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Gwadar critics see lessons in Hambantota debt woe

Beijing and Islamabad see Gwadar as the future jewel in the crown of the China-Pakistan Economic Corridor. (Reuters)
GWADAR, Pakistan: China is lavishing vast amounts of aid on a small Pakistani fishing town to win over locals and build a commercial deep-water port that the US and India suspect may also one day serve the Chinese navy.
Beijing has built a school, sent doctors and pledged about $500 million in grants for an airport, hospital, college and badly needed water infrastructure for Gwadar, a dusty town whose harbor juts out into the Arabian Sea, overlooking some of the world’s busiest oil and gas shipping lanes.
The grants include $230 million for a new international airport, one of the largest such disbursements China has made abroad.
“The concentration of grants is quite striking,” said Andrew Small, author of a book on China-Pakistan relations and a Washington-based researcher at the German Marshall Fund think-tank.
“China largely doesn’t do aid or grants, and when it has done them, they have tended to be modest.”
Pakistan has welcomed the aid with open hands. However, Beijing’s unusual largesse has also fueled suspicions in the US and India that Gwadar is part of China’s future geostrategic plans to challenge US naval dominance.
“It all suggests that Gwadar, for a lot of people in China, is not just a commercial proposition over the longer term,” Small said.
The Chinese Foreign Ministry did not respond to a request for comment from Reuters.
Beijing and Islamabad see Gwadar as the future jewel in the crown of the China-Pakistan Economic Corridor (CPEC), a flagship of Beijing’s Belt and Road initiative to build a new “Silk Road” of land and maritime trade routes across more than 60 countries in Asia, Europe and Africa.
The plan is to turn Gwadar into a trans-shipment hub and megaport to be built alongside special economic zones from which export-focused industries will ship goods worldwide. A web of energy pipelines, roads and rail links will connect Gwadar to China’s western regions.
Port trade is expected to grow from 1.2 million tons in 2018 to about 13 million tons by 2022, Pakistani officials said.
But the challenges are stark. Gwadar has no access to drinking water, power blackouts are common and separatist insurgents threaten attacks against Chinese projects in Gwadar and the rest of Balochistan, a mineral-rich province that is still Pakistan’s poorest region.
Security is tight, with Chinese and other foreign visitors driven around in convoys of soldiers and armed police.
China’s Gwadar project contrasts with similar efforts in Sri Lanka, where the village of Hambantota was transformed into a port complex — but was saddled with Chinese debt.
Last week, Sri Lanka formally handed over operations to China on a 99-year lease in exchange for lighter debt repayments, a move that sparked street protests over what many Sri Lankans view as an erosion of sovereignty.
The Hambantota port, like Gwadar, is part of a network of harbors Beijing is developing in Asia and Africa that have spooked India, which fears being encircled by China’s growing naval power.
But Pakistani officials said comparisons to Hambantota are unfair because the Gwadar project has much less debt.
On top of the airport, Chinese handouts in Gwadar include $100 million to expand a hospital by 250 beds, $130 million toward upgrading water infrastructure, and $10 million for a technical and vocational college, according to Pakistani government documents and officials.
“We welcome this assistance as it’s changing the quality of life of the people of Gwadar for the better,” said Senator Mushahid Hussain Sayed, chairman of the parliamentary committee that oversees CPEC, including Gwadar.
China and Pakistan jointly choose which projects will be developed under the CPEC mechanism, Sayed added.
The scale of Chinese grants is extraordinary, according to Brad Parks, executive director of AidData, a research lab at the US-based William and Mary university that collected data on Chinese aid across 140 countries from 2000 to 2014.
Since 2014, Beijing has pledged more than $800 million in grants and concessional loans for Gwadar, which has fewer than 100,000 people. In the 15 years before that, China gave about $2.4 billion in concessional loans and grants across the whole of Pakistan, a nation of 207 million people.
“Gwadar is exceptional even by the standards of China’s past activities in Pakistan itself,” Parks said.
But there are major pitfalls ahead.
Tens of thousands of people living by the port will have to be relocated.
For now, they live in cramped single-story concrete houses corroded by sea water on a narrow peninsula, where barefoot fishermen offload their catch on newly paved roads strewn with rubbish.
Indigenous residents’ fear of becoming a minority is inevitable with Gwadar’s population expected to jump more than 15-fold in coming decades. On the edge of town, mansions erected by land speculators are popping up alongside the sand dunes.
For its investment in Gwadar, China will receive 91 percent of revenues until the port is returned to Pakistan in four decades’ time. The operator, China Overseas Ports Holding Company, will also be exempt from major taxes for more than 20 years.
— Reuters

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