1. Thank you very much to the Institute of Economic Growth and Ministry of Finance, Government of India, for the kind invitation and of course to Dr Rakesh Mohan (President Emeritus and Distinguished Fellow, Centre for Social and Economic Progress) for chairing this session. 

2. My key message is this: In response to turbulence, we are all seeking resilience. This can be strengthened through some degree of self-sufficiency, but it can also be achieved through stable frameworks for cooperation, trade flows, and financial flows. Stable policy frameworks will be an important part of that equation, and I think we want to bear that in mind.

3. Let me take a step back to describe what have been the key drivers for growth and development in our region. This will help us understand what has been fundamental to our growth and how we can continue to leverage these factors even as we encounter some headwinds or an easing of the tailwinds.

4. Without a doubt, developing and emerging Asia has been a model for growth, with an average growth rate of nearly 7% over the past 50 years. This far exceeds that of other developing regions. Latin America averaged just over 2% over that period, and Sub-Saharan Africa averaged less than 4%. Accompanying this growth has been a remarkable uplifting of populations out of extreme poverty. We know the number in China is 800 million, and there has also been a substantial reduction in extreme poverty rates in India. From a starting point as a low-income region, we now have a few economies at high income levels, most at middle income, and more broadly, the region has continued to strive towards higher income and developed country status.

5. What has underpinned this growth? I would suggest four major drivers.

o First, enabling cooperation frameworks. Asia's take-off from the 1970s onwards followed the cessation of major conflicts in our region, including the Korean War and the Vietnam War. In my immediate region, the formation of ASEAN in 1967 was a key milestone for regional cooperation. Peace, stability, and cooperation are prerequisites for growth take-off. Globally, the environment was also conducive to trade. The GATT was instrumental, and the 1964-67 Kennedy Round was particularly significant, with substantial expansion of membership and agreement to give preferential trade treatment to developing countries. Asia rode the wave of trade liberalisation. This tailwind is now in doubt, but we must not forget the importance of trade.

o Second, pragmatic policies that were generally pro-market and aimed at economic liberalisation. Many economies turned progressively away from import substitution policies of the 1960s, implementing trade liberalisation, opening up to FDI, and later pursuing financial sector deregulation and capital account opening. Critically, they leveraged comparative advantage. In the initial phases, this meant labour-intensive industries. In later phases, each economy developed deep specialisations, leveraging efficient logistics and fostering the emergence of global value chains. This distributed production activity comprised specialised component manufacturing and final assembly throughout the region, making Asia a major centre for manufacturing and a major global trade player.

o Third, effective resource mobilisation to deepen capital stock. Capital stock contributed an average of two-thirds of Asia's growth over these decades. One ADB study put the increase in Developing Asia’s physical capital stock at well over US$170 trillion (in constant 2011 US$).ADB (2020), “Chapter 1: 50 Years of Asian development” in Asia's Journey to Prosperity: Policy, Market, and Technology Over 50 Years. ADB. http://dx.doi.org/10.22617/TCS190290 Much of this was funded by stable long-term FDI, but was also aided by domestic intermediation of gross savings that stepped up sharply in the 1980s and remain substantially above the global average.

o Fourth, sound policy frameworks and macroeconomic stability. It has been well studied that in Latin America, economic crises have caused significant impact on poverty. More broadly, financial crises are associated with long-lasting scarring effects that weigh on potential output, principally by depressing investment and causing labour market hysteresis. Reinhart and Rogoff find that globally, banking crises lead to an average output decline of over 9% and a rise of 7% in unemployment.Reinhart, Carmen M., and Kenneth S. Rogoff (2009), “The Aftermath of Financial Crises”, American Economic Review, 99(2), 466–472, https://doi.org/10.1257/aer.99.2.466 Our region has faced shocks —we had the Asian Financial Crisis in 1998, and India went through a challenging time in 1991—but we have otherwise generally maintained currency and economic stability through global crises including 2008 and more recently COVID-19. This has been the result of careful deficit and debt management, balanced current accounts, monitoring and management of currency mismatches, development of local currency capital markets and financing, strengthened regulation of the banking system, and ample foreign exchange reserves.

6. Where are global currents taking us? There is a risk that, given current challenges, we get pulled along by fragmentation, trade conflict, and mercantilism. These have the potential to bring us into a world of volatility, inefficiency, higher prices, and slow growth, which could result in less investment, less diffusion of technology, and higher trade barriers for emerging Asia. Some may think of going down the path of import substitution, but Asia has been down that path before and it has not delivered. Asia can play a role by continuing to support cooperation and openness to trade, and being a region of stability, pragmatism, and sound policy. I will point out two areas of potential for us. 

7. First, intra-regional trade. Looking at ASEAN alone, there is great potential. Intra-ASEAN goods trade accounts for 22% of its total merchandise trade, well below intra-EU trade of 60%. Intra-ASEAN services trade fares worse at 13%, so there is considerable potential to deepen trade within ASEAN and also with the large Asian economies. Consider India's merchandise trade complementarities with other Asian economies. We have examined India's goods export basket and matched it with other Asian economies' goods import basket, and vice versa. For most pairwise comparisons, we have found a significant upward shift since 2010 in the similarities of those goods import and export baskets, and hence an increase in trade complementarities. Currently, India's services complementarity remains robust and accounts for a substantial 5-8% of the services imports of major ASEAN economies, particularly in business and ICT services. There is scope for this to grow. The ongoing review of the ASEAN-India Trade in Goods Agreement (ATIGA) provides an opportunity to strengthen ASEAN-India trade and investment.

8. Second, recycling and reinvesting regional savings. Asia’s net international investment positions are mainly allocated to capital markets in advanced economies. This is the Lucas ParadoxLucas, Robert E., (1990). “Why doesn’t capital flow from rich to poor countries?”, American Economic Review, 80(2), 92–96. http://www.jstor.org/stable/2006549 of uphill capital flows. We can do much more to channel savings to finance investment in our region. For example, Singapore is a regional intermediation centre and is also the largest source of India's FDI flows. There are opportunities to open up greater access so that domestic financing needs in our region can be met by capital flows from within our region. An IMF Selected Issues paper found that whilst Asia's participation in global trade is very high at well over 30%, as a share of global portfolio liabilities, we are attracting about 15%, achieving far less than our potential.Hennig, Tristan., Christian Alonso., and Wanying Li (2025), “Financial Interconnectedness in Asia and the Pacific: Recent Shifts and Implications for Singapore”, IMF Selected Issues Papers 2025 114, https://doi.org/10.5089/9798229020077.018 There is room for us to do much more. 

9. I will end by saying that the prospect of encouraging more trade and financial flows can be achieved in a stable manner. We must keep our focus on key objectives and policies for stable inflation, sustainable fiscal and current account positions, financial and currency stability, broad-based employment participation, a better balance of consumption and investment, and supporting the transition of our economies towards higher growth.

10. Thank you.

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