Beijing is spending its way to No 1 status

ISLAMABAD // China is set to supplant the United States as Pakistan's biggest economic partner under a series of agreements to be signed by the country's premier, Wen Jiabao, during a three-day visit starting today.

Mr Wen is scheduled to sign a five-year economic assistance programme tomorrow that envisages the investment of US$13.3 billion (Dh48.8 billion) in 36 projects.

His visit coincides with the 60th anniversary of the establishment of diplomatic ties between the neighbours, whose only land link is the 1,300km Karakorum Highway, completed in 1978 and currently being renovated by Chinese engineers.

The highway meets China at the 4,700-metre high Khunjerab Pass, making it the world's highest metalled border crossing.

Pakistan was the first country to recognise Mao Zedong's Communist party as the legitimate government in Beijing, but the relationship did not warm until a border war broke out between China and India in 1962.

Islamabad capitalised on the conflict between the Asian giants, sealing relations by ceding thousands of kilometres of territory to China in the disputed Kashmir region, also claimed by India.

Pakistan and India have fought three wars since independence from British colonial rule in 1947, two of them over Kashmir.

Mr Wen's second, and probably final, tour of Pakistan before he steps down in 2012 would crown his efforts to broaden the relationship.

Previously, ties between China and Pakistan had focused on strategic and defence co-operation, much of it targeted against India.

Since Pakistan decided in 1989 to reduce its dependence on weaponry from western countries, it has developed a nuclear weapons programme and huge conventional defence industry on the back of transfers of technology from China.

Nonetheless, strategic competition with the US is apparent as a major motivator for China's generous investments in Pakistan, effective from 2012, after an existing programme runs out.

In scale, it far surpasses a $7.5bn, five-year American programme of aid to Pakistan that started this year.

The US programme has been slow to kick into effect because of Washington's insistence that most projects be executed by non-government organisations it nominates, a condition that has irked Pakistani politicians.

US officials have cited justifiable concerns about economic assistance being siphoned off by corrupt Pakistani officials.

The US has approved only about $500 million of the envisaged $1.5bn aid to Pakistan for 2010.

The Chinese programme is also considered far less politically intrusive by Pakistan than America's. It comes with only one string attached: all economic assistance has to be invested either in joint ventures between Chinese and Pakistani state corporations, or projects that are built and operated by the Chinese contractors on behalf of the Pakistani government.

The list of 36 Chinese-funded projects, agreed by officials at a December 2 meeting in Islamabad, is also notable for its inclusion of projects that the US and other western aid partners have refused to back for political reasons.

At the top of that list is the expansion of the Chashma nuclear power complex. China is to build two more generation plants, in addition to the existing twins.

Mr Wen and his Pakistani counterparts are expected to discuss the construction of a fifth, much larger nuclear power plant.

In addition to helping to plug Pakistan's crippling electricity shortfall, the expansion of the programme would serve as a diplomatic retort to the US and France, which have signed comparable nuclear power deals with India, but refused them to Pakistan.

The Chinese investment programme also includes less controversial projects, ranging from the expansion of Pakistan's sole steel mill, to the development of hybrid crop seeds and installation of security systems for Pakistan's major cities.

Mr Wen's deliberations in Islamabad would further encompass so-called "mega-projects" situated in strategically sensitive areas of Pakistan that the government has virtually closed to other foreign partners. Among them is the development of massive copper reserves and activation of a Chinese-built port in Balochistan, a south-west province wracked by a nationalist insurgency.

He is also expected to discuss the prospects of building a rail link between the western Chinese city of Kashgar and the Pakistani port of Gwadar. The proposed railway would open a direct trade route to the Arabian Sea.

The impact of the Chinese programme on economic growth would be enormous.

Valued at an average of about 229bn rupees (Dh9.8bn) a year, it would practically double Pakistan's current development expenditure.

More than half of Pakistan's budget goes towards repayments on its $50bn foreign debt, and defence expenditure that has spiralled because of military operations against Taliban and al Qa'eda militants based in tribal regions bordering Afghanistan.

thussain@thenational.ae