India’s Diplomacy Power Play Pays Off, Seoul Pulls Plug On Pok Projects

India’s Diplomacy Power Play Pays Off, Seoul Pulls Plug On Pok Projects

India’s diplomatic power play is paying off with countries rethinking and reviewing decisions to invest in Pakistan-occupied Kashmir (PoK).

South Korea’s Daelim Industrial Company Limited, which is leading a consortium to develop the 500 MW Chakothi Hattian Hydropower Project on the Jhelum in Muzaffarabad, is reconsidering its investment in the venture.

This after financiers such as the Asian Development Bank, International Finance Corporation and Exim Bank of Korea expressed their inability to back a project in a disputed area. The information minister of PoK Mushtaq Ahmed Minhas has confirmed the development.

Further, other Korean-financed ventures in the region, such as the Kohala Hydropower project, may also be stalled.

Sources have told India Today TV that Pakistan has been aggressively trying to seek investment from international financial institutions and countries, including China and South Korea, in  energy and other infrastructure projects in PoK and Gilgit-Baltistan. Both are parts of undivided Jammu and Kashmir, and claimed by India as its territory.

“I think it’s a very favourable development for us,” said Jayadeva Ranade, president of the Centre for China Analysis and Strategy, and a former additional secretary in the Cabinet Secretariat. “It’s a development that we should follow up. In fact, I would say that we should encourage South Korea and its companies to come to India particularly in areas that we are weak like shipbuilding.”


While investments were being considered earlier, lately there has been a general reluctance both by financial institutions and countries towards putting money in these areas. This disinclination is on account of an increased international understanding of the legal status of Gilgit-Baltistan and PoK.

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“If it is as a result of diplomatic effort on the part of India, I would say that it is very good and encouraging news that countries are receptive to concerns that we have,” said former foreign secretary Shyam Saran.

Following the announcement of the China-Pakistan Economic Corridor (CPEC), and India’s categorical objection to it on the grounds that Pakistan and China could not construct an economic corridor that passed through Indian territory currently under illegal occupation of Pakistan, the international community has woken up to the disputed nature of the region.

Hydropower has been a source of friction between the neighbouring nations, with the two sides over the years objecting to each other’s major dam projects. New Delhi has in recent months fast-tracked hydropower projects worth about $15bn in Kashmir, ignoring warnings from Islamabad that power stations on rivers flowing into Pakistan will disrupt water supplies.

The CPEC has also brought to the fore the legal position of the two areas in Pakistan. Not only do the regions remain disputed territory, they are also not formally part of Pakistan under the country’s constitution. Azad Kashmir (AJK),i.e., Pakistan-occupied Kashmir, and Gilgit-Baltistan, are not named in the constitution of Pakistan, thereby leaving a large number of questions unanswered, including the citizenship of people residing in these parts. India’s continuous efforts to highlight these facts over the last few years have yielded results where doubts have been raised among investors on the economic feasibility of projects in the disputed area. “I think this realisation will dawn on commercial entities which have major stakes in India,” said Ashok Kantha, former ambassador to China. “They will have to take a call sometime on what is more important for them: to get involved in PoK or to look after their commercial interests in India.”

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Apart from South Korea, sources say China has also been putting pressure on Pakistan to legalise the status of PoK and Gilgit-Baltistan through amendments to its constitution before it pours in huge investments in these areas as a part of the CPEC.

China is aware that not only is the region disputed, being claimed by India, but even Pakistani laws do not give it the status of Pakistan’s sovereign territory. Chinese pressure has led to the recent move by the Nawaz Sharif government to change the status of Gilgit-Baltistan and declare it the fifth province of the country.

“There must be some technical reason for their pullout,” said Sardar Atiq, former Prime Minister of AJK (PoK). “One needs to find out. But as far as foreign investment in ‘Azad Kashmir’ is concerned, this is not for the first time. We have 2-3 projects going on right now and are accommodating a lot of foreign investment.”

Earlier, Asian Development Bank also refused to fund the $14 billion Diamer-Bhasha Dam on the Indus river. This project has been facing problems with financiers since its inception with several sponsors backing out in 2012. The following year, it appeared that the project would take off after the Aga Khan Foundation and ADB agreed to be its financiers. However, subsequently the ADB put its decision to bankroll the project on hold.

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