Commission on Security & Cooperation in Europe:
U.S. Helsinki Commission
“The New Silk Road Strategy:
Implications for Economic Development in Central Asia”
Policy Advisor, CSCE
North America Representative,
Asian Development Bank
Senior Desk Officer for Russia, Caucasus and Central Asia,
U.S. Department of Commerce
U.S.-Turkmenistan Business Council
Freelance Journalist and Analyst
The Briefing Was Held From 2:05 p.m. To 3:46 p.m. in Cannon House Office
Building, Room 340, Washington, D.C., Shelly Han, Policy Advisor for Economics,
Environment, Technology and Trade, CSCE Presiding
Wednesday, July 31, 2013
HAN: Good afternoon. I’d like to welcome you all to the Commission on
Security and Cooperation in Europe’s briefing on economic development in
Central Asia. We’re focusing our attention today on what is broadly called the
New Silk Road strategy. It’s a strategy that’s been around for quite some time
but has been resurrected as part of our post-2014 strategy for Afghanistan.
The U.S. has struggled to define a strategic value for engagement in Central
Asia that goes beyond security or counterterrorism or energy, and Central Asia
has become more important after the invasion of Afghanistan in 2001and then a
similar shift occurred in 2009, with the creation of the Northern Distribution
Over the past few years, I get the impression that our economic and foreign
policy in the region has been led by military logisticians and that it will
create some challenges as we move away from the need for these supply lines and
to seek other avenues of engagement.
All of the countries in Central Asia face economic challenges, even the
resource-rich countries like Kazakhstan and Turkmenistan. Kazakhstan and
Turkmenistan are both facing problems, even though they literally have oil and
gas to burn. They’re having problems creating a more coherent economic
strategy that can provide jobs, and then also the high employment and the
fragile economies in Tajikistan and Kyrgyzstan and Uzbekistan mean that job
seekers often have to leave the country in order to find work. Remittances have
become important linchpins in these economies.
Combine these economic challenges with the lack of political freedoms and we
have a recipe for potential future instability.
Because we have a limited time for discussion today, we’re going to leave aside
an in-depth discussion of the political challenges and focus on the challenge
of economic development as a key component of stability in the region. I
realize that the political and the economic are always intertwined, and nowhere
more so than in Central Asia, but I think that we’ve all heard the very good
and persuasive political arguments on why economic integration is important.
But what I think would be most interesting to do today – and it doesn’t get as
much attention – is hearing the business case for investment in Central Asia.
I’d like to ask the panel to talk about where we are in terms of building a
better foundation for that economic development and how integration to the
south, east and west can help accomplish that.
Once we hear from the panelists, I’ll kick off the question-and-answer period,
and then we’ll open it up to the audience for questions as well.
I’m going to start with Craig Steffensen, who is the North American
representative for the Asian Development Bank. Craig just moved to Washington
in May. I think you just came from Thailand, right? And then you were also –
before that, had spent time in Afghanistan and Kazakhstan, and so bring some
good experience from the region. I look forward to hearing your thoughts.
STEFFENSEN: Thank you, Shelly and members and staff of the Helsinki
Commission, for this opportunity to join you this afternoon. I’d like to
especially thank Senator Cardin and Representative Smith for hosting this
discussion on economic development in Central Asia.
By way of introduction, I’m originally from Alexandria, but I’ve lived and
worked in Asia for 30 years, most of them with the Asian Development Bank,
almost all of them in the field. I hope, therefore, that my view from the
trenches that you’ll hear when we move to the discussion section will be useful.
The ADB has embarked upon the rebuilding of – well, embarked upon the
rebuilding of a New Silk Road that connects Afghanistan with Central Asia – and
there’s no stretch to say the Eurasian supercontinent – beginning in 2001.
Much of the required investment that’s taken place has been administered
through the Central Asia Regional Economic Cooperation, or CAREC, program to
what the ADB serves as a de facto secretariat. I was the head of the CAREC
unit in Almaty, Kazakhstan, for a few years, in 2004 to ’7.
To date, CAREC has funded some 136 projects, focusing primarily on transport,
energy and trade facilitation, valued at more than $21 billion. Some 7.5
billion (dollars) has been financed by the ADB, 4.2 billion (dollars) by the
governments themselves and another 9.4 billion (dollars) by our development
partners who work with us on CAREC
For those of you who don’t know CAREC, it’s a voluntary grouping of 10
countries from Azerbaijan to Mongolia, including all the “stans,” together with
six multilateral institutions – ADB, the European Bank for Reconstruction and
Development, the IMF, the Islamic Development Bank, UNDP and the World Bank.
It’s not founded by a treaty or a charter. It’s a very practical,
results-oriented sort of building block approach to development.
The officials involved are not from ministries of foreign affairs. They tend
to come from economic ministries, most of them at the technical level.
There’s annual ministerial-level conference that signs off on things. There
are quarterly senior officials meetings, who prioritize and sequence what needs
to be done. And then there are lots of working groups in transport, energy,
trade policy and in trade facilitation that meet as needed to flesh out the
details of what can and should be done.
In simple terms, CAREC – it’s all about projects. It’s also the only
ADB-supported regional cooperation program that has a results framework which
has been endorsed by all the country ministries to monitor the programs’
Is CAREC achieving the results? Well, I’m probably not the one to say so, but
I believe yes, it is. As part of CAREC’s transport strategy that calls for six
transport corridors running east and west, north and south, ADB has already
helped build about 2,500 miles of new roads, 2,000 miles of new railways, 1,500
miles of transmission lines, and trade facilitation or the time it takes to get
goods, people and vehicles across borders has seen a 50 percent improvement in
In Afghanistan, CAREC is helping to rehabilitate the Ring Road, a 1,367-mile
highway that links major cities like Kabul and Kandahar with Mazar-e Sharif and
Herat. It’s also supporting the development of a north-south corridor that
will one day provide improved access for Central Asian countries to the ports
of Karachi and Gwadar in Pakistan.
It’s also supporting a new expressway linking Kabul with Jalalabad, and it – a
new 46-mile railway line that connects Mazar-e Sharif with Uzbekistan and, for
that matter, with the railway network of Central Asia, Europe, Russia and
So I’d like to believe that CAREC is playing a pretty important role in linking
Afghanistan with its neighbors.
You may have heard of the TAPI project or the
Turkmenistan-Afghanistan-Pakistan-India natural gas pipeline project. It’s
something we’ve been supporting for about 10 years. We put about a million
dollars a year into it. I used to think it was a pipe dream, but I think every
time they meet there’s a little bit of progress, you know, towards moving this
project towards reality. It’s currently envisioned to be able to transport 90
million cubic meters of natural gas a day from Turkmenistan to Pakistan and
In Afghanistan, I think the – my proudest moment working there for six years
was the day that the Ministry of – the Ministry of Energy flipped the switch
for lights to come on in Kabul via a transmission line from Uzbekistan across
some pretty mountainous country in Afghanistan to reach Kabul. It currently
provides about 40 percent of the town with 24-hour-a-day reliable adequate
Let me skip ahead here and say that the construction and formation of the New
Silk Road – it’s very much underway, and there’s been a lot of success over the
past 11 years. We project that by 2020 more than $50 billion in additional
infrastructure is required to complete the six transport corridors, improve
energy security and promote new corridors.
We look forward to the continued support to our multilateral partners to
support the United States, one of ADB’s largest shareholders, together with
Japan, on these initiatives. The U.S. has been very important to ADB over the
years, and we look forward to closer collaboration with the U.S. to ensure that
Afghanistan resumes its rightful place at the heart of the Silk Road.
Thank you for your attention, and I look forward to the discussion.
HAN: Thanks, Craig, I appreciate that.
Next, we’re going to turn to Danica Starks, who is the senior international
trade specialist in the Office of Russia, Ukraine and Eurasia for Market Access
and Compliance in the International Trade Administration of the Department of
Commerce. Danica spends basically all day of every day trying to promote U.S.
engagement, particularly economic engagement, in the region. So I’m looking
forward to hearing her thoughts.
STARKS: Great, thank you, Shelly and thank you to the members of the Helsinki
Commission for having me on this panel today. You all have my statement; I
will run through parts of it as briefly as I can and am definitely open to
My role today is centered around three primary areas that I’ll talk about, and
that is looking through strictly a commercial lens, what is there to be gained
by the strategy, the New Silk Road strategy? Is it viable going forward? What
are the challenges that need to be overcome to make the strategy effective?
And how is the Commerce Department in particular leveraged its mission in terms
of promoting American business, but also its expertise in trade and investment
and economic development, to promote regional – the regional integration
policies of the New Silk Road strategy?
As has been mentioned before, the idea of a regional approach into development
is certainly not new. I can say, at least for the last 10 years, there have
been various iterations of regional integration versus North-South corridor,
and there’s always been a certain amount of controversy going with it,
especially the idea of integration for the region. There is a lot of
sensitivity coming from many of the countries of the region with integration
sort of having a context of domination, that the idea of integration would mean
therefore a zero-sum game in terms of less political and economic independence,
for nations that were legitimately trying to struggle for an independent
identity, as well as an independent economic identity.
But one of the things that I would like to proffer is that regardless of the
terminology, regional integration, New Silk Road and other things, that the
greater issue is that regional collaboration at the very least needs to
increase in order for the economic viability of this regional to be fully
New Silk Road or not, no matter what we call the policy, ultimately, companies
are going to go where the opportunities of the market meet what they perceive
as the risk and what their risk tolerance level is. And in looking at the
region, the question becomes, does this strategy or do our – how do the
strategies that the U.S. government is working on help to mitigate this risk?
And that is definitely something that the Commerce Department in particular is
Taking it back to Economics 101, I think we still believe that the development
of economies of scale and the pursuit of comparative advantage still increases
economic efficiency and is still a viable economic model that companies often
look to in making a decision as to whether or not they’re going to export to,
invest, import from the region. And companies will go where the market is, and
the greater the – and the greater the market and economic opportunity, the
greater of amount of risk that they generally are willing to pursue.
In my work, I meet with companies pretty much on a daily basis, answering
questions about what the business environment in the region is like and what
are the opportunities, and I’ve been told on many occasions that in their –
companies are often in a wait-and-see mode. They’re either in the region doing
certain projects and waiting to see whether or not they can expand to other
countries in the region and do other projects, or they’re waiting on the
margins of the region, often doing business in countries such as Turkey or
Russia, looking at opportunities in Central Asia.
In some cases, depending on the business model, the companies do not see the
potential of just operating ad hoc-ly in one or two markets in the region.
They really need to see a fuller, more developed market of the whole region,
partly for population reasons, in terms of selling consumer products, consumer
goods, but also logistics in order to make it viable to enter into the region.
So for example, if a company wants to set up in Country X, they would like to
be able to use Country X to be able to export to Countries Y and Z.
The other thing that we have noticed is – I’ll take an example of the
franchising sphere – we’ve done quite a bit of work trying to help facilitate
U.S. franchise businesses to take root in the region. And we noticed that
especially looking at a lot of the smaller markets, given the logistics with
both supply chain, as well as the need to control quality, to control branding,
that often, the master franchisers are looking for the ability to conduct a
franchise agreement with the region, not just one country. In other words,
they don’t necessarily want to go through what it would take to set up in, say,
Kazakhstan alone, without there being a plan to use that as a base for further
– for further work in the region.
And so often, when you see a franchise open up in one country, very often, the
person who got that license actually has a license for the whole region, not
just one country.
In addition to those things, the geography of the region, mainly the fact that
the region is landlocked – and even the countries that border a sea do not
border an ocean – necessitates that there are – there’s increased
transportation infrastructure links, ease of customs administration on a
regional level in order for individual countries to be successful in getting
their goods out to market, especially outside of the region.
There really is simply just a lot more business that could be done if the
region would work together.
There’s a recent article that I came across in Industry Magazine called “Cold
Facts,” and it was a newsletter and it was an article written by a gentleman
named Bsrat Mezghebe and he’s the knowledge manager for the Global Cold Chain
Alliance. And he noted that there are many opportunities for further
investment and further work in exports agriculture from the region if the cold
chain storage infrastructure and transportation and road infrastructure were
improved. He noted that from the Caucasus to Central Asia, fresh vegetables
and fruits, frozen produce often do not make it to market due to the poor
infrastructure and the lack of cold storage capacity.
In this case, this is an example of why regional collaboration is imperative.
If one country were to develop an elaborate road system and one for cold
storage, that’s great, if you’re only staying in that one country. But if your
goods need to move anywhere else, you need every country the route to have
developed the same level of capacity.
So while other – some countries have made more progress than others,
ultimately, it really depends on a regional approach to looking at things such
as supply-chain management. We’ve seen some successful examples of where
regional collaboration has led to transformative projects and success.
Assistant Secretary Blake from the State Department spoke in March and he
mentioned the Baku-Tbilisi-Ceyhan pipeline as an example in the energy sphere
of a promising area. And he said, and I quote, that the Baku-Tbilisi-Ceyhan
energy corridor shows us that linking producers in the region with consumers in
Europe is a win-win. The leadership and collaboration among Azerbaijan,
Georgia and Turkey and the development of the pipeline was critical not only in
opening up that pipeline and that corridor, but also paid forward for further
projects, just as the Baku-Tbilisi-Kars railway.
Mr. Blake also went on to note the TAPI project that my fellow panelists also
mentioned, the Turkmenistan-Afghanistan-Pakistan-India gas pipeline, and that
this project, just like BTC, could be another transformative moment in the
region, opening up not just the energy corridor, but a corridor for goods in
As we look specifically to Afghanistan, it’s definitely imperative, based on a
lot of the nascent industries in Afghanistan, that transportation links be
improved. The benefits in general, again, are not just limited to the New Silk
Road. It’s not just about Afghanistan and Central Asia. A lot of this
regional collaboration is necessary if these countries are going to compete
with the world and are going to be able to do business with the world. The
challenges have been enumerated, the invitation to this event actually laid out
very well a lot of them, in terms of the governments being able to create the
necessary conditions, the questions about infrastructure development, customs
regimes, reliable transportation networks, and the political divide.
I would like to proffer two other challenges from the commercial perspective
that we see: One is looking at the area of public sector procurement.
Companies have noted to myself and my colleagues very often that they’re
unaware of the opportunities in the region, because there is a lack of advance
notice about opportunities in mining, in road construction and other things
that are done by the governments of the region. And even when these
opportunities are announced, often the window for applying is very short,
they’re very short lead times.
Also, there’s often a nontransparent or perceived nontransparent selection
process for many of these tenders, so we have had experiences where U.S.
companies have wanted to go after projects in the region and have not been able
to, solely because they can’t actually bid on the tender.
Another area that has reduced and has potential to reduce commercial interest
in the region is the limited infrastructure for innovation, and by this I mean
the legal infrastructure: poor and in some cases nonexistent protection of
intellectual property rights, a lack of legal basis for technology transfer,
judiciary systems that are not equipped to adjudicate commercial disputes and
commercial issues and also that are perceived as being heavily influenced by
the executive or other government ministries, and then an often outdated or
nonexistent policies regarding standards and other quality control items that
disincentivize not just U.S. but any companies coming to the region to innovate
but also discourage local innovation as well.
In terms of a commerce response, in my statement that you have in paper, you’ll
see that we have a lot of programs to offer. But I wanted to really emphasize
that our goal is broader. It’s – in our opinion, it’s not just narrowly about
a new Silk Road. It really is about enabling this region to be the commercial
partners that will allow people on both sides of the water to do more business.
I note that, you know, ideally we would love for Kyrgyz farmers to sell their
food in markets not just to Kyrgyzstan but Afghanistan and Pakistan. If Uzbek
traders could fly directly to Dushanbe, if businessmen flying from New York
could visit Azerbaijan, Kazakhstan and Turkmenistan in one week – how many of
us in this very room have tried to string together three countries on a trip to
Central Asia and just can’t do it because the flights don’t exist? You can’t
drive. It’s definitely a challenge.
So we want to move beyond just a new Silk Road to really helping these
countries to be competitive globally. Listing several of the programs that we
have working in this area, I’m from the International Trade Administration,
which, broadly speaking, strengthens competitiveness of U.S. industry by
promoting trade and investment. We work to improve the global business
environment. We work to promote U.S. exports to this region and all the
regions of the world. We support efforts, for example, with accession to the
World Trade Organization, which several countries in the region are pursuing.
We have another program that I’ll be mentioning, our Special American Business
Internship Training Program, which we lovingly called SABIT, and that program
brings managers from all over Eurasia, as well as Afghanistan and Pakistan, to
the U.S. for sector-specific training and interaction with U.S. companies.
We have an Afghanistan Investment and Reconstruction Task Force that supports
the development of the Afghan private sector through business, business
matchmaking and various other programs. And we have our commercial law
development program, which is under our general counsel’s office, which works
to try to help U.S. foreign policy goals by advising on commercial legal
I’ll just list out a couple of examples. The rest you can read in the
statement. The Regional Business Integration program of our Afghanistan
reconstruction task force is going to be assisting its participating Afghan
firms to develop relationships that can produce opportunities for trade.
One of the programs that they have coming up is called Sheep to Shop, and it’s
an interagency initiative to develop Afghanistan’s carpet sector. The carpet
sector is still Afghanistan’s top legal export. And the idea is to help
introduce Afghan carpet producers to wholesale retail markets and also giving
them a sense of what modern trends are in terms of rug design.
We’re also doing several business missions, helping Afghans to access markets
in Oman, Turkey, the UAE, Singapore and others places. Our Special American
Business Internship Training Program, among the sectors that it runs programs
in, we have programs in transportation and logistics and cold-chain storage,
where we bring these companies from the region to meet with U.S. companies and
logistics in these areas. And I can explain more about that later.
Our commercial – our development program has been implementing programs in
Kyrgyzstan as a pilot for the rest of the region, looking at legal
infrastructure. They’ve been working on intellectual property rights. They’ve
been working on customs. They’ve been working on public procurement. And they
are – (inaudible) – submitted a proposal in cooperation with the U.S. trade
representative to do a regional program looking at standards and customs.
In conclusion, I wanted to emphasize that we do not believe that our core
mission, which is primarily to support American business, American exports, is
not mutually exclusive to helping the countries of the region. In fact, we
believe that as we, the U.S., are looking to promote our own economic growth
and to grow domestic jobs, that building opportunities in this region only
helps us. This region taken together does have tremendous opportunity for U.S.
exports, does need U.S. goods and services, lots of needs and equipment in
other areas. And creating better markets there creates better markets for U.S.
Our efforts are not in vain. Our SABIT program that I mentioned has received a
14:1 return investment for the money – U.S. government money that was used –
that has been used to run the program, they have generated over $900 million in
We believe that in helping these countries to compete not just locally but
globally, that there will also potentially be investors for the U.S. One of
the things that this administration has looked at is how to increase foreign
investment in the U.S. And I have to put in the obligatory plug. The Commerce
Department is having a first-ever SelectUSA Summit – Investment Summit October
31 to November 1st, where we’re encouraging people from other countries to come
and learn about opportunities to invest all over the U.S. And we would love
one day, if not this year, to see companies from Central Asia coming to maybe
franchise their products and to franchise their businesses in the U.S. and to
employ U.S. workers. So we believe that there’s return on investment in these
programs, that there is potential but tremendous amount of challenges. But
we’re looking forward to working to try to do what we can to meet those
HAN: Thanks, Danica, that’s great.
Next, I’d like to ask Eric Stewart to offer his expertise. He is a partner
with the Washington, D.C., firm of Williams & Jensen, and he also serves as the
executive director of the U.S.-Turkmenistan Business Council. Prior to that,
he was a deputy assistant secretary for Europe at the Department of Commerce.
But Eric gets a gold star in my book because he’s the first U.S. businessman I
met at an economic forum of the OSCE. So he’s one of the few U.S.
businesspeople who understand that OSCE process. And so over the years I’ve
followed your work, and am interested to hear how the U.S.-Turkmenistan
Business Council is going and how that parlays into the new Silk Road strategy.
STEWART: Great. Thank you very much, Shelly. I thought I was going to earn
the gold star because I drove back from vacation today for this hearing.
HAN: That too, that too. (Laughs.)
STEWART: So – and I’m going back to vacation right after this. So hence the
I have not submitted my paper to you yet, Shelly, but I will do that after this.
HAN: Taking away the gold star.
STEWART: Yeah, yeah. And so I’m going to just talk a little bit and – rather
than go through – directly through my paper, just give some collective thoughts
on my view of the region and these ideas, something that we’ve been talking
about, Danica and I have been talking about for many, many years.
And what do we do? And if you look – if – somebody actually put out a map out
front, which was really nice to have the map so everyone can see where the
countries are. (Chuckles.) But if you look at the map, Central Asia really is
in the middle of the world. And when you consider the fact that you are
surrounded by China, Europe, Russia, India and the Middle East, the only thing
you’re really missing is the Americas and Africa. I mean, other than that,
you’re surrounded by the world. And so what a great strategic asset. In
addition to oil and gas and minerals and agricultural, what a great strategic
But there’s always a but. There’s a hook, right? So the Central Asian
countries are in the most wonderful strategic location in the world, but the
hook is, you’re landlocked. So if you’re landlocked, you can’t develop
maritime. Well, right now, the maritime between Europe and the West, if you
will, the West more generally and Asia, 90 to 95 percent of all the goods going
back and forth between Asia and the West is maritime. So the biggest use –
utilization of a supply route is something you can’t utilize.
So what do you do? You develop the land transportation, and that’s essentially
what really needs to happen. And you’re starting to see a fair amount of the
land transportation being developed: Kazakhstan, China, Turkmenistan, Russia.
A lot of the countries are developing the rail and putting a lot of emphasis
and investment into rail, which is a great idea. But roads need to also be
significantly developed as well, because road transportation is a great
mechanism not just for the long haul between Europe and Asia, but for the
short-distance trading. And why is this critical? Because this is where the
Central Asian countries will input their goods and their products into the – in
the process as well. So if the roads aren’t developed along with the rail,
then what you’re essentially doing is building a bridge over or through Central
Asia, and that’s obviously not the strategy or the development that will lead
to a long-term development for the republics of Central Asia. So it’s critical
that we not only have rail development but we have – we have road development
In a previous sort of life, if you will, I ran a program at the U.S. Chamber of
Commerce called the Eurasia Business Platform. It was – it was a program that
we ran for a number of years that was focused literally on this very idea of
how do we develop and create an interesting policy program that would be of
interest to American companies and doing more business in Central Asia, because
at the end of the day, you know, each of the countries is doing well enough,
right? Each of the countries is developing. Each of the countries is
developing at their own pace. They have some – they are having success.
Kazakhstan, obviously, has attracted billions of dollars in U.S. investment.
Turkmenistan – we have – as the head of the Turkmenistan Council, we have
almost 20 American companies that are members of our council, which is
absolutely significant. The countries are, themselves, doing very, very well
in many respects.
They could be doing better, though. And I think that’s the idea, and that’s
the discussion that we’re having today is, how do you – how do you make it
better? And what Danica has talked about, and what’s been discussed for many,
many years, this idea of the great Silk Road is, you create some type of
regional hub, you create some type of regional interaction.
Well, the fact of the matter is, those discussions – the way we have had those
discussions are not working, in my opinion. And the reason they’re not working
is, we continue to have these discussions, in my opinion, with the Central
Asians as a group. And we group the Central Asians together and say, you are
That doesn’t work very well, in my opinion. Each of the individual countries
need to be treated as individual nations, as individual republics, and on a
very bilateral basis, with the same messaging and the same points, but not
together as a group. And this is something that I think the U.S. government
and specifically the USTR recognized a number of years ago when they had this
Central Asia TIFA – the Trade & Investment Framework Agreement, which is
supposed to be a mechanism leading to future free trade agreements, if you will
– and a number of years ago, made the decision to not just have Central Asia
discussions regionally, but made a decision to have regional discussions and
And that’s something that I think is absolutely essential and critical, but I
think for me and the number of companies that I talk and the businesses that I
talk to, what’s essential is to work with the Central Asian republics to the
point where they see the future value and the immediate value of developing
what I consider to be the lowest common denominator of working together, which
is to create some type of harmonized customs and border procedures, going to
Danica’s point from the Commerce Department, because individually, the largest
country in Central Asia is just under 30 million; the smallest is a couple of
Well, for the distance, the complexity, the cultural differences that we have –
that’s a long way to go for many American companies to make an investment.
Now, if you bring all the Central Asian governments together, now you’re
looking at a substantial market. You put the Central Asian and the Caucasus
together, now you have a market of 80 million people, which is roughly the size
of Germany. Now you have an interesting – from a business standpoint, an
interesting market that has a lot of consumer potential for not only trading
but also investing and potentially creating hubs.
So the lowest common denominator, in my opinion, that needs to be accomplished,
is to have some type of harmonized customs and border procedures. And again, I
believe this is something that needs to happen individually with each of the
nations and understanding what they would be comfortable with and what they’re
willing to do, recognizing that security is going to be a – one of the top
issues on that agenda, in addition to the ease of doing business.
But you know, I’m – as I’m – as we talk about this and go through this process,
I’m sort of struck – and I’m not an expert and I don’t know – I don’t know
what’s in it, but I’m sort of struck by curiosity as to what’s in the
Russia-Kazakhstan-Belarus customs agreement, and, you know, here is something
that was able to be accomplished between three neighbors, two of them very
important – or three of them, really – all three of them very important for the
land bridge, if you will, between Asia and Europe. Is there something in there
– is there enough in there that would allow for the transparency, the security,
the stability for some type of mechanism that Western companies would be
And I don’t know the answer to that question; I’m simply throwing the question
out to experts who might. But I think, in my opinion, that’s really what it
comes down to, is really finding a way to develop the borders, because if you
don’t, then they will – each country will continue to develop on its own pace,
which is not, frankly, in my opinion, fast enough for each of the countries to
allow themselves to really take their God-given potential in this global
economy and developing at the rate they should be for where they’re located and
for the great natural resources that they have.
I think, in order to achieve this – this is not a go-it-alone, America-type
approach; that won’t work. This has to be an approach – and I’m glad the ADB
is here – this has to be an approach with a lot of organization – we call them
the alphabet soup, if you will; the ADBs, the UNCTADs, the UNECEs, WCO, UNDP,
World Bank – I could go on and on; you name it – but also with the countries
themselves, the Turkeys and Russia and China and the European member states.
And I think what else is really interesting about this is because the first
contact points into Europe – if you were to truly develop a private sector Silk
Road that really made sense are some of the U.S.’ closest friends and allies
anywhere in the world. I mean, and a lot of the first entry point countries
are going to be Poland, Romania, Lithuania, into the European Union. And these
are countries that we worked with very closely.
And I think also, it is very interesting – these are countries, I think, that
would be good partners and good role models and good interlocutors with Central
Asian countries simply because of some of the shared history and some of the
shared challenges that they have jointly gone through together, and especially
when you look at some of the Baltic countries, the – a lot of the populations
are similar in size. So I think they could be good interlocutors in the
process. And in fact, over the last five years or so, we’ve seen a lot of
heads of state from the Baltic countries and Central Asian countries visiting
one another, and from Central Europe as well. So I think there’s a – there’s a
real potential there.
I’ve gone longer than I expected to talk, but the bottom line is, my message
is, very simply, the importance of some type of custom harmonization border
control program that not only allows trade between Europe and Asia, but allows
the Central Asian countries to participate and develop in that, so they service
the land bridge, but then they also participate in the land bridge as well.
And if that’s possible, then we end up with a win-win-win-win situation, thanks.
HAN: Thanks, Eric. Batting clean-up is Josh Kucera, who is a journalist who
writes for EurasiaNet. He also has his own blog – or do you – the Bug Pit is
your blog, right?--and travels a lot in the region; just recently came back
from Tajikistan and also an extended trip to the Caucasus and the Baltic
countries. I’ve asked Josh to sort of step back from the details that we’ve
been talking about and give a little broader view of what’s going on, in your
KUCERA: Well, thanks, Shelly, for inviting me to this. So as a journalist
covering Central Asia, and especially U.S. policy towards the region, I’ve been
closely following the development of the U.S.’ New Silk Road Initiative since
it was formally announced by Secretary of State Clinton two years ago, and even
before that, when it was a concept being worked out by think tanks here in
Washington and by military policy planners at CENTCOM who were looking at
long-term ways to stabilize Afghanistan.
For those of you who are – don’t recall the New Silk Road Initiative when it
was rolled out, Secretary Clinton spoke – it was almost exactly two years ago
in India; her sort of takeaway quote from this – announcing this New Silk Road
Initiative – let’s work together to create a New Silk Road; not a single
thoroughfare like its namesake, but an international web – a network of
economic and transit connections. That means building more rail lines,
highways, energy infrastructure like the proposed pipeline to run from
Turkmenistan through Afghanistan through Pakistan into India; it means
upgrading the facilities at border crossings, such as India and Pakistan are
doing now at Wagah, and it certainly means removing the bureaucratic barriers
and other impediments to the free flow of goods and people. It means casting
aside the outdated trade policies that we are all living with and adopting new
rules for the 21st century.
That’s a very ambitious statement. Even before this initiative was rolled out
two years ago, there was a lot of skepticism about whether it was workable.
And two years since then have only given more reasons to doubt its efficacy.
Two years after it was announced and a year – only a year before the U.S.
starts to pull out its forces from Afghanistan, it seems that the New Silk Road
remains more of a talking point than an actual initiative.
So when we talk about the New Silk Road, it’s important to clarify exactly what
we’re talking about. Generally speaking, the New Silk Road is basically a
marketing term that encompasses anything that involves trade between Asia and
the West, whether the former Soviet Union or the Middle East or Europe.
And no doubt there are connections like that popping up all over the place.
That was an inevitable result of the collapse of the Soviet Union.
With the opening up of the borders of Russia and Central Asia – the Central
Asian states of China and South Asia – of course, cross-border commerce of all
kinds is filling that vacuum that was artificially created by those hard Soviet
borders. Companies now ship goods by rail from China to Europe through
Kazakhstan. New railroads are being built from Kazakhstan through Turkmenistan
to Iran. China, Iran and Turkey are building roads and bridges in Tajikistan.
However, when we talk about the U.S.’s New Silk Road initiative, this is
something much more specific. This initiative puts Afghanistan at the center,
as a hub of regional trade. This is why the U.S., when it talks about the New
Silk Road initiative, you’ll hear them over and over mention two specific
projects: TAPI, like several people here have already mentioned, and the
CASA-1000 electricity export project, which would ship electricity from
Kyrgyzstan to Tajikistan to Afghanistan and Pakistan.
However, while this U.S. vision is more specific, the means by which the U.S.
intends to implement it remain very unclear. U.S. officials emphasize they are
supporting a regionally-owned vision rather than putting their own money into
it or developing their own projects.
But the problem is that very few existing regional integration projects involve
Afghanistan, for the obvious reason, that it’s very unstable and has very poor
infrastructure. There are very few pairs of countries that if you try to
imagine, you know, the most advantageous way to get goods from one to the other
that the route would pass through Afghanistan. Making this even less likely is
that the U.S. explicitly says that it doesn’t want these projects to include
Iran, Afghanistan’s giant neighbor and probably its most convenient corridor to
Europe. So effectively, that leaves only trade between ex-Soviet Central Asian
republics and South Asia projects like TAPI and CASA-1000.
And so those projects, even if they do develop, hardly seem like the kind of
game-changing projects that Secretary Clinton said were part of the U.S.’
vision of the New Silk Road. This focus on Afghanistan I think is the
fundamental flaw to the U.S.’ vision of the New Silk Road.
However, there’s also a number of more specific reasons that it won’t work.
I’m going to focus primarily on, you know, Afghanistan’s northern neighbors,
the ex-Soviet Central Asian republics. I think there are analogous issues.
Pakistan’s relationship with Afghanistan obviously is very complex, not to
mention with India, that sets on a set of issues but I’m going to focus here on
the Central Asian question.
The first problem is the lack of a market for this sort of commerce. U.S.
officials have repeatedly argued that the Northern Distribution Network, the
series of military transport routes that it uses to ship cargo to soldiers in
Afghanistan can serve as a proof of concept for the New Silk Road. And NDN has
indeed been a success in terms of ensuring relatively smooth delivery of
supplies to the military in Afghanistan via the Central Asian states.
Recently, the U.S. celebrated its 100,000th container shipped via the northern
spur of the NDN, originating in the Baltics. But the NDN has a market: troops
in Afghanistan. Absent the military, the U.S. has failed to demonstrate what
sort of market there might be for an Afghanistan-centered New Silk Road.
The second reason, and this is a big one, is that these countries fear
Afghanistan. Most Central Asian countries want nothing to do with Afghanistan.
They see it as a source only of potential problems, primarily drugs, radical
Islamism and guns.
One buzz word that you now regularly hear in Central Asia, Central Asian
capitals, is spillover. This is the idea that once U.S. forces leave
Afghanistan, the chaos there will increase and spread into Central Asia. I
would argue that these fears are somewhat overblown and exaggerated for their
own internal reasons. Nevertheless, it’s obvious that these countries see
Afghanistan, especially post-2014, as more of a problem than as a solution.
U.S. government officials, when they talk about the New Silk Road initiative,
indirectly acknowledge this fear by saying that increased trade will result in
positive spillover from Afghanistan. But this – while it’s a nifty rhetorical
device, there’s no indication that Central Asian governments believe it.
One telling statistic is that while about 80 percent of military cargo going
into Afghanistan has been shipped via the NDN, only 4 percent of the goods
being shipped out go via the NDN. That’s because Uzbekistan, which is the
first stop after Afghanistan on the main route of the NDN, has thrown up a
number of barriers to traffic coming out of Afghanistan, making it almost
prohibitive to use that route. Shipping companies working on the NDN say that
the government of Uzbekistan is apparently afraid that contraband can be
smuggled via these trains carrying U.S. military cargo back. The U.S. is
sending scanners to the Uzbekistan border to help expedite this process of
clearing these shipments, but it speaks to the great mistrust that Uzbekistan
has of Afghanistan.
A third big problem is regional mistrust, not just of Afghanistan but among the
Central Asian countries themselves. No Central Asian regional integration plan
can work without Uzbekistan. This is something everybody agrees on. It’s the
most populist country in the region, the only ex-Soviet Central Asian republic
to border all the others. It’s the hub of the Soviet legacy transportation
system and has by far the best connection from Afghanistan’s north to the rest
of the world. However, it has very bad relations with nearly all of its
neighbors and has exhibited no interest in U.S.-backed regional integration
programs like the Istanbul process.
In addition to the problems mentioned before with Afghanistan, Uzbekistan has
also systematically cut off commerce with Tajikistan. If you look at the map,
you’ll see that Tajikistan really relies on Uzbekistan to – for commerce with
the rest of the world. Uzbekistan has used – with various political problems,
has used that fact as a lever to pressure Tajikistan in various ways. Over the
past decade, Uzbekistan has mined the border, repeatedly raised import duties,
imposed visa regimes on Tajikistan citizens and blocked rail traffic.
Neighboring countries have begun to react to this by creating rail projects
that bypass Uzbekistan, like the Kazakhstan-Turkmenistan-Iran, and the
Tajikistan-Afghanistan-Turkmenistan projects. And while the projects are
necessary lifelines for these countries to avoid the road blocks that
Kazakhstan is throwing up, a real regional strategy has to include Uzbekistan.
U.S. officials, however, almost never acknowledge Uzbekistan’s intransigence on
this, let alone criticize it, needing to stay on the good side of the
government for the sake of the NDN.
Fourth big reason is the lack of interest in free trade in the region.
Boosters of the New Silk Road initiative argue that it doesn’t require
hardware. It doesn’t require the U.S. to necessarily spend any money on large
infrastructure projects, but only software, like reducing bureaucracy on
Like Eric said, that is the – you know, the primary barrier now to trade in the
region, but the bureaucracy on these borders, that is the high customs fees and
the pervasive corruption are in the minds, of Central Asian government not bugs
but features. Control of border traffic is a sinecure which all Central Asian
governments use to pay off elites, including their family members. So while
free trade may be good for the countries of Central Asia, it would be bad for
the members of the government and their allies. And that’s who these
governments serve. And that is a problem that the U.S. is incapable of
Finally, the problem is the – the final problem is the lack of U.S. resources.
This is an incredibly ambitious vision with a lot of obstacles. And yet, the
U.S. has promised basically that it’s not going to devote any resources to
implementing it. The – with a – with a resurgent Russia exerting its authority
again in Central Asia, a China that’s obviously becoming increasingly
economically active in the region, the U.S. has less and less clout to throw
around in Central Asia. Absent that, and without spending any money, it’s not
clear what Washington hopes to do to steer these regional integration projects
in the direction that they want them to go. Furthermore, U.S. interest in
Central Asia is certain to decline even more as the pullout from Afghanistan
In addition to the large amount of skepticism that Central Asia watchers have
regarding the New Silk Road initiative, among its few backers, there’s a
frustration that the State Department and other officials who are supposed to
be implementing it are in fact slow rolling it and not doing anything to
Taking that all into consideration, it’s hard not to escape the conclusion that
the New Silk Road initiative is effectively a little more than a talking point,
a rhetorical fig leaf to make it appear as if the U.S. isn’t abandoning Central
Asia after 2014.
Thanks for having me. And I look forward to your questions.
HAN: Great way to start the discussion, Josh. (Laughter.) So I’m going to
kick off with a couple of questions for the panelists. And there will also be
an opportunity for the rest of you to maybe react to some things that Josh has
I think it’s true that the term the Silk Road – and the State Department does
have a specific definition I believe on Silk Road strategy itself, the New Silk
Road, but we could look at it as a larger issue of just economic development
and whether or not you’re looking at Afghanistan being integrated with South
Asia, India, Pakistan, or if you’re looking more at Central Asia or if you’re
talking about China to Europe going through Central Asia, if we just look at
this broadly and ask, what are the opportunities?
I’m curious because Eric had touched on something that’s always been a question
in my mind is if we look at the markets and where goods go – you know, there
was a great New York Times article last Sunday about Hewlett Packard sending
computers from China to Europe going across the – Central Asia by rail. And
you mentioned that, you know, just rail routes aren’t going to cut it because
you need the road infrastructure so that – because even – but to me, it seems
like even with roads, Central Asia is just becoming another transit point.
And then how does transit then translate into economic development, because it
seems that without having any sort of value added by the Central Asian states
or inherent markets that it’s difficult to have growth, economic growth?
They’ll just become transit opportunities. And no matter how many truck stops
you would build, how is that going to help the country?
So if we could talk a little bit about what we see as opportunities for actual
development and what those things would be. And it gets also into the question
of harmonization. And I think the ADB and CAREC do a lot of work on this in
terms of the harmonization of the infrastructure. And maybe you could talk a
little bit more about what the ADB has done and what Eric was talking about,
the need for doing that. And Danica, I think you also have that as well.
And if you could also perhaps comment on the Eurasian Union proposal and then
also how, China, I believe, has also proposed a Shanghai Cooperation
Organization free trade area as well, and how those types of opportunities
could help or hurt this type of harmonization strategy that is needed.
And I’ll start with Craig, then go to Danica and then Eric and Josh, if you all
want to weigh in.
STEFFENSEN: Before moving to Washington a few weeks ago, I was – I headed up
ADB’s office in Bangkok. And I worked quite a bit when I was there on
something called the Greater Mekong Subregion Economic Cooperation program,
which is a predecessor in some ways to the CAREC program.
We like to show a PowerPoint where we show the sort of evolution of the road
and network across the sub-region. It shows transmission lines and Internet,
telecommunications, trunk lines, pipelines, what have you.
And from 1992, you know, you see one sort of grid, sort of a skeleton
framework, and then it switches to 2002 and then 2012, and the final slide is
what things, you know, may look like in 2022. And it’s all very impressive to
see these cascading slides of this road, power network appearing.
And that’s the most dynamic region in the world today. And we thought for a
long time that, you know, GMS investments were sort of – undergirded a lot of
the development that’s taking place.
But I saw some slides at a tourism forum recently – it had really nothing to do
with GMS program because it was all private sector – but they showed the
evolution of a low-cost air carrier network in that part of the world. And it
got started sort of in 2001, I think. And they had only a few slides, but if
you look what happened between 2001 and 2013, it makes everything that’s
happened on GMS look like, you know, like it’s not – it was wired. It looked
like the backside of a – you know, a computer chip under a microscope. It was
just amazing how quickly the regional air network has come together. And it’s
not something that ADB or the governments were directly involved in. These are
all private investors. And it’s not something that really required a whole lot
of attention on our part. On the contrary, no one was really paying much
attention to this at all. Maybe that’s the reason it’s taken off so well.
But extrapolating all this and applying it to Central Asia – and what I’d like
to say is that sometimes I think we sort of take as a given that there are
things we have to do for things to happen. And I think that maybe the low-cost
air carrier network and the GMS shows that if the conditions are right, if
entrepreneurs believe that they can make a buck, and that the government is not
going to shut them down, and if the demand is there, you know, if there are
tourists who want to fly from Bangkok to Mandalay, to Luang Prabang, to –
(inaudible) – up to Da Nang in Vietnam and back to Bangkok, sort of a tourism
circuit there, if the same thing were to happen in Central Asia between – you
know, between Tashkent and Bamyan, and then Bishkek, and I could go on, there’s
nothing that anyone really would have to do except to make it known that this
is possible. And it’s always been sort of a mystery to me why there aren’t
more low-cost air carriers across the subregion.
So I’m – I don’t want to look at a glass half empty here and see what’s wrong
with the place. I see just all kinds of opportunities. And for all the sort
of attention that – for all the reports we read in the media about how things
aren’t going so well militarily, even politically in Afghanistan, my view from
the trenches there is that, at least economically – and if you look at what,
you know, development partners together with -- (inaudible) -- and others are
doing, you know, there’s a real success story that can be told.
Who has the upper hand at this point? I don’t know. The politicians or the
business people? You know, one could really muck it up for the other, but I
can’t help but think that things aren’t as bad as maybe we’d like to believe
On harmonization, what can I say? The fact that Russia has joined the WTO is
huge, and now that they’ve sort of set terms and conditions for their own
participation, I think the expectation for a long time has been that Central
Asian countries will follow suit, you know, with a very similar package.
And when it comes to some of the trade issues we’ve been hearing about, I think
WTO will sort of provide a framework where everyone can negotiate a way
forward. There’s a spaghetti soup of trade agreements across the region that
sort of, you know, has everyone confused, if not paralyzed at the moment, but
thanks to WTO, I think, you know, there’s a way out of this mess yet.
HAN: Danica, is WTO sufficient or what else do we need to do to get
STARKS: Sure. Well, being in the WTO alone is not sufficient. It’s what you
make of it. Passing laws is not enough. It’s enforcement. So I think that
alone – however, it does provide an incredible framework. And the actual
process of accession is a tremendous opportunity to take a look at the entire
trade infrastructure from a policy standpoint.
But again, a lot of it comes down to something that Josh implied when he was
talking, which is political will, that you can have all the great laws in the
world, but if there are interests who benefit from those laws not working, then
you ultimately are not going to be able to move forward.
Answering Eric’s comment about the Eurasian Economic Community and the Customs
Union, it has been very interesting to watch. The interplay between Russia,
Kazakhstan and Belarus as they negotiate, in some cases not negotiate, tariffs
and other – and common borders and looking at intellectual property rights and
other things, it’s a little bit complicated because, for example, Russia got
into the WTO; Kazakhstan is still acceding. And so there are things that have
had to change over time.
But it’s been fascinating to watch because it’s forced a dialogue, and the
dialogue is not between countries of the region and the U.S. It’s not about
what the U.S. or Europe or what anybody else wants. It’s them looking at their
own country, their own nascent industries and trying to work out among
It’s an interesting idea, but I don’t know that the complexity that it requires
is something that there’s political will for right now in Central Asia in terms
of looking at that level of harmonization that’s needed.
I do think that your example, Eric, of looking at the Baltics or some other
countries as there a country – interlocutors and models is a great idea.
Again, I use the term “regional collaboration” over, say, integration not
because integration in some cases is necessary – Eric and others mentioned that
harmonization is a – is a key area – but in some cases, the collaboration is to
enable each country to develop individually. But right now, in a lot of cases,
they are competing against each other.
Everybody is trying to make the same things. Everybody is trying to sell the
same commodities. And the region has not really realized the comparative
advantages that it could if countries could actually specialize amongst
themselves. You know, if everybody would agree that, you know, this is the
country that’s going to specialize in this area, this is the country that’s
going to specialize in this area – there were some examples given the other day
that there are countries that are producing products that they really don’t
have the economies of scale to make enough money on.
And it would be great if they could just stop producing those products, but
that’s not that easy to tell a country that’s struggling to prove that it can
operate independently and on its own, but a regional approach in terms of
collaboration and looking at where are the niche areas that we can fulfill.
You mentioned the Baltics. I look at Estonia. I was there actually on
vacation recently, and I’d gone on a cruise. And you pull up to the port, and
they basically did everything possible to encourage you to get off that ship
and spend money in Estonia. I mean, everything but – come on and, you know,
wheel you around in a golf cart. In terms of making it very easy to enter into
the port, no bureaucracy in terms of getting into the country; English and
Chinese, Japanese speaking tour guides waiting around, and sightseeing and
those types of things.
And then I look at a lot of the countries in the region that have some of the –
have similar touristic ambitions but it’s impossible just to buy a plane ticket
over the Internet in some cases. And so the ability to actually develop a
niche, but to have the political will to make the changes necessary I think is
In terms of the idea of harmonization, I think one the tacks that we’ve taken
is exactly what Eric mentioned, that, in some cases, it doesn’t always work to
put everybody in the same room and try to get everybody to speak the same
language. And you’re right. USTR had the idea of an – in addition to the
Central Asia Trade Investment Framework Agreement to have bilateral working
groups to work individually with countries.
Our commercial – our development program – I believe we have a representative
here, Emily Lanihan (sp) – Emily, are you still here? In the back. They’ve
put together a proposal that would do just that, that would look at standards
and customs and other issues but work individually with each country to get
them up to international standard. And if you get everybody up to
international standard, then you eliminate just right there a lot of the
barriers. And then you can talk to each other on a regional level because
everybody’s speaking from the same page.
So that’s another strategy going forward. Whether or not the sort of Customs
Union idea would work, I just – I’m not sure. It remains to be seen. It’s
still in the development stages for what it is, but it is an interesting model
to look at.
HAN: Eric, do you have a comment?
STEWART: Sure. Just building on this idea. There’s a lot of – there’s just
so many cultural differences and so many ways of doing business that are
different from us and Central Asia that I – that’s the reason I suggested
looking outside the box.
I don’t think you can continue to say this is the way we do it and, you know,
you, Central Asia, adopt our programs. It’s not going to work. We’ve got to
find ways to do things together that make sense from – you know, I think from a
Central Asian perspective and working to their culture and their ideas for
business. And, you know, so that’s the reason I threw out something – you
know, what I think as sort of unconventional, if you will.
But to go back to your question, Shelly, on the idea of investment and, you
know, how does Central Asia play a role and not just be, you know, passed over
or passed through, if you will, transient from one to the other.
You know, if you look at where American companies and Western companies and any
kind of companies invest, they’re not political decisions, they’re decisions
based on costs, on supply chains, on consumers and the ability to, you know,
efficiently run an operation.
I mean, you look at your example of HP. They’ve opened their plants in western
China, where issues of corruption run rampant, where crime is high, where
poverty is high, people are still on a couple of dollars a day. I mean, they
are in the Wild, Wild West, if you will, of China with their plant. You know,
what country in the world doesn’t want HP to open a plant in their country?
Every country wants an HP plant, so western China has one. There’s no reason
that that same plant couldn’t be housed in any one of the Central Asian
countries, but there are reasons today why they are not. And one of them is
the ability to move efficiently.
So I don’t think it’s so much just focusing on what do the Central Asians have
today that they, you know, grow or that they develop or that they manufacture
that would fit into the overall scheme. It’s what opportunities can they
attract, and what types of companies can they attract, and what types of
companies can they bring in? Because a lot of countries around the world
haven’t necessarily developed from themselves what their niche is, right? They
brought it in and they made themselves competitive.
And so you have tiny little countries all over the world who have made
themselves extremely competitive by being transparent and open and having the
ability to create themselves as a hub for other parts of the world. And so I
think that’s the – that’s the message to continue to push.
And, frankly, when I look at the countries of Central Asia, I’m not sure there
is a single big American investment anywhere in Central Asia, outside of
energy, outside of the energy sphere. I’m not sure that here is something
significant. There are few things here and there. I mean – I know Uzbekistan
has an assembly planned from Case New Holland, and they’ve got the Ford,
STEWART: – GM, sorry. That was an Uzbek sort of financed operation as they
were losing the plant from another company. But I think the point being, for
me, it still goes down to the very fundamental fact that this is what needs to
be developed and it’s the ability to move across borders. And if that happens,
as you talked to – you said, as you termed it, the soft – if that happens, the
hard infrastructure will come. The companies will build the roads. The
government doesn’t need to do that, the companies will do it. If they see the
opportunity to do business, they’ll put the money into the infrastructure.
They’ll put the money into the ports, into the stations, into whatever it takes
if there is a system there that shows them they’re going to be able to move the
HAN: Thanks. Just one more question from me and then I’m going to open it up
to the audience, so you all can be thinking about what you might want to ask.
I want to talk a little bit more about the role of China and the European
Union, and how things are moving across, and what push and pull factors are
there. I know that China is really active in Central Asia. And you probably,
Eric, run across trade delegations from China in Turkmenistan all the time.
But I’m curious – do you ever run across European trade delegations with the
same frequency? Do we see the same type of engagement? And then does the
European Union support the ADB and CAREC programs? What kind of engagement do
you have from Europe in terms of trying to create some sort of integration that
And then, Danica, how are you all working with China? Do you work with the
Chinese in the region or is there any sort of engagement on that side? Thanks.
On Central Asia –
STARKS: Oh, you want me to start?
HAN: Sure. Yeah.
STARKS: In terms of Commerce specifically, I can’t think of an area where we
directly – in terms of third-party work, work with the Chinese on the region.
I think – as far as commerce is concerned, we’re market oriented. So we’re
following what the companies are doing. We are not taking the lead and telling
companies where to go and what to do.
So very often, we will – we will look at opportunities where U.S. companies
have expressed an interest in a certain sector, and there might be Chinese
interest in that sector. And we, of course, will do our best to try to promote
the U.S. component.
But in general, we have not had any sort of third country or bilateral
cooperation with the Chinese in any commercial spheres. But yes, you do see
quite a bit of engagement by the Chinese, as they should. I mean, they’re
neighbors. So that makes sense.
HAN: And do you see them opening up opportunities that U.S. companies might –
perhaps the Chinese are willing to put in some extra time and effort or money
that doesn’t necessarily make sense for American companies, but then, once it’s
STARKS: I would say in general, a lot of the sectors where we’ve seen a lot of
the Chinese interest are not necessarily areas where U.S. companies have been
as interested in general. So there hasn’t been that cross-pollination as much.
HAN: Except for maybe energy would be the exception.
STARKS: But even there, look at, for example, Uzbekistan. There’s quite a bit
of Chinese interest in the energy sector in Uzbekistan, but you don’t really
have any U.S. majors that are doing exploration and development there. I think
STEWART: Smaller energy. It’s not bigger – it’s not the huge projects.
STARKS: Very small, but it’s not – necessary, not the majors. And I think
part of it is our interests are different. China actually borders Central
Asia, so it’s interested in pipelines and roads going to and from places that
don’t necessarily have an attraction for a U.S. company. It doesn’t mean it’s
not good for the region, but I think there are a lot of areas where there’s a
Chinese interest that there just is not a U.S. interest, and that’s OK.
HAN: Craig, you want to talk about –
STEFFENSEN: Yeah, a lot of what Danica just said about China versus Central
Asia is true. The EU – is there EU interest in CAREC? Yeah, definitely.
We’re both involved in trade facilitation work. They tried to – you know, they
made very clear for years they’re interested in joining CAREC, but as a
bilateral at best. And we kept them out because once we open the door to the
EU, then, you know, the U.S. and the Germans and Chinese and others and Japan
aren’t far behind. And the countries themselves decided just to limit this
thing to current membership plus or minus a couple of countries to ensure that
it remains a forum where their interests – that is, the countries’ interests –
can be discussed and not those of their development partners. Yeah.
You said something earlier regarding the New York Times article, and if I could
share or relate something unrelated to Central Asia, but related to this
railway. About a year ago, I had a discussion with the chief policy advisor to
the Thai prime minister. And he started talking about these time trials to
move containers between Chengdu, China, and Lodz, Poland. And I didn’t know
what the heck he was talking about, so I went back and started Googling and
found a few articles, including a good one on Business Week. But it was – the
gist of the New York Times article. And bottom line is, you know, there is no
rail connection between Southeast Asia and China for that matter between
Southeast Asia and Europe today.
But he was talking about the importance of engaging the Chinese now, even
before a rail connection is built maybe through Myanmar or Laos or Cambodia and
Vietnam, to ensure that one day Thailand has access to the Chinese railway
network to be able to export its containers to Europe in a way that’s cheaper
and almost as fast as – well, cheaper than air transport – almost as fast as
sending it by ship that’s green and that would, you know, improve logistics and
lower transport cost and improve Thailand’s competitiveness.
So this railway experiment, it’s potentially a game-changer, I think, in the
way we see trade across the continent. And the Thai authorities are looking at
it very carefully. ADB has begun to look at it in terms of the intermodal
possibilities that we could be – should be supporting. But it’s potentially a
huge development, yeah.
HAN: All right. Eric and then Josh, I don’t know if you have anything to say
about China and EU. I’ll let Eric start, then you can finish. And then we’ll
go to questions.
STEWART: Just before I forget, let me also just include talks about WTO.
Please keep focusing on WTO. It is a very, very good thing. We’re – you know,
from the Turkmenistan perspective, we’re extremely pleased that Turkmenistan
has started down this process. It’s a very, very good thing. It’s a very
painful, long, arduous thing to go through, but at the end of the day it’s
very, very positive regardless of how it plays out.
I think what’s actually going to be interesting, going back to your question,
well – one – actually one historical thing that’s sort of interesting. If you
look back at the European Union, back when it was the EEC, before it was the
European Union, you know, land transportation was a big component of that
actually coming together and frankly bringing countries like France and Germany
to be able to do business together. So I think actually Europe is a –
continues to be – and again, going back to the point of the Baltic and the
Central Europeans, a good, I think, interlocutor for working with the Central
But given that, there is a – you know, every dynamic has politics in it. There
is some politics involved obviously in that because the Europeans want oil and
gas coming from the region. And that’s not a bad thing, that’s a good thing.
But that is something -- a factor. I think what’s actually interesting and I
don’t know the answer to this, but I think what’s actually interesting and
maybe this is not accurate, but it would seem to me that post-Afghanistan,
actually the U.S. would be a sort of a benign interlocutor in a sense because
there is less of an agenda in the region, right? I mean, the agenda at this
point, will be simply, you know, business opportunities for American companies
and the development of the Central European – Central American – Central Asian,
sorry – Central something – Central Asian countries.
So I think that’s actually a very interesting question, sort of flipping it
around and looking at it post-2014.
KUCERA: Well, I’d make the point sort of the converse of what Eric just said
that the U.S. has a very different interest in all of this than China and the
EU in that China, especially, to a lesser extent EU, I mean, they actually have
an economic interest in this trade. I mean, they can get cheaper stuff or
export their stuff cheaper, whereas the U.S., you know, only very indirectly
will benefit economically from trade in Eurasia. And so the U.S.’ interest is
kind of more geopolitical. And I think that – you know, you see a lot of – you
know, to the extent that the U.S. is doing anything, it’s more driven by
geopolitics than economics.
And whether that’s – you know, whether the U.S. being an outsider makes them an
honest broker, like you suggested, or if, in fact, you know, maybe they have
less at stake, and so they’re more willing to meddle without getting benefit,
you know. Maybe China and Europe’s interest is in fact sort of pure in that we
just want open markets to – for our benefit for open trades.
One more point I wanted to make that I was thinking about the Eurasian Union.
And that Kazakhstan – I mean, in my presentation, I made blanket statements
about all of Central Asia. I think Kazakhstan is an exception in a lot of ways
to what I said, that Kazakhstan is in fact interested much more than the other
countries in free trade. I mean, this HP example is one. I sometimes get the
sense that people in Astana are more interested in the New Silk Road initiative
than people in Washington are. They’re constantly asking about it. They’re
promoting the port at Aktau for the U.S. to build up and so on.
And this also speaks to the Eurasian Union, that they’re willing to do this
with Russia and Belarus as well. So Kazakhstan does seem to be, in fact, quite
interested in free trade. It’s the other ones that we should have questions
HAN: All right, thanks. Now, I’m going to turn to the audience to see if
anyone has any questions. We do have a microphone, I think, Max, is that
right? We’re not sure. OK. We do need you to speak into the mike, though,
right? If they don’t speak into the mike, is that OK? I need to ask our
MR. : Just speak loud.
HAN: All right. So if you’re going to ask a question, please speak loudly.
We can hear you, but we just need to make sure that the transcriptionist can
hear you. And if you could identify yourself, that would be great. Anyone
have a question? Yes over here.
Q: Hi. I hope this is loud enough. My name is Charlie and I’m working for
Senator Sheldon Whitehouse. I just have a question. I wonder if the rest of
panel could react to Mr. Kucera’s depiction of the economic outlook for
Afghanistan. I’m wondering if the U.S. is mistaking economic hopes or
fantasies for economic strengths in the post-2014 world.
HAN: OK. Anybody want to take on Afghanistan? Maybe Craig.
STEFFENSEN: Yeah, I lived and worked in Kabul for six years. And I don’t know
what to say except Afghans are born entrepreneurs and you know, if the security
situation were to improve and if there were opportunities made available to
them, other than to carry a gun, I think they’d be, you know, out there running
a business before we knew it happened.
That’s sort of generally speaking, but the mining sector there, as I think
it’s, you know, it’s no secret whether it’s Ainak or Hajigak or other parts of
the country, iron ore and copper, you know, one estimate made by a Norwegian
mining specialist working in the Ministry of Mines and Industry was that
Hajigak alone could bring, I think it was $3 billion a year in revenues to the
government for centuries.
Now, that’s not as much as USAID was putting in at one point, but it’s a lot
for Afghanistan and it would free up the government, I think, from using a lot
of the funds that we’re now providing by way of support to cover recurrent
costs, I mean salaries of government officials and all that, to begin investing
in things, so that the mining sector could actually take off. And by that, I
mean railways and power and training for people to work in that industry, et
Nothing’s going to happen overnight. I think these are – you know, these are
long term solutions to problems. But I don’t doubt for a second that
Afghanistan has the potential to become, you know, a leader economically in
that part of the world. Someone said at one point that – I mean, it was the
ministry of mines said that Afghanistan has more underground than China has in
international reserves in banks. And someone went on to say, well, there’s a
big difference between having money in a bank and having it underground. But
that’s the, you know, that’s the amount of resources that we’re talking about.
HAN: Thanks. Anyone else? Yes.
Q: Hi. My name is Olga Kuzmina. I’m from the Center on Global Interests.
It’s a new think tank that focuses mostly on U.S.-Russia relations. And to me
it seems like Russia here is the big elephant in the room that we haven’t
really addressed. I mean, you’ve mentioned the customs union and the Eurasian
Union that Russia’s kind of trying to build in this area. And it seems like
your kind of idea’s maybe that the U.S. can kind of piggyback often the
progress that’s made there, like if they free up the trade borders and have
some kind of internal visa regime, that would make it easier for the U.S. to
trade with the region as a whole.
I think the kind of understated fact is that Russia is kind of trying to, you
know, contain this area for itself, you know, with these projects. So how do
you envision working with Russia or what problems do you anticipate, you know,
with Russia as the U.S. has been a supporter of the Silk Road plan and how do
you intend to address them or involve Russia probably could be better –
STARKS: Sure. I don’t think that involvement of Russia and our interests are
mutually exclusive. I think Russia not being brought up today mostly was
because my brief from Shelly was to talk about Central Asia, not to talk about
Russia. It wasn’t an intentional slight. I cover Russia as well and there’re
actually far more U.S. companies now that are doing business with Russia that
if Central Asia – if opportunities to transit to Central Asia, even from
Russia, were to open up, that they could benefit.
So I don’t think they’re mutually exclusive. I think they could actually work
together. I think there’re a lot of U.S. companies now that are doing business
in Russia that are not in Central Asia could foresee having better
opportunities because they already have a base from which to operate. But
right now, because of – going back to, you know, Eric’s point about the
harmonization and customs and other issues, just being in Russia doesn’t
necessarily mean that the Central Asian market is open for you.
In the case of the customs union with Russia and Kazakhstan, there are some
U.S. companies that have benefited from the opening of transit between Russia
and Kazakhstan. Companies that are already doing business and producing or
doing things in Russia have been able to benefit by being able to send goods
duty-free into Kazakhstan.
So I don’t think that it’s an issue of if or or. And I don’t think that the
U.S. – and I’ll let my State Department colleagues take over the political
aspect – but commercially, we’re not looking to compete with Russia in the
region. I think similar to China, a lot of our interests commercially are very
different. Right now, as Josh mentioned, the amount of U.S. investment and
trade in the region, apart from oil and gas, is quite minimal. And so in terms
of the commercial perspective, I don’t think that we could compete with Russia
even if we tried at this point.
And I don’t think that we’re necessarily going after the same things. For
example, one of the areas in which several of the countries of the region are
looking for investment is in hydropower. Hydropower is not an area generally
where U.S. companies invest in and manage projects. It’s just not something –
we might supply equipment and services, but it’s not an area where you see a
lot of U.S. interest in investment. So that’s a major area where we’re not
actually competing with anyone. It’s not an area where we feel that we have an
advantage looking forward.
In terms of this, whatever sphere Russia may or may not want to create, we
cannot – that’s Russian foreign policy. That’s their choice. I actually had a
lunch, several years ago, with trade attachés from Russia, Japan, Germany and a
couple of other countries in Uzbekistan. We all had the same challenges. The
Russians, the Europeans, the Japanese, everybody was facing some of the same
business environment challenges, so I think actually greater Russian investment
and looking at opportunities in the region could still actually promote a lot
of this opening of doors and opening of harmonization. I don’t think it would
be to our detriment if there was greater Russian interest in the region on the
Politically, that’s a whole different ballgame, but commercially, I don’t know
that that actually takes anything away from us.
HAN: Eric, I think –
STEWART: Yeah, my point in mentioning the issue or throwing out there the
issue was simply – look at it from a Central Asian perspective. If you’ve got
this – Kazakh perspective – you’ve got this customs union already with
Belorussia and Russia. And then, you know, the Americans come along and say
we’ve got this great new border harmonization program we want you to implement.
Then here we go again. Is it the Russians or the Americans? I mean, you’re
stuck in the middle of the two, right? So my point in saying the businesses
aren’t interested in the political jockeying. The businesses are interested in
getting business done.
And so if that means taking the already existing – the only customs union that
I’m aware of in the region and saying how do we use that as a starting point to
create something broader that we can support and that we can buy into and that
makes sense for American companies, then let’s go that road. That was simply
the proposal and the idea. And to sort of further what Danica was saying, when
I take business missions to this part of the world, almost every executive that
comes from an American company is – not all of them, but a majority of them are
based out of Moscow.
So this is for them a regional approach to doing business. And if we can find
ways to simplify it and to make it easy and make it happen, that’s all we want.
KUCERA: I would just add that, you know, the U.S. does engage in a lot of
Eurasian trade right now, which is the NDN. And Russia is, in fact, very
cooperative with that. I mean, they host almost all of the equipment and have
never really caused any problems from it.
So one thing I’m curious and this discussion got me thinking, and I wonder if
somebody in the audience knows – if so, tell me afterwards – you know, whether
the customs union has made it in fact easier because most of this NDN traffic
goes, you know, from the Baltics through Russia or through – but through
Russia, then Kazakhstan, then the rest of Central Asia. So I wonder if this
customs union has made that Russia-Kazakhstan border crossing easier.
STEWART: And just on that point, I think you are – you tried Josh and I think
did a good job of trying to clarify what is the Silk Road right now. And I
actually think there’s two different things that we talk about. There’s the
north and the south and then there’s the east and the west. And I think
they’re very, very different proposals and programs. There is the potential
for them to both work together and intersect together, but how that works at
this point is yet to be determined. I mean, it’s unclear.
We know it works north to south now with military, but is that long term,
sustainable via the private sector. Look at companies like Maersk that are
moving goods from, you know, Klaipeda to Afghanistan. I mean, that’s working
great. And you’re seeing a neat supply chain that’s building out of that.
Hopefully, that’s sustainable before ’14, but the answer to that question is
yet to be determined.
HAN: And Craig, that was one of the questions that I wanted to ask you was the
issue of the north-south versus east-west. And certainly, I think, the U.S. is
focused more on the South Asia integration. And I think there’s lots of ADB
programs that focus on that. You know, you support TAPI and other things, but
I mean, do you think that there’s relative value to one or the other, or is it
an all-of-the-above strategy?
STEFFENSEN: The last time I looked, I think there was about 1 percent of trade
going north-south as there was going east to west. And it was mentioned
earlier. I think Josh mentioned it that a lot of countries would prefer, you
know, not to pin their hopes on Afghanistan as a transport – trans-accorder at
this point in time. And that’s exactly right.
It’s been stated as much in quite a few CAREC meetings. Until the security
situation, you know, calms down and the cost of trucks from Central Asia
transiting Afghanistan to Pakistan come down as well.
We didn’t mention Russia very much. We also didn’t mention Iran. You know,
the northern and western parts of Afghanistan are – it’s not like they don’t
have security incidents once in a while. They do. But it’s a lot safer up
there relatively speaking than it is to the east and south in Afghanistan. And
if only Iran were part of the picture, you know, we might be able to facilitate
movement of people, goods, and vehicles between Central Asia and, well, ports
on the Caspian Sea. I’m sorry, in the strait of – in the straits that we can’t
The ports in Bandar Abbas, in Chabahar are just waiting for these goods to move
in their direction, but you know, until now, I think all of the incentives are
to access ports in Pakistan. Until that changes, you know, I think it’s
unrealistic to expect the trade picture between Central Asia, South Asia to
change a whole lot.
HAN: OK. I’m going to wrap it up with one last question and give the
panelists one last chance to respond. I think one of the themes that we
identified today is the issue of trust among the countries and how that, in
conjunction with political will, is a necessary precondition to creating a
better economic environment there, the precursors for a better economic
environment. And wondered if you had thoughts on what sort of confidence
building measures or what sort of things we should be doing, either from the
U.S. government strategy or from international organizations or other areas
that would help move that forward, the trust issue. And I’ll start with Josh.
I know you’re not a policy person, but give it a shot.
KUCERA: I think you have to think in generational terms frankly. I think you
have to think in generational terms. I think these political systems that have
arisen in these countries are, you know, the closed borders and the insularity
is built into the system. And you know, what the U.S. can do about that?
Frankly I’m at a loss, other than, you know, wait and perhaps train younger
cadres of people on how to do things more in the way that we would like them
that in the case that there’s a slow opening in the future those people will
have the technical expertise to do something better. But I think we have to
think very modestly.
STARKS: I don’t know that it’s something that the U.S. as a government can
make people trust each other. I just don’t know how that could possibly
happen. Speaking as a commercial person, I would say commercial success that
involves these countries working together to achieve a goal could do it. And I
go back to the Baku-Tbilisi-Ceyhan example, BTC, and look what that did for the
relationship between Georgia, Azerbaijan, and Turkey. It created – friendship
might be too strong a word, maybe it’s not strong enough, but these countries
now depend on each other and depend on each other’s security for the viability
of that pipeline.
When Georgia faced troubles, early on in the decade, Azerbaijan was very
supportive of Georgia in helping them to develop and keep the lights on and
that type of thing. And there’s a lot of interest in the security of the
pipeline because they – Turkey had an interest in what happened in Georgia.
And I think, you know, I don’t want to beat the TAPI horse too much, but I
think that’s why the State Department and others have pushed this and other
similar projects, is if you can get these countries to work together for an
overriding goal and have something that important at stake, that’s what, I
think, can build the trust, having something where everybody in this particular
project is benefiting, but you need everybody to cooperate and having those
kinds of things in place.
But as Josh mentioned, that could be generational. I mean, these projects
don’t happen in one year. Craig said he’s been working on TAPI for a decade.
And it may not be TAPI. Maybe it’s something else. But I do think that in the
long term, there’re going to be some projects that will not go forward unless
two or more or three or more countries in the region come together. And the
benefit and the economic benefit and the economic outlook of that project is
going to be so good that it will force some people to come to the table.
What that project is necessarily, I don’t know, but it’s going to be something
– it’s going to be a deal of a lifetime that the countries are not going to
want to pass up. And so they’re going to work together. And that, I think, is
one of the ways that trust can be built. But do I think that it can come from
a random government policy? No. I think we can support projects and things
that can, in small ways, help build trust, but I don’t know that there’s any
one particular thing that we can do.
HAN: It’s one way of doing it. Craig.
STEFFENSEN: Yeah, I agree with everything that Josh and Danica have said.
Clearly there’s a new form of multilateralism going on out there that doesn’t
include the U.S., and whether it’s the Shanghai Cooperation Organization or the
European Economic Community or CACO or some others. And I think it’s important
for all of us just to be realistic about what the U.S. can say and achieve in a
part of the world that others consider their backyard, not ours.
And so maybe we need to, you know, be a little more collaborative in our
approach to getting things done. The bilateral approach oftentimes is easier,
but I think the sure way to success is just doing something Eric said, meeting
with people privately before you go to a meeting and talk about it as a group,
you know, focusing the discussion on some issues that people aren’t prepared to
discuss and not allowing the discussion to go off course because the next thing
you know, they’re talking about trans-boundary water management and all hell
breaks loose. But things like that, very, very simply really.
And as people have said, it’s really a generational thing, not just in terms of
addressing these problems because they’re big problems, but I think a new
generation of leadership in that part of the world is probably required too
before we can see solutions to some of these things.
STEWART: I think a lot of it is expectations; I mean, expectations on both
sides. And what I mean by that is, we’re working very closely with Uzbekistan
on the NDN and we say, Uzbekistan, what do you want? Well, we want investment.
We want companies. And so we bring the companies, but then they don’t invest.
And then the Uzbeks look at us and say, what are doing for us, right? And so
I think managing the expectations that our system doesn’t work that way, right?
So we can’t go to HP and say, Uzbekistan is a great friend of ours, put a
plant there. That just doesn’t work that way.
And so I think really, again, I’m going to beat my drum of the customs and
border harmonization, that’s what’s going to bring the companies. And nothing
that the – not nothing, but little that the U.S. government tells the companies
is going to make a difference. What actually takes place in the region is
what’s going to make the difference and what’s going to attract the companies.
And what else can we do? I think, going back to what I mentioned earlier, is I
really think we need to engage Russia, engage the EU, engage Turkey, engage
China and have these Central Asian talking points, something of common
trilateral, multilateral, whatever you want to call it. And so when working
with the Central Asians or working directly with the individual countries in
Central Asia, they hear a common theme from Russia. They hear the same theme
from the U.S. They hear the same theme from Turkey. Then it becomes the right
answer versus what do the Russians want, what do the Americans want. They’re
constantly being pulled in so many different directions from so many different
entities that want something. But if they continue to hear the same answer and
the same issue repeatedly, then it becomes the right thing to do.
And, you know, from that perspective, I think in – going back to the question
about Russia – there are so many opportunities to be had in Central Asia and
there are so many opportunities for investment, for trade. There’s a lot of
development that needs to take place. There’s a lot of money to be made for
each of the countries, but also for the interlocutors that are working with
And so, from the Russia perspective, they actually would have the upper hand
from the Americans because of location and because of historical reasons, et
cetera. I tend to believe – I’ll put an American company up against any
company in the world, head to head, and I’ll take us. But at the same time,
the natural advantage for Russia would give them – would give them the lead.
So I think there are a lot of opportunities and I think there should be less us
versus them and more, if we would do this all together, we’re all going to
HAN: Yes, that’s a great point. And I think because the U.S. does have
interests there besides promoting U.S. business. I think we want to see
economic development happen regardless if it’s U.S. companies that are doing it
or not. So that’s a good point.
I want to thank all of our speakers for participating today. You’ve made a
great contribution to this discussion. And I look forward to continuing the
discussion on this as we go forward. Thanks for coming and thanks all of you
for participating as well.
(Whereupon, at 3:46 p.m., the briefing was adjourned.)