Will Hu Or Will Hu Not?

Chinese President Hu Jintao will be visiting India and Pakistan afterattending a summit meeting of the Asia-Pacific Economic Co-operation (APEC) organisation at Hanoi from November 17 to 19, 2006. He will not be visitingBangladesh, which will be in the midst of its election campaign.

Teams of officials from Pakistan and China have already been exchangingvisits for preparing the ground for this first state visit by President Hu toPakistan. Since  taking over as the President in 2001, President GeneralPervez Musharraf has already paid three state visits to China. In addition, healso visited Shanghai in June last to attend the summit of the ShanghaiCo-operation Organisation (SCO) as an observer.

Indications till now are that President Hu, during his four-day visit toPakistan, will visit Islamabad, Lahore and Karachi. According to reliablesources in the Pakistan government and Police, the Pakistani authorities arealso keen that he should visit Gwadar in Balochistan to formally inaugurate theChinese-aided Gwadar port and the Northern Areas (Gilgit and Baltistan) toinaugurate a project for the upgradation of the Karakoram Highway with Chineseassistance. These sources say that Chinese security officials have been opposedto his going to Gwadar and the Northern Areas on security grounds. They are notconfident that the Pakistani authorities will be able to ensure his securityeffectively due to possible threats from the Baloch nationalist elements and theanti-Beijing Uighurs.

An alternative reportedly under consideration is that even if he does notofficially go to Gwadar to formally inaugurate the port, he will make anunpublicised visit to the place to meet the Chinese engineers working there. Anannouncement about his visit and meeting with the Chinese engineers would bemade after he returns to Islamabad.

Even though the Pakistani authorities are keen that he should formallyinaugurate the port, Pakistani official sources say that the port is not yetready to be commissioned. The port is being constructed in two phases. In thefirst phase, the originally fishing harbour of Gwadar is being converted into aninternational port to cater to the external trade of Pakistan, Afghanistan, theCentral Asian Republics, and the Xinjiang region of China.

This phase has already been completed by the Chinese in April last  andhanded over to the Pakistani authorities, but the port is not yet ready forbeing commissioned because the Pakistani authorities have been lagging behind incompleting the support infrastructure for which they are responsible. Suchsupport infrastructure includes roads, housing for those who will be working inthe port  and the port channel. The Pakistani engineers, who wereresponsible for constructing the port channel, had made wrong calculations ofthe required length of the channel. They have now undertaken an extension ofthis length. Mr Kamil Ali Agha, minister of state for parliamentary affairs, hadtold the Senate, the upper House of Parliament, on September 13, 2006, thatPakistani engineers had completed 70 per cent of their work and were hopeful ofcompleting the remaining 30 per cent by December 30, 2006. The violent incidentsafter the murder of  Nawab Akbar Bugti, the legendary Baloch nationalistleader, by the Army in August and the escalation in the activities of theBalochistan Liberation Army (BLA) since then have created labour problems due tothe desertion of a large number of workers brought from outside Balochistan.This is being sought to be made good by recruiting ex-servicemen in Punjab andthe North-West Frontier Provice (NWFP) and bringing them to Gwadar to completethe construction. It is doubtful whether even after this the Pakistaniauthorities would be able to complete their construction by December 30.

Moreover, a decision is yet to be taken by the Pakistani authorities as towho will operate the port. Originally, it was being rumoured that this contractwould be given to a Dubai company of international reputation, but Beijing isreported to have shown interest in the contract being given to one of theChinese bidders from Singapore and Hong Kong. Fresh tenders have reportedly beencalled for.

Despite these teething problems, the Chinese remain committed to undertakingthe construction of the second phase which would create a naval base in Gwadarby 2010, capable of being used by the Pakistani and Chinese navies. It is learntthat preliminary work in this regard is already on despite the deterioration inthe security situation after the murder of Nawab Bugti.

President Musharraf is keen to expand the further scope of Sino-Pakistanico-operation in Gwadar and has been suggesting the construction of a mega petro-chemicalcomplex in Gwadar and a railway line and an oil/gas pipeline connecting Gwadarwith Xinjiang. While the Chinese have shown preliminary interest in these ideas,they are reluctant to make formal commitments in this regard till the securitysituation in Balochistan improves. The Pakistani authorities are pressing theChinese that at least an announcement regarding the commissioning of feasibilitystudies should be made during President Hu's visit.

Two other major, high profile  items of interest to Pakistan are thesigning of a comprehensive free trade agreement between Pakistan and China and aformal agreement on Chinese assistance in the construction of at least two morenuclear power stations of 300 MW capacity each, with an agreement in principlefor four more later. Pakistan presently does not have a comprehensive free tradeagreement with any country covering investments, services and trade in goods. Ithas a limited free trade agreement with Sri Lanka, which covers goods only.

In the meetings with Chinese  officials , an agreement has already beenreached in respect of investments and services, but an agreement on trade ingoods has been proving elusive due to the Chinese insistence that Pakistanshould reduce its negative list drastically. In 2005, bilateral trade reachedUS$4.26 billion, up 39% over 2004. Trade between China and Pakistan amounted to$1.018 billion from  January to March this year, up 42.3% over the sameperiod last year.

While the Pakistani authorities have been gratified by the co-operation whichthey have been getting from Chinese state entities, they have been unhappy overthe attitude of the non-state companies whose assistance has been sought for theconstruction of a hydel station in the Federally-Administered Tribal Areas(FATA), the Saindak Project for the development of the copper and gold mines ofBalochistan and a coal-based power station in Sindh. The work on the hydelstation has been dislocated following a terrorist attack on the Chineseengineers two years ago. The Chinese company is now reportedly demanding anescalation in the cost of the project due to security reasons. The copper-goldproject is under implementation without any security-related hitch, but thePakistani authorities feel that the Chinese company has taken them for a rideduring the negotiations on the contract, which is proving to be unfavourable toPakistan. The contract for the construction of a thermal power station could notbe finalised so far even though negotiations in this regard have been going on for nearly 10 years  due, inter alia, to the terms for power tariffproposed by the Chinese company, which the Pakistani authorities findunreasonably high.

Even in respect of state entities, the project for the supply of Chineselocomotives to the Pakistan Raiways has got into an unsavoury controversy whenit was found that the locomotives supplied by China were not suitable forPakistani railway tracks. There have also been allegations of payment of bribeby the Chinese to some senior retired officers of the Pakistan Army, whoselected the Chinese locomotives as suitable for the Pakistan Railways.

B. Raman is Additional Secretary (retd), Cabinet Secretariat, Govt. ofIndia, New Delhi, and, presently, Director, Institute For Topical Studies,Chennai.