China picks Pakistan dam as first stop on US$40b Silk Road investment plans
Pakistan is seen as the key to President Xi Jinping's efforts to access the Indian Ocean over land and boost trade with Europe, Africa and the Middle East
China has picked a dam project in northern Pakistan as the first investment project of its US$40 billion Silk Road infrastructure fund as President Xi Jinping looks to expand the country’s influence across three continents.
The fund will become a shareholder of China Three Gorges South Asia Investment which will construct the Karot dam on the Jhelum river, said a statement on the Chinese Foreign Ministry’s website on Tuesday.
Total investment in the project will be US$1.65 billion, said the People’s Bank of China.
See more: Infographic: China's plans to revive the old Silk Road
Xi’s visit to Pakistan this week was the first by a Chinese head of state in almost a decade.
Pakistan is seen as the key to his efforts to access the Indian Ocean over land and boost trade with Europe, Africa and the Middle East.
China is Pakistan’s top trading partner, and they have a mutual distrust of India.
The two nations, which have long had close security ties, are planning a total of US$45 billion in projects along a 3,000-km corridor stretching from Xinjiang, in western China, to Gwadar on the Arabian Sea.
The investments will help to boost Pakistan’s economic growth and open alternative trading routes for China.
The Karot dam will be located in Rawalpindi, near the capital Islamabad.
The dam was a “great match” between the development strategies of the two nations and a priority project in the China-Pakistan Economic Corridor, China’s central bank said in its statement.
The 720-megawatt dam would take about six years to build, according to project documents filed by the World Bank’s International Finance Corp, which is investing US$125 million in China Three Gorges South Asia Investment.
The project would generate 75 per cent of its energy during the summer months when water flow in the Jhelum river was at its highest, the documents show.
China Three Gorges Corp, the Beijing-based developer of the world’s largest dam, was expected to become Pakistan’s biggest clean-energy company with plans for US$5.5 billion of hydropower, solar and wind projects totalling more than 2,000 megawatts in capacity, said the International Finance Corp, which is part of the World Bank Group.
Pakistan requires as much as US$20 billion in investments over the next five years to overcome a 10,000-megawatt shortfall in power capacity, it said.
On Monday Xi and Pakistani Prime Minister Nawaz Sharif signed pacts valued at US$28 billion to build roads, ports and power plants – nearly equal to the amount of foreign aid the US has provided to Pakistan over the past decade to support its war in Afghanistan.
The investments, if realised, will help Sharif revive Pakistan’s economy, which suffers from chronic power failures and an insurgency that has killed more than 50,000 people since 2001.
Sharif has received a loan from the International Monetary Fund to help put the country’s finances back on track.
“It’s very significant,” said Mohammed Sohail, chief executive of Topline Securities, in Karachi. “It can bring a big change for all our economic fundamentals, in particular in energy.”
The 51 agreements included an “All-Weather” strategic partnership that seeks to formalise longstanding defence ties between the nations.
They also pledged to fight terrorism and help bring peace to Afghanistan.
The two nations may conclude the sale of eight Chinese submarines – more than doubling Pakistan’s fleet.
Xi met the chiefs of Pakistan’s armed forces and called the operation against militants near the Afghan border a game changer in bringing peace, said army spokesman Major General Asim Bajwa on Twitter.
The president had also pledged to contribute in the effort, Bajwa wrote, without providing details.
China is viewed more favourably in Pakistan than in any other Asian country, the American think tank, Pew Research Center, found in a poll conducted last year.
Pakistanis gave a 78 per cent favorable rating to China, compared with 14 per cent for the US, the poll showed.
Watch: Security fears for China-Pakistan corridor as Xi Jinping ends visit
