Trade minister says Asia key to UK recovery

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By Sharanjit Leyl Asia Business Report, BBC World

I actually think the UK economy is very robust Lord Davies

Early this year, in his first week as UK trade and investment minister, he was greeted by his civil servants with the phrase "yes, minister".

Lord Davies of Abersoch's joking reference to the 1980s BBC comedy of the same name, which dramatised the antics of a British minister who was consistently bested by his conniving civil service cohorts, hints at how the workings of government may be new to him.

But Lord Davies, better known as Mervyn Davies, is no stranger to the business of trade and investment.

Until January, he was the chairman of Standard Chartered, a bank that has weathered the financial storm that has engulfed many of its counterparts.

Asia is the future

During a recent trip to Hong Kong and Singapore, Lord Davies was traversing familiar territory. Having lived in Hong Kong for several years and Singapore for a year, the people he was addressing in a recent speech in Singapore were already familiar with him.

But clearly they are emerging markets with challenges Lord Davies

As chairman, Lord Davies played a pivotal role in developing Standard Chartered Bank's Asia focused strategy.

And he still believes that companies should look east for a route out of the recession.

"Asia is after all where the future is," he says.

"I do think that Asia is hugely important to the global economy. It's part of the world I know well, and it's a part of the world the UK has huge trade with."

Enormous challenges

Since becoming trade and investment minister in January, Lord Davies has visited China three times, all in the space of a month.

He notes its importance "in terms of the scale of its market, the opportunity, the way domestic demand is increasing".

But he also acknowledges that the same can be said of India.

"These are two large markets that are hugely important for the future, and with growing middle classes, but clearly they are emerging markets with challenges," he says.

"And this global slowdown has posed enormous challenges, not just to the OECD, but to markets such as Asia."

All has changed

Many of Asia's export driven economies have faced record falls in exports in recent months.

There are many lessons to be learnt on remuneration, in capital, on liquidity Lord Davies

But it is not just economic fundamentals that are changing.

Asked if the beleaguered banking industry will ever return to its former glory, Lord Davies, a veritable City man, says it will never be the same.

"You can't have banks collapsing around the world, eroding trust in the systems, and have it remain the same," he says.

"I think that in the UK we took bold measures on Royal Bank of Scotland, Northern Rock and Lloyds etc and we've had to draw a line under it faster than other countries."

Lessons to be learnt

Lord Davies is critical, indeed he was one of the early critics, of the excesses in the financial industry.

He himself is not getting paid for his current role, and $6m (£4m) worth of shares he was entitled to after "many years" of service at Standard Chartered, are being kept in a blind trust.

"There are many lessons to be learnt on remuneration, in capital, on liquidity, so I think it's an industry that has to go through a period of reflection and it has to learn those lessons," he says.

"The lessons are for ratings agencies and investors as well as governments."

He also stresses the need for global standards of accounting and regulation as a way to keep the banking industry in check.

Way forward

Lord Davies also thinks some doomsayers are overly gloomy about the UK's economic health.

"I actually think the UK economy is very robust.

"Yes, the UK, like anywhere else in the world, is having short-term problems," he acknowledges.

"The reality of what has happened is that we've had a financial service industry that has had severe setbacks.

"It moved into banks collapsing, having serious problems and then moved into global consumer confidence deteriorating and across the world, global demand has fallen.

"If you have an open market and if you truly believe in free trade and a mobile workforce, then you will be affected. The UK has very robust industrial positions across a range of industries."

Furthermore, Lord Davies reckons the weak pound means "the UK has an opportunity to export its way out of recession".