ishrat husain : economic cooperation in asia address by mr ishrat husain, governor of the state bank of pakistan, at the high level seminar organised on the occasion of the asian cooperation dialogue, islamabad, 5 april 2005. * * * during the past five decades developing countries in asia have provided the most persuasive and credible story as to how poor countries can progress and bring about prosperity for their downtrodden people. beginning with japan, followed by nics particularly korea, asean countries and now china, these countries have not only doubled or quadrupled per capita incomes in a record time but also significantly reduced the incidence of poverty. there are several different interpretations of the east asian miracle and every school of thought has taken the credit for the unprecedented success of more than 1. 5 billion people inhabiting this region. those who believe in the supremacy of state led industrialization have attributed the turn around to the selective interventions by the government through directed credit, subsidized foreign exchange, tax concessions, tariff exemptions and picking the winners. those whose faith in pure market mechanism remains unblemished argue that unilateral trade liberalization, integration with the global economy, attracting foreign investment and technology and generally pursuing market friendly economic policies were responsible for these spectacular results. a more dispassionate analysis would reveal that no single extreme model can satisfactorily explain this phenomenon. there are, however, several common elements of strategy that have also been practiced outside east asia and have also generated similar results. there is now a wide consensus that participation in international, inter - regional and intra - regional trade enhances the market size for sale of goods and services substantially relative to those who remain confined to the domestic markets. this added purchasing power accelerates the pace of economic growth and shortens the period required for doubling incomes. second, as the poor countries have low domestic savings in relation of their investment needs they have to draw on foreign savings either in form of official flows, commercial loans or foreign direct investment to supplement this inadequate pool of domestic savings. the only exception is china whose citizens save a remarkable 40 percent of their income in form of savings. the contrast between china and other comparators is evident in the time it took china to double its per capita income. third, even if the countries have large pool of domestic savings they cannot transform this pool into productive and remunerative investment over sustained period unless they acquire, assimilate and di

risk management. for instance there is a basic rule since inception of banks which says “ do not put all your eggs in one basket ”. had this simple rule been followed, many institutions could have avoided huge losses. the challenges posed by the global financial crisis have impacted leaders of all major businesses. elevating corporate governance should not be confined to banks, but commercial concerns must also do the same. we all know the pace of globalization has accelerated, resulting in increased domestic and global economic integration. today we cannot just shrug off failures within a particular sector or sometimes even a single entity if it has global linkages. gone are the days when a financial or political crisis in one country could be contained to that country ; now there are several contagion effects at different levels. that is why emphasis on good corporate governance regimes cannot be underscored more as it creates an attractive investment climate necessary to maintain investors ’ confidence, resulting in positive impact on the share price and creating possibilities for raising low cost capital. it is imperative that we develop and implement good governance practices in order to provide impetus to economic growth. given globalization and the crisis we all face, let me highlight the traits of effective leadership that are universally applicable and that i have cited in earlier talks. leaders must be visionary to see the future trends, anticipate institutional bottlenecks, remain competitive and be able to adap rapidly to changes. they should be continuous learners, a necessity for enhancing leadership skills. leaders need also to take into account their corporate social responsibility so that profit seeking is balanced against the objective of social service and well being of society. leadership success requires strong conviction and belief. yet having humility and recognizing the need to reinvent and inspire their organization to adapt to new challenges remain an integral part of successful leaders. this is vital if businesses want to remain at the forefront of new innovations, critical for long term competitiveness. all these and more comprise the necessary characteristics for dynamic leaders that push the frontiers of excellence. such corporate leaders fuel the drive towards long - term growth and stability. i ’ ll conclude my thoughts with a small personal aspiration. twenty years from now, i would like to hear the story of how a pakistani corporation entered the global market, the challenges it faced and overcame, and became the first pakistani company to be bis central bankers ’ speeches consistently featured in the fortune global 500 list of companies. i look forward to being in an audience of thousands, listening to that story. that is my final challenge