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Diplomacy in Action

Remarks to the Washington International Business Council Army and Navy Club


Remarks
Geoffrey Pyatt
Principal Deputy Assistant Secretary, Bureau of South and Central Asian Affairs
Washington, DC
January 13, 2011

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Thank you for inviting me to talk about the State Department’s priorities in South and Central Asia and their implications for the international business community.

I’d like first to acknowledge Chairman and Executive Director Solveig Spielmann for her leadership of the Washington International Business Council and Woolf Gross for the warm introduction. It is great to be here.

South and Central Asia is one of the most diverse, yet least integrated, regions in the world. However, with rapidly growing economies like India, fast-emerging markets in Bangladesh and Kazakhstan, and resource-rich countries like Uzbekistan, Kazakhstan, and Turkmenistan, broadening and deepening our partnerships in South and Central Asia—or SCA as we call it at the State Department—is one of our highest U.S. foreign policy priorities.

Our sustained and multidimensional engagement with South and Central Asia includes four key objectives:

· advancing the U.S.-India strategic and economic partnership;

· working with India and Central Asian countries to support U.S. efforts in Afghanistan;

· expanding our engagement with Central Asia; and

· supporting the advancement of peace, democracy, economic stability, and sustainable growth across the region.

Comprehensive economic engagement is a cornerstone of each of these strategic goals, and the private sector plays an especially important role, whether through trade and investment, or by advising governments through public-private dialogues such as the U.S.-India CEO Forum. Indeed when I look back on my own twenty- year involvement with the SCA region, the most remarkable change is the increasing role of economic issues as a driver of relationships.

The past year was a good one for U.S. business in the SCA region, and since Assistant Secretary Blake spoke with you last year, there have been several significant developments in our economic relationships with South and Central Asia that demonstrate our commitment to the region, and our recognition of its strategic importance and vast potential for American and international companies.

President Obama’s November trip to India is a watershed example of our commitment to strengthening our relationship with the world’s largest democracy and deepening opportunities for American businesses to compete in one of the world’s fastest growing markets. Similarly, Secretary Clinton’s trip to Kazakhstan, Kyrgyzstan, and Uzbekistan in December highlighted U.S. interests in the Central Asia region in the diverse fields of energy, science, technology, education, and human rights.

Today I would like to speak in more detail about some of our priorities for the region and the opportunities these present for American businesses. Across the SCA region, there is no economic opportunity that looms larger than India.

President Obama’s Visit to India

The President’s trip consolidated a decade-long process of transforming the U.S.-India relationship and multiple concrete examples of how the U.S. and India increasingly are working together to advance global peace, development, and security. During his visit President Obama announced commercial deals valued at over $14.9 billion, with $9.5 billion in U.S. export content, supporting an estimated 54,000 U.S. jobs.

Defense Sales: In addition to symbolizing our growing strategic relationship with India, closer defense cooperation provides enormous opportunities for American businesses. During the trip, the Indian government positioned itself to take on a leading role in enhancing global stability by finalizing a $4.1 billion sale for ten C-17 Globemaster III heavy lift transport aircraft, which will give India the second largest C-17 fleet in the world behind the United States, supporting more than 20,000 U.S. jobs. This procurement is important both as a marker of Indian confidence in the U.S. as a defense sales partner and as a symbol of India’s expanding strategic horizons and determination to defend its growing global interest.

Subsequent to the visit, we have welcomed the Indian government’s newly announced Defense Procurement Procedure, which enlarges the envelope for India’s offset policy to include internal security, civil aerospace, and technical training.

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 to India.

Export Controls: In their November 2010 Joint Statement, Prime Minister Singh and President Obama committed to transform our bilateral export control cooperation to realize the full potential of the strategic partnership between our two countries. This announcement reaffirmed the two leaders’ joint commitment to expanding the U.S.-India strategic partnership, strengthening global nonproliferation efforts, and facilitating trade in the civil space, defense, and high technology sectors.

Commensurate with India’s nonproliferation record and its commitment to abide by multilateral export control standards, the United States will remove all civil space and defense-related entities from the Department of Commerce “Entity List.” The removal of these Indian entities from the Entity List is intended to facilitate trade and cooperation in civil space and defense and enable the two governments to accelerate our already important bilateral high technology trade and investment relationship.

The United States also intends to “realign” India in its dual-use export control regulations from categories that implicate India as a “country of concern” to those that reflect India’s status as a strategic partner, effectively treating India similarly to other close allies and partners. In return, India will harmonize its national control list with the multilateral regimes and incorporate re-export controls on certain U.S.-origin items to address potential transshipment.

Finally, as part of his visit, President Obama announced U.S. support for Indian membership in all four global export control regimes in a phased manner, consistent with maintaining the core principles of the regimes. This was the first public statement of support by a world leader for Indian membership in all four regimes, and a signal of the Administration’s strong backing for a close strategic partnership with India.

Civil Nuclear Cooperation: U.S. companies see enormous potential in participating in India’s nuclear energy and high technology sectors, building on the U.S.-India Civil Nuclear Cooperation Agreement. Strong India-U.S. cooperation on nuclear energy is based upon a shared strategic vision as well as acceptable technical and commercial terms and conditions for U.S. companies seeking to enter the Indian nuclear energy mandate. We look forward to the early conclusion of commercial negotiations to bring U.S. companies into the Indian civil nuclear energy sector, which will stimulate economic growth and sustainable development, and generate employment in both countries.

Clean Energy: In the energy field, the United States and India both are committed to developing, deploying, and commercializing innovative clean energy technologies through our bilateral Partnership to Advance Clean Energy (PACE). Under this initiative, we have already begun to undertake joint research efforts and the deployment of clean energy resources, such as solar, advanced biofuels, shale gas, and smart grids. This cooperation will help to create green jobs at home, and improve living standards and stimulate the economy in India’s villages and urban centers.

Our bilateral commitment to improve access to clean energy is also manifested in a public-private partnership to promote green building technologies. Prominent global companies like Wipro, Infosys, Wal-Mart, and Marriott are leading the way to commercialize and implement these technologies and practices across India.

Agricultural Cooperation: President Obama and Prime Minister Singh also agreed to consult closely to remove barriers to agricultural trade and to build on the historic legacy of cooperation between India and the United States during the Green Revolution to develop, test, and replicate transformative technologies to extend food security as part of an “Evergreen Revolution.” These efforts will focus on providing farmers the means to improve agricultural productivity. We will also be partnering with India on agricultural initiatives with several African countries—a new and exciting horizon for our bilateral partnership that illustrates India’s expanding global reach.

Education: The United States and India have continued to make strides in bilateral education cooperation. President Obama and Prime Minister Singh agreed to convene a high-level U.S.-India Higher Education Summit, chaired by senior officials from both nations later this year. Education will be an increasingly important feature of our agenda in 2011 and beyond. In this regard it is worth noting the unique importance of high technology issues in the U.S.-India relationship, a reflection of both countries’ admiration for innovators, entrepreneurs, and intellectuals of every stripe.

Supporting Afghanistan’s Development

An important illustration of the changing contours of the U.S.-India partnership was the agreement during the President’s visit to begin trilateral cooperation in Afghanistan capitalizing on India’s already significant engagement here. This increased cooperation in Afghanistan is in line with our strategic goal of supporting Afghanistan’s economic development and stabilization and reflects India’s role as an essential U.S. partner across the SCA region. Since 2001, India has contributed more than $1.3 billion in development aid and has undertaken numerous infrastructure projects, including roads, dams, power stations, and the Afghan Parliament building in Kabul.

During President Obama’s visit, we agreed to pursue joint development projects in Afghanistan in agriculture and women's empowerment and to strengthen capacity building efforts. Eighty five percent of Afghans derive their income from agriculture, and Afghan women continue to lack economic, social, and political opportunities. India is a hopeful example to Afghanistan in both regards.


Bangladesh

Before leaving South Asia, I would also like to say a word about Bangladesh, a country of increasing regional stature and strategic importance to the United States. Though it is the size of Wisconsin, Bangladesh has a population of approximately 160 million people—more than Russia or Japan. Despite its impressive social and economic progress, the image of Bangladesh for most Americans remains frozen as a country facing desperate poverty.

While Bangladesh remains a poor country, it has made impressive progress since those dark early days after its independence in 1971.

Bangladesh has reduced child mortality by more than two-thirds. Bangladesh has been particularly successful at reducing the number of chronically food-insecure people—from 40 to 27 million—and at reducing gender inequality in schools and in the labor force. Bangladesh’s civil society groups and NGOs are some of the world’s most respected. Many of these successes have been achieved in part because of the $5 billion that the U.S. and USAID in particular have invested in Bangladesh over the past 40 years.

Steady economic growth over the last two decades has been the key factor in lifting millions of Bangladeshis out of poverty. Few people know that despite the global recession, the Bangladeshi economy has continued to maintain an economic growth rate of 5-6% per year for almost two decades. Bangladesh is now the world’s third-largest exporter of ready-made garments. I would be willing to bet that the clothes that a number of you are wearing today were made by some of the millions of Bangladeshi garment workers, the overwhelming majority of whom are women.

Central Asia

The markets of South and Central Asia are naturally matched in terms of resources and needs, but the difficulty of transiting through Afghanistan and Pakistan has so far limited the countries of the SCA region from reaching their true potential for regional trade, cooperation and integration. I would like to turn from South to Central Asia, briefly outline our approach to the region, discuss progress in our bilateral relations, and describe some specific opportunities we see for business in Central Asia.

The United States has an important interest in promoting a stable, secure and prosperous Central Asia integrated into the global economy and respecting internationally recognized human rights, among other reasons, because success in Central Asia will reinforce U.S. efforts in Afghanistan.

In order to pursue our regional priorities, we developed, in partnership with each of the countries of Central Asia, a structured, annual dialogue on all key issues and practical steps our countries can take to advance each of our goals. We have conducted these Annual Bilateral Consultations, or ABCs, with all of the Central Asian governments except the Kyrgyz Republic; those consultations are envisioned for the spring. When we held the inaugural talks with Turkmenistan in Ashgabat last year, Assistant Secretary Blake brought along a sizeable U.S. business delegation. We would like to have similar business components during this year’s ABCs in other Central Asian countries. The first ABC this year will be in Uzbekistan next month and I would like to encourage you to participate in the delegation.

Both economic growth and democratic political development in Central Asia will be necessary to ensure stability and provide more reliable partners for the United States in addressing global challenges.

With that common foundation, I would sketch the following specific business opportunities we see in Central Asia.

Kazakhstan: Since its independence, Kazakhstan has set an example in Central Asia with economic reforms that have attracted investment and created jobs. Kazakhstan hosted the first OSCE Summit in eleven years in December 2010, demonstrating its continued regional leadership.

A quickly growing middle income country, Kazakhstan’s best prospects for trade and investment are in areas such as electric power generation, agricultural machinery, food processing and packaging, information and communications technologies, mining, medical equipment and pharmaceuticals, and oil and gas equipment and services. We enjoy a very receptive audience in working with the Government of Kazakhstan to further improve the business and investment climate.

Turkmenistan: To the west Turkmenistan is a country rich in hydrocarbons with a developing energy sector. 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 opportunity for American agricultural companies to supply modern equipment. That said, Turkmenistan remains a challenging business environment with the government playing a controlling role in most commercial activities.

In December we welcomed the signing of the intergovernmental agreement to construct the TAPI pipeline, through which natural gas from Turkmenistan will flow through Afghanistan and Pakistan to India. Numerous issues surrounding financing and security remain, but the signing was an important first step and a signal of Turkmenistan’s great economic potential.

Uzbekistan: Uzbekistan weathered the global economic downturn with solid economic growth in 2010. Since Uzbekistan's independence, U.S. firms have invested roughly $500 million. Uzbekistan is seeking to increase foreign direct investment in its energy sector and hosts international companies, including Lukoil and Petronas. Several South Korean companies also have recently entered into contracts in Uzbekistan’s energy sector. Uzbekistan has established the Navoi Free Trade Zone and has plans to improve infrastructure and expand the use of computers and technology in its schools. Here too we see room for growth.

Public-Private Sector Engagement

The last area that I would like to touch on is the importance of public-private engagement. In the last several years, SCA has given this area special priority, with the appointments of Senior Advisors for education and Diaspora outreach, specifically charged to enhance our collaboration with the American private sector.

In India, 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 to encourage the growth and exchange of information regarding health care technologies.

Facilitating public-private partnerships and corporate social responsibility initiatives of this sort is a priority in the SCA region. Even in the Maldives, for example, large hotel chains have expressed interest in partnering with companies to combat climate change and coral reef damage, two of the country’s most serious problems. During our discussion, I would be interested to hear your views on other potential partnerships elsewhere in the SCA region.

Conclusion

Thank you for the opportunity to speak with you this afternoon. At this moment of unusual economic dynamism across the SCA region, I look forward to hearing your views about doing business in South and Central Asia and ways in which we can partner to achieve our mutual goals.

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