The New Silk Road Strategy
The much talked about 2014 US Security Drawdown from Afghanistan could have dire, if not catastrophic implications for the Afghan economy; contraction, current account deficits, balance of payments crisis, fiscal policy and even high unemployment. The transition therefore not only has security implications, it has economic and fiscal implications that have already begun to bite!
The war in Afghanistan has led to a substantial supply chain, valued at billions of dollars a week. With the supply chain expanding into Pakistan and Central Asia, strategic withdrawal will also have economic implications for the entire region. So what will the transition look like and what organizing framework will be deployed by the US and its Allies?
With the official international war coming to an end, the need to progress reconciliation and economic development to secure and stabilize the core functions of state has never been more pressing. Reconciliation aside, the future of Afghanistan now rests on maximizing returns to growth, revenue and employment. The emerging New Silk Road Initiative, which includes investments in core (mining, energy and rail), ancillary (roads, policy reforms) and spin-of (downstream and sidestream) investments, will need to lay the foundation for a transit economy in the first order, and for extractive industry scale up over the next 3-10 years. Current exports include carpets and fruit, as well as opium of course. However, unless export led growth options are considered failing external support will mean significant changes to macroeconomic and fiscal means.
However, with US financing heavily in decline, tapping regional and private investments provides the only viable option for financing a New Silk Road Initiative. The money is within the wider region, but the incentive to invest has not been! Can the forthcoming 2001 Bonn Conference bring an often divided regional community together to cement stability in Afghanistan?