But why does this BCIM project challenge the prospects for Pakistan's Gwadar-Kashgar corridor? The factors really relate to the market size, onward transit markets, terrain involved, scope of activity possible, security in the region and the scope of investment flows between the countries.
The main motivation of this project is from China itself. India-China trade has shot up exponentially, and China became India's largest trading partner in 2012. The consumer market of both countries and their production capabilities in complementary sectors means that the potential for deepening trade is still enormous. Cost-effective access to the huge Indian market is a major incentive for China. The project also gives it access to Bangladesh and Myanmar. A bit akin to the old-saying - killing two birds with one stone, or three in this case. Bangladesh is a 150 million large consumer base, while Myanmar's 60 million are emerging from economic isolation. Add to this India's 1.2 billion and one sees the numbers China accesses with one single corridor. In comparison, Pakistan's 180mn through the Gwadar corridor look small. China is already developing the road network in Yunnan (portions of the erstwhile Stilwell Road), almost to the Myanmar border. A Chinese engineering company is also upgrading its stretches within Myanmar.
But the onward-markets to which these corridors give access are also important. Gwadar was built to enable China's access to the Middle East for oil and trading, by using the land route. This shows that China sees value in land-sea transfers. Even BCIM can serve as a gateway for onward-transit of Chinese products into the Indian Ocean, SAARC and Middle East markets. Goods can be shipped from Kolkata/Haldia in India or Chittagong/Mongla in Bangladesh to onward countries, as long as the modalities of duty-free access and recordings are worked out. Moreover, the BCIM corridor can also be inter-connected with India's Golden Quadrilateral National Highways to enable the goods' transfer to India's western seaboard to the ports in Gujarat or Mumbai. That would minimise shipping freight costs for Middle-East bound goods almost comparable to that from Gwadar.
One needs to look at the geography involved, and the investments needed for that terrain. Yunnan is in proximity to the developed provinces of Guangdong and Hubei in southern/central China. So goods can move point-to-point from China's industrialised regions to South Asia much faster. In comparison, the Karakoram highway to Pakistan is reachable only after traversing several thousands of miles through scarce-developed Xinjiang, Tibet and Qinghai. BCIM does not have the severe mountainous terrain of the Karakoram since this route geographically bypasses the rougher sections of the Himalayas, except for around India's Manipur-Assam provinces or Myanmar's Shan province. The Kashgar-Gwadar corridor involves extensive tunnelling and upgrading of the highway, which would be more time and capital intensive than construction over a smoother terrain. The $18bn tunnelling deal was signed during Prime Minister Sharif's 2013 trip to Beijing, but the project itself would be time consuming to complete.
The planned scope of economic activity possible on the BCIM is significant, when compares the investments involved in the projects. BCIM is not just about trading goods between four countries. It would also facilitate power distribution via inter-connected grids into power-deficit Bangladesh and energy-consumer China, hydrocarbons, gas and oil movement from resource bases in Myanmar/Bangladesh, mineral, ore and coal movement from the provinces of Jharkhand, Odisha and West Bengal for industrial projects in Myanmar and China. Even the planned scope of the Kashgar-Gwadar had been extended to include rail network, oil pipelines, optic-network, industrial units, apart from trade. Trade from Gwadar port is still largely centered around importing Middle East oil, even after the Chinese took control of it in 2013. There is a significant opportunity for the network to facilitate deeper Pakistan-China trade or Middle East-China trade, but it would really depend a lot on the construction in the Karakoram stretch.
The planned route of the Kashgar-Gwadar corridor interestingly shows that it is closer to its eastern border than to its western border. The reasons might be related to maintain safety and security of the network, given the restive situations in Fata and KPK, not to mention Balochistan. But the planning of the route, given the sentiments of some sections of Pakistan Army and ISI in popular media channels who regard India as the biggest threat to Pakistan's internal security. But be that as it may, the issue of security is also an aspect playing between the two corridors. India also has insurgency problems in its North East, which have been a thorn in the flesh in its relations with Bangladesh. But they have never come to the stage of a full-blown armed offensive by the Army, unlike Operation Zarb-e-Azb. China has also expressed concerns about growing incidents of violence in Muslim-dominated Xinjiang. It has also detained several people for questioning. That includes a Uighur-origin economics professor Ilham Tohti.
One cannot forget the money involved. If India intends to take this project forward, it would need long-term financing as it has limited fiscal ability. The financing can be supplied by cash-rich China. China is already pitching to invest into India's urban development, railway and highway projects. So there are several projects at stake for China for it to lend, and all these add up to big money. China is looking to invest approx $500 billion of its approx $3 trillion forex reserves into overseas projects over the next five years. A major chunk of this (approx $100-300 billion) can be possibly expected for India for its railway infrastructure and industrial parks. Nobody wants to disturb the hand that feeds it, and this feeling is mutual between India and China now.
In conclusion, the geopolitical equation might alter with the BCIM project. The success of this project is in more hands as it involves four countries, unlike a bilateral deal. For China, the volume of India-China trade and investment will be manifold as compared to that with any other South Asian country. So the stakes are high for China to see BCIM through. It would facilitate mutual economic inter-dependence between China, and it would have a motivation to keep India as a friend. Its engagements with other South Asian countries might mirror that posturing. Sri Lanka and Maldives should not worry though, given their support for China's Maritime Silk Route plan. Pakistan can also benefit from the BCIM network if it wants to, by moving goods from BCIM corridor into the Indian highways right up to the Wagah border. But that is another story. As of now, some Pakistanis might just see the irony in witnessing its strongest ally's shades turning from an all-weather-friend to one of friend-of-convenience.
(DISCLAIMER: The writer is an Indian-base finance professional. The views expressed and arguments articulated in this article are solely his own. These do not necessarily reflect those of the newspaper)