Atlantic Council Energy & Economic Summit: “New Opportunities in a Dynamic Region”

Session 1: Transit, Trade, and Reviving the Silk Road

Ambassador Pierre Morel,
Former European Union Special Representative,
Council of the European Union

Yahya Bas,
Deputy Minister of Transport and Communications,
Republic of Turkey

His Excellency Sham Bathija,
Senior Economic Adviser and Minister to the President,
Islamic Republic of Afghanistan

The Honorable Robert Blake, Jr.,
Assistant Secretary, Bureau of South and Central Asian Affair,
U.S. Department of State

Ambassador Leonidas Chrysanthopoulos,
Adviser, International Road Transport Union ,
Former Secretary General, Black Sea Economic Cooperation

Klaus Gerhaeusser,
Director General, Central and West Asia Department,
Asian Development Bank

Fuji Ballroom I
Swissôtel, The Bosphorus
Istanbul, Turkey

10:30 – 11:45 a.m.

Friday, November 16, 2012

Transcript by
Federal News Service
Washington, D.C.

MS. : Ladies and gentlemen, please take your seats. We’re about to begin the next session.

AMBASSADOR PIERRE MOREL: Merci. Ladies and gentlemen, thank you very much. Maybe if – even if others will join, we have to keep with the schedule. So we have quite, for once, a nonenergy or nonenergy-first session this morning, which is, Transport, Trade, and Reviving the Silk Road. Wide subject, a very wide region, and wide array of contributors.

As you have on your program, there is a keynote speech which was supposed to be delivered by Minister Yıldırım of transport of the – of Turkey, but we just get news – got news that Minister Yıldırım is – has been kept by Cabinet meeting and therefore could not attend. So, Vice Minister Bas is with us for the same ministry of transportation, of course, in charge of this sector.

We know the very dynamic approach of Turkey to this Central Asian region – well, this continental dimension of the policy of Turkey, and therefore we’ll be very much interested in having this keynote speech, and now before we come to the different views from the group. So, Mr. Vice Minister, welcome. And please, if you’re ready to give your keynote address now, we’ll be happy to listen to you.

YAHYA BAS: (In Turkish.)

AMB. MOREL: Thank you, Mr. Vice Minister. And we’ve had exactly what any moderator would like – that is, come to very precise operative dimensions. Because, in the end, we have to take this dimension if we want to speak about what is really happening.

Indeed, Central Asia has been very much calling for great expectations. I mean, it started with Alexander the Great, so we are quite familiar with his grand views. And at the same time, while it’s part history, but maybe we should be a bit careful on this because big formulas don’t necessarily deliver even if they say as great ideas. We have heard about the great game. We hear about heart of Asia. And, well, even the new Silk Road still has to been – has to be implemented. It’s appealing expression but in the end what is really taking place is the real matter. And this is what our speakers of today following the vice minister will try to bring to you.

Indeed, we have very experienced people with Mr. Bathija here as senior economic advisor to President Karzai, and long – much multilateral experience within UNCTAD – especially the fourth U.N. conference of UNCTAD – and the setting of objectives in covering this problem of infrastructure of so on. Assistant Secretary Bob Blake, covering South and Central Asia in the State Department, is also very much on the ground. From my six-year practice, I will say the best way to meet him is find an airport where you will land the same way he is landing. Otherwise, very difficult to catch him in Washington. I can speak from experience.

And of course, continuing with Ambassador Chrysanthopoulos who has been so many years in BSEC – I mean, the Black Sea. He knows all the corners of the region and he’s continuing on this logic of linking the continents through the international road association. And finally with Mr. Gerhaeusser coming from ADB. You can see in the reference book that he’s been posted in almost all places, all corners of Asia – from Central to South to extreme – to Far East, and so on. So, this is giving to us the opportunity to speak about facts, and I think this is on the subject which is coming easily to the minds but not necessarily very concrete. This is what we can bring to you today.

I just will pick facts to start with. NDN, Northern Distribution Network – absolutely key for the follow-up of the activity of the coalition in Afghanistan in the last years. Tremendous achievement when you look at the map from the Baltic Sea to the heart of Afghanistan. This has been an impressive realization. At the same time, a complex one. I remember a conference where all the participants, operators, were saying that 60 percent of the cost and of the time of NDN operation, even so important as such, is devoted to border crossing – 60 percent. Well, it tells something about what should be coped with. Of course, well, let’s say, bribes, corruption is part of the crossing so many borders, maybe. But it’s far too much to spend 60 percent of time and money in that way.

Now, at the same time, the other perspective which is the subject of today: Is it possible to make it dual-purpose and move in the coming years from military to civil news for the benefit of linking the different parts of the region, different parts of this wide Eurasia region? Then, about the routes – the roads. Indeed, great projects. European Union started 20 years ago – I can’t say that; I remember – with Traceca.

But while experts were recommending roads and routes and railways, and the leaders decided they would prefer this or that. And so, in many cases at the border, they didn’t cross or meet at the same place. So a mixed experience, I would say, but at the same time look at the Chinese investment: Road-building, tunnel-digging, bridge-building is moving on at the heart of the Pamir region in a very dynamic way.

I’ll continue with energy. We all recognize here we have to speak around this context of energy mobilization, which is at the core of Eurasia, but they are very much linked. If TAPI is ever built, TAPI will not be only a pipeline; it will be more than that. But at the same time, I mean, look at the roadshows we have had recently about TAPI. Not so many companies were ready to attend that just because there are plenty of question marks.

Look further at the Istanbul Process. A very interesting set of meetings mobilizing neighborhood cooperation. And this is a very good project but it has to take shape with the commitment of the neighbors with Afghanistan. And we’ll hear, I’m sure, more about that. Look at the project of Eurasian Union. But the question is – I mean, pushed by Russia: How far infrastructure project are just pushed by this union? How far does this union go? Tajikistan, Kyrgyzstan and Uzbekistan are not within this Eurasian Union up to now, so a big question.

And I would finish with a rather sour note. Allow me to argue that the only Silk Road which is really working is the drug-and-chemical precursors road. This works terribly well, and all too well, in fact. So let’s reflect that in terms of real connection in this region, a lot has to be made. And therefore we need to cope with these direct questions. So I will turn to Mr. Bathija, who will open this kind of review of the situation. Please.

So, five, six minutes quick presentation in a row.

(Audio break.)

SHAM BATHIJA: (In progress) – organize for it. Of course, not only the Silk Road initiative but Istanbul Process and many such initiatives which Afghanistan is a principal beneficiary out of it.

When you gave an overview of the – of the number of issues and initiatives which is being taken place in this region, particularly Afghanistan comes right to the heart of it because we may be the beneficiary out of it. The Silk Road Initiative – of course, you already gave the history of it, but we would go beyond the history of it. All these years which such initiative comes it, gets updated and new ideas comes in.

Now, the Silk Road, which, again, started from China all the way to Europe, but now this time could be Silk Road – could be a labeling which could even start from Saigon, which can even go all the way from any perspective – but just a name – and then build the commerce, trade, development of – under that road.

We attach quite a bit importance to this initiative because this initiative will provide us an opportunity because Afghanistan is a land-locked country and my personal view is that we should unlock that landlocked-ness. By doing that, what I mean is we should become the transit, transport, investment hub of the whole region – connecting Central Asia, South Asia, West Asia and beyond. And if that is what’s achieved through the Silk Road, which I think it can, this will be a step in a very right direction to do so.

Similarly, Silk Road is not only the trade route which, of course, in earlier days it was – it was considered to be. But Silk Road could also have initiatives, as you rightly said – the other areas such as energy, for example. Afghanistan is – or, wished to be considered as a facilitator of such energy corridors. For example, TAPI is one of it, which we are working on it. CASA-1000 is another one. And just a few months back, for example, our good neighbor Pakistan was buying electricity from Uzbekistan, asked us if Afghanistan should become – provide the facilities of the transit – with pleasure. So, that is another view that we are thinking of, and so on.

In addition to that, it’s the private sector which will get involved fully in this whole process of the Silk Road Initiative, which will bring enormous amount of businesses, people-to-people contact, connectivity and integration within the region, which I think we can certainly build upon it on that side. I will stop here but there’s plenty to say about Afghanistan and so on, but I’m sure it will come in the course of the – of the session. Thank you.

AMB. MOREL: Ambassador Blake.

ROBERT BLAKE: I want to thank our Atlantic Council hosts but also our Turkish hosts. It’s great to be back with my good old friend, Pierre Morel. As he said, we didn’t normally have the chance to come to beautiful places like Istanbul. More often, we were meeting in the transit lounge in Tajikistan or some other glamorous place like that. I’d like to just take as my point of departure just the overall strategic context, which is that the United States is looking at this regional integration objective in the context of supporting the important transitions that are taking place in Afghanistan.

Both the security transition but also the political transition that will take place with the elections in 2014 and, equally important, the economic transition. And that is, how do we develop, as Ambassador Bathija said, a private sector- and trade-led economy in Afghanistan, particularly after 2014? And the answer we believe is to encourage regional integration to develop these pipelines, these roads, these rail networks and, importantly, the transit trade.

Ambassador Morel referred to a great game that might be underway. And I think the experience of the last year or so has shown that increasingly the countries of the region don’t see this as a great game but rather as a great gain. And indeed I have stolen that particular phrase from the new foreign minister of Kazakhstan, Erlan Idrissov, who coined that, and I think it’s a very apt description.

Now, why do I say that? I think there’ve been a series of good international meetings that have taken place. The Istanbul Process that Ambassador Bathija talked about, but also the very important NATO summit in Chicago and the Tokyo conference in Tokyo this past summer – all of which showed that there is strong regional and international support for this transition process for Afghanistan and that this support will continue well beyond 2014.

Just to take the example of the Tokyo conference, donors pledged an additional $16 billion worth of support through 2015 on the economic side to complement the assistance that NATO countries will be providing post-2014. Likewise, I’m sure, my good friend Klaus Gerhaeusser will talk about the very important CAREC conference that just took place in which, again, a considerable envelope of funds have been pledged to support this regional integration project in Central Asia and Afghanistan.

Let me just point to three concrete ways which we see that there is progress beyond the consensus that I talked about. The first is energy. Reference has already been made to TAPI. All of the countries of the TAPI project have agreed on gas sales purchase agreements. A road show has taken place. And now the really hard part will start, which is to form a consortium to actually build this pipeline. And so we are hard at work with the Asian Development Bank and others to encourage the parties to reach a consensus on this and to move this thing forward because I think this would be a very strong and concrete demonstration of the value of regional integration.

Let me also point to the electricity transmission projects that are already underway. Uzbekistan already is providing significant electricity that is helping to light Kabul. Likewise, Turkmenistan is increasing dramatically its electricity exports to Afghanistan. And further down the line, we are working very closely to try to reduce tensions between Tajikistan and Uzbekistan that would unlock the capacity for the Central Asia-South Asia Electricity Transmission Line – the so-called CASA-1000 line. So we think that there are very good opportunities and also substantial momentum.

I should also mention, in terms of energy cooperation, that uranium exports from Kazakhstan are now powering nuclear power plants in India. And India and Pakistan are taking important steps. It’s interesting that now Pakistan is figuring out how to meet some of its energy needs by exploring the possibility of developing pipelines through India to take advantage of India’s refining capacity to help meet and also to help build the cooperation that is taking place between India and Pakistan.

A second tangible area is railways. Uzbekistan has taken the lead in building with the ADB the railway that goes down all the way to Mazar-e Sharif. The hope is eventually to connect these railways down to the Indian Ocean. That will provide a very important outlet for potentially Chinese exports but also exports from Central Asia.

Likewise, Kazakhstan and Turkmenistan are cooperating on a line that will come down through Turkmenistan to link up to that central railway link that I talked about. So, I think there’s good positive momentum in that respect as well. And eventually the hope, of course, is that you can connect the markets of India and Central Asia and well beyond through some of these important links.

The third, I think, very concrete area of cooperation and progress is in the transit trade. Ultimately, the real game-changer, I think, is going to be when it’s going to be possible for Bangladeshi and Indian trucks to traverse all the way through Pakistan and Afghanistan into Central Asia and beyond. India and Pakistan are making very good progress in their own bilateral relations.

Trade has increased from about $300 million 10 years ago to 270 million (dollars), and, with the most-favored-nation status that Pakistan is expected to provide later this year to India, it’s probably going to jump to $10 billion. So a very significant increase. The next step then will be to try to allow transit trade for Indian trucks through Pakistan and into Afghanistan. That would be of huge benefit to Afghanistan as well, and enable a very substantial increase in Afghan exports back into the huge and growing Indian market.

I think I should just say much more needs to be done. As part of the effort on the part of the international community to encourage support for Afghanistan post-2014, there’s also a very important mutual accountability framework; that is, that Afghanistan itself must create the conditions for improved private investment. It must pass laws like a banking law, like a mining law to provide a clear regulatory framework for the investments that must take place in these areas; it must reduce corruption; it must improve governance – all of which will help a lot to, again, establish the conditions for this.

But I think I’d just conclude on a positive note to say that we do believe that there’s momentum. We do believe that crucially now there’s a consensus in the region and beyond to move forward with this. And so, the challenge is now to move ahead on all these different fronts, to work together and to, again, be very clear-eyed about the challenges but also positive about the possibilities.

Thank you.

AMB. MOREL: Thank you, Bob, and, indeed, we deepen our understanding of the opportunities step by step. And we’ll continue with Ambassador Chrysanthopoulos. Please.

AMBASSADOR LEONIDAS CHRYSANTHOPOULOS: Yes. Thank you. I would like first of all to thank the – (inaudible) – for this. I think it’s – I’ve been in all the meetings of the Atlantic Council from the outset – all of them here in Istanbul. But to go to the essence, now, of our discussion – with road transport, we eliminate the notion of landlocked countries. That’s the important issue and why – this is why the revival of the ancient Silk Road, international road transport is beneficial to everybody.

We have started – when I was in the Black Sea Economic Cooperation organization, we gave great emphasis on road transport and we signed the memorandum for the construction of the Black Sea Ring Highway, a road 3,000 – no, 300 kilometers, that would effectively join the European road network to that of Asia. And it’s going well. I mean, Turkey has done its part. Unilaterally, I mean. It has done from the Georgian border up to the Bulgarian border. Greece has done its part from the Ionian Sea up to the Turkish border. And it’s going – it’s going well.

With – BSEC and IRU organized The Black Sea Ring Highway Caravan, which was 12 trucks that went around the ring highway, to see what kind of problems we would find. That was one thing. And the other thing was to promote this project, which is a flagship project of BSEC. And we found things. But also afterwards IRU organized with ECO the caravan – the Silk Road caravan, which went into Afghanistan. And there, again, we saw what problems we had.

So, the basic conclusion is that it’s not so much the infrastructure. The infrastructure can be done. The basic problem is waiting at the border crossings. That’s the basic problem. I mean, for example, 40 percent of time lost – I mean, of time lost in these trips, 40 percent is by the waiting lines at the border; 38 percent of the cost of transport goes to illicit payments. And that’s the big problem.

The solution to this is very easy. It is the implementation of the United Nations conventions of facilitation of road transport. Along – and this is what the International Road Union now is doing. I mean, for example, they have an IRU border – we have initiated an IRU border waiting-times observatory, where the truck driver knows that if he goes to this border, he will wait so many hours; if he goes to the other border, he will wait less hours. So, he can choose.

We’re organizing – we have set a TIR electronic declaration system, where the information is sent to the customs beforehand. And we’re trying now to organize green lanes which allows the trucks that have these documents to pass without any – without more complications.

Another thing that we did in BSEC which was very significant was that we made the agreement of the BSEC permit for trucks. These were permits – we did it on a – on a – on a project basis with the participation of seven countries with permits issued – we issued 200 permits to the seven participating countries, which allows a truck driver from Ankara to pass through the seven countries with one piece of paper instead of seven pieces of paper.

But this had a very important political implication because it allowed for the first time Armenian trucks to go through Turkey with a basic permit because with the normal bilateral permits since there was no diplomatic relations between the two countries it was not possible. And this was a very silent success story of the Black Sea Economic Cooperation organization at the time, and we’re very happy to hear that ECO is also interested in doing such an initiative.

To go back to BSEC again, BSEC is also – and we’re going to – under the Turkish chairmanship of BSEC, we have a meeting at the end of the month of the ministers of transport where we are going to launch the project which is, again, an implementation of a U.N. agreement. It is the project that will allow – it’s called the International Vehicle Weight Certificate. What happens is that now any truck traveling through countries can be weighed at any time and can be – and is usually penalized because the weight machines in each country show different weights. And this is also used for illicit payments also.

Now, this is a document – the United Nations document – that will be given to the truck who will not be weighed until its arrival. This project also – and it’s BSEC that’s going to launch it. I mean, there are all the countries who have signed the UNECE agreement. None of them have implemented yet. It’s going to be implemented now for the first time by the Black Sea Economic Cooperation organization with the assistance and the support of UNECE and UNDP and IRU, of course.

Now, and, of course with Afghanistan, it is – it is a very important – it is a – it is very important also what Mr. Bathija said about it. And I think that he also – he also participated in the Silk Road Caravan that was done by IRU and by – and by ECO. And we are – and IRU is cooperating with the United States in development and stabilization there and it’s also supporting the demining activities in Afghanistan.

Now, on the question of the railroad that was mentioned, well, objectively speaking, the railroad costs lots of money. Much more than road transport. It uses much more energy also. And I would just like to remind you of – a little bit of the role of road transport in CO2 emissions. The footprint of road – of road transport is very small. Overall, transport accounts for 30 percent of CO2 emissions while the commercial road transport industry is responsible for 3 percent of that. And we are working to reduce the CO2 emissions by 30 percent up to the year of 2030.

Of course, OK, we have the issue of biofuels – that’s another thing where we found – I mean, where we have in Europe the total production of – I mean, out of the total production of grape seed in Europe, 60 percent is used for biofuels. In the United States, 50 percent of corn production used of – is used for biofuels. The result is increase of the global price of food; more people starving. I think that other measures should be taken there. We should be very careful on the welfare of humanity. So, these are the few things that I would just like to say, Ambassador.

AMB. MOREL: I’m not sure – yes, it works, thank you.

The final angle will come from Manila. That is, Asian Development Bank having the full perspective on the whole region. Mr. Gerhaeusser.

KLAUS GERHAEUSSER: Thank you very much. First of all, I would like to thank the organizers for inviting ADB to be part of the panel. ADB for the past 10 years has been engaged in what is called CAREC, Central Asia Regional Economic Cooperation initiative. It’s an initiative covering 10 countries starting in China, Mongolia, Central Asian countries, South Asia, India, Pakistan and Azerbaijan. So, it covers a huge geographic area. Within CAREC, focus is on transport and energy connectivity recreating a modern Silk Road by enhancing the connectivity on physical infrastructure.

In the past 10 years, within the CAREC initiative, about $20 billion U.S. in investment were affected, comprising road construction, road rehabilitation, railways, energy infrastructure and so on. The CAREC program has identified six corridors, corridors which combine Europe, Russia, the Middle East, with Central-South Asia and East Asia. And those six corridors intersect very closely with the Northern Distribution Network, so there’s a very good match in terms of the issues which, in particular, ambassadors Morel and Blake mentioned on Northern Distribution Network on how it can then subsequently be used as a basis for further developing the Silk Road.

But physical investment is only one part. The second part is investment in the soft side: customs harmonization, cross-border transport facilitation. And these are the issues which we have mentioned that, for example, in the Northern Distribution Network, 60 percent of the time-delay in the course is associated with border crossings. So, heavy investment in the softer side is important and it’s part of the CAREC Initiative.

When we look forward, there has been a lot of asset creation. Asset creation needs to be complemented with sustainability consideration: operating maintenance, having appropriate institutional and policy environment in order to maintain both the transport – (audio break) – in order to ensure that both the transport and the energy infrastructure is maintained.

For example, in the case of Afghanistan, that means you establish a rail authority, a road authority. You need to think about the funding mechanism particularly with the external financing still being dominant within the public finances of Afghanistan. For example, having a dedicated road fund established.

Private sector involvement is essential for the future of the further development of the Silk Road. So far, a lot has been done and spearheaded by governments, by public sector. In the Northern Distribution Network, it’s also originating from military consideration. So getting the private sector into investment through public-private partnerships, through operating and maintenance contracts and other mechanisms will be important.

It will also be important – and ADB has initiated a corridor performance measurement and monitoring system where you actually monitor the progress through capturing the time required as well as the cost associated with utilizing the corridors. Those will give you valuable information where the bottlenecks are – bottlenecks in terms of time, speed, but also formal and informal costs in utilizing the corridors.

When we look forward, TAPI has already been mentioned as a major initiative and regional project. TUTUP is something which is currently being conceptualized – TUTAP, combining Turkmenistan, Uzbekistan, Tajikistan, Afghanistan and Pakistan. And the idea behind it is utilizing what Ambassador Blake already mentioned: the transmission between Uzbekistan-Afghanistan and Tajikistan-Afghanistan on electricity; complementing it by linking Turkmenistan and Afghanistan. Building the transmission – (audio break).

OK, building transmission network in Afghanistan and then having the opportunity of electricity exchange from the Central Asian countries to South Asia. As you may know, Pakistan has a tremendous energy shortfall. And through enhanced collaboration and connectivity between Central and South Asia, Central Asian surplus could be transferred and exported to South Asia – strengthening the interrelationship between those two subregions.

However, some geopolitical considerations need to be taken into account. The issue of India-Pakistan was already mentioned. Transit trade is being facilitated but you also have substantial geopolitical considerations in the broader energy nexus. In particular – (audio break) – the large hydro potential in Tajikistan and Kyrgyz and irrigation requirements which you have downstream. So, the geopolitics within Central Asia and Central Asia and South Asia is something which will need to be taken into account in the further development of the Silk Road both from the physical infrastructure but also from the softer side. Thank you.

AMB. MOREL: I thank Mr. Gerhaeusser for this additional picture so that now I think we have had a rather good review of what is under way. And I think this was really the good base. Of course, you could note from the different contributions that the reference to the political dimension, geopolitical, the practice on the ground, the obstacles, the soft part of these projects are very important, too. I mean, we are not far from politics. We are in politics through infrastructure. Let’s consider these different dimensions turning to the floor, and we have 20 minutes maximum opportunity for debate. The floor is open. (Pause.)

Are these projects so intimidating? (Chuckles.) Maybe it – somebody, yes. Yes, please. Up to you.

Q: Thank you. Thank you. Just – I’m Steven Mann from ExxonMobil. We have, of course, an interest in Turkmenistan and the potential TAPI pipeline. And my question is for Mr. Gerhaeusser from – because the ADB has been leading TAPI effort. I’d like to ask what the ADB sees as the 2013 timeline for TAPI events. I know there’s another roadshow in March. And a second question to that, in terms of the financing for TAPI, what the ADB envisions as the debt-versus-equity ratio in financing the TAPI project.

AMB. MOREL: Thank you, Steve. Mr. Gerhaeusser.

MR. GERHAEUSSER: Thank you very much for the question. As you know, the TAPI project has made quite some progress over the last two to three years. The intergovernmental agreements we have signed – the pipeline framework agreement was signed, and just recently the gas sales and purchase agreements among some of the players, as well as the roadshow in Singapore and New York as well as in London. I myself was in London for part of the discussions.

The TAPI discussions are structured and spearheaded by a steering committee comprising ministers of the four countries: Turkmenistan, Afghanistan, Pakistan and India. And their deliberations – there were deliberations immediately after the roadshow. There are further deliberations on how to move forward. There has been quite interesting feedback from the market on the project. The project as such is seen as bankable, and quite a number of financial institutions took park in the roadshow.

And therefore looking forward to 2013, and as Ambassador Blake already mentioned before, the issue of a consortium – formation of a consortium will be the next step. And we are in the process of discussing the preliminary steps towards such a formation. You mentioned in particular 2013, the timeline. I don’t want to go into any details at that stage but clearly the steps forward are known and based and informed by the roadshow and by further discussion among the participants. We hope that further progress is being made.

AMB. MOREL: I think, Mr. Gerhaeusser, I may add a word on this because, indeed, we have seen progress moving forward but the big question is about the company, and so the forthcoming question of the consortium. Because in the end I think we must relate this point to the debate of yesterday we had when Ambassador Richard Morningstar reminded that de fact no international company would enter without having a foot for its own activity in Turkmenistan.

And we know very much that TAPI has perspective because the – (inaudible) – big opportunity is giving great potential for the future. But for the time being – and this is the same problem with Trans-Caspian. The problem is of access of the companies into the Turkmen energy system. And for the time being, except China and, in some way, Gazprom, I mean, this is unclear. So, we can see here quite an important question mark.

Mr. Bathija wanted to speak.

MR. BATHIJA: No, I just wanted to enlarge the whole issue, which you did very well, I presume. But as far as Afghanistan is concerned, we are attaching significant importance to this TAPI. As a matter of fact, we have – (inaudible) – visits even at the heads-of-state level. We have raised these issues and we have committed to it and there’s a continuous dialogue actually on the monthly basis. And, of course, ADB is right in the heart of it and they are accompanying us in many, many discussions and so on. So, this is – commitment is there. Commitment is also there with Karzai because we also see this whole – these type of projects as part of regional cooperation initiatives and what we want to attach to it.

Similarly, on the roads, Afghanistan has built in the past 10 years more roads than the history – in the history we have done so. So it’s very well-connected in terms of roads. Of course, much is happening because of the mountainous environment. The transactions or tracking your transport takes place by the road. And as the secretary general of BSEC already mentioned, we are already signed – or, reactivated our IRU arrangements with the countries.

Ambassador Blake very rightly pointed out that with all the assistance that we get – and I would like to put it on the record we appreciate it very much – from the United States and the donor community, the railway programs. I have been actually asked by the Cabinet to set up an institutional mechanism to have a railway because we never have the experience of the railway.

So, we have now set up some sort of an institutional cell, independent authority idea, which hopefully will go through it. But this railway is basically for our natural resources. As you know, Ambassador, we have an iron ore contract which we have signed with India; we have a copper contract which we have signed with China. And many other such future natural resource has to be developed, and those you cannot go by trucks or they cannot go by horses, so it has to have a railway as a part of it. So we are working on that aspect very, very extensively.

Very rightly so that you mentioned on the – on the softer side of it – the border crossing. Yes, that is an obstacle. I need not to say that the press is full of it – what is happening on our eastern border side: how much our transactions, our commercial goods and services are postponed. So, that help is certainly needed on that part.

But overall, since you also referred to earlier on this Northern Distribution Network, we have taken this whole initiative very seriously. And of course we are in close touch with – under the United States guidance, we are basically talking to our Central Asian neighbors to make sure that all this – what is required to be done for the movements of goods, services, military hardware has to be taken place in a more efficient manner than we are doing, and so on.

But all in all, it all links to some sort of update initiative – as, Ambassador, you rightly pointed out. Many has been taken place, what is the next one, and how to go about it. I fully agree with you that the Silk Road Initiative is one of it that we can go by it.

AMB. MOREL: Thank you very much. Back to the floor with questions. (Inaudible) – again. Bob.

MR. BLAKE: Is this on? Yes. Let me just comment briefly on the Northern Distribution Network since that’s come up repeatedly. As has been said, there was a quite important effort over the last three years by the United States and others to stand up the Northern Distribution Network; working very closely with our partners in Afghanistan and of course with our partners in Central Asia.

I think that there are opportunities now to leverage those networks that have been created – not only rail but also road networks – to indeed supplement the very important efforts that the ADB has under way to develop the six transport corridors that Klaus talked about earlier because we see that, as we look ahead now, you have Central Asia and Afghanistan at the crossroads of many different trade routes: from Turkey, from the EU, from Russia, from China, and of course from India. And if you could open up these trade routes and, again, reduce a lot of the border impediments that have been discussed already, but many of the other impediments, there’s a huge opportunity to dramatically increase trade.

I mentioned just the India part of it, but the India-Pakistan part of it is as much as $10 billion just in a year. But I think that there’s much more to be considered. And I think what’s encouraging now is that countries like the Chinese are beginning to take quite an important effort in this – helping to develop this infrastructure – and they see that there are important opportunities to move, for example, goods through roads and rails through Kazakhstan and Kyrgyzstan, through Uzbekistan down to Turkey, down to the Indian Ocean, but also across Kazakhstan to Europe. So, again, many of these projects are already under way and I think that’s an encouraging sign.

MR. GERHAEUSSER: I would just like to expand a bit on what Ambassador Blake said about the Chinese dimension. Well, we could not cover everything but I think we also have to realize using the words which have been taken about landlocked countries in order to stress that Qinghai and Xingjian provinces in the western part of China are also highly landlocked provinces.

And that this far west of China has an absolute need with the pace of economic development China, we all know, to get the ways out for its own activity. And therefore when you travel in the region – and we have been doing that in different respects – we can see step by step how bits and pieces of connections – roads and so on – are built in order to allow export from the west, and not only from the ports of the East, which are of course the big fields of this tremendous expansion.

But now, what has been called the development of the west as a program, which has been launched 10 year ago, begins to – from insight – where loss of finances come to these remote provinces. Now, the need to go further. And therefore, I mean, if you take one of the most mountainous parts of Tajikistan through the 4,000-meter-high place where you have the – (inaudible) – gap, this is really a high plateau of a Tibetan type. You see trucks – Chinese trucks all the day, and this is a very complicated road to be improved through further investment.

So we have to bring in this picture this additional dimension, I think, to understand the challenge of crossing this huge physical barrier, either from the big northern part. And you have to add China – on the Chinese dimension – this Turkmenistan-China pipeline which has been built in two years – from 2009 to 2011 – with 30 bcm potential and we are already in the discussion about the 60 bcm. This is a doubling. So, I just would like to recall this about the scope of expansion of this part of this which until now have been clearly underdeveloped for physical or political reasons.

AMB. MOREL: Further contributions or questions from the floor? Yes, please.

Q: Bill Veale. I’m executive director of the U.S.-Kazakhstan Business Association. I want to bring another topic into this discussion, and that’s global warming. About maybe three or four months ago a former American ambassador to Kazakhstan wrote an op-ed piece that appeared in either New York Times or Wall Street Journal about a passing window of opportunity for Central Asian and these land routes, the Silk Road.

That with the warming going on in the Arctic, that water routes from Asia to Europe will become attractive at a certain point. If this friction continues to exist at the border-crossing points, strategic shippers, shall we say, will look at these new emerging opportunities as a bypass around this patchwork of political units that are imposing this friction. So it seems to be that there’s a kind of – well, you can take it or leave it, really, in terms of whether that’s a – (inaudible).

But the issue, it seems to me, is really with the governments in the countries where the border-crossing issues are, and that there needs to be a serious effort by donor countries and assistance countries to focus the elites of these countries on the opportunities of the growing trade – which several of you have mentioned in that area – as participants in helping the pie grow.

Right now, you have an informal revenue-collection system going on at the border that is flowing in to various hands in the governments and elsewhere in these countries. And that’s what you’ve got to really focus on, is diverting that and making the case that there’s more money to be made legitimately in the trade.

Part of that picture, it seems to me, is also cultivating the development of local entrepreneurs on either sides of the borders so that you have a kind of demand pull for this amongst the players in the countries for that. And that’s, again, something that seems to me that donors need to be contributing. I’d appreciate any comments from any members of the – of the panel on that. thank you.

AMB. MOREL: I thank you. And I think we come back again to this problem we mentioned several times. As you said very starkly, in fact, the problem is that border crossing is a trade by itself. A good to be shared through different connections and linkages. And so when you have such an expansion of the cost of the border-crossing-specific trade, well, what is the price? The price is loss in trade itself.

So, for myself, I must say I’ve been really advocating after different technical conferences on NDN that are real and regional-based. Because, yes, donors can do a lot but in the end it’s a local governance problem. And therefore, you can push, you can recommend, but if the customs management integration is not working enough, then the culture is missing to exploit these tremendous opportunities we are discussing.

EU has had a very well-known program in the region which is BMCA, Border Management in Central Asia, connected with BMAF, Border Management in Afghanistan. But we are still working on the elementary datas that is to pass the concept of integrated border management. We repeat that all the time, everywhere in repeated conferences and so on, but we are still working on the basics there. This is one of the core problems. Maybe the softer, in technical terms, but directly linked to governance.

Ambassador Chrysanthopoulos.

AMB. CHRYSANTHOPOULOS: Well, let’s go to what you started at the outset with the – with the shipping lanes that will be open because of global warming. Okay, so the ships may go but where do they – where do they land to leave their freight? I mean, if there are no port facilities there, it would be just a long trip to one of the already – how do you call it – overburdened ports of Northern Europe where the waiting time is simply tragic sometimes there. That’s why – that’s the benefits of the road transport if we are able to eliminate these delays at the borders.

Now, within BSEC, I mean – and IRU has done a lot and Turkey has done a lot there – we have customs that – you only cross customs once. I mean, you have, for example – I think it’s on the Bulgarian border or the Georgian border, where there is only one control, where you have the customs officers on the Turkish side working along them. So, the trucks pass and the passengers pass only once from one control post. That helps a lot because it eliminates the delays of having a double custom-control, double payments, and makes life simpler – much more simple for everybody.

And the electronic pre-declarations are also very, very useful and very practical. We are doing it – within all BSEC countries it’s being implemented. And I think that slowly, slowly this will be extended to the Asian countries, and in this way will try to eliminate. But, as you say, it’s a question of the governments that have to take the decision to simplify the process. And as I said at the outset – the U.N. conventions. If they’re implemented correctly, it solves the problem.

AMB. MOREL: Thank you very much. Ambassador Blake wanted to have a word.

MR. BLAKE: Let me just address what Bill was talking about in terms of the importance of competition, and I think that’s sort of at the heart of this. I think companies and countries are constantly looking for ways to cut costs but also cut shipping times. One of the interesting phenomenon that I’ve noticed in my own work has been that countries like Latvia and Lithuania are increasingly active in Afghanistan and Central Asia because they see a strategic opportunity to take a bit of the – of the China trade.

Instead of having a shipment that has to go through the Straits of Malacca, across the Indian Ocean and then up through the Suez Canal, they see a tremendous opportunity to leverage the road and rail transport networks that are being developed through Kazakhstan and the rest of Central Asia to significantly cut the shipping times to Europe. And so they are – they are already hard at work at this and are very, very active in this whole field. And that’s very welcome, and so we encourage that.

And so I – it just comes back to the point Bill made, which is that there is already competition under way and the Central Asians must recognize that and take immediate steps to address many of these issues that we’ve just talked about.

AMB. MOREL: Thank you, Bob. I don’t – (inaudible) – and time is running, so I think we must come to a close. And the conclusion of Ambassador Blake is maybe a very good one. We are in a historical stage. If you come back to old times, you have had – the Silk Road was a land route and was more or less killed by the maritime Silk Road around the 14th-15th century.

And when you look at the economics of transportation today, you can have some kind of reversal which is exactly what was described through the initiatives and moves of Latvia and Lithuania. Taking advantage of circumstances, it was a bit forgotten. But NDN gave a boost, and so now this is to be expanded.

I must say, following your point, Kazakhstan has been very much pushing in that – in that direction. But once again, I mean, what struck me is that Kazakhstan is arguing very well but is confronted with lack of perception outside and practical problems of management inside; this border-business problem, which is killing business, in a way.

So I would finish with a recommendation to very good organizers – for next session – next forum, we – I think we’ll have to come back because there’s a potential here. And my only personal request, we should have a map because this is key to understand how much the challenge is there, the importance is there, and it’s just not to have the physical location of the countries, where more or less we have some idea, but just to see the routes.

And the routes are not enough perceived to drive enough understanding. We all have – (inaudible) – including lights there for the Botash pipelines. We need to have some kind of even modest equivalent for the transportation route. And then I think a much wider circle of participants and decision-making authorities will understand that there’s a good and promising challenge.

Thank you very much, and please join in thanking the speakers as well as thanking yourselves, I would say, for this good informative session. (Applause.)