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SOUTH AND CENTRAL ASIA IN EURASIAN INTEGRATION: KEY TO PROSPERITY AND STABILITY

By Prof. Dr. Zahid Anwar

Department of Political Science University of Peshawar, KP, Pakistan

Phone: +92919216751,zahid_anwar@upesh.edu.pk

INTRODUCTION: This paper explores to understand the impact of South and Central Asian connectivity in the overall ambit of evolving Eurasian matrix. Will Economic integration of South and Central Asian regions augment Central Eurasian prosperity and stability? The history of Silk Road shows that Indian subcontinent was one of the exotic destinations of the Central Asian Caravans. The empirical evidence of cross-regional interactions between Russia, the Caucasus, Central Asia and the larger developing world highlights that South Asia has contributed to prosperity of Eurasian region. In antiquity Central Asia was connected with South Asia through trade routes. From time immemorial people and goods crisscrossed the two regions. South Asian society, culture, religions, history, architecture, economies and political systems reflect Central Asian imprint and vice versa. In Middle Ages trade along the present day Afghanistan and Pakistan flourished between South Asia and Central Asia. This paper explores how regional economic integration will increase trade, commerce, investment and other economic activities and also gauges the impact of increased economic activity as a result of South and Central Asian integration on the prosperity and stability of Eurasian Space. HISTORICAL SETTING: In antiquity Central Asia was connected with South Asia, West Asia, Europe and China through the network of routes known as the Silk Road. Aside from geography, Central Asia bridged time as well. On one hand it connected different physical region on the other it was a big bond between ancient times and the modern world1.In the development of the civilizations of Europe, China, Persia, Arabia and India trade on the Silk Road played important role. The Silk Road Network is distinctive evidence from antiquity, of intercontinental collaboration and cooperation of trade, commerce, ideas and cultures. It spread over about eleven thousand km from Roman Empire to China, Central Asia, northern India and Parthian Empire covering the period from two hundred BC to 14th century AD. The interaction among these civilizations through the Silk Road enriched philosophies, religions and technologies. In ancient times the major traders were Indians and Bactrian, then from fifth to eighth century AD the Sogdians traders played a leading role and afterward the Arab and Persian traders dominated the economic scene. India was part of the Silk Road network centuries ago and the geographical space now called Pakistan was entryway to the South Asian region. The Grand Trunk Road connected Calcutta through the Khyber Pass to exotic Central Asian destinations. People, goods and cultural exchanges took place through the Silk Road that facilitated the people of these regions to know each other’s` history, culture and thought process. ROUTES AND REGIONS: Xian (Changan) was the capital of ancient China and the northern route started from there. The other most used route was southern one. The southern route (Karakoram route)was basically a single route which passed through the Karakoram mountains. Broadly it persisted to present day Karakorum Highway that connects China to Pakistan. Crossing through northern Pakistan, over

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the Hindu Kush Mountains, it re-joined the northern route in Turkmenistan near Merv. Experts underline that the southwest route was the one that passed through Brahmaputra / Ganges Delta 2 . Another route known as Ledo Route linked Bangladesh, Myanmar and China3. During Kushan Empire Indus valley and Central Asia were unified in the first and third centuries. That political development strengthened the role of the traders from Taxila and Bactria as well as nurtured multi-cultural relationship. In Central Asia, Muslims expanded from the seventh century onward and trade flourished in that part of the world. There were thousand and one trading cities on the Silk Road ranging from the Middle East to Europe, North Africa to the Indian Subcontinent. Some of the cities on the southern route are still important urban centres of Afghanistan, Pakistan and India like Kabul, Kandahar, Peshawar, Taxila and Ahmedabad. In ancient world Badakhshan, a province of contemporary Afghanistan was famous for Lapis lazuli. Lapis lazuli was traded as far as Egypt. Then its trade was extended to the valleys of Tigris and Euphrates in fourth millennium and afterwards in 3rd millennium BC it was stretched to Indus valley particularly Mohenjo-daro and Harappa 4 .Silk, paper, spices, sandalwood, horses, camels, carpets, fruit, vases, dishes, gold, silver, rice, tea, medicines and military equipments were also traded on the Silk Road. It is not a story of few decades but a narrative of thousands of years of trade and communication5.These exchanges laid the foundations of modern world6. With the discoveries of direct sea routes, by passing the Ottoman Empire, the significance of the Silk Road decreased. GEOGRAPHIC COMPULSIONS: The diversity of topography makes the Central Asian Region distinct. The Central Asian Terrain reflects its natural beauty. There are great mountain systems in the region which include Hindu Kush, Tienshan, Kunlun, Pamir, Kopet Dagh, Altai and Karakoram. There are world famous deserts in the region like Taklimakan, Karakum, Kyzylkum, Dasht-e-Margo and Registan. It is custodian of great water bodies for instance Caspian, Aral, Assykkul, Balkhash, Kaindy and Changan. The region`s rivers feed its lands since time immemorial e.g., Amu Darya, Syr Darya, Murghab and Kashgar. The people of Central Asian Region are broadly divided into Turkic and Non-Turkic groups. The Turkic group of people include Kazakh, Kyrgz, Turkmen and Uzbeks while the non-Turkic group includes Tajik, Pakhtun, Russian, Korean, and Germen. POLITICAL MOSAIC: Political instability in one part of Eurasia is harming political stability in other parts of the region. Keeping in view this fact great powers as well as neighbouring countries of Afghanistan have developed a consensus to coop with the situation in Afghanistan. The best way to coop with that situation is develop commonality of interests and this can be done by making Afghanistan a bridge for economic interaction between South and Central Asia. It seems that with passage of time China will play pro-active role in regional stability specifically in Afghanistan. The purpose of Istanbul process is stability and security in Afghanistan. It was the result of an agreement between several Central Asian states, Russia and China in Istanbul in November 2011. Its fourteen members include Afghanistan, China, India, Iran, Kazakhstan, Pakistan, Russia and Turkey. Its supporting parties include the US, the UK, the United Nations and the Shanghai Cooperation Organization. This regional mechanism has played a positive role in promoting Afghanistan's reconstruction7.

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CENTRAL ASIAN CONTEXT: Central Asia is a bridge between Europe and Asia. Its location has reinforced its centrality in the Post-Cold War scenario. South Asia`s role in Central Eurasia is determined by its cultural and Silk Road connections and energy needs8.In the last few decades the economic progress has helped millions of people of the Asian continent to come out of their abject poverty. Some experts opine that South Asia‘s growth rate will rise again and progress at six to eight per cent until 20309. High and sustained growth rate can be speedily achieved by pooling regional resources through mutual economic cooperation. The slow progress in achieving regional cooperation has been due to various reasons like underdeveloped infrastructure, poor connectivity, bureaucratic hurdles in decision making, preoccupation with security issues and political instability. Regional economic collaboration will benefit all South Asian countries in their economic development and in alleviating poverty in the region. Integration will be easier if has been done in stages and region wise. In the context of Central and south Asia the foundation of ECO is an important development. In this point in time its potential is not fully realized. Economic interaction between the two regions can be increased through this type of new regionalism. The ECO members have signed agreements in 1995 which have specified the establishment of an ECO Reinsurance Company based in Pakistan along with a shipping company and an airline and an ECO Trade and Development Bank to be based in Istanbul,. Despite commitment execution of these agreements has not yet materialized. There is no denying the fact that there are many possibilities and vivid prospects for greater integration between South Asian countries and their Central Asian neighbours.10. Central Asia is Centre of Eurasia and Eurasia means all of Europe and Asia, including the Arab World. In the Eurasian space many new regional organizations have emerged. Since the advent of the 21st century Central Asia and South Caucasus have experienced a process of rapid economic growth and of internal and external integration. Eurasian economic integration will be much influenced by the performance of SCO (Shanghai Cooperation Organization), EurAsEC (Eurasian Economic Community) and CAREC (Central Asia Regional Economic Cooperation)11. The economic cooperation trend will continue to shape regional dynamics, as the Shanghai Cooperation Organization (SCO)’s scope has broadened from regional security issues to stability, trade, and science. The Shanghai Cooperation Organization`s Council of Heads of Government accentuated the significance of regional cooperation in gas and oil exploration and distribution networks, transportation and telecommunications in October 2005. In the meeting India, Iran, Mongolia, and Pakistan participated as observers12. The economic corridor between Pakistan and China connects Gwader port with Xinjiang. Chinese government intend to make Xinjiang a key transportation, trade, logistics, culture, science and education center and a core area on the Silk Road Economic Belt. The Silk Road Economic Belt is a China-proposed initiative to boost cooperation with Central, South and West Asian countries. Xinjiang has so far opened 107 international road transport routes to adjacent countries, accounting for 43% of the total number in China. Chinese Xinjiang Uighur Autonomous Region is rich in oil and gas. Chinese President Xi Jinping visited Pakistan on 21 April, 2015 to launch projects worth $46 billion. Xi oversaw agreements on pipelines, power plants and other projects as part of a massive $46 billion joint development programmme that Beijing hopes will stabilize its long-time ally's economy. Pakistan hopes that the investment plan will end a chronic energy crisis and transform it into a regional economic hub13.

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SOUTH ASIAN VISTA: Notwithstanding the current difficulties, South Asia and Central Asia are important in the 21stcentury because of its important role in world politics economics and history. The formation of SAARC (South Asian Association of Regional Cooperation) was a new leap in New Regionalism. One of the big issue regarding SAARC‘s slow progress is due to the member nations` inability to fuse their domestic agendas with the SAARC agenda. There are many ways to address the difficulties confronted by the two regions. For instance the dynamics of smooth intra-regional trade if brought into play can be pivotal in strengthening the economies of all SAARC and ECO countries by unleashing a soft process that might create a helpful environment for resolving long standing regional political issues, which would further boost mutual economic cooperation. There is huge potential for intra‐state electricity trade among the SAARC countries which is reflected in the formation of SAARC Working Group on Energy. Besides, the creation of a Power Pool would enable the region to utilize its sources of electricity optimally by balancing the demand and supply. This could make electricity cheap and reliable. Moreover, this would create interdependence among the regional states. ECONOMIC DYNAMICS: Getting a greater connectivity is a global challenge for

all countries. There is big congruence between externally promoted mega-schemes

for regional integration and regions` own vision of its economic evolution. There are

sub-regions in the Central Eurasian Space and in tuning regional interests with the

interests of the Central Eurasian Region will further enhance the process 14 .

Afghanistan’s fortunes remain tied to its neighbourhood, just as the neighbourhood’s

fortunes remain tied to Afghanistan. This region is important for global security view

point and a region full of economic opportunity and human potential. Pakistan offers

the critical overland routes and connectivity for mutually beneficial trade and energy

transactions intra regionally and inter-regionally15.A more interconnected region can

serve as a driver of economic development and as an anchor of peace and security16.

Regional cooperation is spurred by the global energy dynamic and the need to

develop transnational pipeline networks17.

Regarding regional economic integration Pak-China Economic corridor is another

important development. People in Pakistan have attached many hopes regarding the

success of the project. It is stated that Pakistan China economic corridor will raise

people`s living standards. The completion of the projects under the recently signed

agreements between Pakistan and China will help in reviving the economy of

Pakistan. Chinese investment in infrastructure and power projects is thrice the

collective foreign investment in the country during the last ten years. The ripple

effects of these projects will create thousands of job opportunities in Pakistan. The

said corridor will attract investors, builders, developers and develop engineering

sector, revive construction industry, and boost housing and construction

sectors18.Another development in this connection further highlight the significance of

the economic corridor. The coastal city of Qingdao, East China's Shandong province,

signed an agreement to establish sister-city relations with Pakistan's port city

Gwadar on 23 April 2015 in accordance with the central government's Belt and Road

Initiative. The move is designed to boost the China-Pakistan Economic Corridor,

which connects Kashgar in China's Xinjiang Uygur autonomous region to Pakistan's

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Gwadar Port on the Arabian Sea, and to establish closer links between two pivotal

port cities, Qingdao and Gwadar, along the "Belt and Road"19.

Source: http://www.piffapk.com/downloads/reports/PIFFACountrreport.pdf It has been said that Xinjiang has huge potential in oil and gas exploration and production. Resource assessment shows the region has 22.8 billion tonnes of oil and 14 trillion cubic meters of natural gas20. There is talk about a project connecting power grids in China and Pakistan. Its materialization will bring development opportunities to Pakistan and neighbouring Kashgar in south Xinjiang21. MODES OF TRANSPORT: Transport plays significant role in economic activity and social development. There is no denying the fact that the Eurasian space with its geographical contiguity has a great potential for cooperation in the connectivity sector. For the improvement of regional connectivity all modes of transport including railways, roads, aviation, and maritime shipping are important. And each one has its distinct operational and physical features. Connectivity challenges in the region include both hard (structural issues) and soft (agreements, legal framework) issues that require better understanding and adequate support. Some other glitches in this respect are restrictive policy regimes and institutional issues. The strategic aspect of cross-border trade in energy cannot be overlooked. It has a tremendous potential for creating cooperation among the states. The significant point in this connection is that energy trade is a win-win situation for every state as it is an economic gain for importer and exporter alike as well as for the transit country. The New Silk Road Strategy integrates Afghanistan with neighbouring states and that strategy opens India to Afghanistan and Central Asia through Pakistan.

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PAKISTAN AND REGIONAL INTEGRATION: Pakistan has taken some steps to upgrade its roads, railways, pipelines and seaports to play its role in regional connectivity projects. The construction of the Gwadar port is an important component of Pakistan’s overall initiative to facilitate trade with the landlocked states of Central Asia22. It is actively participating in TAPI, CASA-1000 and many other such projects so that to connect South Asia, China and Central Asia. A major development is the proposed Turkmenistan-Afghanistan-Pakistan (TAP) pipeline designed to carry some US$ 4 trillion worth of oil and natural gas to Asia and Europe via Arabian Sea ports23. Some phases of its Motorway Project are already completed and the work on the rest is going on as per plan. The latest addition is Hazara Motorway which is a component of the Pakistan-China Economic Corridor. That sixty kilometers long four lane fenced expressway will cost $30 million. It will reduce drive time from the capital Islamabad to Havelian town to just thirty minutes and will provide road to the Havelian Dry Port project. Different towns on the way like Haripur, Abbotabad, Mansehra, Batagram and Kohistan will be linked to Motorway. The project is part of the networks of motorways to connect Pakistan with China, Afghanistan and Central Asian Republics. It will give rise to socio-economic uplift, new business ideas and employment opportunities in the region24. Pakistan is geographically lucky enough to become hub operating as a focal point of logistics to the neighboring countries particularly Afghanistan, Azerbaijan, Kazakhstan, Kyrgyzstan, Uzbekistan, Turkmenistan and Tajikistan. Hydrocarbon rich Central Asian and Trans-Caucasian Republics need a corridor and a transit route to export their energy resources to South Asia. An important component of regional integration is Pakistan and Afghanistan`s agreement on the broad parameters of Afghan exports to Pakistan and India and the use of Afghan territory for Pakistan’s exports to the Central Asian states. The bi-lateral Afghan-Pakistan Transit Trade Agreement (APTTA) with both commercial and non-commercial logistics has added to the importance of Pakistan as a prominent trade corridor. If Pakistan`s efforts yield results and it succeeded in penetrating the Central Asian markets then without an iota of doubt it can become a major trade corridor through the seaports of Karachi, Port Qasim and Gwadar. Another important aspect of this development is emergence of international freight forwarding industry since the early 1980s in Pakistan. Currently, the industry comprises about 550 entities with an estimated annual turnover of Rs 43 billion, over 12,000 employees and geographical coverage in the major export-oriented centers25. The Government of Pakistan in 2005 has launched major initiatives around the National Trade Corridor (NTC) to reduce the cost of trade by improving transport logistics infrastructure and services26.

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Source: http://www.piffapk.com/downloads/reports/PIFFACountrreport.pdf

Iran is also developing with Indian support its Chahbahar seaport to make it

attractive for the landlocked countries of Central Asian Region. The Iranian

government has declared Chahbahar as a Free Trade and Industrial Zone. Better

transit services and developed physical infrastructure will enable Pakistan to tap this

potential and will boost its reviving economy. Pakistan is also geo-economically

significant for China. To sustain its economic growth China needs way in to other

countries for trade development and extension. Pakistan provides China with the

transit trade routes for western region, energy corridor to import oil from the Gulf

region and naval facilities on the Arabian Sea coast to protect its energy supply line

from the Middle East. Pakistan is facing many challenges to become logistics hub for

transit trade. If it overcome these challenges then it will be great leap forward to

South Asian prosperity because nothing opens up an area to economic development

better than good transportation networks with good transit rules and an ability to

transport goods and people effectively27.

CHALLENGES: For mutual regional connectivity the road, rail, air and communication links needed to be improved. Multilateral agreements relating to economic development contribute towards socio-economic development of individual states leading to regional cooperation. Some experts have highlighted that the following Non-Tariff Measures (NTMs) are holding back progress: a strong focus on food security and self-sufficiency; complexities and variations in licensing; permits and tariffs; anti-dumping duties and quantitative restrictions; duties and

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charges over and above tariffs; import of specific products through specified ports only; transportation restrictions; import only by state trading agencies; and stringent visa regimes etc. To enhance intra-regional trade the countries of South Asian Region should minimize NTMS. These are: sensitive lists; poor connectivity and transit crisis; insufficient transit; poor logistics affecting cost of export and import; institutional constraints; bi-lateral free trade agreements (FTAs); non-tariff and para-tariff barriers; exclusive focus on ―trade in goods; identical comparative advantage; fear of loss of revenue; lack of trust; and trading blocs with countries outside the region. To implement SAFTA on priority basis these issues should be addressed by the SAARC states mutually and through negotiations at SAARC level28.

Source: http://www.piffapk.com/downloads/reports/PIFFACountrreport.pdf In 2011 it was projected that average per capita income in Asia will likely cross US$

42000 by 2050 with Pakistan crossing US$ 7900 and India $42000. It is in the

interest of the region that all countries of South Asia put their own houses in order to

be winners in the 21st Century. The promotion of travel and tourism within the

SAARC region is necessary to build confidence amongst the people of the region for

greater economic cooperation and to establish joint infrastructure funds to facilitate

connectivity in the region. Another helpful step in this direction will be the

establishment of a joint investment company or SAARC Bank to facilitate trade and

investment. No dispute resolution mechanism can effectively work without

demonstrated political will to resolve the disputes by the involved parties. SAARC

can learn much from ASEAN in this realm. The annual summit and periodic

ministerial meetings at SAARC level provide an opportunity to member states to

exchange views on controversial issues nevertheless the SAARC does not have a

forum like ASEAN Regional Forum (ARF) where the states could discuss their

political disputes with honesty of purpose29. Despite geo-economic significance of

Pakistan it needs to properly coop with challenges so that it can play its due role in

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this regional connectivity project. This aspect was precisely highlighted by Takehiko

Nakao, Asian Development Bank chief that Pakistan still faced a host of challenges

hampering its potential growth, forecast at 4.5 per cent of GDP this year. He

elaborated that there were quite a lot of challenges Pakistan faced currently. The

challenges included security situation on the borders, the standards of human

resource that required to be improved and financial inclusion and infrastructure

development and power sector were other areas where Pakistan was deficient30.

WIN-WIN PERSPECTIVE: Working together to restore Eurasian region to its historic role as a vital hub of global commerce, ideas, and culture will give rise to win-win situation. The Central Asian Republics are focus of a struggle for hydrocarbons in which many players are involved31. The efforts to resume traditional trading routes and reconstructing significant infrastructure links broken by years of violent conflicts are now showing its results. South and Central Asia are constructing through Pakistan and Afghanistan new North-South trade and transit routes that supplement vital East-West connections across Eurasia. Another positive aspect of the development in the region is reduction of barriers to trade, investing in each other’s economies, and supporting international development and cross-border projects. The countries of the region have slowly and gradually realized that they have more to gain economically by working together. It’s the world least economically integrated region and promoting connectivity in a region is not an easy task yet it’s worth taking keeping in view its long term benefits. To materialize this vision recent efforts of the International Community in four key areas are particularly noteworthy. Firstly, to create regional energy markets. There are more than 1.6 billion people in South Asia and its economies are growing rapidly and its demand for reliable, efficient and inexpensive energy is growing in turn. Central Asia is a source of vast resources of oil, gas, and hydropower. Turning some of these resources from the republics of Central Asia to the countries of South Asia, through Afghanistan, would be beneficial for the region’s energy users and energy suppliers alike. In this connection the U.S. has provided support for CASA-1000 regional electricity grid, including a $15 million contribution following the March 2014 World Bank commitment of $526 million and support for the CASA Secretariat; more than $1.7 billion in support of energy transmission lines, hydropower plants, and associated reforms in Afghanistan since 2010; and adding 1,000 megawatts to Pakistan’s power grid, supplying power to more than 16 million people. Secondly, trade and transport: Improving trade and transit in South and Central Asia means improving the “hardware” of reliable roads, railways, bridges, and border crossing facilities. There is need to get neighbours to work together, to harmonize national custom systems, break down bureaucratic and institutional barriers to trade and connect regional countries into multi-lateral institutions. The U.S. has provided more than 3,000 kilometers of roads built or rehabilitated in Afghanistan; support for Kazakhstan and Afghanistan’s accession to the WTO; technical assistance for the passage of the 2010 Afghanistan-Pakistan Transit-Trade Agreement (APTTA), and support for the Cross-Border Transport Agreement (CBTA) between Kyrgyzstan, Tajikistan, and Afghanistan. Thirdly, customs and border operations: Profitable regional trade depends in large part on speedy and efficient transit. It also depends on border security and good governance that prevents transit of weapons, drugs, and human trafficking. Efforts are underway to minimize border wait times, increase cooperation at key crossings

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and checkpoints. In the 21st century intraregional trade in Central Asian Region has increased. Since 2011, the average cost of crossing regional borders decreased by 15 percent; customs procedures have been streamlined at seven Afghan border crossing points, resulting in expedited trade with average release time down from eight days in 2009 to three and a half hours in 2013, saving $38 million annually. Fourthly businesses and people-to-people contacts: Regional economic connectivity is more than infrastructure, border crossings, and the movement of goods and services. Sharing ideas and expansion of economic markets also creates opportunities for youth, women, and minorities and enhances regional stability and prosperity. The organization of trade delegations, meetings and conferences in Almaty, Islamabad, Kabul, Mazar-i-Sharif and Termez which have resulted in over $15 million in trade deals is a good step 32 . Organizing symposia workshops, conferences, faculty and students exchange of the regional institutions will further strengthen people to people contacts. Pakistan and Afghanistan are expanding economic ties an important aspect of which is expansion and up-gradation of infrastructure, including road and rail links connecting the two countries 33 . Regarding regional political developments some positive steps which have been taken recently will exhibit positive results. CONCLUSION: The most distinctive feature of the twenty-first century is regional cooperation for accelerated trade and economic development. Political problems would take time to be solved and the process of resolution of disputes would be helped by economic relations which would soften up attitudes creating a spirit of give and take. These new central Asian States are rich in hydrocarbon and are in search of their identity. They are seeking new routes to export their natural resources and trace their cultural and historical roots. In this quest they have realized the significance of West and South Asia. In the current regional geostrategic and politico-economic scenarios the South and Central Asian independent and sovereign states have realized the benefits of stronger regional economic interaction. Greater interaction between South and central Asia will pave the way for sustainable development of Eurasian Region. Central Asia is rich in hydropower, oil and gas and South Asia is deficient in oil and gas but rich in other resources. So import and export of these and many other commodities will be mutually beneficial. Regional integration will usher economic development which will prove a great leap forward to regional political stability. Political and economic stability are two facets of the same coin. Enhancing one will strengthen the other. Steps for regional economic integration will benefit people which will galvanize peoples` interests in the regional political stability. Advancements in the communication technology in the 21st century have made it easy to restore and develop the historical connections between Europe and Greater Central Asia of the Silk Roads Era. The Eurasian connectivity project particularly developing its South Asian component will boost prosperity and raise the living standards of people provided irrevocable commitment is made to build it notwithstanding challenges. South and Central Asian integration will enhance stability and prosperity in Central Eurasia if the nation-states of the region succeeded in turning their focus from zero- sum to positive- sum interplay.

ENDNOTES

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