This is a review of news and analysis pertaining to the China-Pakistan Economic Corridor and related regional connectivity and security issues, covering the period of November 15, 2018 – February 28, 2019.

CPEC and CPEC-Related Projects

Over $6 billion in CPEC projects will be completed this year. These include:

  • two major CPEC highway projects — the Multan-Sukkur section of the Karachi-Lahore Motorway and the Thakot-Havelian section of the realigned Karakoram Highway;
  • and a 1320MW coal-fired power plant in Hub, Balochistan.

CPEC has generated around 75,000 jobs in Pakistan and could generate 700,000 new jobs by 2030, the Chinese Embassy in Islamabad claims.

CPEC debt concerns to recede as transparency improves and political risks ease, accordingto an assessment by rating agency Fitch.

Chinese survey ship visits Pakistan for hydrocarbon research and geological mapping.

China to help modernize Pak-Afghan border crossings. Beijing will fund and install cold storage facilities at the Chaman and Torkham border crossings and a drinking water facility at the Ghulam Khan Khel terminal in North Waziristan.

Pakistan’s anti-corruption National Accountability Body will oversee CPEC projectsreportsPakistan Today.

Motorway connecting cities of Dera Ismail Khan and Hakla expected to be completed by the end of this year.The motorway is part of the CPEC central and western routes, but is funded outside the CPEC framework by the government of Pakistan.

Iran expresses desire to join CPEC. The Iranian ambassador to Pakistan made these comments days after a militant attack on IRGC forces in the Sistan-Baluchestan province.

Iran says it is willing to build a railway connecting the Chabahar and Karachi ports.

Karachi Port Trust looks for funding from the CPEC piereports DAWN. Potential projects include a freight corridor connecting Karachi Port to Port Qasim and a special economic zone adjacent to the Karachi Port. A new 16m terminal opened at Karachi Port in 2017, but it lacks dedicated connectivity to Pakistan’s highway and rail networks, resulting in congestion.

India establishes shipping line connecting three ports to Chabahar. A new line will make callsat Chabahar, Kandla, Mumbai, and Mundra ine makes calls at Mumbai, Kandla, and Mundra every two weeks. An Indian consortium took control of a terminal at Chabahar in December.

Afghanistan to send first cargo to India via ChabaharreportsTOLO News.

Pakistan did not receive major FDI inflows outside the CPEC portfolio in the first quarter of FY 2018-19.

Pakistan-China optic fiber link activated for commercial use. It presently runs from China to Rawalpindi via Khunjerab. The next phase will extend it to Karachi. This is a partnership between the Pakistan Army-run SCO and Huawei.

China Power and Pakistani partner Hubco establish jetty for fishermen in Gadani, Balochistan.

Pakistan and China convene sixth security joint working group, reportsThe Nation.

Himalayan glaciers in danger. Rising temperatures in the Himalayas will melt at least one-third of the region’s glaciers by the end of the century and as much as two-thirds.

Gwadar

Saudi Arabia to invest $11 billion in Gwadar oil refinery and petrochemicals complex.

Qatar may invest in food storage facilities Gwadaraccordingto The Express Tribune.

Foreign Minister Qureshi visits Muscat. He discussedcooperation between Gwadar and Duqm ports with his Omani counterpart.

Gwadar Port to be expanded. As part of the port’s second phase, five new 16m berths will be developedto add to the three existing 14m berths. The port can be dredged to a depth of 20m.

Groundbreaking of Gwadar projects due next monthreports The News. Planning Minister Bakhtiar said that groundbreaking for a new airport, coal power plant, hospital, and vocational institute will be conducted over the next few weeks.

Pakistan’s second shipyard will be located in Gwadar. Karachi Shipyard and Engineering Works (KSEW) recently acquiredland near the Gwadar port at Surnallah. KSEW aims to develop the facility with international partners. 

The city of Gwadar’s status will be upgraded to a metropolitan corporation from a municipal committee. This would notionally allow for the local governance system to be strengthened.

Gwadar master plan remains unfinalized. It could be completed in March or April. However, there is indication that the master plan recently developed by a Chinese firm may be revised after the completion of a fresh geological and satellite survey. Planning Minister Khusro Bakhtiyar said in January that “Gwadar would be made a green, clean and environment-friendly city.” Yet a coal power plant will be the city’s main source of electricity.

Gwadar Airport construction to begin in April. The project has been delayed for several years.

Pakistan Senate passes unanimous resolution calling for protection of rights of Gwadar locals, providing them access to vocational training, and preserving the city’s demographic balance.

Economy and Trade

Pakistan has come out of financial crisis: SBP governor (DAWN)

But a fiscal crisis loomsargues DAWN‘s Khurram Husain.

Pakistan eyes $50 billion in investment over the next five years from China, Saudi Arabia, and the United Arab Emirates.

S&P cuts Pakistan’s credit rating to “B-” from “B,” but keeps stable outlook.

Pakistan and China may finalize FTA second phase before April’s Belt and Road Forumreportsthe Business Recorder.

Pakistani government to issue close to $3 billion in 10-year bonds to ease electric power sector circular debtaccordingto The Express Tribune.

Qatar plans to recruit 100,000 Pakistani laborerssaysthe Qatari consul general in Karachi.

Gojra-Shorkot section of the M4 motorway connecting Faisalabad and Multan opened in early February. This section was fundedby the ADB and DFID. Three of the four sections of the M4 are now complete, with the final section from Shorkot to Khanewal expectedto be completed some time this year, months behind schedule.

Swat Expressway to open in Mayaccordingto the Khyber Pakhtunkhwa provincial government.

Pakistan Railways will manufacture all passenger bogies domestically starting in 2020accordingto Pakistan’s railways minister.

Khyber Pakhtunkhwa government plans highway connecting all former FATA regionsreportsDAWN.

AIIB could finance over $1 billion in projects in Pakistan this yearreports Pakistan Today. The bank’s president Jin Linqun said the bank is keen to “prioritize efforts” in Pakistan. Potential projects include:

  • a $409 million ring road projectin Rawalpindi;
  • a $436 million wastewater treatment facilityin Lahore;
  • $500 million in loans for the Mohmand dam and power project; 
  • and the $640-million Karachi water and sewerage services project.
  • and the Karachi Bus Rapid Transit system.

Pakistan plans on introducing 5G telecom service this yearpossiblyusing Huawei technology.

Malaysian company to invest $250 million in Pakistan’s telecom, digital sectors (GEO News)

The Belt and Road

China has invested $28.9 billion in 82 economic zones in Belt and Road countries since the initiative’s launch six years agoaccordingto a Chinese diplomat.

Value of big-ticket Chinese investments in Southeast Asia drops by 49.7 percent in 2018 to $19.2 billion, the lowest figure in four years.

Will China let the Belt and Road die quietly? (Nikkei Asian Review

  • Minxin Pei: “…the world has changed in the last five years. China’s economic slowdown has triggered a capital flight, draining more than $1 trillion from its foreign exchange reserves. If we factor in the trade war’s impact on Chinese balance of payments in the future, China will unlikely generate sufficient foreign exchange surpluses to finance BRI on the same scale.”

AIIB to finance $4 billion in projects this year, up from $3.3 billion last year. The bank’s president Jin Liqun said: “Quantity is important…but quality its he most important thing.”

Will Kyaukpyu overtake Gwadar and Hambantota? (Daily FT — Sri Lanka)

China has established a small military or paramilitary outpost inside Tajikistan along the Wakhan Corridor where the Sino-Afghan-Tajik borders convergereportsthe Washington Post. The post is at least three years old. Chinese researchers told Russian counterparts in 2017 that the post is for training and logistics. In 2018, foreign news outlets reported that China planned to construct a military base in Afghanistan’s Wakhan Corridor.

More: 

  • Slowly but surely, China is moving into Afghanistan (TRT World)
  • Erik Prince company to build training center in China’s Xinjiang (Reuters)
  • Integrating Afghanistan into the Belt and Road Initiative Review, Analysis and Prospects (DROPS Afghanistan)

Malaysia Nears Deal With China to Revive $20 Billion Rail (Bloomberg)

More:

Maldives seeks to renegotiate with China over Belt and Road debt (Financial TimesFinance Minister Ibrahim Ameer claims that contract values were inflated to pay for kickbacks for members of the previous government.

Nepal will use Chinese gauge standards for its national railway networkreports the Nikkei Asian Review.

More:

  • China Opens Border Connections to Nepal (YaleGlobal)

The Xinjiang government will spend $1.48 billion this year on expanding the region’s railway networkaccordingto Xinhua. The Hotan to Ruoqiang will strengthen rail connectivity within Xinjiang and other inland China regions, helping complete a loop linking southern Xinjiang cities and eventually linking to Tibet once the Korla-Golmud line is complete.

China to spend $6 billion on expanding Uruqmi airport in Xinjiang. The airport will be able to handle 63 million passengers by 2030.

Oil discovery in Xinjiang suggests significant commercial shale oil potentialaccordingto Morgan Stanley analyst Andy Meng.

Xinjiang’s top cotton producer reports greater output in 2018accordingto Xinhua. Cotton cultivation areas under the jurisdiction of the paramilitary Xinjiang Production and Construction Corps (XPCC) reached a record high in 2018, exceeding the previous year’s output by 20.7 percent. The XPCC produces around 40 percent of Xinjiang’s total cotton production. And Xinjiang is China’s top cotton-producing region.

Cosco’s Peru port buy latest in China’s Belt and Road push (Nikkei Asian Review)

The Counter Belt and Road

U.S. Strategy Towards Afghanistan And (The Rest Of) Central Asia
(The American Interest)

Competitive Coexistence: An American Concept for Managing U.S.-China Relations (The National Interest)

Spite Won’t Beat China in Africa (Foreign Policy)

The Geopolitics of the Quad (NBR)

Competing Against Chinese Loans, U.S. Companies Face Long Odds in Africa (NYT)

With China on its mind, India deepens engagement with Myanmar (The Straits Times)

First Shipment Of Afghan Goods Heads to Chabahar (TOLO News)

Iran is using the Chabahar sanctions waiver as a selling point for the port, pitching it as a gateway beyond India-Afghan tradeaccordingto a report in The Hindu.

India Offers $1.4 Billion to Maldives Amid Tussle With China (Bloomberg)

Regional and Strategic

Pakistan convenes 46-country naval exercises in the north Arabian Sea. Participants includedChina, Japan, and the United States.


More:

  • Pakistani, Turkish navies hold joint exercises in Arabian Sea (Daily Sabah)
  • Pakistan, Malaysian navies hold Malpak II drill: spokesman (ARY News)


Turkish parliament approves extension of naval forces in Gulf of Aden (Daily Sabah)

More:

  • Maritime struggles: Turkey is not going to play from the sidelines (Yeni Safak

From Blackwater to Batteries (Foreign Policy)“Erik Prince has moved beyond mercenary armies. His next project is mining minerals in Congo and Afghanistan to help power electric cars. It’s unlikely to help conflict-ridden countries—and could harm them.”

Report: The Gulf’s eastward turn: The logic of Gulf-China economic ties (American Enterprise Institute)

Report: New Dynamics in China-Iran Trade Under Sanctions (Bourse and Bazaar)

Posted by CPEC Wire Staff