Strategic Pak-China Economic Corridor, Connectivity and Maritime Cooperation

[Riaz Haq]

China's new Prime Minister Mr. Li KeQiang has just ended a two-day visit to Pakistan. Speaking to the Senate, Li declared that "the development of China cannot be separated from the friendship with Pakistan". To make it more concrete, the Chinese Premier brought with him a 5-points proposal which emphasizes "strategic and long-term planning", "connectivity and maritime sectors" and "China-Pakistan economic corridor project".

Source: China Daily

From L to R: Premier Lee, President Zardari and Prime Minister Khoso

Here's a recent report by  China's State-owned Xinhua News Agency that can help put the Chinese premier's speech in context:

“As a global economic power, China has a tremendous number of economic sea lanes to protect. China is justified to develop its military capabilities to safeguard its sovereignty and protect its vast interests around the world."

The Xinhua report has for the first time shed light on China's growing concerns with US pivot to Asia which could threaten China's international trade and its economic lifeline of energy and other natural resources it needs to sustain and grow its economy. This concern has been further reinforced by the following:

1. Frequent US statements to "check" China's rise.  For example, former US Defense Secretary Leon Panetta said in a 2011 address to the Naval Postgraduate School in California: "We try everything we can to cooperate with these rising powers and to work with them, but to make sure at the same time that they do not threaten stability in the world, to be able to project our power, to be able to say to the world that we continue to be a force to be reckoned with." He added that "we continue to confront rising powers in the world - China, India, Brazil, Russia, countries that we need to cooperate with. We need to hopefully work with. But in the end, we also need to make sure do not threaten the stability of the world."

Source: The Guardian

2. Chinese strategists see a long chain of islands from Japan in the north, all the way down to Australia, all United States allies, all potential controlling chokepoints that could  block Chinese sea lanes and cripple its economy, business and industry.

Karakoram Highway-World's Highest Paved International Road at 15000 ft.

Chinese Premier's emphasis on "connectivity and maritime sectors" and "China-Pakistan economic corridor project" is mainly driven by their paranoia about the US intentions to "check China's rise" It is intended to establish greater maritime presence at Gwadar, located close to the strategic Strait of Hormuz, and  to build land routes (motorways, rail links, pipelines)  from the Persian Gulf through Pakistan to Western China. This is China's insurance to continue trade with West Asia and the Middle East in case of hostilities with the United States and its allies in Asia.

Pakistan's Gawadar Port- located 400 Km from the Strait of Hormuz

As to the benefits for Pakistanis, the Chinese investment in "connectivity and maritime sectors" and "China-Pakistan economic corridor project" will help build infrastructure, stimulate Pakistan's economy and create millions of badly needed jobs.

Clearly, China-Pakistan ties have now become much more strategic than the US-Pakistan ties, particularly since 2011 because, as American Journalist Mark Mazzetti of New York Times put it, the  Obama administration's heavy handed policies "turned Pakistan against the United States". A similar view is offered by a former State Department official Vali Nasr in his book "The Dispensable Nation".

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[Riaz Haq]

China Pushes U.S. Aside in Pakistan

China is staking a claim to supplanting the U.S. as a Pakistan’s most influential ally with tens of billions of dollars of investment, an embrace that promises Pakistan economic benefits and saddles it with debt—ensuring the relationship will last.

http://www.cetusnews.com/views/BklEbNyNXb?cat=news&title=China-...

By

Saeed Shah

ISLAMABAD—Pakistan’s ruling power structure has long been summed up with the saying “Allah, Army and America.”

China is now staking a claim to supplanting the U.S. with tens of billions of dollars of investment, an embrace that promises Pakistan economic benefits and saddles it with debt—ensuring the relationship will last.

Chinese President Xi Jinping has made Pakistan his flagship partner in a program to spread Chinese-built infrastructure—and Beijing’s sway—across Asia and beyond. Pakistan has so far signed on to $55 billion in Chinese projects, many of them guaranteeing China a high return on its investments and granting tax breaks to Chinese companies.

Former President Barack Obama’s “Asia pivot” is giving way to Mr. Xi’s infrastructure juggernaut, in a model that could be replicated across the region.

“China came in when no one else was willing to invest,” said Commerce Minister Khurram Dastagir. The U.S. missed its chance, he said.

Beijing calls its program “One Belt One Road,” referring to the ancient sea and land Silk Road trade routes that China seeks to revive. Pakistan Prime Minister Nawaz Sharif inaugurated the program’s first big completed project here in late May, a Chinese-built, coal-fired power plant in his home province of Punjab.

China is building roads, railways, power plants and a port, and has lent Pakistan $2 billion in under two years to shore up its foreign-exchange reserves.

A promised $1 trillion Chinese splurge hasn’t yet materialized for many countries. But in Pakistan, $18 billion in projects are under construction in what is known as the China Pakistan Economic Corridor.

The centerpiece is Pakistan’s Arabian Sea port at Gwadar, under expansion and run by a Chinese company to enable trade in goods from China’s southwest.

Pakistan calculates that the Chinese investments will add 2 percentage points to growth in the next few years by providing infrastructure needed to kick-start industrialization.

President Donald Trump has abandoned what was viewed by the Obama administration as a counterbalance to China, a trade deal with nations in the region called Trans Pacific Partnership. An American official said civilian aid to Pakistan, a longtime ally, remained substantial but “getting our message out is a challenge.”

Chinese workers gather at an open pit mine in Pakistan’s Thar desert in March. Photo: Asim Hafeez/Bloomberg News

“The Chinese are winning the perceptions game, whatever the reality. That then leads to political outcomes, because people see the inevitability of China’s rise and China’s power,” said Ely Ratner of the Council on Foreign Relations, an independent U.S. think tank.

While Washington’s approach in Asia is military-led, Beijing is binding countries to its interests with economics, said Mr. Ratner.

At a Chinese celebration of its belt and road plan in Beijing in May, Matt Pottinger, senior director for East Asia at the National Security Council, welcomed the initiative but called for Beijing to “ensure that privately owned companies can bid in a fair process.”

That means that American businesses should be allowed to compete for contracts, U.S. officials said.

There is little sign of that in Pakistan. Islamabad chooses bidders from an all-Chinese short-list provided by Beijing. Pakistani officials say this is because Chinese companies bring their own financing.

The U.S. has asked to participate in the China-Pakistan Economic Corridor, but nothing has come of it, one of the American officials said.

Much as the U.S. secured the Pakistan alliance with aid to the country’s powerful military, China has made the Pakistani army a beneficiary. Many construction contracts that weren’t given to Chinese firms have been awarded to the military’s engineering arm. The military has raised a special force, now at 15,000 and set to double in size, to protect Chinese projects.

Since 2001, Islamabad has received $33 billion in U.S. military and civilian aid, according to the Congressional Research Service. But U.S. aid hasn’t yielded any high-profile infrastructure projects in Pakistan, and Pakistani officials say that joining America’s war on terror has cost it $123 billion in economic losses and tens of thousands of lives.

Infrastructure development under the China-Pakistan Economic corridor plan links southwest China to Pakistan’s Arabian Sea port at Gwadar, shown here in March.Photo: Liu Tian/Xinhua

“We want to move away from geopolitics, to geoeconomics, from fighting wars for others,” said Ahsan Iqbal, Pakistan’s planning minister, who oversees the Chinese investment. “Our vision is to place Pakistan as the hub of trade and commerce in this region.”

China’s expenditure isn’t aid. With transport projects, Pakistan incurs debt; power plants come with an obligation for Pakistan to purchase the electricity produced.

Tahir Mashhadi, a senator from the opposition Muttahida Qaumi Movement, compared China to the East India Company, the commercial enterprise that colonized India before the British government took over.

“Here’s the danger: the banks are Chinese. The money is Chinese. The expertise is Chinese. The management is Chinese. The profits are for China. The labor is Chinese,” said Mr. Mashhadi.

Nadeem Javaid, chief economist at Pakistan’s planning ministry, said Pakistan would be paying $5 billion a year to China by 2022, but that the debt should be easy to manage as Pakistani exports rise, electricity prices fall, and toll revenues are generated from trade from China to Gwadar.

“The fears,” he said, “are not genuine.”

[Riaz Haq]

Any Attack on Pakistan Would Be Construed As an Attack on China

"Any attack on Pakistan would be construed as an attack on China," Beijing recently warned the US. After the Abbottabad operation, in which Osama bin Laden was killed, Pakistani Prime Minister Syed Yusuf Raza Gilani's visited China from May 17 – 21, 2011. His trip was hailed by the Pakistani press as a new historic landmark in bilateral relations, and interpreted as a sign of the progressive breakaway between Pakistan and U.S.


https://www.gatestoneinstitute.org/2152/china-warns-us-pakistan

China Warns U.S.: 'Any Attack on Pakistan Would Be Construed As an Attack on China' – Evolving Pakistani-Chinese Alliance to Face the U.S./India

https://www.memri.org/reports/china-warns-us-any-attack-pakistan-wo...

[Riaz Haq]

China’s aid to Pakistan aims for fundamental improvement in economic conditions
By Wang Jiamei Source:Global Times Published: 2018/1/7 23:43:39

http://www.globaltimes.cn/content/1083768.shtml


China should pay more attention this year to the quality and effectiveness of its economic cooperation with and assistance to Pakistan, as ties are set to get closer amid hostility from the US.

After US President Donald Trump used Twitter to slam Pakistan for harboring terrorists, the US State Department said on Thursday that it would suspend security assistance to Pakistan until the country takes decisive action against the Afghan Taliban and the Haqqani network, according to Reuters.

As US aid to Pakistan has already been on the decline in recent years, the latter is reportedly concerned about the potential impact of this latest move on its fragile economy. While the US seems unlikely to impose comprehensive economic sanctions on Pakistan, its hostile attitude toward Pakistan is expected to exert certain pressure on the economy, especially for Pakistani companies with Iran-related business.

In these circumstances, it makes perfect sense for Pakistan to shift its foreign policy focus toward China and Russia. The day after Trump's strongly worded tweet, Pakistan's central bank announced that it will be replacing the US dollar with the yuan for bilateral trade and investment with China, a move seen as a clear signal of closer ties.

China will, of course, continue its economic support to Pakistan. China sees Pakistan as a prime partner under the Belt and Road initiative, with land and sea projects worth billions of dollars (known as the China-Pakistan Economic Corridor) under construction. The key to China's cooperation with and assistance to Pakistan will be to improve the quality of bilateral cooperation so that relevant projects can boost the Pakistani economy as soon as possible.

It should be made clear that such China-Pakistan cooperation is not meant as competition for geopolitical advantage with the US, but to really help the Pakistani economy by strengthening its infrastructure. Sustainable economic development in Pakistan will play a positive role in stabilizing the geopolitical environment in South Asia, which will be conducive to overall regional development.

In addition, India needs to change its view of Pakistan. It is reported that the US move to cut aid to Pakistan was a result of India Prime Minister Narendra Modi's diplomacy, according to a tweet by BJP spokesperson GVL Narasimha Rao. This mindset of harming others without gaining any benefiting oneself will only aggravate the confrontation, dragging each other down.

[Riaz Haq]

#Chinese Gov't Commissioned Study: #China-#Pakistan #railway ‘worth it’ at estimated US$58 billion. It should proceed because of its #strategic significance. It has the potential to reshape #trade and #geopolitics across the Eurasian continent. #CPEC https://www.scmp.com/news/china/science/article/3218413/china-pakis...

Belt and Road Initiative’s most expensive transport infrastructure project ‘has potential’ to reshape trade and geopolitics
The rail link is part of a broader plan to revive ancient Silk Road connections and reduce reliance on Western-dominated routes

The China-Pakistan railway – China’s largest Belt and Road Initiative transport project – will cost an estimated 400 billion yuan (US$57.7 billion), but should proceed because of its strategic significance, a government-commissioned feasibility study has found.
The proposed railway, connecting Pakistan’s port of Gwadar to Kashgar in China’s Xinjiang Uygur autonomous region, was assessed by scientists from the state-owned China Railway First Survey and Design Institute Group Co Ltd.
The team, led by the institute’s deputy director of capital operations Zhang Ling, said the project was the belt and road plan’s most expensive transport infrastructure.
Despite the cost, the project had the potential to reshape trade and geopolitics across the Eurasian continent and should be supported, the team said in a report published by the Chinese-language journal Railway Transport and Economy in April.
“The government and financial institutions [in China] should provide strong support, increase coordination and collaboration among relevant domestic departments, strive for the injection of support funds and provide strong policy support and guarantees for the construction of this project,” they said.
The institute is one of the largest of its kind in China and has been involved in many major railway projects at home and internationally, including Indonesia’s Jakarta-Bandung high-speed rail line.
The 3,000km (1,860-mile) railway will link China’s western regions with the Arabian Sea, bypassing the Strait of Malacca and reducing dependence on the South China Sea.
Connections with other transport networks – including in Iran and Turkey – would also provide a more direct route to Europe for Chinese goods, while Pakistan is forecast to get a much-needed boost from the improved infrastructure and easier trade with China.
The scheme is a key component of Beijing’s broader belt and road plan to promote economic cooperation and connectivity among the countries along the ancient Silk Road trade routes.
Previous studies by Chinese government researchers have suggested the infrastructure initiative could have significant geopolitical implications, helping to shift the balance of power away from traditional Western-dominated trade routes.
As well as encouraging a more multipolar world order, the belt and road plan could also help to promote economic development and stability in countries along the route by creating jobs, boosting infrastructure investment and increasing trade, the studies said.
Most belt and road transport infrastructure construction projects had received a significant proportion of funding from the host countries, and the scale of investment was much smaller, Zhang and his colleagues noted.
For example, total investment in Kenya’s Mombasa-Nairobi standard gauge railway was US$3.8 billion, with China providing 5 per cent of the funding and Kenya paying for the rest.

[Riaz Haq]

#Chinese Gov't Commissioned Study: #China-#Pakistan #railway ‘worth it’ at estimated US$58 billion. It should proceed because of its #strategic significance. It has the potential to reshape #trade and #geopolitics across the Eurasian continent. #CPEC https://www.scmp.com/news/china/science/article/3218413/china-pakis...


The project connects the port city to the Kenyan capital and is part of a larger plan to link East African countries by rail. Similarly, China contributed 30 per cent of the US$4 billion funding for the Addis Ababa-Djibouti rail line in Ethiopia.
China covered 75 per cent of the Jakarta-Bandung high-speed railway’s costs of US$5.9 billion, with Indonesian state-owned enterprises providing the remainder.
But Pakistan is unable to make a similar contribution. Its GDP last year was US$370 billion – just six times the estimated cost of the project.
“Due to energy shortages, poor investment environment and fiscal deficits,


Pakistan’s economic growth rate has come under pressure,” the team said.
“In terms of railway investment and construction, Pakistan is unable to provide sufficient financial and material support and mainly relies on Chinese enterprises for investment and construction.”

One reason for the hefty cost is the mountainous and geologically complex terrain along the route. There could be technical challenges to overcome in the construction and operation of the railway, the researchers said.
The project also required supporting infrastructure – such as ports and logistics facilities – that might not be immediately available in Pakistan, they said.

The study said Pakistan’s labour policies could be unpredictable, which could potentially affect the railway’s construction and operating costs.
The team also noted that Pakistan had experienced security challenges in recent years, including in its western region where the railway will pass through. Balochistan province, for instance, has been plagued by separatist violence for decades.

This could potentially disrupt construction and operation of the railway and pose a risk to Chinese workers and investments, the researchers said.
The study also pointed out the railway’s potential impact on neighbouring countries, such as India. With each country having its own priorities and interests, there could be disagreements or delays in decision-making related to the project, it said.
Zhang’s team suggested that a build and transfer (BT) model would provide the best investment and financing strategy for the project.
They considered BT against build-operate-transfer, public-private partnerships, and the engineering, procurement, construction mode that are becoming more popular in belt and road projects.


In the BT model, a contractor would be responsible for designing, building and financing the railway, with payment on completion and ownership transferred to the government or other commissioning entity.
The researchers said BT would allow the risks associated with the railway’s construction and operation to be allocated more effectively between China and Pakistan, potentially reducing the financial risks for both parties.
By ensuring that ownership of the railway was transferred to Pakistan, BT could also help to build trust between China and Pakistan by showing China’s commitment to supporting Pakistan’s long-term economic development, they said.
China and Pakistan have been talking for years about the railway, a crucial part of the China-Pakistan Economic Corridor (CPEC) that was launched in 2015 and aims to connect Gwadar port to Xinjiang through a network of roads, railways and pipelines.
The researchers said the China-Pakistan relationship was complex, with both countries having different priorities and interests.
Negotiating agreements related to financing, labour policies, and other issues would require careful consideration of each country’s priorities and interests, they said.
In conclusion, Zhang and his team said their recommendation could help to move negotiations forward.

[Riaz Haq]

China's new Premier Li Qiang on Thursday held talks with his Pakistani counterpart Shehbaz Sharif and voiced support for cash-strapped Pakistan in maintaining financial stability, and hoped that Islamabad will continue to create a favourable environment to guarantee the safety of Chinese institutions and personnel

https://www.deccanherald.com/international/world-news-politics/chin...


Noting China and Pakistan are good neighbours, friends, partners and brothers, Li said that both sides should maintain high-level exchanges and promote greater progress in bilateral relations and cooperation in various fields, the state-run Xinhua Xinhua news agency reported on the telephonic talks.

Li, who assumed charge as Premier in March, also said, "China supports Pakistan in maintaining financial stability, and hopes that Pakistan will continue to create a favourable environment so as to guarantee the safety of Chinese institutions and personnel in Pakistan." He was referring to frequent terror attacks on Chinese personnel and projects in Pakistan under the China-Pakistan Economic Corridor (CPEC).

On this, Sharif added that "Pakistan will make every effort to ensure the safety of Chinese personnel, institutions and projects in Pakistan."

Sharif, who called both the countries "iron-clad brothers", also thanked China for its firm support and selfless help to the cash-starved country in safeguarding national independence and sovereignty and promoting national development. Besides political and military support, China has supported Pakistan financially, rolling over earlier loans and approving new financial packages.

Li also expressed that the two sides should support each other in the multilateral field, uphold international fairness and justice, safeguard the common interests of both countries and other developing countries, defend regional peace and security,and promote common development, the state-run agency reported. Sharif congratulated Li and reiterated Pakistan’s "unstinting" support to Beijing's “one-China” policy, as well as its stance on Tibet, Xinjiang, Hong Kong, and the South China Sea, an official statement said in Islamabad. "As all-weather partners and close friends, Pakistan appreciated China’s peaceful development as a positive factor of international peace and stability, and confident that China will continue to achieve milestones on its journey towards modernisation and rejuvenation," the Pakistani prime minister said. The Pakistani premier also thanked his Chinese counterpart for China's "principled position"on the disputed Jammu and Kashmir issue. Li, for his part, "praised Pakistan’s support for China and reaffirmed his country’s continuing support to Pakistan’s national development, sovereignty, and territorial integrity".

"China would continue to stand with Pakistan at all times," said the Chinese premier. On China's ambitious Belt and Road Initiative (BRI), Li said that both sides should work together to improve the quality of the China-Pakistan Economic Corridor (CPEC) cooperation, making it a high-quality demonstration project of the Belt and Road cooperation. This year marks the 10th anniversary of Chinese President Xi Jinping's proposal of BRI and the 10th anniversary of the launch of the CPEC.