PAKISTAN-China economic ties are growing. More than 31 Chinese companies operate in this country in oil/gas, IT, telecom, power generation, engineering, automobiles, infrastructure and mining sectors. But the potentials for Chinese to invest in various sectors of the economy are not yet exchausted.
Currently investment from China stands at $4 billion, a sizeable chunk of which is on various development projects in the largest and strategically located province of Balochistan. On Gwadar deep-sea port and Saindak copper project, the Chinese have invested about $230 million.
Besides, the Chinese Metallurgical Construction Group (MCG) plans to invest $50 million in Duddar lead-zinc project. Duddar has an estimated 17 million tones lead-zinc reserves.
At present, different Chinese firms and engineers are engaged in developing key sectors including infrastructure, mining and oil and gas exploration.
Chinese assistance of $198 million in Gwadar port project includes grant of $18 million, another grant assistance worth $31 million, interest-free loan worth $31 million, concessional loan worth $58 million, buyer’s credit $60 million. Pakistan has allocated $50 million for the project. This allocated amount is being spent on design and construction of residential buildings and civil works of various port operation buildings and related infrastructure development.
The first phase of the Gwadar Port for the anchorage of heavy vessels was completed in first week of November 2004 ahead of the scheduled date of March 2005. A cargo vessel from China carrying 4000 tones of goods berthed at the port heralded the completion of the first phase. An agreement with China has been signed for the dredging of Gwadar port channel up to the depth of 14.7 metres, allowing big vessels access to the port.
In the first phase, three berths have been constructed besides dredging of navigational channel. In this phase, 15.5 meters channel draining draft has been developed and three approach channels have also been constructed. The phase includes the development of navigational aids, radar plus VTM system, service jetty, pilot boats, survey boats and a maintenance workshop. After completion of the phase, the port is able to handle bulk carriers of up to 30,000 DWT and container vessels of 25,000 DWT.
The second phase will cost $600 million. It would be built on build, operate and transfer (BOT) basis. Another 18 additional berths will be constructed. It involves construction of two container berths, bulk cargo terminal, grain terminal, two oil piers and the roll off/ roll on terminal. The container work will be expanded to an area of 141 hectares.
The MCG of China acquired the Saindak copper and gold project on lease for the period of 10 years in September 2002. Pakistan and China signed a formal contract worth $350 million for development of the copper-gold project. According to the contract, the company will pay $500,000 monthly to Pakistan over next 10 years plus 50 per cent of total revenue from mineral sale. Balochistan will receive $0.7 million per year as royalty.
Saindak project is based on ore reserves of 412 million tones containing on an average 0.45 per cent of copper, 0.50 gram gold per ton and 1.50 gram silver per ton. Copper production has started. Pakistan reportedly exported copper worth over $30 million to China during four months, from July to October 2004. The companies prefer to import copper from Pakistan, which have its competitive advantage— both quality and price-wise.
The MCG has estimated 20,000 tons copper production in first year, which is expected to reach 250,000 tons within five years. MRDL is operating the project, with an initial investment of $26 million since August 2003. The company has produced 18,000 tons blister copper till September 2004.
Chinese sources say that about 75 per cent employees from Balochistan and more than 60 per cent employees from district Chaghi have been recruited for the Saindak project. Provision of health, education, drinking water and other facilities to the local population form the part of the project.
The installed project facilities have a capacity to annually produce 15,800 tones of blister copper containing 1.5 tones of gold and 2.8 tones of silver. The latest developments include installation of modern machinery, including crushers, smelters and other plants.
On the infrastructure side, 50 mw power house that will cater to the need of electricity for the Saindak project, a 35 km railway from Taftan to Saindak and a township for 1300 employees have been constructed. An underground water reservoir 39-km away from the project has been developed for supply of 30,000 tones per day of industrial water.
The MCG is committed to replace Chinese experts by Pakistanis gradually and the reemployment of 700 ex-employees who lost their jobs due to closure of this project. The company is investing $350 million and according to an estimate the project will generate annual revenue of about $65 million. Besides, it will create 1,288 direct and 11,000 indirect jobs.
The government has declared the Saindak copper and gold mine fields as the export-processing zone in order to make the project more profitable as a whole. In the non-ferrous metal production, it will generate an annual revenue of $35-45 million.
The lead and zinc mining project will be another symbol of Pakistan-China economic cooperation in the mineral sector development. Under this joint venture, a lead-zinc concentration and production plant will be installed. According to an estimate, 25,000 tons of ore will be used to manufacture lead-zinc based chemicals for export and domestic use.
The lead-zinc deposits at Duddar are located in Lasbela. Pakistan and China signed a memorandum of understanding on March 22, 2002 for the Duddhar project. The Chinese company is scheduled to launch the Duddhar project in April 2005.
A consortium of Chinese companies recently signed a contract to borrow $54 million loan from the China Development Bank to finance the development of a medium-sized lead and zinc mine. Under the contract, Chinese consortium will be responsible for the construction, operation and sales of the project.
The banking loan makes up about 80 per cent of the total investment of $72.6 million in the project. The MCG will fund the rest 20 per cent of the investment from its own capital. China Metallurgical Construction Group Corp holds 51 per cent in the consortium. Hunan Zhuzhou Non-ferrous Metals Smelter Co Ltd takes a 34 per cent share and Hunan Huangshaping Lead and Zinc Mine Company holds the remaining 15 per cent.
China is the world’s largest producer of mined and refined zinc. China alone accounted for 28 per cent of gross new mine capacity added globally during the 1990s. The increase in Chinese mine output during the last decade amounted to 58 per cent of the total net increase in global mine output.
The Duddar project has mining and concentrating capacity of 660,000 tons a year. Once completed, the mine will be able to enhance its production to 100,354 tons of zinc concentrate and 32,584 tons of lead concentrates annually. The project will commence production by the end of 2007.
The Chinese are also engaged in petroleum exploration sector in the province. A Chinese petroleum firm, the Bureau of Geophysical Prospecting (BGP), was awarded $1 million contract in 2001 by Pakistan to carry out seismic survey over an area of 178km in Dera Bugti. The company had suspended the survey in Sui due to security reasons. In 2002, the company reportedly resumed the seismic and aerial surveys in Bugti tribal area.
At present, Chinese are the major partners in Balochistan’s development. The Chinese had to pay for their developmental efforts in the province. Last year, three Chinese engineers lost their lives in an act of terrorism in Gwadar. Even after the killing of three Chinese engineers, there seems no change in China’s firm commitment to the development of the province.