South and Central Asia: U.S. Policies and Priorities for 2016
Assistant Secretary, Bureau of South and Central Asian Affairs
As prepared for delivery
It is wonderful to be here and I want to particularly thank Patrick Cronin and Richard Fontaine for hosting me today at CNAS. With two of its co-founders serving in the Obama Administration during the birth of the Asia Rebalance, CNAS can rightly claim some credit for the strong focus this Administration has brought to our engagements with a rising Asia. Today, I’ll focus my remarks on our policies and priorities for the next year in South and Central Asia, which I believe will play a leading role in the rise of Asia.
Before I begin, I’d like to solemnly note the horrific attacks over the weekend in Lahore, and express my deep condolences to the people of Pakistan. We are disappointed that Prime Minister Nawaz Sharif will not be able to attend the Nuclear Security Summit this week in Washington, but of course understand his decision to stay home to support the victims of the attack.
Allow me to start by offering a few data points on the tremendous opportunities, as well as the stark challenges, that the region of South and Central Asia presents.
Demographically, about one-quarter of humanity lives in the region, including one-third of the world’s Muslims. Over the coming decades, about half a billion people throughout the region could enter the middle class. Yet most still live in the countryside, many hundreds of millions are without electricity, and no other region has as many poor and undernourished people as South Asia.
Economically, we have a mixed picture. There is no question that a rising India, now the world’s fastest-growing large economy, is and will continue to be the engine of South Asia’s growth. But India is certainly not the only game in town. Bangladesh, with its two decades-long streak of about six percent growth per year, is on track to become a top-thirty economy by 2030. Sri Lanka, which is rebalancing its own foreign and economic policy as it emerges from its self-imposed isolation, will benefit from its strategic location as a maritime gateway to some of the largest markets in Asia.
Geographically, the Indian Ocean’s sea routes connect Asia with the Middle East, Africa, and Europe, and the Straits of Hormuz and Malacca are two of the world’s most important strategic economic throughways. This ocean is the world’s energy interstate, in the words of Robert Kaplan – host to over half of the global maritime oil trade, and home to 40 percent of the world’s offshore petroleum production. The countries of Central Asia, meanwhile, share borders with Russia, China, Afghanistan, and Iran – all states where we have complex and critical foreign policy interests – and historically integral to overland trade between Asia, Europe, and the Near East.
So looking across the entire spectrum, I think a picture emerges of a South and Central Asia region of rising importance in Asia, as well as to the United States. And as we strengthen our partnerships in this region we are focused not only on the important opportunities, but also, and perhaps more importantly, to help manage and mitigate the region’s many challenges.
Economically, the United States is already South Asia’s largest trading partner, and the past few years have seen some major successes that create opportunities for even stronger trade and investment ties.
The biggest factor is of course India, and the economic resurgence that is underway there. According to the U.S.-India Business Council, almost 30 U.S. companies have invested over $15 billion in the last year and a half, with over 50 U.S. firms cxpected to ink more that $27 billion worth of deals over the next year.
The high-level engagements between our two countries since May of 2014 include six at the leader-level, including the Nuclear Security Summit this week, and we could well see more before the end of the Administration. Much of the focus has been on the economic partnership, and while there continue to be challenges, we have seen a dramatic rise in U.S. investment in India, which today outpaces U.S. investment in China. In parallel, we have elevated our commercial relationship with India by inaugurating a Strategic and Commercial Dialogue and revitalizing the CEO Forum.
In the past few decades, Bangladesh has gone from a food importer to a food exporter, lifted tens of millions out of extreme poverty, and met several of its Millennium Development Goals, sharply reducing child mortality and improving maternal health. USAID played no small part in those achievements, and it’s another great example of what can be accomplished with U.S. partnership.
The Millennium Challenge Corporation, which had previously focused mostly on Africa and Latin America, is now looking to invest more in Asia, having recently announced a compact with Nepal and a threshold program with Sri Lanka. This could not only bring in much-needed investment and expertise, but also trigger the “MCC Effect,” where international businesses are drawn to countries that have proven themselves MCC eligible.
Sri Lanka deserves special attention as it continues to consolidate democratic gains in the past two elections and put the country on a path to reconciliation. The United States was among the first to welcome these moves and offer our support and assistance. Both Secretary Kerry and Ambassador Power visited last year – and I myself visited four times in 2015 – and this year we launched our first-ever Partnership Dialogue.
While there is still much to be done to pursue justice, strengthen political rights, and establish enduring peace, the current government has shown that it is committed to moving the country forward: among many other moves, it has already returned over 3,400 acres to displaced families, including another 177 acres just this past week. USAID has launched several programs to stimulate economic growth and development in the country’s north and east, and U.S. businesses are seeing many new and attractive investment opportunities.
The positive momentum of Sri Lanka stands in sharp contrast to the largely negative trajectory of Maldives, which has seen a steady weakening of its fragile democracy and an erosion of the rule of law. Opposition politicians remain behind bars simply because they gave voice to their views, and because the government’s skin is too thin to brook any criticism or competition. History shows that such tactics are short-sighted and counterproductive, and we strongly encourage the Maldives to return to the democratic practices that will best ensure its future success, economic and otherwise.
The economic picture is more complex in Central Asia, where a heavy toll has been exacted by a weakened Russian economy combined with lower oil and gas prices. While the Eurasian Economic Union reflects the past and present dependence on the Russian market, a number of these states are hedging their bets, including through accession to the WTO, and by looking east to China, as well as to other key Asian partners, to diversify their economies. In 2015, we saw unprecedented engagement with Central Asia, as Secretary Kerry visited all five countries and launched the C5+1, a new mechanism for advancing economic and security partnerships with the region, as well as addressing concerns on human rights, the environment, and education.
And we’re not the only ones that have noticed the growing strategic significance of Central Asia. Last year saw visits by Indian Prime Minister Modi, Japanese Prime Minister Abe, and UN Secretary General Ban Ki Moon, among others, showing that global leaders are interested in increasing their engagement with this important region.
I’d now like to spend a few minutes on the important security challenges and our relevant efforts. The most immediate challenge facing every country in the region is the threat of violent extremism and terrorism. All of our partners are concerned about the recruitment of foreign fighters from their countries, the presence of terrorist financing networks, and the effect of poisonous extremist ideologies. We have seen recent efforts by the Islamic State to expand its presence and influence in Afghanistan and Pakistan, as well as about a dozen Daesh-claimed terrorist attacks in Bangladesh.
Central Asians are worried not only about fighters flowing into Iraq and Syria, but also about how to deal with them when they come back. So we are expanding our efforts to work with these societies to combat terrorism and more effectively counter violent extremism. Kazakhstan, for example, has hosted summits where the region’s governments and civil society representatives can share best practices, increase coordination, and improve communication. But we continue to be concerned by actions in many countries that suppress religious freedom and civil liberties in the name of combatting terrorism.
While I do not have direct responsibility for Afghanistan and Pakistan, which is managed by Ambassador Rick Olson, the political and security transition in Afghanistan is at the forefront of any discussions about security and terrorism with our partners in South and Central Asia. We are also increasing engagement with our friends in the region to support economic stability and security in Afghanistan, and we are pleased to see efforts by India and Pakistan to continue dialogue on issues of concern for both countries.
We are just days away from the Nuclear Security Summit here in D.C. that President Obama will host, and it’s important to note Kazakhstan’s leadership role in non-proliferation, especially its key part in the Iran nuclear agreement, where it agreed to store enriched uranium transferred out of Iran. South Asia has also been a key partner in advancing global security through UN Peacekeeping missions: Bangladesh, India, Nepal and Pakistan are four of the largest troop contributing nations in the world. Others, like Sri Lanka, are looking to expand their participation, and even Central Asia states are exploring a role in peacekeeping.
But by far the area of greatest potential is in maritime security, especially as we engage in unprecedented cooperation with India, the region’s largest maritime power. Nearly 90 percent of global trade relies on maritime shipping and the Indian Ocean is the super-highway for much of this commerce. In the two decades from 1992 to 2012, the average number of ships in the Bay of Bengal and the Arabian Sea increased by more than 300 percent. As the economies of Asia continue to rise, so to will the need for greater maritime security in the Indo-Pacific region.
We have seen in other maritime areas that tensions emerge when countries seek to advance competing territorial claims through unilateral actions. But the Bay of Bengal presents a more optimistic example, one where a dominant power worked with its neighbors to amicably resolve claims through international arbitration.
So as a regional power that is committed to advancing the rules-based international order, India has become a key player and an important partner in advancing maritime security in the Indo-Pacific. As such, our bilateral cooperation is increasingly taking on trilateral and multilateral aspects.
Last year, our annual naval exercise with India, MALABAR, also included ships from Japan’s world-class navy, and maritime security was a central focus of our inaugural U.S.-India-Japan ministerial in New York last September. And last summer, for the first time Indian vessels joined the United States, China, and twenty other nations in the RIMPAC exercise, the world’s largest international maritime exercise.
Defense trade has increased substantially, from a mere $300 million just over a decade ago, to close to $14 billion today. And through the U.S.-India Defense Technology and Trade Initiative, for the first time ever we’re working together with another country on its indigenous aircraft carrier development program. In the not-too-distant future, we hope to see the day when the U.S. and Indian navies, including our aircraft carriers, are cooperating on the high seas, protecting freedom of navigation for all nations.
Of course there is much more to our engagement in this region than what I have laid out today, and we are working closely with all of the countries across the Indo-Pacific to mitigate the effects of climate change and environmental degradation, eradicate disease, reduce poverty, and improve access to education. We are partnering to strengthen accountable governance, improve economic inclusion, and advance human rights. Overall, we have without a doubt greatly intensified our focus and engagement with this important region, and set our partnerships on an impressive trajectory for years to come.