GWADAR: Pakistan’s trade deficit with China has been rising, and there areconcerns about what happens if it is unable to repay its debts vis-à-vis$63 billion worth of the corridor projects, Nikkei Asian Review said onWednesday.
“As with other countries that have benefited recently from Beijing’slargesse, some in Pakistan worry that the price of such investment could bea huge debt burden,” the Asian-focused publication said.
The Nikkei Asian Review and The Banker examined how Belt and Road (BRI)projects are unfolding in eight countries: Indonesia, Sri Lanka,Kazakhstan, Bangladesh, India, Poland, Laos and Pakistan. They alsocollaborated with the Center for Strategic and International Studies’Reconnecting Asia Project to aggregate key BRI infrastructure projectsworldwide.
The idea of transforming the ancient fishing village of Gwadar into abustling port city has been around since at least 1954, when Pakistancommissioned the US Geological Survey to examine its coastline. It foundthat Gwadar, which sits on the Arabian Sea, would be an ideal location fora deep-water port.
Nikkei Asian Review said Gwadar’s potential went unrealised for decades,but it is now at the heart of a hugely ambitious plan known as theChina-Pakistan Economic Corridor (CPEC).
China has pledged to spend $63 billion to bolster Pakistan’s power plants,ports, airports, expressways and other infrastructure under the initiative,which Beijing positions as one of the pillars of its $1 trillion globalBelt and Road Initiative championed by Chinese President Xi Jinping.
“The investment is clearly visible at Gwadar,” it said. “More than 1,000people, about half of whom are Chinese, work at a recently completed660-meter container terminal.”
Nearby is a hospital built using Chinese funds. Pearl Continental Hotel, aluxury hotel owned by a local company, stands on a hill overlooking theport. The pier is dotted with Pakistani naval and coast guard ships. Armedboats and pickup trucks patrol the area, while wooden fishing boats floatin the distance.
Nikkei Asian Review said the gains for China in all of this development areperhaps less visible, but potentially far more significant. A major goalfor China is to link its landlocked western region to the port at Gwadar.This would allow ships carrying oil and other goods from the Persian Gulfto avoid the “choke point” of the Strait of Malacca, shaving thousands ofkilometers off existing routes frequently patrolled by foreign navies.
The China-Pakistan corridor “will no doubt be a game changer for Pakistan,but we need to be careful,” Nikkei Asian Review cited Ehsan Malik, chiefexecutive officer of Pakistan Business Council, a business policy advocacyforum, as saying.
“Ten years’ tax concessions, 90-year leases for Chinese companies and cheapimports will impact the competitiveness of existing domestic industries.”
Pakistan symbolises both the promise and the potential peril for countriesparticipating in China’s BRI undertaking – arguably the largest investmentdrive ever launched by a single country – and its related projects.
Mushtaq Khan, an economist and former chief economic adviser at the StateBank of Pakistan, acknowledges that the country’s debt to China is rising.But he says Beijing “cannot afford” to bankrupt Pakistan – in part becauseof the country’s importance as a counterweight to India, a regional rivalof China’s.
“China’s primary interest in Pakistan is geopolitical rather than strictlyeconomic, and therefore, for China, repayment of the debt burden will besecondary to maintaining a good political and economic relationship withPakistan,” he said.
Gwadar, with a population of 110,000, is 90 minutes west by propeller planefrom the mercantile city of Karachi and just 70km from the border with Iran.
China refers to neighbouring Pakistan as its “all-weather friend,” but thecountry is not known for having a healthy business climate. Pakistan ranked147th out of 190 countries and regions in the World Bank’s Ease of DoingBusiness 2018.
The deeper ties with China come amid strains between Pakistan and the US.In January, the US State Department announced that it would suspendsecurity assistance to Pakistan over what it called a failure to clamp downon terror groups.
The country’s economy has been battered over the years by terrorism, fuelshortages and tattered governance, but it grew 5.4 percent in the yearthrough June 2017, the fastest pace in 10 years. The State Bank of Pakistanforecasts growth to approach six percent in the year ended June 2018.
The projects are underway with the belief that the troubled nation can jointhe vibrant club of emerging Asian economies. The government of Pakistanplans to transform Gwadar into one of the world’s largest port cities by2055, housing steel mills, terminals for liquefied natural gas, oilrefineries and other facilities.
Under the plan, trade and industrial zones will be concentrated on thecity’s east side, while the western side of the peninsula will serve asresidential and tourism areas.
“Gwadar port will be a hub to link Afghanistan and Central Asia, but it isnot just a trade and logistics center,” Dostain Khan Jamaldini, chairman ofGwadar Port Authority said. “We will set up an industrial estate withexport manufacturing zones, and invite the motorcycle and electronicsindustries.”
“Gwadar port is not given to China only,” Jamaldini said, stressing theauthority’s willingness to welcome US, European and Asian companies.