Chinese technological giant Huawei announced on Wednesday that it would be investing close to $100 million in Pakistan to build a regional headquarters in Islamabad. The investment includes the expansion of an existing technical support center in the country to buttress the sale of Huawei consumer devices.
The announcement was made by Huawei Vice President of Public Affairs Mark Xueman at a meeting with Pakistan Minister for Planning and Development Khushro Bakhtiar in Islamabad. Bakhtiar, as minister for planning, is also the lead coordinator in Pakistan for the China-Pakistan Economic Corridor (CPEC), a $62 billion connectivity project linked to China’s Belt and Road Initiative (BRI).
Xueman told Bakhtiar that Huawei would provide $55 million for the development of a regional headquarters and $15 million for improvements to the local technical support center. The status of the remaining $30 million from the total investment remains unclear.
Huawei’s presence in Pakistan is robust and growing, driven not just by the value the company offers retail and commercial consumers, but also by strengthening bilateral ties between Beijing and Islamabad—including through BRI and CPEC. The company is playing a pivotal role in upgrading Pakistan’s digital infrastructure, including the installation of next-generation technologies like fifth-generation cellular connectivity or 5G.
Pakistan Is Part of Huawei’s Global Push
Chinese companies are going global in search of overseas markets. In Pakistan, China is now the top source of foreign direct investment. Chinese manufacturers—some operating locally—dominate the Pakistani consumer market, including in the home appliance and mobile device industries.
Huawei leads a growing pack of Chinese companies operating in Pakistan. According to Planning Minister Bakhtiar, Huawei has a 25 percent share in Pakistan’s smartphone market and ranks as the top tax-paying Chinese company operating in the country.
Pakistan is a critical growth market in both mobile device manufacturers and wireless service providers. As of June 2019, Pakistan has over 69 million wireless internet subscribers and 71 million broadband subscribers, according to the country’s telecommunications authority. In 2017, Google identified Pakistan as among four countries that will collectively generate the world’s next billion smartphone users.
Huawei is pouring money into expanding its sales and support operations across Pakistan to accelerate its share of the smartphone consumer market, where it’s risen to second place—just behind Samsung.
Alongside its ascendance in the Pakistani consumer market, Huawei has experience partnering with both Pakistan’s civilian government and army. These relationships are likely to only grow in the future.
In the past, Pakistani officials have repeatedly asked Huawei to invest more in research and development to help the country’s embryonic information technology industry. It’s unclear how many of these proposed ventures have materialized. In May 2017, Bakhtiar’s predecessor, Ahsan Iqbal, urged Huawei to open a research and development center in Pakistan. In April this year, Pakistan Foreign Minister Shah Mehmood visited a Huawei research center in Beijing and highlighted the need for a similar center in Pakistan.
Earlier in May, Huawei signed a memorandum of understanding with the Pakistani government for the establishment of the first cloud data center in the country. Although little details have emerged about the cloud center, Islamabad said earlier in May that the center would be built for the finance and media industries of Pakistan.
Huawei Powers Counterterrorism Surveillance in Pakistan and Potentially 5G Too
To combat the threat of terrorism, Pakistan has initiated Safe City projects in many of its major metropolitan areas. A core feature of the Safe City projects is surveillance camera networks monitored through integrated command, control, and communications centers.
Three years ago, Huawei was awarded Pakistan’s first Safe City surveillance system contract at a cost of $85 million. A report on the Data Center Dynamics website, citing filings with Pakistan’s Supreme Court, states that Safe City projects for Islamabad and Peshawar were funded by Chinese government concessional loans that required the equipment procurement contract to be awarded to Huawei.
It’s unclear whether Pakistani officials have security concerns with respect to Huawei equipment. However, in 2017, officials at the Punjab Safe City Authority discovered wi-fi transmitting cards in the system that were relaying data back to Huawei and ordered the company to remove them. Huawei later claimed that the cards had been placed there for remote troubleshooting services.
In addition to prior projects with Islamabad, Huawei is also bidding on future government contracts for the provision of the latest telecommunication services. As Pakistan plans the rollout of commercial 5G services by 2020, Huawei wants to be the company that sets up the infrastructure for it.
BRI and CPEC Drive Huawei’s Inroads Into Pakistan
China and Pakistan have long been diplomatic and strategic allies. But their partnership is increasingly in the realm of investment, trade, and physical connectivity. The major framework for this economic cooperation is the Belt and Road-linked China-Pakistan Economic Corridor.
While CPEC mainly consists of energy projects, there is a digital component as well. And it’s tied to plans for a “Digital Silk Road” under the broader BRI framework.
One of the initial CPEC projects was an optic fiber cable line connecting from Pakistan’s Khunjerab Pass bordering the western Chinese region of Xinjiang to Rawalpindi, the sister city of Pakistan’s capital, Islamabad. Unsurprisingly, the $44 million engineering, procurement, and construction contract for the project—financed mainly by a Chinese concessional loan—went to Huawei. The 500-mile-long network was inaugurated last year.
Through Pakistan, the optic fiber line will eventually connect China to Africa and Europe. The ground line will be extended from Rawalpindi to the Chinese-operated Pakistani port of Gwadar, from where a Chinese corporation named Peace Cable International—supplied by a Huawei subsidiary named Huawei Marine Services—is involved in building an undersea optic fiber network to Djibouti.
The network improved internet reliability in Pakistan and reduces its dependence on older network lines owned and operated by arch-rival India.
Both Huawei’s global push and the pushback against Huawei have been tied to the fate of China and the China-led Belt and Road Initiative. Huawei has become the focus of the U.S.-China trade war and concerns worldwide about rising Chinese influence. The company, perhaps, is banking on its returns from investments in markets like Pakistan, Italy, and other countries to offset the pushback elsewhere.