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    Rongji, Musharraf to embrace strategic challenge
    By Nadeem Malik

    ISLAMABAD - Chinese Premier Zhu Rongji will shake hands with General Pervez Musharraf in a strategic move here on Friday that is likely to lead to improved economic and defense relations between China and Pakistan, with a possible engagement of the Arab world.

    From the development of the Hataf series of missiles, the Al-Khalid Main Battle Tank (MBT) and the yet-to-be rolled out state-of-the-art Super-7 fighter jets, the leaders are expected to enter into the construction of the Gwadar deep-sea port in Balochistan and the modernization of the 113-year-old Pakistan Railways.

    There is also the possibility China will extend technical assistance for the second phase of the 300 MW Chashma Nuclear Power Plant, similar to the first phase inaugurated recently.

    Zhu arrives in Pakistan on Friday for a four-day visit on the first leg of a five-nation visit that includes Nepal, the Maldives, Sri Lanka and Thailand. However, India is not on his tour itinerary. Briefing reporters in Beijing on Zhu's visit, the Director-General of the Asian Department of the Chinese Foreign Ministry, Fu Ying, said Zhu was not covering India because the chairman of the National People's Congress, Li Peng, had visited India in January.

    However, she said, "this doesn't mean that there is a pause in our high-level exchanges". "We think both countries are important to us, both countries are very important neighbors," Fu said.

    The Pakistani side is attaching great significance to Rongji's visit. "Pak-China relations would enter into a new era of mutually reinforcing economic and defense cooperation this week after enduring the best and worst of times during the past 50 years," said a senior foreign office official. At a time when Indian war games along the border to train personnel for nuclear warfare are straining relations with both China and Pakistan, Musharraf and Zhu will reaffirm a commitment to improved ties.

    India said on Tuesday its biggest military exercise in more than a decade held near the border with Pakistan "held no offensive threat". More than 50,000 troops and about 120 combat aircraft are taking part in the five-day war games that include the air force practicing new tactics to shoot down "enemy" planes and end in a firepower display in the Pokhran range where India's nuclear blasts were carried out.

    With Pakistan, India and China all having nuclear capability, the three nations periodically employ brinkmanship in a bid to underscore their might in the region. Pakistan, however, claims that it was dragged into the battlefield by the Indian nuclear tests of May 1998 - and responded with the same boom and thunder in undertaking its own tests. Since then, the fragile external sector and the vulnerable balance of payments have put a brake on Pakistan's economy, which was further aggravated by the international sanctions it received for the nuclear tests.

    However, oil-rich Arab nations came to the rescue of Pakistan by supplying crucial oil on a deferred payment basis and by providing diplomatic support. Pakistan hopes that its time-tested relations with Muslim Arab nations and China will bail it out from its economic and financial quagmire. The country has offered multibillion dollar state-owned oil and gas companies, telecommunications and banks to Arab groups, and it has drawn up a list of mega projects seeking Chinese and Saudi investment.

    "Pakistan seeks deep strategic economic relations with China to invest in large-scale development projects, including the construction of the Gwadar sea port," said a senior official of the Ministry of Finance. The country saw a 74 percent decline in foreign direct investment (FDI) last year, and capital flight from the stock market made it more painful and difficult owing to weak foreign exchange reserves that have fallen to little over the US$1 billion mark.

    "The Pak-China friendship cannot be seen in the context of dollars and pounds. It is much beyond that," said Anwar Muhmood, the Secretary of Information, at a press briefing on Sunday. This year the countries are celebrating the 50th anniversary of the establishment of their diplomatic relations.

    The Pakistan government has already exchanged working papers on new investment projects with An Min, Vice Minister of the Ministry of Foreign Trade and Economic Cooperation, who visited Pakistan at end of April.

    Though there are close and friendly relations between the two countries, particularly in armaments, this is not fully reflected in the economic ties between Pakistan and China. In recent months, the volume of trade had inched up, but still there is a huge untapped potential. The two sides have conducted various studies on the subject to jack up trade and investment.

    The government has shown a willingness to import textile machinery from China as part of its Balancing, Modernization and Replacement (BMR) plans in the industrial sector, with the possibility of long-term credit lines. China is likely to roll over a $500 million loan to Pakistan to help stabilize its balance of payments. In addition, it will help Pakistan in the agriculture sector, particularly in the development of high yielding rice varieties, and it is also likely to announce some projects for drought relief in the country.

    Since a Joint Economic Committee meeting of May 2000, and the follow-up visit of General Musharraf in January this year, the two sides are aggressively trying to work out a strategy to diversify their bilateral economic relations. This is likely to yield dividends in the shape of three large strategic infrastructure projects, including the rehabilitation of Pakistan Railways, the construction of the Gwadar sea port and expansion of Pakistan Steel Mills. Chinese companies will also examine the possibility of reinvesting in the Saindak Copper Refinery.

    Pakistan Railways, with its century-old 7,700 kilometer long rail track and 700 locomotives, half of them in poor condition, would be the first to take advantage. Islamabad and Beijing will sign a deal for long-term Chinese investment that will allow the railways to buy 98 3,000 horsepower locomotives from Dalian Industries of China. The company will also transfer technology to help the Risalpur locomotives factory in Pakistan assemble the engines locally. Pakistan Railways will also buy passenger coaches. In a related deal, China is likely to extend technical assistance for the production of rail tracks at Pakistan Steel Mills.

    The Gwadar deep-sea port project is the most significant item on the agenda. Due to the strategic importance of the area and its proximity to the oil rich Arab nations and Iran, the United States had shown keen interest in developing the port. However, Pakistani authorities had always shown reluctance. Should China come on board, it will protect the security considerations of all the neighboring countries.

    Due to the strategic importance of the project, it is expected the Saudi Investment Fund will co-finance the port's development. A high level mission of the fund arrived in Islamabad on Sunday to hold technical negotiations with the government. This tripartite arrangement is also likely to look at the possibilities of new infrastructure projects, including the construction of dams and water reservoirs in Pakistan. Chinese companies are also likely to build small and medium-sized hydroelectric power plants in Pakistan with the support of the Chinese Export and Import Bank in the shape of investment guarantees and trade financing.

    Pakistani authorities have explored new investment opportunities with high-level Saudi dignitaries in recent months. The most recent was that of Prince Sultan bin Naseer bin Abdul Aziz Al Saud, Chairman of the Al Sultan Group of Companies, who had shown keen interest in marketing Pakistani defense products in the Arab world.

    The prince visited Pakistan Ordinance Factories (POFs) in Wah, where he was briefed on the variety of various arms and ammunition of international quality being manufactured at competitive prices. The group has also engaged an internationally reputed firm, Arthur Anderson, to do a market analysis of the available investment opportunities in the country.

    Regarding Pakistani-Chinese cooperation in defense production, there is a possibility that further technical assistance and financial support for Aeronautical Complex Kamra, Heavy Rebuild Factory, Heavy Mechanical Complex, Heavy Electrical Complex and Pakistan Machine Tool Factory will kick-start the production of the stalled Al-Khalid tanks and fighter aircraft, and will enhance the capacity of domestic industries in the production of electric equipment for the state-owned water and power utility.

    Aeronautical Complex produces Mushaak trainers and K-8 light combat aircraft. The ambitious Super-7 fighter planes, claimed to be as sophisticated as US F-16s or Russian Mig-29s, are next on the production line. Financial difficulties of Pakistan have delayed the project completion dates. In the meantime, Pakistan has bought new F-7s from China to maintain its defense capabilities. Pakistan also exports its trainer jets to Middle East countries.

    China's role on South Asia and Southeast Asia has gained an added significance in the wake of Asian crisis that broke in mid-1997. The Association of Southeast Asian Nations (Asean) is committed to a currency safety net to fend off future crises, with the active involvement of China.

    The currency swap plan, also known as the Chiang Mai initiative after the Thai city where it was hatched last year, aims to link international reserves of the 10-member Asean through bilateral pacts, with the three other economic powerhouses of Asia - China, Japan and South Korea.

    Now, the reinforced mutual faith of Pakistan, China and the Arab world may provide a new impetus to the regional strategic balance that has changed in favor of India due to US foreign policy interests in the South Asian region.

    ((c)2001 Asia Times Online Co, Ltd. All rights reserved. Please contact [email protected] for information on our sales and syndication policies.)


    Woh afsaana jise anjaam tak, laana na ho mumkin
    Use ek KHoobsoorat moR dekar, chhoRna achha

    Inview of the articles theme .let us not forget the other side of it.

    Lets not forget the nay sayers ,or the devils advocate ,against this sentiment of Chineses good will & bipartisanship,There are some who sceptically deride Chinese as being unfriendly untrustworthy & oppertunistic themselves like:

    "All these China-Pakistan-Arab Strategic talks are BS. Arabs are throwing some crumbs at Paksitan just to satisfy few religious local leaders but they are with USA by force and for security reasons. No body knows when the Chinese people will come on the streets for the multi-party democratic rule. But everyone is sure that it is going to happen sooner or later. May be it takes 5 years or a decade. What will heppen if the new Chinese democratic leadership in next decade decides to break the ties with rogue states like Pakistan and deal with USA/India combine in more positive manner? Chinese will eventually know that they can have Taiwan merge with the mainland only if they bring in a democracy.

    In the mean time, I don't think China has that kind of extra money to put into the sinking Paki economy. "