* China grants $500m for projects including airport, school
* Projects are in support of key Belt and Road port
* U.S., India fear projects highlight Beijing's naval
By Drazen Jorgic
GWADAR, Pakistan Dec 17 (Reuters) - 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 United
States and India suspect may also one day serve the Chinese
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
harbour 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, according to researchers and Pakistani officials.
The handouts for the Gwadar project is a departure from
Beijing's usual approach in other countries. China has
traditionally derided Western-style aid in favour of
infrastructure projects for which it normally provides loans
through Chinese state-owned commercial and development banks.
"The concentration of grants is quite striking," said Andrew
Small, an author of a book on China-Pakistan relations and a
Washington-based researcher at the German Marshall Fund think
"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 fuelled suspicions in the
United States and India that Gwadar is part of China's future
geostrategic plans to challenge U.S. naval dominance.
"It all suggests that Gwadar, for a lot of people in China,
is not just a commercial proposition over the longer term,"
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 tonnes in
2018 to about 13 million tonnes by 2022, Pakistani officials
say. At the harbour, three new cranes have been installed and
dredging will next year deepen the port depth to 20 metres at
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 Baluchistan, 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.
Beijing is also trying to overcome the distrust of outsiders
evident in Baluchistan, where indigenous Baloch fear an influx
of other ethnic groups and foreigners. Many residents say the
pace of change is too slow.
"Local people are not completely satisfied," said Essar
Nori, a lawmaker for Gwadar, adding that the separatists were
tapping into that dissatisfaction.
Pakistani officials are urging Gwadar residents to be
patient, vowing to urgently build desalination plants and power
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
harbours Beijing is developing in Asia and Africa that have
spooked India, which fears being encircled by China's growing
But Pakistani officials say 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
towards 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.
When China suggested a 7,000 metre runway for the new
airport, Pakistan pushed for a 12,000 metre one that could
accommodate planes as large as the Airbus 380 and be used for
military purposes, according to Sajjad Baloch, a director of the
Gwadar Development Authority.
The scale of Chinese grants is extraordinary, according to
Brad Parks, executive director of AidData, a research lab at the
U.S.-based William and Mary university that collected data on
Chinese aid across 140 countries from 2000-2014.
Since 2014, Beijing has pledged over $800 million in grants
and concessional loans for Gwadar, which has less than 100,000
people. In the 15 years before that, China gave about $2.4
billion in concessional loans and grants during this period
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.
HEARTS AND MINDS
There are early signs China's efforts to win hearts and
minds are beginning to bear fruit in Gwadar.
"Baluchistan is backward and underdeveloped, but we are
seeing development after China's arrival," said Salam Dashti,
45, a grocer whose two children attend the new Chinese-built
But there are major pitfalls ahead.
Tens of thousands of people living by the port will have to
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. Many of the fishermen say they fear they'll lose their
livelihoods once the port starts operating.
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.
Analysts say China is aware that previous efforts to develop
Gwadar port failed partly due to the security threat posed by
Baloch separatists, so Beijing is trying to counter the
insurgents' narrative that China wants to exploit Baluchistan.
"That weighs heavily on the minds of the Chinese," Parks
added. "It's almost certainly true that they are trying to
safeguard their investments by getting more local buy-in."
Chinese officials, meanwhile, are promoting the
infrastructure development they are funding.
"Every day you can see new changes. It shows the sincerity
of Chinese for development of Gwadar," Fijian Zhao, the deputy
chief of mission at the Chinese embassy in Islamabad, tweeted
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
Pakistan's maritime affairs minister, Hasil Bizenjo, said
the arrival of the Chinese in the region contrasted with the
experience of the past two centuries, when Russia and Britain,
and later the United States and the Soviet Union, vied for
control of the warm water ports of the Persian Gulf.
"The Chinese have come very smoothly, they have reached the
warm waters," Bizenjo told Reuters. "What they are investing is
less than a peanut for access to warm waters."
When a U.S. Pentagon report in June suggested Gwadar could
become a military base for China, a concern that India has also
expressed, Beijing dismissed the idea.
"Talk that China is building a military base in Pakistan is
pure guesswork," said a Chinese Defence Ministry spokesman, Wu
Bizenjo and other Pakistani officials say Beijing has not
asked to use Gwadar for naval purposes.
"This port, they will use it mostly for their commercial
interests, but it depends on the next 20 years where the world
goes," Bizenjo said.
(Additional reporting by Hassan Raza Syed in KARACHI and Asif
Shahzad in ISLAMABAD:; Writing by Drazen Jorgic; Editing by Kay
Johnson and Philip McClellan)
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