Debt-ridden Pakistan government hands free rein of Gwadar Port to China, country to army chief

Imran Khan Niazi, Prime Minister of Pakistan and self-proclaimed fan of almost everything Chinese travelled to Beijing, days before President Xi Jinping is due to visit India. The deliverables for the visit were evident in the past few weeks, and seem to underline the fact that despite warnings from economists, Islamabad is following in the footsteps of Sri Lanka and other such unfortunates, in deciding to give a Chinese company a virtual 23-year virtual walkover on the prize of the CPEC — the Gwadar Deep Sea Port complex. The China Overseas Ports Holding Company (COPHC) has been recently waxing eloquent on the potential of Gwadar, with its chairman Zhang Baozhong declaring that it would rival Karachi soon in commercial importance, create 47,000 jobs and become the prime source of revenue for Pakistan by the next decade. After years of prevarication, the Pakistani government announced a 23-year income tax and sales tax exemption for the the company, which is operating the Gwadar Port, as well as for its four subsidiaries who will operate industrial units located in it. These are units of ‘sunset’ vintage and will relocate to Pakistan to apparently kick start the Special Economic Zones. In all fairness, the proposal to move these old and polluting units into Pakistan was signed in 2017, and it is to the credit of present economic managers that they managed to stall this disastrous project, with Islamabad giving the Chinese the old run around for seven years. Pakistani media has now reported that the contract was finally cleared by the National Development Council. This body is chaired by the prime minister with all major ministries and provincial chiefs on board, and came into the news when the Pakistani army chief was inducted into its ranks. Commentators observed that the army had crossed the last mile in governing Pakistan. Baozhong was therefore careful to copiously thank the military for their cooperation. [caption id=“attachment_5494041” align=“alignleft” width=“380”] File image of Imran Khan and Xi Jinping. Reuters[/caption] Clearly, there was some twisting of arms in the background to push the deal through. It doesn’t need a great deal of analysis to link the timing of the contract to Khan’s visit to Beijing. But there’s more. The prime minister’s rant at the UN General Assembly did succeed in bringing the Kashmir issue to the fore, but also proved more than ever that no one is really interested very much in Pakistan. Worse, there is a palpable unease at Islamabad’s tendency to play the nuclear card at every juncture. Then, there is the economic situation. The State Bank of Pakistan’s most recent quarterly report points out that the economy is in a classic debt trap, with more debt required to pay off the earlier loans taken. Recently, Pakistan’s top corporate honchos voiced their frustration and anger at a dinner hosted by the army chief following a seminar at Rawalpindi. The event itself was tailored to project the army’s message that it had done its bit for internal security and it was now time for Corporate Pakistan to weigh in. The army chief’s speech underlined the ‘intimate’ security link between the economy and security, which may have set the tone for the formal — some would say unnecessary — meeting with the prime minister thereafter. Clearly, the army has given up on backseat driving and reclaimed the steering wheel, with the pretence of a ‘civilian government’ now wearing extremely thin. Even more clearly, it is apparent that the army is not getting the resources it wants. The contract with the Chinese construction giant therefore followed less than a week later. It seems the army has pushed civilians into a deal about which they are (rightly) uncomfortable, for short term gains that will get the army the toys it thinks it needs to fight an (imaginary) war against India. And the army expects to get the resources and materials for said ‘war’ from Beijing. China, however, is not so easily inveigled into a commitment, given that it has reason to be miffed with Islamabad. In recent months, Pakistan’s diplomatic and academic circles, as well as a select few from the media had begun to air their unhappiness with China, and their desire for a new compact with the United States. Rumours were also rife of a slowdown on the CPEC by Islamabad, amid well-aired doubts about its economic viability. Beijing was clearly not amused. Some large concessions therefore seemed to be indicated. But, as always, there’s more. In addition to the virtual giveaway of the port, is the 7,000-MW Bunji power project — which will put the energy sector even deeper into Chinese hands, the ‘offer’ of Pakistan Steel Mills in which Russia has also showed interest, the Pakistan Oil Refinery (which is another PSU that has run down over the years) and a fresh look at the M-1 railway refurbishing, dogged by controversy due to very high pricing. Beijing, now beset by its own slowing economy is viewing the whole with a somewhat jaundiced eye. As Khan walked the red carpet during his third visit to China in less than a year — with the army chief on his heels, Beijing already taken a step back. Its Kashmir statement reiterating the bilateral nature of the dispute is hardly likely to enthuse Islamabad. But Beijing will use the Kashmir issue to gain its own goals with India, even while extracting its pound of flesh from Pakistan. The problem is that there’s not much flesh left on that skeletal form to hand out. What there is, increasingly, carries a ‘Made in China’ label.