Monday, March 27, 2017

How China could benefit from Pakistan's 'dream corridor'

My article How China could benefit from Pakistan's 'dream corridor' appeared in Mail Today/Daily Mail

Here is the link...

For Pakistan, it was a dream come true.
When President Xi Jinping visited Islamabad in April 2015, he pledged an eye-popping 46 billion dollars for the China Pakistan Economic Corridor (CPEC). While for Beijing the mega project was a vital element of the One Belt, One Road (OBOR), it was a ‘game-changer’ for Pakistan which would bring prosperity to the entire region.
It is true that Xi brought with him munificent gifts for Pakistan: the Chinese billions would boost Pakistan’s flagging economy with massive energy and infrastructure projects. This included an additional 12,000 megawatts to Pakistan’s national grid through coal, hydro and renewable energy projects.
The Corridor would have railways, roads, optical fiber cables, dams, pipelines, you name it! Observers the marveled at Beijing generosity (and wealth), but lately, the ‘beneficiaries’ have started realizing that the project may first and foremost benefit Beijing!
The architects of CPEC plan to build a 2,700-kilometre corridor stretching from Kashgar to Gwadar, which will link Central Asia (via Xinjiang) to Europe and Africa (via the maritime route).
Is it a boon for Islamabad?
Not everyone agrees, even in Pakistan. Salman Rafi Sheikh, a research analyst wrote in Asia Times: “The CPEC continues to look like a mystery, wrapped in an enigma. In the absence of agreements stipulating and documenting both countries’ interests, the CPEC is creating problems that would strip Pakistan of whatever benefits the multi-billion-dollar project promises.”
He continued: “Claims about CPEC’s ability to change Pakistan’s economic outlook appear hollow and unreal. …The question remains: what’s the game changer for the region when CPEC is changing nothing in Pakistan?”
The author certainly has a point.

It is true that the Corridor faces several serious issues, security for example. Now, suppose the scheme becomes ‘unstable’ due to terrorism (presently localised in Pakistan, but which can be easily exported to Xinjiang), the cost of the project could tremendously shoot up. This deeply worries Beijing.
Last month, The Dawn reported that Pakistan has deployed 15,000 military personnel, “as part of the Special Security Division (SSD) and Maritime Security Force (MSF) to protect projects under the CPEC”.
Senator Mushahid Hussain Sayed, chairman of the Parliamentary Committee on CPEC, noted: “Both forces will work under the interior ministry, in coordination with the provinces.”
The question is who is going to pay the bill?
Quoting military sources, The South China Morning Post affirms that the PLA would soon increase its fighting force to 100,000 personnel, “allowing for deployment in Djibouti in the Horn of Africa and Gwadar in southwest Pakistan.” Chinese troops in Gwadar, the main entry to the CPEC, is worrisome, to say the least.

The economy of the corridor

Recently Pakistan’s Public Accounts Committee asked for the details of rate of interest for the loans obtained from China.
The secretary of the Ministry of Water and Power gave some figures: there were 19 power projects under the CPEC with the capacity of 12,114 MW; out of which 3,960 MW from coal, 2,714 MW from hydro projects, 900 MW from solar projects and 4,260 MW from imported coal.
The amazing part is that after the COP21 accords, the planet is abandoning coal, but China is financing new coal projects in Pakistan ….with Chinese coal!
Beijing has agreed to provide a $ 6 billion loan for road infrastructure and Rs 2.8 billion for Railways ‘on lowest interest rate’. While these loans are at a reasonable 1.6% interest, in some other cases, they can be as high as 6 or 7%. Will Pakistan be able to repay these loans?
By including the cost of insurance, also paid to a Chinese insurance company, the cost of borrowings could surge to 13%: “Adding insult to injury, the government has already exempted income of Chinese financial institutions from dividend income tax,” said The Pakistan Herald.
Another issue is regional disparity: on February 28, Sardar Akhtar Jan Mengal, president of the Balochistan National Party-Mengal (BNP-M), accused Islamabad of getting funds for the project in the name of Gwadar while using them in one province only, Punjab. Mengal argued that the people of Balochistan, a province through which a major portion of the Corridor passes, have neither been consulted nor taken into confidence on CPEC projects. Other provinces, particularly Khyber Pakhtunkhwa (for the western route of CPEC) and Gilgit-Baltistan have similar views.

India’s position
As the project crosses Indian territory in PoK, the CPEC is unacceptable for India. Delhi cannot pretend that nothing is happening and forget about the legality of the accession of Jammu & Kashmir State to India.
Beijing has hinted that India should join the ‘global’ project, but China does not seem to be ready to implement what it is preaching.
After Tibet was invaded by China in October 1950, the traditional Himalayan trade routes were progressively closed down. An effort was done in 1954 to regulate the flow of people and goods through the 'Agreement on Trade and Intercourse between the Tibet region of China and India', i.e. the Panchsheel Agreement; however China was not ready to implement the letter or the spirit of the Agreement which eventually lapsed in 1962.
While China is adamant to not reopen the Himalayan land ports between India and Tibet, why ‘invite’ Delhi to join the CPEC bandwagon? There is no logic.
In any case, the Corridor is first and foremost a vital investment for Beijing, which is slowly ‘buying’ the strategic corridor; Beijing will soon control its new dominion, Pakistan. For India, it will be a game changer as it will then face China on two fronts, the northern and the western ones.
Modi Sarkar should ponder about this.

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