Goh's warning on convertibility

By Our Special Correspondent

NEW DELHI, JAN. 19. The visiting Singapore Prime Minister, Mr. Goh Chok Tong, today cautioned developing countries such as India against haste in moving towards capital account convertibility, even while seeking greater liberalisation on foreign investment flows.

Speaking to a galaxy of corporate leaders, bureaucrats and diplomats at a function here today, Mr. Goh warned the developing economies against moving towards capital account convertibility without a well-developed banking and financial sector. ``Unless (the) developing countries are fully prepared, they should not liberalise too quickly on the capital account as they could be overwhelmed by the sudden withdrawal of short-term funds invested in the stock markets. Countries without a strong Central Bank and well-developed system of financial supervisory systems should not open up quickly as funds can come in and leave very quickly, and economies can be ruined,'' he said.

At the same time, Mr. Goh pointed out that Singapore was strengthening its financial sector in the wake of the South Asian currency crisis and also to meet the onslaught of competition. It had plans of utilising Indian manpower in a big way, both in terms of skilled labour for construction activities and technical personnel in the Information Technology sector. Proposals had been made to train Indian workmen for construction projects in Singapore. Another proposal was to educate and train young Indians who could then return to this country. ``But I hope you don't mind if some of them stay on in Singapore,'' he added in a lighter vein.

Responding to a query by the MTNL chairman, Mr. S. Rajagopalan, about Singapore's lack of interest in the Indian telecom sector, Mr. Goh said there might be a misguided notion that it was difficult to operate in this country. Though he was not aware of the opening up of the telecom sector, he said he would surely advise investors in Singapore to come here. However, Mr. Goh also mentioned in this context, Singapore's fruitless efforts to set up an airline joint venture. India could have adopted an open skies policy, allowed investments to come in from abroad and then utilised funds saved for other development projects.

Earlier, delivering the key-note address on ``Globalisation in the new millennium'' at a meeting organised by the Confederation of Indian Industry, Mr. Goh warned that the backlash against globalisation had begun but no economy was strong enough to stop the tide. Neither was there a viable alternative. As such, governments would have to strengthen domestic institutions and equip citizens with skills to cope with the new environment.

Calling upon India's corporate sector to prepare for the changes following the recent economic reforms, he said the Indian economy would experience the same pattern of corporate mergers and internationalisation of business operations which had already occurred in the developed countries and which was going on in East Asia. ``I believe that when India liberalises its economy and plugs itself into the global network, it will fulfill its vast economic potential,'' he said.

Referring to the failure of the Seattle WTO meeting, he said it could threaten the survival of the multilateral trading system.

Without an international order to regulate global trade, the world could fragment into exclusive and protectionist trading blocs.

It could evolve into a two-tiered system in which developed economies would be linked by trade and technologies while excluded developing economies would have to seek refuge in isolationist policies.

Conceding the substantial differences in the levels of development between India and Singapore, he said his country's experience had shown that it was possible to harness the forces of globalisation for the good of the people. Ultimately, isolation and protectionism could not be the answer.

The essential requirement was to build the capabilities for the people to derive the benefits of globalisation.

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