Mr. Chairman, Excellencies, Ministers of Foreign Affairs of our ASEAN countries and my colleagues from the dialogue partner countries.

  1. It is a pleasure and a privilege to be participating in the 31st Post Ministerial Conferences of ASEAN. This coming together of ASEAN regarded for some time now as the symbol of Asian vitality and resurgence with its ten dialogue partners from Asia, Europe and America, provides us with a major opportunity to address recent critical developments in Asia’s evolution. In particular, the PMC is well placed to provide latest insights into the South East and East Asian financial crisis, its implications and spur innovative strategies and enlightened action – national, regional and international.
  2. During the past year, we have seen many previously dynamic and high growth economies in East and South East Asia ravaged by financial turmoil, slow down and contraction in economic growth and production. Trade and investment flows which have been the mainstay of their economies have suffered a significant decline. Their currencies and capital markets are in a state of turbulence and are victims of volatility. Overnight, the national and per capita incomes of some of these countries have been reduced by one third to half. In some, the political and social consensus built painstakingly over decades seems to be under strain. Increasing poverty, unrest, unemployment, migration and collapse of local banks and corporates signify the enormity of the socioeconomic cost.
  3. What is disconcerting is that the crisis has proved to be much deeper, more widespread and prolonged than originally expected. This is perhaps as much because of the scale and dimensions of the crisis as the nature of the palliatives and cure prescribed. As a result, the East and South East Asian financial crisis has reverberations beyond the confines of East Asia and Asia, replicating itself in countries and markets as diverse as South Africa and Russia. Many more countries, within and outside the region, with similar policy parameters could catch the East Asian flu, thus rendering recovery even more difficult and protracted. IMF, OECD and UNCTAD reports have projected that the crisis could affect the economic outlook of both developed and developing countries in the next two years and that there could be a significant deceleration in world trade. Thus the established locomotive economies such as US, Europe and Japan are likely to be affected by the slump in the emerging locomotive economies of Asia and elsewhere. This, in turn, could set in motion a vicious recessionary circle in the global economy instead of a virtuous circle, of prosperity and growth.
  4. It is in everyone’s interest to fully understand the phenomenon, to draw appropriate lessons and to take corrective measures. Otherwise, our collective capacity to meet the multiple challenges of accelerated economic growth, poverty eradication, environmental protection and social welfare could be impaired. No country can afford to be sanguine or ever indifferent, however sheltered it may seem to be from the storms raging around us.
  5. Mr. Chairman, India, a large and emerging economy on the very doorsteps of ASEAN – by land and by sea – has been aspiring to ride the next wave of the Asian economic miracle. Our civilizational, cultural and people to people links with ASEAN have reinforced our long held perception of this region as “a land of golden opportunities” or Suvarna Dvipa. Further ASEAN’s success in regional integration and in involving their dialogue partners from East Asia and the Pacific so productively in their economic development has been an inspiration as will as an additional reason for embarking on our Look East policy. This policy was not only reiterated by our government but given a special emphasis in our National Agenda for Governance – an agenda that was articulated in April this year when the East and South East Asian crisis was in full fury.
  6. Whilst this crisis has not altered the basic coordinates and rationale of our Look East policy, we naturally seek to adjust our sights, find ways to overcome challenges and to set new markers. Firstly, India, in keeping with its South East Asian affinities and economic interests, will continue to express solidarity with our brethren and assure them that India’s policies and positions will be supportive of their recovery. Secondly, we will keep in mind the perspective that this crisis is a transitory phase, which, with time, national adjustment and international support, will pass, giving way to sound and vibrant economies once again. Thirdly, we will try to minimise the effects of the crisis on our own economy as well as on the long term development of ASEAN-India relations, whatever the temporary set backs. Fourthly, whilst dealing with ASEAN as with other East Asian countries, we will seek to evolve modules of economic and political relationships which fully take into account the conditions and requirements of each country in its inter action with India. In other words, our Look East policy will be flexible and responsive to the diversity within the evolving unity of East and South Fast Asia instead of trying to be all things to all countries. Fifthly, we will engage in sub regional and supra regional arrangements to the extent that others value our contribution and participation. Sixthly, being of the region and the Asian continent, we will attempt to be a stabilising and balancing force in ASEAN’s evolving security and economic equations with regional and extra regional partners. Last but not least, our Look East policy will be integrated into a larger regionalization strategy which encompasses South Asia, the Indian Ocean Rim, the Bay of Bengal Rim and the Asia Pacific.
  7. Against these policy parameters, India has a special interest in seeing early restoration of normalcy and high growth so that the East and South East region can once again be one of the key sources of our own economic vitality. Since a quarter of our trade and investment is with this region and we are targeting 7 to 8 % growth for the next few years, this could be a crucial input. In the last 3 years we have maintained a GDP growth rate of 6.6 % inflation rate of about 5.7 % and sustainable current account deficit of 1.4 % During this period, external debt to GDP ratio has been reduced from 32.3 % to 23,8 % and the debt service from 26 % to 18 %. The short term debt as a proportion of total external debt is low at 6.3 %. The fundamentals of the Indian economy are strong and our prudent policies have enabled us to withstand recent uncertainties in the international economic environment. It would, however, make a positive difference if the crisis in Fast Asia winds down quickly.
  8. The crisis has underlined the importance of economic security for developing countries and how they would have to redefine that in terms both of content and management, nationally and internationally. Relevant issues include (a) guarding against increased vulnerability of developing economies to forces of globalization, the fragility and uncertainties of the international monetary and financial systems and the effects of speculation; (b) the need to build inherent strength, capacity and institutions and allocate resources so that economic security is enhanced; (c) adequacy of macro economic management and exchange rate arrangements, prudent supervision and regulation of financial sectors; (d) mobilization of development finance including ODA, long term FDI and short term financial flows given their relative values for development, (e) need for prudent and well sequenced liberalization, particularly of the financial sector and on the matter of current account convertibility. The crisis should, therefore, be handled in a way that faith is maintained in the benign aspects of globalisation and liberalisation and in their positive relationship with the economic security of developing countries.
  9. We have some anxieties about indirect implications of the crisis for emerging economies. A prolongation of the crisis, seems to have dampened somewhat the sentiment of investors towards emerging economies and even credit rating agencies seem to have become extra cautious. It is hoped that this would change so that the potential of emerging economies is fully recognised and fostered for global good. ASEAN’s developed country dialogue partners could help in this area by giving favourable political impulse for, it would also benefit them. There is incontrovertible evidence and research including by the OECD to show that the destinies of emerging and developed countries are linked and supporting the formers’ growth will in turn revitalise the latter.
  10. Dialogue partners have a crucial role to play bilaterally and in regional contexts as well and have a responsibility to maintain a structure of cooperation which enables tapping of complementarities to the full. They can also contribute to necessary changes in the international financial and monetary systems. Bilaterally we can render assistance, each according to our capacities, for example by keeping markets open and not undertaking competitive devaluation. We have done that and in this period ASEAN exports to India have surged. Similarly, we have adopted some transitional measures to sustain our economic cooperation, trade and investment flows with the affected countries. We have indicated our willingness to look at regional schemes for trade and financial cooperation that could offset the difficulties being faced by these countries.
  11. Suggestions on the critical issues to be addressed in the international monetary and financial architecture have been taken up in the IMF and World Bank as well as in fora such as G-15, APEC, G-8, G-24 and ASEM-II. I would like to highlight some key elements like establishment of effective early warning; remedial and support systems within the Multilateral Financial Institutions; improved risk analysis by private credit rating agencies; adequate institutional arrangements to deal with market failure when they occur and coordinating international responses to such situations; surveillance and sound supervision to be exercised in respect of the financial sectors and policies in capital exporting as much as the capital importing countries and keeping the international trading system open, fair and equitable for developing countries so that they can be helped to avoid as well as grow out of such crisis. These and other ideas, along with appropriate regional arrangements, should be pursued with a sense of urgency so that the crisis can be stemmed, the contagion contained and prevented from casting a gloom on the world economy as a whole.
  12. Mr. Chairman let me briefly address myself to the agenda item relating to ASEAN initiatives for regional cooperation, It is heartening to note that ASEAN is persisting with its efforts to reach its original goal posts with regard to these initiatives despite the Problems created by the East Asian financial crisis. ASEAN celebrated its 30th anniversary last year with such achievement to its credit and with an equal sense of the challenges ahead. India admires ASEAN’s economic integration plans including AFTA, AICO, AIA, Growth Areas – and would like to interface with them in whatever manner found to be of mutual utility. Given the limits and disadvantages of ‘closed circuit’ East Asian and South East Asian co-operation arrangements brought out so vividly by the recent financial crisis, it would always be useful for ASEAN to find invigoration from extra East Asian neighbouring countries like India.
  13. Finally, Mr. Chairman, this is not the first time that Asia has, after reaching the pinnacles of glory and achievement, experienced a temporary downturn in it’s fortunes. So the affected countries as well as. the dialogue partners of ASEAN should work to build confidence in the ability of these countries to recover within a sustainable time frame and we should all contribute towards that outcome. As for the countries of ASEAN and East Asia, I would like to remind them that it is in Asian character to take a longer view of history and show resilience and agility in overcoming setbacks. It is, therefore, premature to pronounce the end of the Asian century even before it has really begun. Mr. Chairman, we believe that Asia will not only overcome, but will do so together, in symbiosis. I am also confident, that India with its many assets will play its rightful role. I recall in this context, the prophecy made by the Indian sage Swami Vivekanand a 100 years ago.

“The star arose in the East, it travelled steadily toward the West, sometimes dimmed and sometimes effulgent, till it made a circuit of the world. Now it is again in the very horizon of the East a thousand fold more effulgent than it ever was.”