Among the major development projects in Pakistan in which the Chinese have been involved till now are the construction of an international commercial port cum naval base in Gwadar on the Makran coast in Balochistan, the development of the Saindak copper-cum-gold mines in Balochistan, the upgradation of the Karakoram Highway connecting the Xinjiang province of China with Pakistan via the Northern Areas (Gilgit and Baltistan), the construction of a small-scale hydel project in the Federally-Administered Tribal Areas and the development of a mobile telephone network in the North-West Frontier Province.
The commercial port in Gwadar has already been completed and commissioned, but it has not been attracting many foreign sea-going vessels due to the poor security situation in Balochistan because of the increasing activities of Baloch nationalists demanding an independent Balochistan. The construction of a naval base in Gwadar, which could also be used by Chinese naval ships visiting the Gulf, has also slowed down due to the poor security situation in the area.
The Pakistanis, since the days of General Pervez Musharraf, have repeatedly sought Chinese assistance for the construction of a petrochemical complex at Gwadar and oil and gas pipelines and a railway line connecting Gwadar with the Xinjiang province. The Chinese have till now not shown much enthusiasm for additional involvement in Balochistan because of the security situation. Since 2002, there have been at least three attacks on Chinese engineers working in Balochistan. In two of these, Uighurs were suspected and in one in 2007, which took place after the Pakistani Army raid of the Lal Masjid of Islamabad in July, 2007, the Pakistani Taliban was suspected. While there were Chinese fatalities in the first two attacks, there were no Chinese fatalities in the third attack of 2007, in which many passers-by were killed. All these incidents involved the use of improvised explosive devices.
The authorities of Pakistan and Iran have been claiming that the Chinese have been showing interest in the extension of the proposed Iran-Pakistan gas pipeline to Xinjiang. Presently, the proposal for the pipeline envisages the involvement of Iran, Pakistan and India -- with India participating only as the purchaser of the gas and not as a contributor of funds for the construction of the pipeline. Since 2005, Indian enthusiasm for the project has declined due to the security situation in Balochistan through which the pipeline has to pass and the US opposition to it. Pakistani and Iranian authorities have been repeatedly hinting since last year that if India withdrew, China might be prepared to step in as a purchaser of the gas as well as a contributor of funds for the construction. There has been no indication from the Chinese side on their reported interest in the project.
Chinese interest in participation in projects in the Pashtun belt has also declined following two incidents of kidnapping by the Pakistani Taliban of Chinese engineers working in South Waziristan for the China National Water Resources and Hydropower Engineering Group Corporation in October, 2004, and in the mobile telephone network in the Dir District of the NWFP in August 2008. There was also an attack by the Pakistani Taliban on some Chinese meat importers in Peshawar after the Lal Masjid raid, resulting in fatalities.
As a result, the Chinese interest in participating in development projects in Pakistan is presently confined to Pakistani Punjab, Sindh and Pakistan-occupied Kashmir, including the Northern Areas. In Punjab, they have been participating in projects like the development of a special economic zone, construction of shopping malls etc. In Sindh, talks have been going on for their participation in the development of the Thar coal mines and the construction of thermal and fertiliser plants.
The Karakoram Highway was originally constructed with Chinese assistance with the participation of Chinese engineers. For the last 10 years it has been in a bad state of repairs due to poor maintenance by Pakistani engineers. During the second tenure of Benazir Bhutto as the prime minister (1993 to 1996) she sought Chinese assistance for the repair and upgradation of the highway. The Chinese agreed. The proposal was that the Chinese would upgrade it on their side and the Pakistanis on their side with Chinese technical assistance. The upgradation work has been going on. It has been reported that while the work on the Chinese side has been completed ahead of schedule, it has been much behind schedule on the Pakistani side. It is not known whether Chinese engineers are participating on the Pakistani side and, if so, how many of them.
During his visit to Hang Zhou in the Zhejiang province and Guangzhou in the Guangdong province from August 21 to 24, President Asif Ali Zardari, who met the local authorities and investors, sought Chinese participation in the development of hydel, thermal and solar energy projects, irrigation and fisheries and mobile telephone networks and in creating facilities for higher technical education, including the setting-up of a telecommunications university and research complex. Among the concrete results from his visit were:
The signing of a Memorandum of Understanding to promote cooperation in river fisheries and related technologies by representatives of the Indus River Fresh Water Fisheries Research Institute and the Pearl River Fishery Research Institute of Guangzhou.
The signing of an MOU for the construction of a dam at Bunji in the Astore district of the Northern Areas by officials of Pakistan's Ministry of Water and Power and China's Three Gorges Project Corporation. The dam, one of the eight hydel projects short-listed for construction will have a capacity of generating 7,000 megawatts of electricity.
Zardari attended a presentation on small and medium sized dams, water conservation and irrigation by the Zhejiang Design Institute of Water Conservancy and Hydroelectric Power. Li Yueming, the president of the institute, said they had carried out feasibility studies of a couple of medium-sized dams in PoK. Shakeel Durrani, chairman of the WAPDA, who was present on the occasion, said that Chinese companies were already working on a number of hydel projects in Pakistan, including Neelum-Jhelum and Gomal Zam and the raising of the height of the Mangla dam in PoK. He said the institute would be invited to bid for the construction of 12 small dams.
Meanwhile, in a report carried by the News of August 18, before Zardari's visit to China, Kamran Khan, its journalist, alleged that without inviting open bidding from interested companies and investors, Pakistan Steel Mills has signed a non-transparent secret MoU with the Metallurgical Corporation of China for a $2.2 billion expansion programme to raise its current production capacity of 1.1 million tons to five million tons. According to him, contrary to relevant government rules and regulations as well as basic norms of transparency, Pakistan Steel didn't place any advertisement in the local and international press to seek the best international offers before entering into secret negotiations with the Chinese company, which was long seeking to clinch this deal. He said: "The most shocking element of this MoU, available with this correspondent, which will bind Pakistan with an additional foreign loan of $2.2 billion, is a clause that requires complete secrecy of this understanding. Clause 6.1 of this MoU states: "This MoU and any discussions related to it shall remain strictly confidential between the parties and no public announcement shall be made without written consent of both parties."
Kamran Khan quoted a Pakistani official as saying: "This was not our requirement but the Chinese company asked for this secrecy clause and we agreed."
There have been allegations that a businessman close to Zardari would be a major beneficiary of this expansion project. Pakistan Steel has become one of the bones of contention between Zardari and Prime Minister Yousef Raza Gilani. A day after the publication of the News report Gilani announced in the national assembly that Moin Aftab Shaikh, the chairman of the Pakistan Steel Mills, had been sacked on corruption charges. "I had directed the interior ministry to investigate the affairs of the Pakistan Steel Mills and submit a report," he said. Some Pakistani columnists interpreted Gilani's action as an affront to Zardari.
Since taking over as the President a year ago, Zardari has been periodically visiting Chinese provinces to study their economic development. During these visits, he does not go to Beijing. Most of his meetings are confined to Chinese businessmen and local party and government officials. A member of the Chinese cabinet -- generally the foreign minister -- goes to the province being visited by Zardari and makes a courtesy call on him. Before going back, he speaks over phone to President Hu Jintao. He has so far made four such visits to China in the last one year. These frequent visits to meet Chinese investors and businessmen have given rise to allegations that he was going there to promote the business interests of his friends in Pakistan.