China Proposes $58 Billion Railway Project in Pakistan to Reduce Reliance on Western Trade Routes

Beijing’s plan to build a $58 billion railway system connecting Pakistan with Western China should move forward because of its strategic importance, South China Morning Post stated on Thursday.

Railway Connecting Point

According to the study, which was conducted by researchers at the government-owned China Railway First Survey and Design Institute Group Co. Ltd., the proposed railway project would link the Chinese area of Kashgar to the Balochistan’s coastal city of Gwadar.

The 3,000 km Pakistan-China railway, according to the study, will bypass the Strait of Malacca and lessen the reliance on South China Sea by connecting China’s western areas with the Arabian Sea.

The Proposal

The proposal of China’s largest Belt and Road Initiative transport project had the potential to transform trade and geopolitics throughout the Eurasian continent, according to the feasibility study, which was directed by Zhang Ling, deputy director of capital operations at the institute. It should be supported, it was recommended.

China’s Constant Support to Pakistan

The reports claim that connections with other transport networks, i.e., in Iran and Turkey, would also provide a more direct route to Europe for Chinese goods, while Pakistan is expected to get a much-needed boost from the improved infrastructure and easier trade with China.

The scientists emphasised that the host nations had contributed a sizable percentage of the funds for most BRI transport infrastructure construction projects, and that Chinese investment was smaller.

However, Pakistan is unable to make a comparable contribution because of the nation’s dire economic circumstances, the report added. Pakistan’s economic growth rate has come under pressure due to energy shortages, a bad investment environment, and fiscal deficits, the team claimed.

Pakistan’s economic growth rate has come under pressure due to energy shortages, a bad investment environment, and fiscal deficits, the team added further.

BT Model

The optimal investment and funding plan for the project, according to the research, is a build and transfer (BT) approach.

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According to the BT model, a contractor would oversee planning, constructing, and financing the railway, receiving payment upon completion, and transferring the ownership to the government or another commissioning authority.

According to a research, BT would enable China and Pakistan to more effectively share the risks associated with the railway’s construction and operation, potentially lowering the financial risks for both parties.

Financing

China extended another $2 billion loan to Pakistan last month, giving respite during that country’s severe balance of payments crisis. Pakistan had already refinanced $1.3 billion from the Industrial and Commercial Bank of China Ltd. (ICBC) in three instalments.

At the end of February, Pakistan also received $700 million from the China Development Bank.

Pakistan is now one of the countries that are experiencing a debt crisis as a result of political and economic unrest that got worse by the devastating floods last year and record inflation.

The bailout agreed upon in 2019 includes a delayed $1.1 billion loan tranche that has been the subject of protracted negotiations with the International Monetary Fund (IMF).

Analysis

In conclusion, the proposed $58 billion railroad project to connect Pakistan with Western China is a significant development that has the potential to bring about positive economic and social changes in the region. The project is expected to enhance connectivity and trade between the two countries and provide job opportunities for locals. It is also likely to strengthen the strategic relationship between China and Pakistan. However, the project also raises concerns about debt sustainability and potential environmental impacts, which must be carefully considered and addressed. Overall, the success of the project will depend on effective planning, execution, and management, as well as ongoing cooperation between China and Pakistan.