October 31st, 2022
Courtesy of Nikkei Asia, a look at Pakistan and China’s efforts aim to jump-start Belt and Road plans in key talks:
Pakistan and China sought to revive Belt and Road projects in the South Asian country at an annual huddle, held virtually on Thursday. In the run-up to the talks, cash-strapped Islamabad appeared to have accepted a Chinese demand to increase the cost of a railway, as it seeks to secure more financing.
This was the 11th meeting of the Joint Cooperation Committee, the key forum for making decisions on the China-Pakistan Economic Corridor (CPEC), a $50 billion Pakistan component of the Belt and Road. Zhao Shiren, the Chinese consul general in Lahore, told local media earlier this month that work on the CPEC is expected to speed up after the JCC meeting.
The center of attention now is Main Line 1, or ML-1, a project that will upgrade 1,733 kilometers of railway track between Karachi and Peshawar. This is the largest CPEC project in terms of cost, and it had been awaiting a final decision for the past five years.
“Pakistan has agreed to increase the cost of ML-1 from $6.8 billion to $9.85 billion, on the demand of Chinese negotiators, who termed the former cost figure as unrealistic,” an official privy to CPEC planning told Nikkei Asia on condition of anonymity since he was not authorized to talk to the media. The official further added that the approval of the ML-1 project by the JCC would be a major boost for the CPEC.
A press release issued by the government after the JCC meeting stated that both sides agreed to start the ML-1 project. However, a final announcement on ML-1, and other projects approved by the JCC, will be made during Pakistani Prime Minister Shehbaz Sharif’s visit to Beijing in the first week of November.
In multiple background interviews, sources said other projects expected to get the nod include the Karachi Circular Railway at a cost of $1.33 billion and the Karakoram Highway realignment, valued at $1.8 billion.
Apart from these plans, another major issue up for discussion was likely to be power projects. Beijing has built 12 power plants under the CPEC and Pakistan owes more than 250 billion rupees ($1.14 billion) in unpaid bills to the facilities. The JCC huddle was expected to deliberate on forming a revolving account for Chinese power producers so that they can get paid without getting entangled in Pakistan’s web of debt.
Moreover, the JCC meeting may have decided the fate of a 300-megawatt power plant in Gwadar — a port intended to be a key Belt and Road hub. The Pakistani government would prefer to scrap the project as it scrambles to save money, whereas China seeks approval to start building it.
Aslam Bhootani, a member of the national assembly representing Gwadar, is not happy about the outlook. “No investment will come in Gwadar” unless the area’s power problems are resolved, he said. “Scrapping the 300 MW power plant will not help in this situation.”
Experts are on the fence about the prospects for rejuvenating the CPEC.
Michael Kugelman, director of the South Asia Institute at the Wilson Center, said the CPEC is in a holding pattern, with no new projects and existing projects moving very slowly out of caution over Pakistan’s economic crisis, with its foreign reserves falling dangerously low.
“Given Pakistan’s severe economic stress, as well as China’s own recent slowdown,” he said, “there will be little space for any type of new economic activity.”
But the Pakistani government does have an incentive to stay in China’s good books, given Sharif’s plan to visit China. This will be his first visit to Beijing as leader.
According to media reports, Sharif will likely seek $10 billion in financial assistance from China, through balance of payment support and rolling over Chinese loans, which make up 30% of Pakistan’s total external debt. Experts said the Sharif government wanted the JCC to be successful so that it can secure the required financial support from China during the prime minister’s visit.
Despite his skepticism and the CPEC’s sputtering progress, Kugelman also suggested Sharif might be the man to restore some momentum. “It was Prime Minister Sharif’s brother [Nawaz Sharif] who launched the CPEC, and there’s reason to believe Beijing is more comfortable working with the ruling PML-N party than with Imran Khan’s PTI, which asked questions about transparency [of CPEC projects] that China didn’t like,” Kugelman told Nikkei.
While Sharif is planning to revive the CPEC, his political nemesis Khan is in full-throttle mode to topple his government. Even after suffering a setback last week with his disqualification from office over alleged mishandling of foreign gifts, Khan has announced a long march from Lahore to Islamabad starting Friday, demanding Sharif’s resignation and fresh elections. Initially, it appeared Khan might be barred from politics for years but for now he has only been stripped of his seat in parliament.
Government officials fear the political uncertainty could jeopardize any gains made at the JCC meeting.
The instability is a problem, said James M. Dorsey, a senior fellow at the S. Rajaratnam School of International Studies in Singapore. But he said Beijing has already factored it in when making decisions about CPEC projects.
“Beijing knows that the ML-1 project is also in the interest of Pakistan and even if Khan again formed the government, he cannot reverse it,” Dorsey said.
He added that the Belt and Road, in general, has been slowing down, and that efforts made to revive the CPEC are partly Beijing’s attempt to fire up its broader global infrastructure drive.
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