CHINA/PAKISTAN: PAKISTANI OFFICIALS PRAISE PRC

C O N F I D E N T I A L SECTION 01 OF 03 BEIJING 002770

SIPDIS

STATE PASS TO SCA/P KATE BATEMAN, USAID PASS TO ALONSO
FULGHAM

E.O. 12958: DECL: 09/25/2019
TAGS: EAID EINV ENRG ETRD PREL PGOV CH PK
SUBJECT: CHINA/PAKISTAN: PAKISTANI OFFICIALS PRAISE PRC
AID MODEL, SEEK GREATER BILATERAL ENERGY AND TRADE
COOPERATION

BEIJING 00002770 001.2 OF 003


Classified By: Acting Economic Minister Counselor Robert W. Forden. Re
asons 1.4 (b, d)


1. (C) SUMMARY: China's model of economic assistance benefits
Pakistan and generates goodwill for China, according to a
Beijing-based Pakistani diplomat. He praised China's focus
on "bricks and mortar" development and use of concessionary
loans and criticized USAID and other donors' for wasting
money on "soft development projects." He expressed
Pakistan's preference for bilateral channels of assistance
and questioned the need for China to coordinate with other
donors. Our contact also downplayed President Hu's absence
from the September 24 Friends of a Democratic Pakistan
meeting in New York and touted the success of President
Zardari's August visit to China. Separately, the Pakistani
Minister of Commerce said Pakistan was urging China to invest
more in its energy sector and boost cross-border trade. End
Summary.

Pakistan Diplomat Sings Praises of PRC Aid and Investment
-------------- --------------


2. (C) China's focus on "bricks and mortar" development
benefits Pakistan and generates goodwill for China, Pakistan
Embassy Counsellor Shafqat Ali Khan told EmbOffs September

23. Khan praised China's model of economic assistance,
arguing that China's investment in large-scale projects was
highly visible and effective in creating jobs and promoting
economic development. He contrasted China's approach to that
of USAID and other Western donors, whose focus on "soft
development" (training and capacity-building) had limited
impact and low visibility. Khan said his work at the UN
Development Program (UNDP) in Pakistan in 2005 convinced him
of the ineffectiveness of such programs, citing a "wasteful"
UNDP training seminar for 150 participants at a 5-star hotel
that was thrown together at the last minute because UNDP had
2 million rupee of year-end funds that had to be spent.


3. (C) Khan downplayed concerns about Chinese assistance
breeding corruption. He insisted that, "looking at the big
picture," more Chinese aid actually reached its intended
target than USAID assistance, much of which was spent on
expensive consultants and overhead costs. He said Pakistan
appreciated China's approach to concessionary loans, by which
China provides the loan and solicits Pakistan's views on how
to use the funds. He cited the Karakorum highway project as
an example of mutually-beneficial cooperation - China
provided the concessionary loan, Pakistan identified the
highway as a priority project, and Chinese firms received the
contract to carry out the project with the help of Pakistani
sub-contractors. Khan said the Chinese firms were the
natural choice for the project, given their experience
working in similar terrain and the relatively low cost of
bringing the necessary equipment from Kashgar into Pakistan.
Plus, China provided the loan for the project, Khan added.

A lone bright spot: USAID-funded Lahore University
-------------- --------------


4. (C) Khan praised USAID-funded construction of the Lahore
University of Management Sciences (LUMS) in the 1980s as a
highly-successful and visible example of U.S. support for
Pakistan. He said many Pakistani officials and business
leaders graduated from LUMS, which is staffed primarily by
U.S.-educated Pakistani professors. Khan urged the United
States to fund similar "physical development" projects that
provide Pakistan with tangible and necessary infrastructure.

Not Pressing PRC to Coordinate with Other Donors
-------------- ---


5. (C) Pakistan did not have any interest in encouraging
China to coordinate its bilateral assistance to Pakistan with
the United States or the international community, according
to Khan. "Why would we do that?" Khan asked rhetorically

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while underscoring China and Pakistan's preference for
bilateral channels of assistance. He downplayed the
possibility of China and the international community funding
an identical project and stated that, even in the
hypothetical case of a redundancy in Chinese and
international community assistance programs, Pakistan would
prefer to de-conflict the projects at the operational level
rather than the diplomatic or political level.

Unconcerned By PRC Level of Participation in FoDP
-------------- --------------


6. (C) Khan stated that China did not need to dilute its
already strong bilateral relationship with Pakistan by
sending its President to participate in the September 24
Friends of Democratic Pakistan (FoDP) Summit in New York.
Khan described the FoDP as important but still "fledgling"
and asserted that it was appropriate for China's PermRep to
the United Nations to represent China at the event, much as
the PRC Ambassadors to Japan and Turkey had represented China
at the April Tokyo Donors Conference and the August FoDP
Summit, respectively. Pakistan-China relations were strong,
Khan emphasized, adding that nothing should be read into
President Hu's decision not to participate in the Summit.

President Zardari's August 21-25 Visit
--------------


7. (C) Khan characterized President Zardari,s August 21-25
visit to Guangzhou and Hangzhou as a success, commenting that
Zardari's frequent travel to China had focused the
bureaucracy in Beijing and Islamabad on China-Pakistan
relations. Khan said President Zardari's visit centered on
fisheries, sugar cultivation and water purification, issues
that were atypical of normal state visits but ones that
affected Pakistan citizens' livelihoods. President Zardari
would return to China again in the next two to three months,
consistent with his pledge to visit China on a quarterly
basis.

Pakistani Officials in Urumqi Discuss Energy and Trade
-------------- --------------


8. (C) China and Pakistan's recent signing of a Memorandum of
Understanding for construction of a USD 6-8 billion dam and
hydroelectric station at Bunji in northern Pakistan was a
sign of growing bilateral cooperation on energy issues,
Pakistani Minister of Commerce Makhdoom Amin Fahim told
EconOff September 2 on the sidelines of the Urumqi Foreign
Economic Relations and Trade Fair. Fahim said Pakistan was
also pushing China to invest in another large hydroelectric
project in northern Pakistan. Regarding assistance, Fahim
said China and Pakistan were still negotiating over how to
use the USD 500 million of assistance that China pledged at
the April donors conference in Tokyo. (Note: This USD 500
million sum had been announced months before Tokyo and was
subsequently re-packaged for the conference. End note.) He
said Pakistan's priorities for the assistance were energy,
counterterrorism and hydro-electric power. Pakistan Embassy
Commercial and Economic Counselor Naeem Khan, who was also
attending the Urumqi trade fair, told EconOff that Pakistan
hoped to establish a Special Economic Zone (SEZ) on its
border with China to boost cross-border trade, which
currently accounts for only five percent of bilateral trade.
Khan cited China's concerns about security and Pakistan's
excess capacity for China's decision to temporarily stop
construction of the oil refinery project at the port of
Gwadar on the Arabian Sea. He insisted the project was not
dead, commenting that construction would resume once security
improved.

Comment
--------------


9. The views of these Pakistani officials not only

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underscore the close bilateral relationship that China and
Pakistan enjoy, but also highlight Pakistan itself as a
potential obstacle to U.S. efforts to better coordinate with
China on aid to Pakistan. The Pakistani officials with whom
we spoke dismissed the prospect of Pakistan encouraging China
to coordinate its assistance with the United States and
suggested that such a recommendation would potentially
undermine Pakistan's strong bilateral channel with China
without offering comparable benefit to Pakistan. At the same
time, the Pakistani officials all agreed that the United
States and China shared common interests in stability and
economic development in Pakistan, a point that the United
States should continue to stress in our efforts to engage the
Chinese.
HUNTSMAN