NEW VISTAS IN PAK-SINO RELATIONSHIPS

SYED FAZL-E-HAIDER
(feedback@pgeconomist.com)

July 19 - 25, 2010

Pakistan and China signed six accords to increase economic cooperation in different sectors during a five-day official visit of President Asif Ali Zardari to China, which concluded on July11. It was Zardari's fifth tour to China since he took office as the country's president in 2008.

Analysts believe that Zardari's visit has not only opened door to more Chinese investment in Pakistan's energy sector but also strengthened Beijing's commitment to expanding the Chashma nuclear power complex in Punjab province. China agreed to spend $10 billion in Pakistan's power generation sector and provide 50 million yuan grant for new projects in the country.

During his visit, Zardari met the leaders of a dozen of China's corporations specialising in defence, petroleum, banking, industrial, energy and construction sectors to further Islamabad's quest for attracting Chinese entrepreneurs to invest in Pakistan in return for liberal economic incentives and security to Chinese work force.

President Zardari pledged to strengthen cooperation with China to promote a railroad connecting the two countries. The proposed rail link would pass through Gilgit-Baltistan region. The two countries signed memoranda of understanding (MoUs) for building two major highways in Gilgit-Baltistan at a cost of Rs45 billion. The Chinese companies are also engaged in $8 billion Bunji and the $2.6 billion Kohala Hydel projects in Gilgit-Baltistan.

Analysts believe that China's economic cooperation with Pakistan is mainly aimed at developing its western region through development of Gilgit-Baltistan where China maintains a large economic presence and plans a number of connectivity projects in rail and road sectors.

The MoUs for building highways in Gilgit-Baltistan were signed after the address of the visiting President Zardari to the Pak-China Economic Cooperation Forum in Beijing. Under the deal, two highway projects worth Rs45 billion would be financed in ratio of 15 percent by Pakistan and 85 percent by China. China will build the 165km long Jaglot-Skardu road and the 135km long Thakot-Sazin road.

"If you want to come to Pakistan or Southeast Asia from China by sea, it will take months, but if you look at the road transportation to my port, it's only 1,100 miles from your border," said Zardari in an interview with China's Xinhua news agency.

Zardari's remarks came amid some reports that China and Pakistan are considering building a rail link to reach the Arabian Sea. Chinese are also involved in the construction of Arabian Sea deep-sea port at Gwadar strategically located opposite to the Strait of Hormuz in southwestern province of Balochistan.

China has acknowledged the concept of railroad connectivity between the two countries and the two sides are working toward the direction. Zardari reportedly said his country can be a "force multiplier" for China's development.

"Pakistan can offer road links to China," China Daily reported Zardari as saying. "China is advanced in the rail field, so we can cooperate and develop together."

In the one on one meeting between President Zardari and his Chinese counterpart Hu Jintao last week, the two leaders discussed ways to boost bilateral relations in all spheres, besides regional and international situation.

"China is a friend and a strategic partner committed to the promotion of stability and economic progress of Pakistan," Associated press of Pakistan (APP) reported President Hu as saying.

China has already declared that it would complete all the projects on which Chinese are working despite security concerns in the south Asian country. The rising violence has not only upset the Islamabad's efforts to attract foreign investment but also forced the foreign firms to quit their operations in the country.

President Hu urged the country to continue to look out for the safety and security of Chinese nationals and companies in Pakistan following a spate of kidnappings in recent years. Presently more than 60 Chinese companies are involved in 122 projects in the country.

Pakistan is currently facing the worst power shortage and its indigenous energy resources are still untapped and not helping the country to meet its pressing energy needs. The country 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.

The visiting Zardari reportedly urged the Chinese companies to invest in the energy-deficient Pakistan, as his government intends to add tens of thousands of megawatts of power to its national grid in the next 25 years through combined hydro, coal, gas, nuclear and renewable energy sources.

The Chinese companies intend to make investment of around $10 billion in country's power generation sector, APP reported, citing the director general International Water and Electric Corporation, who was also a part of the delegation.

"We are in agreement with the Government of Pakistan to develop hydro and other means of power generation including wind energy." APP quoted Cao Guagjing, the chairman of China's Three Gorges Corporation after meeting with President Zardari as saying.

Guagjing reportedly said the feasibility for the $2.6 billion Kohala hydel project had been completed, which will provide 1,200 MW after its completion in four years. He said work on the feasibility study for the Bunji Dam project had begun that will produce 7,000 MW at a cost of $8 billion and 500 MW will be generated from wind turbines at Karachi.

During his visit to China in August last year, Zardari sought Chinese participation in the development of hydel energy projects and subsequently, the two countries last year signed an MoU on construction of a hydro-power station at Bunji in Gilgit-Baltistan. Under the deal, China agreed to invest and complete the project on a build-operate-transfer (BOT) basis.

The country's electricity generation mix presently comprises 65 per cent of thermal, 33 per cent hydel and only two per cent of nuclear generation. China has already built one reactor unit at the Chashma atomic complex in the country, and it is currently involved in building another one likely to be finished by next year.

Last month, the two Chinese firms- China Nuclear Industry Fifth Construction Company (CNIFCC) and China Zongyuan Engineering Corporation (CZEC) agreed to work together on the third and fourth plants at the Chashma complex in the country. The deal, which was reportedly signed in Shanghai on June 8, confirms that long-running plans about Chinese help in expanding Chashma are moving forward. China claims that the 650-megawatt Chashma-3 and Chashma-4 in Pakistani province of Punjab are part of the original deal of 2004 under which Chashma-1 and Chashma-2 were supplied.

The new nuclear reactors are being established to reduce the growing power shortfall in the country and the Executive Committee of the National Economic Council (Ecnec) of cabinet has already approved these projects.