[PEN-L:456] FW: Escaped East Asia Crisis On Good Debt Mgt- State Min

[Arno Mong Daastøl]

India Escaped East Asia Crisis On Good Debt Mgt- State Min

(Copyright (c) 1998, Dow Jones & Company, Inc.) http://www.dowjones.com/

HYDERABAD, India, Oct. 2 (Dow Jones)--India escaped the economic crisis that
recently swept east Asian countries, due to its prudent debt management and
focus on longer term capital inflows, such as foreign direct investment,
Andhra Pradesh chief minister Chandrababu Naidu said Friday.
Naidu is due to address the valedictory function of the three-day conference
of South Asian foreign exchange dealers being held in Hyderabad, the
southern state capital on Friday at around 1030 GMT (6:30 a.m. EDT).
Andhra Pradesh has been aggressively marketing itself as a profitable and
efficient investment destination. U.S. giant Microsoft Corp. (MSFT), has
committed to setting up a software development center in Hyderbad, a rare
instance of the American company setting up an offshore base. Oracle Corp.
(ORCL) and some Indian software companies are following suit.
"Fortunately for us, India has been less vulnerable to shocks due to the
lower ratio of short-term debt to reserves compared with other east Asian
economies," Naidu said in his speech, an advance text of which was available
to Dow Jones Newswires.
The east Asian experience has brought into sharp focus the importance of
efficiently managing the exchange regime in an increasingly integrated
international economy where developments in one part of the world affect
other countries, Naidu said.
An important lesson from the East Asian experience has been that "over
valuation can snowball into a major run on the currency, as expectations of
a corrective action fuel market play," he said.
"The exchange rate policy of the Indian government has fortunately been
moving towards increasing liberalization," he said.
"If we look at the East Asian crisis, currency over valuation, declining
exports, overheated property markets and a fragile banking system all
contributed to intense foreign exchange speculation," he said.
"One of the lessons from the East Asian crisis has been that overdependence
on short-term international loans can be dangerous." Naidu added.
Naidu said that despite the current problems of the Asian "tigers", there is
still a lot to be learned from their previous success in achieving high
rates of growth.
In the case of India, Naidu said "there is need for radically redefining the
developmental agenda," and added that much can be done by the individual
states themselves.
"First of all, I believe that the conventional approach to planning based on
a five-year perspective needs to be replaced by a longer-term horizon. We
are in the midst of defining a Vision 2020 for the state which aims at
achieving a seven-fold increase in per capita income," Naidu said.
"While we may not entirely pursue a policy of export-led growth, it is
necessary for us to focus on the exports sector in order to be able to
import capital goods, technology and intermediate products," he said.
He said India has great potential for service sector exports, based on
information technology, and is "convinced that India can attain a position
of global leadership in information technology in keeping with its
engineering and scientific capacities,"