CHINA WATCH [JULY 11 – 17] India Rejects China’s Role in Kashmir Issue

Summary:

India rejected China’s offer to play a role in resolving the Kashmir dispute between India and Pakistan. The International Monetary Fund (IMF) in its latest country report of Pakistan has discussed the likely impacts of the China-Pakistan Economic Corridor (CPEC) on country’s economy. Experts and officials from China and Pakistan have discussed the establishment of Special Economic Zones (SEZs) under the CEPC. Pakistan Army Chief Gen Qamar Bajwa has emphasised on the civilian institutions to play their respective role in the successful implementation of the CPEC. Chairman Joint Chief of Staff Committee (JCOSC) General Zubair Mahmood Hayat has said that Pakistan was aware of the Indian designs to sabotage CPEC project. Iran has sought that Quetta-Taftan railway line be given extra attention by Pakistan under the CPEC.

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India Rejects China’s Role in Kashmir Conflict

India rejected China’s offer to play a role in resolving the Kashmir dispute between India and Pakistan. Indian Ministry of External Affairs Spokesperson Gopal Baglay told media “[W]e are ready to have a dialogue with Pakistan on Kashmir under a bilateral framework”.[i] He also said that cross-border terrorism supported by the neighbouring country (i.e. Pakistan) was at the heart of the matter. The statement from New Delhi came in response to an earlier statement by Beijing offering to play “a constructive” role in improving relations between India and Pakistan. Spokesman for Foreign Ministry Geng Shuang had said “[T]he conflict is occurring near the Line of Control in Kashmir. This will not only harm the peace and stability of the two countries but also peace and tranquility of the region.”[ii] He pointed out that “[T]he situation in Kashmir has attracted attention of the international community. Both India and Pakistan are important countries in South Asia and we hope that relevant sides can do more things that are conducive to peace and stability in the region and avoid escalating the tensions.” While talking about the border standoff between China and India in Sikkim region, Geng said “[W]e once again require India to withdraw border troops to India side of boundary and properly settle this dispute at an early date.” China’s offer to mediate between Pakistan and India has predictably fallen flat on India: China is an important actor of the strategic triangle of rivalry and friendship involving China, India and Pakistan. In addition to its close relations with Pakistan, China has been engaged in border disputes with India. The recent impasse in Sikkim is no exception. However, Beijing has clearly a point when it urges India and Pakistan to contain the bilateral dispute. China (more in line with Indian policy) has maintained the Kashmir issue is bilateral and should be resolved bilaterally between India and Pakistan. Compared to Indo-Pakistan disputes, China has very successfully managed its disputes with India. Since 1962 China-India war, no crisis has escalated to active aggression (not to talk about war).  China’s trade with India is more than $60 billion. The Kashmir dispute, on the other hand, has constantly put relations between India and Pakistan in the state of instability and crisis.

IMF Report Sheds Light on the CPEC

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The IMF in its latest country report of Pakistan has discussed the likely impacts of the CPEC on country’s economy.[iii] As for the favourable outcomes of the CEPC for the country are concerned, the reports reckons that investments in energy infrastructure can help the country not only diversify sources of energy production but also get over the chronic energy shortages which cost about 2 percent of the GDP per annum. The boost to Pakistan’s GDP as a result of CPEC projects will unfold in three stages. The first stage encompasses construction of power generation projects which will become operational in the next stage. The input of these new energy projects will boost broader economic activity because of increased productivity, lower costs, and improved trade connectivity owing to improved infrastructure. The reports also highlights the related economic challenges posed by the CPEC. By the time these projects start functioning, repayments of loans, profit repatriation and imports of input fuel will lead to considerable capital outflows, peaking at about $3.5-$4.5 billion by 2024/25. The IMF had presented more or less the same review of the CPEC projects in its report October last. Due to IMF’s extensive expertise and history in development economics, these kind of observations are very valuable and consequently need to be taken into consideration by the Pakistani government. For now this possibility seems unlikely. The incumbent government is more concerned about how to showcase the CPEC projects for their electoral gains. Unlike the IMF (which always preconditions its aid to certain economic reforms), the Chinese assistance is free from these kind of agenda of economic reforms and financial discipline. Ultimately, the costs of these economic indiscipline and financial irregularities (if any) will be passed on to the taxpayers and the next elected government to deal with.

SEZs in Limelight

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Experts and officials from China and Pakistan have discussed the establishment of the SEZs under the CEPC. The Chinese Industrial Expert Group visited Pakistan for this purpose and participated in the industrial dialogue. The head of Chinese group Li Yuan urged the Pakistani side to expedite the formation of related experts’ group, long term cooperation mechanism to select priority sectors and synergize policies for SEZs.[iv] The two countries had reached an understanding during the last meeting of Joint Cooperation Committee of CPEC to set up nine SEZs on priority basis. Both had to set up expert groups to discuss the construction of such SEZs. Chairman of Pakistan’s Board of Investment Miftah Ismail told the Chinese group that Pakistan plans to establish a total of 46 SEZs and the experts’ group will soon be nominated for this process. SEZs constitutes one of the primary components of the CPEC (others are energy projects, transport infrastructure and Gwadar port). While the work on other parts of CPEC is in full swing, SEZs are yet in the pipeline. It is also one of the most critical parts of this whole planning. With all its capital, expertise and a coherent planning, the Chinese side seem to have the upper-hand in making crucial decisions. The Pakistani side, being the recipient of investment and also marked by political bickering and institutional lags, have yet to keep the pace with Chinese counterparts on this issue. The government have yet to share the full details of Master Plan of the CPEC. Lack of transparency related to terms and conditions of investments and SEZs functioning have raised concerns in some quarters that Pakistan might be in some ways at a disadvantage in CPEC arrangements. The government unfortunately has weathered all reasonable criticism as baseless and conspiratorial.

Army Chief Talks of CPEC

Pakistan Army Chief Gen Qamar Bajwa has emphasised on the civilian institutions to play their respective role in the successful implementation of the CPEC. He said that “[W]hile the army will provide security to the project (CPEC), the other national institutions will have to come forward and play their respective role”.[v] He went on to say that the corridor was a harbinger of peace and prosperity in the region and unlike other countries of South Asia, Pakistan believed in peace and inclusiveness rather than divisive competition. The army chief said that “CPEC, being an important project of OBOR, holds great promise for turning around economies of Pakistan, Western China and the region.” Pakistan’s military, like the civilian government, has some major stakes in the CPEC. The military is responsible for the security of the CPEC projects and Chinese citizens working in Pakistan. Besides, some of the military companies are directly engaged in the CPEC projects, e.g. National Logistic Cell. The civilian government of Prime Minister Nawaz Sharif is marred by corruption charges and distracted by the question of survival of his office. The central and provincial governments often struggle in finding a common ground on the details of share in the CPEC projects. In contrast, military enjoys an image (though questionable in some ways) of an efficient and disciplined institution that has performed many of the national tasks with relative success. The debate should also be understood from the perspective of behind-the-scene power struggle between the two powerful institutions of the country.

Miscellaneous     

Chairman JCOSC General Zubair Mahmood Hayat has said that Pakistan was aware of the Indian designs to sabotage CPEC project.[vi] Iran has sought that Quetta-Taftan railway line be given extra attention by Pakistan under the CPEC.[vii]

This report is compiled and written by Abdur Rehman Shah, Research Associate at the Centre for Research and Security Studies (CRSS), Islamabad. He tweets @abdur_shah

[i] The Indian Express. (2017, July 13). Kashmir dispute: India rejects China offer, says ready for dialogue with Pakistan. Retrieved on 16, 2017, from http://indianexpress.com/article/india/india-rejects-chinas-offer-of-intervention-in-kashmir-issue-says-will-talk-to-pakistan-under-bilateral-framework-4749094/

[ii] The Nation. (2017, July 12). China willing to play constructive role in improving Pak-Indo relations. Retrieved on July 16, 2017, from http://nation.com.pk/national/12-Jul-2017/china-willing-to-play-constructive-role-in-improving-pak-indo-relations

[iii] IMF. (2017, July 13). Pakistan Country Report. Retrieved on July 16, 2017, from https://www.imf.org/external/country/PAK/index.htm

[iv] Ahmad, Amin. (2017, July 114). China pushes Pakistan on Special Economic Zone, Retrieved on July 15, 2017, from https://www.dawn.com/news/1345155

[v] Our Correspondent. (2017, July 13). We will make CPEC success, come what may: COAS. Retrieved on July 15, 2017, from https://tribune.com.pk/story/1456715/well-make-cpec-success-come-may-coas/

[vi] Radio Pakistan. (2017, July 15). Pakistan aware of the Indian designs to sabotage CPEC- India will never success in its subversive activities in Pakistan. Retrieved on July 17, 2017, from http://www.radio.gov.pk/15-Jul-2017/pakistan-aware-of-indian-designs-to-sabotage-cpec-india-will-never-succeed-in-its-subversive-activities-in-pakistan-analysts

[vii] The News International. (2017, July 15). Iran seeks Quetta-Taftan section in CPEC. Retrieved on July 17, 2017, from https://www.thenews.com.pk/print/216522-Iran-seeks-Quetta-Taftan-train-section-in-CPEC

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