North-South trade corridor

K.N. Pandita

China has an ambitious plan of reviving the historical Silk Road for trade and commerce, albeit with new vision and modern connectivity system. She looks for a shorter and less expensive route for trade with Central Asia, Eurasia and Europe.

China’s movement westward is facilitated by the vacuum in Central Asia created by the implosion of the Soviet Union, and declaration of independence by the Central Asia Republics. 

In pushing its agenda of expansion of trade, China has already established rail link with Kazakhstan and Kyrgyz border. Road connectivity via Uighur Autonomous Republic becomes the backbone of Sino-Central Asian trade venture.

Kazakh oil and Turkmen gas deposits are strong incentives for China to invest in infrastructure requirements in Central Asian Republics. These Republics provide a rewarding market for her goods, with which these are already flooded.

In a bid to contain China’s ambitions in Eurasia, New Silk Road Initiative promoted by the United States underscores new geographical and preferential alternative. Elucidating the new initiative, Hillary Clinton, the then Secretary of State told the audience in Chennai in 2011 that increased trade with India would offer diversification and needed balance in the region, helping avoid a Chinese monopoly.

This initiative has to be dovetailed to Central Asian Regional Economic Cooperation (CAREC) countries as crucial players in the programme. In the Asian Development Bank-sponsored 12th Ministerial Conference of CAREC at Astana in Kazakhstan in October 2013, President of the Bank, Takehiko Nakao spoke about how Central Asia could become a transport link for the RICE countries (Russia, India, China and emerging Europe).

The idea of including India as an actor in the new trade initiative between Eurasia and East Asian countries found reflection in the presentations of some academia in prestigious institutes of study and research in the region. The US intends to seize the opportunity of promoting much-needed trade relations between Central Asia and Afghanistan with India as well as connecting these regions to booming Southeast Asian markets. He also stressed the need to align CAREC corridors to new routes.

It was Dr S Frederick Starr, chairman of the Central Asia – Caucasus Institute and Silk Road Studies Program at Johns Hopkins – SAIS, who pointed out that the CAREC road infrastructure project was missing one very important link: it is limited to road projects within Central Asia and Afghanistan and lacks transit corridors to India, one of the major cargo centers closest to the region that sits between Southeast Asian and Middle Eastern markets.

India’s foreign trade has been expanding considerably over the last few years, including with Central Asia. According to Evgeniy Vinokurov, of the Eurasian Development Bank’s Center for Integrated Studies, India’s foreign trade has been increasing at around 19% since 2000. In 2008, India earned US$43 billion from exports to the European Union and almost $3 billion from exports to Northern and Central Eurasia – compared to 2000, when these numbers were $12 billion and $0.7 billion, respectively.

Reflecting on the potentiality of the New Silk Road Initiative, henceforth to be called North-South Trade Corridor, the predictions are that the delivery time of goods traveling along the North-South Corridor would be reduced by anywhere from 10 to 20 days and that the cost per container would decrease by $400 – $500, compared to the more circuitous routes through neighboring countries that are in use currently.

However, due to the continued lack of infrastructure development and the availability of already established routes, freight forwarders are little interested in transit corridors through Afghanistan at the moment. If the North-South Corridor can be successfully developed, an estimated $100 – $120 billion worth of goods could be passing through Central Asia and Afghanistan – up to 20% of India’s $500 – $600 billion worth of trade with Europe, the Commonwealth of Independent States (CIS), Iran, Afghanistan and Pakistan.

The vision of North-South Trade Corridor does not leave out the strong possibility of Afghanistan as crucial to the corridor, benefitting not only in terms of trade and scope for exploration and exploitation of its mineral wealth but also in achieving fair amount of political stability with the exit of NATO forces in 2014.

But this initiative needs to bring Afghanistan, Pakistan and India on board. In the first place, the vision will reduce environment of long hostility between India and Pakistan. With Iran-Pakistan gas pipeline running into complicacies, and the alternative of TAPI prospectively becoming integrated into the North-South Trade Corridor, Pakistan could expect far better option than what IP pipeline promised.

The contemplated corridor would also help in reducing atmosphere of mutual rivalry and antagonism between the two countries over their reach in Afghanistan. It could usher prospect for joint collaboration for the development of Afghanistan with international community in tow.

But on the ground, various factors are still in force. What will be the political structure and dispensation in Afghanistan in post-withdrawal era, and how far will the civilian power in Pakistan assert over the recalcitrant army? These questions are of vital importance.

Also large investments made by China in various projects like Afghanistan mineral deposits, especially the copper mines, or Kazakh and Turkmen gas, cannot be wished away that easy. But the Eurasian-South East Asian trade grid across the Indian sub-continent has bigger potential for dividends.

Both India and Pakistan, two important countries of the sub-continent, will have stakes in the project. It depends on their vision of new markets and trade strategies in this region that will give direction to future course of relationship.

Notwithstanding the fact that India is far less represented in Central Asia in comparison to Russia or China, promoting India’s cooperation within the New Silk Road Initiative and working with Central Asian countries to overcome non-infrastructure related issues, such as legal and pricing issues in border transit, is a niche that the US can exploit with potentially tremendous results. India’s greater involvement in the region would likely be welcomed by Central Asian governments to help balance China and Russia’s presence.

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