Bad news for Shehbaz Sharif, Pakistan’s close friend China exits its mega project due to…, Rs 172000000000 to…

The growing importance of the Asian Development Bank shows that Pakistan is not going to remain dependent on China only.

It is well known that China and Pakistan share a close relationship. However, recent developments suggest that their ties are experiencing some challenges. Pakistan has chosen to go to the Asian Development Bank (ADB) for assistance rather than China for upgrading its old railway network. Pakistan is requesting a $2 billion loan from the ADB to upgrade the Karachi-Rohri railway section. This is the same ML-1 project that was touted as the largest and most ambitious project proposed under the China-Pakistan Economic Corridor (CPEC).

What is the ML-1 project and why is it important for Pakistan?

China’s exit from this endeavor has raised eyebrows about Pakistan’s economic plight. There has been a great deal of speculation as to why China chose to withdraw from the Pakistani project. However, the decision was not made on the basis of a whim. Speculations hold that Pakistan’s poor economic condition and risk of being unable to repay loans may have ultimately provided China with a rationale for withdrawal.

At this point, China has already sunk billions of dollars into Pakistan and is facing extreme adversity in extracting those capital injections. Given the strains on its own economy, China has decided to lessen its exposure to high-risk investments. Clearly, this displays that even the most committed partners would not ignore big swings to the viability of their respective economies.

This development indicates a major step away from the original CPEC, wherein China committed nearly $60 billion to energy and transport infrastructure throughout Pakistan. The upgrade to the ML-1 railway (about 1,800 kilometers from Karachi to Peshawar) was supposed to be the largest individual project and the most transformational. Unfortunately, despite almost ten years of solemn diplomatic negotiations, financing has yet to materialize. The project is now being financed by the Asian Development Bank (ADB), and Pakistan has effectively allowed a multilateral lender to begin leading a project that was once touted as a flagship project of China’s Belt and Road Initiative (BRI) in the region.

What role does the Reko Diq copper and gold mine play in Pakistan’s economy?

The Reko Diq copper and gold mine in Balochistan could be a game-changer for Pakistan’s economy. The mine can produce considerable mineral resources, but it is not possible to transport them on a large scale because of the old railway line’s current condition.  Upgrading the ML-1 railway line for the mine is therefore essential. For that reason, the ADB has shown interest not only in the ML-1 railway project but has also provided $410 million to support the Reko Diq mine.

Who is taking the lead on the ML-1 project now, and why is this significant?

The growing importance of the Asian Development Bank shows that Pakistan is not going to remain dependent on China only. Sources indicate that Pakistan intentionally sought China’s approval before proceeding to ensure bilateral relations were not constricted, media reports suggest.

Asim Munir, the Pakistani army chief, noted, “We will not sacrifice one friend for another.” The US is also apparently expressing interest in Pakistan’s Reko Diq project. This means Pakistan is now moving into a more multidimensional framework of foreign policy, including China, the US, and multilateral organizations such as the ADB and IMF.

Recently, reports indicate that there seems to be a growing relationship between Pakistan and the US, especially after US President Donald Trump announced that the US would help build Pakistan’s oil reserves. Earlier, US President Donald Trump announced a trade deal with Pakistan, touting a joint initiative to develop oil reserves in India’s terror-harbouring neighbour and even floated the idea that “some day” Islamabad might sell oil to New Delhi.

STORY HIGHLIGHTS

1. The Reko Diq copper and gold mine in Balochistan could be a game-changer for Pakistan’s economy.
2. The introduction of the ADB now could present major challenges for the future of CPEC.
3. China has already sunk billions of dollars into Pakistan.
4. China’s exit from this endeavor has raised eyebrows about Pakistan’s economic plight.

Numerous highways, power plants, and ports were built between 2015 and 2019 under CPEC, but it is now perceived to have slowed down since 2022. Further, Chinese power producers are experiencing problems arising from unpaid invoices. The abandonment of major projects, particularly ML-1 from China, is also evidence of this slowdown. The introduction of the ADB now could present major challenges for the future of CPEC.