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The Importance of IPR in the New Silk Road Initiative

Silk Road

Ever since former Secretary Clinton announced the New Silk Road Initiative in September 2011, the regional economic integration of the South-Central Asian region has been a priority of the U.S. State Department. Key to its implementation, however, is the participation of the private sector in spurring growth and creating jobs. As Secretary Clinton stated at the time, “We also know that governments alone cannot possibly solve Afghanistan’s economic problems, so we have to work to create an environment that attracts private sector investment.”

Facilitating such an environment is no easy task. Primarily, it requires the removal of impediments to the flow of goods and services. Recent progress on this initiative is encouraging; the region is becoming more integrated through trade liberalization. The reduction of non-tariff trade barriers, improved regulatory regimes, transparent and efficient border clearance procedures, and coordinated policies all accelerate the flow of goods, services, and people throughout the region. More importantly, the efforts of the South-Central Asian region to join the WTO–Kyrgyzstan and Tajikistan are the most recent ascensions–will also open markets and increase economic opportunity for the people of the region. Azerbaijan, Kazakhstan and Afghanistan are all making good progress in their accession processes, while Uzbekistan and Turkmenistan show new interest in the WTO.

However, in addition to trade liberalization, there also needs to be a creation of rule-of-law infrastructure for private-sector capitalists. In the United States, venture capital accounts for 10 percent of jobs, or approximately 18 percent of U.S. revenues. According to Parag Saxena of New Silk Road Partners, a $1.3 billion investment firm in South-Central Asia, the venture capital model is an American intellectual property (IP) asset from which this region would do well to learn. In fact, according to Saxena, it has the potential to obviate the need for official development aid.

But before this can occur, countries in the South-Central Asian region, India in particular, need to build up their IP and innovation regimes and dispose of outdated mercantilist policies. As a leader in the region, India is especially guilty; it continues to be a perennial member of the Special 301 “Priority Watch List.” The continued usage of local content requirements, and forced technology transfer regulations, are not only undermining the growing regional economic integration but also setting a poor example for countries just beginning to develop their relevant IP infrastructure.

With stronger intellectual property protection, the region will become a desirable location for FDI, spurring domestic innovation and catalyzing job growth, just as Saxena and other investors envision. In order to continue to be successful, the New Silk Road Initiative needs to achieve meaningful partnership between local stakeholders, natural investors of capital, and the government-run agencies that protect foreign investors. Two years in, there have been many great successes, but India’s intellectual property regime continues to hold back the region’s growth potential.

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About the author

Michelle Wein is a Trade Policy Analyst at ITIF, specializing in the connections between international trade, innovation, intellectual property and economic productivity.