December 14, 2016

Indo-Pacific Regional Connectivity, Commerce, and Cooperation

Thank you, it’s a pleasure to be here with so many of my distinguished colleagues from around the region. I have to congratulate Ram Madhav and the India Foundation, as well as RSIS and organizing partners from Bangladesh and Sri Lanka, for bringing together such a stellar group of people. In fact, looking through the list of today’s speakers and panelists, it really makes me wonder if there’s anyone left running things back in our capitals.

Today, I’ll talk about why the United States supports greater economic connectivity in the Indian Ocean region, some recent developments, and then some areas for future work.

My country has long recognized the strategic significance of the Indian Ocean. Well over one hundred years ago, Admiral Alfred Mahan – one of the most important American strategists of the nineteenth century – said that the destiny of the world will be decided on the waters of the Indian Ocean.

The question we then face is – How will we write that destiny? Will it be a story of friendly cooperation and mutual benefit, or one of adversarial competition and unnecessary conflict? A story where many millions of people are lifted out of poverty, or one where millions are condemned to suffer the consequences of our inaction? Starkly different outcomes, and we believe that only a strong, transparent, rules-based architecture can bring about the peace and prosperity that all will benefit from.

That means a system where all countries pursue their territorial claims in accordance with international law. It also means a system that engenders greater cooperation on natural disasters, maritime security, and mitigating the effects of climate change. And it means a system that enhances regional economic connectivity across the entire Indian Ocean region, and in particular South Asia, so that goods and services can move at faster speeds, in greater numbers, and at lower costs.

The statistics show just how much needs to be done: South Asia is one of the least economically integrated regions in the world, with less than six percent of its total trade and less than one percent of its investment flows occurring within the region.

Compare that to North America, where over 50 percent of total exports are sold within the region – or Europe, where the same figure has averaged more than 70 percent over the last 20 years – and you can see what is possible. Indeed, one look outside of this building’s windows shows what can be accomplished when a country decides that its future will be built on trade and commerce.

So we know what better economic connectivity can do for the countries of South Asia and the entire Indo-Pacific. And the United States also has a stake in the region’s success – not only because we seek to strengthen our business ties, whether it’s trade in consumer goods, financial services, technology, energy, or education – but also because we know that prosperity is linked to security and stability. This is the basis behind President Obama’s rebalance to Asia and the Joint Strategic Vision that the United States and India put forward last year, showing that our leaders recognize how much more can be accomplished when we work in partnership.

And, as my colleague Rear Admiral Gabrielson rightly pointed out in the last panel, the stability of the Indo-Pacific and the safety of its sea lanes are vital U.S. interests. Twenty five percent of the world’s traded goods and seaborne oil crosses the Strait of Malacca, visible from Singapore’s skyscrapers. That means that one-quarter of the global economy is dependent on the security of a stretch of ocean which, at its narrowest, is only one-and-a-half miles wide.

I think that covers the “why”, but we’re really here to talk about the “how”. Greater connectivity requires infrastructure, and infrastructure requires investment: $2.5 trillion over the next ten years in South Asia alone, according to the World Bank. Roughly speaking, one-third for transport, another third to electricity, and the last third to critical services like water, sanitation, and telecommunications.

It’s a tall order, but with smart investments from the right stakeholders, it can be fulfilled. Asian powers like Japan, India, and China are stepping up, and international financial institutions like the World Bank and the Asian Development Bank have been working on this challenge for decades. Public-private partnerships are also increasingly filling in the gaps.

But greater economic connectivity will take more than just the new hardware of roads, rails, and ports. It will also require better infrastructure “software” – meaning improved regulatory frameworks, more capable institutions, and better-networked businesses and people.

That’s where we think the United States government can add value, and that’s where we’ve focused our efforts. We see ourselves as a convener and a partner. We can help identify projects that have multiplier effects, bring all stakeholders to the table, support and catalyze the early stages of development, and provide the necessary technical support to make sure it gets done right.

Through an initiative we call the Indo-Pacific Economic Corridor, or IPEC, we’re helping create new energy linkages, open up trade and transport corridors, streamline customs procedures and border crossings, and connect entrepreneurs and businesses throughout South Asia and beyond.

On energy alone, there is tremendous potential for expanded trade within South Asia. One example is the 500 megawatt energy link between India and Bangladesh; the U.S. conducted the initial feasibility study that showed the viability of the line, and it’s now being expanded to 1000 megawatts. It’s a true proof-of-concept for what can be accomplished when a multi-stakeholder project is pursued with transparency, quality, and good-faith cooperation.

While relatively modest, IPEC projects like these are emblematic of the vision we are working to build – a vision of a connected Indo-Pacific, of a region that is at the epicenter of global trade and commerce, a region that has lifted hundreds of millions of people out of poverty and drives economic growth in Asia, Africa, and the Americas.

And we see the region embracing this vision.

Through its Act East policy, India is improving relations with its neighbors and overcoming long-standing disagreements.

Bangladesh has been a willing partner, and together with India has peacefully resolved age-old land and maritime border disputes, which will allow for greater investment and the freer, faster, and cheaper movement of goods, services, and people.

Burma’s democratic transition has created new opportunities for investment, and it is working with Bangladesh and India to open up trade corridors into Southeast Asia. Just a week ago, India and Burma signed agreements to complete the Kaladan Multi-Modal Transit Transport project and the trilateral highway to Thailand, which will have a profound impact on the movement of goods and services between South and Southeast Asia.

Sri Lanka has the potential to become a global transit and commercial hub: ninety percent of the oil destined for China and Japan, and seventy percent of all Indian Ocean maritime traffic, pass within 12 miles of Sri Lanka’s southern coastline.

Colombo is already among the top 15 ports in the world for trans-shipment traffic, and top 30 for total container volume. It is now seeking a partner from the Indian subcontinent to finish a mega-terminal that will accommodate the world’s largest container vessels.

And better regional economic connectivity also begets closer cooperation on other cross-cutting issues like maritime security, natural disasters, trafficking and piracy, and environmental protection. These are problems that affect all of our countries, and we can most effectively address them when we recognize our common interests and work together toward common goals.

The United States also believes that harnessing the economic benefits of the ocean – including fisheries, tourism, energy, and transportation –requires responsible investments in sustainability and environmental protection. To put it simply, if we want these resources to last, we have to take care of them. And that requires cooperation, because we all share the same ocean.

In a couple weeks, Secretary Kerry will host the Our Ocean conference in Washington, with a focus on marine protected areas, sustainable fisheries, marine pollution, and climate-related impacts on the ocean. The future of the blue economy depends on how we address these issues together, and inaction is no longer an option. President Obama took the lead last week when he created the world’s largest ecologically protected area in the Northwestern Hawaiian Islands, declaring that “it is in the public interest to preserve the marine environment” – and we know that it is in the global interest too.

We also share an interest in seeing organizations like the Indian Ocean Rim Association strengthened, to help build consensus on pressing regional challenges. IORA presents an opportunity for the Indian Ocean region to craft its own identity – to set its own priorities, build its own connections, set its own peaceful and transparent norms, and strengthen its own common voice – just as other regional organizations have done before.

To conclude, we’ll continue to strengthen and expand our work to promote regional connectivity in the Indo-Pacific, and we believe that it can create fair, broad, and sustainable growth, underpinning the region’s prosperity, security and stability. The United States has an unwavering commitment to this region’s success because, in the words of President Obama, “in an interconnected world, we all rise and fall together.”

(This article is the gist of remarks made by Nisha Desai Biswal, Assistant Secretary, Bureau of South and Central Asian Affairs, USA at the Indian Ocean Conference 2016 at Singapore on 2nd September, 2016.)


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