Sun, Sep 04, 2005 - Page 11 News List

Asia must stop relying on China, India: UN

RISING GIANTS A study by the Conference on Trade and Development said exports to China and India will not be enough to reverse a long-term decline in commodity prices

AFP , BANGKOK

Asian countries must stop relying on imports by rising giants China and India, the UN said on Friday.

Urging a long-term strategy of stepped-up diversification for Asia, the UN's Conference on Trade and Development (UNCTAD) also said the developed world should not to take protectionist measures to support their economies at the expense of developing nations.

Steps also had to be taken to ensure the Doha round of WTO negotiations are a success, officials said at the release of the agency's annual Trade and Development Report in Bangkok.

The study said the East and South Asian region was well established as a "new growth pole" for the world economy, mostly because of progress achieved by India and China.

UNCTAD issued its report on the same day Asian Development Bank (ADB) president Harukiko Kuroda said China and India will help pull the rest of Asia to forecast average growth of 6.5 percent this year. He said the growth may even pick up further next year and in 2007.

Speaking in Singapore, Kuroda cautioned, however, that surging oil prices -- which hovered near US$70 a barrel on Friday afternoon in Asia -- remained an uncertainty and could scupper the growth projections.

While rapid growth by China and India has been a key cause of a recent surge in primary commodity prices, "growing imports by China and India will not be enough to reverse a long-term decline in real commodity prices," the UNCTAD report said.

"The windfall profits being reaped by many developing countries as a result of surging economic growth in India and China should be used to diversify those countries' economies and prepare them for more stable economic development in the future," it said in a statement.

Developing countries should also cooperate in the formulation of generally agreed principles on the fiscal treatment of foreign investors so that more export income remains at home, it said.

"The international community, in turn, should review and improve mechanisms for reducing price instability for a wide range of commodities, not just oil, and take further steps to reduce its adverse impacts on developing countries," according to the statement.

The report said that there are widespread fears in many countries that the pace of structural change required to face the new economic environment could result in higher unemployment and lower output.

"Most of the earnings of developing countries from their exports to the developed countries are translated into higher import demand for advanced industrial products, and thus flow back, directly or indirectly, to the latter," it said.

Mark Proksch of the UN's Economic and Social Commission for Asia and the Pacific said the Doha round of WTO negotiations, currently in stalemate, "must succeed" if developing countries were to reap significant gains through trade, especially agricultural and manufactured products.

The 148 nations in the WTO set the rules for international trade.

Since 2001, they have been trying to prepare a treaty on cutting tariffs and other barriers to commerce in farm produce, industrial goods and services.

Trade diplomats and observers have grown increasingly pessimistic about what can be done at the WTO's Dec. 13-18 Hong Kong conference, which is meant to produce at least the bare bones of a treaty to come into force next year.

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