Indian Prime Minister Manmohan Singh called for a vast Asian free trade area embracing major economies to drive the region's growth as he opened the Asian Development Bank's (ADB) annual meeting yesterday. He also called for international financial bodies to tackle sharp swings in oil prices.
"We are linking India into a web of partnerships with the countries of the region through free trade and comprehensive economic cooperation agreements," Singh told the ADB board of governors in the southern city of Hyderabad.
"This pan-Asian FTA [free trade area] could be the future of Asia and will, I am certain, open up new growth avenues," Singh said. The "web of engagements" could herald a free trade area embracing all major Asian economies and possibly extending to Australia and New Zealand, he added.
More than 3,000 delegates including finance ministers, business leaders and representatives from global organizations are attending the ADB meeting to focus on Asian development challenges.
Singh's free trade pitch came after the finance ministers of Japan, South Korea and China announced on Thursday an agreement to study a regional currency that could eventually be like the euro as part of sharing "a long-term vision for financial integration in the region."
Singh meanwhile called on international financial bodies to "devise credible strategies to enable the world economy to cope with the increased unpredictability and volatility of energy prices."
Singh's comments came as oil prices rebounded to above US$70 in Asian trade amid ongoing worries over the row about Iran's alleged nuclear weapon ambitions and the separatist threat in oil-producing Nigeria.
High oil prices may shave off at least 0.6 percentage points from Asia's overall economic growth, the ADB's chief economist said.
"There are two aspects to the oil price increase. One is the magnitude of the increase and the second is the duration," Ifzal Ali said, noting that if the increase lasts for a year, GDP growth will slow.
"If you have an oil price increase of about US$10, from US$60 to US$70, developing Asia's GDP growth rate will be shaved off by about 0.6 percentage points," Ali said.
ADB president Haruhiko Kuroda said the record-high oil prices were bound to fall.
Oil prices headed back toward an all-time high of US$75.35 a barrel hit on April 21 amid ongoing concerns over Iran's nuclear ambitions.
"At US$75 per barrel, it's unsustainable. Some geopolitical events may destabilize the market. But apart from that, the current level is very high," he said.
The ADB cut its Asia growth estimate for this year to 7.2 percent from 7.4 percent last year "based on the assumption that oil prices will gradually soften," he said.