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COVID-19 Delays CPEC Investments & Aspirations of China & Pakistan?

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Pakistan authorities recently warned about the possible delay and disruptions in China-Pakistan- Economic-Corridor (CPEC) often touted as the game-changer for the Islamic Republic. The delay in the multi-billion dollar CPEC project is due to the outbreak of COVID-19 pandemic.

The detailed report was presented before the National Coordination Committee (NCC) and stated that Chinese multinationals working on CPEC projects will suffer delays and higher costs of production along with disruption in supply chains and workforce disruptions.

CPEC is part of the ambitious Belt and Road Initiative (BRI) of President Xi Jing Ping. Announced in 2013, BRI consists of a Silk Road Economic Belt – a trans-continental passage that links China with South-East Asia, South Asia, Central Asia, Russia and Europe by land – and a 21st century Maritime Silk Road, a sea route linking China’s coastal regions with South-East and South Asia, the South Pacific, the Middle East and Eastern Africa, all the way to Europe.

Pakistan’s plan to build Special Economic Zones (SEZs) will also be thwarted or at least face severe delays as Chinese companies will find it difficult to manage the required human and capital supplies on an urgent basis.

As G-8 countries are striving to diversify their supply chains to reduce over-dependence on China, Pakistan could take advantage of the pandemic climes experts talking to the EurAsian Times. As many organizations are planning to shift their production units from China, Pakistan on the back of its infrastructure availability can also be a likely destination.

‘’A well-articulated policy is need of the hour, however, the response may be constrained by –

  • Scepticism about the nature and duration of shocks may hinder policy action;
  • Appropriately finance demand of health systems and social safety nets within the confines of already compressed budgets may not be adequate;
  • Need for a mix of modern and specific strategies on hard-hit sectors and segments of the nation via tax relief and cash transfers (identification issues);
  • Reprioritise revenue and spending objectives as lower revenues resulting from lower imports copulated with supplementary spending requirements for pandemic mitigation are likely to widen the fiscal deficit.

This, in turn, will further aggravate precarious debt situation; Target measures to defer taxes and government fees, defer loan payments, and increase concessional financing for small and medium-sized enterprises; SBP to provide ample liquidity to banks particularly for lending to SMEs as financing needs to remain solvent is likely to grow at a rapid pace,’’ the report said.

Additionally, in the second-round effect, many businesses will face liquidity issues and will turn towards the financial sector for cheaper sources of financing. Global markets will be tight thereby constricting exports and remittances, a fiscal adjustment will be difficult, higher debt accumulation will be problematic, the development will be harder to find financing, revenues will be difficult to increase while expenditure demand will be immense, and in all this, an intricate policy mix has to be in place for stable transition out of the crisis, the report concluded.

The announcement comes as a U-turn as Pakistan had earlier claimed that the CPEC projects will face no delays because of the pandemic. In March, Pakistan Foreign Office spokesperson – Aisha Farooqi spoke about the CPEC projects and how they remain on schedule to be completed.

‘’We are quite confident that we will be able to complete the CPEC projects in time and, going forward, the short-term impact by the spread of COVID-19 will be counterbalanced by effective and swift mobilisation of resources,” she added.’’

In recent weeks, the virus has spread rapidly in Pakistan. First responders to the virus are struggling as they lack adequate supplies to protect themselves. Doctors and nurses recently launched a hunger strike in protest. More than 150 healthcare workers have tested positive for the virus and several have even lost their lives. 

Pakistan’s neighbour and decades old-foe, India, sees the CPEC projects under BRI as a major threat. The fact that the $46bn corridor route passes through the disputed Kashmir region is India’s biggest concern.

India’s opposition to CPEC reflects a concern over the internationalisation of the Kashmir dispute and the growing influence of China in the Indian Ocean, according to the Stockholm International Peace Research Institute.

Additionally, India sees the Gwadar Port in Balochistan, leased to the Chinese for 40 years, into potentially turning into a deep-sea Naval outpost for Beijing thus threatening India’s energy and economic security, as more than two-thirds of India’s petroleum imports pass through the area.

China has tried to play down India’s apprehension about CPEC in Pakistan by claiming to be India’s friend, offering New Delhi to join CPEC and maintaining its status-quo on Kashmir. However, with the delay and increasing costs of the CPEC, this might work in favour of India, in geopolitical terms.

The delay in the CPEC project comes as another major blow to China. Already facing the ire of countries all over the world for mismanagement of the virus and withholding vital information, delays and disruptions in its ambitious project adds insult to injury. After the dust from the pandemic settles, Chinese ambitions will need a major reassessment as the anti-China rhetoric gains momentum.

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South Asia

Instigated by China, Sri Lanka could end port deal with India?

Sri Lanka recently announced that Colombo will review the port agreement signed between India and Sri Lanka at an estimated cost of $700 million.

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Amid India’s growing tensions with China, Pakistan and Nepal, there are signs that ties with Sri Lanka could also turn sour as Beijing could instigate the island country to terminate a port deal with New Delhi. 

Sri Lankan President Gotabaya Rajapaksa recently announced that Colombo will review the port agreement signed between India and Sri Lanka at an estimated cost between $500 to $700 million.

Experts see this move as an effort to distance itself with ‘QUAD’ nations, especially India, which is trying to counter China’s growing geopolitical influence. The “QUAD” nations include the U.S., India, Japan and Australia who currently have turbulent ties with China.

“We heard that there is a lot of pressure from India over this project. But we are not a province of India, we are a sovereign nation and we do not need to dance to their tunes,” said Shyamal Sumanarathna, secretary of the Ports, Commerce Industries and Progressive Workers Union. “Following our strike, the prime minister assured [us] that he will sort this issue out,” he added.

The previous government of Sri Lanka signed a Memorandum of Understanding (MoU) with India and Japan to develop the new East Container Terminal (ECT). According to the terms, Sri Lanka holds 51% stake while India and Japan share the remaining stake.

However, the Trade Unions fear that it will cede the ownership of the ECT to India. They are demanding a guarantee that the project will be fully owned by the Sri Lanka Ports Authority, a government entity. Prime Minister Mahinda Rajapaksa has assured them that there is “no final agreement” yet.

“About two-thirds of Sri Lanka’s international cargo traffic is with India. There are opportunities for win-win cooperation among India, Sri Lanka and Japan in developing the ECT to promote prosperity in our maritime region,” stated a representative of the Indian High Commission in Colombo.

Rajapaksa has formed a five-member committee to review and report on the concerns over the project in 45 days and also to recommend steps ensuring the terminal delivers the maximum benefit for Sri Lanka.

However, it is important to note that Sri Lanka has turned to China several times for bailouts when the country went down on lockdown for two months amid the Covid-19 pandemic.

As reported earlier by EurAsian Times, Sri Lanka had relied heavily on China to construct $1.5 billion port in Hambantota in the country’s south. After the port was operating at a loss and couldn’t generate enough revenue to repay the loan to Beijing, the port was leased to China for 99 years in return for $1.1 billion which eased its position.

Beijing further granted $500 million to Colombo to fight the pandemic to help the looming financial crisis.

Sri Lanka has also requested various foreign governments including India for a postponement of repayment of the debt as the island nation is reeling under major economic crisis. “The matter has progressed and technical level discussions are presently underway,” Spokesperson in the Ministry of External Affairs Anurag Srivastava said.

Rohan Masakorala, a maritime shipping expert and CEO of the Shippers Academy Colombo disputed the trade union’s claim calling them “nationalistic” and politically motivated with views, not in line with the global business strategies.

“South Asia Gateway Terminal has been running for over 20 years with a number of international partners, and similarly the Colombo International Container Terminal has been operating for seven years with a Chinese company,” he said.

Sri Lanka’s government has also recently halted the Japan-funded Colombo Light Railway project and a $480 million Millennium Challenge Corporation grant from the U.S. Harin Fernando, a Member of the Parliament of Sri Lanka, accused the current administration of turning Sri Lanka into a “banana republic” under Chinese rule.

“In 2014, before we toppled the government, this is what we highlighted. But now we see [the Chinese] doing this much more strategically,” he said. He is also of the view that China now has a complete monopoly on Sri Lanka’s development projects and that Sri Lanka is “under debt” of China.

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South Asia

India-China Tensions: India launches solar power plant to stop China imports

China is a major exporting nation of solar equipment to India. However, border clashes last month which resulted in the killing of 20 Indian troops have triggered a trade war between the two Asian giants.

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As tensions between India and China grow, Indian PM Narendra Modi on Friday launched a solar power plant with the aim to stop reliance on imports from neighbours – China and Pakistan

The 750-megawatt power plant in the central state of Madhya Pradesh is being dubbed as the largest in Asia by local media. The project is expected to reduce carbon dioxide emissions by 1.5 million tons each year.

“Several steps are being taken to increase domestic manufacturing and it has been decided that government’s departments and institutions will only buy domestically manufactured solar cells and modules,” said Modi, in the wake of recent border tensions with China.

China is a major exporting nation of solar equipment to India. However, border clashes last month which resulted in the killing of 20 Indian troops have triggered a trade war between the two Asian giants.

In the virtual launch of the Rewa Ultra Mega Solar Power Project, Modi highlighted that India’s progress in the field of solar energy will garner international interest.

“Hopefully very soon India will be a major exporter of power. The International Solar Alliance was launched with the motive to unite the entire world in terms of solar energy.” The project is a step toward India’s ambitious target of installing 175 gigawatts of renewable energy by the year 2022.

Cheena Kapoor

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Asia Pacific

Indian Rafale Jets Would Have Been Useless Against Chinese Airforce – Russia Experts

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Rafale jets would have been useless against the Chinese Airforce (PLAAF) – Russian aviation experts have claimed. Rafale fighter jets belong to the 4 ++ generation would not have been of much use had an aerial conflict broken out in Ladakh again the PLAAF.

JF-17 vs Rafale: Why Pakistani JF-17 Thunder Poses A Serious Threat To Indian Rafale Fighter Jets?

As reported by EurAsian Times, India and China had been engaged in a brutal conflict in the Himalayan region of Ladakh. Troops of both countries have exchanged blows and even lost soldiers in the conflict that began more than a month ago.

Kulbhushan Jadhav Will Not Be Hanged; Could Be Swapped With India: BBC Report

Keeping in mind the situation in Ladakh, France said that it would accelerate the delivery of Rafale fighter jets to India. Aviation experts believe that the arrival of Rafale fighter jets will significantly boost the combat capability of the Indian Air Force (IAF). However, according to Russian experts, who did not wish to be named, the French fighter would not help India much incase the conflict turns hot.

Instigated by China, Sri Lanka could end port deal with India?

The astronomical cost of Rafale fighter jets is one of the reasons the French 4++ fighter jet would not help India. In the deal struck with Paris, New Delhi agreed to purchase 36 Rafale Jets. The total cost of the deal was an estimated Rs 59,000 crore with each jet costing around Rs 1,646 crore.

The cost of a Rafale is about three times higher than the Chinese J-20 stealth fighter jets. In other words, for 36 French-made Rafale fighters that will appear in the Indian Air Force, China can respond with three times as many of its fifth-generation J-20 fighters – for the same money.

CPEC Project A ‘Trillion-Dollar Blunder’, Pakistan Calls It ‘Outstanding Initiative’

Even if, in some ways, the characteristics of the Chinese combat aircraft lag behind the French 4 ++ fighter jet, then the Indian air force could get overwhelmed by what is called “capable of crushing by quantity”.

And the cost is not the only reason why Rafale jets would not help India much. Compared to another Chinese jet – J-16 (an analogue of the Russian Su-35) which Beijing is also using in its airforce, the Rafale jets will find it extremely challenging to outgun the Russian Su-35s operated by the Chinese.

Rafale vs Chengdu J-20: How Will Indian Rafale Jets Compete Against Chinese ‘Stealth’ J-20s?

The maximum speed of the Rafale jet is about Mach 1.8 and the J-16 is Mach 2.2. The Rafale’s practical ceiling is also lower than the J-16s. Even in engine thrust, the Chinese J-16s aka Russian Su-35s are far superior to the French combat aircraft.

Even if the IAF was to deploy all 36 of its newly acquired jets, the technical superiority would still be on the side of China, claims the Russian expert.

China Fighting India With ‘Sticks & Stones’ Cheaper, But Confronting The US Can Bankrupt China: Experts

The IAF has been on high alert in Ladakh and is closely monitoring all Chinese activity near the Line of Control.  As reported by EurAsian Times, New Delhi has inked a deal with Moscow to buy 33 new fighter aircraft including 12 Su-30MKIs and 21 MiG-29s along with up-gradation of 59 MiG-29s. The addition and up-gradation of jets have been approved to strengthen India’s air power.

Rafale vs F-16: Can The Indian Rafale Jets Overpower The Pakistani F-16s In Aeriel Showdown?

The air defence systems of both the Indian Army and the IAF have been deployed in Ladakh to prevent any misadventure by the Chinese Air Force fighter jets or the People’s Liberation Army choppers there.

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