Remarks Before the Washington International Business Council
Assistant Secretary, Bureau of South and Central Asian Affairs
Thank you for inviting me to talk about my bureau’s priorities in South and Central Asia and implications for the international business community.
South and Central Asia is one of the most diverse, but least integrated regions in the world with significant economic potential. It includes economic powerhouses like India, emerging markets such as Bangladesh, and resource rich countries such as Kazakhstan, Uzbekistan and Turkmenistan.
The South and Central Asia’s Bureau’s main priorities are:
- to work with India and Central Asian countries to support U.S. efforts in Afghanistan,
- advance the U.S.- India partnership,
- increase our engagement with Central Asia, and
- support the advancement of peace, democracy, economic stability, and sustainable growth across the region.
The private sector plays an important role in our efforts to achieve these goals, whether through trade and investment, or advising governments through public-private dialogues such as the India CEO forum.
That is why the U.S. government is there both to help U.S. businesses in the global marketplace and partner with U.S. businesses on CSR and other projects. As President Obama stressed in his recent State of the Union Address, we will do as much as we can to help U.S. companies expand their exports and business overseas. Let me talk in more detail about some of our priorities and the opportunities they present for American business.
Advance the U.S.- India Partnership
I would like to start with India. India is a rising global power, soon to be the world’s most populous country, with a trillion dollar-plus economy. It is a model of a tolerant pluralistic society in the region. And it is a country increasingly comfortable with working with the United States. This past July, Secretary Clinton visited India and launched a Strategic Dialogue, which called for increased collaboration in a number of areas that fall under five pillars: strategic cooperation; energy and climate change; education and development; economics, trade and agriculture; and science, technology, health and innovation. In November, President Obama hosted Prime Minister Manmohan Singh for the first state visit of his Presidency, calling India an “indispensable” nation. President Obama has also pledged to visit India in 2010, further underscoring the importance of India to the United States.
India Economic Growth
The strength of India’s economy makes it the powerhouse of South and Central Asian regional growth. The Indian economy has been one of the fastest growing economies in the world since 2003, averaging 8 to 9 percent growth in recent years. Moreover, India has managed to weather the global economic recession quite well. India’s economy grew about 5.6 percent in 2009, and is expected to grow 7.7 percent this year. If India can sustain its economic reforms, it has the potential to sustain close to double digit growth rates for many years to come.
You all know that reforms to date have made Indian companies leaders in areas such as information technology, pharmaceuticals, telecommunications, and now increasingly, in manufacturing as well as in clean energy. We hope the Indian Government will seize the opportunity to undertake new reforms that will both attract new investment and propel higher growth.
One sign of India prospering internal market is its growing middle class which now numbers about 300 million and is expected to double over the next 20 years to reach 600 million. To put that into perspective, that’s roughly the size of the total population of the European Union right now.
India Strategic Dialogue
As part of the U.S.-India Strategic Dialogue, the U.S. government is working with India to expand business opportunities. Let me outline several areas of the Strategic Dialogue that I think are particularly relevant for U.S. business:
The economics, trade, and agriculture pillar of the Dialogue is particularly important for business. Our trade has doubled just in the last five years. U.S. exports to India were more than $28 billion in 2008. And, we expect that growth to continue into the foreseeable future as India’s middle class continues to grow and as India’s economy continues to open up. U.S. investment also has grown very quickly, and now totals more than $16 billion.
The strategic cooperation pillar also is expected to offer numerous business opportunities. Last year, our two governments agreed on an end-use monitoring arrangement that will help the process of technology transfer between our two countries, and I think there’s scope for further progress in that area.
We are also urging the Indian Government to raise the cap on foreign equity in Indian defense firms from 26 percent to 49 percent to provide more opportunities for U.S. companies interested in defense sales in India. We’ve had some important recent sales with the C-17s, C-130Js, and the P8 maritime patrol aircraft. But there are significant new sales on the horizon, up to $18 billion worth of contracts, for which American companies are competing. The most notable of these is the multi-role combat aircraft purchase which by itself is a $10 billion sale in which two American companies -- Boeing and Lockheed Martin -- are competing against European and Russian firms. Obviously that would be an extremely important contract for American suppliers and something that we in the government will be advocating and following very closely.
The civil nuclear cooperation initiative has also opened up new possibilities that did not exist for U.S. firms several years ago. Although we have a few remaining steps to conclude, which we expect to do in the coming months, the Indian government has already designated for U.S. firms two sites in Gujarat and Andhra Pradesh – two of the most business-friendly states in India. Each nuclear park could accommodate up to eight reactors, and at over a billion dollars per reactor, the nuclear deal could mean more profits, and jobs, for U.S. firms. Less concretely, technical collaboration with experienced Indian nuclear scientists, already underway in our Energy Dialogue, could also lead to new innovations in more efficient, safer nuclear reactors, enabling us to produce cheaper and cleaner energy.
Finally, the Energy and Global Climate Change pillar of the Dialogue offers potentially significant opportunities. India is a rapidly emerging technological and entrepreneurial power. As McKinsey & Company put it in a recent study, “80% of the India of 2030 has yet to be built.” India has acknowledged that it stands to be seriously affected by the impacts of climate change and has begun taking important steps to transform to a low-carbon growth model. India recently launched an ambitious National Solar Mission and plans to produce 20,000 megawatts of energy by 2022. In particular, the U.S. has taken action to catalyze private sector participation in India’s solar mission. A small U.S.-based business, Azure Power Punjab, is using a $6.2 million loan from OPIC to build the first privately developed solar project in India. The United States also supports India’s broader low-carbon growth objectives, most notably through the Clean Energy Research and Development Initiative announced this past November during PM Singh’s visit. This Initiative envisions significant private sector participation and we hope it will be a case-study of a successful public-private partnership that creates clean technology jobs both in India, and in the United States.
I would like to turn to Central Asia. For thousands of years, Central Asia served as a bridge between East and West, North and South via the Silk Road. The Obama Administration places a high priority on building partnerships in the Central Asian region that could contribute to Central Asia becoming a new crossroads for trade and ideas.
Our Central Asian partners already are playing an important role in our efforts to confront violent extremists in Afghanistan. They have provided much-needed electricity to Afghanistan, supplied foods and medicines, and facilitated the transport of non-lethal supplies via the Northern Distribution Network through the region into Afghanistan. Indeed the Northern Distribution Network has the potential to improve transportation infrastructure and stimulate trade routes connecting Central Asia to the growing markets of South Asia, which will have a lasting economic benefit for both.
Central Asia also possesses significant reserves of oil, gas, and minerals that can help meet growing demand. U.S. energy companies have invested billions to develop hydrocarbon reserves. The energy resources of Central Asia can be a force for predictability in the global economy, providing diversity of sources and transit routes, while also driving economic development in the region itself.
While energy is important, we would also like to expand our commercial ties to other sectors of the Central Asian economies. We are doing so by reinvigorating mechanisms such as the Central Asia Trade and Investment Framework Agreement. The TIFA Council met here last October, with participation from all five Central Asian countries and Afghanistan to increase regional cooperation.
Since becoming Assistant Secretary, I have traveled to each of the five Central Asian republics, and I've met with senior officials from each of the countries here in Washington and in New York. What I've heard -- again and again -- from our friends in Central Asia is a renewed interest in stronger ties and practical cooperation. To capitalize on this interest and broaden our cooperation, we have established high-level, bilateral mechanisms with each Central Asian country, to provide structure to seek progress on the full range of our common interests.
These cover a full range of issues from security issues, including counter-narcotics and counter-terrorism; to the human dimension, including democratic reform, rule of law, human rights, and relations with NGOs; and economic and development issues, including trade and investment, health, and education. In the future, we hope to include private sector components on the margins of the consultations to allow each of the countries to elaborate business opportunities and the U.S. to offer suggestions for how the business climate might be improved.
Let me now briefly describe some specific opportunities we see in Central Asia.
Since its independence, Kazakhstan has set an example in Central Asia with economic reforms that have attracted investment and created jobs. U.S. oil companies played a significant role in fueling Kazakhstan’s rapid economic growth over the last decade. The invaluable skills, technology and training these companies have brought to the table have enhanced Kazakhstan’s energy sector and set it on a course to become one of the top non-OPEC oil exporters in the next ten years.
As Kazakhstan’s economy continues to recover from the global economic downturn, it should again be an engine for growth within Central Asia. Since 1993, cumulative U.S. investment in Kazakhstan has reached the $29 billion mark. The best prospects for trade and investment in the future are in such sectors as electric power generation, agricultural machinery and equipment, food processing and packaging, information and communications technologies, mining, medical equipment and pharmaceuticals, and oil and gas equipment and services.
Turkmenistan is a country rich in hydrocarbons, with a developing energy sector. As of 2006, U.S. firms invested more than 40 million dollars in the energy sector, as well as agriculture, IT, construction and transportation. As Turkmenistan opens gradually, telecom could also provide future opportunities for investment. There are currently opportunities for U.S. companies to develop offshore hydrocarbon resources in the Caspian, and to develop onshore resources through service contracts and sales of equipment. In addition, Turkmenistan’s agricultural sector is expanding, providing an opening for American agricultural companies to deliver the equipment needed for modernization. As the country’s textile, communications, and transportation sectors develop, these areas present further opportunities for trade and foreign investment. Turkmenistan remains a challenging business environment, with the government playing a controlling role in most commercial activities.
Uzbekistan weathered the global economic downturn with solid economic growth in 2009. Since Uzbekistan's independence, U.S. firms have invested roughly 500 million U.S. dollars in Uzbekistan. Sectors that offer the best opportunity to foreign direct investment include oil and gas, energy, production of building materials, textiles, machine building, and tourism infrastructure. It is a resource-rich country that exports natural gas, mineral fertilizers, ferrous metals, agricultural products, and automobiles. It has shown promise in the manufacturing sector with the creation in 2007 of a joint venture by GM-DAT, a Korean subsidiary of General Motors, and UzDaewoo to assemble Korean-manufactured cars, including Chevrolet. This plant now produces many lines of cars under the Chevrolet nameplate for export to Russia as well as the domestic market. General Motors recently signed a deal to begin constructing power trains in Uzbekistan at a new plant just outside Tashkent, and Boeing has a longstanding relationship with the national airline of Uzbekistan, Uzbekistan Airways.
Uzbekistan has substantial natural gas reserves as well as some oil fields. In December 2009, the Turkmenistan-China gas pipeline, transiting Uzbek territory, became operational. Uzbekistan is seeking to increase investment in its energy sector and hosts several international companies, including Lukoil, Petronas, and several South Korean companies that have recently entered into contracts in Uzbekistan’s energy sector. Uzbekistan is an important exporter of electricity to Afghanistan. It has also taken on bridge and rail projects, which have contributed to our reconstruction efforts in Afghanistan.
Uzbekistan, like Turkmenistan, presents obstacles to doing business, but it has taken welcome initiatives such as the establishment of the Navoi Free Trade Zone and Government plans to improve infrastructure and expand the use of computers and technology in its schools. The U.S. Embassies in Tashkent, Ashgabat and elsewhere in the region stand ready to facilitate U.S. business activities through active engagement with the U.S. private sector and advocacy on behalf of American companies.
Public-Private Sector Engagement
The last area that I’d like to talk about is the importance of the private sector. We have expanded the U.S.-India CEO Forum to focus on how government can work with the private sector to really capitalize on the energies, ideas, and practical experience of the private sector.
Let me put the vital role the private sector plays into context. Annually USAID gives India roughly $100 million, mostly for health. Working with the Government of India, the private sector and other donors, USAID leverages approximately five dollars for every dollar of our development assistance. We would like to try to take that model and apply it to virtually everything that we’re doing. I think our private sector has a great interest in working in a variety of areas. It’s just a matter of identifying discreet projects where we can really make some progress and help the people of the region. That’s really the purpose of the CEO Forum – to give us that kind of strategic advice about where we should really focus our energies to make a positive difference. We also want to strengthen the private sector role throughout our dialogues with India – in agriculture, information and communication technology, health, and education, to name just a few.
We have also begun to develop strategies to support greater involvement by small and medium enterprises in each other’s economies, to create public-private partnerships to further develop India’s infrastructure, to promote collaboration on clean energy technologies and environmental services, and encourage the growth and exchange of information, communication, and health care technologies.
National Export Initiative
As President Obama said in the State of the Union address, we're launching a National Export Initiative that will help U.S. farmers and small businesses increase their exports and reform export controls consistent with national security. This will advance our goal to double our exports over the next five years, an increase that will support 2 million jobs in America.
I look forward to hearing your views about doing business in South and Central Asia and ways we can partner to achieve our mutual goals.