CHINA: THE MAJOR PARTNER IN BALOCHISTAN'S DEVELOPMENT

SYED FAZL-E-HAIDER
Nov 24 - 30, 2008

Chinese are the major partners in Balochistan's development. At present, different Chinese firms and engineers are engaged in developing key sectors of the provincial economy including ports and shipping, mining and oil and gas exploration. The growing Chinese stake in the development of the province has created jealousy among various players of geopolitics in the region. Chinese have paid heavy price for their developmental efforts in the province. In May 2004, three Chinese engineers lost their lives in an act of terrorism in Gwadar. Even after the killing of three Chinese engineers, there seems no change in China's firm commitment to the development of Balochistan.

The increasing Chinese influence in the strategically important 'chokepoints' like Gwadar (located opposite to the Straits of Hormuz) is despised and suspected by some actors in regional geopolitics and they are currently active in their geopolitical agenda of China's containment.

The most important projects being launched with Chinese assistance include construction of Gwadar deep-sea port in Mekran, Saindak copper & gold project in Chaghi and the lead & zinc mining project in Lasbela district of Balochistan. The Chinese companies working in Balochistan include Tianjin Zhongbei Harbour Engineering Supervision Corporation of China (TZHESC), China Harbor Engineering Company Group (CHECG), Metallurgical Construction Corporation (MCC) and MRDL (a subsidiary of MCC) and Chinese petroleum firm, the Bureau of Geophysical Prospecting (BGP). A number of Chinese mining firms are already engaged in tapping the mineral potential of Balochistan that has a rich mineral endowment. During last five years the mineral -rich province has witnessed a steady growth of Chinese stakes in mineral sector.

GWADAR PORT

The two-phase program of port construction at Gwadar is being supervised by TZHESC. The total cost of Gwadar port project is estimated at $1.6 billion. While China has so far contributed about $198 million, Pakistan has allocated US$50 million for the project.

The first phase was completed by the China Harbor Engineering Company Group (CHECG) in November 2004 when a cargo vessel from China carrying 4000 tons of goods berthed at the Gwadar port. The port then needed a draught of 14.5 metres and above, as it had been designed as a hub port. China under an agreement signed with Islamabad in December 2004, started work on dredging of the port channel up to the depth of 14.7 metres, allowing big vessels access to the port. It completed the dredging work by December 2006.

China Harbour Engineering Company (CHEC) is currently involved in the construction of an international airport at Gwadar at a cost of US$ 70 million. The US$12.5 billion petrochemical city project at Gwadar is also being undertaken by Great United Petroleum Holdings Company Limited (GUPC) of China. China-funded oil refinery will have a total capacity to refine 21 million tons of oil per annum. The petroleum products so refined in Gwadar refinery may be transported to Kashghar on Pakistan's North through a pipeline. The proposed refinery and the oil pipeline is a part of the proposed energy corridor. Gwadar's location opposite to the Straits of Hormuz, also provides China an alternate to Strait of Malacca, which is considered as unsafe route and notorious for piracy and through which about 80% of China's oil import is carried out.

Last February, the Pakistan Railways and China's Dong Fang Electric Supply Corporation had signed an agreement for establishing rail link between Havelian and Khunjerab. On February19, 2007, Pakistan awarded Rs72 million contract to an international consortium to carry out feasibility study for establishing a rail link with China, which will boost trade relations between the two countries. By extending its East-West Railway from the Chinese border city of Kashi to Peshawar in Pakistan's northwest, China can receive cargo to and from Gwadar along the shortest route, from Karachi to Peshawar. The rail network could also be used to supply oil from the Persian Gulf to the Xinjiang. China has also invested another $200 million to build a coastal highway, which has been completed, connecting Gwadar port with Karachi.

SAINDAK COPPER & GOLD PROJECT

About Rs1.3 billion were injected into the project in the late 1990s under military government of General Musharraf to revive the project and was later leased out to the Chinese company, Metallurgical Construction Corporation (MCC) for 10 years in September 2002. Pakistan and China signed a formal contract worth $350 million for development of Saindak copper gold project. According to the contract the Chinese company will pay $500,000 monthly to government of Pakistan over next 10 years plus 50 per cent of total revenue from mineral sale. Government of Balochistan will also receive 0.7 million dollar per year as royalty.

Chagai district in Balochistan has acquired fame internationally for having huge deposits of copper. Saindak project in Chagai is based on ore reserves of 412 million tonnes containing on the average 0.45%, 0.50 gram gold per ton and 1.50 gram silver per ton. A survey report states that Saindak copper is of excellent quality. The Saindak mine is reported to have produced a total of about 50,000 tons since October 2003. According to official estimates, the project has the capacity to annually produce 15,800 tons of blister copper containing 1.5 tons of gold and 2.8 tons of silver.

The discovery of copper deposits at Saindak in district Chaghi was made in the 1970s in collaboration with a Chinese engineering firm, aimed at exploiting the mineral resources of Balochistan. Saindak copper-gold project was completed by Saindak Metals Limited (SML), a public limited company wholly owned by Government of Pakistan by the end of 1995 at a cost of Rs. 13.5 billion. It was financed through Government of Pakistan (GOP) investment and guaranteed borrowings. The project was put on trial production during the period August 1995 to January 1996 and it achieved the designed production capacity and quality. It produced 1541 tones of blister copper containing 12 Kg gold and 198 Kg silver during trial operations which was sold in the international market at a price of Rs.280 million. The project was shutdown in February 1996 due to lack of working capital.

Chinese are simultaneously the producers and buyers of Saindak copper. They are pioneers in transferring technology in metal mining, mainly in copper. They are committed to train Pakistanis by offering them on job training facilities. According to the Chinese company sources, about 75 percent employees from Balochistan and more than 60 percent employees from district Chaghi have been recruited for resumption of production in Saindak project. Moreover, provision of health, education, drinking water and other facilities to the local population is also the part of the project. The MCC is committed to replace Chinese experts by Pakistanis gradually and reemploy the 700 ex-employees who lost their jobs due to closure of this project.

China is today a big market for Pakistani copper. Copper export from Saindak started in the year 2004 when Pakistan exported copper worth over $30 million to China during four months, from July to October. The Chinese companies prefer to import copper from Chaghi, which is currently meeting the Chinese demand. MRDL, a subsidiary of MCC produced 18,000 tons blister copper till September 2004. It is operating in the Saindak project, with an initial investment of $26 million since August 2003.

LEAD & ZINC MINING

Pakistan and China signed a Memorandum of Understanding in 2002 for Lead & Zinc mining project, located at Duddhar in Lasbela district of Balochistan. The project will be another symbol of Pak-China economic cooperation in the mineral sector development in Balochistan. Under this joint venture of the two friendly states, a Lead-zinc concentration and production plant will be installed. According to an estimate 25,000 tons of ore will be used to manufacture Lead-Zinc based chemicals for export and domestic use. A few years back, the consortium of Chinese companies signed a contract to borrow $54 million loan from the China Development Bank to finance the development of a medium-sized lead and zinc mine in Balochistan. Under the contract, the Chinese consortium will be responsible for the construction, operation and sales of the project. The project has mining and concentrating capacity of 660,000 tons a year. Once completed, the mine will be able to enhance its production to 100,354 tons of zinc concentrate and 32,584 tons of lead concentrates annually.

OIL & GAS EXPLORATION

Rich in oil and gas resources, Balochistan offers enormous opportunities for Chinese investors. A Chinese petroleum firm BGP was awarded $ 1 million contract in 2001 by the Government of Pakistan to carry out seismic survey over an area of 178km in Dera Bugti. The company had suspended the survey in Sui due to security reasons. In 2002, the Company had reportedly resumed the seismic and aerial surveys in Bugti tribal area.

Balochistan Chief Minister Aslam Raisani has invited investments in oil and gas exploration in the province and assured full protection to national and foreign investors. The government has issued NOCs to five national and international companies for investments in the oil and gas sector. The federal government should also extend all help to the province in exploration and development of its natural resources.