Tashkent's "soft power" on the Afghan track
Tashkent's policy on Afghan issues has acquired new dynamism with the arrival of a new leader in Uzbekistan. Within the framework of the new policy of forming a "security belt" around Uzbekistan and the priority of building mutually beneficial relations with neighboring countries, Afghanistan has become one of the main directions of Tashkent's foreign policy. Tashkent's intentions to help establishing peace in Afghanistan, restore the country from the ashes of war and its socio-economic development were well received in Kabul and many countries around the world interested in solving the Afghan problem.
Significance of Afghanistan for Uzbekistan
The importance of Afghanistan for Uzbekistan can hardly be overestimated. Both countries were previously part of a historically developed cultural region and since ancient times have had close cultural and economic ties. Afghanistan is the 30th largest market in terms of foreign trade expansion opportunities, and it is the largest of all Uzbekistan's neighbors.
However, the incessant military conflicts on the territory of Afghanistan for 40 years sharply limit the potential for economic developmentof the vast Asian region. The war in Afghanistan led to the destruction of its economy, impoverishment of the population, the purchasing power of the population remains very low. According to the World Bank, Afghanistan's GDP per capita in 2019 was $507, which is significantly lower than in bordering countries.
One of the most negative manifestations of the Afghan conflict for the economy of Uzbekistan is the actual closure of the southern direction for foreign economic activity. Uzbekistan is cut off from the main sea trade routes by at least two countries. The exit through Afghanistan to the seaports of Pakistan - Gwadar, Karachi - is the shortest, but the actual paralysis of the transport and transit system of Afghanistan due to hostilities and underdeveloped transport infrastructure forces to use bypass routes, which increases the already high transport costs of Uzbek exporters.
The above factors negatively affect the competitiveness and comparative advantages of the Uzbek economy. This determines the active actions of Tashkent in the Afghan direction in recent years, designed to minimize negative factors and expand opportunities for economic growth in Uzbekistan.
Contribute to the resolution of the Afghan conflict
The leadership of Uzbekistan has repeatedly stated that the resolution of the Afghan conflict is possible only through dialogue between the warring parties. In recent years, Tashkent has actively come out with initiatives contributing to the de-escalation of the situation in Afghanistan.
After 2016, the agenda of Uzbek-Afghan relations acquired a pronounced economic character. The issues of trade and economic cooperation were put at the forefront. And one of the most important areas for the development of economic cooperation in the region is Afghanistan for Uzbekistan.
Without achieving peace in Afghanistan, it will be impossible to fully use the southern foreign economic direction; Uzbekistan is actively involved in the processes of political resolution of the Afghan conflict. A major event in the field of Uzbekistan's efforts to promote peace in Afghanistan was the International Conference on Afghanistan, held in Tashkent in March 2018.
Uzbek diplomacy is actively involved in the process of settling the Afghan conflict. Meetings are regularly held with representatives not only with the government of Afghanistan, but also with the Taliban movement), as well as with representatives of the Afghan government of various countries.
In 2020, the Afghan direction in the international agenda of Tashkent has become more active. In September 2020, the Minister of Foreign Affairs of Uzbekistan Abdulaziz Kamilov took part in the ceremony of launching direct inter-Afghan negotiations in Doha. On November 11, the Chairman of the Supreme Council for National Reconciliation of the Islamic Republic of Afghanistan Abdullah Abdullah visited Uzbekistan. During a meeting with the President of Uzbekistan, he highlighted the contribution of Uzbekistan to the involvement of Afghanistan in regional trade and economic processes.
Now Afghanistan is close to actually establishing peace in the country. Negotiations between the Afghan government, are going on. The international community seeks to facilitate peace negotiations and offers various platforms to achieve the necessary consensus between the warring parties. The Central Asian countries also express active support for achieving peace, including within the framework of international cooperation formats.
It is worth noting that Tashkent has repeatedly come forward with proposals to hold one of the rounds of negotiations between the government and the Taliban movement on the territory of Uzbekistan. It has also been stated that assistance to the socio-economic development of Afghanistan will also accelerate the achievement of peace in the country.
Uzbekistan's policy towards Afghanistan is based on several fundamental aspects. The first is to minimize the threats of a military-political, terrorist nature, and the spread of drugs in the country. The second is to fully engage the southern foreign economic direction in the development of the national economy as soon as possible.
Economic cooperation with Afghanistan as a stabilization factor
Tashkent considers assistance to socio-economic reconstruction and subsequent development of Afghanistan as the main factor in stabilizing the situation in this country. This is clearly manifested in the fact that in most of the speeches of the President of Uzbekistan in the international arena, the need to solve the Afghan problem and contribute to the socio-economic reconstruction of Afghanistan is noted. A striking example is the speech of the President of Uzbekistan at the 75th session of the UN General Assembly. Speaking about the Afghan problem, the President of Uzbekistan proposed to create a permanent committee for promoting the socio-economic development of Afghanistan under the UN.
One of the most effective mechanisms for assistance is the involvement of Afghanistan in world economic relations, the increase in foreign trade and the increase in cooperative interconnection with other countries. In this direction, Uzbekistan and Afghanistan are taking active measures and striving to expand the potential for trade and economic cooperation, which eloquently demonstrates a double-digit growth in trade even during a pandemic.
According to the State Statistics Committee of Uzbekistan, Afghanistan ranks sixth in the country's total exports. It accounts for 5% of all exports. At the end of 2020, Uzbekistan's trade with Afghanistan increased by 25% and reached $777 million. The bulk of Uzbekistan's exports to Afghanistan are wheat flour (28.1%), rail freight services (25.3%), electricity (17.2%). The export of cement increased by 21% and ferrous metallurgy products by 26.6%. It should be noted that in 2020, in comparison with 2019, the range of exports of ferrous metals and products from them has been significantly expanded. If in 2019 the main export commodity was electricity, then in 2020 it is already wheat flour. The explosive growth in flour exports is due to the liberalization of the wheat and flour market in Uzbekistan and a decrease in the level of regulation of the flour-grinding industry.
It should also be noted that if in 2019 only 293 commodity subheadings were exported to Afghanistan, then in 2020 - already 662. This indicates a sharp diversification of the commodity nomenclature of exports. Naturally, for many of the goods there are small volumes of natural and value supplies, but the very fact of entering the Afghan market with new products is indicative. Firstly, this means that domestic business views the Afghan market as promising, and secondly, that domestic products are in demand among the Afghan consumer. For example, the supply of footwear to Afghanistan increased 4 times, pharmaceutical products - 2.3 times, flour products - 5 times.
On November 12, 2020, a Presidential Resolution "On measures to further expand and strengthen economic cooperation with the Islamic Republic of Afghanistan" was adopted. The document contains a "road map" for building up trade and economic cooperation between the countries. The decree introduced the post of Deputy Minister for Foreign Economic Cooperation who is also the director of the newly created Directorate of the free trade zone "International Trade Center Termez", which is a clear signal of the increasing importance of the Afghan direction in foreign economic policy for Tashkent.
Thus, in accordance with the roadmap, it is planned to increase the volume of trade to $2 billion in the coming years. To achieve this goal, a number of measures have been approved. In particular, in 2021, it is planned to create trading houses of sectoral economic associations of Uzbekistan in Kabul and Mazar-i-Sharif for the supply of agricultural and industrial products. To simplify and reduce transportation costs for exporters between Uzbekistan and Afghanistan, an agreement on international road transport is being worked out.
Industrial cooperation with Afghanistan has significant potential for further building up trade and economic ties, but this area remained poorly implemented. The decree provides for a number of measures aimed at expanding industrial ties between the countries. In particular, it is planned to organize the supply of raw materials from Afghanistan and its subsequent processing in Uzbekistan - these are marble, stone products, fruits and vegetables and jewelry. It is planned to organize the processing and packaging of fruit and vegetable products on the territory of the ITC "Termez" and in the future to export them to the markets of the CIS countries. On the territory of Afghanistan, it is planned to restore the activity of textile factories with the assistance of the Uzbek side.
Surkhandarya region in trade with Afghanistan
Border and regional cooperation play an important role in raising the level of trade and economic partnership. In particular, Surkhandarya region, as the only region bordering Afghanistan, is already leading in cooperation.
The volume of foreign trade turnover of the Surkhandarya region with Afghanistan at the end of 2020 amounted to $45.5 million, which is 10.8% of the region's foreign trade.
In recent years, there has been an explosive growth in the number of enterprises with the participation of Afghan capital in the Surkhandarya region. As of January 1, 2021, the number of such enterprises reached 267 units, or 63% of all enterprises operating in the region with the participation of foreign capital. For comparison: as of January 1, 2019, there were 100 operating enterprises with the participation of Afghan capital in the region, and as of January 1, 2018, there were 57 operating enterprises with the participation of foreign capital. This dynamic of recent years is very indicative.
Currently, the Surkhandarya region is actually the main hub of socio-economic interaction between Afghanistan and Uzbekistan. In recent years, an International Trade Center and a special economic zone have been created in the region and it focuses on stimulating trade and economic interaction with Afghan business. There is also a training center for Afghan citizens in the region.
As part of the two presidential decrees approved in November 2020, additional measures were taken to improve the efficiency of the region's trade and economic infrastructure. Among other things, a list of representative offices opened by organizations in the Surkhandarya region with the aim of developing foreign economic cooperation was approved. This list makes it possible to understand in which sectors the government sees and intends to actively promote products to the Afghan market. These are products of oil and gas, chemical, electrical, textile, leather and footwear, pharmaceutical industries, automotive industry, building materials industry, flour-grinding industry. However, the main thing is the creation of the long-awaited free trade zone on the border with Afghanistan, which is expected to become a powerful catalyst for economic cooperation.
Towards Free Trade
The creation of a free trade zone on the border with Afghanistan has been discussed for a long time. Simultaneously with the resolution on Afghanistan, the President's Decree "On measures for the further development of the activities of special economic and small industrial zones in the Surkhandarya region and the city of Tashkent" was also adopted. By the decree in the Surkhandarya region, a free trade zone "International Trade Center Termez" is being created.
On the territory of ITC "Termez" services for the reception, storage, processing, sorting and packaging of products, as well as e-commerce portals will be organized. Various customs, tax, certification, hotel and other services are organized according to the "one-stop shop" principle. Foreign citizens are allowed to stay on the territory of ITC "Termez" for ten days without an entry visa. Foreign goods are placed by way of registration in the customs regime "free customs zone", moreover, it is allowed to conduct retail trade operations with these goods. The above decisions create the basis for free trade on the territory of the Center and the establishment of joint production activities, not burdened with unnecessary bureaucracy, tariff and non-tariff barriers.
Meanwhile, ITC "Termez" is only a step in the liberalization and simplification of trade between Uzbekistan and Afghanistan. In the future, the parties plan to conclude agreements on preferential trade and work out the possibility of concluding a free trade agreement. It is expected that this will give a serious impetus to increase the volume of trade between the countries by reducing tariff barriers.
Transport and energy
The effect of the taken measures to facilitate trade could be seriously limited by the underdeveloped transport and energy infrastructure of Afghanistan. In addition, as mentioned above, the role of Afghanistan for Uzbekistan and the entire Central Asian region in matters of transport links with the countries of South Asia and the shortest access to seaports is very high. The development of Afghanistan's transport infrastructure has been considered by the international community for decades. For example, the Asian Development Bank has developed an updated master plan for the development of the transport sector of Afghanistan for 2017-2036.
Uzbekistan takes an active part in the implementation of the transport agenda of Afghanistan. As you know, in 2010, Uzbekistan built a 100-kilometer railway on the Hairaton-Mazar-i-Sharif route. In 2017, an Agreement on the construction of the Mazar-i-Sharif-Herat railway was signed between Uzbekistan and Afghanistan. Taking into account the transport and communication importance of Afghanistan for interregional economic cooperation, the creation of this center will contribute development of the transport and logistics system of Afghanistan and this is key in the development of interregional trade.
In recent years, the construction of the Mazar-i-Sharif-Kabul-Peshawar railway has also been actively discussed. The project is currently the most promising, as it provides the shortest rail route to the seaports of Pakistani Karachi and Gwadar. It is expected that the railway will lead to a reduction in the transportation of goods from Uzbekistan to Pakistan from 35 to 3-5 days. It is important that the proposed route of the railway will run through territories rich in minerals. In particular, in the provinces through which the railway is expected to pass, there are deposits of coal, sulfur, copper, iron, marble and other minerals.
In recent months, the activities of Uzbekistan, Afghanistan and Pakistan on the implementation of the project have noticeably intensified. On February 2 this year, a meeting was held in Tashkent with the participation of the participating countries, as well as representatives of international financial institutions. Following the meeting, Uzbekistan, Afghanistan and Pakistan signed a "road map" of the project. It is planned to involve the states of the region, the USA, Russia, the EU countries and international financial institutions in the implementation and financing of the railway.
Other equally important areas of Uzbekistan on the Afghan agenda are energy and developing Afghanistan's energy infrastructure. Currently, Uzbekistan is the largest supplier of electricity to Afghanistan. At the same time, the Afghan economy is experiencing an acute shortage of electricity. In order to expand opportunities to increase imports of electricity, Afghanistan and neighboring countries are working on expanding the infrastructure for delivering electricity to Afghan provinces. In particular, Afghanistan and Uzbekistan are implementing a project for the construction of the Surkhan-Puli-Khumri transmission line. The construction of the power transmission line will increase the supply of electricity from Uzbekistan to Afghanistan by 70% - up to 6 billion kW.h per year. In 2020, an agreement was signed between Afghanistan and the Asian Development Bank to finance this project in the second half of October. In addition, it is worth noting that Uzbekistan and Afghanistan are exploring the possibilities of attracting Uzbek design and contracting organizations to the construction of infrastructure for roads and railways, as well as civil and industrial purposes in Afghanistan.
Promoting human capital development
Without human development in Afghanistan, infrastructure assistance will be largely constrained by the lack of skilled workforce in Afghanistan. Tashkent is also taking active measures in this direction. In particular, as mentioned above, a Training Center for Afghan Citizens has been operating since 2018 in Termez. As reported in the media, in 2020, 172 students were trained at the Center, from them 119 were trained in the direction of "Uzbek language and literature", 35 - in the direction of "Land transport systems and their operation" and 18 - in the direction of "Obstetrics, gynecology and nursing”.
According to the decree of the President of Uzbekistan, additional measures were identified to assist in obtaining education for Afghan citizens. In particular, the Uzbek side plans to explore the possibilities for the development of cooperation between higher educational institutions in the field of architecture and construction, the allocation of quotas for Afghan citizens to study in magistracy and doctoral studies on the basis of a grant in higher educational institutions of Uzbekistan. It is also planned to introduce the educational direction "Fundamentals of Entrepreneurship" at the Training Center for Afghan Citizens and organize practical seminars with the participation of qualified specialists from enterprises and organizations of the Surkhandarya region.
In the field of intercultural cooperation, in the fall of 2020, festive events dedicated to the Day of the Uzbek language were held in Afghanistan. Also, between Uzbekistan and Afghanistan, the possibilities of the parties are being worked out for the restoration of cultural and artistic monuments in the ancient cities of Afghanistan.
Thus, Uzbekistan and Afghanistan are striving to expand socio-economic interaction in all possible areas and proceed from the comparative advantages of their economies. Despite the ongoing armed confrontation in Afghanistan, Uzbekistan is adopting a program of socio-economic cooperation with this country, suggests that Tashkent sees high chances for reconciliation between the parties in the peace talks.
However, the war-torn economy and underdeveloped infrastructure will remain serious constraints to the reconstruction of Afghanistan. Huge financial and capital injections into the Afghan economy will be required from the international community and investors. In this context, the creation under the UN of a permanent committee for promoting the socio-economic development of Afghanistan can help to consolidate the efforts of the world community in helping to restore the Afghan economy.
Ruslan Abaturov, CERR