Summers Calls for International Fund

University President Lawrence H. Summers suggested on his India trip that developing nations should invest their capital reserves more aggressively, and proposed the formation of an international fund to manage those investments.

Emerging markets like India and China are amassing significant reserves, but by holding onto their funds rather than investing in global markets are missing out on potential gains, the former Treasury secretary said in remarks prepared for delivery at the Reserve Bank of India in Mumbai on Friday, March 24.

The return on investment could be substantial, Summers said, noting that over the last decade, the average university endowment in the U.S. achieved a real return close to 10 percent.

Since countries’ central banks are bound to draw political flak when their investments dip, Summers instead suggested that the International Monetary Fund and the World Bank back the creation of an “international facility” to invest those assets.

“It is an irony of our times that the majority of the world’s poorest people now live in countries with vast international financial reserves...it seems appropriate that some part of the focus of the international financial architecture move towards the challenge of deploying their large reserves as effectively as possible,” Summers said.

The international fund investing developing nations’ capital reserves could charge a management fee, which could in turn be devoted to debt relief or grant assistance, the president proposed.

SUMMERS ON TOUR

The president’s academic lecture on international economics was just one stop on his week-long trip to India, filled with speeches and meetings intended to strengthen Harvard’s ties to the country.

At a conference held by the Federation of Indian Chambers of Commerce and Industry in New Delhi on Thursday, March 23, Summers said India could benefit from playing host to more American students studying abroad.

Only 0.5 percent of American university students who went abroad last year visited India, despite its use of the English language and prominence in the global economy, according to Summers.

Summers said that an increase in the number of Americans studying abroad in India could contribute to the local economy, forge new relationships between Americans and Indians, and enable foreigners to take advantage of the country’s economic opportunities. During his tenure at Harvard, the president has advocated increases in the number of undergraduates who study abroad.

“Foreigners who study here will inevitably make long-lasting connections with their India counterparts,” Summers said, according to a transcript of his remarks. “They will forge lifelong relationships that over time will change the attitudes of our nation and other nations towards India.”

A BUSY SCHEDULE

On March 23, Summers also cut the ribbon for two of the University’s new outposts in Mumbai, India—a Harvard Business School research center and an office for the Harvard South Asia Initiative.

And the following weekend brought one of the trip’s highlights, an academic symposium hosted by the Harvard Alumni Association in New Delhi—the first such gathering to take place in India, according to the University.

The symposium, which was kicked off by India’s prime minister, Manmohan Singh, featured an assortment of Harvard professors including Lamont University Professor Amartya K. Sen.

One of the speakers at the symposium, Tarun Khanna, Lemann professor at Harvard Business School, wrote in an e-mail that the event successfully reached out to alumni “by giving a flavor of diversity of research and teaching activity that is underway” across the University.

“The turnout was phenomenal,” wrote Yasheng Huang ’85, an associate professor of international management at the MIT Sloan School of Management who spoke at the event, in an e-mail. “There are so many Harvard alumni in India and this is a huge asset for the country as it moves its economy forward.”

Summers spent Monday, March 27, the final day of his trip, in Dubai, where a Harvard Medical School program is collaborating with the local government to construct a 350,000-square-foot medical research facility.

The emirate occupied the center of national security debates in the United States after a company based there announced plans to take over management of six major U.S. ports. The firm later said it would turn over operation of the ports to a U.S. entity.

At a meeting hosted by the Dubai School of Government, Summers said he was impressed by the emirate’s economic development strategies, according to AME Info, a website that covers business news about the Middle East.

—Staff writer Nicholas M. Ciarelli can be reached at ciarelli@fas.harvard.edu.