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Richard Ghiasy: Afghanistan president paves the way for Chinese investors

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Chinese President Xi Jinping, right, and Afghan President Ashraf Ghani attend a signing ceremony at the Great Hall of the People in Beijing on Oct. 28.   © Reuters

This week China became the second foreign destination for new Afghan President Ashraf Ghani, who had previously visited King Abdullah in Saudi Arabia. The trip is tied to the Heart of Asia-Istanbul Process, which involves meetings between China and 13 other Asian and European states. But it highlights the rising importance of neighboring China to Afghanistan's future, especially now that significant U.S. and allied military operations in Afghanistan are to wind down by the end of the year.

     Ghani, who took office in September, received a special welcome from Chinese President Xi Jinping, who pledged to provide 2 billion yuan ($326 million) in aid through 2017. The visit, postponed due to election complications in Afghanistan, has been much anticipated by both sides. Ghani was accompanied by a number of acting ministers and by business leaders. 

     While China welcomes Ghani's business-oriented mindset and has recently committed to increasing what it gives to Afghanistan in terms of aid, professional training and scholarships, it will refrain from becoming involved in the country's security affairs. It will also be guarded when it comes to making major investments going forward, given the country's uncertain security outlook.

     China is concerned that a deterioration in Afghanistan's security situation could grant the East Turkestan Islamic Movement, a small Islamic separatist group said to be active in Xinjiang Province, an opportunity to set up bases outside Beijing's direct reach. Ghani has indicated that Kabul will do everything in its power to avoid that from happening.

     China is also worried about political instability in Afghanistan, in part because of tensions that came close to exploding before a deal between Ghani and election rival Abdullah Abdullah to create a unity government. Beijing will assess the risks involved in any major investments by state-owned or private enterprises in Afghanistan, rather than quickly jumping into deals.

     In the meantime, Ghani's administration will have to alter the enduring perception that the Kabul government does not rule beyond the city's gates. The former Afghan administration was not even able to safeguard the Mes Aynak copper mine, which attracted Chinese funding, from attacks, although the mine is right outside Kabul.

     Still, the potential for economic collaboration is promising. Afghanistan's bountiful mineral resources could be funneled into China's factories, creating a symbiotic relationship that could last for decades. The ties could even underpin Afghanistan's reconstruction. In addition -- although this would be challenging considering Afghanistan's security dynamics -- Iranian hydrocarbon resources could be piped to China through Afghanistan's relatively stable northern region.

     The pipeline would have to go through the rugged Wakhan Corridor, a strip of land that stretches eastward to Afghanistan's short border with China.

     Stability in Afghanistan would also allow the country to act as a north-south energy and trade corridor, expanding landlocked Central Asia's potential access routes to the Arabian Sea (with the cooperation of Pakistan), and reducing the region's dependence on transit across Russia for access to world markets. China would welcome this scenario.

     More importantly, perhaps, a secure Afghanistan would enhance the Silk Road Economic Belt proposed by Beijing to further develop economic ties between China, Central Asia and Europe. Beijing has been vigorously promoting the Belt and wants to make it an economic success story.

     Unlike the former Afghan administration of President Hamid Karzai, Ghani's government is very much aware of the country's dire need for investment. The president's development vision will require vast flows of revenue against a backdrop of diminishing international aid from the U.S. and its allies, not to mention Afghanistan's falling economic growth rate.

     Afghanistan, which has few efficient businesses, needs to leverage the advantages of its natural resources and geographic location. Ghani knows this well and thus welcomes economic powers that show an interest in investing. China, a manufacturing powerhouse, would be an ideal candidate; it has the appetite, capital, and experience to build the infrastructure that Afghanistan's infant extractive industry requires.

     The newly founded Asian Infrastructure Investment Bank, heavily promoted by China, could plan and finance large infrastructure projects, even though Afghanistan is not yet a member.

     Ghani's visit provides China's leadership with affirmation that Chinese investment is welcome and that Kabul will address Beijing's understandable security concerns. However, the Chinese leadership will want to test the ground before it gets significantly involved with its troubled western neighbor.

     In an environment as unique and challenging as Afghanistan's, pilot investments in the less insecure north of the country could provide a smart "port of entry." China sees itself as a preferred commercial partner of Afghanistan.

     The two nations have maintained diplomatic relations for nearly 60 years. A new era of cooperation is on the doorstep.    

Richard Ghiasy is a researcher at the Stockholm International Peace Research Institute. His views do not necessarily represent those of SIPRI.

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