Afghanistan Reconnected Regional Economic Security Beyond 2014 Afghanistan Reconnected: Regional Economic Security Beyond 2014

Report on the Abu Dhabi Process Consultations 2013-2014

May 2014

Report prepared by Anna Deister, Mohammed Shinwari, Wael Abdul-Shafi, Dr. Beate Maeder-Metcalf (Regional Security Team, EWI Brussels Center).

Editor: Sarah Stern; Coordination: Anna Deister

The views expressed in this publication do not necessarily reflect the position of the EastWest Institute, its Board of Directors or staff. _

The EastWest Institute seeks to make the world a safer place by addressing the seemingly intractable problems that threaten regional and global stability. Founded in 1980, EWI is an international, non-partisan organization with offices in New York, Brussels, Moscow and Washington. EWI’s track record has made it a global go-to place for building trust, influencing policies and delivering solutions. _

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[email protected] www.ewi.info AFGHANISTAN RECONNECTED 5 ACKNOWLEDGEMENTS cooperation. cooperation. “Afghanistan Reconnected” consultation series. series. consultation Reconnected” “Afghanistan consultation series “Afghanistan Reconnected” in 2013 and 2014. 2014. and 2013 in Reconnected” “Afghanistan series consultation governments of Turkey, Pakistan, India, Afghanistan and Germany. and Germany. Afghanistan India, Pakistan, Turkey, of governments of Abu Dhabi and of Germany for co-funding the Abu Dhabi Process Abu Dhabi Process the co-funding for Germany Abu Dhabi and of of We also would like to thank our partner organizations, in particular the in particular organizations, partner thank our to like would also We not have been possible without the invaluable diplomatic support of the the diplomatic support of without the invaluable been possible not have Federation of Indian Chambers of Commerce and Industry (FICCI), New New (FICCI), and Industry Commerce of Indian Chambers of Federation The articles of this report were kindly provided by the participants of the of the participants by kindly provided were this report of The articles well as the German Council on Foreign Relations (DGAP), Berlin, for their for Berlin, (DGAP), Relations on Foreign as the German Council well Delhi, the Sustainable Development Policy Institute (SDPI), Islamabad, as Islamabad, (SDPI), Institute Policy Development the Sustainable Delhi, The consultations held in Istanbul, Islamabad, New Delhi and Berlin would and Berlin would Delhi New Islamabad, held in Istanbul, The consultations The EastWest Institute (EWI) in Brussels wishes to thank the governments the governments thank to wishes in Brussels (EWI) Institute The EastWest AFGHANISTAN RECONNECTED

6 AFGHANISTAN RECONNECTED 7 44 48 54 56 62 63 66 71 76 79 84 86 88 8 12 16 26 29 32 34 38 CONTENTS Annexes Conclusions and Ways Forward Ways and Conclusions Economy Afghanistan’s in Rebuilding Parliaments of The Role Anna By Deister Regional Cooperation in Transport in Cooperation Regional Thapar By K.L. Economy Jump-Starting Afghanistan’s Farhadi Adib Starr and Frederick S. Prof. By Security Energy Cooperation and Regional Security Energy Mohammad Naeem Shinwari By Afghanistan for and Prospects Potential Asia: and South Central between Trade Electricity Raina D.N. By Aspects Internal Security: Energy Afghanistan’s Bochkarev Danila Dr. By Pakistan of Security in the Energy Afghanistan of The Role Raza A. Hilal By and Pakistan Afghanistan in Development Sector Private By Acar Ozan Forward Ways the Region: Interconnecting Mohammad Naeem Shinwari By Conclusions Reconnected: Afghanistan James By Creighton Trade and Investment and Investment Trade Potential Economic Afghanistan’s Harnessing Ambika By Sharma Transport Infrastructure Transport and Challenges Prospects Infrastructure: Transport Regional Kerami Zubair By Regional Economic Cooperation: An Overview An Overview Cooperation: Economic Regional Abbas Najam Dr. By Regional Economic Cooperation: Prospects and Challenges Prospects Cooperation: Economic Regional Afghanistan in the Heart of Asia Asia of in the Heart Afghanistan Michael Koch Dr. Ambassador By Figures and Facts and the Region: Afghanistan Team Security Regional By and Perspectives Challenges Asia: in Central Cooperation Economic Regional ča Jen Ambassador Miroslav By Asia and Central Afghanistan between Relationship and Current The Historic Finn Robert (ret.) Ambassador By and Prospects Progress Trade: and Development in Energy Investing Berdiniyazov Sapar Ambassador By Perspectives from the Region from Perspectives Integration through Changing Discourse Gulshan Sachdeva Prof. By Introduction Introduction Maeder-Metcalf Beate Dr. Ambassador By Introduction

Ambassador ith the end of the ISAF mandate, lenges and opportunities in 2013—on in- Dr. Beate Afghanistan will enter the “de- frastructure in Istanbul, on energy trade in Maeder-Metcalf cade of transformation” in late Islamabad and on investment in New Delhi. 2014, and assume security for In a fourth meeting, held in Berlin in April Vice-President Wand within the country. The challenges with 2014, we reviewed progress and defined and Director for regard to security and governance are obvi- future activities. Our philosophy in this se- Regional Security, ous; they attract much political and public ries of “Afghanistan Reconnected” consul- EastWest Institute attention. 1 tations is similar to the Istanbul or Heart of Asia Process, with its regional confidence In 2012, the EastWest Institute chose to fo- building measures. We engaged stakehold- cus on the economic and regional aspects ers from Afghanistan and from the region, of the transition. Afghanistan’s economy is including however not only governments, an important factor in the future stabiliza- but also the business sector and parlia- tion of the country, and so is the developments. We wanted to generate knowledge ment of economic cooperation with her and interest in the region in Afghanistan’s neighbors. economic potential and highlight the win- win potential of economic cooperation. For The departure of foreign troops by 2014 this, we believe it is essential to engage also and a gradual medium-term decline in over- the private sector, which is attracted to new all donor support are expected to lead to a business opportunities. It has proven to be considerable drop in economic growth in very helpful to have Members of Parliament Afghanistan. After years of robust economic at the table—mostly from Afghanistan and growth with GDP rates of around 10%, the Pakistan—as they have a say on legislation, growth is projected at 3.5 percent for 2014, trade and mining laws for example. Govern- according to the World Bank, before rising ments, on the other hand, tend to be more gradually to around 5 percent as the secu- “conservative” and remain mindful of old rity situation stabilizes and mining projects patterns of conflict and rivalry. come online.2 Afghanistan’s economic policy needs to move away from the “security A World Bank Representative stated in one economy” and aid dependence, and exploit of our meetings that, while there is growing the country’s considerable potential which trade between the region of South Asia and exists in agriculture, in mining and as a tran- the rest of the world, economic cooperation sit hub at the crossroads of Asia. within the region has been stagnating. This is due to instability in Afghanistan, located The EastWest Institute convened three in the center of Asia, as well as to long- meetings on cross-border economic chal- lasting problems among neighbors. It goes, however, against the global trend towards AFGHANISTAN RECONNECTED 1 This introduction is based on a speech greater connectivity in terms of infrastruc- delivered at the European Parliament, ture and exchange. And last year, the first 8 December 18, 2013, at the High Level intercontinental railway line was opened in Conference “Afghanistan and Central Istanbul connecting Europe to Asia. Neither Afghanistan with her specific challenges in Asia: Prospects and Challenges after the “decade of transformation,” nor the re- Withdrawal of NATO/ISAF Forces.” gion as a whole, can afford to be left out of 2 World Bank (Jan. 2014) “Global global trends for growth. It is time to over- Economic Prospects”, p. 79, URL: http://www. come the old zero-sum-game mindset. worldbank.org/content/dam/Worldbank/ GEP/GEP2014a/GEP2014a_SAR.pdf. AFGHANISTAN RECONNECTED 9 General Findings from of natural gas per year from Turkmenistan over 30 years. The Asian Development Our Consultations Bank will advise on the establishment of the TAPI pipeline company owned by state One of the most frequent debates was gas firms of these four countries. The 1,800 about the link between security in Afghani- kilometer gas pipeline will allow landlocked Central Asia is stan and economic development: some ar- Turkmenistan to diversify its gas export gued there could be no economic develop- markets to the southeast, provide a vital endowed with ment without a secure environment. Others new fuel source for southern Afghanistan considerable argued that there was no time and perhaps and help Pakistan tackle chronic fuel short- no need to wait for more secure conditions, ages. In India, it will allow the northern re- gas, oil, and as long as local ownership and benefits gion to access a steady supply of gas to fuel water resources were guaranteed in any major undertaking. its growth. The Asian Development Bank While long-term investment would require stressed the transformative potential of and seeks to confidence in the government and in the the project: “It will bring multiple benefits diversify its economy, short-term and medium-term to the participants, including access to new measures were possible, if arrangements markets, enhanced energy security and job supplies, while could be made. The economy can’t wait, opportunities and have transformational Afghanistan, and quick gains may flow from improved impact on regional cooperation.” logistics, reduction of tariffs and removal of Pakistan and impediments at border posts. Progress was also made in 2013 on another India need landmark regional energy project known as A second observation is on the regional na- the “CASA-1000.” This electricity transmis- these resources ture of this economic vision: it will require sion project will allow Tajikistan and the Kyr- to ensure sus- long-term pro-active efforts by all stake- gyz Republic to sell surplus hydro-power holders. It is not only about Afghanistan’s to Afghanistan and Pakistan. Afghanistan tainable eco- impact on other countries, as it is often would doubly benefit as a consumer and nomic growth. suggested. Afghanistan’s neighbors are not as a country of transit. Pakistan would add only at the receiving end of developments 1000MW to its national grid in peak de- in Afghanistan, as countries affected by mand periods. drug trade and terrorism. They are neighbors and active stakeholders. Regional par- Another issue for regional cooperation ticipation in our conferences was very en- between the States of Central Asia and couraging; exchanges were frank and to the Afghanistan is regional infrastructure. point. Participants from Turkmenistan and The Asian Development Bank estimated Tajikistan attended our consultations, while already in 2005 that the construction of it was explained to us that Uzbekistan’s North-South corridors between Afghani- policy is to deal with Afghanistan only bilat- stan and Central Asia could increase trade erally. Most active participants were from by as much as 15 percent or $12 billion Pakistan, India, Turkey and the Middle East. within 5 years. We now know that the north- Iran—like Pakistan—is a key economic ern Afghanistan holds the largest potential partner for Afghanistan and joined the con- in the country for multi-billion dollar min- sultations in 2014. ing. Mineral resources are considered to be Afghanistan’s largest economic asset Looking at the economic relationship be- with an estimated wealth of $1-3 trillion in tween Afghanistan and her neighbors in proven resources alone. Developing these the north, the EastWest Institute focused resources in the long term is considered Af- on the potential for trade in regional ener- ghanistan’s route to prosperity and growth. gy and electricity. Central Asia is endowed For this to occur, a functional regional infra- with considerable gas, oil, and water re- structure is required. sources and seeks to diversify its supplies, while Afghanistan, and Pakistan and India Roads, of course, will not only serve for AFGHANISTAN RECONNECTED need these resources to ensure sustainable the transportation of apples, copper, iron, economic growth. or gold. UNODC found that in 2013 opium 10 poppy cultivation in Afghanistan rose by The TAPI natural gas pipeline—a project of an alarming 36 percent. The illicit drug the 1990s, now moving towards comple- economy, originating mostly in the south tion in 2017—could be one of the most of Afghanistan, is likely to grow with the transformative economic projects of the predicted slowdown of the legal economy region, linking Turkmenistan via Afghani- in 2014. Narcotrafficking via the Northern stan to Pakistan and India. The pipeline Route through Central Asia supplies the could export up to 33 billion cubic meters Russian market with opiates. Iran has also AFGHANISTAN RECONNECTED 11 , - - to U.S. and U.S. to interviewed interviewed Ambassador Ambassador Ambassador “Afghanistan “Afghanistan Reconnected“ Reconnected“ Yousef Al Otaiba Yousef during the first during the first member of the member of to Afghanistan, Afghanistan, to Top: Top: Yousef Saif Al Ali, Al Ali, Saif Yousef EastWest Institute EastWest Board of Directors, Directors, of Board meeting in Istanbul U.A.E. Ambassador Ambassador U.A.E. Ambassador U.A.E. - Prof. S. Frederick Starr Frederick S. Prof. and Chairman, Professor Research Senior Institute, – Caucasus Asia Central U.S. Johns Hopkins University, “First, it must be said that EWI identified identified EWI that said be it must “First, - and then proceed issue significant a very and productive it in a correct frame ed to a high level This subject demands way. helped EWI and attention, serious of - And while India has increas that. achieve the potential appreciate to ingly come “Southern so-called of the to it benefits to Hamburg from extending Corridor” Af the Caucasus, Turkey, Hanoi through ghanistan, Pakistan and India, it has been it has India, and Pakistan ghanistan, this of pursuit in its surprisingly passive them to nudge helped The EWI objective. action. is that the Islam- impression my Second, valuable, particularly meeting was abad gov the new of members in that it gave express to opportunity ernment a clear the of in public their understanding of importance and economic strategic show to and also Corridor the Southern being taken steps the concrete of some that The fact Pakistan. it through open to the attended military officers former two - trans new on their and reported event (even) that proof was clear port firms move.” is beginning to Pakistan istan-Pakistan Trade and Transit Agreement Agreement and Transit Trade istan-Pakistan fully implemented. be yet needs to (APTTA) could if fully implemented, The agreement, Af via Asia Central to Asia South connect politi- require will Such progress ghanistan. vision within and a shared commitment cal the region. - re be able to would Afghanistan stable A in Pakistan shortages the energy spond to - in Paki business for avenues and provide consultations, In our 2013-14 and India. stan the opportuni- outline to managed have we be- cooperation regional for that exist ties and South Asia Central Afghanistan, tween in the Afghanistan vision is one of Our Asia. - econom with a considerable Asia of center hub. and as a transit own its of ic potential within the region this potential Developing for all. if not for many, will hold benefits - As to Pakistan, there is great potential for for potential is great there Pakistan, to As - Afghan The 2010 trade. enhancing bilateral been widely affected, as well as Pakistan. Pakistan. well as as been widely affected, national or regional is no short-term, There with economy this unwanted to solution and health public on implications wider its of assessment EWI April 2013 An security. how has analyzed Narcotrafficking Afghan of reduction a for allowing conditions ever, substitution from Apart cultivation. poppy “on a national scale, that it found strategies, and de- reconstruction economic general - industri of the growth including velopment, - pro may sectors, services and resource, al, the opium to vide a [….] viable alternative is a need there In other words, economy.” development economic in the real invest to the drug economy. reduce to in the country and will is diverse economy Afghanistan’s regionally. develop AFGHANISTAN RECONNECTED

12 AFGHANISTAN RECONNECTED 13 (IPIS), Iran. (IPIS), Qamar MNA, MNA, Qamar Cooperation, Cooperation, and Industry, and Industry, for Economic Economic for Dr. Mostafa T. T. Mostafa Dr. of Commerce Commerce of for Political and Political for Deputy Minister Minister Deputy Former Minister Minister Former Director General General Director Zahrani, Director Director Zahrani, of Petroleum and Petroleum of General, Institute Institute General, Ambassador Ambassador Michael Koch Dr. Special Representative the Federal of for Government and Afghanistan Foreign Pakistan, Germany Office, Wahidullah Waissi, Waissi, Wahidullah Ministry of Foreign Foreign of Ministry Natural Resources, Resources, Natural Clockwise from left: left: from Clockwise Member of National Member of Assembly, Pakistan; Pakistan; Assembly, Affairs, Afghanistan; Afghanistan; Affairs, Mozammil Shinwari, Shinwari, Mozammil Afghanistan; Naveed Naveed Afghanistan; International Studies Studies International - - - - mission. Germany is prepared to shoulder to is prepared Germany mission. as mission within that new responsibility - pro to intention its has announced and well an initial for 600- 800 troops vide between - neces of if a number years two period of met. are conditions sary the after own will not be on its Afghanistan will continue Germany ISAF. of wind down year each euros 430 million up to provide to - com The international 2016. until at least - in civil recon involved will remain munity the to according and development struction Account Mutual Tokyo up with the set rules Afghanistan in 2012. Framework ability commit in meeting its has made progress government Afghan the However, ments. resolve sufficient not shown has hitherto some other corruption and in in fighting such as fields key in progress More fields. and the protection law rule of governance, will rights including women human rights of stabilize and reconcile further to needed be growth. economic foster and to the society ac- in 2013 percent 10 declined by Growth which is expect Bank, World the to cording down in 2014, growth of percent ing 3.5 sig of News in 2012. percent 14.4 from investment major of downscaling nificant Hajigak of development the as such plans in- and complementary mines Aynak and Curtailing signs. not good are frastructure much needed while completing corruption necessary are law mining the like legislation investment. international private attract to - - -

2014 is a challenging and important year in is a challenging and important year 2014 elect people are Afghan The Afghanistan. forces security Afghanistan’s What is more, - full responsibil over take to preparing are - Secu International the from security for ity on December (ISAF) Force Assistance rity has community The international 2014. 31, assist to continue to readiness its stated by 2014 after forces security Afghan the and support with- advice training, providing Support” “Resolute a of in the framework Afghanistan in 2014 Afghanistan the first will witness We president. ing a new of in the history transition democratic ever these before, Unlike Afghanistan. modern issues related elections and all security and authorities Afghan by handled be will - the Interna with Forces, Security Afghan in a merely ISAF and tional Community I can this in March, Writing supporting role. place take will the elections hope that only and as possible environment an in as safe reasonably as can and fair as transparent difficult cir under the given be expected look bet preparations far, So cumstances. to According election before. than any ter of all districts data in nearly the available al- situation will security the Afghanistan And millions their votes. cast people to low on using their keen are men and women of of Credibility vote. right to constitutional Afghan of in the eyes the election outcome for precondition main the be will citizens during the transition. stability political

the Heart of Asia of Heart the Afghanistan in Afghanistan Afghanistan Afghanistan as a land bridge of the border and gives the population not Reconnected only a new opportunity to sell their prod- Group in Berlin Afghanistan is a landlocked country, not ucts but also provides access to doctors, an easy position to be in, yet one that puts schools and other services on the other Afghanistan on ancient crossroads of trade side of the border. and exchange of all kinds of commodities. Development of cross-border infrastruc- And, of course, this is even more true for ture and trade has enormous potential to bigger efforts such as the CASA-1000 Re- create much needed jobs – in Afghanistan gional Electricity Trade Project connecting and all its neighbors. South and Central Asia, the main elements of which now finally seem to be close to Even if done on a small scale the impact completion. of the development of cross-border infra-

AFGHANISTAN RECONNECTED structure on ordinary citizens’ lives can be The countries of the region have a key role huge. This is true for the projects imple- to play in the overall effort to rebuild Af- 14 mented by the Pakistan-Afghanistan-Tajik- ghanistan. In my view, the Heart of Asia Pro- istan Regional Integration Programme, or cess (or Istanbul Process) is proof that this PATRIP, funded by the German Foreign Of- simple truth has been understood by the fice. An example is the construction of the governments involved. The growing willing- Vanj bridge on the Pyanj river between Af- ness by so many different countries to take ghanistan and Tajikistan and adjoining mar- responsibility for their common neighbor- ket facilities (stalls, etc.). The bridge is used hood is very encouraging to watch. The fast by around 55.000 people from both sides establishment of this young process, established in Istanbul only in November 2011, in AFGHANISTAN RECONNECTED 15 U.S. Top: Beate Top: Embbassy of of Embbassy Iran in Berlin; Iran Koch, Special Koch, of the Federal the Federal of Najam Abbas, Najam Abbas, and Professor Representative Representative Institute, Johns Institute, and South Asia, and Asia, South Government for for Government Afghanistan and Afghanistan Maeder-Metcalf, Maeder-Metcalf, Senior Research Research Senior Research Senior Bottom: Michael Bottom: Asia – Caucasus – Caucasus Asia Fellow for Central Central for Fellow S. Frederick Starr, Starr, Frederick S. Security Program, Program, Security Chairman, Central Central Chairman, EastWest Institute. Institute. EastWest EastWest Institute; Institute; EastWest Vice-President and Vice-President Hopkins University, Hopkins University, Saeid Khatibzadeh, Khatibzadeh, Saeid Pakistan, Germany; Germany; Pakistan, Director for Regional Regional for Director them, develop and discuss solutions and solutions and discuss develop them, cooperation. Abu Dhabi Process the of The conferences crucial ele- very some researched have - the com for cooperation regional of ments as and the region Afghanistan of mon good act to Afghanistan of The potential a whole. linking Asia, in land bridge as an economic and Asia in consumers to suppliers energy - in the re potential unlocking investment economic boosting for factors key are gion and growth. development of members the distinguished of The work example is a good Process Abu Dhabi the joining forces. by be achieved what can of goals common and achieving Trust-building Abu Dhabi but the night, over do not work It work. that it can is living proof Process that the pleasure with great therefore was co-fund- has Office Foreign German Federal process. ed this valuable The institute has established a dialogue be- has established The institute experts analysts, parliamentarians, tween bring is easy: The recipe makers. and policy an put them into smart people, together among trust build environment, inspiring The EastWest Institute has tapped into the tapped into has Institute The EastWest - Afghani from civil society of rich potential - Paki Iran, India, China, Asia, Central stan, and others. Emirates Arab the United stan, The Istanbul Process is a government-led is a government-led Process The Istanbul for role a key it envisages However, process. alas, Civil society, too. actors, civil society than offi- creative and more faster is often inaugurated Abu Dhabi Process The cials. civil is a high level Institute the EastWest by which has a similar agenda group, society link the to better process: the official to Asia. of the heart of people and economies spite of not always convergent interests and interests convergent not always of spite some member between conflicts historical the enormous potential. shows states, Afghanistan and the Region: Facts and Figures

The country will face two main challenges that Transition and Economic productivity and private investment. Ac- cording to a World Bank projection, growth will affect eco- Potential in Afghanistan is projected to remain weak at 3.5 percent nomic activity in 20144, with any further increase in un- The transition to full Afghan security re- certainty likely to further dampen growth and growth in a sponsibility for all of Afghanistan’s prov- prospects and prolong the slowdown. Even major way. inces is due to be completed at the end of the mining sector (Afghanistan’s great eco- 2014. The country will face two main chal- nomic potential) contributed only 1.0 per- lenges that will affect economic activity cent to the overall GDP share in 2012. Rais- and growth in a major way: the departure ing revenues to the target of 14 percent of of foreign troops by 2014 coupled with an GDP by 2018 will require a concerted effort increase of Afghan national security spend- in strengthening enforcement, expediting ing; and a gradual decline in overall donor introduction of the planned VAT and prog- support over the medium term with a larger ress on legislative and regulatory frame- share of remaining donor support possibly work for the mining sector. The World Bank being channeled through the Afghan gov- estimates that post-transition growth is ernment’s budget. projected at about 5 percent per year during 2015-18 under the baseline scenario, In light of these two developments, do- which is considerably less than the 9.4 per- nors’ contributions are expected to shrink cent average growth in 2003-12 that was gradually. The International Monetary Fund fueled by aid and security spending.5 (IMF), the World Bank (WB) and the Asian Development Bank (ADB) all projected that Sectors such as transport and construc- Afghanistan’s GDP growth has slowed con- tion, which are dependent on a military siderably from about 14 percent in 2012 presence, will be most affected by the with- 3 to an estimated 3.1 percent for 2013. The drawal of foreign troops, and Afghanistan decline in GDP is attributed to increasing could suffer a severe economic depression uncertainty about the volatile political and when foreign troops leave in 2014. However, security environment, lower agriculture if the decline in aid is gradual and predict- able, an economic crisis can be avoided. The 3 World Development Indicators, World Afghan government and the international Bank National Accounts Data; and OECD National Accounts, Data Files; and International 4 World Bank (Jan. 2014) “Global AFGHANISTAN RECONNECTED Comparison Program Database, accessed on Economic Prospects”, p. 79, URL: http://www. January 10, 2014; International Monetary worldbank.org/content/dam/Worldbank/ 16 Fund, World Economic Outlook Database, GEP/GEP2014a/GEP2014a_SAR.pdf. October 2013; World Bank (January 29, 2014) 5 World Bank (January 29, 2014) “Afghanistan: Transition to Transformation “Afghanistan: Transition to Transformation Update”, JCMB Meeting, URL: http://www. Update”, JCMB Meeting, URL: http://www. worldbank.org/content/dam/Worldbank/ worldbank.org/content/dam/Worldbank/ document/SAR/afghanistan/AF-JCMB- document/SAR/afghanistan/AF-JCMB- meeting-jan-29-2014-presentation-english. meeting-jan-29-2014-presentation-english. pdf (accessed on March 3, 2014). pdf (accessed on March 3, 2014). AFGHANISTAN RECONNECTED 17 Above all, Above Afghanistan towill have amanage fromtransition an economy bysupported of the presence troops foreign self- a more to sustaining economy. The Afghan government must orchestrate an economic fromtransition a contract economy a marketto economy.

8 - - - Afghanistan Afghanistan Afghanistan expects the dual challenges challenges dual the expects Afghanistan do- and declining spending increased of to lead can this scenario While nor funds. argues Bank World the crisis, an economic - aid on eco declining of “[t]he impact that expected.” than will be less nomic growth 8 World Bank (May 2012) Bank (May 8 World 2014, Looking beyond in Transition: p. 109. 2: Main Report, Volume An overemphasis on the occurrence of an an of on the occurrence An overemphasis - nega strong has 2014 in crisis economic in activity on the economic impact tive economic a possible of Fear Afghanistan. the affecting is already crisis in the future investors businesses, of private confidence - Pes economy. in the local and consumers influ- will negatively expectations simistic and agents economic of the behavior ence a cri- of expectations the initial will validate of business Maintaining the confidence sis. - stimu to crucial is consumers and owners and beyond. in 2014 growth economic late Economic Potential Afghanistan’s potential considerable a has Afghanistan within the country growth economic for of center the in location its and—given the region. Asia—within result benefits the economic In general, are troops foreign of presence the from ing in the northern and west substantial more - in the south than the country of ern parts factors Various regions. eastern ern and - which has re this situation, to contribute - Pash that the mostly in accusations sulted and east tun population living in the south Any being marginalized. are Afghanistan of development economic to achieve effort will need Afghanistan in stability and overall imbalances. regional these address to the considerations, economic narrow In - in pre trade home to are northern areas Badakhshan from (especially stones cious - and re agriculture provinces); and Panjsher - with Cen and transit trade activities; lated Asia Turkmenistan); with (especially tral through Tajikistan with trade hydropower oil imports and and gas Kunduz province; Jozjan prov through Turkmenistan from in potential The north has the largest ince. dollar mining. multi-billion for the country is considerable, potential trade The transit - develop agricultural for as is the potential ment. trade, from profits Afghanistan of The west notably Iran, to ties and investment transit Herat provinces. and neighboring in Herat - - - - - http:// 7 Afghanistan Afghanistan - behind that consump ), 6 Above all, Afghanistan will have to manage manage to will have Afghanistan all, Above supported an economy from a transition a more to troops foreign of the presence by The Afghan gov economy. self-sustaining The expected decrease in foreign aid could aid could in foreign decrease The expected - Afghani of if the government be worsened, inter by set not meet conditions does stan LargelyEconomic Growth Externally Driven withdrawal troop 2014 of the The effects are but they predict in detail, to difficult are While private significant. be very bound to driver has been the primary consumption - half-de the past over growth economic of real 22.5 of of points (22.1 percentage cade in 2009–10 growth community must ensure planning and ef planning ensure must community in or measures sustainability fiscal fective 2014 in recession an economic avoid to der and beyond. conference Tokyo at the national donors pledged. were billion USD 16 when in 2012 all puts Afghanistan crisis in An economic the both at risk, at achievements security this under of All levels. and regional local stimu- to efforts of importance the scores an im- which will have the economy, late and economy the domestic on both pact with interaction economic Afghanistan’s in the region. other countries economic an orchestrate must ernment a to economy a contract from transition economy. market tion growth, the World Bank has noted, lies lies Bank has noted, World the tion growth, de- that generated economy” “security the and equipment. services goods, mand for donor spending and important are Also Government contributions. off-budget large mainly as increase to spending is expected spending on both rising security of a result the mili- for and maintenance operations been until now which have tary and police, by the donors. funded off-budget Economic Update: Poverty, and Economic and Economic Poverty, Update: Economic South Asia Region. Management, web.worldbank.org/WBSITE/EXTERNAL/ COUNTRIES/SOUTHASIAEXT/EXTSARREGTO PMACECOGRO/0,,contentMDK:20592478~ menuPK:579413~pagePK:34004173~piPK: 34003707~theSitePK:579398~isCURL:Y,00. 26, 2014). (accessed on February html 2013) Bank (April 7 World 6 World Bank (Feb. 2011) “Growth in 2011) “Growth Bank (Feb. 6 World Economic Recent Afghanistan’s Afghanistan: and Macroeconomics Performance”, in South Asia, URL: Growth Economic Afghanistan’s GDP Growth Sector Contributions to GDP Growth, 2003-2012 (in percent)

Sources: has by far the most developed industrial most bountiful rainfall in 32 years.10 Accord- production in the country. Agriculture re- ing to the World Bank, GDP growth reached Graph 1: World Bank (Octo- mains a major economic activity. The eco- an estimated 11.8 percent in 2012-2013, ber 2013) Afghani- nomic relationship with Iran will be without thanks to favorable weather conditions and stan Economic doubt of major importance for economic an exceptional harvest. Typically, agricul- Update, Poverty development post-2014. ture accounts for one-fourth to one-third of Reduction, and 11 Economic Manage- GDP, depending on annual output. In the ment, South Asia The southern and eastern provinces of Af- 1970s, before the Soviet invasion, Afghani- Region, p. 21. ghanistan border Pakistan and Iran. Eco- stan produced 20 percent of the world’s nomic activity in the informal sector is par- raisins12 (compared to 3 percent in 2010- Graph 2: 13 World Bank (Octo- ticularly strong. The areas also depend in 2011 ) and was self-sufficient in the produc- ber 2013) Afghani- a major way on the war economy, notably tion of milk, meat and cereals. Afghanistan stan Economic the procurement needs of ISAF troops and was a significant exporter of animal fiber Update, Poverty respective transport business. In addition, and high-value processed animal products. Reduction, and Economic Manage- trade and transit with Pakistan, notably While meat production decreased from ment, South Asia through the Karachi port, constitute signifi- 1996 to 2006, it has been increasing since Region, p. 4. cant economic activity. This implies partic- 2006 with an annual growth rate of 4.32 ular dependence on effective cross-border Graph 3: World Bank (April processing of transit, trade, and entry and 2013) Afghanistan exit procedures at the Karachi harbor. Economic Update, Poverty Reduction, Domestic Growth Potentials and Economic Management, 10 AREU Afghanistan South Asia Region, Agriculture Research Newsletter, Number 28, p. 4. January/February 2011, p. 2, URL: Afghanistan’s agricultural potential is very http://www.areu.org.af/Uploads/ considerable. The United Nations Food and EditionPdfs/1102E-Newsletter%2028.pdf. Agriculture Organization has suggested that the country can become self-sufficient 11 World Bank “Afghanistan in food production.9 Even under difficult se- Overview”, URL: http://www.worldbank. AFGHANISTAN RECONNECTED curity and overall economic conditions, Af- org/en/country/afghanistan/overview ghanistan almost reached self-sufficiency (accessed on February 26, 2014 ). 18 in cereal production in 2009 thanks to the 12 The Afghan ministry of Agriculture quoted by The Global Partnership for Afghanistan, and the Council on Foreign 9 FAO (Jan. 2011) Food and Agriculture Relations; Nourishing Afghanistan’s Organization (FAO) in Afghanistan, Kabul, Agricultural Sector, Greg Bruno, May 2009. Afghanistan, ULR: http://coin.fao.org/coin- 13 Global Agricultural Information Network static/cms/media/8/13103724862880/ GAIN (July 18, 2011) 2011 Raisin Annual Report, faoaf_brochure_2011.pdf. GAIN Report Number AF-2011-11, p. 2. AFGHANISTAN RECONNECTED 19 GDP Sector Shares (in Percent of GDP) of (in Percent Shares Sector GDP While Afghanistan has developed a national has developed Afghanistan While there this issue, address to policy water no- sustainability, about its questions are downstream Afghanistan’s to tably relating such issues as domestic as well neighbors sus- and management water as integrated tainable agriculture. Mining largest Afghanistan’s probably is Mining esti- have sources Official asset. economic min- $1 trillion in proven of a wealth mated an addi- for and the potential resources eral Afghanistan’s Developing tional $3 trillion. - Afghani is considered resources mineral economic and prosperity to gateway stan’s growth. the are Agreements Mining Major Current to given award an Tender, Copper Anyak of production and exploration China for $1.3 a minimum of worth a contract copper, and the province) Logar billion (location: with an investment goldmine Qara-Zaghan - royal million plus a 26 percent $71 of value The contract government. Afghan the to ty finan- for its not only significant, is very supported it is because also but value cial United investors—the leading several by - and Britain—and is intend Turkey States, foreign encourage to an example set ed to Baghlan the in Afghanistan in investment province. mining currently potential, huge its Despite - eco to a small contribution represents In 2009–10 Afghanistan. in nomic growth GDP of percent 0.11 mining constituted - - - all 15

14 16 http://www.irinnews. 14 FAO STAT (2014) Country Profile: Profile: (2014) Country STAT 14 FAO URL: http://faostat. Afghanistan, fao.org/CountryProfiles/Country_ Profile/Direct.aspx?lang=en&area=2 (accessed on February 26, 2014). (accessed on February “Afghanistan: (April 17, 2008) 15 IRIN News food self-sufficiency for potential Tremendous URL: expert”, - FAO org/report/77814/afghanistan-tremendous- potential-for-food-self-sufficiency-fao- 26, 2014). (accessed on February expert Bank (April 14, 2009), 16 World Third on a Proposed Paper Project for the Emergency Additional Financing Report Project, Rehabilitation Irrigation p. 6. D.C., Washington No. 47594-AF, percent from 2006 to 2011. to 2006 from percent Experts point to the fact that Afghanistan Afghanistan that the fact point to Experts “bread the becoming of potential the has target with exports the region for basket” India and the Middle East, ing Pakistan, of which face shortfalls in food production. production. in food shortfalls which face of the of the development time, the same At highly depen- remains sector agricultural - The develop conditions. dent on weather as a major contributor agriculture ment of Afghanistan in and employment growth for - in con considered be carefully needs to Total agriculture. for nection with irrigation 1979 prior to in the country area irrigated but in million hectares, 3.2 to amounted - high precipita with relatively (a year 2007 irrigat were hectares million tion) only 1.8 ir the areas of hectares 600,000 Only ed. so have invasion the Soviet prior to rigated been rehabilitated. far Sector Contributions to GDP Growth, 2003-2012 (in percent) 2003-2012 Growth, to GDP Contributions Sector Afghanistan’s Top Trading Partners (2012)

Source: growth.17 While the share of mining in ag- jority of the stones produced are sold in the European Commis- gregate output was at 0.6 percent of GDP informal sector. Private investment in this sion, Directorate- General for Trade in 2010, it increased up to an estimated 1.8 sector is largely deterred because of un- (November 7, percent in 2012.18 Mining is also capital- clear processes of mining allocations, fees 2013) “European incentive, and its impact on employment and royalties. The market is also flooded Union, Trade in is limited. The large mining industry should with fake stones and imitation stones, and Goods with Af- ghanistan” be linked to smaller local businesses, and most Afghan gemologists do not have the local capital investment be increased. Salt required capacity and equipment to fight mines offer opportunity with 54,000 tons fakes. Transportation of raw materials to of salt, worth an estimated $21.6 million, markets is another serious problem. consumed in Afghanistan yearly. Salt can be obtained locally and replace imports. Other Activities As to small scale mining of gemstones, the current production is estimated at $2.8 There is potential for economic growth million per year. If improved in production, for the production of construction mate- cutting and finishing, the production can rial (gravel, sand, crushed stones), for fired be raised exponentially to $300 million per bricks and for marble. Under government- year, according to USAID. However, this will controlled production prices, the annual require government intervention and good value of construction material production governance. The government has not yet could increase from the present $55 million formalized laws and regulations that gov- to over $90 million. It may also be possible ern the majority of the mines, and the ma- to generate $1.8 million per year in royalties from this production, assuming a 2 percent 17 World Bank (Feb. 2011) “Growth in royalty. The construction of homes and the Afghanistan: Afghanistan’s Recent Economic urban growth in Afghanistan will require Performance”, Macroeconomics and very large amounts of fired bricks that can AFGHANISTAN RECONNECTED Economic Growth in South Asia, URL: http:// be locally produced. With specific pricing web.worldbank.org/WBSITE/EXTERNAL/ and safety regulations, the government can 20 COUNTRIES/SOUTHASIAEXT/EXTSARREGTO rehabilitate coal mines and boost small- PMACECOGRO/0,,contentMDK:20592478~ scale local production. menuPK:579413~pagePK:34004173~piPK: 34003707~theSitePK:579398~isCURL:Y,00. Afghanistan’s marble industry can become html (accessed on February 26, 2014). a major player given the right technological and governance support. USAID reports 18 World Bank (April 2013) Afghanistan that in 10 years the industry could be close Economic Update: Poverty, and Economic to producing $700 million in exports, equal Management, South Asia Region, p. 6. to more than 6 percent of current GDP. For at the end of 2012. Reserves declined to example, Herat alone has a minimum of $6.9 billion in June 2013.21 20 marble factories and exports $3 million of marble. It is expected that the number Economic cooperation between Afghani- of factories will grow, employ more people stan and Iran has intensified in recent years. Afghanistan’s and export more than $10 million. While Pakistan had a bigger share in Af- transit trade ghanistan’s total trade, Iran’s trade with Af- interests with Regional Economic ghanistan has increased notably in the last 10 years. Iran’s exports to Afghanistan rose India and Cooperation from $120 million in 2002-2003 and $250 million in 2005 to $1.18 billion in 2013.22 Pakistan’s Pakistan and Iran are the most relevant re- Trade between the countries reached about interest in gional economic partners for Afghanistan, $2 billion in 2011.23 Exporting an average of both in terms of connectivity and trade and 30 MW of electricity to Afghanistan, Iran is a reaching the investment proper. The economic relation- key supplier of electricity to western Afghan Central Asian ship with both countries is also marked on cities, including Herat, as well as to the Af- the one side by the ethnic and language ghan provinces of Zabul and Nimroz.24 Af- markets affinities between Pashtun in Afghanistan ghanistan receives from Iran 50 percent of dominate and Pakistan and on the other between its oil imports25, as well as important private Dari-speaking Hazaras and Tajiks who are investment.26 the bilateral culturally influenced by Iran. trade agenda. While Pakistan remains the most relevant Pakistan’s exports to Afghanistan in FY of all Afghanistan’s neighbors in terms of At the same 2012 stood at $2.25 billion, while exports economic partnership, Iran is very actively time, political from Afghanistan to Pakistan rose from trying to increase its economic relevance $0.199 billion in FY 2012 to $0.917 billion in Afghanistan. In 2008, Iran, Afghanistan obstacles and during the first quarter of FY 2013.19 In late vested interests February 2014, Afghanistan and Pakistan 21 World Bank (October 2013) Afghanistan signed an agreement to double trade be- Economic Update: Poverty, and Economic on both sides tween Kabul and Islamabad to $5 billion Management, South Asia Region, pp. 11-14. prevent trade 20 per year. 22 The International News (December from reaching 6, 2013) “Pak-Afghan trade target for FY15 As a land-locked nation, Afghanistan is unattainable: report”, URL: http://www. its full potential. highly dependent on other countries for thenews.com.pk/Todays-News-3-218352-Pak- its trade, transit, security, and stability. Afghan-trade-target-for-FY15-unattainable- As shown in the figure below, Pakistan is report (accessed on February 26, 2014). Afghanistan’s largest trading partner, followed by the United States, the European 23 Bloomberg News (December 25, 2011) Union, and regional neighbors. In its latest “Iran, Afghanistan Trade Hits $2 Billion in 2011, analysis, the World Bank found that Afghan- IRNA Reports”, URL: http://www.bloomberg. istan’s trade deficit widened in 2012 to the com/news/2011-12-25/iran-afghanistan- equivalent of 41.9% of GDP. Total exports in trade-hits-2-billion-in-2011-irna-reports. 2012 increased approximately 3 percent to html (accessed on February 26, 2014). $2.76 billion, while total imports rose about 24 Shabnam Mirsaeedi-Glossner (July 15, 11 percent to $11.4 billion. This gap was 2013) “Iran’s Flourishing Regional Influence”, largely offset by foreign aid. International URL: http://www.sciencediplomacy.org/ assistance allowed for an overall surplus in article/2013/irans-flourishing-regional- Afghanistan’s balance of payments and a influence (accessed on April 18, 2014). record $7.1 billion in international reserves 25 Viola Gienger (April 4, 2012) “Afghanistan 19 The International News (December Needs Leeway on Iran Sanctions, Minister 6, 2013) “Pak-Afghan trade target for FY15 Says”, URL: http://www.bloomberg.com/ unattainable: report”, URL: http://www. news/2012-04-03/afghanistan-needs- thenews.com.pk/Todays-News-3-218352-Pak- leeway-on-iran-sanctions-minister-says. Afghan-trade-target-for-FY15-unattainable- html (accessed on April 18,2014). 21 report (accessed on February 26, 2014). 26 In 2006, an estimated 2000 Iranian 20 Tolo News (February 25, 2014) private firms operated in Afghanistan. Hazifullah “Afghanistan and Pakistan Agree to Expand Gardesh (October 3, 2006) “Afghans Fear Trade”, URL: http://www.tolonews.com/ Fallout from Iran Sanctions”, Institute for en/afghanistan/13984-afghanistan- War and Peace Reporting, URL: http://iwpr. and-pakistan-agree-to-expand-trade net/report-news/afghans-fear-fallout-iran- (accessed on February 26, 2014). sanctions (accessed on April 18, 2014). and Tajikistan agreed to form the Economic ineffectiveness of Pakistan Railways,31 are Council of the Persian-Speaking Union.27 making the Iranian ports of Chabahar and Iran also has encouraged Afghan business- Bandar Abbas increasingly the preferred es to relocate their international offices route for cargo originating in or destined for from the United Arab Emirates to Iran. Afghanistan.32 33 34

While Pakistan Possibly, the greatest potential for Iran to Iran’s economic interests have been par- remains the grow its economic relevance in Afghanistan ticularly noticeable in the Herat region. is by using the Iranian port of Chabahar in- Equally, most of Iran’s pledged reconstruc- most relevant stead of the Pakistani Karachi harbor as a tion assistance, estimated at $660 million, of all Afghani- major entry and exit point for Afghan goods is in Herat.35 Iran’s investments in the Herat and goods destined for Afghanistan. In May region involve infrastructure projects, road stan’s neigh- 2012, the governments of Iran and Afghani- and bridge construction, education, agri- bors in terms stan inked a deal securing Afghanistan’s ac- culture, power generation and telecommu- cess to the newly expanded facility.28 nication projects. 36 37 38 of economic partnership, Since January 2003, Afghan businesses 31 Business Recorder (February have been able to use the Iranian port of 25, 2014) “Goods transportation from Iran is very Chabahar with a 90 percent discount on Peshawar to Karachi and vice versa: actively try- customs and port fees for non-oil goods and KPCCI asks Railways to specify time a 50 percent discount on warehouse charg- period”, URL: http://www.brecorder. ing to increase es, as well as transit rights on Iranian roads com/business-a-economy/189/1156862/ for Afghan trucks.29 Iran has also upgraded its economic (accessed on February 27, 2014). a tax-free trade route linking Chabahar, lo- relevance in cated at the southern end of the Sistan and 32 US Department of State (June 13, Afghanistan. Baluchestan province, near the Oman Sea, 2011) “Afghanistan-Pakistan Transit Trade to the southwestern border post of Malik in Agreement”, Press statement by Mark Afghanistan, and to Kandahar and Kabul. C. Toner, Deputy Spokesperson, Office The road shortens the distance from the of the Spokesperson, URL: http://www. Persian Gulf to Afghanistan by 700 kilo- state.gov/r/pa/prs/ps/2011/06/166078. meters, and can significantly diminish the htm (accessed on February 27, 2014). importance of the Karachi-Kandahar road, 33 The International News (April 20, 2011) which is Afghanistan’s traditional roadway ”Afghan transit containers going through 30 to international waters. Iran”, URL: http://www.thenews.com.pk/ TodaysPrintDetail.aspx?ID=42524&Cat=3& In addition, a portion of the Afghan transit dt=4/20/2011 (accessed on February 27, 2014). trade has shifted to Iran’s Bandar Abbas port from the Pakistani port of Karachi be- 34 Dawn.com (April 29, 2013) “Decline cause of delays in the implementation of in Afghan transit trade”, URL: http://www. the Afghan Pakistan Transit Trade Agree- dawn.com/news/1025675/decline-in-afghan- ment (APTTA). The agreement took force transit-trade (accessed on February 27, 2014). in 2011, but complications in clearance 35 Mohsen Milani (no date) “Iran and transportation of cargo, as well as the and Afghanistan”, United State Institute of Peace, URL: http://iranprimer.usip. org/resource/iran-and-afghanistan (accessed on February 27, 2014). 36 Iran has helped rebuild Afghanistan’s radio and television infrastructure and 27 Institute for the Studies of War (no has increased its own radio and television date) “Iran and Afghanistan”, URL: http:// programs in Dari. The Iranian state www.understandingwar.org/iran-and- telecommunications company began providing AFGHANISTAN RECONNECTED afghanistan (accessed on February 26, 2014). Internet transit services in Afghanistan and 28 Tolo News (May 2, 2012) “Iran Opens Iraq in 2010, acting as a carrier for both 22 Chabahar Ports to Afghan Traders”, URL: http:// commercial and government traffic. www.tolonews.com/en/afghanistan/6097- 37 Mohsen M. Milani (Spring 2006) iran-opens-chabahar-port-to-afghan- “Iran’s policy towards Afghanistan”, Middle traders (accessed on February 26, 2014). East Journal, Vol. 60, No. 2, p. 251. 29 A. Pappas (2009) Trade 38 Jim Cowie (September 15, 2010) “Iran: Promotion in Afghanistan: Roles for Exporting the Internet (1)”, URL:http://www. Infrastructure and Institutions. renesys.com/blog/2010/09/iran-exporting-the- 30 Ibid. internet.shtml (accessed on February 27, 2014). AFGHANISTAN RECONNECTED 23 Ministry of of Ministry (UNRCCA). Central Asia Asia Central General and General Afghanistan, Afghanistan, for Preventive Preventive for Diplomacy for for Diplomacy a, Special Jenča, Turkmenistan; Turkmenistan; Acting Head of of Head Acting Foreign Affairs, Affairs, Foreign External Action Action External Head of the UN of Head Bangladesh, Sri Bangladesh, Chief Operating Operating Chief Service (EEAS); (EEAS); Service Regional Center Center Regional Officer, EastWest EastWest Officer, Tomas Niklasson, Niklasson, Tomas James Creighton, Creighton, James Representative of of Representative Institute; Miroslav Miroslav Institute; the UN Secretary- Division, Pakistan, Pakistan, Division, Division, European European Division, Counselor, Asia Asia and Counselor, Lanka and Maldives and Maldives Lanka Sapar Berdiniyazov, Berdiniyazov, Sapar Pacific Department, Department, Pacific - - - Afghanistan’s Afghanistan’s 41 http://app.com.pk/en_/index. Pakistan is targeting a further increase of of a further increase is targeting Pakistan 2015. $5 billion by up to periences delays in the harbor at Karachi. the harbor at Karachi. in delays periences handling open for in the rules Ambiguities as container as well sugar) (wheat, cargo Afghanistan to Pakistan from shipments Pakistan, For concern. of areas major are is the establishment an important concern that would Tajikistan to corridor a trade of - Cen to route trade its shorten considerably Turk through goes that currently Asia tral menistan. in 2004, noted Bank already World the As between in particular in the region, trade high from suffers Pakistan, and Afghanistan Continued costs. and logistical transport invest infrastructure for assistance outside of and removal on security progress ments, to fulfill the required are barriers non-tariff relationship. trade this bilateral of potential - with India and Paki interests trade transit Asian the Central in reaching interest stan’s - agen trade the bilateral dominate markets obstacles political time, the same At da. prevent on both sides interests and vested full potential. its reaching from trade its regarding concern Afghan The major im- is the Pakistan through trade transit - agree trade transit its of plementation with the goal (APTTA) ment with Pakistan Afghan the Indian market. reaching of implementa- the around center concerns and agreement bilateral an existing tion of ex often cargo Afghan other regulations. 41 APP (January 17, 2014) “Pak-Afghan 41 APP (January 17, 2014) “Pak-Afghan $ 5 billion to trade enhance bilateral to agree URL: 2015”, by php?option=com_content&task=view&id=1752 27, 2014). (accessed on February 01&Itemid=2 - - - -

it is clear it is clear 39 http://www. (accessed on February 27, 2014). (accessed on February While Afghan businesses are often not able not able often are businesses Afghan While - lead competitors their Iranian challenge to and dumping” “price against protests ing to higher import tariffs, for calls Pakistan remains of all Afghanistan’s neigh- Afghanistan’s all of remains Pakistan - econom of in terms relevant most the bors - Afghani to exports Pakistani ic relations. such as supplies food include basic stan and dairy products; sugar oil, cooking rice, - Paki and fertilizer. materials; construction phar of an important exporter is also stan Af of typical are Pakistan to exports Afghan that the role of Iran in achieving an accept an achieving in Iran of role the that Af in and productivity growth of able level important. will be very 2014 post ghanistan economic successful the relatively Given western Afghanistan’s of performance Iran of importance the economic provinces, the 2014 after will increase Afghanistan to withdrawal. troop maceuticals Afghanistan. to interests: spectrum of current ghanistan’s - pre and cotton raw vegetables, and fruits trade bilateral of The volume cious metals. million in 2000– $170 from has increased and to billion in 2008-2009 $1.49 to 2001 $2.5 billion in 2010–11. approximately afghanistan-today.org/article/?id=111 27, 2014). (accessed on February of Legislative Institute 40 Pakistan (PILDAT) and Transparency Development Pak– trade”, (December 2011) “Pak–Afghan p. 7, URL: VI discussion paper, Dialogue Afghan http://www.pildat.org/Publications/publication/ FP/Pak-AfghanTrade-DiscussionPaperDec2011. pdf Mohayudin Noori (May 13, Noori (May 39 Mohayudin in a free survival 2011) “Struggling for URL: economy”, market Perspectives from the Region AFGHANISTAN RECONNECTED

24 AFGHANISTAN RECONNECTED 25 Perspectives from the Region Region the from Perspectives Changing Discourse through Integration

Prof. Gulshan Sachdeva here is a lot of uncertainty sur- attract foreign investment particularly in Professor and rounding the bilateral security sectors like mining, hydrocarbons, infra- Chairperson, agreement between Afghanistan structure, telecommunications, agriculture, Centre for European and the U.S. as well as on the peace education, health services etc. Secondly, for Tprocess. Within this context, most analysts long term sustainability, it ultimately also Studies, School of International and international reports clearly indicate has to play its traditional role of facilitating Studies, Jawaharlal that in the post-2014 phase, Afghanistan is trade and commerce through its territo- Nehru University, going to face three major challenges—series. Apart from big Chinese investment in New Delhi curity, political and economic.42 Economic the mining sector, many Indian companies challenge is by no means less serious than have also decided on big investments. A other difficulties. At various platforms, both consortium of seven Indian companies led the international community as well as re- by the state-owned Steel Authority of India gional players, have reaffirmed their long- (SAIL) have won a $10.3 billion deal to mine term commitment to the future of Afghani- three iron ore blocks in central Afghanistan. stan, which goes much beyond 2014. These Some Indian companies are also planning developments, however, fail to reduce un- to bid for copper and gold projects. There certainty about Afghanistan’s future. Now are reports that India is also planning to sustainability of gains made in areas of ed- build a 900 Km railway line between Iran’s ucation, health, infrastructure, communi- Chabahar port and the Bamiyan province of cations and women empowerment is under Afghanistan. serious threat. The strategic location of Afghanistan will al- With declining Western interest, the ways be important for India, particularly in amount of resources available for develop- the context of difficult India-Pakistan rela- ment projects in the next decade is likely to tions. However, the importance of Afghani- be significantly lower than the past decade. stan for India is much bigger than normally Experience suggests that withdrawals of perceived in this narrow context. Once Af- international troops in other parts of the ghanistan becomes stable, trade through world have reduced civilian aid, with impli- Pakistan, Afghanistan and Central Asia has cations for economic growth and fiscal sus- the potential to alter the nature and char- tainability. Therefore, potential financing acter of India’s continental trade. So far gaps in the budget could threaten security the majority of Indian trade is conducted and recent progress made at the develop- by sea. Looking beyond Central Asia, it is mental front. Despite international com- clear that India trades a great deal with mitment for the “transformational decade other CIS countries, Iran and of course with

AFGHANISTAN RECONNECTED of 2014-2024,” the Afghan government will the European continent. In 2012-13, India’s be forced to deploy its limited resources on total trade with these countries amounted 26 maintaining security infrastructure. to about US $ 173 billion. Just before the global economic slowdown, India’s trade To offset these trends, Afghanistan will have with this region was growing very fast, par- to concentrate on two things. First, it has to ticularly with Afghanistan, Pakistan and Iran. Simple calculations on the basis of 42 As a regional cooperation advisor, Prof. past trends show that India’s trade with Eu- Gulshan Sachdeva headed the ADB and The rope, CIS countries, plus Iran, Afghanistan Asia Foundation projects at the Afghanistan and Pakistan would be in the range of about Ministry of Foreign Affairs in Kabul (2006-2010). $ 400-500 billion annually within the next AFGHANISTAN RECONNECTED 27 Once Afghanistan becomes trade stable, through Pakistan, Afghanistan and Central has theAsia topotential the nature alter and character India’s of continental trade. - - - ghanistan have decided, in principle, to in- to in principle, decided, have ghanistan this make To APTTA. in the Tajikistan clude regional a serious into initial small project include to it is imperative force, economic (and perhaps Uzbekistan Turkmenistan, However, agreement. the broader into Iran) interest limited very be of will the project to India if traffic countries Asian Central to Once in both the directions. is not allowed included in the and India are Asians Central to will be ready the region APTTA, expanded Eurasian the emerging from advantage take years. within a few Union space Economic there level, at the political tensions Despite between developments positive some are Both matters. trade on Pakistan and India - re viz agreements three on agreed have mutual recog grievances, trade of dressal Pakistan cooperation. custom and nition for Wagah through trade bilateral will allow items). 137 to restricted (presently all goods the number of reduce to India has agreed 30 per by list under the restricted items signs that Pakistan some are There cent. nation (MFN) most-favored provide may While India had given India soon. to status been has Pakistan MFN in 1996, Pakistan India that happens, Once do so. to refusing - Afghani Still, Afghanistan. from strategies - continuous to but option has no other stan this strategy. toward ly work of implementation imagine to difficult is It political regional in the current this policy de- positive some However, environment. - Afghan The place. taken have velopments Agreement Trade Transit istan-Pakistan of years after reached been has (APTTA) - encourage U.S. and active negotiations - seri and nature limited its Despite ment. the in implementation, problems ous initial - as a major develop be seen can agreement It cooperation. economic ment in regional - Afghan beyond interest generated has also Af and Both Pakistan and Pakistan. istan - - - vari happen, to things these of many For at dif discussed small projects and ous big With Indian continental trade moving moving trade Indian continental With - econo the Pakistani region, this through way. in a major benefit to going is also my that with Indian fear within Pakistan Many and Central Afghanistan to moving goods may products Pakistani for markets Asia, show figures trade However, be eroded. - Paki without Indian competition, that even Central much to export is not able to stan Pakistani years, of couple In the last Asia. than $20 less are Asia Central to exports only exports It has significant million a year. those and a major portion of Afghanistan to fact, In be affected. to is unlikely exports development with major infrastructural both and services, goods of and movement - be important eco could India and Pakistan the mo- At Asia. in Central nomic players players. insignificant ment both are few years. Even if 20 percent of this trade this trade of percent if 20 Even years. few billion $80-100 road, through is conducted through passing be would trade Indian of im- With Asia. and Central Afghanistan an relations, India-Pakistan in provement - (particu Indian trade important portion of northern states landlocked the larly from will be mov Jammu and Kashmir) including With Afghanistan. and Pakistan ing through through passing this trade of the possibility the of most Asia, and Central Afghanistan will be- in the region projects infrastructural viable. economically come need years few in the last meetings ferent Afghan and American clear prioritization. about talked repeatedly now have officials is This strategy Strategy. Silk Road the New trade, international an of vision term a long - Cen that links network and energy transit through economies Asian and South tral blueprint for a good This was Afghanistan. has been unfortunately but Afghanistan and exit geopolitics with regional mixed will bring the South Asian Free Trade Area process. In the Istanbul process India leads (SAFTA) sensitive list to just 100.43 Pakistan the Trade Commerce and Investment Op- will do so in the next five years. By 2020 the portunities Confidence Building Measure peak tariff rate will not be more than 5 per- (TCI-CBM). Uncertainty concerning post- cent. Both have also agreed to cooperate 2014 Afghanistan has also added a new in investment, banking, electricity and gas dimension to India’s relations to Central trade, railways and better air connectivity. Asian republics. The failure of the Afghani- In addition, they have signed new liberal- stan project poses common security chal- ized visa agreement. lenges but any positive outcome will open tremendous economic opportunities to In the last few years, all four countries in- both India and Central Asia. These two fac- volved in the Turkmenistan–Afghanistan– tors have increased strategic significance Pakistan–India Pipeline (TAPI) project have of the region considerably and are perhaps already signed most agreements required reasons for announcing a 12-point “Con- for its commencement. These include: an nect Central Asia” policy. As the Shanghai Inter-Governmental Agreement (IGA), a Cooperation Organization (SCO) may play Gas Pipeline Framework Agreement (GPFA) a bigger role in Afghanistan in any post- and Gas Sales and Purchase agreement. A 2014 situation, India is also hoping to get its broad agreement on transit fees has also full membership soon. been agreed upon. Recently, Indian Minis- ter for Petroleum and Natural Gas M. Veer- Overall, economic integration both within appa Moily asserted that the framework for and between South and Central Asia is lim- TAPI is moving forward on a fast-track basis ited at the moment. High economic growth by the four stakeholder nations. A transac- in both the regions, however, will be pushing tional advisor for the project has also been policy makers to work for integration strat- appointed. He announced confidently that egies. Regional economic integration is also “gas is expected to reach the border of In- important for sustainability of Afghanistan dia by August 2017.” The Indian public sec- as ultimately it has to play its traditional tor giant ONGC also plans to bring Russian role of facilitating trade and commerce hydrocarbons to India via Central Asia, Af- through its territories. Between 2006 and ghanistan and Pakistan. 2009, the issue of regional economic coop-

AFGHANISTAN RECONNECTED eration through Afghanistan was becoming Within the broad context of increasing re- serious. Since then, however, the focus on 28 gional economic cooperation, India contin- exit and later on “negotiated settlement” in ues to support both the Regional Economic discussions pushed the issue into the back- Cooperation Conference on Afghanistan ground. Now it is high time to bring it back (RECCA) as well as and the “Heart of Asia” on the agenda. Even if a single major project like the TAPI takes off, it could become a 43 The sensitive list defines products “game changer” in regional geopolitics and which will not be eligible for lower the whole discourse on Afghanistan may import tariffs in the South Asian Free change. Trade Area (SAFTA) [editor’s note]. AFGHANISTAN RECONNECTED 29 Ambassador Jenča Miroslav Special Representative the Secretary- of Head General, the UN of Center Regional Preventive for for Diplomacy Asia, Central Ashgabat, Turkmenistan - that regional cooperation could undermine could cooperation that regional or prolong to and lead their sovereignty on their dependency a disadvantageous - compound are factors These neighbor(s). interests and economic the strategic ed by in the region. players external of both affects trust the lack of Unfortunately, in Central relations and multilateral bilateral between the relationship particularly Asia, countries. and downstream upstream although identity”, “regional a The lack of among cooperation affecting not directly limit the to be seen also can the countries, and increasing building trust for potential put a states Asian While Central contacts. unique po- own emphasis on their stronger the region of the advantages sition and role, underused. as a whole are - re to it is important time, the same At mentioned the above member that despite since countries Asian Central the factors, to managed have independence gaining - rela stable and relatively maintain peaceful the region decade and that in the last tions, growth. economic solid has experienced - with seri cope to potential The regional manner in a cooperative crises ous security However, should not be underestimated. challenged be seriously can this potential ar lasting if more in medium term even and negative not found are rangements grow. factors their strengthen to tried have countries The the establishment through ties economic - The Pro organizations. regional various of - on a Com States Asian Central Five of tocol Tashkent signed at the was mon Market The International 1993. January Summit in - Preven for Centre he UN Regional Asia Central for Diplomacy tive mandate its through (UNRCCA), has been diplomacy, preventive of

But in spite of serious efforts to make such to make efforts serious of But in spite trade cross-border happen, cooperation mod- is very in general the region within and infrastructure of The development est. its behind far remains links communication trans-boundary of use The shared potential. tensions serious causes resources water - coun and downstream upstream between arrangement sustainable as long term tries is Cooperation yet. has not been achieved - stra different the countries’ by hampered in and their role their future visions of tegic and fear grievances; historical the region; - coop regional Asia Central In landlocked It would important. is particularly eration the bringing economically, sense make for allowing market, larger a of advantages the lowering resources, local of use better in- and and transport, production of cost busi- local of the competitiveness creasing of has an abundance The region nesses. could and the countries resources natural from using them in an significantly benefit to Failure manner. cooperative efficient and security to bring risks also may cooperate and stability. dealing with a number of challenges in the challenges of number with a dealing those in particular region, Asian Central peace regional to a threat pose that may chal- address effectively To and security. the to whether relating region, in the lenges resources, natural shared of management and cross-border extremism, terrorism, crime such as drug-trafficking, organized important very is a cooperation regional component. Perspectives Perspectives Asia: Challenges and Challenges Asia: Cooperation in Central Central in Cooperation Regional Economic Economic Regional T Stable energy transit and trade require

regional co- Fund for Saving the Aral Sea (IFAS), com- Asian approach. To give a few examples, operation prising all the five Central Asian countries, Kazakhstan has allocated US $ 50 million was established in the same year. Kazakh- for the education and training of Afghan mechanisms stan, Kyrgyzstan and Uzbekistan set up students. Uzbekistan, a key partner in the and multi-lay- the Central Asian Economic Union (CAU) a “Northern Distribution Network,” has built a year later. Interstate presidential and prime railway line from Hairaton to Mazar-e Sharif ered political, minister-level committees and the Central in Afghanistan, providing electricity for Ka- technical and Asian Bank for Cooperation and Develop- bul. Turkmenistan is a strong promoter of ment were created. In 1998 Tajikistan joined the development of the TAPI project (Turk- commercial the CAU, that after changes including of its menistan-Afghanistan-Pakistan-India natu- linkages. There name was finally merged into the EurAsEC ral gas pipeline). It has also increased the (EurAsian Economic Community), putting capacity of existing electric transmission is a growing the idea of a Central Asian regional com- lines to Afghanistan and plans to build new understand- munity on hold. In 2008, Uzbekistan sus- ones. The construction of a railroad to con- pended its activities in EurAsEC. The efforts nect Turkmenistan, Afghanistan and Tajiki- ing in Central to establish functional regional structures stan has started in Turkmenistan. Tajikistan Asia that with of economic cooperation in Central Asia and Kyrgyzstan, with the support of the have so far failed. The only exception is World Bank, promote the CASA-1000 proj- a more stable IFAS, which sees different levels of engage- ect (transmission of electricity from Kyr- and developed ment by its five member states and also gyzstan and Tajikistan to Afghanistan and struggles to meet expectations. Pakistan). Both countries are very inter- Afghanistan in ested in the development of their transport the future, the The challenges to regional cooperation in and communication links with and through Central Asia also impact on how the coun- Afghanistan, in particular railways. Tajiki- efficient and tries engage with Afghanistan. The coun- stan also supplies electricity to Afghanistan fair distribution tries share deep concerns over the poten- and actively supports cross-border trade tial developments in Afghanistan, notably between the two countries. of water re- the possible deterioration of the security sources in the situation there and how this could impact Despite the currently fragmented regional on Central Asia. Security concerns, such as interaction, both within Central Asia and region would the threat of terrorism, religious extremism, with Afghanistan, developments in Afghani- become even drug trafficking and other forms of orga- stan can bring an additional impetus to nized crime are also factors that lead these regional cooperation. There is a common more crucial. countries to display a cautious approach to understanding among the Central Asian closer economic cooperation with Afghani- countries that economic cooperation with stan. At the same time, while the above- Afghanistan is of vital importance for the mentioned security threats should provide stability and sustainable growth of the re- a strong incentive for closer cooperation gion as a whole. With Afghanistan more between the five countries to jointly tackle engaged in the economic processes of the these threats, they have selectively pre- countries of Central Asia, chances of at- ferred to seek better protection of their in- tracting foreign investments and providing terests through broader structures like the economic opportunities will increase for Shanghai Cooperation Organization (SCO), the entire region. the Collective Security Treaty Organization 30 (CSTO) with its Collective Rapid Deploy- The potential for closer regional economic ment Forces and the Commonwealth of In- cooperation is highest in the fields of ener- dependent States (CIS). gy and infrastructure, as these areas are of primary interest for the Central Asian coun- With regards to economic cooperation with tries and would be difficult to develop pure- Afghanistan, the Central Asian countries ly on a bilateral basis. Stable energy tran- are engaging on a bilateral or trilateral ba- sit and trade require regional cooperation sis, without pursuing a common Central mechanisms and multi-layered political, AFGHANISTAN RECONNECTED 31 The main is toobjective security achieve and stability, long-term development and economic in prosperity Asia, Central including Afghanistan and the broader region. - - - - these constraints in Central Asia are par are Asia in Central constraints these Process Istanbul The important. ticularly or an um- platform a political become could - proj regional under which concrete brella, are above, mentioned including those ects, that the it is essential However, promoted. projects its for funding reliable has process - only pro to not simply devolve and does existing on already reporting viding formal activities. (mainly bilateral) Di- Preventive for Center The UN Regional bilat both supported has actively plomacy enhance to approaches and regional eral - con as the best in the region cooperation part is a UNRCCA measure. flict preventive confidence counter-terrorism the of ner process, the Istanbul of building measure on the implementa- activities its focusing Terrorism Counter UN the Global tion of a It has facilitated Asia. in Central Strategy implementation the on Action Plan of Joint - in Novem adopted Strategy the Global of ber 2011. be- Understanding of The Memorandum Nations and the Executive the United tween for Fund the International of Committee Ashgabat signed in was Sea Aral the Saving mutual for basis a solid providing in 2009, - Cen The Regional support and interaction. a offer to power convening its has used ter on meetings regional for needed platform in the region resources water shared of use participant. as a frequent Afghanistan with en- has been actively Center The Regional cooperation in supporting economic gaged and SPE mentioned RECCA earlier through - important in this re Not less initiatives. CA - orga regional with cooperation our is spect ECO, EU, OSCE, CIS, such as SCO, nizations Financial International as with as well CSTO Bank. World notably the Institutions economic regional while promoting Finally, in mind keep it is important to cooperation, itself. in and of is not a goal that cooperation security achieve is to The main objective and development long-term and stability, includ- Asia, in Central prosperity economic region. and the broader Afghanistan ing - - Different regional frameworks, such as the regional frameworks, Different - Eco (Regional RECCA Process, Istanbul - Afghani on Conference nomic Cooperation for UN Special Program (the SPECA stan), and CAREC Asia), Central of Economies - Coop Economic Regional Asia (Central support regional could Program) eration in a complimentary cooperation economic Development Asian as an CAREC, manner. has a main initiative, Bank (ADB) supported and resources financial its due to advantage in- cross-border a number of implements SPE to regards With projects. frastructure Infrastructure and communication links links and communication Infrastructure regional increased from benefit also would - The Afghani of development cooperation. that has idea is an country as a transit stan Asian Central from much attention received (the corridors major transit Two countries. Central connecting Corridor North-South and the East-West ports with Pakistani Asia - with Ira Asia Central connecting Corridor through be developed could nian ports) these of The development Afghanistan. and in improved result could corridors two broader the across connectivity diversified on both em- positively and impact region - ca and production opportunities ployment pacities. significant also has Process The Istanbul - not only the eco as it includes potential, - re also but aspects, security and nomic effective for constraints political moving mentioned above, As cooperation. regional technical and commercial linkages. There There linkages. and commercial technical Asia in Central understanding is a growing Af and developed stable that with a more fair and the efficient in the future, ghanistan in the region resources water of distribution crucial. more even become would of improvement in the lies strength its CA, and transport- procedures border-crossing while region, in the data harmonization body of as a coordination serves RECCA Afghanistan to related activities economic Bank (WB) has World The Asia. and Central cope to on how various alternatives offered in Central shortages energy with seasonal Asia. The Historic and Current Relationship between Afghanistan and Central Asia

Ambassador (ret.) Robert Finn abur, the founder of the Moghul dy- in Western China are not new, and neither is nasty of India, came from the lovely the trade in carpets, grapes and yes, opium Former U.S. Fergana Valley, where Uzbekistan, from Afghanistan to the north. Ambassador to Tajikistan and Kyrgyzstan come Afghanistan Btogether in contorted and anguished em- So then, what is it that Central Asian coun- brace. Driven out, he conquered Kabul, then tries see when they look at Afghanistan? Kandahar and finally Delhi and Agra. He is Historically, it is part of their world and one buried in Kabul, which he considered the with which they are familiar. In spite of the most beautiful place on earth.44 extensive cultural changes that took place during the Soviet period, there are still com- The ties between Central and Southeast mon bases of language and culture that can Asia date back to pre-history and are well- make communication and commerce easi- known to the people of the region, who have er. The Economic Council of Persian-Speak- moved across the landscape in response to ing countries, set up in 2008 among Iran, economic and political pressures. Today, Tajikistan and Afghanistan, is a preliminary there are more Tajiks in Afghanistan than in example of how such ties can be utilized. Tajikistan and millions of Uzbeks, Turkmen and Kyrgyz as well. These ethnic groups Iran, which must be included when discuss- spread east and south into China and Paki- ing Afghanistan on a regional basis, helped stan. Many of those came to Afghanistan in sponsor Afghanistan‘s participation as an response to the Russian imperial and then observer in the 2012 Shanghai Cooperation Communist advance into Central Asia. A Organization summit. At that meeting, the British observer on a hill in Kyrgyzstan in countries of Central Asia made it clear that the 1920s recorded the movement of thou- they intend to work closely to help Afghani- sands of Kyrgyz and their flocks into China stan develop. Economically, Afghanistan to escape the Communists. can provide a quick and ready route to the sea that could be of enormous importance The separation between the British and Rus- for Central Asian countries as they develop sian Empires was legal, but imperfect. Raid- economically and seek to establish them- ers from south of the border attacked the selves as players independent of the two Soviet Union well into the 1930s and tribes great powers—Russia and China that loom

AFGHANISTAN RECONNECTED and family ties spill across the borders. The over them. Trucks could arrive in Karachi in routes of the Silk Road moved horizontally 18 hours from Tashkent, whereas it takes 32 through the region as well, running on both them a week to get to Europe if they go west. sides of the Hindu Kush. The traders from The transport savings are equally substan- Kazakhstan snapping up bargain products tial. For the Northern Distribution Network (NDN) to take a container from Afghanistan 44 Excerpted from “Central Asia and overland to a Russian port costs $17,000, to Afghanistan”, speech made by Ambassador go south to Karachi costs only $7,000. In a (rtd.) Robert Finn at the EastWest future where U.S.-Iranian relations improve, Institute’s “Afghanistan Reconnected” the Iranian port of Chabahar could provide consultation in Istanbul, April 10, 2013. another ready access for traffic. AFGHANISTAN RECONNECTED 33 - northern neighbors are to closer and more and more closer to are northern neighbors - in Cen in power many For relations. open Afghanistan currently represents Asia, tral funda- and democracy of dangers twin the Tajikistan and Uzbekistan Both mentalism. fundamentalists Islamic of experience have later and Afghanistan in refuge who sought and unsuccessful were when they Pakistan Asia. in Central reappeared have who now will be wary the region the nations of All of entangling avoid All need to Afghanistan. of The as well. politics Afghan in themselves will not the region of histories intertwined succeed is to Afghanistan If that easy. make neighbors, Asian Central its with the help of do to can on what they focus must they will bring them at a it on the benefits help, and in the growth, time in their own delicate - param positive new setting for potential excit most the of one in relations of eters The world. the of regions ing and promising - Cen of should be the century century 21st window be its can Afghanistan and Asia, tral the world. to - Afghanistan is a question mark which is a question Afghanistan of in a variety uneasy neighbors its makes af Afghanistan What will happen in ways. - coop economic of advantages The obvious fun- Islamic [of the threat outweigh eration work even and in time may damentalism], economic as an improved it, eliminate to of the problems mitigates environment popular to contribute that heavily poverty dissatisfaction. Afghanistan’s mineral wealth has been de- has been wealth mineral Afghanistan’s un- still are resources water its lineated; is in the early potential tapped; and energy holds a Afghanistan development. of stages - and coop development for major potential steps, and some neighbors, with its eration being already are such as electric lines, - planning and coop Regional constructed. build and maintain to essential are eration the for infrastructure a modern regional only cover can cooperation Bilateral future. be done. that needs to the work of part will politics Afghanistan’s and how 2014 ter its receptive how will determine develop Investing in Energy Development and Trade: Progress and Prospects

Ambassador Sapar Berdiniyazov

Advisor, Asia and Pacific Department, Ministry of Foreign Affairs, Turkmenistan nternational and regional support for Af- ture in Central Asia and Afghanistan will ghanistan’s stabilization and economic meet the objective requirements for re- development beyond the 2014 transition gional development. Turkmenistan offers period and during the 2015-2024 trans- the civil-engineering design of the railway Iformation decade are essential factors.45 from Turkmenistan to Afghanistan with prospects of its further continuation in the Turkmenistan has presented a five-point Afghan territory. formula for peace and stability in Afghani- stan. The interacting theme is “Peace In June 2013, the construction of the railway through progress.” These are not empty line Turkmenistan–Afghanistan–Tajikistan words. Turkmenistan is working actively on began from the Lebap province of Turk- these points. menistan. Turkmenistan will construct with its own funds a 58 km track spanning Ata- Two of the promising areas of regional de- myrat–Ymamnazar section (Turkmenistan) velopment are transport and communica- at the cost of 200 million USD. In addition, tions. Geo-economic potential of transport Turkmenistan has expressed its willingness and transit ventures is enormous because to construct A 2km long track Ymamnazar it involves huge and extensive spaces, hu- (Turkmenistan)–Akina (Afghanistan) and man resources, attracts considerable in- a 35km track Akina–Andhoi (Afghanistan) vestments and creates opportunities for part of the project. Earlier, Turkmenistan transformation of transport segments into reconstructed the railway line Sarhadabad one of the engines for the development (old name Kushka)-Turgundi and now by of regional economy. In its geo-economic the request of the Afghan side, Turkmeni- strategy, Turkmenistan assigns a major stan plans to extend it. role to the creation of modern transport infrastructure and together with other states Turkmenistan finds it absolutely essen- implements large-scale regional and conti- tial to implement the potentially beneficial

AFGHANISTAN RECONNECTED nental projects. Turkmenistan– Afghanistan–Pakistan–In- dia (TAPI) gas pipeline project. The benefits 34 Turkmenistan believes that the develop- of the project are far more important, as it ment of transport and transit infrastruc- will greatly influence the development of the Afghan economy, resolve major social 45 Excerpted from “Investing in Energy issues and promote inflow of investments. Development and Trade: Progress and The construction of this gas pipeline will Prospects”, speech made by Ambassador address the economic, social and humani- Sapar Berdiniyazov at the EastWest tarian issues such as creation of the new Institute’s “Afghanistan Reconnected” jobs, development of social infrastructure consultation in Berlin, April 10, 2014. along the pipeline route and what is more AFGHANISTAN RECONNECTED 35 - - menistan and India, between Turkmenistan Turkmenistan between and India, menistan - Turkmeni And signed. were and Pakistan - “Memoran signed Afghanistan and stan on the long (MOU) Understanding” dum of sphere. in the gas cooperation term - Com Steering the 17th 2013, 9, July On held was project TAPI Meeting on mittee and representatives Directors Ashgabat. in the member of Ministries the concerned of Asian the of the representatives counties, at part Bank (ADB) took Development this of framework the Within Meeting. the - Agree an Committee Steering Meeting of Gas, Natural of and sale ment on purchase - Con the State between project, TAPI under of and the cooperation “Turkmengaz” cern signed. was Afghanistan Commit Steering Technical the Recently the leading where held, Meeting was tee with the member states, from specialist - Devel Asian the of experts the of support came and opment Bank (ADB) discussed of matters on the basic an agreement to of formation of upon the issues the project the and Ltd TAPI Consortium specialized a Consortium. the of a leader election of pipeline gas scale a large is really TAPI The to necessary is it and region, the in project the of anchor interest and to attention draw to it. and financial circles business world TAPI of presentation of the purpose For within the 2013 in September project - repre the meeting with the of framework ments on buying and selling between Turk between on buying and selling ments - The Meetings of the Technical Steering Steering Technical the of The Meetings differ discussing held regularly, are Group The rough estimates indicate that TAPI will TAPI that indicate estimates The rough for USD million 200–500 some generate country annually as a transit Afghanistan Afghan the for job places 12,000 and create - proj this of The construction nationals. the partner of the welfare ect will improve industrial the meeting besides countries, conjectured It is also needs. and domestic greatest be the would it completed that if The Afghanistan. project of development Yolotan South through pipeline will route Kanda- to Heart, Turkmenistan of field gas Mul- Quetta, Chaman, (Afghanistan); har and Northern Indian city tan (Pakistan) km is in 145 length is 1735; total Its Fazilka. the length of Afghanistan in Turkmenistan; it km; in Pakistan be 735 the pipeline would will be in In- be 800 km and the rest would inches 56 be will tubes of diameter The dia. project gas-pipeline TAPI The (1219 mm). 33 billion of transportation for is designed 31.4 Gas annually, natural of cubic meters - which will be con of billion cubic meters and India. Pakistan Afghanistan, sumed in as a be utilized portion will The remaining the along stations compressor the at fuel pipeline. - (Turkmeni “Avaza” in 2012 23-25, May On TAPI Meeting on the 15th Steering stan) - Agree this meeting At held. was project - politi maintain and enhance important—to in the region. stability cal project. TAPI concerning ent matters sentatives of leading international Oil & transmission line and construction of small Gas companies and financial institutions, power transmission units. After the com- business —tours to the largest business pletion of the construction power supply and financial centers of South-East Asia, to Afghanistan will increase up to 1.5 billion America and Europe—to the cities of Singa- KWT annually. Already 80 percent of the pore, New York and London were organized. construction has been completed, and the Such International Oil & Gas companies project will be fully completed in the near- like Chevron, Exxon Mobile (USA), BP, BG est future as well. Group (UK), RWE (Germany), PETRONAS (Malaysia) express their willingness to par- Electric energy sector promotes opportu- ticipating in the project. Some banks and nities for the regional cooperation as well. financial institutions show their interest in The power system of Turkmenistan is asso- participation in TAPI project as well. ciated with the combined power system of Central Asia. It is capable of exporting large At the same time, Turkmenistan pays great amounts of electricity to Afghanistan, Ta- attention to trade economic ties with Af- jikistan, Iran, Turkey and other countries in ghanistan. Increasing dynamics of Turk- the region as well. Energy sector potential men-Afghan cooperation especially visible is constantly increasing. The construction in the sphere of trade-economic coopera- of high voltage overhead power lines and tion between two countries, as well as in the substation complex has begun in Lebap projects related to a creation of transport and Mary provinces. Upon completion of and energy infrastructure Turkmenistan these works Turkmenistan will be able to in- supplies electricity to Afghanistan. Liq- crease the export of electricity to Afghani- uefied gas, diesel and gasoline and other stan five times. In order to connect power items are also supplied. lines of both countries, Afghanistan with assistance of international organizations One of the main points of trade and eco- and financial institutions should build new nomic cooperation between two countries power transmission units in its territory.

AFGHANISTAN RECONNECTED is power supply. Turkmenistan annually Electric power promotes the development provides 352 million KWT power to Mazari- of national energy security, greater regional 36 Sharif and Herat provinces of Afghanistan. co-operation. In the future Turkmenistan intends to increase the power supply to Afghanistan. The most important component in the comprehensive development of Afghani- In February 2011, President G. Berdymu- stan is strengthening international efforts hamedov of Turkmenistan signed a de- aimed at reconstruction of economic and cree about construction of Mary-Lebap- social infrastructure, and its active involve- Afghanistan 500 KWT high voltage power ment in regional and global trade and eco- AFGHANISTAN RECONNECTED 37 Belgium. From left: From Niklasson, Niklasson, Chairman, Chairman, Former U.S. U.S. Former K.L. Thapar, Thapar, K.L. of Transport Transport of Robert Finn, Finn, Robert Afghanistan, Afghanistan, (AITD), India; (AITD), Development Development Ikram Sehgal, Sehgal, Ikram Asian Institute Institute Asian Acting Head of of Head Acting External Action Action External Ambassador to to Ambassador Member of EWI EWI Member of Bangladesh, Sri Bangladesh, Service (EEAS), (EEAS), Service Pakistan; Tomas Tomas Pakistan; Afghanistan, U.S.; U.S.; Afghanistan, Division, Pakistan, Pakistan, Division, Division, European European Division, Board of Directors, Directors, of Board Lanka and Maldives and Maldives Lanka Asia in Ashgabad. The Centre’s activity is activity Centre’s The Ashgabad. in Asia region. in the affective very be complete cannot settlement Political - devel economic without real and lasting terrorism against battle Effective opment. without is impossible and drug trafficking - and improve problems social of solution In this and culture. education ment of of list the that note to like I would regard, are which measures, confidence-building confirm We their results. planned will give such as regional in areas our participation of and activities education infrastructure, and industries. commerce of chambers as Afghanistan considers Turkmenistan - Turkmeni The partner. an important trade is bilateral; partnership stan–Afghanistan as well. character and has a multilateral base legal a solid have relationships These 33 agreements. comprising Turkmenistan between relations Trade By year. by year increase Afghanistan and 7th the holds Afghanistan 2013 of the end turn- trade foreign Turkmenistan in place turnover trade of the level 2013 For over. 997.76 USD reached countries two between million; im- 984.89 – USD million : export items export Main million. 12.87 – USD port of products different gas, liquefied oil, are textile electricity, industry, petrochemical agricul- are imports The products. industry and materials construction products,, tural - and oth industry the chemical of products ers. - - - At the beginning of March 2014, there were were there 2014, March the beginning of At the between Ashgabad in consultations Turkmeni- of Affairs Foreign of Ministries Af during which the Afghanistan and stan - re opinion, Turkmenistan’s In this context, made in and progress gional cooperation an is process, Istanbul the of the framework rapidly affect can that mechanism effective and beyond. Afghanistan the situation in is Turkmenistan that It should be noted the situation of the solution supporting by as mentioned earlier Afghanistan in bringing long- means, and political peaceful to In order our neighbors. to peace lasting Berdy President principle, this implement - as implementa as well nomic processes, projects. and transport major energy tion of join to their willingness ghans expressed of infrastructure and transport the transit - Afghan routes: these Mainly to the region. - Afghan istan-Turkmenistan-Kazakhstan; istan-Turkmenistan-Tajikistan-Kirgizstan; - Afghan Afghanistan-Turkmenistan-China; istan-Turkmenistan-Azerbaijan-Georgia; (seaport Afghanistan-Turkmenistan-Iran in- means all by these of All Charbahar). Afghanistan’s of the opportunity crease growth. and economic export-import UN of an initiative put forward muhamedov with Afghanistan on talks peace sponsored and parties, all interested of participation political provide to readiness he expressed Turk In this regard, that purpose. for space with the closely very is working menistan Central for Diplomacy Preventive of Centre AFGHANISTAN RECONNECTED

38 AFGHANISTAN RECONNECTED 39 Dr. Abbas Najam Dr. Fellow Senior on Central focusing and Asia, South Institute EastWest - ticipants to focus less on the obstacles and on the obstacles less focus to ticipants on the opportunities. more Infrastructure Barriers is usu- forward steps concrete any Taking poor insecurity, unrest, by ally hampered and insufficient funding. infrastructure Differences Policy among the key mutual trust of The paucity begin discussions them to pushes players - lega Lingering viewpoints. divergent from possibilities the obstructs past the of cies with op- start players The key progress. of - a posi ensuing from standpoints, posing much effort, Hence, trust. deficient tion of di- a result, As and time is wasted. energy differences and ongoing ambitions, verse buyers energy potential opinion between of that gains collective the possible out cancel delays Long with timely action. arise could may differences policy continuing due to wane. to interest investors’ cause help can campaigns communication Wider - re and prod hesitations any address to action. into agencies government spective ticipant countries to enjoy the dividends of dividends of the enjoy to countries ticipant elu- will remain location their geographical the security- break is a need to There sive. that funds do not get link so development security. to diverted predominantly Geopolitical Interests and dogmas can impediments Ideological past cling on to to stakeholders some cause par encourage to a need is There baggage. - -

- join co to entrepreneurs Encourage initiatives, operation for home-spun solutions Jointly move partnerships. widely public private Convince beneficiary countries of countries beneficiary Convince benefits, concrete energy of future benefits Quantify trade,

• • • • If active participation in a regional setup setup regional a in participation active If par for benefit potential any is delayed, Development vs. SecurityDevelopment Scenario Overview of Challenges ticipants should propose how to: to: how should propose ticipants For bringing all participants around an ac- an around participants all bringing For par approach, result-driven and tion-based There is a need to explain how rising fuel how explain is a need to There - solu energy regional to demands will lead in potential highlight the profit tion and to - appeal more investments make to order reduce would that measures including ing, - inter-con regional Increased risks. security in thrive market will help an energy nectivity prices. at competitive the region As an administration under a new president president under a new an administration As Afghanistan in responsibilities will assume it will be elections, April 2014 the after a partners Afghan with our share timely to - practi which suggests map) (road proposal on economic, forward moving for steps cal cooperation. and energy trade Prospects for Economic for Prospects Cooperation An Overview Cooperation: Cooperation: Regional Economic Economic Regional Institutional Weakness ning rods for future cooperation.

There is slow progress due to the passivity An emphasis on the benefits achieved by and misgivings on the side of Central Asian boosting broader collaboration will encour- leaders as they fear their sovereignty could age the Afghans to see TAPI as the first step be compromised. towards a steady income source.

Stakeholders are yet to agree on sustain- We next move to identify what are the cre- able solutions. An absence of any mecha- ative ways to make inroads on several criti- nism to resolve differences in priorities and cal, closely interrelated clusters of issues plans for energy partnership retards poten- which are holding back progress, most no- tial progress. Political will to move forward tably the nexus of border security issues There is a need is not mobilized adequately enough for ef- with narcotics and trade facilitation. fective decisions. to showcase There is a need to provide alternate income the advantages Capacity Limitations generation opportunities for the border population. Crop replacement initiatives of taking steps Energy deficits remain a source of instabil- for poppy growers will encourage the con- to achieve ity owing to poor funding and insufficient in- cerned players to switch to legal yet profit- frastructure. There is a need to raise more able means (e.g. pistachio, pomegranates, economically public funds to invest in regional associa- saffron and walnut) for earning secure and feasible initia- tions to facilitate energy solutions. There stable livelihoods. tives that can is still a lack of interest from investors that needs to be addressed. Nexus between Transport Infrastructure be put in place and Transit Facilitation

from 2014 and Breakthroughs and It is desirable to start with modest yet onwards. Quick Wins meaningful steps that could help entrepreneurs and investors become engaged in There is a need to showcase the advantag- regional initiatives that are commercially es of taking steps to achieve economically profitable and attractive for investors and feasible initiatives that can be put in place host sides alike. from 2014 and onwards. Several matchmaking possibilities were Attention should be drawn to the best case proposed during the “Afghanistan Recon- examples to convincingly demonstrate how nected” consultation in New Delhi to attract economic gains can always triumph over ri- investments. They may well be appealing for valries and differences. regional donors as they also overlap bilateral and regional objectives. This may also An extension of Turkmenistan’s rail links provide an opportunity to diversify the EWI to Afghanistan and Tajikistan can be pre- funding base to supporters of the Istanbul sented as a watershed initiative which can Process. Ideas that promise to benefit from have a multiplier effect for other areas of future matchmaking include instituting an economy. “Industries for Peace” initiative for cross- border facilitation as well as development Even some modest doses of UAE invest- of industrial parks as conditions become ment in TAPI can be seen as an encourag- more favorable. ing signal for participants to proceed. The UN General Assembly resolution on Safe Such initiatives will help bring further jobs Energy Transit pursued as Turkmenistan’s and opportunities for all participants. There initiative will encourage the government in is a need to facilitate international coop- Ashkhabad to take bolder decisions to put eration to provide some training. Technical AFGHANISTAN RECONNECTED plans to action. capacity must be built for greater trade and transit. As the transport corridor country, 40 Until regional networks come into place, Afghanistan needs to develop systems to alternative energy generation via local pro- ensure pipeline security, stable transit fees, duction units can serve as a step forward. speedy custom clearance, efficient facilita- As a measure to improve stability, stake- tion at borders, investment protection and holders should be encouraged to link prac- dispute resolution mechanisms. tices with local citizens at the grass roots level. There is a need to identify one or two pilot projects as models serving as light- AFGHANISTAN RECONNECTED 41 As a first step, step, a first As is a needthere identifyto a mutually beneficial thatproject India bring can and Pakistan together. - - - - tion of benefits lost and costs incurred if TAPI if incurred costs and lost benefits tion of or shelved. is delayed to as key project TAPI the While pursuing - transforma transport Asia Central-South - eco trust, on are focus to words the key tion, and cooperation regional partnership, nomic Asian South The approach. benefit a shared (SAA Cooperation Regional for Association implementa- act as a mechanism for can RC) cooper The regional tion and harmonization. differences bilateral override can ation forum forward. interests collective and move as a me- serve could trade energy Beneficial and conflicts intractable resolving dium for of the language speak stakeholders make the the gains, The greater interest. common differ political address to it becomes easier The and deepen further cooperation. ences may frameworks cooperation regional of use con- In this capital. of private inflow enhance the how showcase to be helpful it may text help multilateral could Union (EU) European cooperation energy EU can How cooperation. How at consensus? arrive help other regions the 1951 vision for Schuman’s Robert can the Community of and leadership creation be years early in its (ECSC) and Coal Steel of Asia? in cooperation oil and gas cloned for and Impulse India: Initiative in- fund to is critical role sector’s The private busi- private, India has vibrant frastructure. - poten that could sectors and corporate ness in investments of as a powerhouse act tially partners. all benefit that could the region Due to low fuel supply reserves, rising fuel rising reserves, fuel supply low to Due on the pressures inflationary pose prices Pakistan of both economies energy-deficient depress to continue shortages As and India. supply gap the demand rate, growth potential is widening. for the rewards that emphasized be It must risks. the than greater much are cooperation the propor be discussing could example One China Factor en- China’s ensure crucial to very It remains Abu with the and engagement of dorsement need to Presenters (ADP). Dhabi Process will rising affluence whether Peking’s discuss of and acquisition access its further advance via South Asia Central from supplies energy will help construct and whether Peking Asia, and commerce of corridor a cross-continent trade. energy - - - - - resourc regional of development Joint mining and CASA- water, energy, es: 1000. Regional resource corridor: prospects prospects corridor: resource Regional industry linking the extractive for infrastructure cross-border through projects; • • With easing of sanctions on Iran, land-locked land-locked on Iran, sanctions of easing With can states Asian and Central Afghanistan expansions, and trade transit from benefit too. Iran for which in turn will bring revenues With regard to the energy and water issues, issues, and water energy the to regard With prag by more driven be should the approach facilitat focus on must efforts Immediate with occur could trade regional of Expansion - agree and transit trade of expansion possible transport of expansion APTTA; (e.g. ments rail Tajikistan-Afghanistan infrastructure— linking projects infrastructure Gwadar; line to (Pakistan), Karachi the port of to Asia Central (in Iran)). and Chabahar Abbas Bandar Nexus of Energy and Water Issues of EnergyNexus Water and instead Hence, ambition. by less matism and - as wa such issues sensitive bringing any of is it stage, at this the agenda sharing to ter back it on a and keep safe play to preferable in cooperation potential of burner as an area the future. between ventures ing specific matchmaking Ka- sides. and energy-surplus energy-deficit be made aware need to investors zakhstan’s should profits significant for the potential of in Kyrgyz projects in hydro-power invest they stan and Tajikistan. It may be beneficial to explore, if any experts if any explore, to be beneficial It may - Devel Asian Bank and/or World either from ben- of a projection share opment Bank can becomes CASA-1000 once expected efits operational. aged to consider offering a transit to Nepal a transit offering consider to aged Such measures in 2014. goods Pakistani for to Pakistan signal for act as a positive could an and reach intentions good reciprocate to Indian goods of transit allow to agreement via Pakistan Asian Central and Afghanistan 2015. by As a first step, there is a need to identify a mu- is a need there step, a first As can bring India that project tually beneficial be encour India may together. and Pakistan What Should India and What Do? Pakistan AFGHANISTAN RECONNECTED

42 Transport Infrastructure AFGHANISTAN RECONNECTED 43 Transport Infrastructure Infrastructure Transport Regional Transport Infrastructure: Prospects and Challenges

Zubair Kerami Prospects and and 201246, with an estimated 14.4 percent Senior Advisor in 201247. to Minister of General Analysis Transport and Delivering flexible transport networks, with Civil Aviation, Afghanistan’s geographic position makes it an emphasis on efficient road use and public Afghanistan a perfect fulcrum for trade and transit inter- transport will make Afghanistan a smooth- action within the region and globally. From moving country. It is advisable to work the trade and transit perspective, the trans- with our transport and regional partners port system in Afghanistan provides choic- to manage our existing road network more es to connect Central Asia with South Asia, efficiently and cost effectively by adopting East Asia and beyond. The war of over three a “one-network” approach and developing decades has had a severe impact on the ef- alternative freight routes to improve access fective functioning of the country’s trade- to the transit borders and freight hubs. Also, transport system. There has been signifi- this is key for effective parking and conges- cant investment during the last 10 years tion management to support the growth of to rehabilitate and support the recovery of commercial centers, green infrastructure the transport infrastructure, especially in and climate change enhancements. relation to roads and airports. This rebuild presents great opportunities to improve On the other hand, funding, affordability and the transport system in line with our vision a long-term commitment are fundamental in trade and transit. Creating a country that to achieving the vision. Funding is required is easier to move around in will improve ac- to not only rebuild roads and provide new cess, support a sustainable economy, help infrastructure but also to capitalize on the create better trade and business and finally opportunities available through improving help create a healthier environment. The the transport system. For the time being, Afghan government’s efforts have created the main sources of funding will continue the opportunity to update our thinking of to be provided by our donor partners, with transport planning and urbanization—plac- some infrastructure and services costs pro- ing a strong emphasis on strengthening vided by transport investors. While these trade and transit by for all transport options notes are being developed, there are many during the next 10-15 years. 46 World Bank (no date) “Afghanistan AFGHANISTAN RECONNECTED At the same time, the country witnessed Overview”, URL: http://www.worldbank. an outstanding rise in the GDP—due to the org/en/country/afghanistan/overview 44 rapid expansion of the service sector, elec- (accessed on March 24, 2014). trification and transportation infrastruc- 47 World Bank (January 29, 2014) ture development. On the average, real GDP “Afghanistan: Transition to Transformation growth averaged 9.2 percent between 2003 Update”, JCMB Meeting, URL: http://www. worldbank.org/content/dam/Worldbank/ document/SAR/afghanistan/AF-JCMB- meeting-jan-29-2014-presentation-english. pdf (accessed on March 3, 2014). AFGHANISTAN RECONNECTED 45 The transport is ansystem partintegral economicof and growth a very plays role strategic bothin moving andfreight passengers theacross andcountry beyond even our borders. - - ation Organization (SCO), a signatory to the to a signatory (SCO), ation Organization Trade Organization Cooperation Economic become to and soon (ECOTA) Agreement Organization Trade World the a member of - posi is thus in a good Afghanistan (WTO). - organi in these membership its use tion to the into integration its promote to zations Asia and Central East South, Middle East, nations. of community and the larger trade reached Afghanistan July 2007, In with Uzbekistan agreements and transit a transit 2013, In early Turkmenistan. and was CBTA, agreement, vehicle and motor and Tajikistan Afghanistan, signed between anoth- signed also Afghanistan Kyrgyzstan. - with Paki agreement and transit er trade a nations will finalize SAARC in 2012. stan Another in 2014. agreement vehicle motor - agree movement and tanker vehicle motor - Afghani and Iran signed between ment was agreements These 2013. during early stan time and transport transit will help reduce trans-nationally. goods moving truckers for tensions external of impact the negative Yet, creates initiatives cooperation on regional the example, For Afghanistan. for obstacles and Pakistan between in relations tension between the land transit India had blocked bilat lengthy After India. and Afghanistan goods Afghan dialogues, and trilateral eral - an extraordi it has provided time, same and the the region for nary opportunity is a member Afghanistan Currently, world. Regional for Association Asian the South of: Asian the Central (SAARC), Cooperation (CAREC), Cooperation Economic Regional Association Trade the Asian South Free Transport Road International the (SAFTA), Internationaux Transports (TIR, System is Afghanistan Furthermore, Routiers). Cooper the Shanghai member of oversight - The government of Afghanistan has recent Afghanistan of The government - Afghani statistics, the available In light of of network road total has an estimated stan More roads). km (including rural 135,000 is in network this road of than 80 percent is not portion a major and condition, bad - The region vehicles. motor by passable networks road national and provincial al, include about for development identified roads the rural excludes This km. 46,500 be built and maintained. also that must - can Afghanistan country, a landlocked As and regional to access without develop not and stabilization The markets. international the gradual Afghanistan, of reconstruction security and better borders, its opening of opened have the country, of parts in certain the At the country. for opportunities new other worthwhile projects being planned, planned, being projects worthwhile other - responsibil the is It projects. mining e.g. to Afghanistan of government the of ity in finding partners with key closely work investment and effective sustainable more of goals long-range its meet to mechanisms and prosperity. growth as it enters forward way ly launched a new - transi and economic political of a phase a be will development future and its tion, of at the cross-roads the region of vital part act as to Afghanistan for The potential Asia. will focus Asia in land bridge an economic and connectivity. infrastructure on regional not could potential economic Afghanistan’s political without strong be fully developed system The transport will within the region. and growth economic of part is an integral both moving in role strategic a very plays the country across and passengers freight our borders. beyond and even Regional Transport Transport Regional Prospects Infrastructure: and Challenges can now reach India through the land transit remarkable growth story. corridor in Pakistan. Land transit for trucks from India reaching Afghanistan is current- Railway network in Afghanistan is impor- ly being discussed between Pakistan and tant as bulk commodities are brought to India, however now, Indian trucks cannot Afghanistan’s borders by rail—then trans- reach Afghanistan through Pakistan. shipped to trucks for movement within the country. Transport costs of bulk commodi- Afghanistan has successfully started the ties over long distances are typically cheap- rollout of the Automated SYstem for CUs- er by rail than road; therefore, an extension toms DAta (ASYCUDA). This will provide of the proposed rail lines into Afghanistan substantial efficiency gains on transit, would result in significant savings of trans- trade, anti-narcotics, anti-smuggling, data- port costs for these types of commodities. exchange and a host of other factors, in- Fortunately, due to large deposits of copper cluding tracing the flow of customs collec- and other minerals, it is possible that new tions. Currently the system transit module rail lines could be built provided private in- is operational along four axes: Torkham- vestors are willing to form public-private Jalalabad-Kabul, Islamqala-Herat-Kabul, partnerships with the government of Af- Sherkhan Bandar-Kunduz-Kabul and Hai- ghanistan to help cover the capital and op- ratan-Mazar-Kabul. erating costs of any new rail lines.

The civil aviation industry is a key national asset to stimulate economic growth Strategic Recommendations through the safe and efficient transporta- Advocate to transform all Afghan tion of goods and people, especially in a • AFGHANISTAN RECONNECTED corridors, air and land, into a devel- landlocked country such as Afghanistan. opment corridor which, in addition There is a great expansion of airport in- 46 to offering safe, fast and competitive frastructure where the number of opera- transport and transit services that tional and standard airports has increased secure regional trade, will stimulate from 10 in 2001 to 21 in 2013. The passen- investments, encourage sustainable ger handling capacity has increased dur- development and poverty reducing the same period from just thousands tion so that the economic and social to approximately one million per year. The growth along the transport corridors growth in air cargo has been from 0 tons in are accelerated while ensuring envi- 2001 to about 35,000 tons in 2013. This is a AFGHANISTAN RECONNECTED 47 Afghanistan’s Afghanistan’s border longest with Pakistan, thanmore km 2,400 and with Iran, thanmore km have 1,000 beenalways manysubject to closure, border disturbance, insurgency, terrorist drugactivities, human and/or trafficking. - http://www. http://blog.usaid. - infrastruc civil (re)building , Despite substantial funding funding substantial Despite 48 49 50 (accessed on March 24, 2014). (accessed on March 2002. - agen development international from major of the reconstruction for cies roads - permanent in the 9/11 attack, After countries, neighboring by timidation drought continuous drug trafficking, - accel have and high unemployment impacts negative the already erated activi- and commercial on economic ties Afghanistan; of with border longest Afghanistan’s and km 2,400 than more Pakistan, km have 1,000 than more with Iran, border many subject to been always ter insurgency, disturbance, closure, human drug and/or activities, rorist trafficking; alternative for work of progress The - such as rail modes transportation connect to slowly too moving is roads India, Europe, with China, Afghanistan and Middle East. ture remains a key challenge.]; challenge.]; a key remains ture • • • 48 Alex Their (April 4, 2012) “Hard Their (April 4, 2012) “Hard 48 Alex blog in Afghanistan”, Progress Won URL: USAID, for post gov/2012/04/hard-won-progress-in- afghanistan/ 49 The United Nations Office for Project for Office Nations 49 The United Services the Afghan (UNOPS) has supported and the (MPW) of Public Works Ministry and Rehabilitation of Rural Ministry Afghan (MRRD) since 2003 in the Development over 10,000 of rehabilitation and construction rural A further 2,000 km of km of roads. and rehabilitated be constructed to are roads National government’s the Afghan through (NERAP), Access Project Rural Emergency UNOPS. UNOPS (no date) by assisted URL: “UNOPS in Afghanistan”, unops.org/english/whatwedo/Locations/ Europe/afghanistan-operations-centre/ Pages/Afghanistan-Operations-Centre-AGOC. 24, 2014). (accessed on March aspx development 50 Since 2001, international $3 approximately donated have agencies the and expanding rebuilding billion towards donor alone. Of the total Highway Regional the 3,200 kilometer-long for commitment about 42%, has committed USAID Ring Road, the ADB (24%), JICA (6%) and by followed Mohammad Abid Amir Bank (6%). the World Post- in Reconstruction (Spring 2013) “Road in or a Curse?”, A Cure Afghanistan: Conflict 5. p. 2, No. XXI, Vol. , Review Affairs International - - - War damage and recovery—almost and recovery—almost damage War roads Afghanistan’s of percent 100 during damage significant sustained - prop and war—land of decades the war the period of from damage erty and households in many has resulted other areas to relocating businesses or within the region. country across that estimated USAID note: [Editor’s of kilometers 50 only were there in country in the entire road paved Develop an integrated strategy on a strategy an integrated Develop roads, where 2018 by level regional are infrastructure and rail airports time, at the same while, improved security, improve programs related ser (extension agriculture develop - wa develop crops), alternative vices, and drinking (irrigation resources ter and health accessible provide water), the and reduce facilities education in narcotics. and trade production Encourage public-private partner public-private Encourage road new build and operate to ships and construct corridors transport that will help lines rail new and extend the into Afghanistan integrate better - and Cen East and South, Middle East Asia; tral Construct strategic dry ports at key at key dry ports strategic Construct - Kan of provinces in the points transit Ma- Heart, Kabul, Nangarhar, dahar, and Nimroz; zar-e-Sharif - sys transport Afghanistan’s Promote licit increasing as a channel to tem per 30 percent by and trade transit the Economic SAARC, through year and (ECO) Organization Cooperation This will WTO. the to accession later standards of harmonization require transit and trade and increasing ECO and with SAARC agreements - Afghani member nations; therefore, will achieve neighbors and its stan - Afghani through times transit lower versa; and vice stan The governments of Afghanistan, Afghanistan, of The governments agree should Iran India and Pakistan, - Cen and to Afghanistan to on access Chabahar, of via the ports Asia tral Border; the Indian and to Gwadar Improve the credibility and safety and safety the credibility Improve ad- by system the transportation of in- and vehicle, behavioral, dressing the through issues safety frastructure region- of use and effective innovative partner coordination, al and global and resources; programs, ships, ronmental sustainability; sustainability; ronmental • • • • • • • Key Challenges Key Regional Cooperation in Transport

K. L. Thapar

Chairman, Asian Institute of Transport Development (AITD), India hroughout the history of confronta- borders, mostly unnatural and porous, dis- tional humankind, two forces have rupting geographic space and economic driven change when most needed: and transport linkages. technology on the one hand and the Twill of the people on the other. Whether it Fortunately, there is now a growing recog- was the invention of the wheel or discovery nition in the region that the time has come of the steam engine that enabled faster mo- to settle the differences of the 20th century bility of goods and people, or it was vox po- and restore the seamlessness in connectiv- puli resulting in the creation of newer forms ity, so that the 21st century can experience of government and cooperation, to begin regional cooperation in South Asia. The re- with amongst tribes and then, over time, alization is dawning throughout the region between nations, the story has been the that the road to prosperity lies in coopera- same. The will of the people and technology tion and not the insistence on settling what have mostly been independent harbingers are, in the end, irrelevant issues to the well- of change. being of the people. The old elites are being forced to make way for a new generation of South Asia is no exception, and today young leaders who have neither the memo- stands at an important inflexion point: slow- ries of the past nor the desire to inflame old ly but inexorably, democracy is taking hold wounds. on the subcontinent. From Myanmar in the southeast to Afghanistan in the northwest, Alongside this enormous political and atti- this enormous land mass which is home to tudinal transformation is the manifest im- almost 1.8 billion people, is witnessing a po- pact of new technologies that are bringing litical empowerment as never seen before people closer. More travel, more contact in its long history. The result is change on an and more exposure is making people realize unprecedented scale. The people demand a that it is only through cooperation that the greater say in ordering national priorities. region can provide its people a better fu- AFGHANISTAN RECONNECTED ture. In the last two decades, the technolog- It is vitally important to grasp the magni- ical face of the subcontinent has changed 48 tude of what is happening because of South beyond recognition. The latest communica- Asia’s recent history. Until recently, it was tion and transport technologies have now not subject to the current geographic divi- become a part of daily life. sions, and trade within it proceeded unhin- dered. It was a single geographic entity with As we peer into the future of the 21st cen- traditional trade and accompanying transit tury, it is immediately apparent that South facilities. The division of the subcontinent Asia has grasped the historic opportunity in 1947 led to the creation of extensive land that it has been offered. It is no longer a AFGHANISTAN RECONNECTED 49 Regional Cooperation Cooperation Regional Transport in Total exports have been witnessing a considerable upward trend. The negative list of commodities trad-

ed has been question of whether and when but how long suspended, have been reintroduced. shrinking. quickly. This is not a sudden development. New trading points along the border be- This has been in the making for almost tween India and Bangladesh have been three decades. Progress, though slow, has opened. Agreement has been reached on been in the right direction of promoting Asian Highway and Trans-Asian Railway free trade through the mechanism of com- networks and on setting up of dry ports on prehensive cooperative agreements. Total the specified routes. exports have been witnessing a considerable upward trend. The negative list of com- Afghanistan has recently been inducted as modities traded has been shrinking. a full-fledged member of South Asian Asso- ciation for Regional Cooperation (SAARC). In the foreseeable future, the depletion of The country has been strategically im- fossil fuels will result in an increase in oil portant, throughout history, as a gateway prices. This will give a boost to the devel- to Asia and Europe and as the dominat- opment of regional rather than global pro- ing geography for the ancient Silk Routes. duction networks. Equally important would This role has assumed greater importance be the availability and access to relevant with the emergence of the Central Asian technologies within the region. This would Republics and the current phenomenon of not only provide a cost-effective solution economic integration both at regional and but would also bring about much desired international levels. harmonization of technologies. In this regard, sub-regional cooperation could work As a landlocked country, Afghanistan has as building blocks for integration at the re- hitherto been solely dependent on the sea gional level in the long run. port of Karachi for its export and import trade. Newly developed ports at Bandar South Asia is endowed with historical con- Abbas and Chabahar (Iran) and Gawadar nectivity of road, rail and maritime modes (Pakistan), have opened alternate sea-land of transport. Recent developments lend routes for accessing the country and be- hope that this infrastructure would be put yond. The recently completed road radial to use for enhancing inter-country linkages. from Zaranj-Delaram links the circular road In the recent past, several welcome steps with Iran and its port at Chabahar. have been taken in this regard. Bhutan and Nepal have been allowed to use Mongla and The topography of Afghanistan has led to

AFGHANISTAN RECONNECTED Chittagong sea ports in Bangladesh, in ad- development of a circular road network dition to the sea ports in India for their third closer to its borders, which has largely been 50 country traffic. Myanmar has been allowed improved in the recent years. The radials the use of its port at Sittwe for transit traffic from this circular network link both the in- to the northeast region of India. terior of the country and its neighboring countries (Pakistan, Tajikistan, Uzbekistan, The Indian Railways’ network is being ex- Turkmenistan and Iran). With the comple- tended to the inland container depots in tion of the stretch between Herat and Qa- Nepal and Bhutan. The ferry services be- iser (300 km), the road circle will be fully in tween Sri Lanka and India, which had been place. AFGHANISTAN RECONNECTED 51 South AsiaSouth is deficient energyof endowments while Central RepublicsAsian abundanthave resources. Energy from resources Asia canCentral be shuffled to the AsianSouth through region efficient energy corridors overland of pipelines. ofThe role willAfghanistan be crucial in this endeavor. - ample, Russian-British rivalries in the 18th rivalries Russian-British ample, - ra of the emergence did not allow century - particu links, tional and modern transport corridors. larly rail and bodies regional agencies, International the of should be the facilitators countries - provi choices, technical of way by process capacities. and building local capital sion of for pre-requisites are and security Stability - in trans investment for climate a favorable in- ways, in many Indeed, port networks. are and stability in infrastructure vestment the long Considering mutually reinforcing. corridors transport building of gestation international benefits, long term and their in this characteristic should factor polity - the coun aid to providing of their calculus have to it is much better run, In the long try. than rather on the ground infrastructure on ground. only boots having need not be only at cooperation Regional Non-governmental level. the government role. an important play can organizations - Develop Transport of Institute Asian The initiatives several has taken ment (AITD) Asian the It has established in this regard. - coopera promote to Association Railways hardware of harmonization research, tive It practices. and operational technologies - pro training launched a regional has also and social economic in technical, gram the Significantly, infrastructure. of aspects provided are courses training residential cost. of free sector would be minimal, keeping in view in view keeping minimal, be would sector period long gestation investments, lumpy - infra ground of paybacks and delayed land-sea developing for Priorities structure. should be corridors) (trans-Afghan routes the country the people of by determined ex For forces. outside by and not imposed - - - - South Asia is deficient of energy endow of energy is deficient Asia South Asian the South It is vitally important from be a stable, Afghanistan that view point of Towards country. and prosperous peaceful that it desirable it is most ensuring this, - infra transport the necessary possess and pipe- rail road, of in the form structure viable ways several are There line networks. - this infra of funding the development of endow include: mineral These structure. Af of constraints the financial Considering In the rail sector, Uzbekistan has extended has extended Uzbekistan sector, In the rail (Uzbekistan) Termez line from railway its Turkmenistan km). (75 Mazar-i-Sharif to at Afghanistan link with a rail has already (Af Kushak (Turkmenistan)-Torghundi extend has planned to Pakistan ghanistan). to Chaman (Pakistan) line from railway its of a distance Spind Boldak (Afghanistan), line railway its has completed Iran 12 km. This will enable Mashhad. to Bafq from Kha- km between 124 building a spur line of (Afghanistan). and Herat (Iran) waf have Republics Asian while Central ments resources Energy abundant resources. to the be shuffled can Asia Central from energy efficient through region Asian South of role The pipelines. overland of corridors will be crucial in this endeavor. Afghanistan from routes the main transit It straddles transit and the Asia Central to Asia South revenue of source be a substantial could fee the country. for fee transit as collaterals, be used to ments - proj pipelines, hydrocarbon from realized of credit/grants lines funding, ect specific infrastructure a dedicated and establishing fund. the funds will have the bulk of ghanistan, the private of The role be as grants/aid. to AFGHANISTAN RECONNECTED

52 Trade and Investment AFGHANISTAN RECONNECTED 53 Trade and Investment Trade Harnessing Afghanistan’s Economic Potential

he year 2014 is extremely important economic growth. Further, the conditional- Ambika Sharma for Afghanistan. The country faced ity on compliances put by the traditional elections in April 2014, followed by donors will get more and more stringent Deputy Secretary withdrawal of NATO forces by the and will impact the aid flow adversely. Tend of 2014. These two events are going to General, Federation of Indian Chambers have profound and long-standing impact on A successful transition would be contingent of Commerce and the future of the country, as the country as- upon forging a greater stake and regional Industry (FICCI), sumes full responsibility for its security. commitment to rebuilding Afghanistan India through economic opportunities, foreign in- Much of the discourse on transition in vestment and transit potential—by capital- Afghanistan has focused on the Afghan izing on Afghanistan’s location, energy and security sector. However, the economic mineral resources in a mutually interdepen- component will be critical to shore up Af- dent regional framework. The long-term ghanistan’s institutional capacities and economic benefits, revenue and employ- bring in long-term stability. ment opportunities arising out of investment, trade and transit would help build Afghanistan will have to manage a transi- constituencies of peace. tion from an economy supported by the presence of foreign troops to a more self- Towards this end, in the last couple of years sustaining economy. It is envisaged that the or so, the international community has re- planned foreign-troop withdrawal by the iterated its commitment to Afghanistan end of 2014 will have direct impact on the at various regional and bilateral fora. One Afghan economy, by some estimates to the such important and unique initiative is the tune of two or three percentage points of “Heart of Asia” process of regional cooper- GDP growth rates. The main reason for this ation for rebuilding Afghanistan. It presents will be the reduced local spending, current- a unique opportunity for Afghanistan and ly being incurred by the foreign forces and its near and extended neighbors to engage also to a certain extent by the concurrent in a sincere dialogue to build confidence withdrawal of foreign civilian organizations and promote cooperation at the regional with international and national staff. The level. The process has been successful in Afghan government must orchestrate an evolving a common set of confidence build- economic transition to a market economy. ing measures (CBMs) ranging from political and security cooperation to economic co- The tremendous challenge in the transition operation, disaster management and edu-

AFGHANISTAN RECONNECTED is further aggravated by the fact that Af- cation. Each CBM is coordinated by a lead ghanistan is highly aid dependent. Afghani- country(s). 54 stan’s aid dependency is one of the highest in the world and has increased sharply in India has taken the lead with respect to the the last decade. In 2010-11, total military Trade, Commerce and Investment Oppor- and civilian aid was US $ 15.7 billion, about tunities CBM (TCI CBM). The government the same size as of the GDP. The civilian of India has designated the Federation of component of aid was nearly 40 percent of Indian Chambers of Commerce and Indus- the GDP. Aid contributed to domestic de- tries (FICCI) as the implementing agency mand for construction and procurement of for this CBM. The TCI CBM provides an goods and services thereby contributing to excellent opportunity to support private AFGHANISTAN RECONNECTED 55 Unlocking andUnlocking harnessing Afghanistan’s economic ispotential imperative, all have and we A in it. stakes stable strong, democratic willAfghanistan a win-winmean proposition the regionfor and the international community. - - - - - an investor-friend provide to commitment poli- sector and pro-private ly environment - des investment it an attractive make cies, tination. in opportunities investment vast are There and food agriculture from ranging sectors and mining; from energy to processing to and infrastructure logistics transport, - tele healthcare, education, like services technology information communication, and skill development. Strat National Development Afghanistan’s pri- emphasis on strong puts egy (ANDS) as a cornerstone development sector vate - Afghani in reduction poverty and growth of have market free of The principles stan. Chapter of Article 10 in been incorporated which constitution, new Afghanistan’s 1 of - and pro encourages “The State that, states and enter investments capital private tects and economy on the market based prises in accordance their protection guarantees - Afghani The law.” of with the provisions (AISA) Agency Support Investment stan of out with a detailed account has come and identi- environment the enabling policy for investment of opportunities sectors fied Invest on Private The Law Afghanistan. in dis- not does Afghanistan in (2005) ment foreign and domestic between criminate 100 up to ownership, Foreign investment. the economic of in most is allowed percent, profit. of with full repatriation sectors Afghanistan’s Unlocking and harnessing all and we is imperative, potential economic democrat stable strong, A in it. stakes have - propo a win-win will mean Afghanistan ic and the international the region sition for community. - - - strate Afghanistan’s before, to alluded As natural of wealth abundant and location gic with the government’s coupled resources, Over the last year, FICCI has undertaken a has undertaken FICCI year, the last Over build- capacity including activities of range meet business-to-business ing programs, problems of share has its the country Sure, logistics. difficult with state landlocked a as po- security, an ongoing this amidst All of amidst Yet, transition. and economic litical op- many are there dynamics, transitional growth economic increasing for portunities Afghanistan. in lives and transforming Increasing regional trade will open up new will open up new trade regional Increasing and agri- energy, materials, raw of sources Afghanistan for just products—not cultural are And we the region. all nations in but for light to coming vision this see to delighted and process Asia” of “Heart the through - agree and transit trade regional various ments. - a co develop to intend we Going forward, are which we through framework operative en- trade, of in a web bind the region able to that will not only linkages and transport ergy measure building confidence major a as act economic greater to contribute but will also and spur economic in the region synergies and beyond. Afghanistan in growth sector development in Afghanistan and to and to Afghanistan in development sector between ties commercial the strengthen of Heart the of countries and Afghanistan is an important This initiative region. Asia Af of development the long term of part ghanistan. - con and an international shows, road ings, Business “Doing on and exhibition ference de- economic promote to Afghanistan” with and but Afghanistan not only in velopment neighboring region. in its also Harnessing Harnessing Afghanistan’s Potential Economic AFGHANISTAN RECONNECTED

56 AFGHANISTAN RECONNECTED 57 Prof. S. Frederick Frederick S. Prof. Starr Research Senior and Professor Central Chairman, – Caucasus Asia Johns Institute, Hopkins University, U.S. - - - was reversed only when foreign companies companies only when foreign reversed was hy the country’s exploit in to brought were resources. drocarbon While Americans and others abroad debate debate abroad others and Americans While chal- and economic security [Afghanistan’s economic long-term Afghanistan’s lenges], what beyond far improved have prospects ago. imagined a decade have could anyone Af seem, it may counter-intuitive However Afghanistan’s Surprising Afghanistan’s Prospects Long-Term soon can is positioned—or today ghanistan sustain as to such a way be positioned—in period the beyond recovery economic its launch an economic and even transition of boom thereafter. opening this vista. are factors new Three is ex Afghanistan out that it turns First, The minerals. and gas, rich in oil, tremely careful of on the basis Geodetic Survey, U.S. there the presence has announced study, - resourc than $1 trillion in natural more of GDP. current Afghanistan’s times es—50 iron, copper, oil, include gas, riches These to Related earths. and rare other minerals that payments the concession are these and the many extraction, from will result special- Resource that task will create. jobs Ku- “mineral as a Afghanistan of speak ists rapid launched its Korea When South wait.” it ago, century half a nearly development no such assets. boast could

51 The situation in East Timor in East The situation 53 In fact, the damage could be could the damage In fact, 52

- the compari should note One yet. worse fate possible Afghanistan’s between son the economy where Timor, East that of and with- the sudden after contracted severely and UN peacekeepers 10,000 of drawal Aggregate in 2005. advisors international fatal with overnight, plummeted demand the damaged severely that consequences en- best the crippling thus sector, private Cleary Paul recovery. the country’s gine for Journal that the Street Wall The in wrote for condition “a sufficient was collapse back country post-conflict any sending conflict.” into 51 Excerpted from “Finish the Job: Jump- “Finish from 51 Excerpted – A Handbook Economy Afghanistan’s Start with Adib Starr S. Frederick by of Projects” 2012. , November Paper Silk Road Farhadi, (2012) H. Cordesman 52 Anthony Economic the Creating “The War: Afghan Efforts Aid Conditions and Civil-Military working Third Transition,” Needed for CSIS, p. 2. 18 September, draft, the 23, 2007) “It’s Cleary (May 53 Paul Journal. Street The Wall Stupid”, Economy, The withdrawal of U.S. and NATO forces will forces and NATO U.S. of The withdrawal - econo Afghan hole in the a massive leave out that points Cordesman H. Anthony my. - [in the military and develop cuts these [the] derail to “threaten ment spending] Transition.” The Threat that Looms that The Threat Immediately

Afghanistan’s Economy Economy Afghanistan’s Jump-Starting Jump-Starting Second, Afghanistan’s central but land- this enormous engine of wealth creation is locked location, seen until recently as an being driven mainly by the private sector, unmitigated liability, turns out to be a major not by governments. Afghanistan plus, for it will enable the country to take full is one of the advantage of the transport revolution that Third, Afghanistan is not the same country globalization is creating across all Eurasia. it was on 9/11. GDP, still miserably low, has world’s hottest Much has been said of the “Silk Road” that risen seven-fold, which places Afghanistan telecom mar- connected China and Europe, and which is above 16 other countries on the UN’s Hu- rapidly reopening. Equally important over man Poverty Index. In 2001, the national kets. Driven the millennia was Eurasia’s great “South- treasury was non-existent; eleven years mainly by pri- ern Corridor” that connected India, Europe later domestic revenues have reached $2 and the Middle East, and which passed billion and are growing steadily. When the vate foreign directly through Afghanistan. On the terri- Taliban ruled the country, 1.2 million chil- investment, tory of Afghanistan, this great thoroughfare dren attended school; now the number has linked with north-south routes connecting risen to 8.2 million. The number of students the com- to China, Russia, and northern Europe. The at public and private universities has also munications closed borders of the USSR long throttled grown: from 4,000 to 75,000. Eighty wom- these corridors of continental commerce. en sit in the National Assembly. Cell phones sector has Now, since 9/11, they are rapidly reopening. are everywhere, and Afghanistan is one of fundamentally In the long run, this unanticipated and un- the world’s hottest telecom markets. Driv- heralded development may prove to be the en mainly by private foreign investment, the changed the most lasting impact of Operation Enduring communications sector has fundamentally way Afghans Freedom. However, if the U.S. accompanies changed the way Afghans go about their its military drawdown with a less-than in- work and lives. It is no surprise that the mil- go about their tensive engagement with the economy, and lions of beneficiaries of these and other re- work and one that is publicly supported at the high- cent gains want to preserve them […]. est levels, the benefits of this could accrue lives. It is no to hostile interests and parties. Together, these and other developments surprise that have generated new expectations among Quite independent of Afghanistan, NATO or millions of ordinary Afghans that no govern- the millions of the U.S., tens of billions of dollars are being ment, even one dominated by the Taliban, beneficiaries invested in these routes by countries as di- can long ignore. All Afghans expect to reap verse as India, Pakistan, China, Bangladesh, benefits from their heretofore unknown en- of these and Turkmenistan, Uzbekistan, Azerbaijan, ergy and mineral resources; they want to be other recent Georgia, Turkey, and Iran, and by such inter- able to export their produce to more lucra- national financial institutions as the World tive markets, and to participate in the new gains want to Bank, Asian Development Bank (through transit trade; they expect their hard-earned preserve them. its Central Asia Regional Cooperation Pro- social and economic gains to continue; and gram, CAREC), and Islamic Development they all want to do so as a single country. Bank. Moreover, in addition to national Like citizens of other countries, they debate governments and international financial how to divide the pie. But no one proposes institutions, such entities as the Economic to take his or her slice and withdraw. Cooperation Organization (ECO), Shang- hai Cooperation Organization (SCO), and South Asian Association for Regional Co- Why the Economy Can’t Wait operation (SAARC) are all actively engaged Underlying nearly all discussion of [the in fostering trade and transport throughout troop withdrawal and Afghanistan’s future] the Greater Central Asia region. are two closely related assumptions: first, that the level of political stability or instabili- Afghanistan is the inevitable hub of all ty in post-Karzai Afghanistan will determine these transport projects. As they are com- the security situation; and, second, that the pleted, that cash-starved country will gain AFGHANISTAN RECONNECTED level of security will in turn determine the a reliable and long-term income stream. chances for economic progress. These as- European freight forwarders and Indian sumptions give rise to an extremely impor- 58 firms are already planning how they will tant corollary, which rarely articulated, has take advantage of this new/old corridor of nonetheless defined the phasing of U.S. and trade through Afghanistan. India estimates NATO strategy in Afghanistan for a decade. that if the political economy of the region This holds that: (a) the first task is to estab- improves and as little as 20 percent of lish political stability; (b) that then, and only western trade is sent by roads, $100 billion then, will it be possible to address the prob- dollars worth of goods will pass through Af- lem of physical security; and, (c) that only ghanistan as early as 2015-16. Significantly, with the establishment of physical security AFGHANISTAN RECONNECTED 59 Afghanistan becannot reintegrated with the world commerce of simply by constructing its to roads Equal borders. mustattention to be devoted the efficiency ofand cost morethose borderdistant and crossings which to ports roads those lead.

November November

54 Afghanistan is awash with programs to de- to with programs is awash Afghanistan little or no exists There economy. its velop serious, More among them. coordination nor neither prioritized are they as a group, phased. - Asia-Cauca the Central an alternative, [As University’s Johns Hopkins at sus Institute Studies International Advanced of School mid- of short-, series identified a has (SAIS) The main thrust measures.] and long-term - the geo overcome is to projects these of world and regional from isolation graphical of the cause that was and commerce trade - and under-develop poverty Afghanistan’s to- so remains and place ment in the first regional opening internal, This means day. transport channels of and continent-wide - neither the coun them, Without and trade. - re nor rich natural wealth agricultural try’s abroad. markets the best reach can source Institute’s Asia-Caucasus [The Central - mea and long-term mid- short-, of listing emphasis on railroads heavy places sures] east-west channels for as the key and roads Eurasia. across transport and north-south in mind bear to one has time, the same [At be reintegrated cannot Afghanistan that] - con simply by commerce of with the world - atten Equal borders. its to roads structing and the efficiency to be devoted tion must crossings border distant more those of cost lead. roads which those to and ports 54 A detailed description of those description 54 A detailed in “Finish the Job: be found can measures – A Economy Afghanistan’s Jump-Start Starr S. Frederick by Handbook of Projects” Paper, Silk Road with Adib Farhadi, 2012, pp. 17-18 and pp. 32 and 36. What Has to Be Done to Be Has What nec- are measures short-term [Immediate of impact economic the soften to essary] the way pave to and drawdown the military measures. and long-term mid- broader for a few of the establishment include These goods Afghan where crossings border key cross- export; for processed quickly be can - cross at those zones economic free border and an air hub at Kabul; trade; foster to ings the of full implementation the immediate with agreement transport and signed trade [APTTA]. Pakistan ------Even as we are bombarded with news of of with news bombarded are as we Even coun- of the parts some in conflicts horrific busy are Afghans million 30 the of most try, but with and guerrilla war not with politics judge They a living. surviving and earning in terms powers contending the country’s the improve to or inability, their ability, of dis- If they people. ordinary lot of economic they in a neighboring region, progress cern causes its identify to seek immediately will ter own their on them apply to work and It is undeniable that this formulation is par that this formulation It is undeniable is not something development Economic and stability political after pursued be to it is rather, been established; have security po- forge to in order be achieved what must peace. and communal stability litical and peace will it be possible to address the address to possible be it will peace and economy. the of problem strat world in an ideal and that tially valid, such precisely around be built egy would has experience But a decade’s a phasing. - pros economic no with people that shown insurgent by be recruited easily can pects bet offer forces if those especially forces, on their own earn than the poor can pay ter National Afghan the of as members or even that un- has shown And experience Army. if not difficult, it is circumstances der these - govern established a newly for impossible, - estab to even or rule effectively, ment to build to seeking Anyone legitimacy. lish its Afghanistan in and peace stability political the to spark out how figure therefore must time undertak while at the same economy wait. cannot economy tasks.The ing these challeng formidable creates this Of course, outlined above strategy But the phased es. but be- it is illogical not because has failed Given factor. the human it ignores cause Afghans in which most poverty the extreme be- have progress economic signs of live, political for condition the essential come peace. and social progress economic of An awareness as well. ritory else than anything will do more progress in Economics, stability. political advance to - vari independent an not while words, other - sta political for shape the prospects able, as much at least and military security bility shape the economy. as they AFGHANISTAN RECONNECTED

60 Energy Security AFGHANISTAN RECONNECTED 61 Energy Security Energy Energy Security and Regional Cooperation

he wider Central Asia region has a record of regional cooperation. Electricity considerable potential for devel- trade may also provide a good entry point oping energy resources as well as for making progress over time on water is- expanding energy trade, but there sues, first from the hydropower perspective Tare major constraints that need to be ad- and then on the more difficult water issue dressed in order for this potential to be re- associated with irrigation use. alized. The sequence of actions would thus be Some regional electricity trade based on first to regularize and expand the ongoing existing power surpluses and gaps is al- electricity trade and to prioritize ongoing ready occurring, including relatively mod- efforts to achieve quick-wins like increas- est electricity imports by Afghanistan from ing the current import from Tajikistan by neighboring countries and the possibility 200 MW and expanding it to Pakistan. A for electricity trade between India and Paki- pilot project of this kind will provide further stan. breakthroughs in the area of accelerating the construction of the CASA-1000 grid. If extended properly, further development Progress in these areas would set the stage of this trade represents a good short-term for systematic exploitation of the large po- option for moving forward, including con- tential for electricity trade in the medium fidence-building and establishing a track and long term.

Table-1: Surplus Electricity Available for Trade (GWh)

Country Season 2005 2010 2015 2020 2025 Summer 3198 3623 6876 3745 -234 Kazakhstan Winter -2504 -2969 -130 -5563 -12318 Annual 694 654 6746 -1818 -12552 Summer 4737 6283 6863 6406 5991 Kyrgyzstan Winter -2092 1584 1517 5761 4753 Annual 2645 7866 8381 12167 10744 Summer 1511 4587 6767 12579 11697 Winter 96 2841 4287 8308 7431

AFGHANISTAN RECONNECTED Tajikistan Annual 1607 7429 11055 20887 19128 Summer 1620 3904 7635 5088 2091 62 Uzbekistan Winter 2862 5485 9846 7058 3767 Annual 4482 9389 17481 12147 5858 Summer 11066 18396 28142 27819 19545 Total Winter -1637 6942 15521 15564 3633 Annual 9429 25338 43663 43383 23178

Source: Word Bank (December 2004) Central Asia: Regional Electricity Export Potential Study, p. 26, URL: http://siteresources.worldbank.org/INTUZBEKISTAN/Resources/REEPS_Main_Report_Final_English.pdf. AFGHANISTAN RECONNECTED 63 D.N. Raina D.N. President, Entecsol International, India - - - - 9 0 14 19 % 44 Peak Shortage Shortage Peak 0 447 447 MW 3971 3971 1084 1084 12159 12159 Central Asia is and shall remain energy sur energy shall remain is and Asia Central From Table-1. in as indicated plus till 2025 will Kazakhstan projections, the available in 1818 GWh of shortage experiencing start by GWh 12,552 to increase will which 2020, will remain countries The other three 2025. 2025. the year up to surplus even energy surplus that the energy the fact Despite from whole will decrease as a the region of in 2025, GWh 23178 to in 2010 25338 GWh 23178 a surplus of have will still the region be export can This energy export. for GWh (SA). Asia South ed to ener acute facing nations are Asian South im- 2) and need to Table (see gy shortages All fuel their economies. to port electricity Bhutan except Asia in South the countries The peak shortages. electricity facing are Supply-Demand Scenario 5 0 % 22 32 8.7 - - Energy Shortage Shortage Energy 0 MU 1171 1171 2000 2000 45877 45877 86926 86926 Table-2: Energy and Peak Shortages in South Asia in 2011-12 Asia in South Shortages and Peak Energy Table-2:

fghanistan can emerge as a vibrant as a vibrant emerge can fghanistan future foreseeable the in economy resources natural its exploiting by - geo its of and taking advantage

Unit/% Afghanistan Afghanistan Bangladesh Country Bhutan India Maldives Maldives Nepal Pakistan

Sri Lanka Sri Lanka for Afghanistan for Potential and Prospects Prospects and Potential Central and South Asia: Asia: South and Central Electricity Trade between Trade Electricity Sources: Compiled by the author: 1. Afghanistan, Data not available; 2. BPDP Bangladesh (2011-12); 3. Bhutan 3. (2011-12); Bangladesh BPDP 2. not available; Data Afghanistan, the author: 1. by Compiled Sources: 2011-12; Annual Report NEA Nepal: 6. Maldives; 5. 2013); (Jan. Websites GOI MOP/CEA 4. Book 2012. Data Power Sri Lanka. of Government Energy, of Ministry 8. (2011-12); Pakistan, NTDC, 7. - an evalu require This will exist. ghanistan supply-demand the prevailing ation of and legal/reg prices electricity scenarios, the electricity governing regimes ulatory regions. in the two sector

graphical location. Flanked by energy rich energy by Flanked location. graphical South deficient and energy Asia Central respectively; north and south its to Asia as an benefit immensely can Afghanistan - facili by country transit and trade energy regions. these between flows energy tating such an arrangement, one suggests Before - whether the pre evaluate to it is essential for investment private attract to requisites Af through infrastructure building energy A Table-3: Summary of Electricity Tariffs in South Asia 2011-12 (US Cents per kWh)

Consumer India Pakistan Bangladesh Nepal Sri Lanka

0-30 KWh: 2.7 0-50 KWh: 2.2 0-20 KWh: 5.6 0-200KWh: 5.5 31-60 KWh: 4.3 0-100 KWh: 5.1 0-100 KWh: 3.3 21-250 KWh: 201-400 KWh: 61-90 KWh: 6.8 Domestic 101-300 KWh: 7.6 101-400: 4.2 10.3 8.8 91-120 KWh: 19.1 301-700 KWh: 12.4 >400 KWh: 7.0 >250 KWh: >400 KWh: 10.4 121-180 KWh: 21.8 >700 KWh: 15.4 13.9 >180 KWh: 32.8

Industrial 11.3 10.3 5.4 9.3 9.1

Agricultural 3.5 6.2 2.6 5.0 13.6

Commercial 15.1 7. 1 10.8 13.6

Sources: Compiled by the author from websites of the Ministry of Power, India; NEA, Nepal; BPDB, Bangladesh; CEB, Sri Lanka; Pakistan Economic Survey 2010-11.

ing shortages range from 9 percent in India tral Asia range from 1.93-3.84 US Cents/ to 44 percent in Nepal. Access to electricity kWh. This price differential is a big incentive in South Asia is next only to Sub-Saharan for the inter-regional power. Africa. South Asia needs to import electricity from the neighboring regions including energy rich Central Asia to meet its elec- Legal and Regulatory tricity demand. Environment

Both the regions have sound legal and reg- Electricity Prices ulatory systems in place to govern electricity sector operations. Electricity prices in South Asia are quite high compared to those prevailing in Cen- tral Asia. The prevailing energy prices in the Afghanistan’s Role two regions are given in table 3 and table 4 below. Tariffs in South Asia are based on Previous studies55 on energy trade between consumption levels and go up as consump- these regions have highlighted the benefits tion increases. The lowest tariff applicable for energy exporting/importing and transit for consumption of 30 kWh is in Sri Lanka countries. To harness the benefits of inter- ( 2.7 US Cents) and the highest is 15.1 US regional energy trade between Central Asia AFGHANISTAN RECONNECTED Cents for commercial consumers in India. and South Asia, Afghanistan shall have to Cost of generation from liquid fuel based improve the security environment and in- 64 power plants in Pakistan works out to over 13 US cents, which is much higher than the 55 D.N. Raina (2007) “Regional Electricity average tariff. The retail tariffs in South Asia Cooperation in Central and Southern Asia – for commercial and industrial consumers Opportunities for Increased Regional Trade range from 5.4-15.1 US Cents/kWh. The and the role of the energy Charter Treaty”, domestic tariffs for consumption below 50 Energy Charter Secretariat, Occasional Papers, kWh/month range from roughly 4.2-32.8 URL: http://www.encharter.org/fileadmin/ US Cents/kWh. The average tariffs in Cen- user_upload/Working_Papers/OP_2007_3.pdf. AFGHANISTAN RECONNECTED 65 (5) 1.93 Uzbekistan Uzbekistan - (4) 0.00 Turkmenistan Turkmenistan (3) 2.25 . Tajikistan Tajikistan . . . (2) 3.84 post-construction phase, these projects projects these phase, post-construction op- for employment long term will provide projects. these of and maintenance eration its export able to be also will Afghanistan it is able as and when, energy, surplus own resources. energy indigenous its develop to Central between trade power the all, Above implemented when Asia, and South Asia as Afghanistan will establish successfully, in other destination investment a reliable That is what exact the economy. of sectors at the should be looking for Afghanistan ly reconstruction. early its moment for Kazakhstan Kazakhstan (1) 3.42 Kyrgyzstan Kyrgyzstan Table-4: Electricity Tariffs in Central Asia (2010-11) - (US Cents per kWh) - (US (2010-11) Asia Central in Tariffs Electricity Table-4: Item Average tariff tariff Average 2. Electricity tariffs, power sector modernization modernization sector power tariffs, Electricity 2. investments: and energyefficiency www.kazseff.kz/.../Article%20Development%20of%20power%20tariffs Sources: Sources: Annual Report Heating District of Board Danish 1. http://www.dbdh.dk/artikel.asp?id=1874&mid=9 2012, 3. World Bank: World 3. siteresources.worldbank.org/.../TAJ_winter_energy_27112012_Eng.pdf; www.ebrd.com/downloads/legal/irc/countries/turkmenistan.pdf EBRD: 4. UZNEWS.NET: 5. http://www.uznews.net/news_single.php?lng=en&cid=2&nid=18476 The major benefits that Afghanistan will Afghanistan that The major benefits from will come this trade facilitating by get re- investments of large benefits attendant - there implementing the projects; for quired - It will cre economy. Afghan the boosting by during opportunities employment large ate spin-off The phase. construction project of the economy sectors in other benefits will Afghanistan will be an added advantage. import can Afghanistan fee. the transit earn use own its for Asia Central from electricity enhancing thereby projects, these through the which is one of electricity, to the access The implementation of in the world. lowest - the devel to will lead projects large these which the energy through areas opment of In the through. pass projects infrastructure Benefits to Afghanistan to Afghanistan Benefits vestment climate. It shall have to facilitate: facilitate: to have shall It climate. vestment and other regulatory legal, Obtaining of 1. right land, acquiring in Help 2. approvals; and and licenses; permits of issue way, of With investments. big-ticket Incentivize 3. - re the of most place, in put things these create to sector the private of quirements through infrastructure energy border cross be met. would Afghanistan Afghanistan’s Energy Security: Internal Aspects

Dr. Danila Bochkarev

Brussels-based fellow, Regional Security Program, EastWest Institute

fghanistan’s social and political de- tion of energy has led to the overall insuf- velopment is at a critical juncture— ficiency of available domestic or imported and in a bit of a conundrum.56 On energy supplies. Afghanistan’s energy situ- the one hand, we are witnessing ation can be described as a prolonged “en- Ahow negative domestic security develop- ergy poverty,” defined as “lack of access to ments affect the country’s economic devel- modern energy services.” This situation is opment. On the other hand, there are con- likely to persist after 2014, and it will nega- cerns that internal peace and stability are tively affect the overall socio-economic de- impossible to achieve without stable eco- velopment. 57 nomic growth. Peace and stability should be based on economic projects of com- The level of power access in Afghanistan is mon interest that will create a positive sum still low, although it has considerably im- game for key political and business actors, proved in the last few years with the power as well as for the country’s average citizens. supply almost tripling between 2006 and The social and economic reconstruction of 2011. According to estimates of the Minis- Afghanistan is therefore impossible with- try of Energy and Water of Afghanistan, only out stable, affordable access to energy for 30 percent of Afghanistan’s population has its citizens, the business sector and govern- access to power, with the level of electrifica- ment services. Access to energy is not only tion reaching 70-75 percent in Kabul.58 Ap- a key for economic growth, it is also essen- proximately 85 percent of the rural popu- tial for any strategy to improve the health lation is without basic access to electricity and social welfare of a nation. required for numerous daily activities.59

The country’s energy sector has been neg- 57 For more detailed explanation, please

AFGHANISTAN RECONNECTED atively affected by decades of war and po- see http://www.iea.org/topics/energypoverty/ litical instability, and it is in dire need of a (accessed on October 20, 2013). 66 large-scale upgrade. The lack of investment in production, transmission and distribu- 58 Data compiled by the World Bank http:// www.worldbank.org/en/country/afghanistan/ 56 This article is based on Danila Bochkarev overview (accessed on October 10, 2013). (March 2014) “Afghanistan Reconnected: 59 Data provided by National Area-Based Linking Energy Supplies to Consumers in Development Programme (NABDP) of UNDP, Asia”, EastWest Institute Policy Report Series, URL: http://www.undp.org.af/whoweare/ URL: https://dl.dropboxusercontent.com/s/ UNDPinAfghanistan/Projects/psl/prj_nabdp. lggrya5mu5dmyss/Danila%202014%20FInal.pdf. htm (accessed on October 20, 2013). AFGHANISTAN RECONNECTED 67 - Sources: 2012/2013), p. 33. 33. p. 2012/2013), stan: Power Sector Sector Power stan: Master Plan”, p. 42. 42. p. Plan”, Master (May (May “Islamic 2013) Republic - Afghani Republic of Islamic Republic of Af of Islamic Republic National Development National Development ghanistan. Afghanistan Afghanistan ghanistan. The World Bank Report Bank Report World The Strategy (2007/2008 – (2007/2008 Strategy Strategy. Energy Sector Sector Energy Strategy. -

61 Net Electricity Demand in Afghanistan in Net Electricity Demand 62 63 National Renewable Energy Renewable National accessed on October 30, 2013). accessed on October tion for years to come. to years tion for potential energy renewable The country’s Nation- U.S. to According significant. is also (NERL) Laboratory Energy Renewable al Western in potential energy wind the data, MW 158,000 reach may alone Afghanistan ex in is potential hydropower national and Sheet Fact Survey Geological 61 U.S. and oil of undiscovered (2012) “Assessment Basin and of the Amu Darya resources gas Iran, Afghanistan, Basin Provinces, Afghan-Tajik 2011”, and Uzbekistan, Turkmenistan, Tajikistan, URL: http://pubs.er.usgs.gov/publication/ ( fs20113154 cess of 23,000 MW. 23,000 of cess we reserves” “undiscovered by 62 Here (oil reserves economic recoverable understand are that undiscovered, yet gas), and natural geologic settings. favorable in exist to estimated please see Dennis details, more 63 For Resource Elliott (Juen 2007) “Wind Afghanistan and Mapping for Assessment and Pakistan,” , Golden, Colorado, U.S., URL: URL: U.S., , Golden, Colorado, Laboratory http://www.nrel.gov/international/ pdfs/afg_pak_wind_june07.pdf (accessed on August 26, 2013). (accessed on August Most of the undiscovered oil reserves are lo- are oil reserves the undiscovered of Most while most basin, Afghan-Tajik in the cated in is located gas natural the undiscovered of basin. Amu Darya the - - There are also also are There 60 (accessed on November 1, 2013). (accessed on November Per capita energy consumption in the SAARC in the SAARC consumption capita energy Per To meet its energy demand, Afghanistan Afghanistan demand, energy meet its To countries (million BTU equals 293 kilowatt hours) kilowatt equals 293 (million BTU countries good prospects for finding new petroleum petroleum finding new for prospects good States the United to According reservoirs. undiscovered (USGS), Survey Geological trillion include 15.687 resources petroleum billion 1,596 gas, (tcf) natural cubic feet of natu- bbl of oil and 0.562 (bbl) of barrels proven are reserves If these liquids. gas ral they development, for viable commercially - consump energy the internal satisfy can 60 World Bank (April 2013) 60 World , Update Economic Afghanistan Economic and Reduction, Poverty URL: http:// South Asia Region, Management, www-wds.worldbank.org/external/default/ WDSContentServer/WDSP/IB/2013/05/02 /000333037_20130502161223/Rendered/ PDF/770830REVISED0box377289B00PUBL IC00.pdf

can develop its indigenous hydrocarbon hydrocarbon indigenous its develop can or import resources energy and renewable If efficiently abroad. from resources energy to might suffice resources local managed, (2014/15- mid-term Afghanistan’s satisfy In demand. energy primary 2024/25) may resources energy domestic theory, self- energy become to Afghanistan allow Dif future. sufficient in the not-too-distant already-discov on based estimates ferent that suggest deposits hydrocarbon ered of 80 percent meet up to can Afghanistan from products petroleum demand for its production. domestic its Sources:

Left: Map from “Afghanistan as Energy Importer and Producer,” presentation by Abdul Razique Samadi, CEO of DABS, Islamabad, Pakistan, September 3, 2013. General location of six sedimentary basins in Afghanistan. Right: USGS, “Islamic Republic of Afghanistan: Power Sector Master Plan.” The World Bank Report, May 2013, p. 94.

It is, nevertheless, too early to claim that report will add another important point to Afghanistan could become soon an ener- the plan for the reform of Afghanistan’s en- gy exporter. The Asian Development Bank ergy sector. Changing the structure of the (ADB) predicts that in 2014 Afghanistan’s energy mix is also a critical undertaking for GDP growth will reach 4.8 percent, which Afghanistan’s energy security. would lead to an even higher increase in energy consumption.64 This trend would not allow, at least at the initial stage, a de- Action Plan for the Reform of coupling of economic growth and a parallel Afghanistan’s Energy Sector increase in energy consumption. Developing Afghanistan’s energy sector is Pillar I: Efficient Use of Energy impossible without relevant specific policy frameworks. Legal and regulatory direc- Improve Energy-Saving Practices tives are essential for providing incentives and guarantees to investors. This will help At this stage, improving energy efficiency to resolve non-payment issues, and will pro- in Afghanistan is low hanging fruit—these vide access to affordable energy supplies. policies will be inexpensive to implement, The regulation will also help Kabul build cost-effective and bring immediate results. contingency and resilience capacity, and it will increase energy efficiency. Move Forward with Pricing and These facts are fully acknowledged in the Subsidies Reform Energy Sector Strategy, the key energy policy document of Afghanistan.65 This EWI Low tariffs and non-payment continue to undermine Afghanistan’s energy sector. AFGHANISTAN RECONNECTED 64 For GDP growth estimates please see There is a clear need for reform that will International Monetary Fund (April 2013) both attract investment in the energy sec- 68 World Economic Outlook, Hope, Realities, tor and provide the local population with af- Risks, World Economic and Financial Surveys, fordable access to energy. Gas and electric- Washington DC, p. 62, URL: http://www.imf. ity prices are still too low to cover costs of rehabilitation, operation and maintenance. org/external/pubs/ft/weo/2013/01/pdf/ However, a simple prescription to increase text.pdf (accessed on November 2, 2013). tariffs would not work in this low-income 65 Islamic Republic of Afghanistan. society. On the contrary, it would lead to Afghanistan National Development Strategy. more socio-economic tensions. In this situ- Energy Sector Strategy (2007/08 – 2012/13). AFGHANISTAN RECONNECTED 69 - -

66 coal-fired electricity plants. electricity coal-fired - transmis power developed Lacking a fully Afghanistan network, distribution and sion the of development on the should focus gen- power regional low-cost or “off-grid” regionally-produced with diverse eration could provide solutions Off-grid mix. energy problems of access—independent local supply such electricity with long-distance and il- faults technical issues, as security networks. transmission to access legal projects micro-generation Furthermore, to and contribute investment less require and employ development economic local ment. Pillar III: Developing Resilience National and Contingency Planning - crisis prevention-cri lacks still The country securing mechanisms for sis management functioning existing, Most supplies. energy of plans at the national level contingency or at the local coverage no guaranteed fer who is it is unclear Often, levels. provincial - and re contingency local for responsible obviously, Afghanistan, For plans. silience 66 Large hydropower projects are unlikely unlikely are projects hydropower 66 Large to internal solution due an adequate present to flow the water to linked challenges and external and rising construction unpredictable problems, and a lack of necessary infrastructure. costs, - The means of estimates are stated next to to next stated are estimates of The means resources. petroleum undiscovered Map showing BCFG unit boundaries. the assessment within given are name and the ranges unit the assessment crude oil (USGS). of is million barrels and MMBO gas natural of is billion cubic feet Guaranteed tariffs for the utilities that for the utilities tariffs Guaranteed - re a secured have them to will allow tar of The issue turn on investment: via be addressed can subsidies geted co- program, subsidies well-shaped a - assis donor international by financed tance. Subsidized social tariffs for the popu- tariffs social Subsidized basic amount of a limited lation for tariffs these In the future, services: removed. should be gradually • • Afghanistan’s energy sector is dominated is dominated sector energy Afghanistan’s generation, fuel oil and diesel expensive by per cents 35-40 US up to cost which can electric- the of price the times 6-7 or KWh countries. Asian Central from imported ity from away move need to is an urgent There and oil in biomass of use the unsustainable mid-scale small and to generation power and gas- and local projects hydropower Changing the Country’s Energy Mix and Energy Changing the Country’s Resources Energy Domestic Developing Pillar II: Expanded/New Supply “Energy Welfare” in Afghanistan Welfare” “Energy should include: ation, the state has a responsibility to en- to has a responsibility the state ation, to access providing welfare,” “energy sure the poor population. for energy S/N Type Average Es- timated Unit Price (USc/ kWh) 1 Hydro 2.29 2 Thermal (NW Kabul) 27.115 3 Imported 2.62 4 Diesel (all provinces) 29.53 5 Hydro and diesel 5.19 6 Hydro, termal and 6.473 diesel 7 Natural gas 2.8 to 3.5 8 Coal (1MW = 4.5 ton) 1 ton = Afs 2,200

Cost of Power Supply in Afghanistan Electricity generation costs (kWh), 2007. The estimated cost of power is based on Sheberghan power plant; no estimate of cost of coal fired capacity is available at this moment (source: DABM).

Source: Islamic Republic of Afghanistan. Afghani- stan National Development Strategy. Energy Sec- tor Strategy (2007/08 – 2012/13), p 36-37.

energy resilience and contingency planning conflicting sides to put aside their disagree- would be extremely useful. ments and start cooperating.

Recent examples of energy trade and con- Energy Cooperation and flict settlement include the area in the Conflict Resolution in Barents Sea that was disputed by Norway and Russia, the Southern Energy Corridor Southwest Asia (passing via Georgia) and Turkish participation in upstream projects in Northern Iraq, The trade in energy both inside Afghani- governed by the Kurdistan Regional Gov- stan and across Southwest Asia could be- ernment (KRG). come an important conflict prevention and peacebuilding mechanism. It can alleviate These examples demonstrate that the internal tensions by a fair distribution of an benefits of the trans-border cooperation “energy rent.” On an interstate level, bilater- may outweigh political disagreements and al or multilateral joint energy ventures may intrastate territorial disputes—if there is contribute to the settlement of conflicts sufficient political will and an available

AFGHANISTAN RECONNECTED when all stakeholders recognize that such framework for cooperation. Afghanistan cooperation can bring tangible economic and other Southwest Asian countries could benefits. Project-based energy coopera- 70 learn from these best practices as well. tion in Southwest Asia might even mirror In practice, the TAPI gas pipeline and the the positive spillover effect of the European CASA-1000 power transmission network Coal and Steel Community, which laid the could promote regional energy cooperation foundation for the European Union. and contribute to trust building and conflict Recently, developments in the South Cau- settlement in Southwest Asia. casus, the Barents Sea and in Northern Iraq proved how mutually beneficial trans- border energy initiatives are leading the AFGHANISTAN RECONNECTED 71 Hilal A. Hilal A. Raza Director, Energy SAARC Islamabad, Centre, Pakistan - - - Domestic production of oil was 76,000 bar 76,000 oil was of production Domestic rels per day (BPD) during the year ending during the year (BPD) per day rels was the requirement whereas June 2013, an import of thus causing BPD, 434,000 gas natural of demand The BPD. 358,000 (BCFD) per day at 6 billion cubic feet stands reflect 4 BCFD around supply was whereas gas Existing 25 percent. of ing a shortfall ad- depleting sharply and new are reserves electric an installed With small. ditions are actual MW, 20,000 over of capacity power MW 13,500 at around remained capacity MW. 6,000 over of gap a massive causing own its of the development In addition to fuel, fossil of resources energy indigenous power, and nuclear renewable hydro-power, - co regional pursuing is actively Pakistan supplement and to as a means operation the Accessing supplies. energy its enhance - is a cardi Asia Central of resources energy would Afghanistan this policy. nal point of due to this purpose link for be an essential location. its of reason the obvious is de- (Figure-3) project The CASA-1000 summer- of 1,300 MW transmit signed to hydro- the existing from surplus electricity countries, Asian in the Central plants power Republic, and the Kyrgyz Tajikistan namely, 300 MW Pakistan: to Afghanistan through - while the re Afghanistan by will be drawn Pakistan to come will MW 1,000 maining ex excellent an is project This (Figure-4). in variations seasonal synergizing ample of climatic and demand due to supply power during the summer months differences; demand in the comparatively is low there - Re Kyrgyz and Tajikistan of heat moderate demand in the hot is peak public while there - Proj The CASA-1000 . Pakistan. of climate World the support by strong ect is receiving - Corpora Finance the International Bank, Bank the Islamic Development tion (IFC), donor agencies. bilateral and many - - -

- eco for is the prime mover nergy the globe and across nomic growth fuels Fossil is no exception. Pakistan percent meet 87 oil and coal) (gas,

Besides, nearly 20,000 MW of electric- of MW 20,000 nearly Besides, - trans with complimentary generation ity system (T&D) and distribution mission growing meet the be added to to will have is power MW If 20,000 demand. electricity - it will re thermal generation, from come to either 1.5 trillion cubic feet year every quire or gas, (BCFD)) per day billion cubic feet (4 or 60 million tonnes oil, 40 million tonnes Invest lignite. million tonnes or 120 coal, - infra power failing demands, rising to Due on imported reliance and heavy structures a severe of is in the midst Pakistan fuel, shortages energy Massive crisis. energy and economy. the industry paralyzed have ly only 0.36 tonne of oil equivalent (TOE) (TOE) oil equivalent of tonne ly only 0.36 and China for 1.7 to as compared per year population has Pakistan’s Malaysia. for 2.4 at 180 reported and is now been increasing sup- in energy the growth million whereas the For has not been proportionate. plies been have supplies energy years, three last annually TOE 65 million around hovering - con energy of rate a growth to in contrast during the years 6-9 percent sumption of an upturn in the Assuming 2006-2008. aver at an consumption energy of growth and 6.5 during 2015-2025 5 percent of age projected the 2025-2035, during percent be can Pakistan of requirements energy in Figure-2. seen based generation the power ment needs for $40 bil- be around would on thermal power $ 2 million per of cost capital lion assuming MW. Pakistan’s per capita energy use is current use energy per capita Pakistan’s of Pakistan’s current commercial energy energy commercial current Pakistan’s of by is contributed needs; the remaining (Figure-1). electricity and nuclear hydro of Pakistan of in the Energy Security Security the Energy in The Role of Afghanistan Afghanistan of Role The E Figure 1: Pakistan Mix of Commercial Energy Figure 2: Projected Energy Needs of Pakistan

Figure 4: Schematic layout of CASA-1000 Project

Graphs provided A ministerial level meeting of the Inter Gov- The hydropower potential of Afghanistan by the author. ernmental Council of CASA-1000 Project itself could be developed for supply to Paki- comprising all four participating countries stan. Afghanistan has a total hydropower was held in February 2014 in Washington, potential of 25,000 MW, far more than its D.C., where the parties agreed, in principle, requirement. The Ministry of Water and En- on the terms and conditions of the Power ergy of Afghanistan has already identified Purchase Agreement; conducted negotia- 15 small-to-large hydropower projects with tions on the Master Agreement; and at the an overall capacity of 7,500 MW. same time initiated negotiations on electricity pricing. The Asian Development Bank has been looking at the potential to develop multiple The progress on the bidding for the Energy interconnections and power generation Procurement Construction (EPC) was also possibilities (thermal-gas and hydro) on the reviewed during the meeting with satisfac- northwestern borders of Afghanistan, call- tion. The negotiations round concluded ing it the TUTAP project (Turkmenistan-Uz- with the signing of a resolution approving, bekistan-Tajikistan-Afghanistan-Pakistan).

AFGHANISTAN RECONNECTED in principle, the terms and conditions of Afghanistan acts as the anchor country to the power purchase between the parties. collect 2,600 MW power from Central Asia 72 Applications for pre-qualification of con- for supply to Afghanistan and Pakistan. tractors for construction of high voltage Interconnections with Turkmenistan, Uz- direct current (HVDC) converter stations at bekistan and Tajikistan are to be located in Sangtuda, Kabul and Peshawar have been Pul-e-Khumri creating a HVDC hub in Af- received; pre-qualification process along ghanistan. with the preparation of bidding documents with respect to converter stations is also In order to meet the natural gas require- expected to be finalized shortly. ment of Pakistan (and India and Afghani- stan), the countries are negotiating the AFGHANISTAN RECONNECTED 73 - - with Pakistan via Afghanistan via with Pakistan Figure 3: CASA-1000 - Connecting Central Asia Asia Central - Connecting CASA-1000 3: Figure to ensure energy security, Pakistan eagerly eagerly Pakistan security, energy ensure to its easing for supplies new to forward looks 2 BCFD over that widened to shortages gas 2013-2014, winter of hours during the peak and factory unrest social which caused closings. signed the Heads already have parties TAPI Governmental Inter (HOA), Agreement of Framework Gas Pipeline (IGA), Agreement bilat and the respective (GPFA) Agreement eral Gas Sales and Purchase Agreements Agreements Purchase and Gas Sales eral been have figures fee Transit (GSPA). Project the parties. upon between agreed conduct ADB, with the help of sponsors, as the acting ADB is also shows. ed road parties TAPI assist to advisor transaction consortium pipeline a of formation the in - the proj construct and design finance, to scheduled are The bidding documents ect. of quarter the second by be completed to - the con of solicitation competitive for 2014 leader. sortium situation of the energy of view complete A CASA- like and the opportunities Pakistan potential Afghan hydro-power TUTAP, 1000, - connec regional that shows clearly TAPI and be prioritized, need to trade and energy tivity energy Pakistan’s strengthen it would since the socio-economic and maximize security The countries. of both the people for benefits neighboring countries among the two synergy opportunities significant creating to is the key - securi energy through progress economic for the largest one of to leading and eventually ty the world. of markets energy integrated - - - Figure 5: Figure Natural TAPI Gas Pipeline The TAPI pipeline offers multiple economic multiple economic offers pipeline TAPI The countries participating four to all benefits Turk For cooperation. promote and would ural gas from Yoloten-Osman gas field of field gas Yoloten-Osman from gas ural and Pakistan Afghanistan, to Turkmenistan is pipeline gas TAPI The (Figure-5). India Herat, through planned along the highway to Afghanistan in and Kandahar Helmand and onwards and Multan in Pakistan Quetta 56 kilometer, This 1,680 in India. Fazilka to cost to is estimated pipeline, inch diameter It will have estimate). billion (2008 $ 7.6 US Pak by shared be to BCFD 3.2 of a capacity 1.325 BCFD receiving each and India, istan The BCFD. 0.5 will get Afghanistan while support of active strong is receiving project Bank (ADB) and is Development Asian the 2017. by be completed to scheduled and revenue provide it would menistan, Paki- For routes. export of diversification energy address it would and India, stan would provide it Afghanistan, For deficits. transit through development for revenue order In enterprises. industrial for and gas TAPI Project (Turkmenistan, Afghanistan, Afghanistan, (Turkmenistan, Project TAPI nat BCFD 3.2 transport to India) Pakistan, Figure 2: Projected Energy Needs of Pakistan Needs of Energy 2: Projected Figure AFGHANISTAN RECONNECTED

74 Conclusions and Ways Forward AFGHANISTAN RECONNECTED 75 Conclusions and Ways Forward Forward Ways and Conclusions The Role of Parliaments in Rebuilding Afghanistan’s

Anna Deister Economy

Program Assistant, Parliamentarians Network for Conflict Prevention and Regional Security Program,EastWest Institute

hile Afghanistan’s security cooperation, focus on regional economic is- situation is most often making sues and operate at the government level, headlines in the international but do not systematically bring members of press, the international com- Parliament to the table. Wmunity is also recognizing that economic growth and development play a crucial role While focusing on similar issues, the East- in the country’s transition and transforma- West Institute has chosen a more compre- tion period: the economic situation is in- hensive approach for its “Afghanistan Re- deed interlinked with the prospects for an connected” consultation series. Conscious improving security situation.67 of the important role that Parliaments play in setting the legal framework for economic Various initiatives have been launched to activity, we bring members of Parliaments promote regional cooperation beyond the from Afghanistan and the region to the table security dimension: the Istanbul Process when consulting with government officials, on Regional Security and Cooperation for experts from national, regional and interna- a Secure and Stable Afghanistan, the Re- tional institutions as well as representatives gional Economic Cooperation Conference from the business sector to identify oppor- on Afghanistan (RECCA), the United Na- tunities for Afghanistan’s economy and re- tions Special Program for the Economies gional economic cooperation.

AFGHANISTAN RECONNECTED of Central Asia (SPECA), and the South Asian Association for Regional Cooperation The private sector plays a crucial role as 76 (SAARC) are the most prominent initiatives the main actor of economic activity and focusing, mainly or partly, on economic is- development by investing, creating jobs, sues. innovating, producing goods and providing services. The government, as the executive These initiatives have three main charac- branch, can adjust spending and tax rates teristics in common: they promote regional (fiscal policy), and manage the money supply and use of credit (monetary policy). Par- 67 See contribution by S. liaments, as the “elected assembly, respon- Frederick Starr, pp. 56-59. sible for passing legislation and granting AFGHANISTAN RECONNECTED 77

Ramazan Jumazada, MP Jumazada, Ramazan Afghanistan Jirga, Member Wolesi of “The ”Afghanistan Reconnected” meetings— Reconnected” ”Afghanistan “The and Is- in Istanbul but also in Delhi, not only in and effective important very lamabad—are that and opportunities challenges indicating as as well post-2014, is facing Afghanistan and Central connecting in role Afghanistan’s This will strengthen countries. Asian South trade improve may and cooperation, regional in development result and ties, and economic countries. in these as a crucial role a very is playing Parliament and ratifying elaborating body in legislative doing business facilitate which can laws good in the countries investment and attracting help trade need to And this we the region. of progress.” and economic (accessed on February 24, 2014). (accessed on February

69 70 tees focusing on financial and economic is- and economic on financial focusing tees sues. 69 In the Afghan Wolesi Jirga, the Finance, Jirga, Wolesi 69 In the Afghan and Banking Affairs Public Accounts Budget NGOs, Economy, the National Committee, and Animal Agriculture Development, Rural the Natural and Husbandry Committee, Committee and Environment Resources on financial and economic focusing are USAID from taken titles issues. Committee Project Assistant Parliamentary Afghanistan 18, March Newsletter, Legislative (APAP) 05, No. 07, URL: http://www. 2011, Vol. cid.suny.edu/APAP_Newsletter/2011/ APAP_Newsletter_March.18.11.pdf (accessed on February 24, 2014). (accessed on February standing parliamentary four 70 In Pakistan, of financial and in charge are committees Revenue, 1) Finance, affairs: economic and Privatization Statistics Affairs, Economic and Production 2) Industries Committee, Resources Natural and Petroleum 3) Committee, 4) Planning and Development Committee, from taken titles Committee Committee. Assembly of of the National the website URL: http://www.na.gov.pk/en/cmen. Pakistan, php?type=1 - - are are 68 Sayed Ikram, MP Ikram, Sayed Jirga, Member Wolesi of Jirga Wolesi of Secretary Afghanistan http://www.oxfordreference.com/

68 Iain McLean and Alistair McMillan (2009) 68 Iain McLean and Alistair (3 Politics Dictionary of The Concise Oxford online version Press, University ed.), Oxford (2013), URL: view/10.1093/acref/9780199207800.001.0001/ acref-9780199207800-e- 971?rskey=Mg43YM&result=1045 19, 2014). (accessed on February government the right to levy taxation” levy to the right government On an institutional level, the Parliament’s the Parliament’s level, an institutional On reflected field is in the economic role commit parliamentary different through equally important actors in setting the le- in setting equally important actors In the activity. economic for framework gal - the coun Article 90 of Afghanistan, of case the Jirga, Wolesi provides constitution try’s with the follow Assembly, National Afghan or modification Ratification, 1. ing duties: decrees; or legislative laws of abrogation economic cultural, social, of Approval 2. - pro development as technological as well as budget state the of Approval 3. grams; loans; obtain or grant to as permission well Parliament of members Furthermore, […]”. their of the interest represent to elected are economic of the end users constituents, policies.

economic transition at the same time.” at the same transition economic transition: security transition, political transition and transition political transition, security transition: crucial point in time when we are undergoing a threefold a threefold undergoing are crucial point in time when we remain connected with the international community at a community with the international connected remain The “Afghanistan Reconnected” helps Afghanistan to to Afghanistan helps Reconnected” “Afghanistan The the threats and opportunities that we face as a nation. face that we and opportunities the threats beyond. It also helps in consolidating our knowledge of of our knowledge in consolidating helps It also beyond. holders and to explore opportunities in the region and in the region opportunities explore and to holders - stake with regional interact to us with the opportunity The “Afghanistan Reconnected” consultations provide provide consultations Reconnected” “Afghanistan The making. Reconnected” that can contribute to better decision decision better to contribute that can Reconnected” public. This requires platforms such as the “Afghanistan “Afghanistan such as the platforms This requires public. are needed to address the different issues faced by the by the faced issues the different address to needed are people, have to decide on what policies and legislation and decide on what policies to have people, Members of Parliament, as representatives of the of as representatives Parliament, of Members started their withdrawal. started stan, especially at a time when international troops have have troops international at a time when especially stan, - Afghani in situation economic the current to ternatives - about the al know me to for it is important Committee, Afghanistan and member of the Budget and Finance and Finance the Budget of and member Afghanistan “As secretary of the Lower House of Parliament in Parliament of House the Lower of secretary “As Clockwise from left: Ramazan Jumazada MP, Member of Wolesi Jirga, Afghanistan; Romina Khurshid Alam MNA, Member of National Assembly, Pakistan; Ozan Acar, Senior Economist, Economic Policy Research Foundation of Turkey (TEPAV), Turkey.

In addition to the specialized parliamen- By bringing members of Parliaments from tary committees, the Afghanistan’s Par- Afghanistan and the region to the consulta- liamentary Business Caucus was inaugu- tion table, the EastWest Institute responds rated in November 2013. Bringing together to their need to develop closer links with key members of Parliament and private sec- actors and experts in international forums tor representatives, the Business Caucus on regional economic security. Through the “provide[s] a platform to discuss issues of “Afghanistan Reconnected” consultation concern to the business community and series, parliamentarians take part in in- ways in which the private sector and MPs formed discussions, forge and consolidate can work together to make sure that Af- ties with key actors and experts, and can ghanistan passes key legislation to spur make their voice heard in an international private sector development.”71 This initia- forum. tive reflects the vital interest of members of

AFGHANISTAN RECONNECTED Parliament in actively promoting the eco- Afghanistan’s security transition does not nomic development of their country, and depend only on internal aspects. Regional 78 illustrates how they see their role as facili- efforts are necessary. The same applies for tators. the economy. And in order to move forward, all stakeholders need to be involved: gov- 71 CIPE (Nov. 26, 2013) “Afghanistan ernments, experts, the private sector, and Launches New Business Caucus in Parliament”, last but not least, members of Parliament URL: http://www.cipe.org/blog/2013/11/26/ who represent the needs of their constitu- afghanistan-launches-new-business- ents, the end users, and who shape the le- caucus-in-parliament/#.UwXXw4X5T1U gal framework that can facilitates economic (accessed on February 18, 2014). development. AFGHANISTAN RECONNECTED 79 Ozan Acar Ozan Economist, Senior Economic Research Policy of Foundation (TEPAV), Turkey Turkey - - - level in the last decade, it is still a fragile and a fragile it is still decade, in the last level that is dependent on country income low towards effort Any aid flows. international on dependence Afghanistan’s decreasing opportuni- expanding and aid flows foreign by should be pursued population its for ties by supported and administration the new Af and all of community the international ghanistan’s friends. Otherwise the country the country Otherwise friends. ghanistan’s of era a new into down spiral easily could instability. A Proposal for the for A Proposal of an Establishment Production Integrated (IPZ) Zone the Meeting, Forum Istanbul the third At of Foundation Research Policy Economic An- in based think-tank a (TEPAV), Turkey - devel the for proposal a presented kara, Zone Production an Integrated opment of and Afghanistan of on the border (IPZ) multiple of is comprised The IPZ Pakistan. - complemen border cross harness to zones - The pro countries. the two between tarities from inspiration its model gets IPZ posed ef (TOBB) Chamber Federation’s Turkish fort to develop Jenin Industrial Zone on the Zone Jenin Industrial develop to fort all Despite and Palestine. Israel of border Jen- for the land acquisition the roadblocks at the end completed was Zone in Industrial ex is work construction the and 2013 of is IPZ 2014. of half in the first start to pected fundamen- with two project border a cross - -

cent on a yearly basis between 2003 and 2003 between basis on a yearly cent - eco significant this of a result As 2012. per capita Afghanistan’s nomic progress, in the world lowest the 20th ranked income out Afghanistan though, Even in 2011. income per capita in 18 countries stripped Afghanistan has had rapid economic economic has had rapid Afghanistan In 2001, decade. the last throughout growth income per capita lowest it had the second revenues of windfall the With world. in the Afghan the aid, development from mostly per 10 approximately by grew economy Two major developments will be extremely will be extremely major developments Two The Afghanistan. of the future important for election that presidential 2014 is the first an important April 5 and was on place took to a transition consolidating toward step with- one is the The second democracy. the country from forces NATO of drawal is over, The election 2014. until the end of be determined. to yet have but the results decide on will need to president The new between Agreement Security the Bilateral after immediately Afghanistan and the US forces the NATO As role. his new assuming na- Afghanistan’s to security will hand over that it is highly likely forces, national scent of part will spend a significant the country near in the security on ensuring energy its is the there In such an environment, future. are woes economic Afghanistan’s risk that being overlooked. A regional development A regional development agenda

in Afghanistan and Pakistan and Afghanistan in Private Sector Development Development Sector Private Proposed site for IPZ

tal targets. The first one is to enhance the tainable, they must produce profits for the economic integration between Afghanistan involved private sectors. and Pakistan, whereas the second target is to bring economic development to the re- Tackling all investment climate constraints gions where IPZ will be established. In this at once is not feasible. Economic uncer- short study, TEPAV’s IPZ proposal is going tainty, infrastructure problems, the lack of to be discussed briefly. a skilled workforce and vulnerability to finance problems are significant challenges Conceptual Framework behind underdeveloped private sectors in such environments. However, creating a In order to bring stability to Afghanistan favorable investment climate at the local and Pakistan there is a need to focus on level can be possible. Three issues should cross border regional development proj- be tackled in creating a conducive business ects based on private sector development environment. The first one is to initiate ca- (PSD). The private sector is the most im- pacity building programs with a focus on portant agent that has the tools and capa- institutional building that are necessary for bilities to bring prosperity to the people of production and commercial transactions. the two countries. PSD programs in this re- The second one is to provide a superior in- spect have to be based upon a set of care- frastructure at the local level. The final one fully selected sectors, the ones that add is to decrease the effective cost of invest- value to both sides of the border should be ment of the private sector through insur- given priority. Policy intervention should ance mechanisms and subsidized credits. aim to focus on missing or weak links in the value chain in the two countries. Such PSD PSD in the framework of an Integrated Pro- policies could be successful even under po- duction Zone (IPZ) requires a cross-border litical constraints as they have the potential cluster development perspective. The suc- to create win-win situations. cess of the project is strongly tied to the sector selection. In making this decision, PSD in a politically unstable environment backward and forward linkages of the sec- AFGHANISTAN RECONNECTED with security problems is a delicate busi- tors and available capabilities in the region ness. Incremental designs rather than should be carefully analyzed. Following this 80 grand projects have a higher chance of suc- conceptual framework, the Economic Poli- cess in such environments. Independent of cy Research Foundation of Turkey (TEPAV) the size of the project, PSD in fragile states conducted an initial feasibility study for an requires effective coordination among all IPZ that is proposed to be established on parties. Maintaining dialogue among public the border of Afghanistan and Pakistan. and private sectors and the international Site and sector selection criteria together community is a key factor throughout the with an evaluation of critical project com- process. In order to make the projects sus- ponents are summarized below. AFGHANISTAN RECONNECTED 81 - - petstrategy.pdf. petstrategy.pdf. tee (April 2006) (April 2006) tee Carpet Commit afghanistan_car trade.gov/static/ “Growth Strategy Strategy “Growth URL: http://www. and Action Plan for Plan for Action and Afghanistan”, Kabul, Kabul, Afghanistan”, Source: Afghanistan Afghanistan Source: the Carpet Cluster of of the Carpet Cluster - - - tunities, the Khost to Gardeyz road is cur road Gardeyz to the Khost tunities, and will shorten under construction rently by Karachi and Kabul between route the 400 km when it is complete. approximately important as extremely is project This road that products of access easier it will ensure Port. the Karachi to in IPZ produced are Selection of Priority Sectors: ExampleThe Carpet integration economic of the level Increasing is one Pakistan and Afghanistan between We idea. the IPZ of the building blocks of en- border cross analyze need to therefore should be identified sectors Priority tities. and the backward account taking into by - coun the two between linkages forward be over that shouldn’t factor Another tries. is sectors priority of in the selection looked skills resources, natural of the availability - produc Carpet infrastructure. physical and sec- of the priority tion is identified as one border cross from benefit that could tors sectors, and furniture The food exchange. due in this short note not covered which are priority other the are constraints, space to TEPAV. by identified that are sectors high- the two is one of sector The carpet feasibility the initial after sectors, potential Afghanistan in IPZ. be targeted to studies, in competitiveness some has achieved The total segment. production the carpet exports carpet Afghanistan’s amount of - which is approxi million USD, 200 exceeds total the country’s of 45 percent mately Afghanistan’s of The main source exports. availability of road transportation oppor transportation road of availability - - - Carpet value Carpet value chain in Afghanistan The proposed site for IPZ is on the northern IPZ for site The proposed It will and Pakistan. Afghanistan of border Khost encompasses that area the to expand Parachinar Afghanistan, of and Gardeyz there this triangle, On Pakistan. Thal of and that will zones will be multiple production available capabilities the existing leverage - complemen border and cross in the region and Pakistan. Afghanistan between tarities - Fed includes partially region The proposed and Areas is not Tribal Administered erally In alternatives. the among secure most the problems security the internal addition to the tensions see one can Afghanistan, of escalat and Pakistan Afghanistan between characteristics, the terrain Considering - con transport availability, crossing border potential, production electricity and ditions an IPZ. is suitable for region the proposed with a perfectly Thal is an open valley First, - the con for convenient terrain, suitable Fur zone. a joint production of struction Proposed Site for IPZ Site for Proposed the downsides, all Despite this region. ing in on the selected was site IPZ proposed the feasibility. and economic technical of basis are there Thal, of in the vicinity thermore, electric- for available reserves and coal gas growing which is crucial for generation, ity an IPZ of Products activity. sector private the bor cross can region in the proposed crossing, the Gulam Khan Border der from important border the most which is one of - and Paki Afghanistan between crossings right now, public use for It is not ready stan. construction is an airport under but there of In terms as well. province in the Khost competitiveness in carpet production is the Integrating the Project Components country’s abundant supply of high-quality wool. The combined lack of adaptation ca- An IPZ that is going to be developed on the pacity to frequent changes in global trends, border of Afghanistan and Pakistan can An efficient working capital, and finishing equipment for be successful only if off-site infrastructure washing and cutting, as well as problems is adequately provided for private sec- logistics and in access to export markets are the main tor companies to operate in an effective road infra- impediments to increasing the country’s manner. Electricity, transportation, border global market share in the carpet trade. crossings, waste management, and secu- structure is Strengths and weaknesses of Afghanistan’s rity are all prerequisites that would make required for carpet value chain are summarized in the the IPZ an attractive investment location. chart on the previous page. TEPAV has completed a needs assessment companies, for off-site infrastructure components. which are go- Establishment of carpet washing and cutting facilities in the Gardeyz-Khost region Power shortages are a key problem for in- ing to be based to strengthen the value chain has the po- dustrial development in both of these coun- in IPZ, to trans- tential to create significant economic gains tries. However, there are deposits of high for Afghans and Pakistanis. Afghanistan quality coal in Kohat and Kurram. Explora- port their raw could contribute to the carpet value chain tion techniques have to be improved in or- materials and through its existing capacity of drying facili- der to make better use of these reserves. ties in Khost region, whereas Pakistan could One or more coal-fired thermal power intermediate provide chemical inputs for the washing plants should be constructed to leverage inputs from stage and electricity to the value chain. As a the availability of coal reserves in electric- third party, Turkish carpet producers could ity production. The private sector would be outside and take part in the value chain through know- interested in investing in coal-fired power final goods how transfer to Afghan producers namely plants under a public-private partnership by following trends in the world market and arrangement (PPP). This framework is a to their the creation of new designs and colors. Car- must to enable the private sector to share customers. pets that are produced in Afghanistan with the risk of such an investment. In addition the necessary inputs from Pakistan could to strengthening the electricity production be marketed and transported to export capacity, there is the need to improve the markets by Pakistani retailers and logistics existing transmission lines and building operators. new cross border transmission lines between Afghanistan and Pakistan. Potential benefits of strengthening the weak parts of the carpet value chain in Afghani- An efficient logistics and road infrastructure stan with the involvement of Pakistan and is required for companies, which are going Turkey are huge for all the parties involved. to be based in the IPZ, to transport their From the point of view of Afghanistan, the raw materials and intermediate inputs from country would increase its competitive- outside and final goods to their customers. ness and production of carpets. Afghan Under the current situation the lack of re- carpet producers’ access to world mar- liable roads and railways makes logistics kets and value added of carpet production difficult in the region. In terms of transport would increase. Know-how transfer from infrastructure, priority should be given to Turkish industrialists in terms of adapta- the improvement of Thal-Kohat railway that tion to changing tastes and preferences in is going to be used for the transport of coal world markets would help Afghan produc- to coal-fired thermal plants. Cross-border ers to sustain competitiveness in the global road infrastructure should be carefully in-

AFGHANISTAN RECONNECTED carpet trade. Potential benefits of such an spected and any problem that increases engagement to Pakistan are significant as travel times should be fixed. In this respect, 82 well. First, in Pakistan, new employment in another priority project should be the im- input industries for cutting and washing provement of Parachinar-Thal road. would be created. New business opportunities for Pakistani fleet operators and retail Customs administration and border gates service providers would increase. are also important project components that affect the likelihood of the IPZ’s success. Ongoing initiatives to improve border gates and customs administration in AFGHANISTAN RECONNECTED 83 There is theThere startneed to thinking about IPZ establishing on the border Afghanistanof to and Pakistan bring prosperity region the to and enhance regional integration these between countries. two - countries. But this will not be But countries. the U.S., of The support enough. countries and other donor Turkey, technical financial, provide to be would assistance and security of the realization in highly useful this project. success IPZ’s The Land issues: location. on its depends greatly should experts of delegation A and identify governments contact an IPZ. for location the best the Analyze process: Legislative the identify legislations to local es- the affect that negatively parts - conces A an IPZ. tablishment of should be drafted sion agreement trade and free at this stage Afghanistan between agreements should be modified and Pakistan a free In addition to if necessary. - Afghan between agreement trade developed and Pakistan, istan tariff zero should give countries produced the products to access markets. their domestic to in IPZ International Identifying donors: - and develop financial institutions major donor of ment agencies should be contacted countries financ- of provisions discuss to the to advisory ing and technical Bank, the Asian The World IPZ. the Islamic Bank, Development the USAID, Bank, Development - De International for Department Turkish and the (DFID), velopment and Coordination Cooperation on the (TIKA) should be Agency contacts. of list 2. 3. 4. It should be noted that “the journey of a of “the journey that It should be noted There begins with one step.” miles thousand - thinking about establish start is a need to and Afghanistan of on the border ing an IPZ the region to bring prosperity to Pakistan between integration regional and enhance all the po- Despite countries. two these and Afghanistan between problems litical that project a workable is this IPZ Pakistan, to gains economic significant provide could TEPAV and TOBB involved. all the parties to assistance technical provide to ready are as governments and Pakistani Afghan the in their ef organizations as business well mission. the IPZ realize to forts - Building consensus: The IPZ is The IPZ Building consensus: initiative. a multi-stakeholder of governments In addition to is there Pakistan, and Afghanistan the endorsement get the need to led by communities business of these of the chamber federations 1. What to Do Next? What The Turkish Chamber Federation (TOBB), (TOBB), Federation Chamber Turkish The in the Is- involved which has been actively be would the outset, from tanbul Process - in the dialogue pro involved get willing to - revital IPZ, of the establishment for cess and designing crossings border of ization which TEPAV, programs. building capacity de- undertake could TOBB, by is supported assist that would studies tailed feasibility - loca in deciding on the best makers policy alternatives. tion and sector Without capacity building programs, the programs, building capacity Without operational become cannot IPZ proposed vo- respect, this In in an efficient manner. should be planned centers training cational in the IPZ. zones the production of as part should target programs training Vocational In addi- skills building and skills conversion. is there centers, training vocational tion to - cen development a business the need for with a SME development in specialized ter Chamber federations focus. micro-credit in adminis- involved that should be actively should im- zones the production of tration resources, income for their capacity prove management. and border estate - com should be and Pakistan Afghanistan the from Aside possible. as as soon pleted of establishment the initiatives, ongoing trade goods where crossing border a new be can and Pakistan Afghanistan between by be supported should quickly processed Chamber The Turkish the governments. modern- gates border (TOBB) Federation as taken be could Turkey in projects ization of the effectiveness a model in increasing with border Afghanistan’s on the crossing six border are there Currently, Pakistan. sig achieved have which Turkey, in gates after improvement performance nificant of goal The them. operate to started TOBB - facilita trade improve is to initiatives these could TOBB scheme. a PPP tion through and Afghanistan a similar task in undertake Afghan of with the partnership Pakistan chambers. business and Pakistani Interconnecting the Region: Ways Forward

WI’s Abu Dhabi Process 2012-2014 and control large cargos, rather than Mohammad has provided an opportunity to the dissipating efforts and resources for Naeem Shinwari governments of Central and South dealing with small individual traders. Asia to engage in regional coopera- Etion, to increase trade both within the re- The business and private sector will have to Program Associate, Regional Security gion and with major more distant partners play an indispensable role. During the Abu Program, EastWest via continental trade corridors. Countries Dhabi Process consultations held in 2013- Institute in South and Central Asia and beyond will 2014, it was acknowledged that the cost gain significantly from reducing trade and of transport is a major obstacle to trade transit costs. Reducing costs, partner coun- in Afghanistan. It is vital to recognize the tries can benefit as well from developing role of the private sector in reducing these transport infrastructures and investment costs. The first step is to have an inclusive strategies, and from working out common approach in the process of evaluation and programs for facilitating trade. Emphasis implementation of reforms by seeking and must be placed on effective trade logistics encouraging direct private sector participa- and trade facilitation; customs and border tion. In doing so, there are a number of key management; and on directly engaging the areas for cooperation where the business business sector as a key partner in regional and private sector can make a successful trade facilitation. Some quick win-win mea- contribution to the expansion of trade. sures include: Engaging the associations of private • Full implementation of the Afghan- transport operators, freight forwarders, istan-Pakistan Trade and Transit insurance companies and chambers of Agreement by improved border man- commerce will provide an opportunity to agement and reduction of smuggling. develop policy solutions for streamlining APTTA requires procedural and regu- border controls and reducing entry barri- latory reform to discourage unauthor- ers for private investors, and also propose ized trade and introduces mecha- policies to stimulate private sector activity. nisms that reduce transit cargo dwell Politicians and donors often find it easier time. The agreement should be grad- to commit resources, if a problem can be ually extended to Tajikistan and India. quantified and if the results of their inter- • Creation of one or two cross-border ventions can be concretely measured. zones adjacent to countries with restrictive trade regimes, where people Furthermore, the benefits from trade in the

AFGHANISTAN RECONNECTED and goods can move freely. This would energy sector also demonstrate that Cen- generate new employment opportu- tral Asia and South Asia can help satisfy 84 nities in the border areas and would each other’s needs. The proximity of sup- also help separate the informal trade plier and consumer countries, the seasonal in goods from narcotics and crime nature of hydroelectric power production, by creating incentives (low tax, duty- and the huge pull from the explosive eco- free trade) for informal traders to de- nomic growth in India and Pakistan all set clare their products. Border guards the stage for successful regional wide trade and custom officials would be better in gas, oil and electrical energy. Impover- able to expedite border processes, ished populations in Afghanistan and Paki- concentrate on stopping criminals stan will benefit immediately, in particular AFGHANISTAN RECONNECTED 85 The creation an inter- of governmental fundtrust regionalfor withinitiatives Afghanistan as a central and withfocus anddirect measurable to benefits players regional effectively can promote a regional development strategy. - - - re be could and transit energy from - develop infrastructure into invested ment. In the beginning, it may also be possible to to be possible also it may In the beginning, for corridor transport identify a particular - coopera of the benefit where investment - assis Donor’s be demonstrated. tion can in such a way should be structured tance opportunities. these maximize that it would - in infrastruc investment In the meantime, should mainly be subject development ture or and implementation change policy to External agreements. bilateral updating of - pro accession WTO the as such anchors bod- cooperation regional or existing cess national coordinate to be used could ies an play could sector The private policies. of in the construction role indispensable which infrastructure, small scale and large opportunities employment generate would people. young for a as potential its realizes Afghanistan As numer it will stimulate Asia in land bridge Thus, region. in the projects ous investment would Afghanistan of reconstruction the - re a successful of part an integral become The creation strategy. gional development - re fund for trust an inter-governmental of - as a cen Afghanistan with gional initiatives and measurable and with direct focus tral can effectively regional players to benefits this objective. promote invest is an undeniably compelling There - coun and participant Donors ment return. to opportunity an unprecedented have tries as cooperation in closer engage decisively - pros regional for pay to price small a is it ties closer of the creation and for perity - eco significant to among nations leading and stability sustained nomic expansion, security. regional - es needs to government Afghan The ensure to institutions credible tablish - the infrastruc of the maintenance revenue and endowment Mineral ture. - in the develop invest may Donors railways Afghan of ment/extension in the region important seaports to Ab- Bandar (Iran), Chabahar such as (Pakistan). and Gwadar (Iran), bas and the improvement road Continued capabilities rail targeted of creation de- and energy extractive vital to are velopment. • • - co regional of gains the potential Finally, - con are sector in the transport operation in- scale large will require they siderable; quick Hence and maintenance. vestment de- a greater will require solutions win-win from and leadership buy-in political of gree ap- selective as a more as well the region their leverage to in order donors by proach will include: measures Quick support. Successful exploitation of such opportu- of exploitation Successful will build a trade energy regional for nities and enhance cooperation of record track possibilities are There momentum. overall “bold strokes”-projects one or more for countries several for benefits with large - participa sector private significant and include the quick start projects These tion. by TAPI and the opening of CASA-1000 of initiatives two these with Progress 2017. term the long over open up prospects may market energy regional a developing for and benefits. flows with major energy in Afghanistan, where energy costs are are costs energy where Afghanistan, in The en- in the region. among the highest - eco not only create would programs ergy alternative and sustainable nomic corridors from the threat against income of sources add much needed but also drug trafficking the state. for streams revenue Afghanistan Reconnected: Conclusions

he “Afghanistan Reconnected” citizens, businessmen and government dialogue has focused on engag- servants. Corruption in Afghanistan is ram- ing public and private leaders from pant from the district to the national level. Central, South and Southwest Asia The April 2014 elections, which according Tand beyond in order to identify challenges to international observers have seen re- and opportunities facing Afghan economic duced levels of corruption, could represent growth prospects. EastWest convened four an opportunity for new leaders to address meetings in Istanbul, Islamabad, New Delhi predatory corruption in the government. and Berlin, which enabled leaders from Af- The assessment of Afghan National Secu- ghanistan, Pakistan, India, Turkmenistan, rity Force performance during the elections Iran, China, the EU, United States and other has been positive as evidenced by the lack nations to exchange ideas, identify oppor- of violence during the election. Even if the tunities and clarify obstacles to growth. The Taliban consciously decided not to interfere James Creighton results of these frank and open discussions with the elections, the insurgent leaders are the identification of several actions that recognize the improved competency and Chief Operating must be taken to assure Afghan growth and capability of the Afghan National Security Officer, EastWest regional stability. Forces. The top three presidential can- Institute didates have agreed to sign the Bilateral To place the challenges facing Afghanistan Security Agreement (BSA) which ensures in context, Afghanistan has endured 35 adequate funding and training for Afghan years of continuous war. The youth in Af- National Security Forces and lays the foun- ghanistan, represented by 65 percent of the dation for continued NATO and internation- population, who under the age of 25, have al community support for Afghanistan over never a known a day without war. Yet, their the next 10 years. positive attitude is reflected in several ways: the exponential growth in education; the 7 Security in the south and east still threatens million voter election turn-out on April 5, economic growth in the Pakistan border re- 2014 (almost double the turn-out of 2009); gion; however, this represents only about 6 and entrepreneurs who develop new oppor- of the 34 provinces in Afghanistan. The re- tunities every day. The dramatic increase in maining provinces, although not completely the number of schools and students, miles secure, are safe enough to allow businesses of new paved and gravel roads, and im- to begin to grow. Security assessments proved life expectancy and health care are must be made on a district to district basis all indicative of tremendous human capital and not aggregated to the national or pro- potential. The young, educated profession- vincial level. Businesses have already made als beginning to populate the Afghan min- their assessments and have invested in gas, istries demonstrate technical competence, granite, cell phones, carpets, higher educa- corruption resistance and a positive out- tion and other sectors. With the departure look for Afghanistan. Afghanistan has bil- of the coalition forces in 2014, there will be a lions of dollars of mineral resources, such reduction in economic growth from over 10 as iron, copper, gold, rare earths, and lithi- percent to less than 5 percent. This reduc- um, which can be an important foundation tion will be offset by improved indigenous for economic development. The prospects security, aggressive businessmen and the for hydrocarbon industry development, potential for improved governance.

AFGHANISTAN RECONNECTED mining sector growth and trade and transport expansion are recognized as sources The illicit drug related industry represents 86 of significant potential. The opportunities an existential threat to Afghanistan and the for business development in these sectors region. Children are admitted to emergen- combined with an energetic, increasingly cy rooms with injuries, yet they cannot be educated and youthful population present operated on because of their addiction to a climate ready for positive development. opium caused by harvesting poppies. This . dire situation is indicative of the dangers The obstacles impeding this positive de- to the population. The continued growth velopments are significant; however, many of poppy production must be addressed of them are being reduced by courageous head-on by religious, tribal and government AFGHANISTAN RECONNECTED 87 Despite theDespite significant challenges associated with economic ingrowth Asia, Central businesses beginningare realize to the growth inpotential Afghanistan and Central Asia. - - - - Phase 1: Policy recommendation recommendation 1: Policy Phase the net development—Engage suitable, precise, define to work policy and acceptable feasible solutions. - engage sector 2: Private Phase the support from ment—Solicit validate to community business - and support the recommenda tions. and leader 3: Government Phase engagement— decision maker support for leader business With “Af the recommendations, these network Reconnected” ghanistan implemen- policy for will advocate a multinational forming tation by - appro engage to task force expert country. in each leaders priate 1. 2. 3. the “Afghanistan Reconnected” meeting. meeting. Reconnected” “Afghanistan the between building relationships by However, nor that countries representing leaders gain to able were we agree, not do mally on agreement for need the on consensus toward ahead and a way initiatives regional The network and implementation. approval - “Afghani the during cultivated experts of will be a vital dialogue Reconnected” stan im- recommendation for in pressing asset plementation. on the follow-up to proposes EastWest Reconnected Afghanistan the of success the defining succinctly by date to meetings - coopera regional to challenges specific concise and clear develop to in order tion aspects The technical recommendations. agreements with the regional associated the in- of It is the policies understood. are the greatest that present dividual countries - The solu implementation. impediment to and related will be policy tions presented process: phase a three follow De- fighting. of tired are people Afghan The associated challenges the significant spite busi- Asia, in Central growth with economic growth the realize to beginning are nesses Asia. and Central Afghanistan in potential - rec to leaders regional for It is imperative over to and fight obstacles regional ognize - coopera economic Regional them. come environment secure tion will yield a more stability. and long term - - - - gyzstan Central Asia South Asia Elec- Asia South Asia Central gyzstan Project and Transmission Trade tricity (CASA-1000) - and Tran Trade Afghanistan Pakistan sit Agreement (APTTA) Turkmenistan, Afghanistan, Pakistan, Pakistan, Afghanistan, Turkmenistan, pipe line India (TAPI) Kyr and the Caucasus Asia Central • • • The “Afghanistan Reconnected” dialogue dialogue Reconnected” “Afghanistan The regional from feedback high level solicited who all leaders and business government with inter approach that a regional agreed - govern and international Regional leaders. their own realize and other agencies ments with the drug associated threats internal - stem at been ineffective but have trade Taliban, The growth. ming the industries poppy all but eliminated who had ruthlessly on the relies now 1990s, in the production - opera its fund to trade this from income - para are challenge this to Solutions tions. growth. economic mount to - pro to way the best national support was and long term development economic mote - insti regional existing In general, security. - ineffec be to considered widely are tutions grow to will have economy regional A tive. and trilateral bilateral a multitude of out of the dialogues of The consensus initiatives. should be agreements regional that was prior Several implemented. and to agreed identified: were initiatives ity - evi were and mistrust rivalries Historic at discussions and open in the frank dent geted rail capabilities are vital to extractive extractive vital to are capabilities rail geted control Border development. and energy trade regional of and liberalization process trade Asian will spur Central agreements to connections and expand and transport Afghan of Resurrection and Europe. Asia - Afghani enable will capacity agricultural Individual self-sufficient. be food to stan and modify to capacity the have nations - and pro their individual processes improve regional help maximize to in order cedures cooperation. On a national level, improvements to in- to improvements a national level, On and governance law, rule of frastructure, to in all countries required are procedures Continued potential. economic maximize tar of and the creation improvement road Afghanistan Reconnected: Conclusions Conclusions Reconnected: Afghanistan AFGHANISTAN RECONNECTED

88 AFGHANISTAN RECONNECTED 89 Annexes Conclusions and Recommendations from the Consultation “Afghanistan Reconnected: The Potential for Afghanistan to Act as an Economic Land Bridge in Asia”

April 10-11, 2013, Istanbul

Summary

About 40 participants from Afghanistan, Pakistan, India, the United Arab Emirates, Tur- key, 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 Afghani- stan and the region. And in times of global trade “the markets won’t wait.”

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. 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

AFGHANISTAN RECONNECTED step in the medium and long-term efforts to modernize and professionalize all Afghan border crossings to Pakistan, Tajikistan, Turkmenistan, Uzbekistan, Iran 90 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 trad- AFGHANISTAN RECONNECTED 91 - Training for the private sector in Afghanistan, Pakistan and Central Asia on Asia and Central Pakistan Afghanistan, in sector the private for Training certification. of standards relevant Provision of regular and accessible information services to traders and the traders to services information and accessible regular of Provision countries Asia and Central Afghanistan in Pakistan, industries transport events; and matchmaking conferences business through - re and in the border/corridor Afghanistan in storages cold of Construction gions; ers and the trucking industry to fulfill deposit/guarantee demands in Paki- demands in fulfill deposit/guarantee to and the trucking industry ers have to industry transport and the traders Afghan enable will also which stan, in Pakistan. and others Karachi the port of to access and assured easy » » » » » » Increase incentives for regional states along transit corridors, especially in especially corridors, along transit states regional for incentives Increase One crossing. border of time and costs the reduce to Asia, and South Central (MHI) Initiative the Model Highway is the implementation of idea promising of as a means Union (IRU) Transport Road the International by developed - unneces in addressing cooperate to bordering its and Afghanistan encouraging such as the donors Major institutional transit. road to barriers bureaucratic sary the funding for initiate Bank (ADB) may Development Asian Bank and the World highways. model cross-border three up to of construction through relations Indian economic and Pakistan Afghanistan, closer Promote of legal facilitation the and through measures confidence-building continued informal current of bring a higher percentage to An incentive and trade. transit and Afghanistan both affect that will positively framework a legal into trade Asia. Central a single to maintain roads to government Afghan the of the capacity Strengthen has and contractors donors of the multiplicity present, At standard. sustainable beds the actual road of and sustainability in the quality wide variations produced and surfaces. network road Afghanistan’s While network. rail Afghan an and extend Develop has Higher priority is virtually nonexistent. network rail its is under-developed, In lines. rail trans-continental through Afghanistan connecting to be given to and the east to be extended Sharif should Mazari line to the rail the short term, initiate to it is necessary this, In addition to in the west. Herat as to as well south via Spin Boldak system rail link it with the Pakistani line and rail the Kandahar connect the would segment rail The final Karachi. the port of to extension and its the to states Asia thus opening Central Kandahar, to via Quetta Gwadar port of port. promising most the region’s by world Strengthen and facilitate trade between South and Central Asian regions and regions Asian and Central South between trade and facilitate Strengthen through: beyond 1. 2. 3. 4. 5. thermore identify specific issues on infrastructure for follow-up in the region and report on report and region in the follow-up for infrastructure on issues specific identify thermore meeting in 2013. Abu Dhabi Process at the next the outcome Representatives from the government of Afghanistan as well as members of parliament parliament of as members as well Afghanistan of the government from Representatives Afghanistan. in recommendations up on these undertaking speedy follow to committed partici- all to recommendations these forward will Institute EastWest the step, a first In on Conference Almaty the prior to in the region other stakeholders as to as well pants will fur Institute The EastWest April 2013. that will be held at end of cooperation regional Implementation Implementation - coopera economic regional boost to measures long-term several suggested Participants tion: Recommendations for Long-term Measures Recommendations for Conclusions and Recommendations from the Consultation “Afghanistan Reconnected: Linking Energy Suppliers to Con- sumers in Asia”

September 2-4, 2013, Islamabad

Summary and Conclusions

As a gateway from South Asia to Central Asia, Afghanistan holds a key position to unlock new economic potentials in the region by providing transit routes for energy supplies from Central Asia to the energy markets of South Asia – a scenario with win-win potentials for all stakeholders.

While sources of energy (gas, oil, hydropower) are abundant in Central Asia where countries wish to diversify the sale of their commodities at market prices, Afghanistan, Paki- stan and India would be obvious markets at reach with significant demand for energy. More external energy supplies will be required in these countries - in addition to domestic reforms of energy markets – to grow the national economies for growing populations. With supplies being available from within the region, effective regional cooperation needs to be promoted and pursued. The role of the economy for the future of the whole region as well as the need for “economic diplomacy” were highlighted throughout the region. It was noted that while Asia is emerging as a new center of gravity and trade between South Asia and the rest of the world is also growing, trade within South Asia has remained stagnant and the proximity in South and Central Asia is not leveraged so far. Likewise, there is a lack of foreign investment in the region. The known ills are distrust, political instability and security concerns, frequent power outages as well as weakness of rule of law.

Participants thanked EWI for taking the initiative of convening this regional meeting on energy as a concrete step to promote regional energy trade as well as trust-building. While doubts were expressed about the effectiveness of existing regional institutions, there is no desire to establish new mechanisms, but rather a preference to move ahead on bilateral agreements as well as to focus on specific small projects which would generate trust. While no time should be lost to engage in “economic diplomacy”, it was stressed that security concerns – in particular in Afghanistan – should not be considered as an impediment to engage in economic cooperation. Participants agreed that security challenges could be overcome as long as there is mutual understanding and interest of all (including local) stakeholders in a given project. Pipeline projects in the 1990s engaging also local power brokers in Afghanistan, and recent engagement of Turkish companies exploring resources in Northern Iraq demonstrate the viability of investment and trade if there is shared interest and local ownership.

Pakistan’s most senior Government representative, Mr. Sartaj Aziz, Advisor to the Prime Minister on Foreign Affairs and National Security, recognized Afghanistan as a vital con- nector for regional energy, communication and transmission. Referring to President Kar- zai’s recent visit to Islamabad, he explained recent agreements on the Peshawar-Kabul Road and the Chaman-Kandahar railway line. He noted that these links would not only improve trade relations between Pakistan and Afghanistan, but would also help connect Central Asia with South Asia. He confirmed that the Afghanistan-Pakistan Transit Trade Agreement (APTTA) was an important step ahead and that it would be implemented. In terms of bilateral support for Afghanistan, Pakistan supports Afghanistan on developing

AFGHANISTAN RECONNECTED the Kunar dam with a capacity of generating 1500 MW of electricity. CASA-1000 electricity grid had now been converted into CASA- 1300 with further addition of 300 MWs. 92 Mr. Shahid Khaqan Abbasi, Federal Minister for Petroleum and Natural Resources urged Pakistan, Afghanistan and neighboring countries to engage in dialogues to meet common growing energy demands and also to seize the significant economic opportunities that energy trade would provide. He said that the region is at the forefront of a transition towards energy economy as the ‘energy security’ has become a key priority for all the countries. He noted that Pakistan was also committed to achieving the Iran-Pakistan pipeline. In terms of areas of cooperation between Afghanistan and Pakistan, the Minister stated that Paki- stan could assist Afghanistan in capacity building through Pakistani universities, help in AFGHANISTAN RECONNECTED 93 - - Turkmenistan is producing 24 billion cubic meter of natural gas per annum, and Tajikistan Tajikistan and annum, per gas natural of billion cubic meter 24 is producing Turkmenistan Central Kwh. billion 7 of capacity installed with hydroelectricity for potential abundant has transportation for networks and rail modern road equipped with well are countries Asian Afghanistan. via Asia with South connect to being still the main hindrance resources, of 2013. in late within reach be coming to seems project TAPI the However, Afghanistan discussed and Producer” Importer Energy as an “Afghanistan on session A National a U.S. to According resources. untapped natural with tremendous as a country Afghanistan Western in potential the wind energy study, Laboratory Energy Renewable 23000 MW. of be in excess to said was hydropower and MW at 158,000 estimated was - re petroleum unexplored of barrels billion 1.6 forecasts Survey Geological U.S. Moreover, - prob of billion barrels and 0.50 gas natural probable of with 444 billion cubic meter serves suggested participants resources, these of use optimum future For gas. able liquid natural and other and the government sector investors/private foreign dialogue between active natural in these Investment common interest. of goal with a defined stakeholders local - ca long-term require also would an exporter into Afghanistan turn which could resources Afghanistan. building within pacity bi- Afghanistan’s of promotion that the at the conference agreement general was There ben- would trade energy multilateral Asia Asia-South and the Central trade energy lateral to utilities Asian power/gas Central the enable would It ways. in many stakeholders all efit Asia in Central enable the States it would In medium term, their assets. of use full make fuel fossil cover and to viability the sector improve to revenues, their export increase to per term In a longer their neighbors. from (needed in winter) imports or thermal power involv projects specific some of on the implementation focus EWI that suggested It was geological surveys, training to Afghan engineers in hydropower projects and facilitation in and facilitation projects in hydropower engineers Afghan to training surveys, geological as- of areas Further dams. and macro micro in developing services consulting engineering system. and an efficient grid lines transmission infrastructure, be building would sistance energy Afghanistan, to As growth. their economic stimulate would trade energy spective to electricity to access more give system, the power help stabilize would and transit trade trade energy Regional purposes. transit for system power its the population and upgrade manner. effective in a cost supply gap current the close and India to enable Pakistan would water/ solve to incentives create also may exports energy substantial of The possibility sharing water sustainable and achieve countries Asian among the Central issues power projects. hydroelectric large attractive many for required that are agreements the to contribute would trade energy regional that enhanced a consensus was There This in the region. stabilization and political cooperation economic of objectives broader get to will have investors Private in the region. commitment political high level will require - orga International facilities. the transnational and operate construct finance, to involved for risk mitigation. instruments offer and financial institutions nization Recommendations - co energy towards step a as conference the convening for EWI commended Participants in the region. and trust-building operation projects on specific progress Tangible partner. a regional as Center Energy SAARC the ing to launch a public was EWI for recommendation general A confidence. promote also would was as there and their benefits, projects energy on key in the region campaign information on opportunities. at large the public inform a need to

Further recommendations included:

• Governments and the private sector should explore the possibility of joint electricity generation in at least two SAARC member countries as a pilot project. • Electricity exports from Tajikistan to Afghanistan should be extended to Pakistan. The governments of Afghanistan and Pakistan should co-operate with the government of Tajikistan to increase volume by 200 MW to be transmitted via Afghanistan to Peshawar. • Renewed efforts should be undertaken by the governments of Turkmenistan, Tajiki- stan, Afghanistan, Pakistan and India to initiate the construction of CASA-1000 network and the TAPI gas pipeline. The transformative potential of TAPI for the region was highlighted, while other options (use of LNG) could replace TAPI otherwise. It was recommended to involve the Energy Charter Secretariat for projects of regional significance to help ensure transit security, provide investment potentials, assist in dispute settlement and address efficiency and environmental issues. • In terms of security concerns, special attention should be given to mitigating transit risks throughout Afghanistan. Measures to be taken include: employment of local workforce and local regular access to supply of electricity and gas along the transmission routes, special security measures to protect the routes, deployment of repair crews and maintenance. In terms of funding, an intergovernmental regional trust fund could be set up to cover such costs. • Energy trade between Pakistan and India: State transmission companies NTDC and PGCI should conduct a joint feasibility study on grid connectivity. • Governments should engage in domestic energy sector reforms to enhance efficiency and to attract investment. Reforms should lead to improving infrastructure, financial performance and collection of revenues, governance and regulatory framework, customer services. • Governments should undertake initiatives to attract foreign and domestic investment in the energy sectors which could develop into very profitable markets. Re- gional private sector associations could be a tool for business consultation. A regional trust fund set up by governments of the region with the support of IFI’s or donors could collect funds for kick-starting regional projects. • Governments in the region should engage in exploring the energy potential of Af- ghanistan. Cooperation between Afghanistan and Pakistan on the Kunar river dam is a step into this direction. For sustainable development of capacity building in Af- ghanistan (training of Afghan experts), regional opportunities for capacity building will be required. AFGHANISTAN RECONNECTED

94 AFGHANISTAN RECONNECTED 95 Third in a series, EWI’s New Delhi consultation was held in cooperation with the Federation with the Federation cooperation held in was consultation Delhi New EWI’s a series, in Third - representa 40 high-level Over (FICCI). and Industries Commerce of Indian Chambers of - partici and beyond the region from investors and key parliaments governments, of tives on “Conference FICCI’s complemented consultation regional EWI’s in this meeting. pated building confidence the economic as one of organized Afghanistan”, with doing business and government Indian the of representatives by led Process Istanbul the of measures FICCI. by managed the trans- in opportunities investment explore to was consultation third EWI’s The aim of and to mining resources, and in the country’s corridors and transport energy Afghanistan assessed also The conference investment. direct and international both regional attract the for gains economic potential and highlighted investment for frameworks regulatory economy. Afghan in the region recognized and beyond the region from governments of representatives Decision-making with win- scenario A 2014. after and investment trade business, for potential Afghanistan’s in investment by reconnected Afghanistan be an would all stakeholders for win prospects TAPI grid and the the CASA-1000 roads, lines, railway infrastructure, and energy transport pipeline. gas to beyond and region the in donors institutional and investors upon called Participants Such in- Afghanistan. in as in mining as well resources natural of in the extraction invest the private from message critical A aid. foreign for substitute essentially could vestments large-scale of in the construction investments to should be given is that priority sector countries neighboring to resources of transportation facilitate which would infrastructure, and beyond. regulatory efficient more a ensure to Afghanistan of the government upon called Investors and ac- transparency require Investors national institutions. and high-quality framework prop- of enforcement and system, judiciary an efficient of law, rule effective countability, communicated be but must regard, in this been taken have strides Significant rights. erty rigorously. more and enforced community the international to in investment for impediments key were challenges that security agreed Participants Afghanistan’s in investment as for as well corridors and transport energy trans-Afghan can risks that security suggest also learned lessons However, resources. natural domestic - such as the construc projects in economic stakeholders local engaging by be mitigated gap pipe- in investments from population should benefit The local infrastructure. tion of insecurity. prevent may ownership Local grids and in mining. transmission electricity lines, and industry interventions targeted by be mitigated also can risks security Furthermore, markets. and free industries zones, economic such as cross-border initiatives, peace for north is such as the resource-abundant regions peaceful in more investment Targeted now. possible also - not be fully devel could potential economic Afghanistan’s that acknowledged Participants TAPI such as projects of The success will within the region. political oped without strong vi- and a shared commitment leadership, strong require to will continue and CASA-1000 the whole region. sion for Summary and Conclusions November 19-20, 2013, New Delhi New 2013, 19-20, November ConclusionsConsultation the from Recommendations and Potential Investment Reconnected: Unlocking “Afghanistan Region”in the Recommendations

A key objective of the New Delhi consultation was to highlight the investment potentials in Afghanistan and to recommend that regional governments take action to attract sustainable investment. The removal of administrative barriers and improvements of the regulatory framework and practice were recommended as cross-cutting issues in all economic sectors.

Investment in Trans-Afghan Transport Corridors

Suggestions for government action included:

• The governments of Afghanistan, Pakistan, India and Iran should agree on access to Afghanistan and to Central Asia via the ports of Chabahar, Gwadar and to the Indian border. • The Afghan government should develop incentives for infrastructure investment to attract foreign direct investment in construction of trans-Afghan roads and rail lines. Several funding options exist (mineral endowment and the regional infrastructure fund). • The government of Pakistan should extend the railway network to Chaman and beyond to Kandahar, if they wish to gain access to Central Asia.

Opportunities for investors included:

With the ring road almost completed, there are several major investment opportunities for transport infrastructure: the construction of dry ports at key transit points in the provinces of Nanagar, Hirat and Mazar-i-Sharif and Nimroz; the construction of transport termi- nals inside Afghanistan; and capacity development of civil aviation authority. Furthermore, investment opportunities exist for construction of cross-Afghan rail lines and roads.

Investment in Trans-Afghan Energy Corridors and Mining

The Afghan government should ensure an investment friendly climate for the development of Afghanistan’s domestic energy resources. Investing in hydropower and coal-fired power plants has the potential to address Afghanistan’s domestic energy demands as well as the growing demand in Pakistan and elsewhere in the region.

Investment in the mining sector is a great prospect for Afghanistan that could ensure financial sustainability after 2014. Successful investment in the mining and extraction sec- AFGHANISTAN RECONNECTED tors will require a two-fold strategy by the Afghan government with regional cooperation. The two main pillars are: building of large-scale infrastructure projects (railway network, 96 power plants) and institutional reforms leading to an efficient regulatory framework that eliminates corruption.

Governments in Central Asia, Afghanistan, Pakistan and India should move ahead on the CASA-1000 electricity grid and the TAPI gas pipeline. These two projects are essential for enhancing regional cooperation. Major institutional donors can provide investment assur- ance fund to guarantee international and regional investment in these projects. AFGHANISTAN RECONNECTED 97 - - The Afghan Government should improve its control over northern cities to facilitate facilitate to northern cities over control its should improve Government Afghan The Asia. with Central trade the regional trade. to increase reduced should be Pakistan and Afghanistan in disparity Tariff - eco establish should Tajikistan and Iran Pakistan, Afghanistan, of governments The by managed be autonomously to Afghanistan, with on the border zones nomic trade involved. sector the business The governments of Tajikistan, Afghanistan and Pakistan should finalize the tripar finalize should and Pakistan Afghanistan Tajikistan, of The governments - Cen India and between trade for border Wagah via access should provide Pakistan and other Nepal to Pakistan from trade for access provide India should Asia. tral Asian South Countries The governments of Afghanistan and Pakistan should undertake efforts to ensure to ensure efforts should undertake and Pakistan Afghanistan of The governments Agreement Transit and Trade Afghanistan-Pakistan the the full implementation of India. to further extension and its (APTTA) trade. cross–border facilitate to transit and on trade agreement tite • • • • • • Suggestions for government action included: action government for Suggestions Expanding Regional Trade through Cooperation and Investment through Cooperation and Investment Expanding Regional Trade The purchase of excess coalition equipment and the use of abandoned coalition bases as bases coalition abandoned of the use equipment and coalition excess of The purchase further for opportunities excellent entrepreneurs Afghan provide could parks industrial growth. ghanistan and the region. and the region. ghanistan Construction of shared production zones in Afghanistan’s border regions with Pakistan, with Pakistan, regions border Afghanistan’s in zones production shared of Construction initia- peace for industry of the initiation Tajikistan; and Uzbekistan Turkmenistan, Iran, Afghanistan in parks industrial of the construction facilitation; trade cross-border for tives Af in development and institutional and capacity zones; economic cross-border and of Opportunities for investors include: include: investors for Opportunities Conclusions and Recommendations from the Consultation “Afghanistan Reconnected: Creating Momentum for Regional Economic Security”

April 8-10, 2014, Berlin

Summary and Conclusions

On April 8-10, 2014, EWI convened the fourth high-level meeting in Berlin, Germany, on regional economic security aspects of Afghanistan post-2014. The objective of this meeting was to review progress on regional economic cooperation and to define an agenda of targeted activities to be implemented in 2014-2015. Progress was stated on some large scale projects such as the CASA-1000 electricity grid and the TAPI gas pipeline, as well as on bilateral trade relationships (e.g. India-Pakistan).

Thirty-five high-level government representatives, members of parliament and business leaders from the region and beyond participated in this meeting held after the first round of presidential elections in Afghanistan. Participants viewed the high voter turnout and the relatively few incidents as a positive sign for a smoother political transition.

Participants once again recognized Afghanistan’s economic potential for business, trade, transit and investment after 2014. Some of them argued that the momentum for regional cooperation has already been largely created. A scenario with win-win prospects for all stakeholders would be an “Afghanistan reconnected” by investments in transport and energy infrastructure, including railway lines, roads, the CASA-1000 electricity grid and the TAPI gas pipeline.

To move forward with this agenda, it was stressed that stakeholders—governments and businesses— should first keep in mind this long-term vision of regional cooperation, while addressing the impediments.

Second, the governments and partners should agree on issues with good prospects for near term success that could serve as entry points for further progress. Trust and security are not absolute preconditions for cooperation if the potential gains are significant enough and risks are quite low. The business sector could help identify potential quick successes. Both large-scale projects and small-scale trade can move ahead.

Third, the business communities in the region should be encouraged to take the lead in the implementation of key regional projects as well as in the reform of national and bilateral cooperation policies. The business sector is an indispensable catalyst in changing the mindsets of policy makers in the region.

Fourth, capacity building will continue to be essential, in Afghanistan, and in some countries of the region as well as in regional organizations.

Overall opportunities for trade, development and cooperation are immense, and they should be turned into gains. Progress is more likely at bilateral levels, as existing regional institutions are considered to be more politicized and less effective. However, in some areas such as transit agreements, quick borders (at Torkham and Spinboldak), transit facilitation, and energy trade as a regional approach— already occurring in some cases—is

AFGHANISTAN RECONNECTED recommended.

98 Recommendations The Berlin meeting laid out the core issues affecting regional cooperation with a focus on the critical interrelationship between trade and transit, border-management and drug trafficking, energy and investment. Participants also discussed issues with good prospects for progress in the short term that could generate further momentum and facilitate “breakthroughs” with larger projects such as TAPI. Recommendations for quick win-win solutions included the following: AFGHANISTAN RECONNECTED 99 The Afghan government needs to establish credible institutions to ensure the main- ensure to institutions credible establish needs to government Afghan The and energy from and revenue endowment Mineral the infrastructure. of tenance development. infrastructure into be reinvested could transit Donors may invest in the development/extension of Afghan railways to important to railways Afghan of in the development/extension invest may Donors and Gwadar (Iran), Abbas Bandar (Iran), such as Chabahar region in the seaports - capabili rail targeted of creation and the improvement road Continued (Pakistan). development. energy and extractive vital to are ties Full implementation of the Afghanistan-Pakistan Trade and Transit Agreement by im- by Agreement Transit and Trade Afghanistan-Pakistan the of implementation Full be should The agreement smuggling. of and reduction management border proved and India. Tajikistan to extended gradually with restrictive countries to adjacent zones cross-border one or two of Creation new generate This would freely. move can and goods people where regimes, trade the in- help separate also and would areas in the border opportunities employment duty- tax, (low incentives creating and crime by narcotics from in goods trade formal and custom guards Border their products. declare to traders informal for trade) free stopping on concentrate processes, border expedite to able better be would officials in- resources and efforts than dissipating rather cargos, large criminals and control with small individual traders. teracting • • • • Perhaps the greatest prospects for quick win-win initia- quick win-win for prospects the greatest Perhaps and Development: Trade Energy - is re energy demand for Afghanistan’s trade. in the energy are level at the regional tives in trans-Afghan fund investment to willingness and donors’ agriculture, its boost to quired to Turkmenistan and Tajikistan for opportunities will create infrastructure transmission markets. their energy diversify will build a track trade energy regional for such opportunities of exploitation Successful or one for possibilities are There momentum. overall enhance and cooperation of record pri- and significant countries several for benefits with large “bold strokes”-projects more and the CASA-1000 of include the quick start projects These participation. sector vate over open up prospects may initiatives two with these Progress 2017. by TAPI opening of and ben- flows with major energy markets energy regional developing for the long term efits. In the beginning, it may also be possible to identify a particular transport corridor for in- for corridor transport identify a particular to be possible also it may In the beginning, as- Donor’s demonstrated. clearly be could cooperation of benefit the where vestment opportunities. these maximize that would in such a way should be structured sistance to subject be mainly should development infrastructure in investment meantime, the In anchors External agreements. bilateral or updating of and implementation change policy be used could bodies cooperation regional or existing process accession WTO such as the in the role an indispensable play could sector The private national policies. coordinate to employment generate which would infrastructure, and small scale large of construction people. young for opportunities The potential gains of regional cooperation in the transport in the transport cooperation regional of gains The potential Infrastructure: Transport quick Hence and maintenance. investment scale large will require they large; are sector the from and leadership buy-in political of degree a greater will require solutions win-win their support. leverage to in order donors by approach selective as a more as well region are: the participants by suggested measures Quick Facilitating trade in the region is a long process. The The is a long process. in the region trade Facilitating Facilitation: Trade Interregional trade Restricted countries. some for sensitive is politically policies trade of liberalization into rather push trade but markets, domestic protect not effectively do however, policies, are: the participants by suggested measures Quick sector. an informal EastWest Institute Board of Directors

OFFICE OF THE OFFICERS MEMBERS CHAIRMEN John Edwin Mroz (U.S.) Martti Ahtisaari (Finland) Ross Perot, Jr. (U.S.) President, Co-Founder and CEO Former Chairman Chairman EastWest Institute EastWest Institute EastWest Institute 2008 Nobel Peace Prize Laureate Chairman R. William Ide III (U.S.) Former President of Finland Hillwood Development Co. LLC Council and Secretary Chair of the Executive Committee Tewodros Ashenafi (Ethiopia) H.E. Dr. Armen Sarkissian EastWest Institute Chairman and CEO (Armenia) Partner Southwest Energy (HK) Ltd. Vice Chairman McKenna Long and Aldridge LLP EastWest Institute Peter Bonfield (U.K.) President Leo Schenker (U.S.) Chairman Eurasia House International Treasurer NXP Semiconductors Ambassador Extraordinary and EastWest Institute Plenipotentiary Former Senior Executive Vice Matt Bross (U.S.) Embassy of the Republic of President Chairman and CEO Armenia to the United Kingdom Central National-Gottesman Inc. IP Partners Former Prime Minister of Armenia Robert N. Campbell III (U.S.) Founder and CEO Campbell Global Services LLC

Peter Castenfelt (U.K.) Chairman Archipelago Enterprises Ltd.

Maria Livanos Cattaui (Switzerland) Former Secretary-General International Chamber of Commerce

Michael Chertoff (U.S.) Co-founder and Managing Principal The Chertoff Group

David Cohen (Israel) Chairman F&C REIT Property Management Joel Cowan (U.S.) Gen. (ret) James L. Jones (U.S.) Admiral (ret) William A. Owens Professor Former U.S. National Security (U.S.) Georgia Institute of Technology Advisor Chairman Former Supreme Allied AEA Holdings Asia Addison Fischer (U.S.) Commander Europe Former Vice Chairman Chairman and Co-Founder Former Commandant of the U.S. Joint Chiefs of Staff Planet Heritage Foundation Marine Corps Sarah Perot (U.S.) Stephen B. Heintz (U.S.) Haifa Al Kaylani Director and Co-Chair for President (Lebanon/Jordan) Development Rockefeller Brothers Fund Founder and Chairperson Dallas Center for Performing Arts Arab International Women’s Forum Hu Yuandong (China) Louise Richardson (U.K.) Chief Representative Zuhal Kurt (Turkey) Principal UNIDO ITPO-China CEO University of St. Andrews Kurt Enterprises Emil Hubinak John Rogers (U.S.) (Slovak Republic) General (ret) T. Michael Managing Director Chairman and CEO Moseley (U.S.) Goldman Sachs and Co. Logomotion President and CEO Moseley and Associates, LLC George F. Russell, Jr. (U.S.) John Hurley (U.S.) Former Chief of Staff Former Chairman Managing Partner United States Air Force EastWest Institute Cavalry Asset Management Chairman Emeritus F. Francis Najafi (U.S.) Russell Investment Group Amb. Wolfgang Ischinger CEO Founder (Germany) Pivotal Group Russell 20-20 Chairman Munich Security Conference Amb. Tsuneo Nishida (Japan) Ramzi H. Sanbar (U.K.) Global Head of Former Permanent Representative Chairman Governmental Affairs of Japan to the U.N. SDC Group Inc. Allianz SE Ronald P. O’Hanley (U.S.) Ikram ul-Majeed Sehgal Ralph Isham (U.S.) Former President, (Pakistan) Managing Director Asset Management Chairman GH Venture Partners LLC Fidelity Invesments Security & Management Services Ltd. Anurag Jain (India) Amb. Yousef Al Otaiba (U.A.E.) Chairman Ambassador Amb. Kanwal Sibal (India) Laurus Edutech Pvt. Ltd. Embassy of the United Arab Former Foreign Secretary of India Emirates in Washington, D.C. CO-FOUNDER DIRECTORS EMERITI

Kevin Taweel (U.S.) Ira D. Wallach* (U.S.) Jan Krzysztof Bielecki (Poland) Chairman Former Chairman CEO Asurion Central National-Gottesman Inc. Bank Polska Kasa Opieki S.A. Former Prime Minister of Poland Amb. Pierre Vimont (France) Executive Secretary General CHAIRMEN EMERITI Emil Constantinescu (Romania) European External Action Service President Former Ambassador Berthold Beitz* (Germany) Institute for Regional Cooperation Embassy of the Republic of France President and Conflict Prevention (INCOR) in Washington, D.C. Alfried Krupp von Bohlen Former President of Romania und Halbach-Stiftung Alexander Voloshin (Russia) William D. Dearstyne (U.S.) Chairman of the Board Ivan T. Berend (Hungary) Former Company Group Chairman OJSC Uralkali Professor Johnson & Johnson University of California, Los Angeles Amb. Zhou Wenzhong (China) John W. Kluge* (U.S.) Secretary-General Francis Finlay (U.K.) Former Chairman of the Board Boao Forum for Asia Former Chairman Metromedia International Group Clay Finlay LLC Maria-Pia Kothbauer NON-BOARD Hans-Dietrich Genscher (Liechtenstein) COMMITTEE MEMBERS (Germany) Ambassador Former Vice Chancellor and Embassy of Liechtenstein to Laurent Roux (U.S.) Minister of Foreign Affairs Austria, OSCE and the UN in Vienna Founder Gallatin Wealth Mangement, LLC Donald M. Kendall (U.S.) William E. Murray* (U.S.) Former Chairman and CEO Former Chairman Hilton Smith, Jr. (U.S.) PepsiCo. Inc. The Samuel Freeman Trust President and CEO East Bay Co., LTD Whitney MacMillan (U.S.) John J. Roberts (U.S.) Former Chairman and CEO Senior Advisor Cargill Inc. American International Group (AIG)

Mark Maletz (U.S.) Daniel Rose (U.S.) Chairman, Executive Committee Chairman EastWest Institute Rose Associates Inc. Senior Fellow Harvard Business School Mitchell I. Sonkin (U.S.) Managing Director MBIA Insurance Corporation

Thorvald Stoltenberg (Norway) President Norwegian Red Cross

Liener Temerlin (U.S.) Chairman Temerlin Consulting

John C. Whitehead (U.S.) Former Co-Chairman Goldman Sachs Former U.S. Deputy Secretary of State

* Deceased EastWest Institute Policy Report Series

2014 Seeking Solutions for Afghanistan, Part 2 Critical Terminology Foundations 2 Policy Report 2011—2 Russia-U.S. Bilateral on Cybersecurity Policy Report 2014—2 Critical Terminology Foundations Russia-U.S. Bilateral on Cybersecurity A Measure of Restraint in Cyberspace Policy Report 2011—3 Reducing Risk to Civilian Nuclear Assets Policy Report 2014—1 Enhancing Security in Afghanistan and Central Asia through Regional 2013 Cooperation on Water Amu Darya Basin Consultation Report Afghan Narcotrafficking Policy Report 2011—4 A Joint Threat Assessment Policy Report 2013—1 [EN | RU] Fighting Spam to Build Trust China-U.S. Bilateral on Cybersecurity The Path to Zero Policy Report 2011—5 [EN | CH] Report of the 2013 Nuclear Discussion Forum Policy Report 2013—2 Seeking Solutions for Afghanistan, Part 3 Policy Report 2011—6 Threading the Needle Proposals on U.S. and Chinese Actions on Arms Sales to Taiwan 2010 Policy Report 2013—3 Economic Development and Measuring the Cybersecurity Problem Security for Afghanistan Policy Report 2013—4 Increasing Jobs and Income with the Help of the Gulf States Frank Communication & Sensible Policy Report 2010—1 Cooperation to Stem Harmful Hacking Policy Report 2013—5 [EN | CH] Making the Most of Afghanistan’s River Basins Opportunities for Regional Cooperation 2012 Policy Report 2010—2

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Priority International Communications Rights and Responsibilities in Cyberspace Staying Connected in Times of Crisis Balancing the Need for Security and Liberty Policy Report 2012—2 Policy Report 2010—4

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