Asia must brace for economic 'typhoon'


Shourie: "Those who are investing in Indian companies have a much longer horizon than a war"

By Alex Frew McMillan

HONG KONG, China (CNN) -- Asia must brace for an economic "typhoon" if Pakistan and India go to war, says India's privatization chief.

"There will be very substantial effects, but certain things cannot be prevented," Arun Shourie, India's minister for disinvestment, told CNN, in a private interview.

The cabinet minister, who oversees development of India's northeast, as well as its national privatization push, said the effect of an India-Pakistan war would be virtually incalculable in Asia.

"I don't think we can calibrate a typhoon," Shourie said. He said that both India and Pakistan would suffer "a very serious effect."

Pakistan more dependent on aid

The official said war would likely affect India less than Pakistan, because Pakistan is more dependent on outside aid from the fight against terrorism.

"Their economy is on artificial respiration, mainly from debt relief," he stated.

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War threat no block to India's reform push

Shourie was speaking on the sidelines of the CLSA Emerging Markets investment conference here in Hong Kong.

Stock markets in both Mumbai and Karachi have tumbled on the tension in the contested region of Kashmir. Unidentified gunmen shot dead Kashmiri separatist Abdul Ghani Lone on Tuesday.

Britain's foreign minister has warned that the crisis is one that "the world cannot ignore" (full story).

India's main index in Mumbai is trading down 0.86 percent early on Wednesday afternoon, continuing six straight days of declines.

Stocks well down after 'battle' remark

The market had been higher but dipped after Indian Prime Minister Atal Behari Vajpayee told border troops to "prepare for a decisive battle" with militants.


The minister, visiting Hong Kong for a conference, asked what China's reaction would be to terrorists crossing its borders

Pakistan's main market, Karachi, is one of Asia's top-performing markets this year. But it is down 4.4 percent during Wednesday afternoon trade.

With the Bank of China building behind the Grand Hyatt hotel's plate-glass windows, Shourie questioned what China's response to pressure from terrorists sponsored by a neighboring country might be.

"In India, 61,000 people have been killed by terrorists, financed, trained, equipped, motivated and sent by Pakistan," he said.

CNN was not immediately able to contact Chinese officials for a response. But the Indian minister said the point was in any case rhetorical.

China on Tuesday called for restraint from both Pakistan and India, calling both 'friends' (full story).

Talks refused by India

But India has refused talks with Pakistan over the latest dispute. Pakistan says Indian fire on its side of the border has been indiscriminate.

Indian officials now believe the only power that can prevent war is the United States. "They have all the levers which can prevent Pakistan from their attacks," Shourie said.

Pakistan's foreign minister Aziz Ahmad Khan held out hope on Monday that India would "come to the negotiating table."

In Hong Kong, Shourie conceded that the uncertainty surrounding a possible war would undoubtedly make his privatization drive more difficult.

Bidders have 'longer horizon than a war'

Many observers were already faulting the slow progress of privatization in India. The government was forced to scrap its sale of a major stake in Air India prior to last September because bidding interest evaporated.

Shourie said the privatization drive would continue, with some 30 companies on the block this year. But the buyers to date have proved almost exclusively Indian.

India believes investors will not be put off by the global economic slump or conflict in the region.

"Those who are investing in Indian companies will have a much longer horizon than a war," he said. "If war happens, it happens. What can you do?"