Jack Straw has said that the UK 'will work with the countries of South Asia, as part of our commitment to their long-term development'. Speaking at the Commonwealth Business Council meeting in London on 19 May, Mr Straw outlined the 'vast potential' of the region, saying there is 'a great opportunity in South Asia to create a virtuous circle of security and prosperity'. He noted that the 'millions of ties between people in Britain and South Asia, give a human dynamism to our business relationship which helps trade and investment to flow'.

The full text of his speech is given below:

"Let me thank the Commonwealth Business Council for inviting me here today and giving us this opportunity to discuss what your invitation fittingly calls the 'South Asian Dynamic'.

Peter Longworth's idea for this discussion came following a visit which I made to India in February this year. In March, I visited Pakistan, and I also want to say something about that in a moment. What struck me in both countries was the speed at which they are changing, and how that is in turn changing Britain's relationships with them.

As you all know, the largest democratic process in the world, in the shape of the Indian elections, drew to a close last week. No-one can fail to be impressed by the power of a democracy where over 380 million people can bring about a peaceful transfer of power through the ballot box. India's pluralist democracy is a role model for her neighbours and partners in South Asia.

And all of us in the British Government wish the incoming Indian United Progressive Alliance Government - which now looks likely to be led by the architect of India's economic reforms, Manmohan Singh - every success in the challenges ahead.

I certainly don't underestimate those challenges, both for India and for governments and people across the region. It is vital, not least, that the leaders of India and Pakistan continue to show vision and courage to keep the Composite Dialogue on track in the coming months. There are other political and security challenges too, such as in Nepal.

VIRTUOUS CIRCLE OF SECURITY AND PROSPERITY

But there is also today a great opportunity in South Asia to create a virtuous circle of security and prosperity. Greater security can encourage businesses to invest for the long term; and the greater prosperity which business generates can in turn reinforce regional security.

If such a virtuous circle can be created, South Asia's potential as a region will be huge. So the commitment by the members of SAARC to enhance their regional cooperation, at their Summit in Islamabad last January, was most positive. So too is the work towards implementing a South Asia Free Trade Area by January 2006, which is gathering pace. I was struck that some of the SAARC conclusions directly reflected the model of the European Union, which has eliminated the scourge of war from our own continent by building economic cohesion.

I first visited India 25 years ago on my honeymoon. Today its economy has changed almost beyond recognition. And even in the relatively short intervals between my more recent visits, the changes brought about by surging growth are unmistakable.

One of the places I visited in February was a research and development centre run by Astra Zeneca in Bangalore, developing drugs against tuberculosis. It is the first such centre which Astra Zeneca has opened in an emerging market - an illustration of how the knowledge-based economy in India is driving forward growth. Even the pessimists expect Indian growth to remain at over 6 per cent, and for the optimists the estimate is far higher.

INDIA - WORLD'S THIRD LARGEST ECONOMY BY 2020?

Some time between 2020 and 2030, India will become the world's third or fourth largest economy - according to Goldman Sachs, it will overtake Britain in 2016. Each year, India's vibrant middle class is growing by a number equivalent to the population of Australia; and 2 million new Indian mobile phone subscribers are added every month. All this is underpinned by an education system which produces 3 million new graduates every year, and a culture which allows creativity to thrive.

That economic success is changing the nature of Britain's relationship with India. Ours is becoming a truly two-way partnership. Indeed India is now the eighth-largest investor in Britain, with three-quarters of that investment going to the knowledge-based sector. Sixty per cent of Indian investment in Europe comes here, and it has created over 1,100 jobs over the last three years. At least two thirds of the software professionals who come here from abroad are from India.

The English language, and the millions of ties between people in Britain and South Asia, give a human dynamism to our business relationship which helps trade and investment to flow. In my own constituency of Blackburn, thousands of people trace their origins to the subcontinent and maintain strong links with families and friends there - and as you all know, that is true across the country.

But South Asia is just as enriched by these links as Britain. When I was in India I had the privilege of meeting Karan Bilimoria, originally from Hyderabad, and the creator of Cobra beer which has sold so successfully in Britain. Now Mr Bilimoria is investing back in India to market Cobra there. He is also co-chairman of the Indo-British partnership for trade and investment. And in that capacity, he is this summer bringing a delegation of Indian chief executives to Britain, all of whom are interested in investing here. Mr Bilimoria personifies our two-way business partnership, which benefits India and Britain alike. And there are many other role models of that type.

EU/PAKISTAN TRADE PARTNERSHIP

On my visit to Pakistan in March I also sensed a real feel-good factor - backed by 6 per cent growth and huge rises in the Karachi stock exchange. The EU/Pakistan trade partnership agreement, in whose negotiation Britain played a leading role, has made an important contribution too. Again, that economic success is paying off in Britain's relationship with Pakistan. Our visible trade rose 14 per cent last year, and Britain is the largest overseas investor there. My colleague, Mike O'Brien, led the first trade missions to Pakistan for over three years when he visited last December. Last week we announced the resumption of ECGD cover for Pakistan.

Meanwhile the improving security situation has allowed us to remove some of the obstacles to an even closer economic relationship. We have reduced the level of warning in our travel advice for Pakistan; and direct British Airways flights there resumed last December. I am glad that at the beginning of this month we restored our visa service in Islamabad.

In Bangladesh too, British firms are well set to make the most of the opportunities offered by growth. British companies already supply some 25 per cent of Bangladesh's electricity and 15 per cent of its gas. Bangladesh is now the largest South Asian exporter of goods to the UK after India.

And in Sri Lanka, the Free Trade Agreement with India, along with sound economic policies, have been allowing the country to benefit from the economic dynamism of its northern neighbour. They make Sri Lanka an attractive base for companies wishing to reach the Indian market.

All this makes for a region with vast potential. The crucial challenge for the future, alongside security, will be to maintain the pace of liberalisation and competition which so benefits business and economic growth.

So we will keep on working to break down barriers and disincentives to trade and investment. It is vital that we make progress on the Doha Round of trade liberalisation, because removing trade barriers is three times more effective a tool for development than direct aid. And meanwhile, we will continue to argue that Indian companies and Indian consumers would benefit if British firms were allowed greater access to the Indian market - especially in the sectors where our firms are world-beating, such as banking, accounting, legal services and insurance.

We will also work for stronger safeguards for business in South Asia, such as a better framework for patents and intellectual property rights. We want to see air services to India increase. And we will work with the countries of South Asia, as part of our commitment to their long-term development, to ensure that the benefits of rising prosperity are shared by all.

Ladies and Gentlemen,

I have tried to sketch out some of my own impressions of how South Asia is changing, and of the challenges ahead. But you all have a wealth of experience and knowledge of the region - so I am greatly looking forward to hearing your impressions of how you see the opportunities for South Asia's future in our discussion today."

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