Global Economies

The EastWest Institute has just released Afghan Narcotrafficking: Post-2014 Scenarios, the second report out by its working group of Russian and U.S. experts. As Afghanistan now faces an uncertain political and security environment following the drawdown of ISAF troops at the end of 2014, the potential for a worsening narcotrafficking threat is great.

The report states that the potential for deterioration “underscores the imperative need for Russian and U.S. policymakers to find the political will to resume and perhaps even increase cooperation despite ongoing differences on other issues. Together with regional partners and international organizations, renewed Russian-U.S. cooperation presents the best hope for a brighter future.”

Senator Dianne Feinstein issued the same call for cooperation in a December 2014 report by the United States Senate Caucus on International Narcotics Control, in which she wrote: “The simple fact is that Afghan narcotics pose serious security and health threats to both the United States and Russia. We should find opportunities to jointly address this shared problem.”

The working group’s first report, Afghan Narcotrafficking: A Joint Threat Assessment, came out in 2013. Post-2014 Scenarios will be followed by three more reports in 2015 and 2016 offering specific policy suggestions on border security, alternative livelihood in Afghanistan and narco-financing, with a final report presenting a compendium of all recommendations.

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Malik is the former director of the Human Development Report Office at the United Nations Development Programme (UNDP). His professional experience in development economics and implementing related programs brought a unique perspective to his presentation, which was followed by a lively question-and-answer session.

Utilizing development data and anecdotes from his time at the UNDP, Malik described how economic inequality, social stratification and uneven access to services drive otherwise peaceful people to ideological extremism and violence.

According to Malik, three important and interrelated forces that push people towards violent extremism are “exclusion, climate change and job insecurity.”

The international community needs to be more “inclusive of other perspectives and increase understanding, in order to implement more effective development policies,” said Malik. Not doing so, he said, has led to inefficient allocation of aid and pushed many in Iraq and Afghanistan, for example, toward violent extremism.

When discussing the impact of climate change on religious extremism, Malik pointed to the Syrian conflict and a drought that began in 2002 that precipitated massive job shortage, ultimately serving as a trigger for the current conflict. Malik also tied climate change issues to conflicts in Mali, Niger and even the rise of Boko Haram in Nigeria.

Malik pointed out that 98 percent of the damage wrought by violent extremism occurs in developing countries. He also highlighted a study which found that 70 percent of young Taliban fighters had joined the group because it offered a rare steady job. Malik was careful to point out that job insecurity does not always lead to a rise in violent extremism, but is often a common feature of regions experiencing it.

When asked whether there were policies that do work to increase access to services and decrease inequality and stratification, Malik displayed some optimism.

“If we stop the flow of illicit money, educate the people and invest in job creation programs, we can see tremendous positive change.”

The EastWest Institute convened the fifth Abu Dhabi Process Meeting, “Afghanistan Reconnected: Businesses Take Action to Unlock Trade in the Region,” in Istanbul on November 26-27, 2014. The Abu Dhabi Process is a series of high-level consultations that address regional economic security issues in Afghanistan post-2014.  

EWI’s Istanbul consultation was held in cooperation with The Union of Chambers and Commodity Exchanges of Turkey (TOBB). Over 40 high-level representatives of private sector and Chambers of Commerce and Industries, CEOs of transport and logistic companies and Members of Parliament from the region and beyond were jointly welcomed by TOBB’s President, M. Rifat Hisarcıklıoğlu and EWI’s Vice President Martin Fleischer.

The aim of this meeting was to assess trade and transit challenges, as well as opportunities in the trans-Afghan transit and trade corridors, and to agree on a list of policy actionsrequired to unlock regional trade. The conference also assessed regulatory frameworks for investment, and highlighted potential economic gains for the region in the Afghan economy. 

Click here to read the full report. 

EWI Board Member Haifa Fahoum Al Kaylani is the newest board member of the Arab British Chamber of Commerce (ABCC) in London, after being formally nominated by the Palestinian Chamber of Commerce on December 5th. Al Kaylani will look to help the ABCC continue to enhance Arab British trade and business ties, while also pushing to improve the economic and social environment in the Palestinian territories.

To read Al Kaylani's bio, click here.

The lack of economic opportunities for the populace in Afghanistan is a major impediment to peace and stability. Without an adequate industrial base and/or agriculture infrastructure, guns-for-hire in abundance as a means to finding income is neither conducive for foreign direct investment nor for domestic entrepreneurial initiatives. That a small elite cabal with fixed mindsets returned after the fall of the Taliban to occupy seats of power in Kabul, does not help.

Economic resurgence for land-locked countries requires facilitating trade to and through their territory.  The EastWest Institute (EWI), a New York-based leading US think tank, headed by Ross Perot Junior, initiated the “Abu Dhabi Process” — a cross-border trade dialogue co-funded by Abu Dhabi and Germany — between Afghanistan and the countries on its periphery. Hosted by the EWI, the recent Istanbul conference encouraged businesses in South and Central Asia to themselves take necessary initiatives to unlock trade and kick-start the war-ravaged Afghan economy.

For the short-term, the recommended ways forward included: a) a regional business council comprising influential business leaders from Afghanistan, Pakistan, India, Iran, CARs, Turkey and Iran; b) one-window custom clearance systems by Afghanistan and improved border sources at Torghundi, Hairatan, Torkham, Chaman, Wagah and Sher Khan Bandar and other border points to reduce time and cost of crossing; c) a generous visa regime to enable businesses to move around easily (under Saarc for the short-term and the Economic Cooperation Organisation for the long-term); d) regional entrepreneurship exchange programmes to promote trade and investment opportunities.

The mid-term recommendations included: a) a unified transaction mechanism system and a regional banking framework; b) standardising the Afghan tax structure to entice business investment; and c) a free trade zone Fata. The long-term recommendations were: a) a regional infrastructure trust fund, with India, Turkey, China, Russia, Pakistan and Afghanistan as donors to invest in designing, developing and expanding transport means, such as railways; and b) the implementation of CASA-1000, TAPI projects and other regional energy projects (without mention by name of the Iran-Pakistan (IP) gas pipeline). The threat of US sanctions remain, and while Pakistan has no intention of bucking that, the Iranian portion is in place at the border at two places, 70 kilometres from Gwadar and 250 kilometres to connect into the extensive Pakistani gas pipeline infrastructure, with planned connections into Fata and Swat.

Recent significant and symbolic events confirm that Ashraf Ghani is a game-changer in the context of the Pakistan-Afghanistan relationship.  To quote a recent article of mine,“Throwing aside diplomatic norms, the Afghanistan’s President visited GHQ immediately after landing at Islamabad. A foreign Head of State heading straight towards a military HQ on arrival carries a lot more than ceremonial importance, the Afghan President means business because he well understands where the real power concerning national security rests. Ashraf Ghani described his discussions later with the Pakistani PM as ‘a shared vision to serve as the heart of Asia, ensuring economic integration by enhancing connectivity between South and Central Asia through energy, gas and oil pipelines becoming a reality and not remaining a dream. The narrative for the future must include the most neglected of our people to become stakeholders in a prosperous economy in stable and peaceful countries, our faiths are linked because terror knows no boundaries. We have overcome obstacles of 13 years in three days, we will not permit the past to destroy the future’.” How will the Afghan president overcome the ‘hate Pakistan’ mindset of a few Kabul diehards, some of these ingrates even born and educated in Pakistan, who must even now be conspiring to cut him down to size?

That the future would not be held hostage by the past was symbolised by the US repatriating (with Afghan consent) Latif Mehsud along with two other militant commanders from Bagram into Pakistani custody. In another one of my articles, I had said, “The capture of the senior leader of the Tehreek-e-Taliban Pakistan (TTP), Hakeemullah Mehsud’s No 2, by US Special Forces represents the ‘smoking gun’ about the Afghan regime’s sustained involvement in terrorism in Pakistan. In the company of the Afghan National Directorate of Security (NDS) agents taking their prized asset to Kabul to meet senior government officials, Latif Mehsud was simultaneously on the American ‘most wanted list’. India’s RAW is using the NDS as a proxy to sustain and support the TTP’s brutal campaign within Pakistan. To its credit, despite Karzai’s fury at the US for his capture (Daily Telegraph, October 13, 2013), this cut no ice with the US, and it signalled that as its enemy, Latif Mehsud would remain in its custody.” The act of handing over this terrorist is a confidence-building measure that will reduce the trust deficit and build on the excellent fast developing working relationship.

Realpolitik is the product of cold, calculated pragmatism based on economics. Afghanistan will make billions of dollars from system-collected royalties from the Central Asian Corridor passing through its geographical location. Without a continuous flow of gas and power, economic resurgence in Pakistan will remain moribund. The EWI’s Abu Dhabi Process emphasises that the entire region stands to gain exponentially from constructive trade and commerce engagement.

Afghanistan has finally found its man of destiny in Ghani. How long before a leader in Pakistan rises above selfishness and greed for the sake of the country? 

New York—U.S. President Barack Obama will conduct a state visit to China in November to participate in the Asia-Pacific Economic Cooperation (APEC) Leaders Meeting. People’s Daily reporter Li Bingxin recently interviewed Piin-Fen Kok, director of the China, East Asia and United States program at the EastWest Institute, about the status of U.S-China relations. Kok argued that the two powers have an opportunity to develop broad cooperation in several key areas.

Strategic trust promotes regional cooperation

Kok stated that China and the U.S. must first build strategic trust in order to develop cooperation in a number of areas. In recent years, China has been suspicious of the U.S. “pivot” towards Asia, and the two U.S. initiatives of strategic rebalancing in the Asia-Pacific and the Trans-Pacific Partnership (TPP). China views these policies as methods to contain China’s rise. On the other hand, the U.S. sees China as taking an assertive stance on its maritime disputes, especially through military activity seemingly aimed toward U.S. allies. This aggression, coupled with recent unusually close encounters between U.S. and Chinese military planes, has left the U.S. unable to decipher China’s intentions. Despite the latter’s proposal for a new major-power relationship without conflict and confrontation, China’s behavior is perceived by the U.S. as raising the risk of conflict. Kok suggests that if the two countries can sit down for honest discussions and agree that the parties are not engaged in a zero-sum game and that peaceful cooperation can clear confusions about the other’s true intentions, then the two powers could reach consensus on a number of issues. After all, the U.S. has affirmed that it has no intention to contain China, and China has declared it will not push the U.S. out of the Asia-Pacific region. From this foundation, the two sides could cooperate on a common strategic vision for the Asia-Pacific, and honestly raise their respective concerns. There is a wide range of issues the U.S. and China can work together to address, such as the North Korea nuclear issue, climate change, counter-terrorism and infectious disease control and prevention. Their recent collaboration in training young Afghan diplomats was a good start, and demonstrated that the two sides can find common ground about how to solve bilateral and regional problems. If both sides can maintain that spirit to establish mutual trust, it would be a blessing for the people of Asia, and the Pacific will become more peaceful.

The rule of law benefits economic cooperation

At the Fourth Plenary Session of the 18th Party Congress, the Chinese Communist Party committed to improving rule of law. This would help attract U.S. investment and contribute to further economic cooperation. In order to accomplish this, the central and local governments have to be consistent in enforcing laws. When China joined the WTO, it committed to implementing policies in line with international rules––such as protecting intellectual property rights––but the key is in uniform enforcement. The central government has established relevant laws and regulations, but they are not always enforced at the local levels. U.S. companies are also concerned about the issue of national treatment in China due to what they view as attempts to target foreign companies. Chinese investments in the U.S. have also faced some setbacks in cases where the U.S. has chosen to protect domestic industries and workers, often in response to the 2009 recession. Both sides have similar issues. China will only be able to solve its problems if it consistently applies the rule of law from top to bottom. The American federal system means states have different laws, priorities and needs when it comes to attracting Chinese investment, and thus several layers of complexity. In short, strengthening the rule of law should be among both countries’ goals—strict enforcement of regulations would encourage foreign investors to invest boldly and confidently, contributing to an all-around increase in economic cooperation.

Political exchanges help cooperation on governance

Kok further remarked that due to differences in the political systems of the U.S. and China, and the absence of organizations focused on promoting exchanges between the U.S.’s political parties, there has been a lack of understanding between Chinese and American political parties for a long time. In 2010, the EastWest Institute’s late president John Edwin Mroz personally opened up a channel for exchanges between the two powers’ political parties, allowing the major parties from both countries to meet face-to-face to discuss their experience in party governance, national governance, military affairs and security issues. The Chinese Communist Party is the ruling party in China, while the U.S. has been governed by both the Democratic and Republican parties, so it is important for both the current and future ruling parties to increase dialogue. Additionally, Mroz worked to increase Chinese understanding of the intricacies of American state politics, for instance, the fact that state governors do not all come from the same party. Mroz passed away from illness in August this year, but Kok emphasized that exchanges between the two countries’ political parties would likely continue to improve