Chinese Activities in Baluchistan
B Raman

There has been an increase in Chinese activities in Baluchistan since General Pervez Musharraf, the self-styled Pakistani Chief Executive, seized power on 12 October 1999.

Even before the military take-over, the Governments of Mrs Benazir Bhutto and Mr Nawaz Sharif had awarded to Chinese firms contracts for the exploitation of the gold-copper reserves at Saindak in Baluchistan and part of the natural gas reserves of Sui.

However, the Saindak project has been lying idle since 1995 due to the bad law and order situation in Baluchistan, the hostility of the Baluchi nationalists and shortage of working capital. In 1998, the Nawaz Sharif Government had started negotiations with a consortium of Western banks for a credit to re-start the project, but the banks withdrew from the negotiations after the Chagai nuclear tests.

During the five-day visit of the Chinese Prime Minister, Mr.Zhu Rongji, to Pakistan from 11 May, China agreed to re-open the project with an investment of US $40 million. The project would be given on lease to the Metallurgical Corporation of China (MCC), for US $500,000 per month for 10 years, with the produce being equally shared by the Chinese Corporation and Pakistan.

The Nawaz Sharif Government had awarded to a Chinese petroleum firm, the Bureau of Geophysical Prospecting (BGP), a one million-dollar contract for a seismic survey over 178 kilometres in Sui. This was the first time that the Chinese had entered gas and oil exploration activities in the country, which were till then largely in the hands of American and French firms.

However, the BGP has halted its operation after the military take-over after having failed to get assurances from the Baluchi sardars of the area for the security of its staff. A four-member BGP team, headed by its Chief Operating Officer, Han Rue Min, had called on the Baluchi leaders to seek their assurance for the security of the company’s staff. The leaders reportedly turned down the Chinese request. Thereafter, Mr Yousuf Abdullah, Secretary, Petroleum, in the Federal Government, had met the Baluchi leaders, but they turned down his request too.

Even in the past, there had been attacks on Chinese experts working in Baluchistan and, just before Mr Zhu’s visit, one person was killed and three others, including a Chinese engineer, were injured seriously when the survey team of a Chinese company was attacked in the Sunny area of Sibi district, 160 km northeast of Quetta in Baluchistan, on 7 May. Suspected militants of the Baluchistan National Liberation Front (BNLF) fired rockets at the vehicle of the survey team, reportedly as a warning to the Chinese not to help the Musharraf regime until the demands of the Baluchis were met.

BNLF cadres again struck after Mr Zhu’s departure when major parts of Baluchistan, including Quetta, went without natural gas for more than 24 hours on 19 May following a blast in the main Sui southern gas pipeline the previous night.

Concerned over the increasing activities of the Baluchi nationalists and pressed by the Chinese for an improvement of the law and order situation, the military regime established contact with the traditional Baluchi leaders before Mr Zhu’s visit and sought their co-operation in improving the situation in Baluchistan.

Sardar Akhtar Mengal, former Chief Minister of Baluchistan, confirmed on 12 May that the Baluchistan Minister, Agha Abdul Qadir, had approached his father, Sardar Ataullah Khan Mengal, in London and sought the co-operation of the Baluchis for the exploitation of the mineral wealth of Baluchistan and that Sardar Ataullah had set certain conditions for co-operation. The conditions included the immediate release of Nawab Khair Bukhsh Marri, the Baluchi nationalist leader, immediate issue of an ordinance for the transfer of oil, gas and natural resources, including metallic and non-metallic minerals, portfolio from the federal Government to Baluchistan and other provinces, allocation of substantial percentage from the income generated from oil, gas and other minerals for the development of the areas where these resources were found and priority to the local people in the recruitment of personnel to work in these projects.

Despite this, during Mr Zhu’s visit,  the Chinese pledged US $240 million for the development of the Gwadar port in Baluchistan and another of US $200 million for the construction of a coastal highway linking Karachi and Gwadar. The News quoted Pakistani official sources as saying that China was seeking "sovereign guarantees" from Pakistan before finalising its commitment to assist in the construction of the Gwadar port.

The decision to develop Gwadar in order to reduce the dependence on Karachi and to cater to the external trade of the Central Asian Republics (CARs) and the Xinjiang Province of China was taken by the first Nawaz Sharif Government in 1992. It had also decided to construct a second naval base at Ormara, also in Baluchistan.

The Jinnah naval base at Ormara, situated 240 kms from Karachi and constructed at a cost of Rs. 4.5 billion, was inaugurated by Gen Pervez Musharraf on 22 June 2000. It is meant to provide berthing facilities to eight ships and four submarines with space for small auxiliary units. The 3.5km-long approach channel leads to a turning basin and both have been dredged by 10 meters.

Speaking on the occasion, the General accused India of aspiring to dominate the Arabian Sea and the Indian Ocean and of building up a navy much beyond its requirements. He said that India’s "hegemonistic designs" had serious political, economic and military implications for Pakistan and that it had, therefore, become imperative for the Pakistan Navy to build an alternative to its Karachi naval base. He lauded the performance of STFA, a Turkish company, in constructing the base in time.

Under the plans drawn up in 1992, the Karachi Port Trust was to fund 60 per cent (US $120 million) of the Gwadar project’s estimated US$200 million first-phase development cost. This was to have involved the construction within two years of three 200-metre multipurpose berths capable of handling 50,000 DWT cargo ships and oil tankers of up to 100,000 DWT. The rest of the money was to have been raised externally.

The Nawaz Sharif Government cancelled the contract signed by the Benazir Government with an Omani firm in 1995 for the construction of the deep-water Gwadar port and, instead, awarded the contract to the US-based Forbes and Company, which was to not only construct the port, but also run it after the construction. However, the project remained a non-starter due to the post-Chagai economic sanctions.

During their separate visits to Beijing last year, Gen Musharraf and Mr Shaukat Aziz, the Finance Minister, had urged the Chinese to assist Islamabad in the construction of this project and reportedly promised, in return, berthing facilities for the Chinese Navy not only in Gwadar, but also in Ormara and also facilities for a Chinese monitoring station on the Mekran Coast of Baluchistan to intercept the communications of the US military bases in the Gulf.

In response to this, a Chinese delegation led by the then Chinese Minister for Communications, Hu Xijie, visited Pakistan for preliminary discussions in November last. During his stay, he offered an oil tanker to the Pakistan National Shipping Corporation (PNSC) and reviewed the working of several Chinese construction companies, which were already engaged in completing highway projects in Pakistan such as the Indus Highway, the Chablat-Nowshera Highway and the Karachi Northern Bypass. There was also discussion with the Pakistani authorities on Chinese assistance for the Mekran coastal highway project.

Pakistan has a coastal belt of about 700 kilometres in the south of Baluchistan facing the Arabian Sea. The area from Hub (near Karachi) to Jiwani (near the Pak/Iran Border) is called the Mekran Coast. There are four ports on this coast-- Ormara, Pasni, Gwadar and Jiwani. The access to these ports from inland is now difficult due to the non-availability of roads.

The Mekran Coastal Highway would connect Lyari, North of Karachi, with the Pakistan town of Gabd on the Iran border. It is proposed to be constructed in the following three sections:

• Lyari-Ormara including link to Ormara Town (248 kilometres)
• Ormara-Pasni including link to Pasni (197 kilometres)
• Pasni-Gwadar-Pak/Iran border including link to Gwadar, Jiwani (208 kilometres).

Gwadar, which is at a distance of approximately 650 kms from Karachi and 900 kms from Ratodero near Sukkur, is presently a small fishermen’s town. However, it has an airport which links Gwadar with Karachi, Turbat, Jiwani and Muscat (Oman) by regular flights. A road track exists which connects Gwadar to Karachi and Ratodero.

It was as a follow-up to the discussions of November last that Mr Zhu announced the Chinese financial pledges for the development of the Gwadar port and for the construction of the coastal highway, subject to satisfactory feasibility studies.

The visit of Mr Zhu was followed by a visit to Pakistan by Rear Admiral Zhang Yan, Deputy Commander, North Sea Fleet, China, from 21 May during which he visited Karachi, Ormara and Gwadar. He also addressed a ceremonial parade at the Karachi naval dockyard held to commemorate the 50th anniversary of Pakistan-China diplomatic relations.

Welcoming the Chinese visitor, Rear Admiral Shahid Karimullah, Commander of the Pakistan Fleet, said: "Since the induction of PNS Nasr, the fleet tanker from China, our mutual relations had improved at a steady pace. Development of Jalalat-type missile boats, equipped with state-of-the art anti-ship missile, acquisition and successful testing of surface-to-air missile system on board Type-21 destroyers are the hallmark of our developing naval relations."

A Chinese delegation, led by the present Communications Minister Huang Zhendong, visited Baluchistan in the beginning of June, 2001, to prepare a feasibility study of the Gwadar port and the coastal highway projects. They called on Gen Musharraf at Islamabad on 12 June. Mr Huang Zhendong reportedly assured the General that China would continue to cooperate with Pakistan in all areas of its economic development. He also informed him that they had started a detailed technical assessment of the projects with their Pakistani counterparts. Tenders costing more than Rs 3.5 billion for dredging, as the first step, are expected to be awarded to a Chinese harbour engineering corporation soon.

The Baluchistan Government is reported to have already allotted about 20,000 hectares of land free of cost for the port project and also the additional land required for the construction of the 653 km-long Karachi-Jiwani coastal highway through Ormara, Gwadar and Pasni. Work on this Rs 11 billion coastal highway has already started from Lyari (Karachi) and from Gwadar simultaneously. The Pakistan Government has also taken up the construction of an expressway from Gwadar to Ratodero (Sindh) via southern and central Baluchistan to provide an alternate overland road direct from Gwadar to Afghanistan and the Central Asian Republics through Baluchistan.

The increased Chinese activities in Baluchistan, the proposed stationing of Chinese naval ships at Gwadar and Ormara and the projected Chinese listening post on the Mekran Coast should be of concern to the national security managers of India as well as the US. With the complicity of the Pakistani military regime, the Chinese authorities are planning to use their presence in Baluchistan to monitor US military activities in the Gulf in the same way as the US uses its listening posts in Australia and Okinawa to monitor Chinese military activities in the South China Sea.

Mr Zhu’s visit also resulted in a number of agreements for expanded Chinese involvement in the telecommunications and information technology infrastructure of Pakistan, in areas outside Baluchistan. This should also be of great concern to India.

A copy of a note on the Gwadar project prepared by Pakistan’s Ministry of Communications before the Chinese entered the scene follows. This does not incorporate any modifications proposed by Beijing.

THE PORT OF GWADAR-AN EXPLANATORY NOTE

The annual maritime traffic in Pakistan is forecast to increase from its present 41 million ton to 120 million ton by 2020. Although Pakistan’s two ports, Karachi and Qasim, need to be modernised to handle this increased traffic, there will also be a need to develop a third port in Pakistan. The Government has approved the building of Pakistan’s third port at Gwadar, at about 234 nautical miles west of Karachi. This port will serve as a regional hub, handling traffic to/from ports of Sri Lanka, Bangladesh, Oman, UAE, Saudi Arabia, Qatar, Iraq, Iran, and landlocked countries like Afghanistan, Uzbekistan, and Tajikistan.

Gwadar is currently a fishing town on the western end of the Baluchistan Coast, formed by a natural headland connected to the mainland by a sand spit. The headland stretches east to west for about 13 km with the maximum width of 3 km. The east and west bays, created by this feature, are generally protected from the southwest monsoon waves. Past studies indicate that the east bay is more protected than the west. The deepwater port site will take full advantage of the natural shelter of the East Bay and will be located in the northern side of the headland with a potential development area of some 500 hectares.

The primary objectives of the port are to:

• Provide port facilities at the strategic location opposite to Straits of Hormuz and on the mouth of the Persian Gulf and provide port, warehousing, trans-shipment, and industrial facilities for trade with over 20 countries;
• Provide additional capacity to relieve congestion at Pakistan’s two ports, Karachi and Qasim;
• Provide an alternative and economical access to maritime trade for the northern region of Pakistan;
• Initiate the economic development of Baluchistan by establishing industrial zone, oil storage and refining facilities adjacent to the port; and
• Boost cargo trade for the export of the abundant mineral resources of Baluchistan, particularly from the Saindak Copper-Gold Project.

To implement the project, the Government has formed the Gwadar Implementation Committee (GIC) under the Ministry of Communications. The project will be implemented in two phases:

Phase I will involve the construction of three berths, 200m each, with 350m back-up area. There will be a five-km access channel with 11m water depth. This phase will also include the procurement of cargo handling equipment and operation crafts, as well as the development of port infrastructure and support facilities. The Government will carry out this phase.

The second phase, which is being planned, for development through private sector participation, will involve the following facilities:

• Container Terminal - 2 berths (300m each)
• Bulk Terminal - 2 berths (300m each)
• Ro-Ro Terminal - 1 berth (200m)
• Oil Terminal - 2 piers (8 million tons/year each)
• Future container terminal - 2 berths (300m each)
• Channel dredging (15.6m to 20m deep)

The GIC is working on implementing the first phase of the project, which will provide three multipurpose berths and the related infrastructure. It is intended that this initiative will provide a clear demonstration of the Government’s commitment to the project and generate a positive environment for the implementation of the Phase 2 components under a BOO or a BOT basis.

The bids for Phase II components will be announced in stages. The period of lease for Phase II project components is expected to be 25 years, which is extendable further on mutually agreed terms. It is expected that Phase II construction will be completed in 36 months.

The first phase construction is expected to cost $200 million. This stage will be undertaken and financed by the Government. All of the second phase components are being planned for implementation under a BOO or a BOT scheme. The breakdown of Phase II cost by each terminal is as follows:

• Container Terminal - US $35 million
• Dry Bulk Cargo Terminal - US $40 million
• Grain Terminal - US $26 million
• Ro-Ro/General Cargo Terminal - US $200 million
• Oil Terminal - US $125 million
• Future container terminal expansion - US $100 million
• Total - US $526 million

In general, the principal competitors of US businesses in Pakistan are European, Japanese, and South Korean firms. Financing is usually the most important component of project implementation decisions in Pakistan. These countries often offer more favorable credit terms, making it difficult for US suppliers to compete. Still the U.S. port equipment suppliers, design and engineering firms, and construction contractors have a strong competitive position, since US products and services are perceived to be of high quality. This should be supplemented by an aggressive marketing position, following up on bidding announcements. Teaming with local firms in these service areas will be beneficial to achieving success.

US companies are expected to be competitive in providing the port with cranes and crane components, RTGs, forklifts, tractor and trailer units, unloading/bagging systems, conveyor systems, and security and environmental equipment. Opportunities also exist for project design, engineering, and construction management services as well as terminal operators.