China’s New Silk Road Hinges on a Small Pakistan Port

Faseeh Mangi, Bloomberg

“Doesn’t it just look like Mars?” says a Pakistan Army lieutenant colonel, as laborers toil under the blinding sun, building a road across the barren deserts of Balochistan.

Against a backdrop of scorched mountains, workers cut steel bars and prepare rock for crushing near a viaduct that crosses a dry river bed. In the distance, a truck kicks up dust, bringing materials to the site. Army vehicles patrol the road with signal jammers, while snipers scan the hills—the lair of armed separatists and bandits until a military campaign cleared most of them out a few years ago.

This is Chinese President Xi Jinping’s biggest gambit in his so-called One Belt, One Road project to rebuild the ancient Silk Road, a trading route connecting China to the Arabian Sea that slices through the Himalayas and crosses deserts and disputed territory to reach the ancient fishing port of Gwadar, about 500 miles by boat from Dubai.

The progress of the new trade route has been eyed with concern by India, which has forged a rival $20 billion plan with Iran to expand Iran’s Chabahar port, 100 kilometers along the coast. Tension between the two South Asian neighbors has been escalating, with both sides claiming some of their troops were killed by the other nation this month, the worst confrontations since 1999.

Xi’s plan envisages a network of ports, railways and highways snaking through Asia to Europe and Africa, that would lift China’s global standing and provide its companies with new markets and investment opportunities.

“The China-Pakistan Economic Corridor is the flagship project for China’s Belt and Road initiative, essentially the only fully-developed section of the entire scheme, and hence an important test case for Xi Jinping’s ambitious plans,” said Andrew Small, a research fellow at the Washington-based German Marshall Fund and author of “The China-Pakistan Axis: Asia’s New Geopolitics”.

Pakistan needs the boost. Despite agreeing on a plan with the International Monetary Fund in 2013 that helped stabilize the economy, its industry is hampered by crippling power shortages, poor infrastructure and a downturn in global demand. Exports in the year ended June fell to $21 billion, the lowest level since 2010, according to the Pakistan Bureau of Statistics.

Frequent power blackouts have driven traditional industries like textiles to countries such as Bangladesh and Vietnam. Of the $46 billion planned investment in the China-Pakistan Economic Corridor, $35 billion is earmarked for energy.

The project includes coal-fired, solar and wind power stations and a network of highways running 3,000 kilometers down the length of the country, from the freezing passes of the Karakoram Highway to the Arabian Sea. They will run through Kashmir, an area claimed by both India and Pakistan that is subject to frequent border clashes, and restive Balochistan, which Pakistan annexed in 1948.

“The energy policy was there for anyone to come and invest, but others were just looking at the political risk,” Planning Minister Ahsan Iqbal said in an interview in Islamabad on July 25. “China took a bet on Pakistan when others were shy.”

Pakistan is deploying 10,000 soldiers to the project, including a newly-created brigade of about 600 troops to guard workers and Chinese employees and escort trucks through Balochistan once the trade route is operating.

For China, CPEC offers a shorter route to the Indian Ocean, without going through the congested and strategically sensitive Strait of Malacca. It strengthens the bond with Pakistan, an ally that bridges South Asia and the Middle East. And it gives China a port in the Indian Ocean that could one day become a naval base.

For Pakistan, it brings soft loans to build power stations, roads and a deep-sea port and free-trade zone modeled on Shenzhen. It gives the nation a powerful ally in its never-ending squabble with India. And it brings the promise of private investment that will alleviate poverty in some of its least developed regions, helping curb the civil unrest that has bedeviled the country for decades.

“China sees Pakistan as an ‘iron brother’,” said Du Youkang, director of the Center for South Asian Studies at Fudan University in Shanghai, and a former Chinese diplomat based in Islamabad and New Delhi. “China’s strategic priority in the region is to secure a trade route to the Indian Ocean which can bypass the overused Strait of Malacca and significantly reduce the travel time between China and the Middle East.”

The cornerstone of the project is Gwadar, 30 minutes from the border with Iran, or an eight-hour drive from Karachi along a two-lane coastal highway that twists through jagged weather-beaten hills and across arid dust-blown plains.

Bought from the Sultanate of Oman in the 1950s, Gwadar is not connected to Pakistan’s power grid, using electricity imported from Iran, also a major source of fuel and consumer goods, much of it smuggled across the border.

Kids here play soccer, rather than the cricket that is popular elsewhere in Pakistan, wearing jerseys of European stars like England captain Wayne Rooney and France’s Paul Pogba. For centuries, the city looked to the sea for its wealth. Wooden fishing boats clustered in the bay haul lobsters and jumbo shrimp that now find their way to China and other markets in East Asia.

Gwadar’s first attempt to change came almost a decade ago, when Pakistan decided to build a deep water port with the help of Singapore. While the first phase of the project was completed, security issues and the global downturn meant the new port failed to meet expectations. Singapore pulled out and China stepped in.

Now construction, and the Chinese flag, are everywhere. Trucks and tractors are building a six-lane road along the seafront and a promenade for food stalls and tourist attractions, said Rafiq Baloch, chief engineer of the Gwadar Development Authority. The hospital’s capacity will increase sixfold, and a new water treatment plant, coal-fired power station and airport are planned.

“Normally MoUs are signed and then they are dispatched to libraries and files in ministries so they can sit there for years and years,” said Planning Minister Iqbal. “So this is a quite remarkable success story and the first set of the projects will be completed by the end of 2017 or beginning of 2018.”

For 26-year-old Mohammad Younis, Chinese money has meant an escape from needing to find a job at sea. As a teenager he joined a gang of fuel smugglers, driving pickups from Iran. After the authorities clamped down, he landed a job as a driver at the Pearl Continental, a five-star hotel built in 2006 that hosts Chinese engineers.

The hotel plans to triple capacity within five years and add office and apartment blocks, said General Manager Salman Saeed Khan.

“Development is happening at a faster pace than ever before, now that the Chinese have come,” said Younis. “It’s good. We will get jobs.”

Not everyone is happy. India’s Prime Minister Narendra Modi launched a thinly veiled attack on CPEC during his recent national day speech, thanking supporters in Pakistan-occupied Kashmir and Balochistan—a direct provocation, since Pakistan has long accused India of backing rebels in the region.

Five weeks after Modi’s speech, 18 Indian soldiers were killed by unidentified gunmen in a predawn raid on an army camp in Kashmir, setting off a diplomatic crisis.

The saber-rattling between the nuclear-armed nations is one indication of the gamble China is making in the region. But for Pakistan, CPEC is a potential game changer.

Source: Bloomberg

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