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Mahesh

19/11/23 16:47 PM IST

China-Pakistan Economic Corridor

In News
  • Seeking urgent funds to the tune of $65 billion via infrastructure investment, Pakistan’s caretaker Prime Minister Anwaarul Haq Kakar recently, completed a five-day trip to Beijing.
About CPEC
  • The original idea for bilateral investment in infrastructure projects in Pakistan began in 2001 when China agreed to finance the construction of Gwadar port and the Makran Coastal Highway which connected Gwadar and Karachi.
  • Soon the port became functional and Hong Kong-based China Overseas Ports Holding Company began freight operations from there.
  • This success gave way to a bigger ‘economic corridor’ project when then Chinese President Li Keqiang visited Islamabad in 2013 and met his counterpart Nawaz Sharif to kickstart China’s One Belt One Road (OBOR)— an initiative to revive the 15th century trade route connecting China to West Asia and Europe via land and sea.
  • CPEC — one of OBOR’s largest investments — was formally launched in 2015 during Chinese President Xi Jinping’s two-day state visit to Pakistan.
  • Signing over 50 projects worth $45 billion, China set up the ‘Silk Road Fund’ to invest in CPEC projects planned till 2030.
  • The main project was establishing the corridor connecting Pakistan’s Gwadar port in Balochistan to China’s Kashgar in south-western Xinjiang region.
Other projects
  • Apart from this connecting corridor, a number of power projects including the 720MW Karot hydropower project and several special economic zones are to be developed under CPEC.
  • Existing facilities of Thar coal-fired power plants (1980 MW) will also be improved using the $33.79 billion ear-marked in the Silk Road Fund for energy projects.
  • Other power projects to be developed are— imported coal power plants at Port Qasim (1,320MW), Gwadar-Nawabshah natural gas pipeline, wind farm at Jhimpir (260 MW), solar park in Bahawalpur (900 MW), and two Thar coal mining blocks.
  • Short-term projects are the Havelian-Islamabad link of the Karakoram Highway ($930m), Gwadar International Airport ($230m), Gwadar port ($66m), and a fibre optic project ($4m), while existing projects to be upgraded are the 1,681-km-long Peshawar-Lahore-Karachi railway line ($3.7billion) and Lahore Mass Transit system ($1.6 billion).
Silk Road Fund
  • The Silk Road Fund, which manages the investment, is being financed by a consortium of Chinese banks including China Exim Bank, Industrial and Commercial Bank of China, and the China Development Bank.
  • The projects themselves are undertaken by various Chinese firms in collaboration with Pakistani companies.
  • For example, United Energy Pakistan Wind Power constructed the Jhimpir wind project with the China Development Bank Corporation financing it.
Challenges
  • The CPEC had teething troubles in 2016 as several projects ground to a halt over confusion on funding, contractor selection, delay in bidding process, differences over tax exemption, and obtaining of no-objection certificates (NOC) from ministries and military for key energy projects.
  • Gwadar port – one of the key CPEC projects – faced multiple issues, starting with water supply.
  • The Rs. 11.2-billion project to supply, treat and distribute water to the port by connecting the Swad and Shadikaur dams was delayed as the port authorities were unclear if the project’s funding was via a grant, an interest-free loan or a commercial loan from China. This project is currently in its final phase of construction.
  • Similarly, the Rs.9.9-billion project to upgrade the Pak-China Friendship Hospital had faced a delay in the commissioning of the feasibility report, cost estimation, and supply of equipment for the existing 50 beds. As of date, only one of the six medical blocks with 50 beds each is functional
  • Other projects like the 600 MW Gwadar coal-fired power plant, the Gwadar Smart Port City Master Plan, the 1320 MW coal-fired plant at Port Qasim, and the 1320MW Sahiwal Coal Power Project too ran into financial issues over uncertainty about project funding.
  • Power projects were also faced with additional issues of synchronisation with the National Power Grid, which the National Transmission and Dispatch Company was hesitant to allow.
  • While the Sahiwal and Port Qasim plants became operational between 2017 and 2019, the Gwadar power plant has stalled as Pakistan seeks to use domestic coal as fuel while China has insisted on using imported coal.
  • Hydropower projects like the Sukki Kinari Project in Khyber Pakhtunkhwa, the Karot project in Punjab and the Kohala Project in PoK ran into issues over slow land acquisition by the respective State governments. All of the above projects are currently under the final phase of construction and are scheduled to be completed by 2024.
  • These projects are financed by commercial Chinese loans and are insured by the China Export and Credit Insurance Corporation (Sinosure) against non-payment, guaranteed by the Pakistan government.
  • Additionally, Sinosure levies a 7% debt servicing fee, a yearly varying interest, and financing fee, making the entire project a huge economic burden on the debt-ridden nation.
Opposition from locals
  • The biggest thorn in CPEC’s side is the intense protests by locals in Balochistan against the Gwadar port city project.
  • Land acquisition by the China Overseas Ports Holding Company for the port project, which spans 2,90,000 acres, has been difficult in the face of stiff opposition by the local residents.
  • Fearing loss of local livelihoods such as fishing, and resisting the use of unskilled Chinese labour instead of Pakistani locals, Baloch residents have refused to sell land to the Chinese for building the port.
  • Moreover, Gwadar port has been leased to the China Overseas Ports Holding Company by Pakistan government, with Beijing reaping 91% of the profits while Islamabad gains only 9%. This has also led to rise in anti-China sentiments among Baloch locals.
  • In Sindh province, locals see CPEC as an attempt by the Punjabi-dominated Pakistan army to infringe on Sindh locals’ land and rights.
  • Insurgent and separatist outfit Sindhudesh Revolutionary Army (SRA) too has joined the Balochi insurgents in attacking Chinese workers and Pakistan army, viewing CPEC as an attempt to block local access to the Gwadar and Badin ports.
  • The two Thar coal fields, the Lahore-Karachi highway, the Karachi-Peshawar high speed rail link and the Hyderabad-Multan-Havelian Dry Port have also been hindered by attacks, civilian protests and slow land acquisition.
India's Opposition
  • Since its inception, India has opposed CPEC as most of its projects run through areas in Pakistan-occupied-Kashmir (PoK).
  • Cutting through Gilgit-Baltistan, CPEC projects link Balochistan to China’s Xinjiang region. New Delhi has always maintained that PoK was an integral part of India and has been illegally occupied by Pakistan since 1947.
  • Moreover, since the Taliban took over power in Afghanistan, they have expressed an interest in joining CPEC — a bid to tap into the mineral-rich Balochistan and also strengthen its ally TTP.
  • India has vehemently opposed this move, stating that “a proposed participation of third countries in so called CPEC projects directly infringes on India’s sovereignty and territorial integrity.”
Differences between China & Pakistan
  • In November 2017, China and Pakistan differed over one of CPEC’s biggest projects, the $14-billion Diamer Basha Dam, with the project ultimately being cancelled.
  • Islamabad stated that China had imposed harsh conditions for financing the project — total ownership of the construction, and operation and maintenance of the dam along with approval for another operational dam.
  • Recently, China stopped funding three road projects — the 210-km Dera Ismail Khan-Zhob Road worth Rs 81 billion, the 110-km Khuzdar-Basima Road worth Rs 19.7 billion, and the 136-km Karakoram Highway worth Rs 8.5 billion — over suspicions of corruption.
  • Though the funds had been cleared by the 6th Joint Cooperation Committee (JCC) meeting, China stopped the funding stating that ‘new guidelines’ for the release of the funds would be issued.
  • China also complicated the Gwadar port issue by insisting on Yuan as a legal tender in the region, though not in rest of Pakistan. This demand was refused twice by the Pakistan Central Bank, which later allowed Yuan to be used for bilateral trade and investment activities.
  • Beijing also refused to set up a new joint working group on water resources management and climate change and a 500kv transmission line from Hub to Gwadar to link the city to the national grid.
Source- The Hindu

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