India aiming for Pan-Asian FTA: Manmohan
The Hindu, India
Business Line
India aiming for Pan-Asian FTA: Manmohan
Our Bureau
5 May 2006
`It could be the future of the region, may open up new growth avenues’
Hyderabad/Having concluded free trade agreements with SAARC, Singapore and Thailand, India is pursuing similar arrangements with several other Asian countries, the Prime Minister, Dr Manmohan Singh, said here on Friday.
Addressing the inaugural session of the Board of Governors of Asian Development Bank (ADB), he said India is working closely with ASEAN, Japan, China and South Korea.
New growth avenues
"This web of engagements may herald an eventual free trade area in Asia covering all major Asian economies and possibly extending to Australia and New Zealand. This Pan-Asian FTA could be the future of Asia and will, I am certain, open up new growth avenues for our own economy," the Prime Minister said.
Asking the ADB also to study the benefits of such an economic agglomeration in Asia, he said India was determined to carry forward the India-ASEAN partnership to an enlarged domain for making the 21st century a truly Asian century.
"With this vision in mind, we have actively pursued external liberalisation by cutting down customs duty rates. The current peak rate, at around 12.5 per cent is quite close to ASEAN levels. India has the announced policy objective of aligning its duty rates with ASEAN levels. Given the rich reservoir of natural, technical, and scientific acumen that South-East Asia harbours, globalisation offers a unique opportunity for harnessing such resources for enlarging not only national and regional, but also global growth prospects," he said.
Asking the Asian countries to look back to take stock of the lessons of the Asian financial crisis, Dr Manmohan Singh said, "An important lesson coming out of the Asian crisis is the need for effective, quick and credible responses from international financial institutions in the event of a crisis."
Pointing out that the international financial institutions had come under heavy criticism in the aftermath of the Asian crisis for not acting quickly enough, he said, not only the quantum of funding but also the speed with which it is channelled is an equally critical factor.
Further, according to Dr Manmohan Singh, the Asian crisis had demonstrated that financial crises can be contagious and that foreign exchange markets are prone to a bandwagon effect.
"These are a result of imperfections in capital markets, which generate information bubbles and trigger a herd mentality among investors. In panic situations, markets do not adequately discriminate between countries with strong and weak economic fundamentals and seemingly strong economies can be engulfed by a snowballing crisis. This means that international financial institutions need to be ahead of the curve, identify potential victims and go to their support in good time so as to contain the crisis. This also means that the size of the funding can be quite large," the Prime Minister said.
