Much to gain for China and Pakistan

PUBLISHED : Saturday, 25 April, 2015, 1:18am
UPDATED : Saturday, 25 April, 2015, 1:18am

China and Pakistan have always been diplomatically close, with geopolitical and strategic reasons being behind their good relations. The rhetoric from both sides during President Xi Jinping's first state visit this week was therefore always going to be affable, with phrases like "iron brothers" and "all-weather partners" being liberally voiced by officials. To outsiders, such terms would seem patronising, especially when used by economically powerful and influential Beijing. But as lopsided as ties may seem, cooperation will bring benefits to both countries as well as the region.

Xi unveiled a US$45 billion investment plan for Pakistan that involves 51 projects aimed at creating an economic corridor between the countries. Central to the vision, involving infrastructure including highways and power stations, is construction of a port at Gwadar on the Arabian Sea, which China hopes to transform into a free-trade zone. There is much symbolism; the corridor is an integral part of Beijing's "One Belt, One Road" initiative, the maritime and overland silk roads that will economically integrate China and the region with Africa, the Middle East and Europe. In keeping with that significance, the first investment from the Silk Road Fund, which will finance "One Belt, One Road" projects, was handed out: a US$1.6 billion contract for a hydroelectric scheme.

Pakistan desperately needs such infrastructure: power shortages are hampering its development. A lack of good ports, roads, railways and internet connectivity also limit access to regional and global trade. The agreements signed during Xi's visit have the potential to dramatically boost productivity and competitiveness. Pakistan's Prime Minister Nawaz Sharif hailed the corridor, believing it would make his country a "regional hub and pivot for commerce and investment".

There are obvious benefits for China. Shipping goods and oil through Gwadar avoids the narrow, busy and pirate-infested Malacca Strait. Economic development is perceived as a way of calming unrest in Pakistan and stemming violence by Muslim militants in Xinjiang . Chinese companies will benefit through helping build infrastructure and subsequent trade.

Much is riding on the success of the corridor. With the US and European countries focused on economic recovery, China offers the best hope for growth. The deal is a model for other nations on the Silk Road routes, which, like Pakistan, have missed out on the development that has taken place elsewhere.