Nov 09 - 15, 2009

Islamabad has formulated a strategy to put its ever neglected northern areas, which are now called Gilgit-Baltistan, on the path of the fast track development with the help and cooperation of China. Some analysts call it a Pak-China development strategy for Gilgit-Baltistan under which steps would be taken for upgradation of Karakoram Highway, Skardu and Gilgit airport and improvement of Sost Dry Port at Pak-China border to enhance bilateral trade links.

Last month, Prime Minister Yousuf Raza Gilani announced a socio-economic package, which includes a series of projects for the region, and vowed to explore and harness the region's huge potential in hydel-power and tourism to boost economy of the area.

The major hydropower projects in which Chinese are involved or interested include Bunji dam, Kohala hydro-electric power project, Neelum-Jhelum hydroelectric project, and Basha dam.

Under Gilgit-Baltistan, Empowerment and Self-Governance Order 2009, the government has already approved formation of Council Consolidated Fund (CCF) and Gilgit-Baltistan Consolidated Fund (GBCF) aiming at managing revenues and different types of loans.

Strategically located Gilgit-Baltistan, which connects Pakistan to China's western province of Xinjiang, is seen by both India and Pakistan as part of the larger Jammu and Kashmir issue which has not yet been resolved.

Addressing a big public meeting in Gilgit last month, the Prime Minister Gilani said the people of Gilgit-Baltistan would have their own governor, chief minister, an independent judiciary and all institutions which came under the new system. He announced to set up cold storage centers to preserve local produce, particularly some 55 unique varieties of cherries grown in the area. He hoped that completion of Diamer-Bhasha and Bunji dams and upgradation of Karakoram Highway, which are the key China-funded projects, would usher in a new era of prosperity and generate employment opportunities for the local people.

The country has planned a comprehensive strategy to attract foreign investment, particularly from China, in all potential sectors of Gilgit-Baltistan economy. Qamar Zaman Kaira, the first Governor of Gilgit-Baltistan has pledged to make it a developed area of the country by tapping its huge potential in mineral, hydel power and tourism sectors through introduction of modern technologies and investment.

In the current financial year 2009-10, Islamabad has enhanced the budget for the Gilgit-Baltistan allocating more than Rs 10 billion in PSDP (public sector development program) for development of the social sector.

Islamabad is specially focusing on power sector to harness the huge water potential of Gilgit-Baltistan region with the help of China for the energy production. During President Asif Ali Zardari's visit to China in August, Zardari sought Chinese participation in the development of hydel, thermal and solar energy projects, irrigation and fisheries and mobile telephone networks and resultantly the two countries signed a number of pacts for cooperation and investment in these sectors.

Islamabad recently approved a self-governance reforms package for the Northern areas aimed at giving it full internal autonomy, but without the status of a province. Critics say that the move has robbed the Northern areas of a special status, virtually converting it into the country's fifth province.

Sinohydro Corporation, a Chinese company has already shown interest in the $2 billion Kohala hydro-electric power project in Azad Kashmir. Sinohydro Corporation, which is already involved in the Gomal Zam Dam and Khan Khawar and Dubair hydropower projects in the country, is also interested in Kohala hydro-electric power project.

Last October, a five-member delegation of the Sinohydro Corporation called on Minister for Water and Power Raja Pervez Ashraf and expressed their keen interest in investing in the Kohala hydro-electric power project. The 110 megawatts project is claimed to be one of the largest hydro-electric power projects in the private sector in South Asia, as it would require a 16kms tunnel, a diversion from Seran village and a powerhouse in Barasala.

The project would be linked to the national grid at Rawat near Rawalpindi through a115kms 500kV transmission line.

Pakistan has already awarded contract of Neelum-Jhelum hydroelectric project costing $1.5 billion in Azad Jammu and Kashmir to a consortium comprising China Gezhouba Group Company (CGGC) and China Machinery Export Corporation (CMEC). In view of the looming energy crisis, it is a high priority project for the country. The main contract for civil works has gone to CGGC of China, which built the massive Three Gorges Project in China. CMCE, a Beijing based contractor, has been awarded mechanical and electrical works of the project. The project being built on Neelam river, which flows from India, will employ 1,100 Chinese engineers and workers besides a larger number of Pakistanis.

The project has one of the most difficult designs, as it involves construction of a 47-km tunnel, passing underneath the bed of Jhelum River, to divert Neelum River. The project site near Muzaffarabad is blessed with abundant hydropower potential by virtue of its topography, meteorology, and hydrology. The rivers Jhelum and Neelum along with their tributaries flow through Azad Jammu and Kashmir. They have immense hydropower potential in their laps. Islamabad considers it crucial to secure its priority rights over Neelum waters - a tributary of the river Jhelum - threatened by the recent Indian move to use its waters for power generation and diversion.

The Neelum-Jhelum hydropower project was scheduled to commence in July 2002 and to be completed in June 2010. The project could not come in a take-off position owing to the issue of foreign exchange funding. The project was delayed by more than six years due to lack of public-sector allocations for the project. India has objected to the project on the ground that it did not meet some of the conditions stipulated in a river sharing agreement signed between the two countries in 1960.

India has expressed concerns over growing Chinese economic presence in Azad Kashmir. New Delhi recently protested the 7,000 MW Bunji hydroelectric project being built in Azad Kashmir with Chinese assistance.

Earlier, India had also protested against the construction of the Neelam Jhelum hydropower project and Bhasa dam in Azad Kashmir.

Neelam enters Pakistan in the Gurais sector of the Line of Control, and then runs west till it meets the Jhelum north of Muzzafarabad. Local analysts believe that New Delhi is actually concerned over the Pakistani move to award the contract to Chinese companies, as the move goes against the India's plan to establish a "security exclusion zone" for Chinese power equipment manufacturers so that they do not invest in bordering state of Jammu and Kashmir.