AUSTRALIA: CONFERENCE ON SOUTH ASIAN ECONOMIC INTEGRATION

UNCLAS SECTION 01 OF 02 CANBERRA 000120

SENSITIVE
SIPDIS

DEPARTMENT FOR: S/SRAP (Mary Beth Goodman/Robert Deutsch)

E.O. 12958: N/A
TAGS: ECIN PREL ECON AS
SUBJECT: AUSTRALIA: CONFERENCE ON SOUTH ASIAN ECONOMIC INTEGRATION


1. (SBU) SUMMARY: An academic conference examined East Asian
development models for application to South Asia. Experts concluded
that without further reform, neither the Chinese nor the traditional
western development model may be appropriate for South Asia.
Conference attendees stressed the constructive role the G20 can play
in South Asian development. Australian Trade Minister Crean
emphasized support for trade capacity building. While little
integration has thus far taken place among South Asian economies,
momentum for change is growing. END SUMMARY.


Looking for the Right Development Model
--------------


2. (SBU) Regional experts discussed prospects for Asian economic
integration at an Australian National University conference on
February 11-12, 2010. South Asian trade, especially inter-regional
trade, is surprisingly low due to political and regulatory barriers.
Bilateral trade between India and Pakistan in recent years has
amounted to only USD1-2 billion. Participants discussed whether
countries such as India, Pakistan or Sri Lanka should adopt
development models fashioned after the Washington or Beijing
"consensus." Early reforms adopted along these lines in the
Philippines and Pakistan were ultimately reversed by subsequent
regimes.


3. (SBU) Comparisons between Chinese and Indian growth noted the
comparatively small size of Indian manufacturing (around 15% of GDP)
and the role of residual regulations in constraining manufactured
exports, where China retains a lead. This regulatory problem will
become significant as 200 million more Indians join the labor market
by 2020. As a result of its resistance to allow the vast rural
movement of labor to the cities that has occurred in China, Indian
economic adjustment will likely be more difficult than in China.


4. (SBU) South Asia is making progress on economic and structural
reform, but the pace of change differs significantly between
countries. India has embraced gradual reform but trade barriers
remain. Peking University Professor Yiping Huang stressed the need
for a "clear policy" approach, instead of a 5-year plan, and
political will for reform. Huang said the Chinese economic
development plan, far from being a detailed plan, consists of a
gradual approach that is interspersed with policy adjustments which
address problems as they arise.

Trade Capacity Building
--------------


5. (SBU) Australian Trade Minister Simon Crean addressed the
conference and described a new Australian policy nexus between aid
and trade, which views investment in "trade capacity building" (TCB)
as a major component. TCB aims to assist developing economies with
trade negotiations and subsequent "behind-the-border" reform
measures that will increase the benefits from opening new markets.
Crean said Australia incorporated TCB into the recent FTA between
Australia, New Zealand and ASEAN. Director of the Australian Agency
for International Development (AusAID) Edward Archibald confirmed to
Econoff there is now closer interaction between Austrade,
Australia's trade promotion agency, and other aid agencies, though
more is needed.

A Role for the G20
--------------


6. (SBU) Indian Professor Rajiv Kumar called for a greater
institutionalization of the G20 and the creation of a secretariat to
Qinstitutionalization of the G20 and the creation of a secretariat to
facilitate its economic role, which could extend into development
policy. Indonesian Trade Vice Minister Mahendra Siregar also called
appealed for the G20 to become a vehicle through which to overcome
crises and more easily allow structural adjustment in both developed
and developing countries. He noted that Indonesia is sympathetic to
discussion of financial matters related to climate change, despite
BRIC (Brazil, Russia, India, China) opposition to such a discussion.



7. (SBU) Deputy Secretary for Department of the Prime Minister
Gordon de Brouwer is closely involved with the G20 and underscored
to Econoff Australia's support for the more inclusive G20
architecture and its ability to react faster to crises than global
institutions which are "too slow and bureaucratic." De Brouwer
suggested the G20 can help advance development goals through its
role as a catalyst for policy improvements in other fora, which
could include development policy.

CANBERRA 00000120 002 OF 002




8. (SBU) Comment: Most scholars at the conference seemed to agree
that the adoption of various reforms by some South Asian governments
has led to a consensus in favor of reform among their populations,
which should help make the momentum for reform self-sustaining.

BLEICH