Statsminister Anders Fogh Rasmussens tale ved Indian Institute of Management i Bangalore den 5. februar 2008 (Talen er på engelsk)

Check against delivery

Making the most of globalisation

– spreading the benefits and mitigating the risks

Professor Pankaj Chandra, Professor Shyamal Roy, dear students, Ladies and Gentlemen,

I am indeed very happy to be here today and to have this opportunity to address you all on the issue of globalisation. I’m particularly very pleased to get this opportunity to meet the faculty students. I know that only the very best students gets access to Indian Institute of Management inBangalore.

In many ways Bangalore is the right place to give such a talk. Bangalore has become a brand, which the world associates with globalisation and associates with India’s rapid economic growth. Thus, I would like to underline how delighted I am to visit this vibrant city and get a firsthand impression of India’s amazing transformation.

Especially, I look forward to exchanging thoughts and ideas with you on how we make the most of globalisation.

* * *

When Mahatma Gandhi urged his compatriots to “be the change you wish to see”, few could have imagined the changes that India would undergo just half a century later. In the past 10 to 15 years, India has undergone an impressive technological development and carried out comprehensive market reforms. The results speak for themselves. According to the International Monetary Fund, India now has the world’s fourth largest economy on the basis of purchasing power parity. And the forecast for continued high growth is good.

Therefore, we can expect that India increasingly will become one of the countries shaping globalisation.

* * *

Ladies and gentlemen,

Today, I have visited Biocon and Infosys – two companies which might be among your future employers. And I must say that I was hugely impressed with the innovation and dynamism, I experienced at both places. With the aim of exploring the Indo-Danish synergies in these sectors, I have brought with me a number of leading Danish business people within IT and Life Sciences. And I am confident this visit has been an eye-opener for them as well.

For me there is a lot to gain from understanding India – and making sure that India understands us.

But why should you want to understand Denmark?

At a first glance, no two countries could be more different. Denmark is a small, Northern European country with a land area 76 times smaller than India and a population size similar to the city of Bangalore. Denmark’s highest point is only 173 meters above sea level, whereas the Indian Himalayas reaches for the stars at 8.5 kilometres.

But nevertheless there are important similarities. We are both experiencing a period of sustained economic growth led by the knowledge sectors. And most importantly, both countries share a firm belief in democratic values and the rule of law.

Differences and similarities aside, what really binds us together is globalisation. Globalisation is changing the way we buy, how we produce, and the way we live.

Sharpened international competition leads both Danish and Indian companies to locate themselves at places where production and research conditions are optimal. Modern means of communication, infrastructure, and globalisation make it possible for companies to carry out their tasks wherever there is the right mix of framework conditions and competencies.

It is quite common for Danish companies to place or outsource production and software development as well as back-up functions and call centres for instance here in India. So far, around 75 Danish companies have established a presence here.

At the same time Indian companies show an interest in Denmark. They want to be closer to the European market and the European customers, and they want to gain access to the technology, which is imperative in order to stay competitive. Just within the last two years, Denmark has welcomed a large number of international Indian companies, which due to strong Danish capabilities have chosen to place their activities in Denmark.

Just to list a few very concrete reasons, I would like to mention that Denmarkrecently – for the second year in a row – was rated by the Economist Intelligence Unit as the most favourable country to do business in.

And that the Danish economy was seen as the most competitive economy in the EU in 2007 by the World Economic Forum and rated by them as the best IT-nation in the world.

* * *

Ladies and gentlemen,

Globalisation offers many opportunities and presents many challenges. I am convinced that India and Denmark share the same vision: We should strive for globalisation with a human face. We must make sure that the economic growth is inclusive. And make sure that the benefits reach the many.

The flip side to modern India, and to many other emerging economies, is widespread poverty. More than one billion people in the world have yet to experience the benefits of globalisation. To my mind, there is no doubt that continued economic growth is a key to solving this problem. Focus must be on sustaining that growth.

In this country, growth is to a large extent bypassing rural areas and thus widening the gap between rich and poor. Fortunately, India has a strong starting point for tackling this problem. India has excellent human resources including a large talent pool of well-educated people. And India has the right framework conditions in terms of a solid democracy, a free press and an independent judiciary.

But it is also clear that globalisation only holds a promise of poverty reduction – it is not a guarantee. More is needed in terms of political decisions. We need policies and reforms aimed at ensuring that growth is widely distributed and brings people out of poverty.

One way to ensure better distribution is through international trade. We all have an interest in free trade.

According to World Bank estimates the gain from full liberalization of global trade would be approximately 300 billion US dollars. Of which the developing countries in the short run would gain approximately 90 billion US dollars or equivalent to around 30 percent.

We, in the industrialised countries, should open our markets to the developing countries. And – just as importantly – the developing countries should open their markets to each other. There is a lot to gain from free trade.

Thus, all of us have a common interest in giving the WTO-negotiations on the Doha Development Round priority. This is the only way to maintain and strengthen the preconditions for rule-based, free, international trade. That, however, requires political leadership and political will.

And I can assure you that Denmark, within the European Union, promotes free trade in order to benefit all countries, regardless of size and income level. Denmark is also a strong supporter of the EU-India Free Trade Agreement that will complement the WTO agreement and further develop the ties between our economies.

* * *

Ladies and gentlemen,

In Denmark, we have experienced that high economic growth based on global competitiveness can be combined with a high level of social security.

Let me briefly outline some characteristics about Danish society in order to explain our approach to the challenges of globalisation.

Firstly, we have an open and trade-orientated economy.

Secondly, we have a unique combination of a flexible labour market and strong social security known as 'flexicurity'. Flexible and security gives “flexicurity”.

Basically, “flexicurity” consists of three elements:

• A flexible labour market with few restrictions on the right of companies to hire and fire, which allows for fast reallocation of labour resources to where they are most efficiently used.
• A high level of social security through protection of individuals’ income rather than protecting the individual job.
• And an active labour market policy.

So you can hire and fire practically without any restrictions. But at the same time you have a high level of compensation – up to 90 percent for those with the lowest income. You may ask then, what are the incentives to work? The answer is that those who are able to work are obliged to accept jobs in order to get the social benefits. And the system works, at the present time the Danish unemployment rate is only around 2.7 percent.

Thirdly, we have a well-educated society with a strong social cohesion. Since 1814 we have been providing free education for all – high and low and on equal terms.

Fourthly, we have gender equality and we have family policies that make it possible to combine work and family life.

And finally, our society is solidly based on our democratic values, which are an important prerequisite for our welfare state and which has secured a strong support for redistribution within our society.

* * *

As you can imagine, Denmark is not in a position to compete on wages for unskilled labour. Knowledge, innovation and entrepreneurial skills are the central factors for our competitiveness.

Our approach to globalisation – and the characteristics of Danish society, I have mentioned – have helped turn Denmark into one of the most competitive and strongest economies in Europe. And into top ten of the most wealthy countries in the world.

Obviously, we would like to keep it that way. But we cannot allow ourselves to rest on our laurels. Denmark and Europe must be ready to adjust to changing conditions.

In order to do so, the Danish Government launched in 2006 an ambitious strategy for Denmark in the global economy.

And we are carrying out reforms aimed at ensuring our continued competitiveness. Key factors are:

• Increased job market participation in Denmark.
• Attracting new talent to Denmark through a green card arrangement
• Further improvements in education, research & development and the Danish business environment
• And we would like to see Indians work in Denmark to a larger extent than today.

* * *

As part of the Danish Government’s globalisation strategy, we have introduced a strong focus on Asia – and not least on India. I see many opportunities for cooperation, including in research and exchange of students.

One Danish University already has a cooperation agreement with a sister university in Kolkata. And the University of Copenhagen is preparing an agreement with the Indian Institute of Technology. I am convinced that more cooperation agreements will follow. For the benefit of both India and Denmark.

Fortunately, in Denmark, globalisation is not viewed as a threat but it is viewed as something positive. Not as an obstacle but as something providing more opportunities and more prosperity. And we have always looked beyond our own borders for new opportunities. From our seafaring days as Vikings 1,000 years ago to our focus on opportunities in the global market place today.

And please rest assured – that our approach today is more peaceful than that of the Vikings.

* * *

Ladies and gentlemen,

With a global outlook also comes awareness of the challenges of globalisation, which are increasingly affecting us all: International terrorism, pandemics, environmental degradation and climate change. All of them are serious problems that require national, regional as well as global solutions and cooperation.

In many ways, climate change is a key example of why we have a common global interest in working together.

Climate change is happening as we speak. We have all – rich and poor; huge emitters and small emitters – in recent years felt the impact of extreme weather phenomena.

India is itself one of the most climate-vulnerable countries in the world, with its long coastline and the reliance on agriculture as the livelihood of a very large proportion of the population.

So we all share the same concerns of what will happen, if we don’t take immediate action. And if we fail we put a great burden on the shoulders of future generations.

What we need is a new comprehensive and ambitious global climate change agreement.

This will require a globally shared understanding that everyone will be made to contribute – industrialised countries as well as developing countries. Otherwise we will not be able to win the battle against climate change. And winning this battle is in our common interest.

But while we have the responsibility to act in common, it is equally clear that different countries have different responsibilities according to their respective level of development.

The 1992 UN Convention on Climate Change talks about a “common but differentiated responsibility” for combating global warming and I believe that this principle remains fundamental in arriving at a new global agreement in 2009.

This will require that we recognize the special needs of developing countries. Adaptation efforts must be led by developed countries. And industrialized countries should stand ready as partners with financial support and technological transfers.

We will also need to fight climate change in ways that can sustain and reinforce economic growth. India’s main priority is economic development and lifting millions out of poverty. I fully understand why this needs to be India’s number one priority. But economic growth does not have to lead to a corresponding increase in energy consumption.

One example is access to energy. This is one of the preconditions for development – also in India where several hundred millions of people are still left without reliable access to electricity. This needs to be addressed – but my message today is that it can be addressed without drastic increases in the emissions of greenhouse gases.

The key tools are energy technologies and incentives that promote efficiency and the use of renewable energy resources.

And high priority on renewable energy is not only good for the environment. In Denmark it has given us better energy security and reduced our dependency on oil and gas. And looking at the skyrocketing oil prices it also makes good business sense.

And for businesses it has made good sense to build up strong competencies in the areas of energy conservation, alternative energy sources including wind power, and environmental protection. In Denmark green technology now constitutes 7 percent of the annual merchandise export.

Improved access to green technology and renewable energy for developing countries and the emerging economies therefore needs to become part of the package when we put together a global agreement on combating climate change. At this point in time, India has a historic opportunity to follow a different development path than the industrialised countries. But the precondition is that green technology becomes a more important part of India’s development.

Denmark will be hosting the UN Conference on Climate Change in Copenhagen in December 2009. At this conference I hope we will achieve a result that will meet this huge challenge facing us all, while also spreading the advantages of globalisation to more people.

Globalisation has a lot to offer. It is up to all of us, to make the most of globalisation. To ensure globalisation with a human face that also brings benefits to those less likely to gain from it.

* * *

Dear students,

Let me conclude today, if you – the elite students of the Indian Institute of Management – will allow me, by reminding you of your special importance. Being selected among so many is an exciting opportunity for each of you, but it also carries a special responsibility.

In this era of globalisation, India will have a strong impact on how things play out in the rest of the world. And you will gain influence on the course that India chooses. I hope - and I do believe - you will manage it well.

Thank you.