by Zia Sarhadi (Special Reports, Crescent International Vol. 44, No. 3, Rajab, 1436)
Pakistani Prime Minister Nawaz Sharif seems to have hit a jackpot. The Chinese plan to invest $46 billion in Pakistan’s infrastructure—roads, railways and power plants—to facilitate transport of Chinese goods to markets worldwide.
The Chinese decision to invest $46 billion in Pakistan’s infrastructure, energy and pipeline projects is impressive by any standard. Its true significance, however, lies in the geostrategic value the deal offers to China while making Pakistan the hub of economic activity. There will undoubtedly be huge benefits for Pakistan if the deal is implemented properly.
The amount China plans to invest in Pakistan is nearly three times the direct foreign investment Islamabad received since 2008 and easily dwarfs America’s aid since 2001 that was disbursed in fits with plenty of demands in-between. Further, US “aid” not only came with strings attached but also caused Pakistani infrastructure losses of more than $68 billion and left its society devastated by extremist violence.
Chinese investment does not have any such conditions attached. True, Pakistan is required to fulfill its side of the bargain but its positive impact on Pakistan’s economy, if properly utilized, cannot be minimized. Announced during the two-day visit of Chinese President Xi Jinping to Islamabad (April 20–21), a grand total of 51 Memoranda of Understanding (MoUs) were signed. The Pakistani establishment went out of its way to make their guest’s visit as warm as possible. There was much pageantry, spectacular display of hospitality — 21-gun salute, presence of all top establishment figures, both civilian and military, to welcome the guest — and lavish dinners. The Chinese president was also given the Nishan-e Pakistan, the highest civilian award. There was a great deal of positive talk about the transformative nature of Chinese investment.
Dubbed the Pakistan-China Economic Corridor (PCEC), a network of roads, railway and pipelines will connect Pakistan’s southern port at Gwadar on the Arabian Sea at the mouth of the Persian Gulf to the Chinese city of Kashgar in the Muslim-majority province of Xinjiang. One cannot help but recall Allama Iqbal’s couplet about the significance of Kashgar, albeit in a different context,
Aik hun Muslim Haram key pasbani kay lee ye (Muslims should unite for the defence of the Haram [in Makkah]),
Neel kay sahel say laker ta ba khak-e Kashgar (From the shores of the Nile to the soil of Kashgar).
Allama Iqbal was a visionary; he talked about Muslim unity in order to achieve the glory of Islam. This has also been the vision of all great Islamic scholars, thinkers and revolutionaries throughout the ages. Were he alive today, Iqbal would be greatly saddened by the state of the Ummah, especially the manner in which the Haramayn in Makkah and Madinah have been illegally occupied by the Najdi Bedouins, and turned into their personal property like the rest of the Arabian Peninsula.
Let us, however, return to the proposed Pakistan-China highway that will run 3,000 km and traverse some rough terrain in Pakistan. Physical challenges, though difficult, may not prove as daunting as ideological problems. Human ingenuity has always managed to surmount engineering challenges. Finding a way around security threats may prove more difficult.
The Chinese president was sufficiently concerned to raise it publicly. His Pakistani hosts were keenly aware of this and announced that a special security force of 10,000 soldiers comprising mostly elite commando units has been approved. The force will be deployed to protect Chinese workers; a two-star Pakistani general would head the force and report directly to the GHQ in Rawalpindi. The security concern was also evident in the manner in which the 3,000 km highway will meander through Pakistan avoiding many sensitive areas (in the Khyber-Pakhtunkhwa province, for instance) although it cannot skip the troubled southwestern province of Balochistan where Gwadar is located. Lahore, the home base of the Sharifain (Prime Minister Nawaz Sharif and younger brother and Chief Minister of Punjab Shahbaz Sharif) — the geniuses of Model Town — would be included in it bringing enormous economic rewards. The highway will link the capital of Punjab province with the southern port and industrial city of Karachi and capital of Sindh province.
China’s $46 billion investment will comprise a first phase of $28 billion and will involve road links and energy development projects for energy-starved Pakistan. At least $15.5 billion is earmarked for coal, wind, solar and hydro energy projects that are expected to come on-stream by 2017. These will reduce Pakistan’s energy deficiency by 10,400 megawatts enabling many industries to resume production at full capacity. The spin-off effect is obvious; Pakistan’s hobbled exports will take off. Similarly, an optical fibre cable between the two countries is due to be built at the relatively modest cost of $44 million in the context of overall figures.
Also included in the first phase is the upgrading of the deepwater seaport at Gwadar. The projects will give China direct access to the Indian Ocean and beyond, especially the energy rich Muslim East (aka the Middle East) and Africa and bypass the Southeast Asian route reducing shipping time considerably.
If it offers China easy maritime access, the benefits for Pakistan are no less impressive; hence expressions such as “transformative” and “game-changer” were frequently used during Xi’s visit. Pakistan’s Planning and Development Minister Ahsan Iqbal was reported by the AFP news agency on April 19 as saying that these were “very substantial and tangible projects which will have a significant transformative effect on Pakistan’s economy.” He mentioned that the total amount would be $48 billion: $37 billion in direct investments and $11 billion in soft loans.
After signing a raft of agreements on the first day (April 20), Prime Minister Nawaz Sharif said, “This corridor will benefit all provinces and areas in Pakistan, and transform our country into a regional hub and pivot for commerce and investment. It will also enable China to create a shorter and cheaper route for trade and investment in south, central and west Asia, and the Middle East and Africa. This corridor will become a symbol for peace and prosperity.”
He also dubbed President Xi Jinping’s visit to Pakistan as a watershed in the history of Pakistan-China relations. While every Chinese leader’s visit to Pakistan is dubbed “historic” and “deepening relations” between the two countries, this time it may be more than hyperbole.
“Together with President Xi we have taken momentous decisions that will raise Pakistan-China relations to new heights and have deep impact for our common economic future, and peace and stability in the region,” Sharif said. Regional and international developments were also discussed and it was agreed to make coordinated efforts for peace and security in the region.
It was Chinese Premier Li Keqiang who had first proposed establishment of the Pakistan-China Economic Corridor (PCEC) during his visit to Pakistan on May 23, 2013. “Our two sides should focus on carrying out priority projects in connectivity, energy development and power generation,” Li said at the time. Sharif was about to be sworn in as prime minister (June 5) following his victory in the May 11 general elections.
The construction and operation of the multi-billion dollar deep-sea port at Gwadar was contracted to a Chinese company during Li’s May 2013 visit. Asif Zardari who was president of Pakistan at the time described the agreement as “one of the happiest days of my life.” It was Sharif who took this forward. His business acumen as opposed to Zardari’s street smarts enabled him to think in grand terms. (Gwadar, once a part of Oman was sold to Pakistan in 1958).
The Gwadar project also includes an airport and a string of energy projects, special economic zones, dry ports and other infrastructure. The estimated cost is expected to be $75 billion, out of which $45 billion is earmarked to ensure that the corridor becomes operational by 2020, that is in five years’ time. This may be ambitious but is do-able. The remaining investment will be spent on energy generation and infrastructure development. Some analysts have suggested that Chinese interest in Gwadar is not merely commercial but also military. They plan to secure a naval base at the mouth of the crucial Persian Gulf to monitor American, Western and Indian maritime movements.
Not surprisingly, Gwadar was also high on President Xi’s agenda. He became the first foreign leader to address a joint session of the Pakistan Parliament. He talked in effusive terms about the enduring friendship between the two countries admitting that Pakistan was a friend of China’s when the latter was globally isolated. He referred to friendship between the countries as being “higher than the Himalayas, deeper than the ocean and sweeter than honey,” repeating the phrases used by various Pakistani officials.
In his address, President Xi said China was prepared and willing to help strengthen Pakistan’s capacity to fight terrorism. This was a clear reference to the menace of terrorism that has bedeviled Pakistan since the US launched its so-called War on Terror. In recent months, the Pakistani military has launched major operations against militants in the country and while the situation has improved somewhat, terrorism is difficult to eliminate completely, especially given the involvement of so many players — both external and internal — supporting terrorists in the country. In addition to fighting terrorists, the root causes of terrorism need to be addressed.
Both China and Pakistan have also vowed to help Afghanistan in bringing about peace in the war-torn country. If there is peace in Afghanistan, it will have a positive impact on the situation in Pakistan as well. For China, the Uighur movement is of critical importance and many Uighur fighters have taken sanctuary in Afghanistan. It is worth noting that the super highway in China will pass primarily through its Xinjiang province where the separatist movement is strong. This will prove a major challenge for both countries to overcome.
The Chinese leader explained to Pakistani parliamentarians, “Of all the cooperation documents that Prime Minister Sharif and I signed, or witnessed the signing of, more than 30 of them concern the corridor.” Elaborating further, he said, “They include the facilities of the Gwadar port, the second phase of the upgrading project for the Karakoram highway, the motorway project between Karachi and Lahore, the rail transportation Orange line project of Lahore and other major transportation infrastructure projects and a series of energy projects.”
Transportation and the Gwadar port are critical to Chinese plans. For Pakistan, energy generation is crucial since it suffers 18 hours of blackouts in certain parts of the country. The corridor will also offer economic opportunities.
In order to facilitate and realize these ambitious projects, China’s government and banks will lend to Chinese companies, so they can invest in projects as commercial ventures. Perhaps for the first time in many years, Sharif’s penchant for “thinking big” is paying off. It seems to have gelled with China’s need to control maritime trade routes and building a network of economically viable entities to serve as outlets for China’s massive production capacity. At the same time, Beijing needs secure access to energy resources. Pakistan may well be the solution to its economic and geostrategic aspirations.
For energy and investment starved Pakistan, the benefits of the super highway and energy corridor are obvious. Chinese officials see the corridor as the “flagship project” of a broader policy — “One Belt, One Road.” The Gwadar-Kashgar corridor will supplement the New Silk Road and Maritime Silk Road initiatives that seek to physically connect China to its markets in Asia, Europe and beyond and ensure a safe passage for China’s shipping through the Indian Ocean and the South China Sea.
Perhaps the stars have finally aligned in such a way as to make this most ambitious of projects viable. Sharif must consider himself extremely lucky. One hopes he does not blow this one up as well through shortsighted policies and partisan approach.