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South and Central Asia: The United States and India: Our Economic Opportunity in Tomorrow's Asia

Also see QA session.

Moderator: Greetings ladies and gentlemen, and welcome to the American Center.

It gives me great pleasure this morning to introduce our new Assistant Secretary of State for South and Central Asian Affairs Nisha Desai Biswal.

Ms. Biswal graduated from the University of Virginia and after that she had a remarkably diverse but yet somehow symmetrical career. She worked twice on the Hill for the U.S. House of Representatives; she worked twice in the NGO world, first at the American Red Cross and then at Interaction; and twice for USAID. So I hope this means that we will get you at least twice at the State Department.

Her most recent position at USAID was as Assistant Administrator for Asia in which she oversaw $1.2 billion in assistance for 22 countries. I cannot help but think that she gave up all of those great projects for all of our hard problems, but thank you, because we are all the beneficiaries of that difficult decision today.

Please join me in welcoming a proud American, a great friend of India, and a passionate supporter of our bilateral relationship, Nisha Desai Biswal.

Assistant Secretary Biswal: Good afternoon. It’s such a pleasure to be here with you today. And thanks, George, for that very warm introduction.

I’m glad to see so many friends here from the business community, so many of you whom I’ve had an opportunity I think to work with over the years.

I really want to thank FICCI, CII, ASSOCHAM, USIBC, the American Chamber and the Indo-American Chamber, all of whom have been such strong partners in helping put this event together. But more importantly, the Chambers have played such an important role, such a critical role in expanding markets, in enhancing opportunity, and in really bringing people together.

In fact it’s a recognition of the innovation, the dynamism of the Indian private sector that increasingly we’re seeing partnerships between Indian and American entrepreneurs that bring important benefits not only to India, but to the American people, and frankly, to the global community.

So it’s indeed a pleasure to be here on my first visit as Assistant Secretary of State for South and Central Asia, and to make my first public address in India here before this crowd.

I want to talk a little bit today about the opportunities that lie ahead as the trade and economic relationship between our two countries expands, matures, and becomes increasingly intertwined and interdependent in the decades to come. But first, let me set the scene a little bit.

We have seen the emergence of a truly globalized world, brought closer together by technology and trade, and yet still contending with the challenges of conflict, environmental degradation, and poverty. Today Asia represents more than half of the world’s population and is the most dynamic and fastest growing economic region in the world. Currently three of four largest economies in terms of purchasing power parity are in Asia, and by 2025 the region’s trade volume is expected to double -- led by China, India and Indonesia. By most estimates by 2050 Asia will comprise half of global GDP.

Clouding this optimistic scenario are the challenges that loom in many Asian societies. Poverty, increasing inequality, competition over scarce resources, the effects of climate change, inadequate investment in human capital, underdeveloped infrastructure, weak governance, and fragile institutions that continue to be plagued by corruption.

And nowhere are the opportunities more compelling and the challenges more clear than in India. In the Indian context, however, those challenges are very surmountable. As business men and women doing deals across the continent, I know you understand this, and the United States gets this. More importantly, my bosses -- President Obama and Secretary Kerry -- get this.

The Asia rebalance that President Obama articulated before the Australian Parliament a couple of years ago fundamentally is a recognition that this continent will play a leading role in global politics, security and economics in the 21st Century, and there is no question that India’s economic success is vital to achieving the strategic aims that our leaders have laid out.

In order for the region to live up to its potential it must create societies that encourage strong and inclusive economic growth; one where the private sector and not government leads economic development. It must quell terrorism and counter violent extremism while at the same time advancing human dignity and human rights.

But let me say this. An Asia that boasts democratic governance, transparency and free market economics will offer 4.3 billion people the best opportunity to pursue happiness and realize their aspirations. And in order for this to happen, in order for all of Asia’s citizens to truly reap the benefits of economic prosperity, countries in the region have to work across boundaries.

The United States is very interested in supporting that vision and in supporting India’s economic connections both west into Pakistan, Afghanistan, and Central Asia; and east with Bangladesh, Myanmar, and Southeast Asia. We fundamentally believe that greater economic connectivity will boost regional stability and prosperity. It will create new markets and new opportunities, and most of all, it will create new incentives for peace.

That’s good for the Indian economy and for the Indian people. And let me be candid, it’s also good for the American economy and for the American people.

And on that front we see two major regional initiatives taking shape. First, there’s the historic opportunity to connect South and Southeast Asia into an integrated economic landscape. This Indo-Pacific Economic Corridor or IPEC is a unique geography, a place where the United States and India’s security, political and economic imperatives converge. It supports both the American rebalance towards Asia, and India’s “Look East” policy that has been the subject of trilateral discussions between the United States, India and Japan. In fact I would say that the policy has moved beyond Look East to Be East, and that is a welcome development.

In Myanmar where Prime Minister Singh just concluded his second visit in three years we are seeing the benefits of a political transition play out with foreign investment more than quadrupling since President Thein Sein’s political reforms initiated in 2011.

Bangladesh stands to develop tremendous commercial ties with the rest of Asia through its very strategic location and wealth of natural resources.

But it is India’s efforts today to create durable land, sea and air links into Southeast Asia that will shape the movement of goods and services tomorrow.

More broadly, we welcome India’s growing economic and strategic influence with the economies of ASEAN. Having cultivated a close bond, very much like our own with the ten nation bloc, India and ASEAN account for 1.8 billion people and 3.8 trillion dollars in GDP with an impressive 40 percent increase in trade in 2012 alone.

We think Prime Minster Singh had it right when he said, “The resurgence of Asia is dependent on cooperative architectures in which all countries are equal participants.”

For IPEC to succeed India will have to work with its neighbors and international partners on developing transportation and energy infrastructure, reducing the time and cost of moving goods, raising financing, and finding regional institutions that can support these efforts.

The other major area of regional integration is as you look west. With the upcoming political, security and economic transition in Afghanistan there is a strategic imperative to connect the economies of South Asia and Central Asia. But how do you do this in a region that is fraught with complexity and historical distrust? You do it like it has been done in the days of old. You talk and you trade.

Through the New Silk Road Initiative we have been focusing our efforts in four key areas. Creating regional energy markets that link Central Asia with South Asia; promoting trade and transportation routes and investing in critical infrastructure; improving customs and borders; and linking businesses and people.

Today Afghanistan and its neighbors are increasingly championing and owning that New Silk Road vision, creating new north/south transit and trade routes that complement the very vibrant east/west connections across Eurasia. And the region is making concrete efforts to reduce barriers to trade, to invest in each other’s economies, and to support international development and cross-border projects.

But let me caveat that the regional connectivity through Afghanistan is very difficult and barriers to trade still remain high. However, we are starting to see some breakthroughs.

For the first time regional energy projects such as CASA-1000 which will bring surplus hydropower form Kyrgyzstan and Tajikistan to Afghanistan and Pakistan is making very real progress with international financing largely in place and with broad support in all four CASA countries.

Discussions are underway on a separate electricity line that would bring additional energy from Central Asia into Afghanistan and Pakistan.

Eventually we hope to see Central Asian energy flow into the Indian markets through TAPI, the Turkmenistan-Afghanistan-Pakistan-India pipeline.

Barriers to trade are also slowly coming down. With U.S. technical assistance custom procedures have been streamlined from 20-plus steps to 12 at many Afghan border crossings, resulting in expedited trade with an average release time that has been reduced from eight days in 2009 to just three and a half hours in 2013.

The United States has also been hosting trade forums that have brought together Indian, Pakistani, Afghan and Central Asian businesses where real deals have been signed on the spot, creating new markets and new opportunities.

In the coming years the most important step that India can take in promoting greater connectivity to its west is to normalize trade with Pakistan. While there has been tremendous progress and political courage and leadership exhibited over the past few years, bilateral trade is still a little over 2.5 billion in 2013. We believe that with continued effort on both sides that could easily grow to 10 billion. And that’s not just our thinking. That’s the number that industry groups in both countries have put forward.

Pakistan can play a critical role by granting non-discriminatory market access to India; and India can reduce non-tariff barriers to increase trade between the two countries.

Put simply, in a region of enormous consequence, India has enormous opportunities for trade integration.

Blessed by the Arabian Sea on one side; the Bay of Bengal on the other; astride the busiest sea lanes in the world; and I think you’d agree one of the most entrepreneurial societies in the world, India has tremendous possibilities.

Even more impressive are Indian’s demographics. With a median age of 23 and 600 million people under the age of 25, India’s consumer class is expected to double to 575 million by 2025. If India can help nurture the talents of its people, provide them with productive outlets, then India will benefit greatly from that youth boom. And we’re betting that by 2030 India can and will grow to be the third largest economy in the world in terms of nominal GDP and not just PPP.

Some predict that India could be the largest economy in the world by 2050. For it to realize that vision these tremendous assets will need to be matched by addressing some significant needs. India is improving its energy and its infrastructure, it is modernizing its agriculture, and it is developing health solutions. Providing higher education and skills to a broader population. Businesses are driving much of this progress and yet India still ranks poorly amongst all countries as a hospitable place to invest and start a new business, ranked 134 out of 189 countries.

If India’s enviable demographic boom is to be harnessed, India must take an unprecedented commitment to develop skill and knowledge across all sectors of its economy.

But remember this. There is no challenge that India cannot overcome. And when our two countries work together, there is no challenge that we cannot tackle more efficiently and more effectively.

First and foremost we need to keep focused on growing the trade and investment ties between our two countries. The United States is committed to this. If we are to quintuple our current significant trade which is at $100 billion to half a trillion dollars over the next ten years -- which is what Vice President Joe Biden challenged us to do during his visit last summer -- then international firms need to believe that the benefits far exceed the costs and the challenges, and that India remains committed to economic growth.

One of the most significant endeavors in world economic affairs since the 2nd World War has been the creation of a rules-based trading system that has sought to increase commerce, connectivity and prosperity across the globe. Most of you in the audience here today would agree that the more integrated India is into global markets and in the key economic architecture of Asia, the more India’s economy will grow and benefit the entire global economic system.

India has come a very long way. Import tariffs on average are more than 30 times lower than they were in 1991 when then Finance Minister Manmohan Singh kicked off the modern reforms.

Like any trading partner, we do have our differences and I know there has been some focused attention to that in the press lately. But the willingness to talk about them indicates that we are indeed confident, mature partners. We are concerned that domestic content requirements here are discouraging investment into India, inhibiting innovation and holding India back from developing into the world class manufacturing sector that it needs to be in order to compete and generate jobs for millions of Indian youth that are entering the job market. And equally important is the need for transparency in India’s tax policies, timely regulatory approvals and contract enforcement, and a commitment to strengthening the protection of intellectual property.

We’re addressing these concerns head on as good partners do, either bilaterally through our long-established dialogues, or through multilateral mechanisms. Again, the solution here is to talk and to trade.

There’s no question that India’s economic success is vital to achieving the strategic aims that both our leaders have laid out, and our ongoing discussions about the Bilateral Investment Treaty when completed will bring even greater investment and innovation to India and stronger partnerships between our two private sectors.

We are each making progress to remove impediments to commerce, and from India’s recently announced Visa On Arrival program to our own partnership on the U.S. Global Entry program, we are enhancing the way real time business will be conducted between our two nations.

Nowhere is the U.S.-India collaboration more important than on addressing global environmental challenges. We have sought common ground on climate change issues, both through multilateral discussions and through bilateral cooperation in forestry adaptation, clean and renewable energy, and on HFCs through the creation of the Climate Change Working Group. As broad as our engagement on global issues is, we can expand it and we will even further to engage on other critical cross-cutting issues such as preserving our oceans.

We are actively working together to mitigate the causes of climate change through our energy and science and technology cooperation. Our nations are together improving the prediction of weather and monsoon forecasting, saving both lives and money. U.S. and Indian scientists, entrepreneurs, and government officials will gather next week in Delhi for the next Energy Dialogue which will be led on the U.S. side by our Secretary of Energy, Moniz. From clean technology to non-renewables, energy efficiency to nuclear energy, these ideas and programs will benefit consumers and businesses in both countries.

And don’t forget, our cities and states are partnering more extensively than ever before, embodying the very essence of our broad strategic partnership. States like California and Maharashtra are sharing ideas on how to improve fuel quality for India’s fast-growing vehicle fleets, which we hope will lead the way to improved health of urban inhabitants and contribute important climate benefits as well.

What is the foundation that enables and propels this cooperation? Knowledge and education.

President Obama and Prime Minister Singh’s 21st Century Knowledge Initiative has seen our governments give $10 million to projects that will strengthen collaboration and build partnership between American and Indian institutions of higher education.

Yet we want more Indian students taking advantage of top universities in the United States. And we’re keen to send more American students to India.

So in closing, we want to work with India, trade with India, invest in India, innovate with India and grow with India. To take what three successive Presidents and two Prime Ministers, 15 years, and our 1.6 billion citizens have created, and to make it even better.

I take that responsibility very seriously and very personally, and I assure you we’re committed to cooperation and ambition in our ties with India.

So thank you very much for being here today, and I would love to continue the conversation as more of a dialogue and hear from you on any thoughts and questions that you have on how we can expand and extend cooperation between our two countries. Thank you.