Pakistan happy to aid in China's quest for land route to the west; India, not so much

Overland access to Middle East oil and markets for western provinces sought

PUBLISHED : Tuesday, 19 November, 2013, 2:52am
UPDATED : Tuesday, 19 November, 2013, 3:00pm

"We want to open to the west and use your country to help us develop a corridor for trade and tourism," Zhu Rongji said, pointing to the giant map of China on the wall behind his desk.

It was 1993, and Shahid Javed Burki, then director of the World Bank's China operations and later Pakistan's caretaker finance minister, was calling on the then vice-premier in Beijing.

China, Zhu told him, was different from other big countries in that it had sea access only on one side. That was where Pakistan came in.

China's "all-weather friend" is an integral part of its "look west" policy to find economic sustenance for landlocked western provinces. This is why China in 1986 started working on a 600-kilometre highway across the Karakoram mountain range connecting Kashgar in Xinjiang province with Pakistan's northeast.

Nearly three decades on, Burki is on a mission to expand the highway into an ambitious 2,000km China-Pakistan Economic Corridor. It will connect the deepwater Pakistani port of Gwadar on the Arabian Sea with Xinjiang, providing China easy access to fuel imports from the Middle East and Africa while creating a cheap overland export route to a maritime exit port for interior provinces such as Gansu and Qinghai.

"The idea is to develop the Karakoram Highway into a motorway network all the way to Gwadar, establish a railway line and two pipelines for oil and gas, and create industrial hubs along the way," Burki said.

The corridor is conceived and planned at the cost of India's interests

Largely financed and built by Beijing, Gwadar is strategically located near the Strait of Hormuz that channels a third of the world's oil trade. It could play a major role in China's energy security by providing a much shorter alternative to the current, circuitous 12,900km route from the Persian Gulf through the Strait of Malacca to China's eastern seaboard.

But the port and the corridor are not without their problems. Baluchistan province, where Gwadar is located, has been grappling with a low-intensity separatist insurgency. Many Chinese workers have been attacked and killed amid the violence, often making Beijing wary of the venture.

The ascent of a new leadership in Beijing, however, seems to have given the China-Pakistan corridor plan a new impetus just as it has done to a proposed Bangladesh China India Myanmar corridor that would provide landlocked Yunnan province access to the Bay of Bengal.

In February, the Pakistani government transferred the contract for running Gwadar from the Port of Singapore Authority to China Overseas Port. During the Pakistan leg of his first overseas trip as premier in May, Li Keqiang vowed to "speed up" the project. An agreement was signed in July when Pakistani Prime Minister Nawaz Sharif visited China within a month of returning to power.

Burki estimates the corridor will take five to 10 years to set up and cost up to US$15 billion. Efforts are being made to raise the money through structured finance instruments with the help of the countries, donor agencies and industrial sectors that will gain from the corridor.

"There is an active South Asian diaspora in the world of structured finance who we hope to rope in," Burki said.

To do that, he is chairing a special session on the economic corridor at the South Asian Diaspora Convention in Singapore this week, hosted by the National University of Singapore's Institute of South Asian Studies.

But the corridor could be a tough sell to the diaspora as a whole because India remains deeply suspicious of Gwadar's endgame. Not only does the planned corridor pass through Pakistan-occupied Kashmir, a sore point with the Indians, but the port would also position the Chinese on its western flank.

Pakistan's enthusiastic noises about offering Gwadar for a Chinese naval base have not helped either, reinforcing India's "string of pearls" fears stemming from China's involvement in nearby ports such as Hanmabanthota in Sri Lanka, Sittwe in Myanmar and Chittagong in Bangladesh.

"What's in it for India? More so when the corridor is conceived and planned at the cost of India's interests, claims and political sensitivities," said S.D. Muni, a former Indian ambassador and special envoy to the UN.

The corridor would find a lot more investors if India came on board because of the market that would come with it. "India matters because it would boost the rates of return. It would also bring in the vast and wealthy Indian diaspora," Burki said. "India is hungry for energy too and this corridor can meet its needs."

India is already part of the Turkmenistan-Afghanistan-Pakistan-India pipeline project that will move natural gas from Turkmenistan through Afghanistan into Pakistan and then to India. It is also among the four countries that invested in the recently commissioned Myanmar-China natural gas pipeline that allows China access to cheap fuel.