With SEZ, Hu brings Lahore in Chinese economic orbit

As he dines on juicy kebabs at Hazoori Bagh next to the Badshahi Mosque in Lahore, just a few miles from Amritsar, New Delhi will find that the heat from the rise of China will soon ignite economic growth in the Panjab.

While the Indian security establishment will pore over the many agreements, including new ones on defence cooperation signed by Hu in Islamabad today, the most consequential outcome is the bilateral free trade agreement, China’s first such in the subcontinent.

Tomorrow, Hu will join Pakistan’s President Pervez Musharraf in inaugurating a special economic zone near Lahore that has been set up for Chinese businessmen. China and Pakistan are also developing a special textile zone in Faisalabad.

Over the last few years, there had been much talk about Punjab-Panjab cooperation across the Indo-Pak dividing line. Prime Minister Manmohan Singh, during his visit to Amritsar earlier this year, put across a vision for greater cooperation between the two provinces and their joint outreach to Afghanistan and Central Asia.

Then the FTA is expected to boost Sino-Pak trade nearly four times to $15 billion in the next five years. The FTA, however, is only one part of Hu’s ambitious plan for economic integration between Western China and Pakistan. The SEZ projects in West Punjab will establish a framework for rapid expansion of Chinese investments in Pakistan. An agreement today to develop a joint investment company will see Beijing financing a broad range of infrastructure development in Pakistan.

Together, these agreements mark a qualitative transformation of Chinese economic presence in the subcontinent.

For pessimists in New Delhi, the emerging Chinese economic clout in West Panjab would mean Beijing is outflanking India in its own natural hinterland. For optimists, though, the Chinese success in cracking open Pakistan’s market might create new opportunities for the rest of the world, especially India.

New Delhi, which for years has been so focused on Beijing’s military and nuclear partnership with Islamabad and chafed at its tilt towards Pakistan on Kashmir, will soon have to reckon with the fact that Chinese money might soon rule the roost in its neighbourhood.

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