Catalog

Growing Regional Importance
ADB Review [ December 2005 ]

Afghanistan’s participation in a recent regional economic cooperation meeting signals its important place in the heart of regional trade

Afghanistan’s growing importance in its region was highlighted in November 2005 with its attendance for the first time as full participant in the fourth ministerial conference of the Central Asia Regional Economic Cooperation (CAREC) Program held in Bishkek, Kyrgyz Republic.

Joining as a new member alongside Russia, Afghanistan’s participation brings profile, scope, and depth to CAREC, and underscores Afghanistan’s strategic position as a transport corridor.

“This is a significant development that will provide new opportunities for regional efforts. Russia is Central Asia’s largest trading partner, and a key link to Europe. Afghanistan serves as a landbridge and important potential trade route to markets in the south,” said Asian Development Bank (ADB) President Haruhiko Kuroda in a keynote speech to delegates at the Bishkek meeting.

CAREC is an ADB-supported initiative to encourage economic cooperation in Central Asia. It started in 1997 with the original members Azerbaijan, Xinjiang Uygur Autonomous Region in the People’s Republic of China (PRC), Kazakhstan, Kyrgyz Republic, Mongolia, Tajikistan, and Uzbekistan. The program has focused on regional initiatives in transport, trade facilitation, trade policy, and energy critical to improving the economic performance of the region.

Afghanistan is expected to complete repair of its primary road network by about 2008 with substantial support from ADB and other donor agencies. The work includes major upgrades of adjoining roads in the Central Asian republics, Iran, and Pakistan, and should help realize an envisioned transport corridor (see related story).

Afghanistan, Iran, Pakistan, Tajikistan, and Uzbekistan also recently endorsed the establishment of the Central and South Asia Transport and Trade Forum, aimed at overcoming the obstacles to establishing a sophisticated subregional transport and trade network.

In his speech, Mr. Kuroda pointed out that Central Asia’s relatively small populations, vast distances to markets, and landlocked geographies make cooperation a necessity for strengthening economies and improving standards of living.

The inclusion of Afghanistan and Russia enlarges the CAREC regional market to over 120 million people. Combined with the region’s rich resources, the CAREC area could become a powerful draw for investors and companies around the world.

The Central Asian region is enjoying one of the most dynamic eras of growth it has ever seen. The gross domestic product in CAREC economies is typically expanding at a rate of 7.9% a year, energy and commodity prices are high, manufactured exports and foreign investment are growing, and per capita incomes have risen significantly since the mid-1990s.

With proximity to rapidly growing markets like PRC, India, and Russia—all of which have huge needs for energy—and with greater transit access to the sea through Afghanistan, CAREC countries are well poised to reap the benefits of their strategic location, said Mr. Kuroda.

CAREC also brings together the European Bank for Reconstruction and Development, International Monetary Fund, Islamic Development Bank, United Nations Development Programme, World Bank, and ADB, all of which have actively promoted economic cooperation in Central Asia.

The CAREC Program operates in close partnership with other key regional cooperation programs/institutions, particularly the Shanghai Cooperation Organization and the Central Asia Cooperation Organization.

CAREC is the only forum that brings together the countries of the region and key multilateral and regional institutions within a single institutional framework.

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