BEIJING: Prime Minister Nawaz Sharif said here on Sunday the China-Pakistan Economic Corridor (CPEC) was open to all countries in the region and it `must not be politicised` as China`s President Xi Jinping opened the Belt and Road Forum for International Cooperation by pledging $124 billion for his ambitious new Silk Road plan `to forge a path of peace, inclusiveness and free trade`.

Speaking at the plenary sessionof thetwo-dayforum, themed `Cooperation for Common Prosperity`, the prime minister called for building a peaceful, connected and caring neighbourhood by shunning mutual dif ferences.

`It is time we transcend our differences, resolve conflicts through dialogue and diplomacy and leave a legacy of peace for future generations,` he said at the gathering, with 29 heads of states and governments and 1,500 delegates in attendance.

Prime Minister Sharif said peace and development went hand in hand, andnothing could pave the path to peace and security more than economic development achieved through regional collaboration.

`The One Belt, One Road (OBOR) signifies that geoeconomics must take precedence over geo-politics, and that the centre of gravity should shift from conflict to cooperation,` he said.

Mr Sharif emphasised that OBOR negated the logic of polarisation and rejected the encirclement ofany country.

Earlier, opening the forum, President Xi Jinping called for abandonment of old models based on rivalry and diplomatic power games.

He used the summit, attended by leaders and top officials from around the world, to bolster China`s global leadership ambitions as US President Donald Trump promotes `America First` and questions existing global free trade deals.

`We should build an open platform of cooperation and uphold and grow an openworld economy,` President Xi said.

China has touted what it formally calls the Belt and Road initiative as a new way to boost global development since President Xi unveiled the plan in 2013, aiming to expand links between Asia, Africa, Europe and beyond, underpinned by billions of dollars in infrastructure investment.

`We must promote the multilateral trade system, establishment of free trade regions and the facilitation of free trade,` the Chinese president said.

Massive funding boost President Xi pledged a major funding boost to the new Silk Road, including an extra 100 billion yuan ($14.50 billion) into the existing Silk Road Fund, 380 billion yuan in loans from two policy banks and 60 billion yuan in aid to developing countries and international bodies in nations along the new trade routes.

The heads of the United Nations, the International Monetary Fund and the World Bank are also attending the gathering.

Britain`s Chancellor of the Exchequer (finance minister) told the summit his country was a `natural partner` in the new Silk Road.

India refused to send an of ficial delegation to Beijing, reflecting displeasure with China for developing a $57 billion trade corridor through Pakistan that also crosses the disputed territory of Kashmir.

`No country can accept a project that ignores its core concerns on sovereignty and territorial integrity,` said Indian foreign ministry spokesman Gopal Baglay, adding that there were concerns about host countries taking on `unsustainable debt`.

China plans to import products worth $2 trillion from countries participating in its Belt and Road initiative over the next five years, Commerce Minister Zhong Shan said.

But some Western diplomats have expressed unease about both the summit and the plan as a whole, seeing it as an attempt to promote Chinese influence globally. They are also concerned about transparency and access for foreign firms to the scheme.

`China is willing to share its development experience with all countries. We will not interfere in other countries` internal affairs. We will not export our social system anddevelopment model, and will not impose our views on others, President Xi said.

`We need joint efforts among Belt and Road countries to boost financing cooperation,` said Zhou Xiaochuan, the governor of China`s central bank.

`To sustain the projects, Belt and Road nations should allow companies to play a key role as government resources are limited.

At the forum, finance ministers from 27 countries, including China, approved principles that will guide project financing along the new Silk Road.

Germany, which was not among the countries that approved the financing guidelines, said its firms were willing to support the Belt and Road initiative, but more transparency was needed.

China has rejected criticism of the initiative and the summit, saying the scheme is open to all, is a win-win, and aimed only at promoting prosperity.

Some of China`s most reliable allies and partners are at the forum, including Russian President Vladimir Putin.

There are also several European leaders attending, including the prime ministers of Spain, Italy, Greece and Hungary.

-Agencies Government of Pakistan and China”.

The government of China will “actively strive to utilise the national special funds as the discount interest for the loans of agricultural foreign investment”. In the longer term the financial risk will be spread out, through “new types of financing such as consortium loans, joint private equity and joint debt issuance, raise funds via multiple channels and decentralise financing risks”.

The plan proposes to harness the work of the Xinjiang Production and Construction Corps to bring mechanisation as well as scientific technique in livestock breeding, development of hybrid varieties and precision irrigation to Pakistan. It sees its main opportunity as helping the Kashgar Prefecture, a territory within the larger Xinjiang Autonomous Zone, which suffers from a poverty incidence of 50 per cent, and large distances that make it difficult to connect to larger markets in order to promote development. The prefecture’s total output in agriculture, forestry, animal husbandry and fishery amounted to just over $5 billion in 2012, and its population was less than 4 million in 2010, hardly a market with windfall gains for Pakistan.

However, for the Chinese, this is the main driving force behind investing in Pakistan’s agriculture, in addition to the many profitable opportunities that can open up for their enterprises from operating in the local market. The plan makes some reference to export of agriculture goods from the ports, but the bulk of its emphasis is focused on the opportunities for the Kashgar Prefecture and Xinjiang Production Corps, coupled with the opportunities for profitable engagement in the domestic market.

The plan discusses those engagements in considerable detail. Ten key areas for engagement are identified along with seventeen specific projects. They include the construction of one NPK fertiliser plant as a starting point “with an annual output of 800,000 tons”. Enterprises will be inducted to lease farm implements, like tractors, “efficient plant protection machinery, efficient energy saving pump equipment, precision fertilisation drip irrigation equipment” and planting and harvesting machinery.

Meat processing plants in Sukkur are planned with annual output of 200,000 tons per year, and two demonstration plants processing 200,000 tons of milk per year. In crops, demonstration projects of more than 6,500 acres will be set up for high yield seeds and irrigation, mostly in Punjab. In transport and storage, the plan aims to build “a nationwide logistics network, and enlarge the warehousing and distribution network between major cities of Pakistan” with a focus on grains, vegetables and fruits. Storage bases will be built in Islamabad and Gwadar in the first phase, then in Karachi, Lahore and another in Gwadar in the second phase, and between 2026-2030, Karachi, Lahore and Peshawar will each see another storage base.

Asadabad, Islamabad, Lahore and Gwadar will see a vegetable processing plant, with annual output of 20,000 tons, fruit juice and jam plant of 10,000 tons and grain processing of 1 million tons. A cotton processing plant is also planned initially, with output of 100,000 tons per year.

“We will impart advanced planting and breeding techniques to peasant households or farmers by means of land acquisition by the government, renting to China-invested enterprises and building planting and breeding bases” it says about the plan to source superior seeds.

In each field, Chinese enterprises will play the lead role. “China-invested enterprises will establish factories to produce fertilisers, pesticides, vaccines and feedstuffs,” it says about the production of agricultural materials.

“China-invested enterprises will, in the form of joint ventures, shareholding or acquisition, cooperate with local enterprises of Pakistan to build a three-level warehousing system (purchase & storage warehouse, transit warehouse and port warehouse),” it says about warehousing.

Then it talks about trade. “We will actively embark on cultivating surrounding countries in order to improve import and export potential of Pakistani agricultural products and accelerate the trade of agricultural products. In the early stages, we will gradually create a favourable industry image and reputation for Pakistan by relying on domestic demand.”

In places the plan appears to be addressing investors in China. It says Chinese enterprises should seek “coordinated cooperation with Pakistani enterprises” and “maintain orderly competition and mutual coordination”. It advises them to make an effort “seeking for powerful strategic partners for bundling interest in Pakistan”.

As security measures, enterprises will be advised “to respect the religions and customs of the local people, treat people as equals and live in harmony”. They will also be advised to “increase local employment and contribute to local society by means of subcontracting and consortiums”. In the final sentence of the chapter on agriculture, the plan says the government of China will “[s]trengthen the safety cooperation with key countries, regions and international organisations, jointly prevent and crack down on terrorist acts that endanger the safety of Chinese overseas enterprises and their staff”.

Industry and minerals

For industry, the plan trifurcates the country into three zones: western and northwestern, central and southern. Each zone is marked to receive specific industries in designated industrial parks, of which only a few are actually mentioned. The western and northwestern zone, covering most of Balochistan and KP province, is marked for mineral extraction, with potential in chrome ore, “gold reserves hold a considerable potential, but are still at the exploration stage”, and diamonds. One big mineral product that the plan discusses is marble. Already, China is Pakistan’s largest buyer of processed marble, at almost 80,000 tons per year. The plan looks to set up 12 marble and granite processing sites in locations ranging from Gilgit and Kohistan in the north, to Khuzdar in the south.

The central zone is marked for textiles, household appliances and cement. Four separate locations are pointed out for future cement clusters: Daudkhel, Khushab, Esakhel and Mianwali. The case of cement is interesting, because the plan notes that Pakistan is surplus in cement capacity, then goes on to say that “in the future, there is a larger space of cooperation for China to invest in the cement process transformation”.

For the southern zone, the plan recommends that “Pakistan develop petrochemical, iron and steel, harbour industry, engineering machinery, trade processing and auto and auto parts (assembly)” due to the proximity of Karachi and its ports. This is the only part in the report where the auto industry is mentioned in any substantive way, which is a little surprising because the industry is one of the fastest growing in the country. The silence could be due to lack of interest on the part of the Chinese to acquire stakes, or to diplomatic prudence since the sector is, at the moment, entirely dominated by Japanese companies (Toyota, Honda and Suzuki).

Gwadar, also in the southern zone, “is positioned as the direct hinterland connecting Balochistan and Afghanistan”. As a CPEC entreport, the plan recommends that it be built into “a base of heavy and chemical industries, such as iron and steel/petrochemical”. It notes that “some Chinese enterprises have started investment and construction in Gwadar” taking advantage of its “superior geographical position and cheap shipping costs to import crude oil from the Middle East, iron ore and coking coal resources from South Africa and New Zealand” for onward supply to the local market “as well as South Asia and Middle East after processing at port”.

The plan shows great interest in the textiles industry in particular, but the interest is focused largely on yarn and coarse cloth. The reason, as the plan lays out, is that in Xinjiang the textiles industry has already attained higher levels of productivity. Therefore, “China can make the most of the Pakistani market in cheap raw materials to develop the textiles & garments industry and help soak up surplus labour forces in Kashgar”. The ensuing strategy is described cryptically as the principle of “introducing foreign capital and establishing domestic connections as a crossover of West and East”.

Preferential policies will be necessary to attract enterprises to come to the newly built industrial parks envisioned under the plan. The areas where such preferences need to be extended are listed in the plan as “land, tax, logistics and services” as well as land price, “enterprise income tax, tariff reduction and exemption and sales tax rate”.

Fibreoptics and surveillance

One of the oldest priorities for the Chinese government since talks on CPEC began is fibreoptic connectivity between China and Pakistan. An MoU for such a link was signed in July 2013, at a time when CPEC appeared to be little more than a road link between Kashgar and Gwadar. But the plan reveals that the link goes far beyond a simple fibreoptic set-up.

China has various reasons for wanting a terrestrial fibreoptic link with Pakistan, including its own limited number of submarine landing stations and international gateway exchanges which can serve as a bottleneck to future growth of internet traffic. This is especially true for the western provinces. “Moreover, China’s telecom services to Africa need to be transferred in Europe, so there is certain hidden danger of the overall security” says the plan. Pakistan has four submarine cables to handle its internet traffic, but only one landing station, which raises security risks as well.

So the plan envisages a terrestrial cable across the Khunjerab pass to Islamabad, and a submarine landing station in Gwadar, linked to Sukkur. From there, the backbone will link the two in Islamabad, as well as all major cities in Pakistan.

The expanded bandwidth that will open up will enable terrestrial broadcast of digital HD television, called Digital Television Terrestrial Multimedia Broadcasting (DTMB). This is envisioned as more than just a technological contribution. It is a “cultural transmission carrier. The future cooperation between Chinese and Pakistani media will be beneficial to disseminating Chinese culture in Pakistan, further enhancing mutual understanding between the two peoples and the traditional friendship between the two countries.” The plan says nothing about how the system will be used to control the content of broadcast media, nor does it say anything more about “the future cooperation between Chinese and Pakistani media”.

It also seeks to create an electronic monitoring and control system for the border in Khunjerab, as well as run a “safe cities” project. The project will deploy explosives detectors and scanners to “cover major roads, case-prone areas and crowded places…in urban areas to conduct real-time monitoring and 24-hour video recording”. Signals gathered from the surveillance system will be transmitted to a command centre, but the plan says nothing about who will staff the command centre, what sort of signs they will look for, and who will provide the response.

“There is a plan to build a pilot safe city in Peshawar, which faces a fairly severe security situation in northwestern Pakistan,” the plan says, following which the programme will be extended to major cities such as Islamabad, Lahore and Karachi, hinting that the feeds will be shared eventually, and perhaps even recorded.

Tourism and recreation

One of the most intriguing chapters in the plan is the one that talks about the development of a “coastal tourism” industry. It speaks of a long belt of coastal enjoyment industry that includes yacht wharfs, cruise homeports, nightlife, city parks, public squares, theatres, golf courses and spas, hot spring hotels and water sports. The belt will run from Keti Bunder to Jiwani, the last habitation before the Iranian border. Then, somewhat disappointingly, it adds that “more work needs to be done” before this vision can be realised.

The plans are laid out in surprising detail. For instance, Gwadar will feature international cruise clubs that “provide marine tourists private rooms that would feel as though they were ‘living in the ocean’”. And just as the feeling sinks in, it goes on to say that “[f]or the development of coastal vacation products, Islamic culture, historical culture, folk culture and marine culture shall all be integrated.” Apparently more work needs to be done here too.

For Ormara, the plan recommends building “unique recreational activities” that would also encourage “the natural, exciting, participatory, sultry, and tempting characteristics” to come through. For Keti Bunder it recommends wildlife sanctuaries, an aquarium and a botanical garden. For Sonmiani, on the eastern edge of Karachi, “projects like a coastal beach, extended greenway, coastal villa, car camp, spa, beach playground and a seafood street can be developed”. It is an expansive vision that the plan lays out, and towards the end, it asks for the following: “Make the visa-free tourism possible with China to provide more convenient policy support for Chinese tourists to Pakistan.” There is no mention of a reciprocal arrangement for Pakistani nationals visiting China.

Finance and risk

In any plan, the question of financial resources is always crucial. The long term plan drawn up by the China Development Bank is at its sharpest when discussing Pakistan’s financial sector, government debt market, depth of commercial banking and the overall health of the financial system. It is at its most unsentimental when drawing up the risks faced by long term investments in Pakistan’s economy.

The chief risk the plan identifies is politics and security. “There are various factors affecting Pakistani politics, such as competing parties, religion, tribes, terrorists, and Western intervention,” the authors write. “The security situation is the worst in recent years”. The next big risk, surprisingly, is inflation, which the plan says has averaged 11.6 per cent over the past 6 years. “A high inflation rate means a rise of project-related costs and a decline in profits.”

Efforts will be made, says the plan, to furnish “free and low interest loans to Pakistan” once the costs of the corridor begin to come in. But this is no free ride, it emphasises. “Pakistan’s federal and involved local governments should also bear part of the responsibility for financing through issuing sovereign guarantee bonds, meanwhile protecting and improving the proportion and scale of the government funds invested in corridor construction in the financial budget.”

It asks for financial guarantees “to provide credit enhancement support for the financing of major infrastructure projects, enhance the financing capacity, and protect the interests of creditors”. Relying on the assessments of the IMF, World Bank and the ADB, it notes that Pakistan’s economy cannot absorb FDI much above $2 billion per year without giving rise to stresses in its economy. “It is recommended that China’s maximum annual direct investment in Pakistan should be around US$1bn.” Likewise, it concludes that Pakistan’s ceiling for preferential loans should be $1bn, and for non preferential loans no more than $1.5bn per year. It advises its own enterprises to take precautions to protect their own investments. “Inter­national business cooperation with Pakistan should be conducted mainly with the government as a support, the banks as intermediary agents and enterprises as the mainstay.” Nor is the growing engagement some sort of brotherly involvement. “The cooperation with Pakistan in the monetary and financial areas aims to serve China’s diplomatic strategy.”

The other big risk the plan refers to is exchange rate risk, after noting the severe weakness in Pakistan’s ability to earn foreign exchange. To mitigate this, the plan proposes tripling the size of the swap mechanism between the RMB and the Pakistani rupee to 30bn yuan, diversifying power purchase payments beyond the dollar into RMB and rupee basket, tapping the Hong Kong market for RMB bonds, and diversifying enterprise loans from a wide array of sources. The growing role of the RMB in Pakistan’s economy is a clearly stated objective of the measures proposed.

Conclusion

It is not clear how much of the plan will be earnestly followed up and how much is there simply to evince interest from the Pakistani side. In the areas of interest contained in the plan, it appears access to the full supply chain of the agrarian economy is a top priority for the Chinese. After that the capacity of the textile spinning sector to serve the raw material needs of Xinjiang, and the garment and value added sector to absorb Chinese technology is another priority. Next is the growing domestic market, particularly in cement and household appliances, which receive detailed treatment in the plan. And lastly, through greater financial integration, the plan seeks to advance the internationalisation of the RMB, as well as diversify the risks faced by Chinese enterprises entering Pakistan.

Gwadar receives passing mention as an economic prospect, mainly for its capacity to serve as a port of exit for minerals from Balochistan and Afghanistan, and as an entreport for wider trade in the greater Indian Ocean zone from South Africa to New Zealand. There is no mention of China’s external trade being routed through Gwadar. Judging from their conversations with the government, it appears that the Pakistanis are pushing the Chinese to begin work on the Gwadar International Airport, whereas the Chinese are pushing for early completion of the Eastbay Expressway.

But the entry of Chinese firms will not be limited to the CPEC framework alone, as the recent acquisition of the Pakistan Stock Exchange, and the impending acquisition of K Electric demonstrate. In fact, CPEC is only the opening of the door. What comes through once that door has been opened is difficult to forecast. BEIJING: Prime Minister Nawaz Sharif said here on Sunday the China-Pakistan Economic Corridor (CPEC) was open to all countries in the region and it `must not be politicised` as China`s President Xi Jinping opened the Belt and Road Forum for International Cooperation by pledging $124 billion for his ambitious new Silk Road plan `to forge a path of peace, inclusiveness and free trade`.

Speaking at the plenary sessionof thetwo-dayforum, themed `Cooperation for Common Prosperity`, the prime minister called for building a peaceful, connected and caring neighbourhood by shunning mutual dif ferences.

`It is time we transcend our differences, resolve conflicts through dialogue and diplomacy and leave a legacy of peace for future generations,` he said at the gathering, with 29 heads of states and governments and 1,500 delegates in attendance.

Prime Minister Sharif said peace and development went hand in hand, andnothing could pave the path to peace and security more than economic development achieved through regional collaboration.

`The One Belt, One Road (OBOR) signifies that geoeconomics must take precedence over geo-politics, and that the centre of gravity should shift from conflict to cooperation,` he said.

Mr Sharif emphasised that OBOR negated the logic of polarisation and rejected the encirclement ofany country.

Earlier, opening the forum, President Xi Jinping called for abandonment of old models based on rivalry and diplomatic power games.

He used the summit, attended by leaders and top officials from around the world, to bolster China`s global leadership ambitions as US President Donald Trump promotes `America First` and questions existing global free trade deals.

`We should build an open platform of cooperation and uphold and grow an openworld economy,` President Xi said.

China has touted what it formally calls the Belt and Road initiative as a new way to boost global development since President Xi unveiled the plan in 2013, aiming to expand links between Asia, Africa, Europe and beyond, underpinned by billions of dollars in infrastructure investment.

`We must promote the multilateral trade system, establishment of free trade regions and the facilitation of free trade,` the Chinese president said.

Massive funding boost President Xi pledged a major funding boost to the new Silk Road, including an extra 100 billion yuan ($14.50 billion) into the existing Silk Road Fund, 380 billion yuan in loans from two policy banks and 60 billion yuan in aid to developing countries and international bodies in nations along the new trade routes.

The heads of the United Nations, the International Monetary Fund and the World Bank are also attending the gathering.

Britain`s Chancellor of the Exchequer (finance minister) told the summit his country was a `natural partner` in the new Silk Road.

India refused to send an of ficial delegation to Beijing, reflecting displeasure with China for developing a $57 billion trade corridor through Pakistan that also crosses the disputed territory of Kashmir.

`No country can accept a project that ignores its core concerns on sovereignty and territorial integrity,` said Indian foreign ministry spokesman Gopal Baglay, adding that there were concerns about host countries taking on `unsustainable debt`.

China plans to import products worth $2 trillion from countries participating in its Belt and Road initiative over the next five years, Commerce Minister Zhong Shan said.

But some Western diplomats have expressed unease about both the summit and the plan as a whole, seeing it as an attempt to promote Chinese influence globally. They are also concerned about transparency and access for foreign firms to the scheme.

`China is willing to share its development experience with all countries. We will not interfere in other countries` internal affairs. We will not export our social system anddevelopment model, and will not impose our views on others, President Xi said.

`We need joint efforts among Belt and Road countries to boost financing cooperation,` said Zhou Xiaochuan, the governor of China`s central bank.

`To sustain the projects, Belt and Road nations should allow companies to play a key role as government resources are limited.

At the forum, finance ministers from 27 countries, including China, approved principles that will guide project financing along the new Silk Road.

Germany, which was not among the countries that approved the financing guidelines, said its firms were willing to support the Belt and Road initiative, but more transparency was needed.

China has rejected criticism of the initiative and the summit, saying the scheme is open to all, is a win-win, and aimed only at promoting prosperity.

Some of China`s most reliable allies and partners are at the forum, including Russian President Vladimir Putin.

There are also several European leaders attending, including the prime ministers of Spain, Italy, Greece and Hungary.

-Agencies