Why climate of fear in Pakistan could derail China's ambitious OBOR project

For the thousands of attendees it was meant to be a conference to showcase China’s flagship Belt and Road project in Pakistan -- the port in southwestern Gwadar that gives Beijing access to the Arabian sea.

In the evenings the almost 8,000 delegates were wowed with cultural shows and a firework display at the newly opened five-story Gwadar Exhibition Center which was host to about 100 companies last month. Yet what really caught the attention of some investors were the hundreds of Pakistani troops patrolling the roads and guarding high-end hotel lobbies.

“Nobody will come and invest in this climate of fear,” said Muhammad Zafar Paracha, director at the Pakistani partner of MoneyGram International Inc.

With national elections due in July, Pakistan’s government is keen to trumpet the commercial viability of the deep seaport in the once sleepy sea town of about 200,000 people in a province long racked by separatist insurgency. To secure Beijing’s funding of more than $50 billion in infrastructure projects, Pakistan has raised a special 15,000 strong security force.

Off Limits

The port is scheduled to start transshipment on March 7. Yet for all the fanfare, some question Gwadar’s prospects amid heavy security. Balochistan is mostly off limits to outsiders and there’s no visible foreign presence beyond the Chinese. Journalists and visitors are closely monitored by Pakistan’s intelligence agencies.

“It doesn’t feel like a normal investment location or an enabling business environment if that level of protection needs to be provided,” said Andrew Small, who has written a book on Pakistan-China relations and is one of a handful of westerns to have traveled to Gwadar.

Beijing has become increasingly vocal over the risks in Pakistan. In December, its embassy in Islamabad warned of imminent terror attacks on Chinese targets. This month a Chinese manager at Cosco Shipping Lines Co., was gunned down in an upmarket area of Karachi. Following the murder, China called on Islamabad to take more measures to ensure security. Last week, China also removed earlier objections to Pakistan being placed on an international terrorism-financing watch list from June.

“The security situation has significantly improved” in Balochistan, Pakistan’s Prime Minister Shahid Khaqan Abbasi said in an interview. “It’s our commitment to the Chinese companies or other investors coming there to provide security.”

Security challenges come from long-standing grievances of the local Baloch people. Many claim they have been discriminated against by Islamabad, which they say plunders their natural resources and gives little back to Pakistan’s least populated and developed province. More than 2,600 people have been killed or wounded in suicide attacks in the Balochistan since 2003, according to the South Asia Terrorism Portal.

‘Security Risks’

Despite the Chinese influx “locals get no jobs, nothing,” said Hameed Rasheed, a dealer of Honda Motor Company Ltd. in Gwadar. Rasheed was also concerned about security in the province after two of his trucks were set ablaze by unknown assailants on the coastal highway in October.

“The main challenges, as I see them, are posed by the security risks of sustaining a large Chinese presence in Balochistan,” said Joshua White, a former director for South Asian affairs at the U.S. National Security Council. “China has demonstrated that it is highly sensitive to threats against Chinese citizens abroad, and even a small number of attacks or kidnappings could constrain the ambitions of China’s state owned enterprises operating in the area.”

Nonetheless some Pakistani companies are investing. Conglomerate Engro Corp. plans to build more than $700 million of wind and solar power plants in Balochistan. Present at the expo’s stands were major Pakistani lenders Habib Bank Ltd. and United Bank Ltd., along with Industrial and Commercial Bank of China Ltd.

With more than half a dozen cranes mostly idle, port authorities at Gwadar are also hoping to siphon millions of tons of cargo currently shipped through Dubai. Pakistan’s Maritime Affairs Minister Mir Hasil Khan Bizinjo said the government is looking to shift NATO cargo bound for Afghanistan from Karachi to Gwadar. China is expected to start work in June on a $1.2 billion port expansion, said Gwadar Port Authority Chairman Dostain Khan Jamaldini.

Some locals see the benefit. Muhammad Wasim Baloch has seen sales of his traditional shoes soar in the past year thanks to Chinese buyers. “Our business has increased about 60 percent,” he said.