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Gwadar: Will Hu Or Will Hu Not?

As appeared in www.saag.org

Chinese President Hu Jintao will be visiting India and Pakistan after attending a summit meeting of the Asia-Pacific Economic Co-operation (APEC) organisation at Hanoi from November 17 to 19, 2006. He will not be visiting Bangladesh, which will be in the midst of its election campaign.

2. Teams of officials from Pakistan and China have already been exchanging visits for preparing the ground for this first State visit by President Hu to Pakistan. Since taking over as the President in 2001, President General Pervez Musharraf has already paid three State visits to China. In addition, he also visited Shanghai in June last to attend the summit of the Shanghai Co-operation Organisation (SCO) as an observer.

3. Indications till now are that President Hu, during his four-day visit to Pakistan, will visit Islamabad, Lahore and Karachi. According to reliable sources in the Pakistan Government and Police, the Pakistani authorities are also keen that he should visit Gwadar in Balochistan to formally inaugurate the Chinese-aided Gwadar port and the Northern Areas (Gilgit and Baltistan) to inaugurate a project for the upgradation of the Karakoram Highway with Chinese assistance. These sources say that Chinese security officials have been opposed to his going to Gwadar and the Northern Areas on security grounds. They are not confident that the Pakistani authorities will be able to ensure his security effectively due to possible threats from the Baloch nationalist elements and the anti-Beijing Uighurs.

4. An alternative reportedly under consideration is that even if he does not officially go to Gwadar to formally inaugurate the port, he will make an unpublicised visit to the place to meet the Chinese engineers working there. An announcement about his visit and meeting with the Chinese engineers would be made after he returns to Islamabad.

5. Even though the Pakistani authorities are keen that he should formally inaugurate the port, Pakistani official sources say that the port is not yet ready to be commissioned. The port is being constructed in two phases. In the first phase, the originally fishing harbour of Gwadar is being converted into an international port to cater to the external trade of Pakistan, Afghanistan, the Central Asian Republics, and the Xinjiang region of China.

6. This phase has already been completed by the Chinese in April last and handed over to the Pakistani authorities, but the port is not yet ready for being commissioned because the Pakistani authorities have been lagging behind in completing the support infrastructure for which they are responsible. Such support infrastructure includes roads, housing for those who will be working in the port and the port channel. The Pakistani engineers, who were responsible for constructing the port channel, had made wrong calculations of the required length of the channel. They have now undertaken an extension of this length. Mr. Kamil Ali Agha, Minister of State for Parliamentary Affairs, had told the Senate, the upper House of the Parliament, on September 13, 2006, that Pakistani engineers had completed 70 per cent of their work and were hopeful of completing the remaining 30 per cent by December 30, 2006. The violent incidents after the murder of Nawab Akbar Bugti, the legendary Baloch nationalist leader, by the Army in August and the escalation in the activities of the Balochistan Liberation Army (BLA) since then have created labour problems due to the desertion of a large number of workers brought from outside Balochistan. This is being sought to be made good by recruiting ex-servicemen in Punjab and the North-West Frontier Province (NWFP) and bringing them to Gwadar to complete the construction. It is doubtful whether even after this the Pakistani authorities would be able to complete their construction by December 30.

7. Moreover, a decision is yet to be taken by the Pakistani authorities as to who will operate the port. Originally, it was being rumoured that this contract would be given to a Dubai company of international reputation, but Beijing is reported to have shown interest in the contract being given to one of the Chinese bidders from Singapore and Hong Kong. Fresh tenders have reportedly been called for.

8. Despite these teething problems, the Chinese remain committed to undertaking the construction of the second phase which would create a naval base in Gwadar by 2010, capable of being used by the Pakistani and Chinese navies. It is learnt that preliminary work in this regard is already on despite the deterioration in the security situation after the murder of Nawab Bugti.

9. President Musharraf is keen to expand the further scope of Sino-Pakistani co-operation in Gwadar and has been suggesting the construction of a mega petro-chemical complex in Gwadar and a railway line and an oil/gas pipeline connecting Gwadar with Xinjiang. While the Chinese have shown preliminary interest in these ideas, they are reluctant to make formal commitments in this regard till the security situation in Balochistan improves. The Pakistani authorities are pressing the Chinese that at least an announcement regarding the commissioning of feasibility studies should be made during President Hu’s visit.

10. Two other major, high profile items of interest to Pakistan are the signing of a comprehensive free trade agreement between Pakistan and China and a formal agreement on Chinese assistance in the construction of at least two more nuclear power stations of 300 MW capacity each, with an agreement in principle for four more later. Pakistan presently does not have a comprehensive free trade agreement with any country covering investments, services and trade in goods. It has a limited free trade agreement with Sri Lanka, which covers goods only.

11. In the meetings with Chinese officials, an agreement has already been reached in respect of investments and services, but an agreement on trade in goods has been proving elusive due to the Chinese insistence that Pakistan should reduce its negative list drastically. In 2005, bilateral trade reached US$4.26 billion, up 39% over 2004. Trade between China and Pakistan amounted to $1.018 billion from January to March this year, up 42.3% over the same period last year.

12. While the Pakistani authorities have been gratified by the co-operation which they have been getting from Chinese State entities, they have been unhappy over the attitude of the non-State companies whose assistance has been sought for the construction of a hydel station in the Federally-Administered Tribal Areas (FATA), the Saindak Project for the development of the copper and gold mines of Balochistan and a coal-based power station in Sindh. The work on the hydel station has been dislocated following a terrorist attack on the Chinese engineers two years ago. The Chinese company is now reportedly demanding an escalation in the cost of the project due to security reasons. The copper-gold project is under implementation without any security-related hitch, but the Pakistani authorities feel that the Chinese company has taken them for a ride during the negotiations on the contract, which is proving to be unfavourable to Pakistan. The contract for the construction of a thermal power station could not be finalised so far even though negotiations in this regard have been going on for nearly 10 years due, inter alia, to the terms for power tariff proposed by the Chinese company, which the Pakistani authorities find unreasonably high.

13. Even in respect of State entities, the project for the supply of Chinese locomotives to the Pakistan Railways has got into an unsavoury controversy when it was found that the locomotives supplied by China were not suitable for Pakistani railway tracks. There have also been allegations of payment of bribe by the Chinese to some senior retired officers of the Pakistan Army, who selected the Chinese locomotives as suitable for the Pakistan Railways.

(The writer, Mr.B.Raman, is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. e-mail: itschen36@gmail.com)

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