Indian Defence Review

Nisha Biswal, U.S. Assistant Secretary of State for South and Central Asian Affairs

Speech by Ms. Nisha Biswal, U.S. Assistant Secretary of State for South and Central Asian Affairs

Good afternoon, it is such a pleasure to be with you today.  Thank you, George, for that kind introduction.  I am so glad to see so many friends from the business community in the audience today.  I’d like to thank FICCI, CII, USIBC, AmCham, Assocham, and the Indo-American Chamber, who have a critical role in expanding markets, enhancing opportunity, and bringing people together.

It is a recognition of the innovation and dynamism of the Indian private sector that increasingly, we are seeing partnerships between American and Indian entrepreneurs that have the power to change lives not just here in India, but also in the United States and around the world.

So I am indeed pleased to be here on my first visit as Assistant Secretary of State for South and Central Asian Affairs, and to make my first public address in India before this audience on the opportunities that lie ahead as the trade and economic relationship between our two countries expands, matures and becomes increasingly intertwined and interdependent in the decades to come.

Challenges and Opportunities in Tomorrow’s Asia

But first, let me set the scene:  We’ve seen the emergence of a truly globalized world – brought closer by technology and trade, but still contending with the challenges of conflict, environmental degradation and poverty.

Today, Asia represents more than half the world’s population, and is the most dynamic and fastest-growing economic region in the world.  Currently, three of the four largest economies in the world by purchasing power parity are in Asia.  By 2025, the region’s trade volume is expected to almost double, led by China, India, and Indonesia.  By most estimates, by 2050, Asia will comprise half of global GDP.

Clouding this optimistic forecast are the challenges that loom in many Asian economies today: poverty and increasing inequality, competition for scarce resources, the effects of climate change, inadequate investment in human capital and under-developed infrastructure, and weak governance and fragile institutions that continue to be plagued by corruption.

Nowhere are the opportunities more compelling and the challenges more clear than in India.  But in the Indian context, these challenges are very surmountable.

As businessmen and businesswomen – doing deals across the continent – you get this.  The United States gets this.  And particularly, my bosses, President Obama and Secretary Kerry, get this too.  Our Asia rebalance recognizes that this continent will play a leading role in global politics, security, and economics in the 21st century.  There’s no question India’s economic success is vital to achieving the strategic aims our leaders have laid out.

In order for the region to live up to its potential, it must create societies that encourage strong and inclusive economic growth, where the private sector, not government, leads economic development.  It must quell terrorism and counter violent extremism while at the same time advancing human dignity and human rights.  But I’ll say this: an Asia that boasts democratic governance, transparency, and free market economies, will offer 4.3 billion people the best opportunity to pursue happiness and realize success.

In order for this to happen, in order for all of Asia’s citizens to truly reap the benefits of economic prosperity, countries in the region have to work across borders.  The United States is interested in supporting India’s economic connections both West into Pakistan, Afghanistan, and Central Asia and East into Bangladesh, Myanmar, and Southeast Asia because we fundamentally believe that greater economic connectivity will help boost regional stability and prosperity.  It will create new markets and opportunities and new incentives for peace.  That’s good for the Indian economy and for Indian citizens.  That’s also good for the American economy and the American people.

On that front, we see two major regional initiatives taking hold:

First, there is an historic opportunity to connect South and South East Asia into an integrated economic landscape.  This Indo-Pacific Economic Corridor or IPEC is a unique geography; a place where U.S. and Indian security, political, and economic imperatives converge.  It supports both the American “rebalance” toward Asia and India’s “Look East” policy that has been a subject of trilateral discussions between India, Japan, and the United States.  Today, India’s policy is closer to “Be East” than ever before.

In Myanmar, where your Prime Minister just concluded his second visit in three years, we are seeing the benefits of its political transition with foreign investment more than quadrupling since President Thein Sein’s political reforms of 2011.  Bangladesh stands to develop tremendous commercial ties with the rest of Asia through its strategic location and wealth of natural resources.  And it is India’s efforts today to create durable land, sea, and air links to Southeast Asia that will shape the movement of goods and services tomorrow.

More broadly, we welcome India’s growing economic and strategic influence with the economies of ASEAN.  Having cultivated a close bond – very much like our own with the ten-nation bloc – India and ASEAN account for 1.8 billion people and $3.8 trillion in GDP, with an impressive 40% increase in trade in 2012.  We think Prime Minister Singh had it right when he said “the resurgence of Asia is dependent… on cooperative architecture(s) in which all countries are equal participants.”

For IPEC to succeed, India will have to work its neighbors and key international partners on developing transport and energy infrastructure, reducing the time and cost of moving goods, raise financing, and find regional institutions that can support this work.

Second, with the upcoming political and security transitions in Afghanistan this year, there is the strategic imperative to connect the economies of South and Central Asia.  How do you do this in a region fraught with complexity and historical distrust?  You talk and you trade.

Through our “New Silk Road” vision, we are focusing our efforts in four key areas: (1) creating a regional energy marking linking Central and South Asia; (2) promoting trade and transport routes; (3) improving customs and borders; and (4) linking businesses and people.  Today, Afghanistan and its neighbors are championing the New Silk Road vision, creating new North-South transit and trade routes that complement vibrant East-West connections across Eurasia.  The region is making concrete efforts to reduce barriers to trade, invest in each other’s economies, and support international development and cross-border projects.

Let me caveat, that regional connectivity through Afghanistan is difficult and barriers to trade remain high, but we are seeing some breakthroughs.  For the first time, regional energy projects such as CASA-1000 will bring surplus hydropower from Kyrgyzstan and Tajikistan to Afghanistan and Pakistan, with international financing largely in place.  Discussions are underway on a separate electricity line that would bring additional energy from Central Asia into Afghanistan and Pakistan.  Eventually, we hope that Central Asia energy will make its way to India as well, through the Turkmenistan-Afghanistan-Pakistan-India pipeline.

Barriers to trade are also coming down.  With U.S. technical assistance, customs procedures have been streamlined from 20+ steps to 12 at seven Afghan border crossing points, resulting in expedited trade with the average release time reduced from eight days in 2009 to three and a half hours in 2013.  The United States has also been hosting trade forums that have brought together Indian, Pakistani, Afghan, and Central Asian businesses where deals have been signed on the spot, creating new markets and opportunities.

In the coming years, the most important step India can take to promote greater connectivity is to normalize trade with Pakistan.  While there has been tremendous progress and political courage and leadership over the past few years, bilateral trade is still just over $2.5 billion in 2013.  With continued effort on both sides, that could easily grow to $10 billion. Pakistan can play a critical role by granting Non-Discriminatory Market Access to India, and India can reduce non-tariff barriers to increase trade between the two countries.

Growth Through Partnership

Put simply, in a region of enormous consequence, India has enormous opportunities for trade integration:  Blessed by the Arabian Sea on one side, the Bay of Bengal on the other.  Astride the busiest sea lanes in the world.  And, I think you would agree, one of the most entrepreneurial societies in the world.

Even more impressive are India’s demographics.  India’s median age is 23, it has 600 million people under 25, and India’s “consumer class” is expected to double to 575 million people by 2025.  If India can help nurture the talents of its people and provide them with productive outlets, India will greatly benefit from its youth boom.  We are betting that by 2030 Indian can and will grow to the third largest economy in the world in terms of nominal GDP and not just purchasing power parity.  Some even predict that India could be the largest economy by 2050.

Yet alongside these tremendous assets, India faces significant needs.  India is improving its energy and infrastructure, modernizing its agriculture, developing health solutions, and providing higher education and skills to a broader population.  Businesses are driving this progress – yet India still ranks poorly among all countries as a hospitable place to invest and start a new business – 134 out of 189 countries.  And if India’s enviable demographic boom is to be harnessed, India must make an unprecedented commitment to skill and knowledge development across all sectors of the economy.

But remember this, there is no challenge that India can’t overcome and that our two countries, working together, can’t tackle more efficiently.  First and foremost, we need to keep focused on growing our trade and investment ties.  The United States are committed to this.  If we’re to quintuple our current trade to half a trillion dollars over the next ten years, as Vice President Joe Biden challenged our two nations to do, international firms need to believe that the benefits far exceed the costs and challenges, and that India remains committed to economic growth.

One of the most significant endeavors in world economic affairs since WW-II has been the creation of a rules-based trading system that has sought to increase commerce, connectivity, and prosperity, across the globe.  Ask anyone in the audience here today and they will tell you, the more India is integrated into global markets, in the key economic architecture in Asia and beyond, the more India’s economy will grow, and benefit the entire global economic system.  India has come a long way: import tariffs, on average, are more than 30 times lower than they were in 1991 when then-Finance Minister Manmohan Singh kicked off its modern reforms.

Like any trading partners, we do have our differences, and the willingness to talk about them indicates that we are in fact confident, mature partners.  We are concerned that domestic content requirements here are discouraging investment into India, inhibiting innovation and holding India back from developing the world-class manufacturing sector it needs to compete and generate jobs for the millions of Indian youth entering the job market.  Equally important is the need for transparency in India’s tax policies, timely regulatory approvals and contract enforcement, and a commitment to strengthening protection of intellectual property rights.

We’re addressing these concerns them head-on as good partners do: either bilaterally in our long-established dialogues or multilaterally through the World Trade Organization.  Again, the solution is to talk and trade.

There’s no question India’s economic success is vital to achieving the strategic aims our leaders have laid out.  Our ongoing bilateral investment treaty (BIT) discussions when completed will bring greater investment and innovation to India and stronger partnerships between our firms.

We’re each making progress to remove impediments to commerce.  From India’s recently announced visa-on-arrival program, to our partnership on the U.S. Global Entry program – we’re enhancing the way real-time business will be conducted between our two nations.

Nowhere is U.S.-India collaboration more important than on global environmental challenges.  We’ve sought common ground on climate change issues, through multi-lateral discussions and bilateral cooperation in forestry, adaptation, clean and renewable energy, and on HFCs through the creation of the Climate Change Working Group.  As broad as our engagement on global issues is, we can expand it even further to engage on other critical cross-cutting issues such as preserving our oceans.

We’re actively working together to mitigate the causes of climate change through our energy and science and technology cooperation.  Our nations are together improving the prediction of weather and monsoon forecasting, saving both lives and money.  U.S. and Indian scientists, entrepreneurs, and government officials will gather next week in Delhi for the next Energy Dialogue, led on the U.S. side by Secretary Moniz.  From clean energy technology to non-renewables, energy efficiency to civil nuclear energy, these ideas and programs will benefit consumers and businesses in both countries.

And don’t forget, our cities and states are partnering more extensively than ever before, embodying the very essence of our broad strategic partnership.  States like California and Maharashtra are sharing ideas on how to improve fuel quality for India’s fast growing vehicle fleets, which, we hope, can lead improved health of urban inhabitants, and contribute important climate benefits.

And what is the foundation that enables and propels all this cooperation?  Knowledge and education.  President Obama and Prime Minister Singh’s 21st Century Knowledge Initiative has seen our governments give $10 million to projects that strengthen collaboration and build partnerships between American and Indian institutions of higher education.  Yet, we want more Indian students taking advantage of the top universities in the United States, and we’re keen to send more American students to India.

In closing, we want to work with India, trade with and invest in India, innovate with India, and grow with India.  To take what three successive presidents and two prime ministers, 15 years, and our 1.6 billion citizens have created – and make it even better.  I take that responsibility seriously, and I assure you we are committed to cooperation and ambition in our ties with India.  The India – and the Asian continent – we know is possible, is the very one we wish to support and partner with.  Thank you.