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Fire in China and India fueled by Pakistan Belt and Road

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Pakistani military PESHAWAR and Chinese companies are at an impasse in the China-Pakistan Economic Corridor (CPEC), a US $ 87 billion plan to build ports, roads, railroads and power plants for facilitate trade, stimulate growth and consolidate power in geopolitically contested lands.

The program, designed to span the length and breadth of Pakistans, has been reinvigorated since the Covid-19 pandemic as Beijing redoubles its efforts to find strategic alternatives for its trade and energy flows amid tensions growing with the United States and its allies.

Over the past two months, amid the economic devastation of global pandemics, Beijing has committed an additional $ 11 billion to CPEC. Yet many projects are located in disputed geopolitically sensitive areas with India, adding fuel to Asian giants, intensifying the Himalayan stalemate.

China has big plans for Pakistan and CPEC. The Chinese-backed port of Gwadar in the volatile Balochistan province is specifically aimed at giving China access to the Indian Ocean, a presence that will help protect and facilitate its trade and fuel shipments. with the Middle East.

Some local reports have suggested that authorities deny that Pakistan has quietly agreed to provide the Chinese military with basic rights in Gwadar and Gilgit Baltistan, the latter territory close to its Himalayan standoff with India.

China is strengthening these strategic investments by working more directly with the powerful military and its affiliated business interests. The army construction arm, Frontier Works Organization (FWO), has won numerous contracts related to CPEC.

This mainly involves the reconstruction and modernization of the Karakoram highway which connects the Chinese city of Kashgar, in the remote western province of Xinjiang, Pakistan, the Punjab, at an estimated cost of 2 billion dollars. dollars. The route has strategic implications for China and its vision of establishing an alternative trade route.

CPEC map with disputed territories with India. Image: Wikimedia

However, critics say many deals were signed without a competitive bidding process that sidelined local private builders in favor of military interests.

The government’s Planning and Development Division, which previously had primary responsibility for the CPEC, has been sidelined with the appointment last year of retired Lieutenant-General Asim Saleem Bajwa as the new president. authority of the CPEC, established by a presidential ordinance last year.

China’s renewed investment in the program marks an important turning point, which both contributes to rising regional tensions and gives Pakistan economic hope after the pandemic. The CPEC has been in the doldrums since Prime Minister Imran Khans Pakistan Tehrik-e-Insaf (PTI) came to power in 2018.

Amid concerns that the BRI projects represent debt traps, Khan called for a reset and realignment of the CPEC to renegotiate its financial and other terms. But this renegotiation attempt mostly failed as the military and its affiliated interests took more direct control of the projects.

At the start of the second phase of the CPECs at the end of June this year, two hydroelectric projects Azad Pattan Hydel Power Project and Kohala Hydel Power Project in Pakistan-administered Kashmir and Gilgit Baltistan were inaugurated at a cost of $ 3.9 billion.

China-based power companies, namely China Three Gorges (CTG) Corporation and Power Universal Co Ltd, took 80% of the stakes in the projects. The remaining 20% ​​has been contracted out to FWO and Laraib Group, a local renewable energy company, sources told Asia Times.

At the same time, Prime Minister Khan inaugurated the construction of the contentious Diamer-Bhasha Dam in the disputed region of Gilgit-Baltistan on the border with India. Although the dam is not a CPEC project, the bulk of the investment comes from Beijing.

Pakistani Prime Minister Imran Khan (2nd from right) attends talks with Chinese President Xi Jinping (not shown) at the Great Hall of the People in Beijing on November 2, 2018. Photo: AFP / Thomas Peter

Considered the largest dam in Pakistan’s history, it is being built on the Indus River in northern Pakistan at a cost of $ 8.5 billion. Chinese state-owned China Power and FWO jointly run the business, which is expected to add about 4,500 MW of electricity to the national grid.

Previously, the World Bank refused to finance the project because it is located in disputed territory.

The Diamer-Bhasa roadblock, critics and observers say, will give China reason to bring People’s Liberation Army troops to nearby or even Gilgit-Baltistan, thereby strengthening the Pakistani army vis-à-vis -vis from India. Some analysts say Beijing may be on the verge of establishing an official military base in Pakistan.

Michael Kugelman, deputy director of the Asia program at the US-based Wilson Center, has been quoted in news reports as saying that the growth of Chinese investment in Pakistan-administered Kashmir is a deliberate blow to India.

These moves will bring one more point of tension to an India-China relationship that is already more strained now than it has been for decades, he said.

The FWO is also playing a leading role in the construction and rehabilitation of a 1,150 kilometer road connecting the port of Gwadar in Balochistan with other parts of the country, as part of a government program to build $ 11 billion infrastructure.

The projects are financed by concessional loans from the Exim Bank of China and the Development Bank of China. Terms of the deal, including long-term maintenance and repairs, have not been made public.

Critics are already raising questions about the road toll, which is currently managed by FWO. They say national governments’ treasuries will receive little or no revenue from tolls, even though FWO has no responsibility for investing in or maintaining the road network.

Pakistani naval personnel stand guard near a container ship in Gwadar port during the opening ceremony of a Pakistan-China trade pilot program in 2016. Photo: AFP / Aamir Quereshi

FWO also won a $ 10.9 billion contract for Peshawar Model City Township and the Khyber Pakhtunkhwa-China Investment Plan (KPCIP), which will facilitate the construction of industrial park networks in the province. The contract includes the construction of three hydropower plants in Chitral, a cement plant in Haripur and a state-of-the-art oil refinery in Karak.

A report by the Pakistan Competition Commission (CCP) on the assessment of competition in the road construction sector shows that FWO is involved in the construction of approximately 13,000 kilometers of road infrastructure across the country, with more than 50,000 employees mainly from the armed forces.

Critics claim that FWO enjoys undue competitive advantages through preferential tax exemptions granted by the state, exemptions from providing bid guarantees and security deposits on won contracts, even though such exemptions are permitted by law. law for projects financed by foreign funds.

From a competition perspective, these exemptions distort a level playing field in the sector by giving SOEs like FWOs a significant cost advantage over other private sector competitors in the tendering process, adds The report.

But that’s normal for the course under the civilian administration influenced by the Khan army, analysts and observers say.

As Ayesha Siddiqa, a Pakistani researcher based in London, puts it: The current political configuration in Pakistan is hybrid martial law, with all strategic government functions headed by serving or retired generals.

Because the role of the military is evident in all industries and sectors ranging from finance, construction, railways, aviation, industry and telecommunications, China arguably had no ‘No choice but to engage and pay the armed forces in pursuit of its BRI and other strategic interests in the country.

Asia Times Financial is now online. Linking accurate information, insightful analysis and local knowledge with the ATF China Bond 50 Index, the world’s leading benchmark of cross-sector Chinese bond indices.Read ATFnow.

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