Developments in South and Central Asia : Richard E. Hoagland,


Richard E. Hoagland
Principal Deputy Assistant Secretary, Bureau of South and Central Asian Affairs
Washington International Business Council
Washington, DC
June 2, 2015

When I look at the map of South and Central Asia in my office, I see a region that is truly at the world’s crossroads – spanning vital sea lanes to the south and burgeoning trade routes and energy flows to the north. So this is a region not just at a geographic crossroads, but also at the crossroads of global economic and strategic trends. In the year since Assistant Secretary Biswal spoke to you, we have seen some important developments throughout the region, which I’d like to briefly review before we jump into discussion.

I’d actually like to begin with Nepal, which, as you have all seen, has been devastated by two major earthquakes and hundreds of aftershocks. Nearly 4 million people have been displaced from their homes, and, with monsoon season beginning this month, they will be facing landslides, floods, and food shortages. Our folks at USAID are working hard to make sure that people are sheltered and fed, but the challenge doesn’t stop there: the effort to rebuild Nepal will take many years and cost many billions of dollars, and will take place amid a delicate political transition following nearly a decade of civil war. We are committed to helping Nepal rebuild in a way that will lead to growth and economic development, to ensure that Nepal emerges in better shape than it was before. Private sector investment, including in Nepal’s hydropower sector, will continue to be a part of that.

And as we begin to plan that tremendous recovery effort, a top priority should be restoring the damage to Nepal’s cultural heritage. The destruction visited upon that inheritance goes beyond just bricks and mortar and lost tourism revenue; it really goes to the heart of our collective human experience. Those damaged sites represented the development and expansion of Buddhism and Hinduism, phenomena which inspired artistic and architectural traditions that, in turn, defined Nepal’s melting pot of diverse faiths and vibrant cultures. The earthquake destroyed many of the monuments to this unique legacy, and I think there is a distinct role for the private sector, in partnership with public institutions, to take part in the restoration of Nepal’s inspiring heritage, and I’d be interested in hearing any of your thoughts or ideas about that.

The tragedy in Nepal actually provides an apt segue for my next topic – India’s growing regional leadership. Within four hours of the earthquake, Indian aircraft were on the way with relief supplies. India sent hundreds of search and rescue and medical personnel, and evacuated thousands of third-country nationals, including many Americans. And, not surprisingly, several of the aircraft India used in its relief efforts were built with the help of American companies, and we expect to see more of that as we expand our security and economic cooperation.

We’re expanding that cooperation not just because India is the region’s geographic anchor, and not just because it’s the world’s fastest-growing major economy, but because it’s a country with which we share many core values and many common interests. And our relationship with India has really blossomed since last year’s election of Prime Minister Modi. President Obama’s most recent visit to India in January was historic not just for its symbolism, but also for its substance, especially for our strategic partnership, our security cooperation, our economic relationship, and our clean-energy and environmental goals.

President Obama and Prime Minister Modi have announced their intention to increase U.S-India trade five-fold, to $500 billion. For their part, India’s recently-released foreign trade policy lays out a vision to double exports of goods and services to $900 billion by 2020. And at the U.S.-India Business Council Summit in New Delhi, President Obama announced several steps that we’ll take to support increased trade:

• the Export-Import Bank will support up to $1 billion in “Made in America” products going to India,

• the Overseas Private Investment Corporation will invest $1 billion in SMEs in rural India, and

• the Trade and Development Agency will put $2 billion toward renewable energy in India.

Further liberalization of India’s investment regime could double U.S. investment into the country, and India could certainly use the technology, expertise, and capital that our companies have to offer. But our companies also need transparency, predictability, and legal certainty. So there’s still a lot on our to-do list, but we have seen several promising breakthroughs recently:

• we overcame a deadlock on the Trade Facilitation Agreement at the WTO;

• we resumed discussions on the possibility for a high-standard Bilateral Investment Treaty;

• we moved forward on issues that were impeding our civil-nuclear cooperation; and

• we elevated our partnership to a Strategic and Commercial Dialogue.

Along with those successes, we announced a Joint Strategic Vision for the Asia-Pacific and Indian Ocean Region. The initiative joins together our “Rebalance to Asia” with India’s own “Act East” policy, which Prime Minister Modi has strengthened. In that joint-vision document, India went so far as to affirm the importance of freedom of navigation and overflight in the South China Sea, which, as I’m sure you’ve noticed, has been making a number of headlines lately. Sharing a vision with India for the region is no small thing, and it sends a very strong and important message to any country that might seek to upend international norms and rules.

We’re also working to promote strong trade ties between South Asia and Southeast Asia with an economic corridor that goes from India, through Burma, and on to the southeast. This initiative received a boost last December when the U.S. Millennium Challenge Corporation announced a compact with Nepal to focus on the energy and transportation sectors.

Democratic elections have also brought about a sea-change in our relationship with Sri Lanka, a mere 35 miles across the Palk Strait from India’s southeast coast, where the new president has moved the country away from divisive politics and crony capitalism toward a new path of reconciliation and inclusive development.

We plan to do a lot to support Sri Lanka’s pursuit of that new path, to strengthen its governance, especially its judicial and financial institutions. This new path will be a boon for the Sri Lankan people, but also for U.S. interests: we can now work together with Sri Lanka to promote good governance and human rights abroad, as well as improve maritime security in the Indian Ocean.

And on the other side of the Bay of Bengal, some 1,200 miles to the northeast, Bangladesh has the potential to become a modern and prosperous country, one that connects the economies of South Asia and Southeast Asia. This is a country that has had an average annual growth rate of about 6 percent for over two decades, reducing its poverty rate from over half of the population to less than a third.

Much of that growth has been driven by the garment sector, which employs some four million workers, 90% of whom are women. But, as I’m sure you’re aware, working conditions there need a lot of improvement. After some truly horrific factory disasters, a remarkable coalition of government, industry, labor, and civil society came together to fix the failures in worker safety and labor rights that led to those tragedies. International brands have played a leading role in improving factory safety in Bangladesh, and have been instrumental in pulling national industry and government in the right direction. But a lot more needs to be done, particularly on labor rights – for all the progress, we have still not seen the change in attitudes, enforcement, and incentives that the garment sector needs to succeed.

Also, the political impasse and negative governance trends in Bangladesh don’t bode well for sustainable growth. Just a few months ago, the IMF revised downwards its projection for Bangladesh’s growth, citing the political climate. The current situation hurts the Bangladeshi people and the economy, so we’re focused on finding a long-term solution to the stalemate, a solution that works for all parties, and one where the Bangladeshi people can freely and peacefully exercise their rights of political expression and participation.

Before I conclude, I’d also like to touch briefly on the region near and dear to my heart, and my career – Central Asia. We’ve been giving it quite a bit of attention recently – Deputy Secretary Blinken, Assistant Secretary Biswal, and I have all spoken publicly about our updated strategy in Central Asia, and how we’re thinking about its security, political and economic reforms, and human rights. Having spent quite a bit of time there, I should also stress that Central Asia is not a monolithic region – it’s a diverse group of states with diverse sets of national interests, and we adjust our approach according to the specific conditions of each.

But we’re also very focused on a regional strategy of greater connectivity, among the Central Asian states themselves, but also with their neighbors in South Asia, Europe, and East Asia. Our efforts are concentrated on improving north-south energy markets, trade and transport infrastructure, customs and borders procedures, and business networks. The region is very welcoming of this work, which we think will open up new opportunities for U.S. businesses to better access growing markets in Asia and beyond.

To increase that likelihood, we’re also promoting a level playing field, working with governments to create institutions and regulatory frameworks that meet international standards. Some are much further ahead than others – Kyrgyzstan, for example, was the first to join the WTO and has developed a far more liberalized foreign-investment environment than some of its neighbors. Its leading role in the CASA-1000 regional electricity project, along with Tajikistan, will deepen regional cooperation on energy markets. Kazakhstan continues to take important steps to diversify its economy away from a dependence on energy exports, and is set to join the WTO, we hope, before the end of this year.

With an expanding web of trade, transport, and energy corridors, there’s some real momentum in Central Asia right now. That said, many of their economies are closely tied to Russia’s, so they’re dealing with the impacts of Russia’s economic downturn right now, especially when it comes to falling remittances. Meanwhile, China’s economic influence is rapidly expanding as it searches for energy and raw-material imports, as well as markets and transit routes for its exports. We think that some of China’s efforts in Central Asia can be quite complementary to our own, and I was actually in Beijing last month for a second round of consultations on how we can best advance common goals for the region.

In closing, I want to briefly put in a plug for our embassies’ commercial advocacy work. Our economic and commercial sections provide a multitude of services for U.S. companies operating or looking to operate abroad, support a range of trade delegations, and tirelessly work with foreign governments to improve the conditions for U.S. investment. On top of all that, our Foreign Service Officers, ambassadors, and high-level officials regularly advocate for U.S. companies on specific cases, and we have a lot of success stories that we’re rather proud of. We also have an embassy-to-business program called Direct Line, where senior embassy officials speak with companies here on business developments abroad – so I’d recommend jumping on those calls if any of you are interested.

With that, and realizing that I’ve left a lot of stones unturned, I’d love to open up the discussion and hear your thoughts about the region’s great potential, as well as its significant challenges. And I’m especially interested in how you think we in the U.S. government can better help businesses like yours to overcome some of those challenges and capitalize on that enormous potential.

Comment Here