Remarks by Franklin L. Lavin
Under Secretary of Commerce for International Trade
Business Opportunities in Afghanistan & Central Asia Conference
The Ronald Reagan Building
April 10, 2007
It’s a privilege to be opening this event with Ambassadors from Kyrgyzstan, Tajikistan and Turkmenistan, as well as representatives from Afghanistan, Kazakhstan and Uzbekistan. We are honored by your presence, and we place a high value on the positive relations we enjoy with your countries.
At the Department of Commerce we have a group of dedicated individuals who are committed to helping companies and governments in Central Asia. The BISNIS project is led by Philip de Leon and Danica Starks, who run a great team in the U.S. and four cities in Central Asia. Similarly, the Afghanistan Reconstruction and Investment Task Force is a key resource to find out about opportunities there. I’d like to take a moment to thank them for their hard work. If you are interested becoming one of their success stories, please see them.
We are here to discuss a region that is undergoing dynamic change and that increasingly offers strong prospects for trade and investment for American companies. Indeed, it is within the context of a “Greater Central Asia Region,” with intra-regional trade and infrastructure development that opportunities for significantly expanded commerce become more readily apparent.
This morning I’d like to address some of the challenges for continued economic growth and progress in the region. I’d also like to touch on the issues that confront the countries of the region if they are to make themselves competitive in an increasingly globalized and integrated international market for goods, services and investment. Finally, I’d like to pose some challenges to the U.S. businesses here today who want to expand their relationship with Afghanistan and Central Asia.
First, let me turn to the good news in our economic relationship. In the last five years U.S. exports to the six countries of the Greater Central Asia Region have grown by more than 110%, and were more than $1.3 billion last year. Admittedly, that is a relatively small figure compared to our overall global exports, which were more than $1.4 trillion in 2006, however the growth has been dramatic. With regional GDP growing at about 8 percent last year, and with continued progress in infrastructure, transportation access, and the business environment, we expect growth to continue.
So my starting point is one of optimism. Our relationship is an important and a growing one. We have a lot going for us, but we face challenges as well.
In a booming world economy, it is sometimes difficult to get U.S. companies to focus on what to many of them might be smaller markets. A U.S. company might be willing to struggle for several years in China to come to terms with a major project, because it views China as a strategic market. But the countries of Central Asia do not, at present, offer the same scale of market opportunity as China. If companies find impediments to doing business there, they will simply go elsewhere.
For example, it is sometimes difficult for the U.S. and the region to connect with such disparate levels of economic development, different cultural and political systems and extreme distances between our frontiers. Although the aggregate numbers of the region are impressive, with more than 90 million people with nearly $100 billion in GDP, when you start breaking it down by particular country, each economy carries less weight.
These are real challenges, but not insurmountable ones, particularly today when regions are increasingly integrated and both communications and transportation links have reduced the distance between producers and consumers across the globe. So there is no reason why Kabul or Tashkent need be any less accessible to the U.S. market than Beijing or Mumbai if we want them to be.
For example with direct flights between Dushanbe and Istanbul and a second line added last year, the number of business travelers to Tajikistan has increased significantly. With the completion of the bridge between Afghanistan and Tajikistan this summer, we expect trade to grow significantly between those two countries, and it will add another connection with world markets. We believe that when you increase connectivity between people and the products they produce, everyone benefits. And we believe the region has many products to offer to the world, and the U.S. has many products that the people of this region would benefit from having access to.
Other challenges exist, and they vary by region and by country. For example how we deal with transparency and the rule of law in commercial disputes. And how we address intellectual property rights. Or how we create and administer commercial standards, and how we manage customs procedures.
Some countries have begun to make the right moves, and the results are clear. Let me give you a few examples of privatization, deregulation and liberalization efforts, resulting in expanded economic opportunity and growth:
In Afghanistan legislation established an independent telecoms sector regulator and the country has embraced a market regime based on aggressive market liberalization, transparent regulation, fair competition and private sector participation. As a consequence, Afghanistan quickly ramped up cell phone access. Today 1.6 million Afghans have cell phones, nearly 20 times as many as just three years ago.
In Tajikistan, the liberalization of the wireless telecom sector has allowed foreign investment in two joint ventures. This will quickly increase cell phone and internet access throughout the country.
A Challenge for Central Asia Governments and U.S. Businesses
Let me issue a challenge to the countries in the room today. How can you make your country as attractive an economic locale as possible? How can your border crossings and customs be more efficient? How can your phone service be better and cheaper? Does your tax code impede economic growth? Can international businesses rely on the contracts they sign with your governments? Will your courts enforce judgments by international arbitration tribunals against local companies?
These are all important factors in creating a business friendly environment.
The U.S. is a willing partner as you seek to overcome these obstacles, using our resources and knowledge to help the region become a better trading partner not only with us, but also with one another and with the world at large.
And I issue a challenge to the U.S. companies here today. I challenge you to think creatively about how to calibrate your activities in these countries proportional to return so you can engage with them profitably. Given the ranges in size and economic development, there is going to be a range of economic activity as well.
For example Uzbekistan is a leading producer of cotton products, Kazakhstan is highly industrialized and experiencing an unprecedented construction boom, and Tajikistan has significant hydro-power potential. A U.S. company cannot simply look at one market or transplant its domestic operations, or its European operations, or even its Turkish operations, and make it work across Central Asia. Its activities have to be specifically tailored to the region and the country. The product slate, financing, marketing, assembly, and logistics will all have country-specific attributes. As these countries zero in on what they do best, opportunities will present themselves for trade and investment.
Some might say that these markets are too small, too distant or lack the consumer economy to merit much attention. But successful U.S. companies do not abandon markets because they are smaller or less standardized than other strategic markets, and indeed many countries off the beaten path can be highly profitable for both trade and investment.
So we each have our responsibilities. Countries in Central Asia need to make their markets as friendly as possible, and the companies need to develop the architecture and approach that allows them to enjoy success by targeting opportunities that are right for them.
There is no magic wand we can wave. The path to a better society is taken step-by-step, improving the economy, attracting investment, helping businesses expand and creating a better life for all.
Allow me to close my remarks with a theme on which I opened. Countries that move toward market economics, that reward private enterprise, that are open to trade and investment and that respect the rule of law will be countries that move ahead.
The countries of the region have some tough policy choices in front of them in order to move down the path of reform and build a better life for their citizens. These are decisions that can only be made by the people and the governments of central Asia. But we stand with them as they move down that path towards a better future.