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Why Afghanistan Should Join CPEC

 
 

The China-Pakistan Economic Corridor (CPEC) is expected to be a “game-changer” in South Asia. Part of China’s ambitious Belt and Road initiative (BRI), CPEC is a $54 billion infrastructure development project that aims to connect China’s Xinjiang region to Pakistan’s Gwadar port. Naturally, with the arrival of such large scale infrastructure investments, CPEC has drawn the attention of other regional actors. Since October 2016, Afghanistan has expressed a strong desire to join and has even done so through official channels. For instance, Afghanistan’s ambassador to Pakistan, Dr. Omar Zakhilwal, emphasized his country’s interest in joining CPEC and stressed that a development project of this scale would be beneficial not only to Pakistan but also for the entire region.

If executed correctly, China and Pakistan stand to gain enormously by welcoming Afghanistan to CPEC. China has long harbored an interest in Afghanistan’s untapped reserves of natural resources, but the security situation in the country has prevented further investments and procurement. Pakistan will benefit from easier access to Central Asia through Afghanistan, as well as economic relief from the return of Afghan refugees to their country once the security situation is stabilized. As a landlocked, terrorism- and militancy-prone nation, Afghanistan is in desperate need of infrastructural development and uplifting its economy by access to Chinese investors. Thus, it appears that trilateral cooperation to include Afghanistan into CPEC can be a win for all parties involved.

Benefits for Afghanistan

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Afghanistan’s security situation has been steadily declining since 2014, when a large number of international forces began to withdraw from the country. The Taliban’s resurgence, which coincided with the withdrawal of forces, has led to several large scale attacks in the country. While the exact numbers are currently unclear, as Afghanistan has yet to officially be invited to be a part of CPEC, joining may present several benefits.

First, CPEC is predicted to bring industrialization and investment to Pakistan, the carry-over effects of which will benefit neighboring Afghanistan. In fact, Pakistan has already undertaken the building of several roads to improve connectivity between the two countries. The 75 km Torkham-Jalalabad road is one of them, while the Peshawar-Torkham road is another. While both these developments have faced considerable completion challenges, they are a step toward increasing connectivity with Pakistan, and in turn, gaining Afghan access to CPEC. In addition, Pakistan has constructed two roads leading from D.I. Khan to Angoor Adda and Ghulam Khan, linking with the Paktika and Khost provinces of Afghanistan respectively. These roads will enable Afghan businesspeople and investors to access the enormous consumer markets in South Asia, thereby increasing Afghanistan’s exports and reducing the costs of imports.

Second, by becoming a part CPEC, and BRI in general, Afghanistan will have the opportunity to stabilize its economy by enhancing its trade opportunities. In 2015, over 70 percent of Afghanistan’s total exports were to Pakistan and India alone, according to data from the UN Comtrade database. The main export goods were carpets, rugs, dried fruit, and medicinal plants, and not the copper, iron ore, and other valuable resources Afghanistan is known to possess in abundance. Accessing the wider BRI network will thus provide two opportunities: first, access to markets in China, Central Asia, and parts of Europe that Afghanistan doesn’t currently trade extensively with and second, the chance to diversify Afghan trade products by exporting copper, iron, and other resources to countries on the BRI.

Benefits for China

For China, Afghanistan presents strategic value due to its geographic location at the crossroads of South Asia and Central Asia. In addition, its vast mineral resources are untapped and present a valuable economic opportunity. According to one report, these are conservatively valued at $1 trillion. However, Afghanistan’s notorious security and corruption challenges have in the past deterred many an investment opportunity. At the core of any potential investment will be the stabilization of Afghanistan’s security situation, an effort that will require great cooperation. For instance, in 2008 China had signed a 30-year agreement with the Afghanistan government to access Mes Aynak, the world’s second largest untapped copper deposit. The deal, which was worth over $3 billion, was viewed with great interest until it stalled due to security concerns and attacks by the Taliban.

China has played a central role in supporting peace talks between Afghanistan and the Taliban by encouraging the latter to join the peace negotiations. Ensuring security in Afghanistan not only contributes to stability in the country, but it also allows China to be at ease regarding instability from Afghanistan impacting security and stability in its western region, specifically Xinjiang. That said, China has only made minimal contributions to directly support the security effort in Afghanistan, largely deferring to the United States and NATO. Since 2014, however, China has increased its security cooperation, providing military aid for counterterrorism efforts. Perhaps a greater effort to combat militancy in Afghanistan will open the doors for Chinese investments and access to the country’s untapped resources.

Benefits for Pakistan

A stable and thriving Afghanistan presents several direct benefits to Pakistan. First, it will allow Pakistan to ease the economic toll of hosting Afghan refugees. For decades, Pakistan has hosted millions of Afghan refugees, who fled major wars and conflicts in their country. Over the years even more Afghans were born within Pakistan, which increased the economic burden on a country that was already struggling. In 2013, a Pakistani minister stated that by then, Pakistan had spent over $200 billion on hosting Afghan refugees. As a result, since 2015, the Pakistani government has forced several hundred thousand refugees to return to Afghanistan, drawing the ire of humanitarian organizations. The economic integration and improvement of Afghanistan’s economy will allow for millions of refugees to slowly return to their homeland and reap the benefits of the new economic opportunities, while easing the burden on Pakistan’s economy.

Second, a cooperative relationship will open up the doors for easier access to trade with Central Asia for Pakistan. Already, there is some movement in this direction. For instance, the Central Asia Regional Economic Cooperation (CAREC) Sherkhan-Ninjpayan border route has been identified by Tajikistan, Afghanistan, and Pakistan as a potential corridor for trade. With an improving economic situation in Afghanistan, supplemented by enhanced security, the region could serve as a transit hub for countries like Pakistan to reap the benefits of trade.

Third, cooperating on economic development while also emphasizing security will be a win-win for both countries and allow for the improvement of cross-border relations. Afghanistan and Pakistan have long blamed each other for security concerns within their borders. Close cooperation between both countries’ security forces will lay the groundwork for eliminating militancy along the Afghanistan-Pakistan border (the Federally Administered Tribal Areas or FATA), which has been a militant haven.

Possibilities for Collaboration with Competing Projects

The United States’ “New Silk Road” and the trilateral Chabahar port project undertaken by Afghanistan, India, and Iran are existing efforts at integrating Afghanistan with its neighboring countries. While both of these projects have faced some roadblocks since their announcements, it is important to look at current measures in place. If executed effectively, these two projects have the potential to give Afghanistan the tools to develop its connectivity and infrastructure, which it can then leverage to become a far more effective participant in CPEC and BRI.

Envisioned in 2011 as a means to economically integrate Afghanistan with its neighboring countries in Central and South Asia as the United States pulled its forces from the country, the New Silk Road Initiative never took off due to lack of political will on many fronts. However, the initial plan was to connect the resource-rich countries of Central Asia with the enormous consumer base in South Asia. The New Silk Road’s two major subprojects are the CASA-1000 hydroelectricity grid and the TAPI (Turkmenistan-Afghanistan-Pakistan-India) natural gas pipeline. While the New Silk Road is currently stalled, a CPEC-led revival of the project could boost its chances of success, and in turn Afghanistan’s economic integration. This would open up avenues for further cooperation between the United States and China in uplifting Afghanistan and allow the direct expansion of CPEC into Afghanistan and other Central Asian nations.

In 2016, India, Iran and Afghanistan signed a trilateral transit agreement allowing Indian goods to travel to Afghanistan via Iran’s Chabahar port. The transit track is crucial for India, as it skips Pakistan, and makes its way to Afghanistan through Iran. This move, which was initially labeled by the Pakistani media as a rival to CPEC and Gwadar port, is now met with more understanding. As Afghanistan and Iran are both keen on joining CPEC and the larger BRI mix, they are unlikely to compete with China through Chabahar port. Besides, some of the benefits of trade obtained via Chabahar port can be used by Afghanistan to build its infrastructure in order to connect with CPEC and BRI.

Towards Trilateral Cooperation

China, Pakistan, and Afghanistan all stand to benefit from trilateral cooperation that enhances security and stability, increases infrastructural development, and opens the doors to economic development and connectivity. This can take the form of three major areas:

Enhancing the security situation: Afghanistan’s security situation has to improve. It neighbors can help either by furthering military aid or through direct involvement. China has played a mediating role between the Taliban and Afghanistan, helping orchestrate peace talks. Perhaps taking a stronger interest in getting the Taliban to the negotiating table, while increasing military aid to Afghanistan, can go a long way in helping Afghanistan strengthen its security status. In order for Afghanistan’s security situation to improve, Pakistan also needs to bolster its efforts to reduce militancy within its borders. Strong military offensives like 2014’s Operation Zarb-e-Azb in the FATA are necessary to wipe out militant strongholds and prevent the movement of Pakistan-based militants to Afghanistan and vice-versa.

Increasing connectivity: By connecting roads and motorways across borders to Pakistan and China, Afghanistan can easily integrate into CPEC and be a part of the trade and energy benefits that it provides. Such a proactive measure will only help build more trust, and indicate that Afghanistan is truly committed to CPEC. There are already some investments from Pakistan to build connecting roads, as mentioned above. Afghanistan should focus its attention on finishing the stalled projects and building confidence in the country’s ability to complete existing infrastructure undertakings.

Opening up natural resources for foreign investment: China is keen on accessing Afghanistan’s large reserves through its state-owned enterprises (SOE), and has the monetary resources to invest in developing the infrastructure for procurement. As such, Afghanistan should be open to such investments and operating deals, which will benefit the country in the long run. In addition, such a move will bring forth much needed foreign direct investment (FDI) to the cash-strapped country.

While China and Pakistan can play major roles in transforming Afghanistan, the biggest contribution has to come from the country itself. The Afghanistan government must take policy steps to facilitate smooth participation in CPEC and the BRI. While the BRI is the Chinese government’s flagship foreign policy project, Afghanistan cannot depend exclusively on potential Chinese investments. As such, it is up to the government to take measures to develop the small-scale energy and transportation industries that could easily fit into the CPEC structure once Afghanistan joins. Further, the government has to create a favorable environment for investment. This can be achieved by involving the private sector and increasing productivity by optimization.

Afghanistan Finance Minister Eklil Ahmad Hakimi truly captured the importance of the BRI for his country when he said, “China’s One Belt One Road (OBOR) project could provide hope and opportunities for the war-torn Afghanistan.” However, in order for the “hope and opportunities” to take shape, Afghanistan must cooperate with Pakistan and China in order to make its inclusion into CPEC a reality.

Anurag Ram Chandran is a Schwarzman Scholar at Tsinghua University in Beijing, China and a visiting Assistant Research Fellow at Pangoal Institution. His research interests include China’s Belt and Road initiative (BRI) as well as China-South Asia security issues.

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