ADDRESS BY MR GOH CHOK TONG, SENIOR MINISTER OF THE REPUBLIC OF
SINGAPORE, AT THE CONFEDERATION OF INDIAN INDUSTRY (CII) PARTNERSHIP
SUMMIT 2006, ON FRIDAY 20 JANUARY 2006, AT 12.15 PM IN KOLKATA,
OUR COMMON HOME:
THE ASEAN-INDIA CONNECT
Bhattacharjee, Chief Minister of West Bengal
Mr Kamal Nath, Minister for Commerce and Industry
Mr Y C Deveshwar, President CII
1. I am very pleased to be back in India and to see my friends again.
Thank you, CII, for the invitation.
I last addressed the Partnership Summit in 1995 at the CII’s
Centenary. The world has changed dramatically since then. So too
India. One clear and significant change is the global trend towards
regionalism. Europe is expanding and pooling sovereignties. The
Americas are coming together, despite the resistance of some countries
to the Free Trade Agreement of the Americas. Asia, too, is drawing
Today, I would like to focus on the economic aspects of East Asian
regionalism and share my thoughts on how I see the regional order
evolving, and how businesses can contribute to regional integration
and take advantage of the new opportunities.
In Asia, the vision of an Asian community is taking shape. And India
is an integral part of this community. This is the concept plan
of the common home which Asians are designing and building. The
foundation for this common home is regional integration. South Asia,
Southeast Asia and Northeast Asia are increasingly being linked
together by trade and investment flows, MNCs spreading their production
chains, and a growing web of bilateral and plurilateral FTAs and
regional processes. The Renaissance of China and India, two old
civilisations, is forcing a competitive dynamic throughout the region.
Consequently, countries have to rethink how to secure their place
in the new Asia. The rise of China and India is accelerating the
integration process. The trade figures reflect this. From around
30 percent in 1980, intra-Asian trade as a share of the region’s
total trade rose to more than 50 percent in 2004. In the last five
years alone, intra-Asian trade grew by 15 percent on average, well
above the average growth rate of 5 percent for intra-NAFTA and 9
percent for intra-EU trade.
The integration process will continue through market forces and
formal arrangements. Unlike Europe, the architecture for Asia will
likely be a complex, overlapping combination of bilateral and sub-regional
structures. It will not be one huge mansion of overwhelming uniformity.
Instead, it will be a sprawling estate of bungalows, with different
designs and sizes, which together form our common home.
I believe India and Singapore share the same vision.
Last month, in Kuala Lumpur, Prime Minister Dr Manmohan Singh outlined
his vision of an emerging Asian Economic Community. He also envisioned
a Pan Asian Free Trade Agreement which, together with many other
FTAs being negotiated in the region, will form the building blocks
of the eventual Asian Economic Community.
I share Prime Minister Manmohan Singh’s vision of an Asian
Economic Community. When I was honoured with the Jawaharlal Nehru
Award for International Understanding in July 2004, I also outlined
a similar long-term vision for an Asian Economic Community, using
FTAs as the building blocks. I therefore welcome Prime Minister
Manmohan Singh’s pledge in Kuala Lumpur for India to play
a major role in achieving this vision.
In Kuala Lumpur, we started the piling work for building our common
home. I am referring to the East Asia Summit (EAS), which brings
together ASEAN and six major economies in the region – India,
China, Japan, South Korea, Australia and New Zealand. Together,
they account for half the world’s population and one third
of global GDP. The Leaders agreed to work towards a regional community
in Asia. Significantly, they affirmed the importance of an open,
inclusive and forward-looking regional architecture. I believe that
the EAS will evolve into a high-level forum for strategic dialogue
and cooperation and complement other existing structures like ASEAN
ASEAN and India should work together to shape the common home we
are building in Asia. I call this cooperative relationship the ASEAN-India
Connect. ASEAN-India Connect encompasses the burgeoning strategic
and economic partnership developing between India and ASEAN. It
is an important beam in the regional architecture.
I should add a clarification here. ASEAN-India Connect is really
a re-connection. India’s relationship with Southeast Asia
goes back a long way. Over many centuries, Southeast Asia and India
were intertwined through the exchange of people, trade, ideas and
culture. But these ties waxed and waned. During the Cold War, Southeast
Asia and India grew apart. India’s present re-connection with
ASEAN began in 1992 when the late Prime Minister Narasimha Rao initiated
India’s “Look East” policy. Since then, political
and economic relations between India and ASEAN have grown steadily.
Trade between ASEAN and India, for instance, increased six-fold
between 1990 and 2004 to reach US$18 billion.
Indian industry and enterprise have taken a lead in this re-connection.
The CII, in particular, has been in the vanguard of pushing for
deeper ASEAN-India Connect. The ASEAN-India Car Rally which the
CII organised in November 2004 vividly underlined the connectivity
between ASEAN and India.
There is tremendous scope for deeper engagement between ASEAN and
India. They have different natural endowments and are complementary
in many fields. The two economies have much to gain through increasing
trade and mutual investment.
Prime Minister Manmohan Singh has set the target of doubling ASEAN-India
trade to US$30 billion by 2007. This is an ambitious but achievable
goal. Experience over the last 10 years has shown that when ASEAN
and China started to integrate their economies, trade grew by leaps
and bounds. Today, this trade is worth US$90 billion. Also, initial
fears that ASEAN economies would be hollowed out by China were misplaced.
While some manufacturing plants did relocate to China, these were
offset by the strong growth in exports and raw materials to feed
China’s booming economy. Over the last 10 years, ASEAN’s
exports to China grew at an average of 21 percent annually, 3 percent
higher than China’s exports to the world which grew at an
average of 18 percent per year. The benefits from ASEAN-China economic
relations indicate what can be achieved for India and ASEAN.
India has a deep pool of intellectual talent and technological capability.
India is strong in services and has carved a niche for itself as
the world’s back office and a global software centre. ASEAN
has abundant natural resources and well-developed manufacturing
industries. ASEAN is already woven into global manufacturing networks.
India and ASEAN should therefore leverage on each other’s
comparative advantages to develop new products and services for
India can also use ASEAN as a launch pad for its companies. Many
MNCs have established themselves in ASEAN. Singapore alone is host
to 7,000. Indian companies can gain access through ASEAN’s
connectivity to markets across the region and the world.
ASEAN can provide useful links for India’s economic dealings
with other Asian countries like China, Japan and Korea. ASEAN has
signed a merchandise trade agreement with China, with plans to implement
a comprehensive FTA by 2010. China and India are re-discovering
each other and making investments in each other's economies. But
ASEAN businessmen have had long dealings with both Chinese and Indian
firms. Indian firms can therefore tap into the experience and networks
of ASEAN businessmen.
Japan, too, is renewing its interest in India. When I visited Tokyo
two months ago, I was pleased to learn that Japan was keen to strengthen
its relations with India. This is driven by both geopolitical considerations
and economic interests. Some Japanese firms have already started
to explore the Indian market. I encouraged them to accelerate the
pace of exploration. However, Japan still tends to see India as
culturally different, geographically distant and bureaucratically
bound. Japanese businessmen told me frankly that they were more
familiar with China. Singapore can help play a role in connecting
India and Japan. This is why Nomura Securities chose to launch its
India Stock Fund in Singapore, which raised US$1 billion in a week.
to ASEAN-India Connect
There is clearly great potential for and benefit in ASEAN-India
Connect. However, we must not overlook the major obstacles which
will prevent this potential from being realised. I would like to
highlight two critical areas which both ASEAN and India should pay
o First, maintaining the momentum of reform and liberation,
o Second, changing mindsets.
Harnessing the full potential of ASEAN-India Connect will involve
not only physical reforms and tackling the "hardware"
aspects but also addressing the "software" underpinning
economic growth. Reforms and mindset change are two sides of the
same coin. Nevertheless, I think it will be useful to consider them
separately so that we can give due attention to each of them.
the Momentum of Reform and Liberalisation
In our globalised world, investors are spoilt for choice. They can
pick and choose their markets. We have to push the pace of reforms
to improve our competitiveness so that we are the chosen ones.
In the case of ASEAN, improving competitiveness must be tackled
through both national reforms and regional integration. In the wake
of the Asian Financial Crisis, ASEAN countries have implemented
structural reforms to strengthen their economies. Collectively,
ASEAN is growing at 4 to 6 percent per year but has the potential
to do better. Individual ASEAN countries are small and national
reforms alone are not enough. Hence, ASEAN countries are stepping
up their integration to create one single production zone and market.
However, efforts at integration are complicated by disparities in
economic development. Political will is therefore critical. At the
ASEAN Summit in KL, ASEAN Leaders agreed to study how to accelerate
the formation of an ASEAN Economic Community and advance the target
date from 2020 to 2015.
The Leaders also signed a historic declaration to establish an ASEAN
Charter, which will map out bold and ambitious programmes to enhance
cooperation and integration of ASEAN.
The reform imperative applies equally to India. India has just started
to reap the fruits of reform. Economic growth has risen from an
average of 3 percent in the 1970s to more than 6 percent over the
last decade. In 2004, India received US$5.5 billion in Foreign Direct
Investment (FDI), a considerable jump from US$0.1 billion in 1990.
However, going by China’s experience, the flood of investments
will come if India stays on the reform path. What India has received
in 2004 is still less than 10 percent of China’s US$61 billion.
To realise its full potential, India needs to press on with and
even accelerate the pace of reform. The Indian political leadership
clearly recognises this and recently announced that it would simplify
procedures for foreign investors. This is an important step.
I believe that India cannot turn its back on reform. No matter which
party comes into power, the government of the day will have to deliver
the economic goods that the people have come to expect. Reform is
irreversible. However, the pace may well fluctuate. The intricacies
of coalition politics means that time and patience will be needed
to forge a national consensus on reforms. This is where businessmen
like you can help. The CII has always impressed me as a forward-looking
organisation with vision. It has always been pro-reform and - liberalisation
and should continue to push the pace.
One important area for improvement is India’s infrastructure.
Many international business rating agencies and businessmen highlight
weak infrastructure as the key impediment for India’s growth.
The Global Competitiveness Report 2005-2006, for instance, places
inadequate infrastructure as the biggest problem for doing business
in India. One Singapore businessman who runs a healthcare group
said that while he was convinced about India’s long-term potential,
he was hesitant about putting in more investments now because of
the lack of good roads, clean water and reliable power.
The Indian Government has stated that in order for the country to
meet its goal of 8 percent growth per year, it needs to spend US$150
billion on infrastructural projects over the next seven to eight
years. This is a huge but critical investment. These projects can
benefit from private sector participation, and open up huge opportunities
for both Indian and foreign businesses. ASEAN countries with expertise
in road and other infrastructural construction are well-placed to
invest in infrastructure development in India.
Apart from maintaining the momentum on reform and liberalisation
and improving “hardware” like infrastructure, an equally
important dimension is mindset change or “software”
transformation. For ASEAN and India to be players in a globally-integrated
economy, a globalised mindset is needed. We have to shift away from
the old mindset that competition is undesirable because it leads
to foreign economic colonisation. In reality, protectionism produces
economic stagnation. Protectionism breeds complacency and inefficiency,
which in turn begets more protectionism. On the other hand, competition
spurs innovation and compels businesses to become stronger and more
efficient, better able to tap the global opportunities. Competition
drives economic growth. You lose some but you win more. Governments
must therefore work to remove impediments to healthy competition.
In the case of ASEAN, looking back, economic integration amongst
members could have gone further and faster during the boom years
before the 1997 crisis. Back then, ASEAN was ahead of China in the
pace of development. FDI was flowing into the region and we did
not feel the urgency to push economic integration as we were doing
well individually. We failed to ensure that as an economic grouping,
we stayed ahead of global trends. Now, ASEAN has fallen behind China
in attracting investments and economic growth.
Although ASEAN countries have recovered from the 1997 Financial
Crisis, the world has not stayed still. Competitive pressures have
been building up. China and India are on the rise. Japan’s
economy is back on track and Korea is remaking itself. Last year,
China drew in two and a half times more FDI than what ASEAN received.
ASEAN countries must constantly seek ways to compete, restructure
their economies or risk falling behind in the global race.
The same logic applies to India. In 1995, when I spoke at your first
Partnership Summit, the thrust of my message was simple:
“Economic deregulation in India aimed at introducing competition
and integrating with the global economy…is no longer a matter
of choice. It is a necessity if you are to avoid being left behind
in the new global economy…Persevering with the reforms will
require taking carefully calculated social and political risks.
But there is no other credible option if India is to relieve itself
of poverty and take its rightful place in the world economic order”.
It is a theme I have returned to repeatedly over the past decade.
At the heart of whether India will open up faster is the country’s
confidence in its ability to compete and take advantage of the global
opportunities. I have no doubt that India can compete. Why? In a
word, it boils down to the availability of talent. I know what Indians
are capable of if they have the educational opportunities and exposure.
Just look at the spread of Indian talent all over the world –
in Wall Street, MNCs and international banks. Also, look at the
enterprises in India. Many are already holding their own internationally.
The Indian business community is exuding tremendous confidence.
I can sense it. Especially on this trip. The buoyant mood is infectious.
I was told that you call this sense of self confidence “atma
vishwas”. This national “atma vishwas” has helped
to build the New Delhi Metro to world standards and on time. It
is this spirit which will drive India forward.
There are signs India is already making the mindset change. One
important step India has taken is to embark on an active FTA policy,
signalling its intention to grow by leveraging on external economies
and opening itself to competition. In June last year, India signed
its first comprehensive FTA with Singapore. India has also concluded
FTAs with Sri Lanka and Mauritius and is negotiating several more,
including with ASEAN and the Gulf Cooperation Council.
The Comprehensive Economic Cooperation Agreement or CECA has facilitated
the deepening of trade and investment links between Singapore and
India. Even while negotiations were ongoing, CECA helped to raise
awareness of the business opportunities in both our countries. In
2004, our bilateral trade reached US$7 billion. Between 2003 and
2005, both bilateral trade and Indian exports to Singapore more
than doubled. Indian official figures show that for the first nine
months of 2005, Singapore was India’s third largest source
of FDI and for the same period, FDI from Singapore was about four
times that for the whole of 2004. Many Indian companies are using
Singapore to plug into the global business, knowledge and social
networks. There are more than 1,600 Indian companies in Singapore
which use it as a base to expand into the region and beyond. CECA
has been in force for about six months. In order to realise its
full potential, it is critical that the Agreement be fully implemented.
CECA can also act as a building block for India’s comprehensive
economic integration with ASEAN. The benefits from CECA show the
potential benefits that can be reaped from an ASEAN-India FTA. Unfortunately,
negotiations have not progressed as quickly as ASEAN’s FTA
negotiations with China, Japan and Korea. India should take a strategic
view and work towards a high-quality FTA. Otherwise, the complementary
and potential benefits from ASEAN-India Connect will remain at the
level of potential. Strong political commitment will be needed to
break the current deadlock. Prime Minister Manmohan Singh has given
his assurance that the ASEAN-India FTA has India’s full political
backing. Businessmen like you can also do your part in helping to
turn the ASEAN-India FTA into reality.
Let me conclude.
Globalisation has intensified competition and is reshaping the world.
Globalisation is not “gobble-lisation”. Competition
is a positive sum game, not a zero sum venture. This is why we in
Asia have started to construct a common home. India has a key role
to play in the transformation of Asia.