By Ernesto Gallo
Newly-elected Afghan president Ashraf Ghani has always been perceived as close to the United States, partially because of his academic education and subsequent positions in American universities. Yet his first State visit abroad in October 2014 was to China, where he spent four days and was personally welcomed by President Xi Jinping at the airport, an honour reserved for prominent personalities.
Despite sustained growth over the past decade, Afghanistan’s economy remains one of the world’s poorest. GDP per capita stands at less than $700, the lowest in Asia. Poor security and massive corruption — according to Transparency International, it was the world’s most corrupt country in 2013, together with Somalia and North Korea — have contributed to the economic woes and prevented foreign investors from engaging with Afghanistan’s basic needs and massive resources, particularly in the mining industry.
China has been one of the major investors in Afghanistan and in 2007 history was made when Metallurgical Corporation of China (MCC) and Jiangxi Copper Corporation (JCCL) agreed on the largest foreign investment in Afghanistan’s history to date –$4.4 billion, spent on the acquisition of a massive copper deposit at Aynak, not far from Kabul. Chinese National Petroleum Corporation (CNPC) has also invested in oil (2011), while MCC has been busy in the railway sector, where Afghanistan is still lagging behind. At the moment there are no passenger services in the country.
But because of adverse security conditions, all these investments have brought about very few results. Afghanistan was once called “the graveyard of empires” and has certainly created momentous problems to Great Britain, the Soviet Union, and more recently the US. Will China encounter a similar fate?
This is rather unlikely, if considering the pragmatic approach which characterises both sides – Afghanistan and China. First, there is the issue of aid. Kabul is searching for skilled workers and cash, and China can offer both. During Ghani’s visit, China promised 330 million dollars in aid for three years, and professional training for 3,000 Afghans. This might be beneficial to Kabul and Beijing alike; $330 million is trivial compared to China’s overall availability of capital and resources, yet it could pave the way to further collaboration.
Then there is the issue of investment. China can invest much more than what it has already done in Afghanistan. Beijing recently launched a massive Asian Infrastructure Investment Bank (AIIB), which has an initial capital of $50 billion and is already supported by twenty other Asian countries. Afghanistan is notoriously backward in the infrastructure sector and China could of course take advantage of the opportunity.
Of course, Ghani’s visit has been extremely important not only because of economic and commercial issues. Security is the elephant in the room. China needs a stable and co-operative Afghanistan to keep under control Islamist militants who operate in the restive Uighur (Xinjiang) province. Areas such as the remote Wakhan Corridor (at the border between Afghanistan and China) and the Northern region of neighbouring Pakistan are often suspected to host extremists and fundamentalist groups.
Co-operation is thus essential, particularly after the withdrawal of the US-led forces and in the light of China’s key role in Pakistan’s economy. A stable and prosperous Central Asia is essential to Beijing’s policy towards its internal regions, which are home to both fundamentalist and separatist groups; Afghanistan is an important part of this equation, which could ideally include it within China’s grand design of the “New Economic Silk Road”.
Will Kabul be on the route of a new China-driven Economic Silk Road? Or is China taking too many risks? To be sure, the new “partnership” between China and Afghanistan is premised on pragmatic foundations. China is not Afghanistan’s new “best friend”; to put it simply, China has cash availability and the potential to develop Afghanistan’s infrastructure; while on the other hand, Afghanistan offers opportunities in terms of security and investment.
If China fails to deliver, Kabul can still knock on other doors; if poor security jeopardises Chinese investment, Beijing can pursue stronger links with other countries within its vast investment portfolio.
First published in Global Risk Insights.