With well-trained, English speaking, and cost-competitive professionals, India has created a niche for itself as the world’s back-office as well as a global software centre. The BJP coalition’s unexpected defeat in the general elections reflects the unhappiness of rural voters who have not benefited from the liberalisation. This may cause the new Congress government to be more circumspect about pressing ahead with reforms, although optimistic commentators argue that the voters are pressing for faster reforms rather than slower. Whether or not that is so, the policy of liberalisation commands bipartisan support, and is likely to continue. After all, the new Prime Minister, Dr Manmohan Singh, was the architect of the initial economic reforms in the early 1990s. He has appointed as Finance Minister Mr Chidambaram, who is also a reformist and a former Commerce Minister and Finance Minister. I am therefore hopeful that the thrust of liberalisation will continue, and India will play increasingly a prominent role like China’s in the regional and global economies. Closer to home, the prospects for Southeast Asian economies are also looking better. The region initially struggled as political and security concerns deterred foreign investments and distracted  BIS Review 33/2004  1  governments from tackling serious economic problems. But Southeast Asia has stabilised considerably in recent years. Governments are responding more vigorously to the threat of terrorism and restoring order and confidence. The political upheavals that swept across the region have also subsided, allowing governments to focus their attention on fostering growth and development.

The complexity and multidimensional nature of US China relations requires both sides to balance and reconcile different perspectives to achieve equilibrium. Good US China relations will calm all of Asia. The major Asian powers are also striving to stabilise relations with one another, at least in part to better deal with post Cold War geopolitical realities. The most fundamental interest of all Asian countries is in development: in growth, trade and investments, not war. Three issues could disrupt Asia’s strategic stability. They are the India Pakistan conflict over Kashmir, the North Korean issue and Taiwan. All three have a potential nuclear dimension. Let me deal briefly with each one. The India Pakistan conflict is complex, mired in history and religion. It is difficult to envisage a definitive solution. But the conflict can and has been managed. In recent months, we have seen encouraging signs of a thaw. We should not underestimate the importance of these small but positive steps, given that only a few years ago India and Pakistan were on the brink of a nuclear war. Both countries know that a conflict over Kashmir would have disastrous consequences that far outweigh any possible gains. It would grievously disrupt India’s economic reforms and perhaps permanently  2  BIS Review 33/2004  relegate India behind China. For Pakistan, it could mean the end of the state as it presently exists. It is therefore a good sign that the new Indian Government has signalled that it wishes to continue dialogue and engagement with Pakistan.