Decclining public revenues, the risk of a run on major banks, and a staggering outflow of refugees all place heavy pressure on Afghanistan’s fledgling economy. On top of that, casualty rates among security forces have increased by 50 percent during the first half of 2015 from the same period last year. These crises threaten the durability of Afghanistan’s political and security transitions. After 14 years of war, America and the West are eager to withdraw, yet the rise of the Islamic State (IS) in Iraq and Syria should change the equation for western countries. In Afghanistan, an early exit or inaction by western partners could lead to devastating instability.
On Dec. 9, 2015, the Istanbul Process on Regional Security and Cooperation for a Secure and Stable Afghanistan – the so-called “Heart of Asia” – will convene for its fifth ministerial meeting in Islamabad to construct a plan for Afghanistan and its neighbors. Joining the 14 member nations, including Russia, Iran, Saudi Arabia, and Turkey, will be 28 supporting countries (including the United States), regional organizations, and international organizations. Since November 2011, the Heart of Asia has sought to combine regional political dialogue with security and economic cooperation to respond to challenges facing Afghanistan and its wider region. The platform’s key strength is the pursuit of regional cooperation, made possible by annual ministerial meetings and six regionally driven confidence-building measure (CBM) working groups.
To revitalize Afghanistan’s faltering political and security transitions, the Heart of Asia should support a strategy for economic development, one that includes job creation and harnessing Afghan and foreign private sector financial and intellectual capital. Integrating Afghanistan’s economy within the South and Central Asian regional economy offers the United States and its Western allies real hope to reduce assistance for essential public services and ensure the sustainability of Afghan security forces, while preventing foreign terrorist groups from making further inroads.
Walk the walk toward economic peacebuilding and cooperation
With the introduction of two priority CBMs in June 2012 – one on trade, commerce and investment, and the other on regional infrastructure – the Heart of Asia adopted the 15 Regional Investment Projects and Policy Priorities introduced at the fifth Regional Economic Cooperation Conference on Afghanistan (RECCA) in March 2012, each designed to generate public revenue, jobs, and regional interdependence. The Central Asia-South Asia Electricity Transmission and Trade Project (CASA 1000), for example, will net Afghanistan an estimated $175 million annually, generate employment opportunities for over 100,000 people, and link the economies of Afghanistan, Kyrgyzstan, Pakistan, and Tajikistan. Similar tangible benefits are projected for priority trade facilitation projects, natural resource extraction, and transport initiatives.
However, despite the promising start in 2012, diplomats more inclined toward political and security goals have dominated Heart of Asia proceedings. This focus has curtailed the much-needed conversations that include more holistic perspectives on regional cooperation and the factors essential to building durable peace.
For example, at a senior officials meeting on Sept. 27, 2015 in New York, Heart of Asia member country representatives once again prioritized the discussion of illicit narcotics and emerging security threats, including the Islamic State, over equally important matters of regional economic cooperation. To the extent that economic cooperation drew focus, it was only to stress the need to go beyond ad hoc or bilateral activities. By ignoring the connection between economic development and security, western countries may win the next battle in Afghanistan, but they will lose the war.
This half-hearted approach to economic issues is worrisome: without greater focus on the economy, the violence will not end. Without investing the necessary time and analytical skills and forging the public-private partnerships, near-term political and security concerns will continue to trump economic initiatives that can ensure fiscal sustainability and use trade to unite the region. These include programs like CASA-1000 – an effort to develop a clean energy system between four Central and South Asian nations including Afghanistan and Pakistan – and transportation and trade facilitation projects. The current Heart of Asia configurations do not lend themselves to serious, technical impact analysis and problem-solving, because key players from relevant economic ministries and the private sector are often absent. Little seems to be accomplished in a timely and effective manner. The Heart of Asia platform could reinvigorate Afghanistan’s economy, but its recent meetings have been bogged down by ill-prepared bureaucratic negotiations that produce no meaningful impact.
Revitalizing regional economic cooperation to advance peace and self-reliance
In July 2011, then-U.S. Secretary of State Hillary Clinton announced U.S. support for a “New Silk Road” initiative to help the Afghan government and business community accelerate cross-border commercial ties and, over time, transform the country into a regional trade and transit hub. Regional economic cooperation between Afghanistan and its neighbors could provide the fundamental building blocks for creating regional stability, opening new public revenue streams, and improving conditions to allow for more substantive regional dialogue.
Research shows that 50 percent of peace agreements fail when not enough of the people affected by an agreement support it. Successful peace negotiations are more inclusive – and effective – when they engage multiple stakeholders and address a sufficient number of issues. At present, the Kabul government and its foreign partners face a growing credibility problem in the eyes of the Afghan people. By combining regional economic cooperation with political dialogue, reconciliation, and the reintegration of former combatants, a comprehensive peace process that includes a strong economic component will further incentivize peace, enhance neighboring country support, and increase the likelihood that more Afghan citizens will accept the outcomes associated with peace negotiations. In other words, a skillful and continuous articulation of short- and long-term economic benefits will motivate Afghan society and neighboring countries to invest in peace and remain resilient against inevitable setbacks.
Cognizant of Afghanistan’s current growth and revenue crisis, the latest RECCA action plan, which exists to boost investment in Afghanistan and the region, reinforces how the country’s economic future depends on transit, trade, and extractives. Except for the illicit opium trade, Afghanistan exports very little – $514 million in 2014, half of that going to Pakistan – and maintained a trade imbalance of $7.12 billion in 2014. To counter the effects of the country’s growth slowdown from 17.2 percent in 2011 to 6.4 percent in 2014, and the progressive currency devaluation, the action plan prioritizes near-term transit (including in the energy sector) and private capital opportunities. In five to ten years, shoring up trade in extractives and other products will be the action plan’s focus, provided the necessary private and public investments to begin repairing the trade imbalance are made in the next 12 to 36 months.
Leveraging the opportunities for stability and economic growth outlined above will require a new level of cooperation between the Heart of Asia and the RECCA. Among Afghanistan and its partners, RECCA should lead in discussions of economic and technical matters and be supported by rigorous research and dialogue with prospective private and public investors. The Heart of Asia can then fortify the economic proposals by translating the concrete economic incentives and goodwill generated from progress in Afghanistan into positive political and security outcomes for the region.
So what needs to happen at this week’s Heart of Asia Ministerial?
First, a full endorsement of the RECCA action plan will send an unequivocal signal that Afghanistan and its neighbors embrace a truly comprehensive approach to regional problem-solving. Placing economic goals on par with security and political goals will improve people’s livelihoods. Economic stability will increase trust in government and grant it greater legitimacy, thereby aiding peacebuilding efforts and strengthening support for state institutions.
Second, major Heart of Asia economic players in the region, including China, India, the Gulf States, Kazakhstan, and Turkmenistan, should lend political and economic support to the new RECCA investment priorities. China, for instance, could expand the investment goals of its more than $100 billion Silk Road Economic Belt (across Central Asia) and $46 billion China Pakistan Economic Corridor projects to include at least parts of Afghanistan. Although it requires continued foreign aid at the start-up, this initiative will move Afghanistan closer to a healthy and more independent economy. These innovations can source urgently needed capital from private investors and sovereign wealth funds, and ensure technical follow-through so that future diplomatic meetings amount to actionable commitments, not just talk.
Rethinking the West’s withdrawal and Afghanistan’s regional economic future
President Obama announced his decision in October to maintain a presence of 5,500 U.S. soldiers in Afghanistan through 2017. This military support creates some breathing space for Afghanistan and its allies to reassess regional conditions while safeguarding vital interests. Recalling the positive influence of its presence abroad following World War II and the Korean War, the United States should weigh the costs of inaction and exit against the tangible benefits of a sustained commitment to Afghanistan. A U.S. military presence now will come at a fraction of the blood and treasure expended since 2001 and, along with the economic stability measures outlined above, will increase American access to growing Eurasian markets and counter the rise in violent extremism, narcotics, and refugee flows.
In conclusion, it’s the region, stupid. Renewed investments and other incentives for building sustainable private and public economic partnerships across Afghanistan’s borders is the only model that offers Afghans a realistic chance of progress toward stability, job creation, and greater self-sufficiency. But success requires immediate action and political resolve, particularly from China, India, Kazakhstan, Pakistan, Saudi Arabia, and Turkey. The right kind of regional platforms exist; it is up to political leaders now to seize the opportunity presented by the Heart of Asia this week in Islamabad.
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