Asia vulnerable without policy coordination

Arun Shourie, Indian parliamentarian and intellectual, says quickening change in economics, technology and politics requires more coordination.
Asian governments need to better coordinate policy responses to crises, says Arun Shourie, member of parliament in India and a former minister of disinvestment, communications and information technology. He says the world is marked by an accelerating pace of change that will throw up unexpected risks.

"We are entering a phase of deep and considerable uncertainty," he argies. Shourie made his comments at a conference in Dubai hosted by Prudential Asset Management that brought together 200 heads of distribution at private banks, commercial banks and securities companies from around Asia Pacific.

Globalisation, underlined by technology and liberalisation, is leading to more changes occuring more rapidly, Shourie says. For example, in politics, the USSR and its empire collapsed in 1989 against all expectations, while America's uni-polar moment seems to have ended before it really began.

The same forces of globalisation and technology have allowed al-Qaeda and the Taleban to undermine the US efforts in Iraq and Afghanistan. They have contributed to deteriorating security conditions in Southeast Asia (terrorism in Indonesia, unrest in Thailand's south), while India finds itself surrounded by six unstable states and cannot even govern broad swathes of its interior.

This same rapid pace of change is evident in economics: ten years ago, Asia was in financial crisis; today it is home to two-thirds of the world's foreign reserves and China and India are exporting capital to the West. Just a few years ago, an Indian would have to wait two or three years to have a fixed telephone line installed; today in India there are six million new mobile phone subscribers each month.

But this change is assymetric, Shourie argues. Owners of Indian shares are damaged by a homeowner in Iowa defaulting on his mortgage, but homeowners in America are not affected if the Indian stock market suffers a severe correction.

This assymetry means Asia's governments need to coordinate policy because the West, and America in particular, still wields more influence. "Asia lacks a coordinating mechanism to respond to a crisis, or to affect policy in the West," Shourie says.

He suggests the existing assymetry doesn't necessarily benefit the West, however, because Asian governments are strong enough to be obstructionist. For example, Delhi played a key role in the failure of the Doha round of trade talks because it would not give in to US demands.

Shourie says he supports liberalisation and closer ties to the US, but says the five-star hotel set, let alone American politicians, need to appreciate that accelerating changes can disrupt tens of millions of people if, for example, the agricultural or retail sectors of India are opened. "They must be alert to the effects and the unknown backlashes," he cautions.

Indeed, populism is one of the greatest risks to global growth, he argues, noting that India ruinously spends more on subsidies than on infrastructure. The other great risk is the strain on the ecology as faster urbanisation and growing consumerism raises demands on resources.
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