across the world, economic security has become the driving motivation for regional and trans-regional cooperation. Nations are increasingly focused on evolving strategies that will help adapt their economies to world markets and to trans-national economic flows. There is universal recognition that this is best done if countries act as a region rather than as individual economies.

In a world where democracy is an universal value, enhancing the quality of life of the people has to be the foremost priority for Governments. Greater regional cooperation enables the creation of mutual stakes in each other’s prosperity and, in the process, creates an environment conducive to the resolution of political differences that may exist. Most countries today recognize the fact that hostility and tension would disrupt their economies, trade and overall wealth aggregation. We too, in South Asia, must recognize this fact.

We should accept the realities of the present world order and identify the objectives of cooperative economic security, as many regional groupings are doing. This will require that we do nothing to undermine each other’s security. Our goal of economic security for the region can be achieved only if we exchange information, investment, technology, know-how, and business opportunities and, thereby, reinforce our developmental agenda.

We all know that foreign investors prefer countries where the economic fundamentals are strong. Reference is often made to factors such as currency stability, adequate infrastructure, size of market, and the labour situation. But even more fundamental to foreign investment is the security environment. There has to be domestic as well as regional peace and stability. Enduring tension will benefit none of us.

In fact, the peace dividend, in today’s globalised context, is more than just the additional domestic availability of resources. It also includes the innumerable regional collaboration opportunities that become available. We also, thereby, become far less vulnerable to global economic shocks and downturns.

There are perhaps no readymade solutions to what has kept us from coming together for so many decades. But to pawn our future to despair is no option either. We have all seen how the limited resumption of business exchanges and people-to-people contacts between India and Pakistan has already contributed to the rise of a new optimism in our region. We must preserve and accelerate such steps across the subcontinent. They can help resolve our differences in a way that old hostility or new distrust never can. Peace is in everybody’s self interest. We only need the courage of conviction and the determination to seek peace in the face of all negative persuasions and blandishments.

If we do not provide legitimate avenues for commercial interaction, then illegitimate channels come into operation. Decades of tension have resulted in predatory economic structures based on illegal cross-border activities including smuggling, narcotics, arms trafficking and support to disaffected terrorist and insurgent groups. The people who have become wealthy through this criminalised economy fund and sustain divisiveness in order to inhibit regular economic and social exchanges. This has to be put an end to. A more participatory involvement in legitimate, cross-border economic exchanges has to be promoted so that the peace economy triumphs over the nefarious one.

SAARC processes, particularly our negotiations on free trade, must make greater headway. A liberal trade treaty with India has significantly narrowed Nepal’s trade deficit with us. India’s Free Trade Agreement with Sri Lanka, signed in 2001, led to an increase in Sri Lanka’s exports to India by around 137% in just one year. The success of the India-Sri Lanka Free Trade Agreement has inspired us to expand its scope to cover services and investment in a comprehensive economic partnership agreement. These examples show that we must discard the myth of asymmetries in economies inhibiting smaller countries from benefiting from closer economic integration within South Asia.

We have assets that few regions have. We have a demographic advantage in our young populations. They are the mainstay of our human resources. Our people have impressed global corporate corridors with their technical, financial and managerial expertise. Their energies and talents must also be given application in regional cooperative enterprises. Our technological advances have put us at the vanguard of today’s Knowledge Economy. The size and increasing purchasing power of our collective market creates economies of scale. The rich diversity of our bio-resources – in the Himalayan region and elsewhere – are yet to be exploited for our common benefit. We can have a common network of financial institutions in the banking and insurance sectors. We can look at education, health and housing sectors, which will fling open huge markets to businesses in all our countries. Intra-regional investment flows also have great potential.

Let us think then of a comprehensive regional economic partnership. South Asia has vast untapped capacities for hydropower and unexploited hydrocarbons, which can more than meet its huge energy deficit. Nepal and Bhutan today have an estimated potential of 100,000 MW of environmentally clean hydropower. They need to create wealth for their societies by profitably selling these energy resources. The hydroelectric projects in Bhutan illustrate this dramatically. Bhutan’s per capita income of USD 600 per annum today is expected to double by the end of 2005, when just one project, the 1020 MW Tala power plant is completed.

The optimum management of our water resources for irrigation, navigation and flood control can similarly have a multiplier effect on infrastructure, development and growth in our entire region. This requires not only financial investments, but also maturity of policy.

Friends, India is willing to move forward rapidly with a South Asia strategy that will help the economic integration of the subcontinent. Let us create softer and safer national boundaries so that the region becomes an economic area that offers profitable, competitive and enriching partnerships to all of us. We can collaboratively create an alliance for an affluent and amicable Subcontinent. In the past, by fragmenting our people and our markets, we have allowed ourselves to realize only a fraction of our worth. A South Asia with one currency, one tariff regime and free movement of goods, services and people is well within the realm of possibility.

We can also look at innovative trilateral arrangements across regions. We have concluded a number of free trade arrangements with many countries of Asia. During my recent visit to Iran, I proposed to the Iranian leadership that India, Iran and Pakistan could form a common market to work together and provide new economic opportunities to the people of the three countries. Later, we could even extend this partnership to include Afghanistan, Central Asia and the Gulf countries to form one huge common market.

Pakistan, with its unique geographical position at the confluence of the Sub-Continent, the Persian Gulf and Central Asia can play an invaluable bridge role in connecting an energy-hungry India with its booming markets to those of Central Asia, West Asia and the Gulf. If Pakistan can find within itself the strength and wisdom to change its current approach towards India, there are immense benefits that it can derive as a transit route for the movement of energy, goods and people. We could then very well see this entire region rise on the tide of regional cooperation as has happened in the case of ASEAN.

India is proud of its achievements and confident of the future. At the same time, we are also clear that if we want to secure this future, our neighbours must become full partners in our economic progress. We wish to purposefully move forward, and move together. It is for this reason, that I have been advocating quick progress towards a South Asian Union. If other regions could achieve this kind of Union, despite political, social and economic differences, there is no reason why we should deprive our people of this opportunity.

Friends, the size, population and the success of India, whether it be in the economic field or the political and social field, is a reality that should not be held against us. It should be seen as an advantage that can be leveraged for the benefit of all of India’s smaller neighbours. India has no desire but to be able to build economic relations aimed at mutual benefit. There are a number of asymmetries in SAFTA. We are quite clear that bigger nations will have to make concessions to smaller nations and such asymmetries are essential to take everyone together. Whatever strengths we have built over the years in terms of technology, in terms of human resource development and capacities, we are prepared to put at the disposal of our neighbours in South Asia.

I would like to conclude by extending my good wishes to all of you in the SAARC Chamber. I hope that your networked determination will make you a powerful steering centre for regional integration. I call upon you to create a dense web of contacts among South Asian businessmen and serve as a key bellwether for the Governments of the region on a wide range of economic issues. You have an important role to play in encouraging the people and the Governments of the region to think and act regional, beyond the zero-sum bilateral bedevilments that have plagued us so far. I am confident that you will play this role effectively and in the process, articulate the true voice of South Asia.

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