PAKISTAN has awarded a multi-billion dollar contract to a Chinese-Pakistani joint venture to build a dam in the long-disputed Kashmir region.
The dam is China's first major infrastructure project in Kashmir, and part of the China-Pakistan Economic Corridor (CPEC), which is tied to China's massive Belt and Road Initiative.
According to a Nikkei Asian Review (NAR) report, the initial phase of the Diamer Bhasha dam project, worth US$2.75 billion (RM12 billion), has been awarded to a joint venture between Power Construction Corporation of China and the Pakistan Army's Frontier Works Organisation on a 70:30 basis.
Pakistan's Water and Power Development Authority chairman Muzammil Hussain put the total cost of the project at US$8.77 billion (RM38.3 billion).
The figure is contentious however, since Hussain previously estimated the cost at about US$14 billion (RM61 billion) on various occasions.
It is located in Gilgit-Baltistan, a northerly region 320km from the border with China.
The multipurpose dam will be used for power generation, water storage and flood control. It will have a 4,500 megawatt capacity.
In 2018, China installed an 820km fibre optic cable under CPEC that passed through the same region.
The NAR report said Pakistan is certainly in a financial crunch and would be unable to self-finance the project. Only last week, the government diverted US$6.23 million (RM27 million) from a Covid-19 relief fund to pay interest on energy debts.
James M. Dorsey, a senior fellow at Singapore's S. Rajaratnam School of International Studies (RSIS), believes that China will fund the project through loans to Pakistan, but how these will be repaid remains to be seen.
Dorsey said the project will serve China's interests more than Pakistan's because "China has the upper hand in bargaining due to its economic support to Pakistan under (CPEC)."
Some observers believe Pakistan is keen to get the dam built quickly and willing to leave financing concerns until later.
"There's no indication that Islamabad has thought through how it will cover these immense costs," Michael Kugelman, deputy director of the Asia programme at the Wilson Centre in Washington DC, told Nikkei.
"Since (Islamabad) will have few other funder options, it won't have much leverage with China in terms of the structuring of a potential loan," Kugelman said.
In Nov 2017, Pakistan pulled the dam proposal out of CPEC because of Beijing's conditions, which included owning the project.
Islamabad's earlier requests to other funding sources, including the World Bank and the Asian Development Bank in 2016, were turned down because of the longstanding hostility between India and Pakistan over Kashmir.
However the move has seriously displeased India, which immediately condemned the latest development.
But Beijing has dismissed the Indian protest.
"New Delhi has long opposed the Belt and Road Initiative because of its intended projects in disputed areas, including Gilgit-Baltistan, and that certainly hasn't stopped Pakistan and China," said Kugelman.
"The same applies to the dam."
Meanwhile, Pakistan has banned a political party well known for criticising China's Belt and Road Initiative along with two other groups for alleged terrorist links.
Pakistan's interior ministry early this month outlawed Jeay Sindh Qaumi Mahaz-Arisar, a party based in the southern province of Sindh, along with two militant groups in the same province – the Sindhudesh Liberation Army (SLA) and the Sindhudesh Revolutionary Army (SRA) – citing "reasonable grounds" that the organisations have ties to terrorism.
Since 2003, Pakistan has regularly banned a variety of organisations.
However, after the arrival of CPEC, the list of outlawed groups expanded to include ethnic and sectarian groups from the southwestern province of Balochistan and the northern region of Gilgit-Baltistan that pose threats to Chinese investment in the country.
The recent bans have been linked with an ongoing campaign – both peaceful and violent – against the CPEC-linked projects in Sindh that began in 2011 when China announced plans to build a new industrial city called Zulfikarabad along the lines of the Chinese city of Shenzhen.
At that time, the province's ethnic Sindhi groups, including the JSQM-A, launched a peaceful campaign against the projects, accusing China of attempting to become a new colonial power.
Although the Zulfiqarabad project did not materialise, security officials believe that a bomb blast near the Chinese consulate in Karachi in 2012 that injured two Pakistani nationals was the start of armed opposition against Chinese investments in Sindh.