Afghanistan Reconnected the Potential for Afghanistan to Act As an Economic Land Bridge in Asia

Afghanistan Reconnected The Potential for Afghanistan to Act as an Economic Land Bridge in Asia

Abu Dhabi Process Meeting April 10-11, 2013

Le Méridien Istanbul Etiler Cengiz Topel Caddesi 39, Etiler, Istanbul

SUMMARY AND RECOMMENDATIONS

I. The Context: Transition and Regional Potentials

Throughout 2013 and 2014, the EastWest Institute is convening a series of meetings on key aspects of economic security for Afghanistan in the framework of its Abu Dhabi Process. These meetings bring together stakeholders from the government, parliament and business communities from Afghanistan and the region.

The EastWest Institute is launching this initiative as Afghanistan has entered a phase of political and economic transition, and its future development will be a vital part of this region at the crossroads of Asia. As of 2014, Afghanistan will also have to manage a transition from a “security economy,” driven by the presence of foreign troops, and from a high level of foreign aid into a more sustainable peace economy with sufficient growth and revenue for the government. While Afghanistan’s medium and long-term economic potential with regard to agriculture, oil, gas and minerals is considerable, efforts must be stepped up to avoid an economic depression in 2014, the year of elections and of the draw-down of combat forces.

The first meeting “Afghanistan Reconnected”, which was held in Istanbul from April 10-11, 2013, focused on regional infrastructure and connectivity. A functioning regional network of roads, air and railway transportation is a prerequisite for further developing trade, energy, and mining in Afghanistan and the region. Opening the channels of transport and trade will improve the lives of average Afghans and will generate sustainable revenues for the governments of Afghanistan, Pakistan and other adjacent countries, as well as for the business sectors.

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II. Summary

About 40 participants from Afghanistan, Pakistan, India, the United Arab Emirates, Turkey, Uzbekistan, Kyrgyzstan, China, the United States and Europe attended EWI’s Istanbul conference. The business communities of the region voiced their interest in unimpeded trade and business opportunities. Participants discussed opportunities and challenges in developing the hard and soft infrastructure required to enhance Afghanistan’s connectivity. The conference’s objective, to reconnect Afghanistan and the region, was driven by the understanding that Afghanistan’s economic potential will be optimized when it becomes a transit route for trade and continental transport connecting people and markets in East and South Asia, Central Asia, Europe and the Middle East.

A key issue at the conference was the relationship between Afghanistan and Pakistan and the need to enhance regular trade in line with the Afghanistan Pakistan Trade and Transit Agreement (APTTA). The potential opportunities of the Southern Corridor from India to the Middle East and Europe were also widely discussed. While uncertainties regarding the security situation in 2014 will remain, it was emphasized that it is not only necessary, but also possible to move on to a trade-led economy in Afghanistan with a number of targeted measures promoting connectivity. Economic progress is key to overall stability in Afghanistan and the region. And in times of global trade “the markets won’t wait.”

III. Recommendations for Short-term Measures

Existing impediments, especially bureaucratic impediments at Pakistani—Afghan borders and at other key borders preventing the quick transit of goods—need to be removed promptly. This step requires swift governmental action and enhanced private–public partnerships. The conference suggested that all governments in the region should undertake the following:

1. Increase efforts to realize the full implementation of the Afghanistan–Pakistan Trade and Transit Agreement (APTTA) as well as its gradual extension to India. Most of the participants expressed the view that full implementation of the APTTA and good governance will be key in achieving progress on associated problems. This will require creative efforts to solicit buy-in from the Pakistani trucking industry and to convince the Afghans to address the illegal re-exports of goods to Pakistan. Once effectively implemented, the Afghan transport business would have access to the ports of Karachi, Qasim and Gwadar.

2. Remove impediments to the fast transfer of goods between Kandahar and the Pakistani port at Gwadar and vice versa. Gwadar is the natural port for most of the Central Asia countries as well as for Afghanistan. Afghanistan, Pakistan, and China should cooperate to provide easy access to Gwadar from the North.

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3. Simplify border operation processes and enhance border cooperation through a single window system and information exchange between border and custom officials, at least at a selected number of border posts. This would be a first step in the medium and long-term efforts to modernize and professionalize all Afghan border crossings to Pakistan, Tajikistan, Turkmenistan, Uzbekistan, Iran and China. Such modernization should include education and training, including English language training for border and custom officials.

4. Enhance mobility, import-export and access to services between India, Pakistan, Afghanistan and Central Asia countries through:

 Introduction of cross-border ID cards for traders, businessmen, logisticians and transporters;

 Removal of duties on the export of Afghan products to Pakistan to support the exportation of agricultural products to Pakistan, India and the Middle East;

 Establishment of credit card, insurance and banking services for Afghan traders and the trucking industry to fulfill deposit/guarantee demands in Pakistan, which will also enable Afghan traders and the transport industry to have easy and assured access to the port of Karachi and others in Pakistan.

5. Strengthen and facilitate trade between South and Central Asian regions and beyond through:

 Provision of regular and accessible information services to traders and the transport industries in Pakistan, Afghanistan and Central Asia countries through business conferences and matchmaking events;

 Construction of cold storages in Afghanistan and in the border/corridor regions;

 Training for the private sector in Afghanistan, Pakistan and Central Asia on relevant standards of certification.

IV. Recommendations for Long-term Measures

Participants suggested several long-term measures to boost regional economic cooperation:

1. Increase incentives for regional states along transit corridors, especially in Central and South Asia, to reduce the time and costs of border crossing. One promising idea is the implementation of the Model Highway Initiative (MHI) developed by the International Road Transport Union (IRU) as a means of encouraging Afghanistan and its bordering to cooperate in addressing unnecessary bureaucratic barriers to road transit. Major institutional donors such as the World Bank and the Asian Development Bank (ADB) may initiate funding for the construction of up to three model cross-border highways.

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2. Promote closer Afghanistan, Pakistan and Indian economic relations through continued confidence-building measures and through the facilitation of legal transit and trade. An incentive to bring a higher percentage of current informal trade into a legal framework that will positively affect both Afghanistan and Central Asia.

3. Strengthen the capacity of the Afghan government to maintain roads to a single sustainable standard. At present, the multiplicity of donors and contractors has produced wide variations in the quality and sustainability of the actual road beds and surfaces.

4. Develop and extend an Afghan rail network. While Afghanistan’s road network is under- developed, its rail network is virtually nonexistent. Higher priority has to be given to connecting Afghanistan through trans-continental rail lines. In the short term, the rail line to Mazari Sharif should be extended to the east and south as well as to Herat in the west. In addition to this, it is necessary to initiate the Kandahar rail line and link it with the Pakistani rail system via Spin Boldak and its extension to the port of Karachi. The final rail segment would connect the port of Gwadar via Quetta to Kandahar, thus opening Central Asia states to the world by the region’s most promising port.

V. Implementation

Representatives from the government of Afghanistan as well as members of parliament committed to undertaking speedy follow up on these recommendations in Afghanistan.

In a first step, the EastWest Institute will forward these recommendations to all participants as well as to other stakeholders in the region prior to the Almaty Conference on regional cooperation that will be held at end of April 2013. The EastWest Institute will furthermore identify specific issues on infrastructure for follow-up in the region and report on the outcome at the next Abu Dhabi Process meeting in 2013.