Developments in South and Central Asia

Remarks

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 worlds 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 Id like to briefly review before
we jump into discussion.
Id 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 doesnt 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
Nepals 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 Nepals 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 Nepals 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 Nepals inspiring heritage, and Id 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
Indias 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.
Were expanding that cooperation not just because India is the regions
geographic anchor, and not just because its the worlds fastest-growing
major economy, but because its a country with which we share many core
values and many common interests. And our relationship with India has
really blossomed since last years election of Prime Minister Modi. President
Obamas 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, Indias
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 well 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 Indias 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 theres 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 Indias 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 Im sure youve 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.
Were 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
Indias 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 Lankas 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 Im sure youre
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
dont bode well for sustainable growth. Just a few months ago, the IMF
revised downwards its projection for Bangladeshs growth, citing the
political climate. The current situation hurts the Bangladeshi people and the
economy, so were 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, Id also like to touch briefly on the region near and dear
to my heart, and my career Central Asia. Weve 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 were 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 its a diverse group of
states with diverse sets of national interests, and we adjust our approach
according to the specific conditions of each.
But were 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, were 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, theres
some real momentum in Central Asia right now. That said, many of their
economies are closely tied to Russias, so theyre dealing with the impacts
of Russias economic downturn right now, especially when it comes to
falling remittances. Meanwhile, Chinas 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 Chinas
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 were rather proud of. We also have an embassy-tobusiness program called Direct Line, where senior embassy officials speak
with companies here on business developments abroad so Id recommend
jumping on those calls if any of you are interested.
With that, and realizing that Ive left a lot of stones unturned, Id love to
open up the discussion and hear your thoughts about the regions great
potential, as well as its significant challenges. And Im 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.
Posted by Thavam