Is China's Belt and Road working? A progress report from eight countrieshttps://asia.nikkei.com/Spotlight/Cover-Story/Is-China-s-Belt-and-Road-working-A-progress-report-from-eight-countriesGWADAR, Pakistan -- The idea of transforming the ancient fishing village of Gwadar into a bustling port city has been around since at least 1954, when Pakistan commissioned the U.S. Geological Survey to examine its coastline. Their conclusion: Gwadar, which sits on the Arabian Sea, would be an ideal location for a deep-water port.
Gwadar's potential went unrealized for decades, but it is now at the heart of a hugely ambitious plan known as the China-Pakistan Economic Corridor, or CPEC. China has pledged to spend $63 billion to bolster Pakistan's power plants, ports, airports, expressways and other infrastructure under the initiative, which Beijing positions as one of the pillars of its $1 trillion global Belt and Road Initiative championed by Chinese President Xi Jinping.
< Edited >
For all this grand ambition, some analysts have doubts. Pakistan's trade deficit with China has been rising, and there are concerns about what happens if it is unable to repay its debt. As with other countries that have benefited recently from Beijing's largesse, some in Pakistan worry that the price of such investment could be a huge debt burden.
The China-Pakistan corridor "will no doubt be a game changer for Pakistan, but we need to be careful," said Ehsan Malik, the CEO of Pakistan Business Council, a business policy advocacy forum. "Ten years' tax concessions, 90-year leases for Chinese companies and cheap imports will impact the competitiveness of existing domestic industries."
Pakistan symbolizes both the promise and the potential peril for countries participating in China's BRI undertaking -- arguably the largest investment drive ever launched by a single country -- and its related projects.
< Edited >
Key findings include:
Project delays After initial fanfare, projects sometimes experience serious delays. In Indonesia, construction on a $6 billion rail line is behind schedule and costs are escalating. Similar problems have plagued projects in Kazakhstan and Bangladesh.
Ballooning deficits Besides Pakistan, concerns about owing unmanageable debts to Beijing have been raised in Sri Lanka, the Maldives and Laos.
Sovereignty concerns In Sri Lanka, China's takeover of a troubled port has raised questions about a loss of sovereignty. And neighboring India openly rejects the BRI, saying China's projects with neighboring Pakistan infringe on its sovereignty.
Mushtaq Khan, an economist and former chief economic adviser at the State Bank of Pakistan, acknowledges that the country's debt to China is rising. But he says Beijing "cannot afford" to bankrupt Pakistan -- in part because of the country's importance as a counterweight to India, a regional rival of China's.
"China's primary interest in Pakistan is geopolitical rather than strictly economic, and therefore, for China, repayment of the debt burden will be secondary to maintaining a good political and economic relationship with Pakistan," he said.
< Edited >
The deeper ties with China come amid strains between Pakistan and the U.S. In January, the U.S. State Department announced that it would suspend security assistance to Pakistan over what it called a failure to clamp down on terror groups.
The country's economy has been battered over the years by terrorism, fuel shortages and tattered governance, but it grew 5.4% in the year through June 2017, the fastest pace in 10 years. The State Bank of Pakistan forecasts growth to approach 6% in the year ending June 2018.
The projects are underway with the belief that the troubled nation can join the vibrant club of emerging Asian economies. The government of Pakistan plans to transform Gwadar into one of the world's largest port cities by 2055, housing steel mills, terminals for liquefied natural gas, oil refineries and other facilities. Under the plan, trade and industrial zones will be concentrated on the city's east side, while the western side of the peninsula will serve as residential and tourism areas.
"Gwadar port will be a hub to link Afghanistan and Central Asia, but it is not just a trade and logistics center," said Dostain Khan Jamaldini, chairman of Gwadar Port Authority. "We will set up an industrial estate with export manufacturing zones, and invite the motorcycle and electronics industries."
"Gwadar port is not given to China only," Jamaldini said, stressing the authority's willingness to welcome U.S., European and Asian companies.
< Edited >
