Gwadar is focal point - Executive Director of Pakistan-China Institute
Source : Business Recorder Date : 29-05-2015
With the Pak-China corridor making headlines in recent weeks, it was only natural to have a sit-down with Mustafa Sayed, the young Executive Director of Pakistan-China Institute, which is the first-of-its-kind non-governmental, non-partisan and non-political think tank. The PCI houses the Pakistan secretariat of the recently launched joint Pakistan-China think tank called Research and Development International. RANDI's China secretariat will be co-hosted by the prestigious Chinese Academy of Social Sciences, and the China Institute of Reform & Development. Below are edited transcripts of the interview.
BR Research: Is $46 billion for real? We ask this because China's total outward FDI all over the world to date is $660 billion. Of this, $330 billion went to Hong Kong, which is its own backyard. The next two major destinations are Cayman Islands and British Virgin Islands, which are tax havens; so you minus that out of the equation as well. The biggest number of Chinese FDI stock to date is $21 billion in the US, which is less than half of the $46 billion pledge that China has made to Pakistan.
Mustafa Sayed: The number may seem huge but you have to put it in the perspective of Pakistan's strategic partnership with China, and the importance which China attaches to a prosperous Pakistan. The corridor will essentially be a trade route, with export and import hubs along the way, as well as oil and gas route for China in the future, which can help Pakistan become a prosperous nation.
In China's future economic strategy of energy security, of maritime security and of maritime areas of influence, therefore, Pakistan's role is the key. So the economic corridor is not about today, it's about tomorrow.
BRR: Tell us more about the maritime corridor.
MS: There are lots of different media reports on disputes surrounding South China Sea, East China Sea, etc. Why are they so important? Well, because the vessels for energy oil are going to come through these areas. So that's why the maritime silk road is also very critical in this in addition to the actual Silk Road, which is via road.
And that's why in order to secure the maritime area of influence, China is not only interested in developing Gwadar but it has also simultaneously launched, though with less urgency, the BCIM corridor - the Bangladesh, China, India, Myanmar corridor.
In other words, Pakistan is part of both the maritime silk route with Gwadar and the Silk Road, which extends from Xi'an to Xinjiang to Gilgit-Baltistan via the Karakorum Highway.
BRR: Still, how does one reconcile with such a figure when biggest Chinese investment anywhere in the world is $21 billion and that too in a country like the US?
MS: Again, you have to see it in the context of this geopolitical strategy which China has with Pakistan - and it's very different from the geo-political context of US-China relations or any other country where China has poured in investments. The $46 billion investment is on a win-win basis. It's very good for Pakistan because China is the only game in town - it's the only real investor which is jumping right in. There are no 'oohs' and 'aahs'; it's no holds barred.
You also have to see that the economic corridor is broken down into different phases, which means the $46 is not coming in one go. The first phase is the early harvest projects. These are the projects that are most immediate that we are going to do now. That's a basket of about 13 to 14 projects by and large. They are already listed, they are announced. These include the likes of Gwadar-related projects - such as Gwadar international airport, construction of breakwaters, dredging of berthing areas & channels - railway projects, Havelian dry port, and road projects such as KKH Phase II (Raikot-Islamabad Section), and the Karachi-Lahore Motorway (Multan-Sukkur Section).
BRR: How many billions can we expect by FY16?
MS: It's difficult to put a number for a given year but $12-15 billion can be expected to come in the early harvest projects.
BRR: What's the percentage of loans and how much is actual investment?
MS: It's too early to say at the moment. But whatever the size of loans, the financing will come from China. It will be a concessional loan with costs ranging between 1 and 1.5 percent, with payback periods of 15 to 25 years, which is extremely competitive.
BRR: How serious is China in building Gwadar as against routing its trade via Karachi?
MS: Gwadar is the focal point for them. When you're making Gwadar, and you're enhancing its capabilities and giving it energy and infrastructure, then you're integrating the Persian Gulf with it. You're integrating Central Asia with it. Iran is also next door. So it's just a place for natural synergies for the Chinese. Of course there are other mechanisms and routes available, but this is a natural focal point for the Chinese to operate from.
BRR: Has China started developing its western regions accordingly?
MS: China's main western frontier area is Xinjiang province which borders with Gilgit-Baltistan province. In Xinjiang, Chinese seriousness is evident from the pace at which they are developing their Kashgar economiczone. Kashgar is a major city in Xinjiang, and is the old center of the silk route. The Kashgar economic zone will be modelled after the Shenzhen economic zone. Shenzhen was a fishing village 40 years ago; today it is one of the most modern cities in the world.
Industries both private and state-owned have already been given the go-ahead by the government of China to set up factories in Kashgar. They are being subsidised to do so. It's very strategically and economically significant because it borders with Kyrgyzstan, Kazakhstan and Pakistan.
BRR: What do the Chinese think about the row over the corridor route; the whole issue of whether the corridor should go from the west of Indus or the East?
MS: That's not an issue. It's been made into an issue because of lack of co-ordination and lack of information. All the provinces are going to be stakeholders. The only difference, which has probably caused confusion, is what projects are going to be immediately done and where.
Our perceptions are generated from what is in the media. So the immediate locations are perceived to be the economic corridor. The development of the corridor is a very gradual process and it will take time - till 2030.
The economic corridor is not one road. It's a network. It's a web. We keep on saying road, because that's the buzz word, but it's not about one single road. So right now the early harvest projects might not be all over the country, but there is no change in the route, the energy production, because the economic corridor technically cannot be sustainable if it's in one area and not the other.
BRR: What are the milestones?
MS: There is no deadline per se, and much depends on project durations. There's a lot of time and work that goes into each project. The company, the contractor from China, is nominated by the National Development Reform Commission, which is the Chinese equivalent of our Planning Commission. Once the contractor is nominated, they carry out the feasibility. Then they sit down with the Ministry of Finance and Economic Affairs Division and negotiate the terms. There's a lot of back and forth. After the MOU, there are commercial agreements, technical agreement, implementation agreement, and so forth. Then eventually the work starts.
But things are moving at a fast pace. I think the Planning Commission is doing a great job, taking the lead and doing it very professionally. The early harvest projects, however, are expected to take 3 to 4 years.
BRR: How do you think India feels about this whole thing?
MS: A stable and prosperous Pakistan is good for all neighbouring countries. It's good for the US and good for the region. India might have concerns because China and India are rivals competing for leadership in Asia, but I think the economic corridor should be welcomed by all countries in the world.