Highlights:-
- The China-funded Gwadar port in Pakistan is unlikely to provide any meaningful economic or strategic advantage to the Chinese
- Most likely, it is only a ploy by Beijing to extract funds from the Pakistani government with tacit approval of the latter’s army
Lets us examine why ?
As per the Gwadar port website, it has 3 berths at present with a plan to add 3 more (a multipurpose, a grain, and an oil berth). Its projected draught is 12.5 metres with which it claims it will be able to handle 50,000 DWT (Dead Weight Tonnes, which denotes carrying capacity) vessels.
Chabahar has 10 berths already, and is expanding to include a deep water berth which would be able to handle VLCCs (Very Large Crude Carriers) of 22 m draught or more.
Let’s look at some of the other ports. Mumbai port has 26 cargo/container berths and 6 POL/chemical berths; Karachi has 12; Nhava Sheva has more than 10, and Dubai (Jebel Ali and Port Rashid), which Gwadar is supposed to be threatening commercially, has 102 berths, with VLCC POL supply terminals as well.
So we can quite clearly see that logistically, Gwadar is just a little dot.
Let’s now see the hinterland that the two ports would serve. Gwadar can have cargo headed for either Xinjiang, or for Pakistan’s internal consumption. The back of the beyond location of this port means that for a private business to switch from Karachi to Gwadar, comparable stevedoring and clearing agencies would be required along with a reliable rail link. That’s not happening any time soon. Even if the infrastructure is complete, the soft support system in a hostile terrain would remain hobbled for a long tie to come.
Comparison with Chabahar is not even warranted, as Chabahar is coming up as a transit port for all of Central Asia and Afghanistan.
The route to Central Asia from Chabahar doesn’t have to go through Afghanistan at all. Moreover, it gives India an alternative route to Russia and the republics to its east, as well as to the 5 ex-Soviet nations.
After Ukraine became independent, Odessa has come to be used less and less. Crossing the Suez has its own costs. So, the Iranian north-south corridor would be very useful for India and most south-east Asian countries.
“Gwadar is simply unlikely to ever be profitable. It means going an unnecessarily long, long way over the world’s highest mountains and through rebels to get to nothing – after all that you’re still separated by water. If you look at a globe and great circle routes instead of the deceptive Mercator projection, you see a direct, low, feasible route between China and the Middle East is going directly through Central Asia to Iran. Turkmenistan already has pipelines selling large volumes of gas to China, and is right next to Iran.”
Singapore PSA found Gwadar unviable in the long run and left. China stepped in not because it found Gwadar viable, but because it looked at Pakistan as a client state and it was sure it would make Pakistan dance to its tunes.
China does not even have much of a use for operating this kind of port because it is already operating a ten times larger terminal in Fujairah, UAE, just across the Gulf of Oman. China will use it only to exercise its hegemony over its willing client state.
It is difficult to foresee a gas or oil pipeline from Gwadar to Xinjiang as a part of the CPEC, at least not yet. China is concentrating on pipelines from Kazakhastan. Its principal silk route runs via Urumqi-Kashgar-Almaty-Tashkent-Ashkabad-Tehran. From Ashkabad, Chabahar is directly connected.
So, Chabahar connects everybody to everybody. Gwadar by comparison is just a provincial port for Pakistan over high mountains which even China would not find viable.
Another oft-repeated argument in favour of the CPEC is that it is a good strategy by China to bye-pass the Malacca choke.
This makes no sense either, as China’s consumption areas lie nearly 6,000 kilometres to the east from Kashgar, the northern point of CPEC.
In the event of a war, both China and Pakistan would do well to remember that Malacca straits at its narrowest choke point below Car Nicobar is 200 km wide, but the CPEC is just 75 kms away from north Kashmir – well within the range of BVR missiles, Prithvis and Brahmos. Gwadar lies directly in the line of Indian Navy, and would be the second one to be blockaded – After Karachi that is.
China would definitely factor that in its strategic calculations. The CPEC infrastructure is passing through a territory which legally belongs to India, and it would be easy for India to blockade Gwadar.
Now, let’s discuss CPEC’s economic calculations. China plans to put in $46 billion over 10 years. $34 billion would build up a power capacity of around 17,000 MW (though I have also heard figures of 7 and 10K MWs). The agreements are not on the table (so much for transparency).
We don’t know whether there is any element of a grant involved. From whatever sketchy information is available, it looks like a combination of loans for road and rail infra, and power plants to be built by the Chinese for which Pakistan has given a sovereign guarantee to buy all the power produced at a fantastic rate of PKR 18 per unit (INR equivalent 11.53). Even the power plants which are going to be all thermal variety are going to be put up at a minimum of $2 billion per GW (1 GW=1000 MW).
India routinely builds its thermal power plants at less than $ 1 billion per GW. The average rate per unit on the India power trading exchange has been INR 2.50 for over a year. Bangladesh is buying 1100 MW from India at INR 6 per unit. This is a classical colony-making exercise by China, which Pakistan establishment and the Army is quite excited with.
So, it looks like as if the CPEC is purely a marketing exercise by China to rip off some good money from Pakistan for its thermal power companies which have to dismantle their old plants in the mainland to meet the emission norms agreed to by China at the Paris meet. It gives an excuse to the Pakistan Army to rip off more money from the exchequer in the name of providing security and strengthening its occupation of Balochistan. It has got an 11 percent raise in its budget in a year in which GDP grew by 4.7 percent.
India need not even discuss this. The CPEC route passes through a treacherous terrain prone to landslides. All India needs to do is to target its missiles on N35 of Pakistan, otherwise better known as the Karakoram Highway.
So better course of action for Pakistan is – not to parade the CPEC and Gwadar to the world. It’s not your salvation, it’s your cross.
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Steve Ovett, the famous British middle-distance athlete, won the 800-metres gold medal at the Moscow Olympics of 1980. Just a few days later, he was about to win a 5,000-metres race at London’s Crystal Palace. Known for his burst of acceleration on the home stretch, he had supreme confidence in his ability to out-sprint rivals. With the final 100 metres remaining,
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]Ovett waved to the crowd and raised a hand in triumph. But he had celebrated a bit too early. At the finishing line, Ireland’s John Treacy edged past Ovett. For those few moments, Ovett had lost his sense of reality and ignored the possibility of a negative event.
This analogy works well for the India story and our policy failures , including during the ongoing covid pandemic. While we have never been as well prepared or had significant successes in terms of growth stability as Ovett did in his illustrious running career, we tend to celebrate too early. Indeed, we have done so many times before.
It is as if we’re convinced that India is destined for greater heights, come what may, and so we never run through the finish line. Do we and our policymakers suffer from a collective optimism bias, which, as the Nobel Prize winner Daniel Kahneman once wrote, “may well be the most significant of the cognitive biases”? The optimism bias arises from mistaken beliefs which form expectations that are better than the reality. It makes us underestimate chances of a negative outcome and ignore warnings repeatedly.
The Indian economy had a dream run for five years from 2003-04 to 2007-08, with an average annual growth rate of around 9%. Many believed that India was on its way to clocking consistent double-digit growth and comparisons with China were rife. It was conveniently overlooked that this output expansion had come mainly came from a few sectors: automobiles, telecom and business services.
Indians were made to believe that we could sprint without high-quality education, healthcare, infrastructure or banking sectors, which form the backbone of any stable economy. The plan was to build them as we went along, but then in the euphoria of short-term success, it got lost.
India’s exports of goods grew from $20 billion in 1990-91 to over $310 billion in 2019-20. Looking at these absolute figures it would seem as if India has arrived on the world stage. However, India’s share of global trade has moved up only marginally. Even now, the country accounts for less than 2% of the world’s goods exports.
More importantly, hidden behind this performance was the role played by one sector that should have never made it to India’s list of exports—refined petroleum. The share of refined petroleum exports in India’s goods exports increased from 1.4% in 1996-97 to over 18% in 2011-12.
An import-intensive sector with low labour intensity, exports of refined petroleum zoomed because of the then policy regime of a retail price ceiling on petroleum products in the domestic market. While we have done well in the export of services, our share is still less than 4% of world exports.
India seemed to emerge from the 2008 global financial crisis relatively unscathed. But, a temporary demand push had played a role in the revival—the incomes of many households, both rural and urban, had shot up. Fiscal stimulus to the rural economy and implementation of the Sixth Pay Commission scales had led to the salaries of around 20% of organized-sector employees jumping up. We celebrated, but once again, neither did we resolve the crisis brewing elsewhere in India’s banking sector, nor did we improve our capacity for healthcare or quality education.
Employment saw little economy-wide growth in our boom years. Manufacturing jobs, if anything, shrank. But we continued to celebrate. Youth flocked to low-productivity service-sector jobs, such as those in hotels and restaurants, security and other services. The dependence on such jobs on one hand and high-skilled services on the other was bound to make Indian society more unequal.
And then, there is agriculture, an elephant in the room. If and when farm-sector reforms get implemented, celebrations would once again be premature. The vast majority of India’s farmers have small plots of land, and though these farms are at least as productive as larger ones, net absolute incomes from small plots can only be meagre.
A further rise in farm productivity and consequent increase in supply, if not matched by a demand rise, especially with access to export markets, would result in downward pressure on market prices for farm produce and a further decline in the net incomes of small farmers.
We should learn from what John Treacy did right. He didn’t give up, and pushed for the finish line like it was his only chance at winning. Treacy had years of long-distance practice. The same goes for our economy. A long grind is required to build up its base before we can win and celebrate. And Ovett did not blame anyone for his loss. We play the blame game. Everyone else, right from China and the US to ‘greedy corporates’, seems to be responsible for our failures.
We have lowered absolute poverty levels and had technology-based successes like Aadhaar and digital access to public services. But there are no short cuts to good quality and adequate healthcare and education services. We must remain optimistic but stay firmly away from the optimism bias.
In the end, it is not about how we start, but how we finish. The disastrous second wave of covid and our inability to manage it is a ghastly reminder of this fact.