PAKISTAN A TRADE CORRIDOR FOR CHINA

The two sides marked the beginning of the new era of cooperation in the wake of signing of 22 agreements

From SHAMIM AHMED RIZVI,
 Islamabad
 Apr 18 - 24, 2005

The Chinese Prime Minister Wen Jiabao, accompanied by a 70-member delegation including his cabinet ministers, high ranking senior officials and leading businessmen arrived on a 4-day visit to Pakistan, last week.

Substantiated by strong friendly ties between the two countries, the visit ushered in a new height of coordination to further strengthen the historic relationship of the friendly nations.

It was really a great day in the course of China-Pakistan ties, when the two countries firmly resolved to safeguard unity, sovereignty and territorial integrity of the two countries by signing a "treaty of friendship and good neighborly relations" by Chinese premier and Prime Minister Shaukat Aziz in Islamabad.

Shaukat Aziz noted that the treaty" institutionalizes the broad-based and multi-faceted relations between Pakistan and China".

The time tested Pak-China friendship has really entered a new phase. The two sides marked the beginning of the new era of cooperation in the wake of signing of 22 agreements and memoranda of understanding that are bound to enhance cooperation on a much larger canvas of trade, technology, agriculture, IT, international road transport, education, defense and collective efforts in combating "terrorism, separatism and extremism.

While an agreement on an early harvest program offers special tariff on 757 items, an MoU paved the way for negotiations on a free trade agreement between China and Pakistan.

Prime Minister Shaukat Aziz's idea that there is a need to encourage the private sector of the two countries to promote mutual investment and trade found reflection in an MoU which invites the corporate sector of two countries to invest in the manufacturing sector.

These accords will give a fresh boost to the ongoing cooperation in different areas, deepening it further. From the Chinese perspective, these accords are to bring them not only economic benefits to each others, they were reassured that Pakistan will provide them with an energy corridor to meet their rapidly rising energy requirements. China will be able to export livestock, through Pakistan to various Middle Eastern markets.

The agreement on terrorism is to ensure that its restive Muslim majority province bordering Pakistan does remain peaceful.

China which has played a key role in developing the third deep-sea port at Gwadar, has agreed to continue its support by investing in Gwadar II project. Deepening of the Gwadar port, 450 miles west of Karachi, from a draft of about 11 meter to 14 meters was yet another significant step forward towards making the newly developed port of Gwadar a hub for trade and trans-shipment in the region.

The port offers enormous business opportunities and a potential alternative to the Persian Gulf route for trade with Central Asian Republics (CARs)

China has also offered a $70-100 million financing for the project.

Pakistan, it may be recalled had bought Gwadar, a fishing village on the Arabian Sea from the Sultanate OF Oman in the 1950s. In fact credit goes to President Ayub Khan to bring back Gwadar within the domain of Pakistan as this precious land was earlier gifted to someone in Oman by a tribal chief of Kalat.

Just four months after the 9/11 events, Pakistan and China entered into an understanding to develop a port at this strategic location. The development work on an Rs14.9 billion phase-1 project was in progress with the active involvement of China Harbor Engineering Corporation (CHEC), which also placed skilled Chinese workers on the site.

China it may be mentioned had offered $198 million financial package for this phase, including $49 million grant, and $31 million interest free loan. Pakistan only provided $50 million equity.

The government wants to involve the private sector on BOT/BOO basis in the phase-II of this project, with an estimated cost of $600 million, including 9 new berths (two dedicated oil berths with a capacity to handle 200 DWT oil tankers, and one bulk cargo terminal with a capacity to entertain 100 DWT ships).

Gwadar deep-sea port could provide port, warehousing, transshipment, and industrial facilities for trade with over 20 countries. Most of the experts were convinced that Gwadar could serve as a regional hub, handling traffic to/from ports of Sri Lanka, Oman, UAE, Saudi Arabia, Qatar, Iraq, Iran, and landlocked countries like Afghanistan, Uzbekistan, and Tajikistan. Some estimates suggest that maritime traffic in Pakistan would increase by threefold in the next decade. The existing two ports, Karachi and Qasim, would not be enough to handle this increased traffic. Currently, 98 percent cargo traffic goes through the Karachi port.

Secondly, China gets a naval outpost in the Arabian Sea to ensure its future energy supplies with greater strategic depth.

The port, being economically viable in terms of accesses, is to maritime trade for the northern region of Pakistan. Establishment of industrial zone, oil storage and refining facilities adjacent to the port, and export possibility of abundant mineral resources of Balochistan, particularly from Saindak Cooper-Gold Project makes it more attractive. Saindak project had also been leased out to a Chinese firm.

It is, however, surprising to note that while at least three berths of the newly developed Gwadar port are ready for commercial operations and to welcome to the calling vessels, yet so far no fueling or oil storage arrangement has been made so far. Pakistan State Oil, having largest oil storage facilities at Qasim and the Karachi Port had time and again approached the government seeking permission to set up oil storage facility at Gwadar so that the ships calling at the port are provided better port services including fueling facility, yet the government has not yet come out with a decision on this important aspect of the port. It seems that instead of the PSO which is on the active list of privatization, the permission to establish oil storage facility might be offered to some other oil companies, it is learnt.

The Prime Ministers of Pakistan and China also addressed a Pak-China joint business forum which turned to be a significant event. Chashma nuclear power project (II), Neelum-Jhelum hydro power project, raising of the Mangla dam, Thar coal, Lowari tunnel and a free trade agreement are some of the significant areas on which agreements signed.

The signing of a free trade agreement between the two countries is also highly significant. Presently bilateral trade between then stands at $2.5 billion out of which Chinese exports to Pakistan are $1.5 billion and Pakistan's exports to China stand at 1 billion dollars. It is quite obvious that a free trade agreement between the two countries would create conditions in which it should expand manifold.

The possibility of Chinese investment coming into Pakistan is bright. Chinese investors are said to have shown interest in various economic areas for investment purposes. As Pakistan is making determined efforts to seek investment, the interest shown by the Chinese investors is highly encouraging.

Chinese premier Wen Jiabao remarked at the Pak-China Business Forum that there was great potential to increase economic cooperation, narrow down the trade deficit and enhance investment. He also talked about closer interaction between the private sector of the two countries and setting up of joint ventures or wholly-owned companies to inject new vigor in bilateral economic relations. He underscored the need for joint trade commissions, business bodies and investment conferences. His reference to the early harvest program that would lead to a Free Trade Agreement is significant.

Speaking at the same forum Prime Minister Shaukat Aziz offered China specialized industrial parks to run them as Chinese investors would like and build infrastructure there. He offered to China equal opportunities, at par with domestic investors, in the privatization process, real estate, construction and housing, tourism, engineering and agriculture based industries. China has helped in setting up a number of projects in Pakistan in the past and is presently assisting in the construction of the Gwadar seaport and the Thar coal and Saindak cooper project.

Pakistan has created an attractive and investment friendly atmosphere, offering numerous incentives to the prospective investors. With more investment coming in, the country could become the hub of economic activity with access to markets in the region. Chinese investment will be a big boost to our economy.

Pakistan and China signed contracts for the construction of four F-22 Frigates Ships for Pakistan Navy. Both sides signed four contracts for the construction of state-of-the-art F-22 P Frigates with all related equipment/systems with special element of Transfer of Technology (TOT). The ships, after construction, will be inducted into Pakistan Navy which would not only enhance the operation capabilities of Pakistan Navy but will also help to make impregnable the seaward defense of Pakistan. These F-22 P Frigates will be equipped with organic helicopters specially designed for Anti-Submarine Warfare, Surface to Surface and Surface to Air Missiles along with numerous associated self defense systems.

The launch by President General Pervez Musharraf of JF-17 Thunder aircraft a Pak-Chinese joint project at Kamra on the day of the Chinese Premier's arrival underlined the potential of collaboration in the defense field. There is a growing realization that this country must diversify its defense procurement sources. Even though JF-17 is not the first project of its kind, Pakistan has been depending mostly on the US for its military supplies. That experience has not been particularly pleasant. When it needed Pakistan's help to fight to proxy war against its communist adversary in Afghanistan, Washington raised no objection to Islamabad's nuclear program and continued to issue presidential certifications to allow for economic and military aid flows. Soon afterwards, it turned its back on its ally, and went on to slap sanctions against it under a discriminatory Pakistan-specific law that sought to punish this country for refusing to freeze its nuclear program while ignoring more advanced activities in India. The US blocked not only the sale of already paid for 40 F-16 planes but also the much needed spare parts for other military equipment. Having returned to fight another war in Afghanistan, it recently made a fresh offer for the sale of F-16s, which, of course, had to be accepted eagerly. But lessons also need to be learnt from the past experience. Pakistan, it may be recalled, made some efforts to purchase defense equipment from Russia as well, though unsuccessfully. Russia has renewed the friendship treaty signed by India and the erstwhile Soviet Union, and hence has been unwilling to provide such help.

Pak-China collaboration in the defense field, aside from being dependable, is vital as Beijing is not hesitant to transfer advanced technology to this country. In fact, the latest project of Pa-China collaboration in the field of conventional weapons, JF-17 , according to President Musharraf, has brought Pakistan "at the threshold of a major leap forward by acquiring indigenous capability" to manufacture the aircraft, which, he said, is rated high among the medium technology fighter planes. A multi role fighter aircraft, it is to be fitted with state-of-the-art avionics. 50 percent of its airframe and, notably, all the avionics are to be manufactured in Pakistan. It indeed is a major step towards acquisition of modern technology.

The renewed efforts to cement the existing friendship between the two friendly countries are sure to bring many more such projects of technology transfer in other areas as well.