The New Silk Road: Where Will It Lead?

Over the last few years the countries of Central Asia have been key transit routes to supply NATO operations in Afghanistan. As Western countries are getting ready for the drawdown of troops, the importance of Afghanistan’s northern neighbors as transit countries will increase. Investments and contracts associated with the reverse transit amount to significant sums of money for the Central Asian states; this massive inflow of funds brings opportunities as well as substantial challenges in a region that is known for autocratic governance and systemic corruption. I talked to Graham Lee, author of a recent study on the Northern Distribution Network published by the Central Eurasia Project, about how ordinary Central Asians benefit—or not—from the military transit through the region.

What are we talking about when we talk about the New Silk Road?

Central Asia has long been a canvas for the grand schemes of the world’s nation builders and empire forgers, from Alexander the Great through Jengis Khan to the British and Tsarist empires in the 19th century. Given the region’s rich history it is perhaps unsurprising that the latest framework to be sketched out for Central Asia is, in fact, a reimagining of a very old one.

The US State Department is promoting a New Silk Road (NSR) in Central Asia, reviving and enhancing ancient trade routes in a way which many hope will bring economic prosperity to ordinary citizens and drive regional cooperation and integration. The scheme was adopted as State Department policy in the second half of 2011, and has been touted as a transformative concept for Central Asian trade, with the potential to erode centralised post-Soviet systems and turn citizens into free economic actors, buying and selling on the open market or feeding the transit economy with goods and services.

So how does the New Silk Road relate to transit of military cargo to and from Afghanistan through Central Asia?

The task of building a New Silk Road—improving infrastructure, tearing down trade barriers, etc.—has barely begun, which makes an empirical evaluation of the scheme difficult. So, I looked instead at a transit scheme which many see as the precursor to a NSR: the Northern Distribution Network (NDN) of NATO military supplies to Afghanistan. The NDN has been sustaining the war effort in Afghanistan since 2009, and in November 2010 the U.S. Deputy Assistant Secretary of Defense for Afghanistan, Pakistan and Central Asia, David Sedney, said, “By expanding trade linkages, the NDN has the potential to one day reconnect Central Asia to India, Pakistan, and other formerly closed markets.”

Central Asia has a reputation for being a difficult business environment. All the countries in the region except Kazakhstan scored low in the 2012 Ease of Doing Business index that the World Bank publishes annually and are regularly at the bottom end of Transparency International’s Corruption Perception Index. How is the NDN faring in this environment?

American officials like to stress that NDN and NSR would have transformative qualities in Central Asia. Amongst the many benefits which it has been suggested the NDN might offer are the abilities to spur regional cooperation, increase trade efficiency, decrease official corruption and provide livelihoods for ordinary citizens, all on the basis of sound economic drivers for change. I questioned which of these benefits were being seen in reality, and the answers which I found were not encouraging. Through dozens of interviews and extensive desk based research a picture emerged of an NDN which has done little to aid regional cooperation or trade efficiency, may in some cases be causing rises in border fees, may indirectly be stimulating corruption in Central Asia and whose revenues flow overwhelmingly to opaque state coffers rather than to ordinary citizens.

Can you give us an example of how this plays out on the ground?

Sure. The Uzbek town of Termiz on the Afghan border is a case in point. It sees about 90 percent of NDN traffic pass close by it, yet it still retains the atmosphere of a frontier town on the outskirts of a secretive empire, not a regional trading hub fit for the 21st century. I visited Termiz both in mid-2009 and in late-2011, and between the two trips nothing appeared to have been built in the town which could be linked to secondary economic activity of the NDN: no new restaurants, hotels, filling stations or mechanical shops. Nothing. Crunching the numbers, I made some interesting findings which shed light on this phenomenon. More than 93% of NDN revenues, according to my calculations, are going straight to regional governments, not to ordinary people as it was hoped they might. Moreover, where NDN revenues really are up for grabs, it seems they are more often than not grabbed by the actor who can hike his fees, engage in graft, or play dirty tricks on his neighbours, rather than the actor who provides the best service to regional traders and logisticians. The clichéd “zero sum game” of Central Asian politics appears to be alive and well when it comes to regional transit.

This is sobering. How much money are we talking about here?

A lot. The Pentagon estimated recently that it costs $17,500 per container to transit the NDN. At 750 containers per week, which would be the NDN running at full capacity, this amounts to $682.5 million per year. On top of this sum Central Asian states have negotiated $500 million in annual transit fees, so this would amount to upwards of $1 billion annually in annual transit value between all Central Asian countries. This is a lot of money in a region where a typical monthly salary is around $200. In 2011, Uzbekistan had a GDP per capita of approximately $1,550, while in Tajikistan the number was around $930. So again, the NDN brings in a lot of money to the region, which could potentially do a lot of good. Unfortunately my research indicates that sustainable development from which ordinary citizens would profit is not one of the outcomes of transiting military cargo in and out of Central Asia.

So what needs to be done?

If the United States is to succeed in leading the creation of a New Silk Road, it needs to learn lessons from the NDN, and take a reality check. It needs to better address the economic mechanisms at work in autocratic, centralized, and patronage-based states, and create drivers for change which handle these dire ground realities with sober pragmatism. The aims of the New Silk Road are laudable ones, so let’s hope for the sake of Central Asia’s citizens that the United States manages to do just that.

Read Graham Lee’s The New Silk Road and the Northern Distribution Network: A Golden Road to Central Asian Trade Reform? published by the Open Society Foundations.

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