Linking up to a Rising Asia
A SUCCESS STORY
1. In 1971, a small shop selling ready made garments opened in Little India, Singapore. After two years, it added electronic products to its merchandise. As the business expanded, the owner first rented space in a shopping centre nearby, then started buying up some old shop-houses along the road one by one. Now he has his own building - the Mustafa Centre, a shopper's paradise selling over 100,000 products and open 24/7, a must see for Indian tourists and many other visitors.
2. Mustafa's is one of the many businesses which are riding on India's growth and rising affluence. India's influences are being felt all over Southeast Asia. In Singapore alone, there are more than 1,500 Indian companies. Many are regional headquarters, some even overseeing operations in the Indian market. Thousands of Indian professionals work in Singapore in IT, financial services and other fields. Bollywood movies enjoy a strong following.
AN ASIAN RENAISSANCE
3. India's links with Southeast Asia go back centuries. India has left the imprint of its great civilisation all over the region, in religion, culture, arts and literature. But during the decades after India's independence, India turned inwards. Its priority was self-sufficiency rather than interdependence, and these historic linkages weakened.
4. Today, India is once again opening up and rediscovering the region. It is attracting investments from all over the world, especially in IT. Outward investments from India have also been increasing. Its external trade has increased, and with Southeast Asia trade has multiplied by six times in the last ten years. If the reforms continue, India's interests and influence in the region will continue to grow.
5. In the meantime, most ASEAN countries are growing steadily, benefiting from the dynamism of India and China. ASEAN is working towards the goal of an ASEAN Economic Community by 2020. The group is also actively linking up with adjacent regions - China, Japan and South Korea in Northeast Asia, India and other countries in South Asia, and also Australia and New Zealand to the South. The prospect of Southeast Asia is bright.
6. Together, South Asia, Northeast Asia and Southeast Asia account for nearly half of the world's total population, with a growing middle class to drive consumption and market demand for products and services. The potential is huge. The stage is set for an Asian Renaissance. There are three important building blocks to this vision - first, strengthening India's ties with Asia; second, evolving a stable, open regional architecture; and third, reaching national consensus on globalisation and economic reforms.
STRENGTHENING INDIA'S TIES WITH ASIA
7. First, we need to strengthen economic ties between India and the Asian countries, and especially with Southeast Asia. While Southeast Asia's trade with India is growing rapidly, it is still only 15% of its trade with China. The centrepiece of India-ASEAN co-operation is an FTA, which will build a strong bridge across the two regions.
8. Yesterday Dr Manmohan Singh and I signed the India-Singapore Comprehensive Economic Co-operation Agreement (CECA). Bilaterally, CECA will create many opportunities for businesses and individuals on both sides. But more importantly, it is a significant step towards an India-ASEAN FTA, and deeper engagement between India and Southeast Asia.
9. Singapore is a natural gateway for India's to engage our region, because of the historical ties and special friendship between our two countries. We are also small and industrialised; our economy complements India's economy, and does not threaten India's sensitive sectors. Singapore-India trade (almost US$7bn) is already half of total ASEAN-India trade (US$15 bn a year). Singapore can therefore play a useful role as a pathfinder for India.
10. The CECA is the first comprehensive free trade agreement that India has signed with any country. It a strong signal that India is committed to continuing economic liberalisation and market reforms and that Indian companies are confident that they can compete and hold their own against international competition. It heralds further moves by India to engage the outside world, not just with ASEAN, but also with its major partners.
11. Sino-India relations are one important dimension of this engagement. Trade and investments between the two countries are growing very significantly and India is moving to improve relations with China. At the same time, India's relations with the US are warming up.
12. Bilaterally, the CECA is just the beginning of what Singapore and India can do together. One obvious area for deeper engagement is in air passenger services. A liberal aviation regime will increase foreign visitorships and create many jobs in the tourism sector. By maintaining a liberal aviation policy, Singapore attracts almost 8 million tourists a year, double our resident population. Between Singapore and China, we now have unlimited flights. But between Singapore and India travellers have great difficulty getting air tickets. This puts India at a significant disadvantage. I hope that before too long, we will be able to liberalise air services between India and Singapore, so that we can generate further spin-offs throughout our economies.
EVOLVING A STABLE, OPEN REGIONAL ARCHITECTURE
13. Second, in this new era, Asia needs a stable and open regional architecture - an accepted framework within which all countries can have their individual voices heard, and their legitimate interests accommodated.
14. The emergence of India and China is stimulating greater intra-regional linkages and cooperation. China is already the biggest trading partner for many Asian countries. As India opens up, it too will develop similar strong links to the region, especially Southeast Asia. From Southeast Asia's point of view, this is an extremely positive development. China and India are like two wings which will give Southeast Asia an extra boost.
15. However, while strengthening regional cooperation, we must continue to keep the region open, and connected to the rest of the world. In particular, we have to keep the US engaged in Asia. The US is not only a major economic partner, but also continues to play a vital security role, as it has done for half a century. It contributes to the stability of Asia and enables all the countries in the region to compete peacefully with one another. No other country is in a position to replace the US in this role for many years to come.
16. One significant new initiative in regional cooperation is the East Asian Summit (EAS), to be held this December. The key issue of participation has been settled. It is important to reflect the emerging shape of regional cooperation in Asia, and include all the countries which are able to make a contribution. ASEAN has therefore decided that the EAS should include not just ASEAN plus three, but also India, as well as Australia and New Zealand if they choose to join. This provides a broader foundation for regional cooperation, and keeps Asia inclusive, forward looking and outward-oriented.
17. Stability in Asia also depends on the wider international order, and thus on a credible and effective United Nations (UN). Singapore supports the UN reforms, because an expanded UN Security Council (UNSC) will better reflect the growing diversity of interests in the world today. Singapore also supports India's bid for a permanent seat in the UNSC. India is a natural candidate, given its size, the population it represents, its growing influence and linkages internationally.
18. However, we should not end up having a situation where we have many vetoes in the UNSC. This will paralyse the decision-making process at the UN and undermine the credibility and effectiveness of the institution. For a small country like Singapore, such an outcome would be a disaster. It would therefore be unrealistic to expect any new permanent members in the UNSC to be accorded veto powers.
STRIKING NATIONAL CONSENSUS FOR REFORMS
19. Finally, to realise and sustain an Asian Renaissance, there must be a consensus amongst the people of each country that they need to embrace free markets and free trade, plug in to the global economy, and continually adjust and adapt to an ever changing world. The strength of this consensus will determine how fast we progress.
20. Building such a consensus is not easy because the people have to undergo difficult and painful adjustments. As technology advances, trade barriers come down and new competitors emerge, countries will find their old advantages being eroded. But at the same time, new opportunities will open up, which they must grasp quickly, before others beat them to it.
21. So every country will have to restructure its economy, find niches where they can add value and prosper in the global marketplace. They must find ways to help people who are left behind by the process of globalisation. They need social assistance, re-training and creating new jobs. Political leaders must persuade their people that the adjustments are necessary and rally them to support or at least accept change. Each country will have to make changes in its own way, and set its own pace, taking into account its unique circumstances.
22. I know that this is an ongoing debate in India. In fact, India's reforms started in 1991 have already borne fruit, with growth averaging at 6 percent a year since the reforms started in 1991. One thing is now certain - there is no turning back. As Dr Manmohan Singh has said, "No power on earth can stop an idea whose time has come".
23. We stand at the threshold of an exciting new era in Asia. The region is growing and modernizing rapidly, absorbing outside ideas, adapting them to its own societies, and influencing the economies and societies of others.
24. The CECA sets the stage for a burgeoning bilateral relationship between Singapore and India, and wider and deeper co-operation between India and Southeast Asia. As government and business leaders, you play an important role in nurturing and growing this seed, and establishing a strong axis of co-operation between our countries and our regions. With greater collaboration and integration between the people of both sides, and continued reforms by those in Government, we can all look forward to a vibrant and dynamic future for Asia.
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