Delivering on the New Silk Road
Principal Deputy Assistant Secretary, Bureau of South and Central Asian Affairs
Thank you, Professor Calder, for such a warm introduction. I’d also like to thank the members of the Tokyo Foundation and the Reischauer Center for East Asian Studies for inviting me to be here today.
I should begin by echoing others to offer warm congratulations to the government of Japan for yesterday's very successful event. Following yesterday’s successful Tokyo Conference on Afghanistan, I’ll focus my remarks here today on Secretary Clinton’s New Silk Road vision for Afghanistan and the region’s future. Secretary Clinton first described this vision nearly a year ago in Chennai, when she spoke to the importance of economic integration for the future peace and security of Afghanistan and the broader region, calling for the development of a “New Silk Road” re-connecting economies that had been torn apart by decades of war and rivalry.
Today I’d like to talk about how the countries of South and Central Asia have embraced this idea and how the United States is working with partners like Japan to revive regional transit and trade networks. We’ve hit some significant milestones in support of greater economic integration, but I hope you’ll permit me to offer some ideas about areas where we can make additional progress. If there is time left after all that, I would be happy to answer questions. I’ll begin with what we’re doing with Japan.
U.S.- Japan Cooperation in South and Central Asia
It goes without saying that both the United States and Japan are deeply invested in Afghanistan and are fully committed to seeing the significant gains of the last decade maintained and solidified through this transitional period. Since the beginning of Afghanistan’s post-Taliban era, Japan has played a leading role, hosting the first international donor conference in early 2002 immediately following the signing of the Bonn Agreement, and filling a critical role in the Disarmament, Demobilization, and Reintegration effort. Now, more than a decade later, we are here again in Tokyo, for another critical event in support of Afghanistan’s recovery.
Japan has been a global leader in providing sustained assistance to Afghanistan over the past decade. Earlier this week, JICA showcased the results of that commitment, testimony to the hard work of Japanese and Afghans alike. I should note here that Japan maintained this commitment, even as the tragic events of last year generated such tremendous needs here at home. I believe that says a great deal about Japan’s standing in the world, and about Japan’s partnership with the United States in tackling the most challenging global issues of our time.
As a long-standing American ally, and as a country that seeks to have a positive influence in the world, Japan has been a natural partner for the United States in South and Central Asia. We have converging interests in economic growth, infrastructure, and in developing South and Central Asia as a source of dynamism and stability for the world economy.
In the years ahead, there will be many new opportunities for collaboration. For example, Japan helped Afghanistan build its Ring Road. Together, the United States and Japan could collaborate to help Afghanistan build the Fiber Optic Ring Road, and expand telecommunications connectivity to the region. We are also positioned to help advance a number of regional energy initiatives, including the further development of a regional energy grid. Other possible areas for cooperation include support for regional vocational training in mining, transport, disaster management, as well as continued support for the Central Asia Regional Economic Cooperation program. Our special partnership with Japan on issues of South and Central Asia is reflected in the trilateral dialogues we have developed with Tokyo and several key regional governments.
Why We Need the New Silk Road
For all its economic potential, South and Central Asia remains one of the least economically integrated areas of the world. Last year, for instance, intra-regional trade accounted for only 1.5 percent of the region’s GDP. South Asian countries’ trade with one another amounted to only 4 percent of their trade with the world in 2010, compared with intraregional trade rates of 26 percent for ASEAN members and 64 percent for EU countries.
But this lack of integration hasn’t always been the case. Actually, in the history of the region, it is not even typical. By virtue of its geography, the region historically served as a hub of interlinking trade routes at the crossroads of Europe, Asia, and the Middle East through which ideas, goods, and people passed from one continent to another.
Today, Afghanistan’s neighbors and near-neighbors once again include some of the fastest-growing economies in the world. This broader region is home to over one-fifth of the world’s population. That market can fuel Afghanistan’s continued economic growth, new jobs, and public revenue, as well as increased private sector investment in the region for decades to come. In other words, the economic segregation that defines the region’s present, didn’t define the past, and shouldn’t define the future.
Recognizing this, Secretary Clinton outlined a vision of economic cooperation, trade liberalization, increased trade flows, and people-to-people linkages throughout the region, referring to it as a ‘New Silk Road.’ In essence, this New Silk Road vision is a framework through which regional partners can think about and promote economic integration. We see this happening through two primary means: First, through trade liberalization – which includes the reduction of non-tariff trade barriers, improved regulatory regimes, transparent and efficient border clearance procedures, and coordinated policies – to accelerate the flow of goods, services, and people throughout the region. And second, through energy, water, transport, and infrastructure – which includes roads, bridges, electrical transmission grids, railways and pipelines – to connect goods, services, and people.
The idea is a simple one: by maximizing the use of transportation and energy infrastructure and actively promoting cross-border collaboration and trade, Central and South Asia can once again become a bustling hub for global commerce. The economic potential of a more open and integrated region as dynamic as this one is virtually unlimited. As the New Silk Road vision becomes a reality, it’s easy to imagine textiles and tea made in Bangladesh making their way through Afghanistan to Central Asia, while Kazakh wheat and energy move southward to feed families and light homes in Pakistan and India. As this New Silk Road develops across the region, we hope Japan will emerge as one of the vital catalysts in this process.
It Is Already Being Built
We know this vision is ambitious. In order to succeed, suspicion and regional rivalries, years of ambivalence about the merits of cooperation, and even geography will need to be overcome. These challenges will be insurmountable unless regional governments truly believe that the benefits of greater integration and connectivity outweigh the costs.
Despite the difficulties, this vision is not merely a pipe dream – it is a reality. The New Silk Road is already being built! As I deliver these remarks, electricity from Uzbekistan and Turkmenistan is powering small businesses and government buildings in Afghanistan; rail connections are being built between Kazakhstan, Turkmenistan and Afghanistan and a new rail line from the Uzbek border to Mazar-e-Sharif has been completed; Turkmen, Pakistani, and Indian officials have finalized a pricing agreement for the TAPI gas pipeline. If the right industry partners can be attracted, this projectwill one day ship billions of dollars worth of natural gas from energy-rich Central Asia, via Afghanistan, to energy-hungry South Asia.
A private Indian-led consortium of investors recently secured a bid on 1.8 billion tons of high-quality iron ore in the Hajigak tender in central Afghanistan, while a few years back, a Chinese firm secured mining rights to Afghanistan’s Aynak copper mine reserves. Earlier this year, the Afghan government issued an additional four tenders – in copper and gold – and will likely offer another in lithium later this year, providing further opportunities for investors to help build the New Silk Road.
Just last week, CII, the Indian business confederation, joined with the Governments of India and Afghanistan to host a conference aimed at promoting foreign investment in Afghanistan and encouraging Afghanistan’s neighbors to play a more active role in Afghanistan’s economic future. Recommendations and outcomes from that highly constructive conference were presented jointly by the Confederation of Indian Industry and the Indian Ministry of External Affairs at yesterday’s conference.
In addition to capital-intensive infrastructure and extractive developments, a push towards regulatory reform, regional capacity building, and increased cooperation on border management is also taking root with regional governments. Initiatives such as the Border Management Staff College in Dushanbe and the Customs Training Facility in Bishkek – both of which strengthen technical and people-to-people linkages between Afghanistan and neighboring Central Asian states – exemplify the New Silk Road vision.
Outside of our own robust USAID regional integration program, initiatives like the Transport Corridor of Europe, the Caucasus and Asia, the Central Asia Regional Economic Cooperation (CAREC) Program, the SARI-Energy programs, and the ADB’s Regional Improvement of Border Services project all advance this idea of more trade through reduced non-tariff trade barriers and increased economic cooperation and integration. The CAREC-facilitated Cross-Border Transport Agreement will help to improve transport infrastructure and accelerate the transit of goods between the Kyrgyz Republic, Tajikistan, and Afghanistan. Over time, this agreement could be expanded to include other countries along CAREC’s “Transport Corridor number five”, which connects East Asia to the Arabian Sea through Afghanistan. Ultimately, safer and more effective border-crossing points coupled with streamlined transportation regulation, means more (and more effective) trade – and that means increased prosperity, peace, and stability for the citizens of this region.
India and the Promise of Trade
The most significant and promising milestones we have seen so far along the New Silk Road are those that strengthen trade. Economic opportunity changes lives for the better, and one of the best ways to increase economic opportunity is by growing a country’s trade relationships. Trade with neighbors makes good economic sense - just look at the United States, where two of our top three trading partners are on our borders, and account for almost thirty percent of our total trade value.
Leaders in India and Pakistan recognize the reality of this and have taken significant steps recently to improve their bilateral trade ties. According to World Bank estimates, trade flows between the two countries have languished at 400 percent below their potential. But the good news is that’s a lot of potential! The process of normalization in both directions, including the full extension of Most Favored Nation status by Pakistan by the end of this year, the reduction of non-tariff barriers by India, and more liberal business visa policies could lead to a $10 billion increase in trade.
India and Pakistani officials have already made significant progress building Integrated Check Posts at the Wagah border, with India investing $30 million to upgrade the infrastructure on its side of the border. The check post, which will become operational later this year, will serve as a portal for goods from the wider region, including Afghanistan, to access the markets in India and Bangladesh. I should note that it takes only eight hours by car to drive from Wagah to the Afghan border via Lahore, Islamabad, and Peshawar. Add to that the conclusion of the historic transit trade agreement between Afghanistan and Pakistan, designed to reduce the costs and delays in transport between the two countries, and it becomes clear that the New Silk Road is taking shape.
Of course, there are countless challenges ahead, and there is always room for improvement. But undeniable progress has been made, and the region is taking ownership of this commercially-driven vision. Every country in South and Central Asia stands to gain from a more open and integrated neighborhood. Recent breakthroughs in regional trade and cooperation demonstrate that regional governments understand and are embracing this. Through the continued efforts of regional governments, donors, and the private sector, that progress will continue.
All along the New Silk Road, Afghanistan’s neighbors and friends have demonstrated their commitment to Afghanistan’s economic and political success. As Afghanistan assumes lead responsibility for its own security and seeks to grow its economy, it is critical that the international community remain engaged to ensure that the progress we have all worked so hard to achieve is preserved and has the momentum to continue.
Thank you very much – I’ll now gladly take any questions.