2:00 P.M. EST
Real Audio of Briefing
MR. BOOKBINDER: Good afternoon and welcome to the Foreign Press Center. This afternoon it's our special privilege to have Under Secretary for International Affairs of the Treasury Department Timothy D. Adams, and Mr. Adams is going to be talking about his upcoming trip to India and the Asian Development Bank meetings and he will be leading the U.S. delegation. So thank you all for coming. Mr. Adams.
MR. ADAMS: Thank you very much. I appreciate you taking the time. I'm looking forward to returning to India. I've been at this job now eight or nine months and this will be my second visit. So I think it's an indication -- where I go, I always say is an indication of how I allocate my time and what's important to us.
I'll be traveling to three different cities: First to Mumbai to interact with financial officials. I think I have a visit with the Central bank, the Reserve Bank of India, which I still have the pen they gave me the last time I was there. They have great pens. I look forward to conversations there and then with other financial market officials. I know there's a desire on behalf of India officials to make Mumbai an important regional financial center. We certainly recognize it as one and so it's important that I start my trip there meeting with our counterparts.
And then, off to Kolkata. It will be my first trip there, where we'll meet with government officials of West Bengal province and then I will be touring some side visits focused on financial and health-related issues and then from there to Hyderabad for the Asian Development meetings.
Before I get to the ADB meetings, let me just make a few comments about this very important and strategic relationship between the United States and India. As you know, the President was just in India in early March and it was an important symbol of this shared relationship we have, one of democratic values and I think the President did an outstanding job of reinforcing, reiterating these shared values. I also reiterate the point that together we're building a global partnership on a variety of issues, whether they be specific to India or to the region. We work very closely, of course, on tsunami relief. We are working very closely on dealing with HIV/AIDS. There are five million infected in India, one of the largest populations in the world. We are working very closely on the issue of energy, which is a hot topic for all of us that are importers of fossil fuels, of oil, and of course we're working very closely on the Doha round to see a successful conclusion to the Doha round. But it's important that our economic ties are strengthened, too.
Over the past 15 years, India has been the second faster growing economy in the world, and it is now the 12th largest economy in the world and a growing important economy for U.S. exporters of goods and services. I think we saw our exports to India jump by 30 percent last year. And India is also an important source and destination for U.S. foreign direct investment. And I actually think that under the right set of circumstances, and we can talk about that in a few moments, under the right set of circumstances we could see even more U.S. foreign direct investment into India. It is also an important destination, a portfolio capital as well.
I was just in India last November with Secretary Snow in which we discussed a number of financial and economic issues, some of those we'll be reiterating on this trip and they're issues that were discussed during the President's visit. And as you know, there's a CEO forum which has looked at some of these economic issues, these joint challenges and come up with a set of recommendations. But some of the financial and economic issues are the important steps. Infrastructure development -- there was a recent poll done of Indian CEOs and they noted overwhelmingly that infrastructure remains one of the great challenges to future growth in India and I know that there is an ambitious infrastructure program underway in India and that we think that that's something that's quite important.
In fact, the World Bank did a study that said that for India to grow well beyond its recent rate of 7 percent to grow at 8 or 9 or 10 percent, you really have to see a massive adjustment in the percentage of GDP that’s allocated toward infrastructure, and I think we're certainly beginning to see that. We certainly see the will to undertake infrastructure. Opening up the financial sector is an important topic. We think it would import important risk-management systems, it would allow Indian favors investors to better manage their risk by expanding their portfolio options. A vibrant banking center and system, one that makes decisions based on commercial terms, is an important ingredient to economic growth.
We will also be talking about fiscal policy. The Indian budget deficit is about eight percent of GDP and it is dominated by subsidies and wages and we think that for the long-term sustainable health of the Indian economy and their fiscal outlook, that making adjustments in the budget deficit is important, but also changing the mix of expenditures away from subsidies and away from wages, more toward infrastructure and investments in human capital.
We'll also use this occasion on this visit to note that we, Treasury, will soon be putting a financial attaché in India. We think it's -- we only have a few attachés around the world. An attaché is someone who represents the Treasury Department with their finance ministry and central bank counterparts and as well as other banking and securities and insurance regulators. But India has become so important to us, not only as an economy, but as a financial center that we'll soon be putting a full-time Treasury representative there.
As far as the Asian Development Bank is concerned, there are several issues in which we'll be discussing there. One is the important role of the private sector in poverty reduction. The other is an issue which we discuss -- actually, two other issues which are important for all the multilateral development banks. One is making sure that we fight corruption. Corruption is a tax on the poor and it should be eliminated when and wherever possible.
The other is measuring results. We cannot make the case for more development assistance from our taxpayers if we can't show them that their dollars are being spent effectively. And we have to do that and we need to show that there are measurable outcomes to the dollars or the rupees or whatever currency, the input that goes into development assistance. And we need to make sure that these institutions work as efficiently as possible, so it's not only the output of the institutions, but how the institutions function themselves.
Why don't I stop there and then we can take some questions.
MR. BOOKBINDER: Okay. And let me remind you, before asking the question, please identify yourself and your media organization. I'll also welcome journalists joining us in New York. If you have questions, we would welcome your questions as well.
Okay. We will start out with India in the back.
QUESTION: I am Sridhar with the Press Trust of India, just a couple of questions. One, could you enumerate a little bit on the kind of cooperation or collaboration you're having with India in fighting terrorism as it pertains to movement of funds? You know, hawala transactions or whatever you call it.. And secondly, you said you're going to appoint an attaché. Is it going to be in the U.S. Embassy or where is the position going to be placed at?
MR. ADAMS: On the second question, we're still determining the optimal solution. In fact, our Ambassador, David Mulford, is actually here in Washington today and we were just meeting with him this morning to determine whether Mumbai or Delhi is the best place and we haven't reached that conclusion.
With respect to the financial war on terrorism, my counterpart, the Under Secretary for Terrorism, Stuart Levey, I know spends a tremendous amount of time with his counterpart in India. We have found the Indian Government to be extremely cooperative in the financial war on terrorism and we look forward to working with them even more in the future.
MR. BOOKBINDER: Okay. Shall we go to Japan in the front row?
QUESTION: Thank you. My name is Kaori Iida. I'm with NHK Japanese Public Television. There's a great interest in Asian countries -- is it on?
MR. ADAMS: Yeah, it's on. It is now.
QUESTION: There's a great interest in the Asian countries on the Grassley-Baucus bill. Could you share with us your thoughts on this bill? Do you think the concept of fundamental misalignment is acceptable to the Treasury? And also, I remember when you were doing a congressional hearing, that you said when you go into your office that you always look at the RMB rate. And I was wondering, do you think some of the heat will be taken off this issue, should the RMB exceed eight yuan to the dollar? Thank you.
MR. ADAMS: It's true, I do -- I look at a lot of currencies first thing in the morning. It's the first screen that pops up when I turn on my computers and it's important to know what's going on in the foreign exchange markets, but I don't know what -- I don't have any particular level in mind or am I aware of any particular level in which it's a tipping point where the political pressure -- you know, ebbs and flows. I really don't know. I would suspect it's probably not that simple of a relationship.
With respect to the Grassley legislation, we as an Administration won't take an official view and we don't, as a matter of policy, take an official view until you have a piece of legislation actually on the floor. So there is no -- there will be no official policy view for some time, assuming that the legislation ever moves. I mean, who knows. I think there are some novel components and I said that in my testimony, that changed the way in which -- or would, if it were passed and signed into law change the way the Treasury would do its semiannual report. And I would -- and they're sufficiently novel that those changes may be an improvement on what we have now.
But I think I'll save further comments for whatever time. There's lots of legislation out there. I could spend all day commenting, but I think I'll stick with that and then if it moves, we'll have a fuller description later.
MR. BOOKBINDER: Okay. I think we'll go to India over in the front row here. Wait for the mike, please. Here it comes.
QUESTION: My name is Hamukh Shah
MR. BOOKBINDER: Here's the mike. Thank you.
QUESTION: My name is Hamukh Shah from Business Times. One of the objectives of your visit to India is to build up the U.S.-India partnership. Can you please specify in what areas, especially, and do you see more trading opportunities? And then also, on what areas you find open market or financial markets to open up? Be more specific. Thank you.
MR. ADAMS: Your first question about opportunities. On the energy front, there's enormous opportunity. Obviously, nuclear energy and the nuclear issue is front and center in the debate, but as we look at global oil markets with oil at -- whatever, $73 a barrel today, India is a big oil importer. Obviously, the United States is a net importer. The United States is a big net importer. Looking for ways in which we can reduce our dependence on and consumption of oil, I think, is an important joint effort. There's also a number of related environmental issues, clean coal technology, which we actually do quite well in the United States, sharing those kinds of technologies and then, again, nuclear energy.
There's agriculture-related issues, agriculture that the President, when he was there, discussed and since then, there's been some details about an Agriculture Knowledge Initiative, how can U.S. universities that -- especially at land grant universities that have agriculture extension services, how can they help their Indian counterparts that bring knowledge about applying technology to the agriculture sector? And I know the current government in India is very focused on rural and agricultural development and want to make sure that there is an important technological component.
HIV-AIDS; I mentioned 5 million infected in, I think, the second-largest population of any country in the world. There's an enormous amount of public assistance in government to government, but there's also an enormous amount of private assistance. I know the Gates Foundation does a tremendous amount of work in India. So health care and energy and agriculture and then on trade, we together should look for opportunities to have a successful outcome to Doha.
Another one, given that we just concluded the IMF World Bank meetings, is working together to find ways to make the IMF more credible, more relevant, and more reflective of the changes that have occurred in the global economy. And that means altering its governance structure to the benefit of a number of fast-growing, some of them Asian, economies that are now woefully underrepresented.
But it's not just a few economies, it's about a whole governance structure, a whole quota system that needs to adapt to an ever-changing world. And given the fast pace of growth in India, whether or not they're a beneficiary in the near term, they certainly stand to be a beneficiary in the future. But here’s the -- IMF reform is an important place that India, given its growing stature and the global economy, here's an important place where they can really show some leadership. And that's one of the issues I'll be discussing with Minister Chidambaram and other Indian officials.
You ask about opening up the financial sector. It's an issue which we've discussed frequently. We think that the Indian economy, the Indian financial system and the citizens of India would benefit by a more competitive, a more open banking system, insurance system, pension system, so the Indian citizens have a greater array or a variety of choices and that there's competition for their deposits. And one way to do that is to raise the caps on ownership and open up the system. And I think there's some interest in that. I know there's always been some political sensitivity to the financial sector, as there is in many countries, but I feel fairly confident that we'll see changes over the near term.
MR. BOOKBINDER: For a change of pace, we'll go to India.
QUESTION: Raghubir Goyal, India Globe & Asia Today. My questions is that IMF and World Bank meeting just took place last week, and according to the IMF and World Bank, India is doing great as far as financially. But also at the same time, India needs more than $150 billion to meet their current plans and programs. Where is that money is coming from? And also, if you are going to discuss or they have requested any help from the United States? And at the same time, as far as oil is concerned, are you going to discuss, like more exploration or drilling in India or to meet the agreement which is the nuclear civilian agreement ? Are there going to be discussions on that?
MR. ADAMS: On the latter, I'm not aware of any conversations about further exploration in and around India. And with respect to oil exploration, I'll defer to my friends at the Energy Department. But we -- the G-7 ministers, and the IMF communiqué as well certainly talked about making markets work more efficiently and through greater transparency of both reserves and flows and data. We think -- we have a role to play as finance ministers making markets more efficient. I mentioned some of the things that the President talked about when he was there and transpired since then: clean coal technology and others. And I'll certainly reiterate the importance of those things. It's not only the energy, but the environmental components are very important to us.
Your first question was on first question was on FDI. I've seen those figures. Look, I think there's billions of dollars sitting on the border of India waiting to rush in. It's just -- waiting to be invited in. And part of that is having an appropriate investment climate. You know, there's an old adage that capital is a coward. It goes where it's treated well and it flees where it's treated badly. And the best thing you can do is improve your investment climate and there are lots of ways of doing that.
We've talked to the Indian officials about a dispute resolution mechanism so that companies who put a tremendous amount of capital in the ground through infrastructure, whether it's an energy facility or a plant, feels like that if something were to go wrong, they can adjudicate their demands. But it really is about creating an overall investment climate: the number of days it takes to get a business license, the number of days it takes to enforce a contract. And India has long way to go on those metrics.
And I know it's tiresome to be compared to China and there's probably some resentment to it. But on a number of these business investment climates, China does remarkably well, compared to India, and we've seen $65, $70 billion of FDI that flows into China every year. I think the money is there from the private sector. It does not need to be subsidized. It just has to be invited in and treated well.
QUESTION: You mentioned, I was going to ask you about that also. Today almost everything we see here is made in China and the U.S. has put a lot of money and investment, private and government investment there, how do you compare India with China in the next 20 years? Are you going to put more effort in India as far as the government is concerned and the business-to-business?
MR. ADAMS: Well, I can't speak business-to-business as a U.S. Government representative. I think there's tremendous interest India. And as I said I think there are billions of dollars waiting to flow in. I think there's enormous interest in India. When I was at the World Economic Forum in Davos, in January, in Switzerland, one of the big themes was India and India sent 40 or 50 representatives. I mean, they practically ran the place. But you could see, you know, a number of leading Fortune 500 companies there quite interested in India. But again, I think it's about an investment climate issue and I think once they see a change in investment climate, that you'll see a tremendous interest.
MR. BOOKBINDER: Okay. We'll go to India in the backrow.
QUESTION: This is Rajagopalan from the Hindustan Times from India. Can you elaborate a little on the regional financial center plan for Bombay? So you said you'll be having discussions with the Reserve Bank of India. Is the U.S. contemplating any role on this, any elaboration, anything of that sort?
MR. ADAMS: There's not necessarily a role for us, other than the time we spend there. But it's my impression that the Indian Government wants to make Mumbai a regional financial center, in some respects it already is. That's one of the reasons we're going there; it's an important stop on the global capital trail that I follow in my job. So we look forward to the rise of Mumbai as an important financial center. They certainly have talented individuals there, enormous capacity.
I think it goes back to the issues I've been discussing, is that modernizing the financial sector, developing a more vibrant corporate bond market, allowing in foreign investment and commercial banking, upgrading the pension system. We've already seen enormous progress in the equity market. In fact, the last time I was there I went out to the exchange, truly talented people that have done a remarkable job, tremendous potential there. And I have no doubt that if officials put their minds to it, we will see Mumbai has an important global financial center.
MR. BOOKBINDER: Okay. Are there additional questions? Okay. We'll go to Japan in the second row.
QUESTION: Yes, my name is Higuchi, JiJi Press, Japanese news agency. I have two questions here. One is about WTO negotiations. As you know, the WTO negotiations in the Doha Development Round is on deadlock now, so you will meet with Indian financial officials, so if the agenda with Indian officials include the financial service negotiations? And my second question is about are you going to meet with Mr. Haruhiko Kuroda, the governor of the Asian Development Bank? And are you going to discuss with (him) the Chinese currency, RMB, because he expert of the Chinese RMB?
MR. ADAMS: I do expect to meet with Mr. Kuroda. About what the topics remain to be seen. I met with Mr. Kuroda when I was in Manila early April-March and I have met with him when he has visited Washington on several occasions. He is doing an outstanding job as the head of the Asian Development Bank and I have enormous confidence in him. He is a seasoned veteran on financial issues and, you know, has a resume that's almost unmatched among development institutions, so I look forward to seeing him. In some respects, he's an old friend.
On WTO we make that a part of our discussion everywhere we travel, both the desire to have a successful conclusion to the development round because I think there are a number of studies that show that a successful conclusion of this round would lift millions of people out of poverty. It would increase global growth. It would increase prosperity and we think those are all positive things. The financial service component to that is very important and we challenge all our places that we visit, all our counterparts to table more aggressive, more ambitious financial service offers. And I will echo that sentiment when I'm in India.
MR. BOOKBINDER: Okay. Why don't we come up to the front row.
QUESTION: Thank you. Kaori Iida with NHK again. If I can ask about the G-7 statement you put out last weekend. The financial market interpreted it as a new kind of plaza for lowering the dollar. Was that your intention? If not, what was your intention for that?
MR. ADAMS: What was our intention? You know, there was one plaza and it existed a long time ago. And this was designed as a way to send a signal about what's important that we need. There was the communiqué and there was annex. The annex was a response to what had been about 12 straight hours of discussions about the IMF within the G-7 about current account deficits and current account surpluses. And whether or not this is something we should be worried about, and if so, what we all -- all -- should do about it, not just the current account deficit countries, which also happen to be, like the U.S. capital (inaudible) surplus country, but what the current account surplus countries should do. What each player, each part of what is a general equilibrium problem that requires a general equilibrium solution, what each component part should undertake to help bring about a change, an adjustment and that's what it was designed to do and that adjustment is quite complex. It includes a number of different factors, including expenditures, switching policies, as well as income adjusting policies. So that's what it was designed to do was to show our renewed commitment and our broad commitment in some detailed fashion about what all of us need to do about addressing what is a shared responsibility.
MR. BOOKBINDER: Okay. Are there additional questions -- okay, we'll come up to the front.
QUESTION: Let me just ask you one more question connected with the Treasury. In the past during, or after 9/11, there was a big problem about hawala or transfer of illegal way of money from the United States. How much problem do you have now? Do you still have problem of that kind of money being transferred from the United States and most of the money was transferred to terrorists in other countries, including in Pakistan. So where do we stand today?
MR. ADAMS: The honest answer is, it's really my counterpart, Stuart Levey, who is the specialist on the flow of money to terrorists or potential terrorists groups. I will defer to him -- your question to him. I will say that the hawala process, in and of itself, which is thousands of years old is probably the first system ever known to man to transfer resources across distances, you know. It can be a way to transfer monies to places that we would prefer it not go and it is extremely difficult to penetrate, to monitor and to thwart. But I trust my colleagues at other places in the United States Government and our colleagues in the Indian Government are undertaking effort to try to address that.
MR. BOOKBINDER: Okay. Is there a final question? Okay. Thank you very much Under Secretary Adams.
MR. ADAMS: Thank you very much.
