Economy /
Pakistan’s Gwadar Port: Bridging East and West
The friendship between Pakistan and China has stood the test of time for decades. Cooperation between the two brotherly nations thrives in various sectors ranging from the economy to regional developments. Diplomatic ties were established in 1950, two years after Pakistan gained independence. Pakistan’s relationship with China has also been a deterrent for India as the country enjoys exuberant support from President Xi’s government.
The China-Pakistan Economic Corridor (CPEC) is a project that lives to tell the tale of this close bond. Under this $63 billion initiative, numerous infrastructure projects are under construction across Pakistan. It is aimed at reviving Pakistan’s slagging economy and modernizing the country’s worn-out infrastructure. What else does this “project of friendship” include? To begin with, there are many energy projects, modern transport networks and special economic zones. Secondly, it is also targeting the social sector by launching development programs which are keen in taking into account the many problems faced by Pakistan on a social level. China’s technological capabilities will also be tested through a $37 million cross border optical fiber cable system and a crucial Early Warning System for Pakistan’s meteorological department.
What sets CPEC apart from other initiatives China has taken across the world is the development of the significant Gwadar port, a strategic location detrimental for the transport of cargo across the south Asian and middle-eastern regions. This is just a small part of China’s grand expansion strategy but a key goal that Pakistan has successfully achieved through Chinese finances. This can be lauded as a great step forward considering the dire situation of the country’s economy which has faced numerous repercussions from the lack of political stability. According to official studies conducted by Pakistan’s government, China’s mammoth investments will stimulate an 8%-10% increase in Pakistan’s GDP by 2030. However, it has not always been an easy ride. Many problems continue to exist considering active terrorism in the Balochistan region where a number of key projects are set to be deployed. Furthermore, challenges have also differed from province to province. Pakistan’s political domination is deeply embedded within its provinces. While terrorism may be a problem in Balochistan as anti-state elements repeatedly target the government, the basic infrastructure might be another headache up north where development has not been so significant.
The port was inaugurated by Pervez Musharraf, Pakistan’s army general in 2007, at a cost of $248 million. In 2015, it was leased to China until 2059 and was given the go-ahead to be developed under CPEC at $1.6 billion. Along with the pivotal shipping port, the project aims to unlock other plans within the coastal city which include an airport, expressways, hospitals, universities, vocational institutes, smart city plans and lastly, a strong focus on petrochemical and steel industries in which Pakistan has the potential to flourish at a great scale.
The reason why this particular port is touted to be a game-changer is because of the incentives it will give to those docking at the port. For example, along with high-quality infrastructure, there will be no cargo demurrage charges and will also give 3-month storage facility options.
The port was officially opened for transit trade on the 2nd of October, 2019 but will be fully functional in November this year. Another aspect why this port holds immense value for the Chinese is because of their own personal interests. China’s navy will be allowed to use the port and it also connects China’s Xinjiang province with the grand port in Baluchistan province. Furthermore, the implementation of additional taxes on Chinese companies establishing fish processing facilities inside and outside the port have also been scrapped to facilitate China in generous ways.
At this point, we may say that the CPEC project is a win-win situation for both sides. For Pakistan, the allocation of financial resources is a major source of concern and China is willing to provide whatever necessary help the neighbor might ask for. However, this is also China’s tactical decision to connect itself with other countries and revive the Silk Road, which the Belt and Road Initiative seeks to acquire.
Gwadar’s main competition will be against the ports in the UAE. The main source of revenue for the UAE is currently earned through ports Rashid and Jebel Ali. Over 5,000 companies from more than 120 countries use the port for trade. The Gwadar port, on the other hand, is a more strategic location just 600km away from the strait of Hormuz, a key shipping destination for oil. Furthermore, the Gwadar port is also closer to China. This is in China’s interest because it becomes easier to use this port rather than a costlier route through the UAE.
For the time being, Gwadar may not possess the capability to outshine the UAE but over the coming period with the development of an oil city funded by Saudi Arabia and a host of other residential development projects and the inclusion of Pakistan’s biggest airport, luck might just be in favor of the Pakistanis.
