Heart of Asia strategy

The summit to place Afghanistan at the heart of Asia took place in November last year in Istanbul. All the neighbouring and regional countries as well as members of the European Union and North America participated. The building blocks of the “New Silk Road” initiative were discussed, prominent among them roads, railways, mining projects and gas pipelines. The summit floundered over Pakistan’s objections to giving India a pivotal role in the New Silk Road Initiative. The Salala Post NATO attack gave Pakistan the opening to opt out of the recently held Bonn conference which was to endorse the way forward for Afghanistan based on an India centric supervisory role, a role not acceptable to Pakistan. It is hoped that in the new engagement with the US, the role of India in Afghanistan will be appropriately modified to cater to Pakistan’s sensitivities.

Flagship of strategic thinking

Before the Salala event, during her recent visit to Pakistan to reset the Pakistan US relationship, Secretary Clinton along with her high powered team of military and intelligence leaders spelled out amongst military and political goals the economic goals of placing trade and connectivity of the region as a means of cementing the future of Afghanistan as a bridge between central and south Asia. The New Silk road Initiative has become the flagship of US strategic thinking regarding a stable post war Afghanistan.
The concept first articulated by the Central Asia Institute at the John Hopkins University has been adopted by the Obama administration as a key initiative. It was carried forward two years ago at the Regional Economic Cooperation Conference on Afghanistan (RECCA) held in Istanbul from November 2-3, 2010 in a paper entitled “The Silk Road Initiative (SRI),” by President Karzai’s top economic advisor, Sham Bathija, who persuasively argued for a Eurasian regional trade and transport network with Afghanistan at its epicenter..
Not surprisingly, India has come out strongly in favor of this concept and in the words of its foreign minister Krishna, “Afghanistan’s growth strategy (should be) built upon the country’s comparative advantage of abundant natural resources and its strategic geographical location.” Afghanistan should become a hub linking Central and South Asia through pipelines, trade and transit routes.

History of the hub

For centuries before the ascendancy of the west, Afghanistan was part of the vast Islamic regions which were basically free trade zones where goods and people moved from one end of the empires to the other without let or hindrances and Afghanistan was certainly at the hub of this movement. However with the advent of the Russian and British Empires Afghanistan became a buffer state between the two empires and collapsed into a wild isolated and impoverished wasteland. During the cold war Afghanistan was a soviet satellite cut off from the world and later during the Afghan jihad and Taleban rule the country was destroyed physically and regressed back into medieval times. Since 9/11 the country has been devastated with unending violence and war. Thus the task of converting Afghanistan back to a trading hub after centuries of isolation and violence is going to be a Herculean task and it cannot be accomplished without Pakistan. Geographically Pakistan and Afghanistan are so intertwined that only together they are at the heart of Asia and not individually. It is therefore important that the two countries come on the same economic and political wavelength and have convergence of interests and policies. In an earlier article, I had argued that the future of a sustainable Afghan/Pakistan trade relationship depends on Pakistani involvement in the exploration and extraction of Afghan mineral resources in collaboration with international finance and technology. At the moment Indian and Chinese bidders are front-runners for deals to mine Afghanistan’s vast mineral and oil deposits, which is not only worrying Western firms who have hesitated to invest in the war-torn region but also for Pakistan which has been left out of the loop.

Conspicuous by absence

Recently, Afghanistan opened up its massive Iron ore reserves estimated at 1.8 billion metric tons with a concentration of approximately 62 per cent Fe at Hajigak, 100 kilometers (60 miles) west of Kabul for international bidding. Unfortunately, Pakistan was conspicuous by its absence as were European and American companies. Afghanistan received four bids, none of which were from the world’s biggest mining groups. The bids had to be accompanied by plans for the transportation of ore to international markets. The bidders included an Indian steel consortium backed by the government of India, two Iranian steel companies and a bid by a Canadian company. Apart from Iran’s bid (since the two countries share a border) none of the others are viable without Pakistan’s participation due to issues relating to the transfer of ore. India’s bid for example is premised on building a railway track from Hajigak to the Iranian port of Chahbahar for onward shipment to India and thereby strategically bypassing Pakistan.

Indian centrality

An Indian newspaper concluded that when completed, this railway track will throw up both tantalising geo-political and economic opportunities for India as well as potential for bad blood with both friends and foes. It wrote that;
1. It will increase Indian leverage in Afghanistan and its strategic presence in the region. In the past, however, New Delhi has refuted Pakistani fears that India is encircling it.
2. It will give Afghanistan access to the sea, thus, reducing its dependence on Pakistan.
3. It will open opportunities for Indian companies to explore Afghanistan’s mineral wealth, believed to be worth $1-3 trillion (Rs50-150 lakh crore), for mutual benefit. Just consider: the entire Indian economy is valued at $1.2 trillion (Rs60 lakh crore);
4. It will add to the economic rationale for Indian investment in Chabahar;
5. Once the entire network comprising of road, rail and port is in place, it can become a launching pad for greater economic and strategic involvement of India in the oil and mineral-rich Central Asia;

Thing with the bids

The transport infrastructure for this plan would alone cost around US$10 billion. In contrast a railway track from Hajigak to Kohat Pakistan would cost a mere one fourth of the Indian transportation plan. Moreover the Indian plan would run afoul of US legislation and sanctions on Iran. The Indian bid is also being criticised by the European Union as unfairly subsidised and funded by the Indian government. On the other hand the two bids from Iran may also be problematic because of US concerns, and it remains unclear how the Canadian company intends to transport the ore out of Afghanistan. It is possible that due to lackluster response, non viability of most of the bids and American rethink this round of bidding may be cancelled and this would open up an opportunity for Pakistan to put together a proposal for exploiting the Afghan reserves with Saudi and Gulf financing, western technology and Pakistani manpower and evacuation infrastructure. The ore could be processed in Kohat which can be designated as Pakistan’s Steel City which can easily supply through the domestic logistic network the 10 million ton per year demand of Pakistan and the rest can be shipped south to Karachi and Gwadar for Middle East and global markets and north to China and east to India. The project could cement Afghan/Pakistan economic relationship and create tremendous incentives for promoting peace and reconciliation in Pakistan and Afghanistan. It would also successfully lay the foundation of the heart of Asia strategy.

Indo-Pak bottlenecks

As far as India is concerned it has not hidden its great ambitions to connect with Afghanistan and Central Asia for exploiting the riches of the area. Prime Minister Manmohan Singh has said that he can foresee the day when we can have breakfast in Amritsar, lunch in Islamabad and dinner in Kabul. This is a laudable goal but cannot be achieved in an atmosphere of rivalry and animosity between India and Pakistan. The confidence building dialogue that started with the Musharraf-Vajpayee initiative has seen one sided Indian gains whether in trade or political issues. India has used the last three years to smother the Kashmir spring with ruthless force, backed off from a deal on Saichen and resisted any movement on Sir Creek. In the arena of trade, it has successfully scuttled Pakistani exports to India while Indian exports to Pakistan continue to grow. With Pakistan granting MFN status to India this trend will grow. India has to come clean on its intent. PAKISTAN CAN EASILY BRIDGE THE TRADE GAP WITH India if its cement and home textile exports to India are not hampered by Non Tariff Barriers and high tariffs. If United States and India want Pakistan to be the gateway for India to reach Afghanistan and Central Asia, they must realise that this will be dependant on India and Pakistan seriously resolving their historic disputes in an equitable manner.

The writer is a former finance minister