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A Response To ‘Foreign Investments In Afghanistan: A Bridge Too Far?’

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By Mukul Arya

I’m writing to you in response to Mr. J. Jeganaathan’s article of 7 July 2012, ” Foreign Investments in Afghanistan: A bridge too far? -Analysis“. The article rightly highlights the need for strengthening institutional capacity and raises pertinent questions about the institutional preparedness of Afghanistan to attract investments. The External Affairs Minister of India, Mr. S.M. Krishna also acknowledged the same at the Delhi Summit when he said that Afghanistan as an investment destination is counter-intuitive and a hard-sell. While the dangers that the writer points our are valid, among the objectives and outcomes of the Delhi event was to underline the important role that investment-led economic growth could play in stabilizing Afghanistan in the context of the western drawdown, tailor an investment strategy for a far from ideal conflict situation, and seek and develop mechanisms to address some of the very issues he has raised. It is not our intention to dispute the author’s analysis. It could, however, be faulted on a few counts.

First, the article assumes that the idea of the Summit had its genesis in the Indo-US Strategic dialogue in June 2012. This is factually incorrect. It was in fact, announced at the first meeting of the India-Afghanistan Partnership Council on May 1, 2012, but the idea of the event had its genesis even earlier, first as a regional investment and confidence-building measure proposed by India in the context of the Istanbul process, and then as a regional and international investment meet as part of the long-term commitments for Afghanistan at the Bonn and Tokyo Conferences. It is another matter that countries like the Japan, the US and others realized the value of the event and supported it.

Second, it would be unfair to judge the Delhi Summit (and, as its corollary, investment in Afghanistan) by the sole yardstick of investment in the mining and the hydrocarbons sectors. It is natural that large-scale investments in the “industrial sectors” (as the author terms them) should attract the most attention and be subject to greater scrutiny. It is also undeniable that these are the kind of large-scale investments that can develop Afghanistan’s natural resources and generate the revenues necessary for the financial sustainability of Afghanistan. However, in the process, the article completely neglects the emphasis at the Summit, spread over part of the plenary and three of the four sector-specific sessions, on “traditional sectors” and more broad-based, short-gestation investments in areas like agriculture and agro-industry, small and medium industries, and the social sector like education and health. These high-employment generating sectors are necessary to enlarge the base of Afghanistan’s economy. The effort to highlight these sectors (in addition to mining) should be acknowledged in any analysis of the Summit.

Third, the analysis simply begs the issue of what can be done about Afghanistan in the context of the western military draw-down and realization that a purely military approach is unsustainable and a political approach looks weak, erratic and uncertain at best, and thus falls into the prevailing cynicism that Afghanistan is fated to another cycle of instability and violence because of its own latent characteristics. In that context, an economic approach that gives the international community a long-term stake in Afghanistan through investments seems to be an approach that is at least worth trying and has the support of both the Afghan government and private sector and the international community. Of course, nothing is given or can be taken for granted, and everything will have to be striven for. But provided the effort is made, the investment approach offers perhaps more hope and opportunity than any other at present.

Finally, there is a tendency implicit in Mr. Jeganaathan’s article, to think of Indian foreign policy as either reactive or following the lead of other countries. We hope your readers can see that in this case it is neither, and that in fact, India has been able to offer an alternative to the current paradigm of looking at Afghanistan largely from the prism of aid dependency and good governance, by offering investments as a way to reform, self-reliance and inter-dependence.

I hope that our remarks are not seen as undue criticism of the author and can be seen in the spirit in which they are offered. We only seek to point out some misrepresentations that detract from an understandably cautionary and otherwise commendable analysis.

With Best Regards,

Mukul Arya
Second Secretary (Political & Information)
Embassy of India, Kabul

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