For all of the bad news emanating out of South Asia – Afghanistan’s bleak prospects, the breakdown in US-Pakistani relations, and growing political instability in Islamabad – there is one heartening development: India and Pakistan have restarted their peace dialogue, which includes important moves toward greater economic engagement.
The Obama administration would do well to reinforce this effort, which, if it bears fruit, would have a very positive impact on US security interests in the region. Fortunately, Washington can do this with a modest level of funding that has already been authorized by Congress.
The annals of India-Pakistan relations are filled with numerous false dawns and the current moves could well founder upon the sharp historical animosities that regularly bedevil bilateral affairs. But things may be different this time.
Reports out of the Pakistani capital indicate that the government realizes it is in desperate economic straits and that closer ties with India constitute a much needed lifeline. The military establishment is also said to understand that the eastern border needs to be stabilized so resources can be focused on combating rising internal security threats.
Both countries just signed agreements this week that will further reduce barriers to bilateral trade. They have announced plans to double their two-way trade flows – to the $6 billion annual level – by 2015, ease visa rules for business travel, and open a new customs post at the Wagah border crossing that lies midway between Lahore and Amritsar.
The two countries also recently advanced several initiatives to enhance cooperation in the energy sector, including joint development of a natural gas field in Turkmenistan.
If deeper trade ties were to develop between South Asia’s largest economies, they would produce significant economic and (eventually) security dividends for the entire neighborhood. Despite common civilizational and historical bonds, the region today is remarkably fragmented economically.
Trade flows between India and Pakistan, for instance, represent a miniscule fraction of each country’s overall trade portfolio. Wagah is the only vehicle crossing along the 1,800-mile-long international border. The two-lane road there is only open a mere eight hours a day, and the cargo that passes through it must be unloaded and transferred to local trucks.
The pervasive barriers to bilateral economic cooperation have also spurred circuitous and highly inefficient trade patterns. A booming India requires cement for its construction sector yet is forced to import it from Africa instead of Pakistan, where the cement industry has excess capacity.
The United States can strengthen the current stirrings by launching a Marshall Plan-like initiative geared toward the expansion of cross-border economic linkages between the two countries. Funding for such a plan already exists.
One of the keys to the original Marshall Plan’s far-reaching success was the major financial inducement it gave European countries devastated by World War II to frame their economic futures in conjunction with their neighbors. By putting an emphasis on reconstruction projects that crossed national frontiers, it was an important catalyst for the historic reconciliation between France and Germany and paved the way for the deep economic integration embodied in today’s European Union.
A similar vision should inspire a US effort to bolster cross-border economic cooperation between India and Pakistan. This initiative would be aimed at helping the two countries, on a joint basis, upgrade and expand the meager trade, transportation, and energy infrastructure presently connecting them.
It would support, for example, projects that increase road and rail linkages, as well as the number and capacity of customs posts. It would help provide resources for modernized seaport facilities that enable more two-way trade. And with each country plagued by chronic power shortages, it would provide seed capital for cross-border energy projects such as joint electrical grids or the proposed natural gas pipeline connecting Central and South Asia via Afghanistan.
The original Marshall Plan entailed a staggering sum of money – well over $100 billion in today’s terms – and an austerity-minded US Congress would certainly balk at any scheme with a similar price tag. But the initiative outlined here need only entail a modest level of expenditures – say, $50-75 million per year over a five-year period – and could be paid for by redirecting funding already authorized under the 2009 Enhanced Partnership with Pakistan Act.
Better known as the Kerry-Lugar-Berman bill, the act provides $1.5 billion annually in non-military assistance to Pakistan through 2013. But due to a variety of factors, much of its economic development funds remain unspent.
This effort would also dovetail well with the Obama administration’s “New Silk Road” initiative that is designed to ensure Afghanistan’s economic viability by building it up as a regional trade and transit hub. Additional countries, such as those Washington has already enlisted in the Silk Road plan, also could be invited to contribute resources.
Obviously, this initiative offers no magic bullet for transforming the singular intensity of the India-Pakistan rivalry or the complex security dynamics in Afghanistan. But it would be a creative investment in nurturing promising though still fragile developments already underway in South Asia. And these efforts would make US interests throughout the entire region vastly easier to safeguard than they are today.
If they take root over the long term, these developments would help encourage a more constructive Pakistani approach in Afghanistan, which Islamabad regards as a theater for its endemic rivalry with New Delhi.
Promoting a better rapport between Pakistan and India would also aid in steering a nuclear-armed but deeply dysfunctional Pakistan away from failed state status. That is a harrowing prospect many believe is all too plausible unless Islamabad looks upon its ever-richer neighbor as an economic opportunity rather an existential threat.
David J. Karl is president of the Asia Strategy Initiative, a political and economic consultancy in Los Angeles. He earlier served as project director of the Task Force on Enhancing India-US Cooperation in the Global Innovation Economy, jointly sponsored by the Federation of Indian Chambers of Commerce & Industry and the Pacific Council on International Policy.