Aerial view of Gwadar Port
|Constructed||Phase I: 2002-2006
Phase II: 2007-present
|Operator||China Overseas Port Holding Company|
|Number of berths:||Phase I: 4
Phase II: 9
|Type of ships:||Phase I: bulk carriers of 30,000 deadweight tonnage (DWT), container vessels of 25,000 DWT
Phase II: 200,000 DWT vessels
Gwadar is located on the shores of the Arabian Sea it is in Pakistan's western province of Balochistan. It is about 533 km from Karachi and 120 km from the Iranian border and 380 km (240 mi) km northeast of the nearest point in Oman across the Arabian Sea. Gwadar Port is located at the mouth of the Persian Gulf, just outside the Strait of Hormuz, near the key shipping routes in and out of the Persian Gulf. It is situated on the eastern bay of a natural hammerhead-shaped Peninsula protruding into the Arabian Sea from the coastline.
The surrounding region is home to around two-thirds of the world's oil reserves. It is also the nearest warm-water seaport to the landlocked, but energy rich, Central Asian Republics and landlocked Afghanistan.
Although construction of Gwadar Port did not commence until 2002, Pakistan identified Gwadar as a port site as far back as 1954 when Gwadar was still under Omani rule. Pakistan's interest in Gwadar started when, in 1954, it engaged the United States Geological Survey (USGS) to conduct a survey of its coastline. The USGS deputed the surveyor, Worth Condrick, for the survey, who identified Gwadar as a suitable site for a seaport. After four years of negotiations, Pakistan purchased the Gwadar enclave from Oman for $3 million on 8 September 1958 and Gwadar officially became part of Pakistan on 8 December 1958, after 200 years of Omani rule. At the time, Gwadar was a small and underdeveloped fishing village with a population of a few thousand. A small port was constructed at Gwadar by the Government of Pakistan between 1988 and 1992 at a cost of Rs. 1,623 million, including the foreign exchange component of Belgian Francs 1,427 million, equivalent to Rs. 749 million, which was arranged by the contractor. However, technical and financial feasibility studies for a major deep-sea port at Gwadar were not initiated until 1993 under the Government of Pakistan's 8th Five Year Plan (1993-1997). Gifford & Partners & Technecon of Southampton, United Kingdom, in association with the Karachi-based Pakistani firm, Techno-Consult International, were engaged by the Government of Pakistan to carry out the feasibility study.
Gwadar Port was developed by the Government of Pakistan at a cost of USD $248 million. The construction contract was awarded to a Chinese firm and construction began on 22 March 2002 and Phase I (see below) of the Port was completed in December 2006 and inaugurated by the President of Pakistan General Pervez Musharraf on 20 March 2007.
Gwadar Port is being constructed in two phases:
Phase I (2002-2006): USD $248 million. Status: Completed in December 2006
- Berths: 3 Multipurpose Berths (capacity: bulk carriers of 30,000 deadweight tonnage (DWT)) and container vessels of 25,000 DWT)
- Length of Berths: 602m
- Approach Channel: 4.5 km long dredged to 12.5m depth
- Turning basin: 450m diameter
- Service Berth: One 100m Service Berth
- Related port infrastructure and handling equipment, pilot boats, tugs, survey vessels, etc.
Phase II (2007–present): USD $932 million. Status: Under Construction
- 4 Container Berths
- 1 Bulk Cargo Terminal (capacity: 100,000 DWT ships)
- 1 Grain Terminal
- 1 Ro-Ro Terminal
- 2 Oil Terminals (capacity: 200,000 DWT ships each)
- Approach Channel: To be dredged to 14.5m depth
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Gwadar Port is owned by the government-owned Gwadar Port Authority and operated by state-run Chinese firm — China Overseas Port Holding Company (COPHC). Earlier it was operated by PSA International (2007-2012).
Following the completion of Phase I, the Government of Pakistan on 1 February 2007 signed a 40-year agreement with PSA International for the development and operation of the tax-free port and duty-free trade zone. PSA International was the highest bidder for the Gwadar port after DP World backed out of the bidding process.
In a highly competitive environment, in order to enable Gwadar to compete with its regional peers, the port fees was kept low by allowing a wide range of tax concessions to the PSA International to cut operational and business costs. These include complete exemption from corporate tax for 20 years, duty-free imports of materials and equipment for construction and operations of the port and a free economic zone; and zero rate of duty for shipping and bunker oil for 40 years”. In addition to these incentives, the provincial government of Baluchistan was also asked to exempt the PSA International from the levy of provincial and district taxes.
According to the agreement, the Gwadar Port Authority, the Government of Pakistan would get a fixed share i.e. 9% of the revenue from cargo and maritime services, and 15% of the revenue earned from the free-trade zone. PSA International is expected to invest US$550 million in the next five to ten years on creating the operational facilities. Salients of the agreement are as under:
- Agreement signed between Gwadar Port Authority (GPA) and Concession Holding Company (CHC) a subsidiary of Port of Singapore Authority (PSA) on 05-02-2007.
- 40-year lease agreement for operating and managing Gwadar Port.
- PSA will invest US $550 million during the next 5 years for Port Development. The areas where the concession agreement is to be implemented are Terminal and Cargo operations, marine services and Free Zone development.
- GPA will receive the following fixed share of revenues: 9% from Cargo operations and Marine services. 15% from Gwadar Free Zone business.
- No duty would be imposed on the machinery and equipment to be imported for development work in this area and for port operations, for 40 years.
- CHC (the port operator) will have complete exemption from corporate tax for 20 years.
- Duty exemption for shipping lines and bunker oil for Gwadar port for 40 years.
- CHC will have complete exemption from all local and provincial taxes for 20 years.
- CHC will take over the marketing and operations of the current terminal area which provides 602 metres of berthing and will invest and expand berthing space as demand grows during the concession period up to a total maximum of 14 berths in an area of 4.2 km.
- Marine services to be operated by CHC will consist of pilotage, tugging, mooring, vessel traffic control, anchorage management and bunkering.
- GPA will be responsible for dredging of approach channel and harbour to maintain the required depth. All conservancy, security and firefighting services will be provided by GPA.
- First Commercial Cargo Vessel "Pos Glory" berthed at Gwadar Port with 70,000 Metric Tonnes of Wheat on 15 March 2008. Handled by Gurab Lines Shipping Gwadar.
In September 2011, the Wall Street Journal reported that Gwadar is doing little business as a commercial port, and that Pakistan had asked China to take over the operation. A year later, China confirmed that it would be taking control of Gwadar, which they believe has the potential to serve as an oil pipeline hub for Chinese energy needs.
Pakistan on 18 Feb 2013 formally awarded a multi-billion dollars contract for construction and operation of Gwadar Port to China. Under the contract, the port which will remain the property of Pakistan but would be operated by the state-run Chinese firm — China Overseas Port Holding Company (COPHC).
The contract signing ceremony was held on 18 Feb, 2013 in Islamabad and was attended by President Asif Ali Zardari Chinese Ambassador Liu Jian, some federal ministers, members of parliament and senior government officials. The ceremony was actually held to mark the transfer of the concession agreement from the PSA (Port of Singapore Authority) to the COPHC.
7 point GEO-ECONOMIC PROSPECTS OF GWADAR-KARAKORAM-KASHGAR CORRIDOR
“To get rich, one must build roads”.
An ancient Chinese proverb (Sering, 2013, p. A1).
7.1. Introduction With the end of bi-polarity with the demise of former Soviet Union, the process of globalization got impetus and geo-economic considerations were given preference over geo-strategic priorities. New bilateral, regional and global economic integration models started coming up and regionalism within the domain of economic globalization assumed immense significance for regional economic development (Rahman, 2011). This regional framework of cooperation has made the entire world interdependent at bilateral, regional and continental level to achieve sustainable economic growth (p. 1). Pakistan and China were not indifferent to this geo-economic trend and both the countries fully realized to institutionalize their bilateral trade.
Since 1960s, Sino-Pakistan political and military relations have substantively strengthened. However, cooperation on the economic and trade front remained slow until 1991. China has recently signed numerous agreements with Pakistan to reinforce diversified cooperation for the enhancement of bilateral trade that saw expansion in the bilateral trade over US $12 billion in 2012 (Cockayne, 2014). The initiatives include construction of a new airport; expansion and extension of the Karakoram Highway in Balochistan, establishment of oil refinery at Gwadar port, overland energy pipelines, constructions of roads and railway lines are the mega projects which demonstrate Beijing’s long term commitment to the existing Pakistan-China Economic Corridor. These economic initiatives come in conjunction with Beijing’s substantial investment in Gwadar Deep Sea Port and will benefit an already well established relationship between the two countries in sustaining their economic growth (p. A1). Moreover, adversarial relations with India brought China and Pakistan together to collaborate and support each other in the international arena. The joint venture in construction of large-scale development projects in Pakistan has further strengthened bilateral cooperation. China has helped Pakistan develop the Haier-Rub Economic Zone near Lahore. It is considered the first overseas Chinese special economic zone with an aim to develop Pakistan’s capacity in different fields to emerge as a regional industrial hub (website of Haier Pakistan). However, the recent mega projects including the expansion of the Karakoram Highway (KKH) connecting China’s western province with Pakistan’s capital; Chasma II nuclear power plant and Gwadar Deep Sea Port are few among a long list of mega projects that have proved the rhetoric “all-weather” friendship.
Presently, the bulk of Chinese investment in Pakistan worth billions of dollars will bring substantial trade expansion and economic development in the region. Since 2012, China and Pakistan have been working on the bilateral Five Year Development Programme for Trade and Economic Cooperation (Pak-China projects, 2012, p. A1) to implement 36 mega projects. Both the countries are determined to focus on the strategic sectors and cooperating in the fields of defence, nuclear energy, space programmes, transportation, telecommunication, electronic products and energy (Kabraji, 2012, p. 9). Moreover, China is also assisting Pakistan in the field of agriculture and livestock, civil aviation, mining, promotion of culture, banking and finance. With the Chinese assistance, the KKH constructed in 1986, has been a main trading route between Pakistan and China. Under the five year development plan, the KKH will be upgraded to facilitate commercial exchange in order to integrate Pakistan’s economy with the western Chinese province. China’s huge investment worth US $1.6 billion in the construction of Gwadar port in Balochistan and related projects signifies its sincere efforts to strengthen bilateral strategic, economic and commercial ties (Kardon, 2011, p. 17). The geo-strategic location and natural deep sea elements of the port drew the attention of the Chinese to construct it which is just 250 miles away from the Strait of Hormuz through which 40 percent of the world’s oil supplies is transported (Haider, 2005, pp. 96–98). Pak-China economic corridor will provide following benefits (Kabraji, 2012, p. 9):
First: China’s economic investment in Pakistan will stabilize Pakistan to avoid any fallout spilling into its Western province; Second: Gwadar-Karakoram-Kashgar corridor would enable China to seek shortest access to the main maritime routes for its trade; Third: The corridor from Gwadar port to Xinjiang province would secure Chinese energy supplies through the Strait of Hormuz and the Persian Gulf; and Fourth: The corridor would allow China to diversify its energy routes by bypassing US and Indian influence in the Indian Ocean and the South China Sea.
7.2 The Ties That Bind Pakistan and China Pakistan’s foreign policy is determined by its hostility with India and security-dominated relations with US. Historically, both Pakistan and China have tense relations with India over border disputes and closer cooperation between these two is actually driven by their common animosity with India. China, unlike the US, has maintained a positive image in the Muslim world to refrain from any attack on its soil and desisted from the clash of interests (Kabraji, 2012, p. 8). Now relationship between these two countries is grounded in almost all sector of economy (p. 3). The rhetoric about Sino-Pak relationship is based on Pakistan’s loyalty to China. In turn, China always rewarded Pakistan with huge financial investment for infrastructure improvement to establish strong strategic and trade links. Unlike US, China has provided unconditional substantial military and strategic assistance to Pakistan and the aid brought about a strategic shift in the Sino-Pak relationship. Since then, Pakistan started defending China’s interest in Xinjiang, Tibet, Taiwan and the South China Sea for which the Chinese leadership applauded Pakistan’s role (p. 7). As a goodwill gesture, China always provided Pakistan with all sort of political and diplomatic support in the international arena to defend its national interests. Subsequent international and regional developments further strengthened the Sino-Pak relationship. Today, China recognizes Pakistan as one of key factors in its foreign policy to secure its national interests and maintain stability in Xinjiang province. Strategic partnership between China and Pakistan has actually helped China keep the United States influence at bay in the region and also facilitated it to maintain a check on the Indian ambitions to safeguard Chinese regional economic and security interests (Kabraji, 2012, p. 21).
7.3 Pak-China Multidimensional Cooperation China has proved to be a sincere and genuine partner to Pakistan than the United States. The bond between Pakistan and China is multi-dimensional covering strategic, economic and military-to-military ties. Following five main drivers of China multi-dimensional cooperation with Pakistan was outlined by the Chinese President Hu Jintao in his visit to Pakistan (Kabraji, 2012): a. Growing deeper strategic collaboration and consolidating long-established friendship; b. Increasing mutual beneficial business ties; c. Enhancing cultural and social exchange programme and strengthening the basis of friendship; d. Expanding cooperation in intercontinental affairs and upholding common interests and; e. Encouraging exchanges among different civilizations to establish world harmony (p. 7). To implement this strategy, Sino-Pakistan is currently working on 36 associated corridor infrastructure projects. The railway link is being established between Havellian to Kashgar in Xinjiang which would roughly run in parallel with the Karakoram Highway for which a contract worth US $1.2 million has been awarded to an international consortium to carry out a feasibility study for railway and 3,300 km oil and gas pipelines linking Gwadar to Kashgar (Backley, 2012, p. 16).
In Pakistan, there is a notable increase in Foreign Direct Investment (FDI) from China and Hong Kong (Mahmood, 2011). Around 120 Chinese companies along with 13,000 workforces are engaged in over 250 projects in Pakistan in the sectors of power generation, engineering, automobiles, mining, infrastructure, IT and telecom (p. 13). Under the renewal of Five Year Development Programme for Trade and Economic Cooperation, China has provided unilateral tariff concession on additional 286 trade items under Free Trade Agreement (FTA) existing between the two countries. This would help Pakistan achieve trade target of US $15 billion by the end of 2015 (Mahmood, 2011). Apart from this, both the countries have also signed different commercial agreements worth US $35 billion (p. 13). According to official reports, China will spend millions of dollars to complete a 900 km long road connecting the Gwadar port with Pakistan’s north and south regions through Indus Highway while facilitating overland transport from Gwadar port to Xinjiang province (China poised to control, 2013, p. A1). Former Chinese Foreign Minister Li Zhozxing once told that China’s all-weather friendship title has only been given to Pakistan in the entire Chinese history.
7.4 Gwadar-Karakoram-Kashgar Economic Corridor Expansion of the Karakoram Highway is China’s ambitious plan to improve the cross-regional transportation and commercial network to convert KKH into a 90-feet wide expressway for a threefold increase in the current capacity (Sering, 2012, p. 22). In the first phase of the strategy, the government is mainly focus on the infrastructure development of roads, railway tracks and establishment of industrial zones like Kashgar economic zone and Gwadar economic zone which will create economic opportunities for the local population (Saeed, 2011, pp. 89–90). Moreover, the western China region would be connected with the KKH linking it with feeder roads. Map 7.1 reflects proposed linkage between Kashgar economic zone and Gwadar port. The construction of Gwadar port would expand the KKH to serve as a viable trade and energy corridor for China which will generate transit revenue for Pakistan. The corridor would also help safeguard political and strategic interests of Pakistan (Sering, 2012). The corridor runs through disputed and sensitive territories allowing the militaries of China, Pakistan, Afghanistan, India and even Russia to converge within a striking distance (p. 11).
Map 7.1: Gwadar-Karakoram-Kashgar Economic Corridor.
Source: (zahoor, 2014).
7.5 Geo-Economic Imperatives of the Corridor for Pakistan Pakistan’s main objective from the Gwadar-Karakoram-Kashgar corridor is to develop a viable conduit for expansion of bilateral and regional trade which would also generate transit revenue for the country. This corridor would not only support the country’s economic growth but enhance its political and strategic leverage over other regional countries (Sering, 2010). The transit system will be expanded to accommodate commodity exchange between regional and cross-regional countries which will generate significant revenue of transit fee for Pakistan (p. 25). It will also help Pakistan and China achieve energy security and would help Central Asia and Xinjiang region overcome food shortage (p. 25). Tourism developments in the region would largely be promoted while people to people contact would also be established in the region. The corridor will not only facilitate trade and transit of fossil fuels, minerals and a variety of other commodities among the producers and consumers in the region, but it will also provide an alternate trade route linking Central Asia via western part of China which will reduce dependence on Afghanistan. For China’s perspective, Pakistan is a viable transit option to the Gulf region over Afghanistan and Central Asia to save substantial transit fees and to avoid multiple countries. To cater future volume of trade, China’s dry-port at Sost is also being expanded to increase trade handling capacity from 40 containers to 400 containers per day which will cater trade flow from Pakistan (Pakistan considers relaxing visa, 2006, p. A1). Following specific prospecting areas are analyzed to substantiate the potential of the corridor.
7.5.1 Expansion of Regional Trade and Economic Activities Both China and Pakistan are preparing a joint feasibility of common parameters for the development of Sino-Pak Economic Corridor project. Under the project, economic and trade link will be established from Khunjerab Pass to Gwadar port which will further be connected with Lahore-Karachi Motorway. In the long run, Gwadar port will serve as a regional supply hub for the huge Kashgar consumer markets. The connection between the port and Kashgar city via Indus Highway with Ratodero and Karakoram Highway will further be linked with the Central Asian states namely Tajikistan, Kyrgyzstan, Tajikistan and Kazakhstan. All these states, under the quadrilateral trade agreement, will further promote economic activities which will result in the expansion of regional trade (p. 89). The agreement was first time implemented by a group of Pakistani exporters who traded with Kazakhstan via Karakoram Highway through Kashgar in 2004 (p. 101). The travelling time as well as cost has considerably reduced after the construction of the Gwadar-Turbat-Ratodero Highway connecting Khunjrab. Moreover, Gwadar port will help China expand its trade relations with Middle East, Central Asia, West Asia and Africa and even can help it improve relations with India as the port will serve as regional trade and energy hub (Yousaf, 2013, p. 8).
The ongoing projects such as the Karakoram Highway expansion, rail track and energy pipeline will cement the existing geo-strategic and geo-economic cooperation between China and Pakistan. The corridor will not only bring expansion in the bilateral trade and economic activities of China and Pakistan but will also enable them to bring regional countries of South, Central and West Asia into a political block to achieve sustainable economic growth and regional stability through regional cooperation. The corridor will have pivotal impact on the regional strategic environment and also for economic integration in the region.
7.5.2 Expansion of Bilateral Trade Currently, Pakistan and China have signed a number of agreements and Memoranda of Understanding (MoU) to cooperate on industrial and technological development under the principle of reciprocity and mutual benefits for broader economic growth. The pacts include lease of Saindak copper-gold project, supply of locomotives and supply of passenger coaches to railways, white oil pipeline and MoU on Zhongxing Telecommunication Equipment Corporation (ZTE Corporation) and Pakistan Telecommunication Limited (PTCL) (Rahman, 2011). Moreover, China has also pledged to finance US $1 billion to implement these projects and re-assured to continue assisting on Gwadar port, Coastal Highway and KKH expansion projects. Pakistan in turn, has granted preferential trade agreement along with free market economy status to China (p. 3). Sino-Pak bilateral trade has reached US $7 billion from US $2 billion in 2002. China has granted four kinds of trade concessions to Pakistan (Sabir, 2010). One; one-sided economic concession which would help expands Pakistan’s exports to China by US $1 to $1.5 billion per annum. Second; China, in addition to FTA, would grant duty concessions on tariff lines to Pakistani products. Third; both the states have signed an agreement to setup a joint venture firm to promote sale of certified hybrid seeds which would be developed in accordance with the soil and environment conditions of Pakistan. Fourth; Pakistan and China would cooperate in the fields of water resources management, water conservation, sprinkling and drip irrigation systems.
In 2011, Sino-Pak bilateral trade achieved 23 percent growth by surpassing the mark of US $10.6 billion as compared to the last year US $8.7 billion trade business (Exports register 23 pc, 2012). In the same year, Pakistani exports to Chinese market expanded by 23 percent while the country’s imports from China also grew at 22 percent (p. A1). Pakistan’s exports to China in 2008 were almost US $1.0 billion whereas exports in 2011 has surpassed to US $2.12 billion which reflects 100 percent increase over the period. According to Ismat Sabir (2010) in 2009 the overall global trade of China reduced by 13.9 percent while its trade volume with Pakistan only declined to 2.9 percent reaching US $6.8 billion. The total export of China reduced by 16 percent whereas its exports to Pakistan declined only by 7.7 percent reaching US $5.5 billion (p. A1). During the same year, Chinese import from Pakistan substantially increased by 25.5 percent reaching to US $1.3 billion as a result of the Free Trade Agreement. According to Pakistan Ambassador to China, Mr. Masood Khan in his interview to daily the nation said that China had vast market to absorb Pakistan’s commodities and services and bilateral trade expansion has been welcomed by both the countries. Both the countries intend to expand bilateral trade up to US $15 billion in the next two to three years.
It is widely believed in Pakistan and China that after completion of Gwadar port projects (including road, railway, energy pipelines etc.), bilateral trade and commerce between the two countries would further expand and diversify to adjoining regional countries. Moreover, strong strategic partnership between Pakistan and China, expansion in trade, deeper economic ties and an elaborate architecture for economic cooperation will provide the most constructive environment for bilateral trade expansion. Chinese Premier Wen Jiabao visited Pakistan in April 2005 and raised three suggestions during his address to the China-Pakistan Business Cooperation Conference on further expanding the scope of bilateral trade, investment and strategic relations (2005, p. A1). First; both countries must adhere to the main beliefs of equality and mutual benefits and share complementary advantages. Both Pakistan and China are the developing countries and the scope of bilateral cooperation should be to seek common development as both the economies enjoy strong complementarities. Pakistan has advantage of its abundant resources and raw material while China has sophisticated technology and modern development experiences and expertise. Indeed, there are immense potentials to expand bilateral cooperation. China would help optimize bilateral trade structure and the trade imbalance with Pakistan will be improved (Rahman, 2011, p. 4). China would also help encourage the competitive enterprise to invest in Pakistan in order to create employment, investment and other economic development opportunities in local areas. Second; both countries must reinforce communications and enlarge scope of business collaboration. The ongoing bilateral business exchange programme has been productive. As the delegation of China Enterprise Confederation (CEC) and the delegation of the private entrepreneurs made visit to Pakistan and in turn, entrepreneurs in Pakistan also started visiting China to strengthen strategic cooperation between the two countries. The exchange and cooperation programme between the two countries’ enterprises has proved to be a catalyst for strengthening bilateral economic and trade cooperation. Moreover, the business and trade exchange programme has helped enterprises to exchange their expertise for common development in such a way that better fulfills the principles of market economy. Both the government should provide a platform to promote bilateral collaboration in all sectors of economy. Third; both countries must diversify scope of bilateral cooperation. The established cooperation basis should be coagulated. The cooperation in the fields of agriculture, finance, science and technology should also be enhanced and cooperation in new fields should also be studied. Dynamic and diversified cooperation such as joint venture, lease, sole foreign ownership and training would infuse new energy to bilateral economic and trade cooperation. The speech was ended by Chinese Premier with words that the economic and trade cooperation between China and Pakistan has bright prospects. Pakistan’s trade with China is presently 20 percent higher than its trade with United States. Shortly after the Afghan War, US followed disengagement policy towards Pakistan which resulted in the close collaboration between Pakistan and China. Since then, Sino-Pakistan trade began to shoot upward and increased from US $2 billion to $8.7 billion in 2009 (Siddiqui, 2011, p. A1). After signing FTA, trade between these two countries is expanding at a very fast rate (Shabir & Kazmi, 2007, pp. 173–200). The Gwadar-Karakoram corridor will help promote regional trade and economic integration.
In the recent past, a shift in the mindset of Pakistani exporters have been observed and now they are more inclined towards China which is the second largest market for Pakistani products after the United States. The latest figures revealed by State Bank of Pakistan (SBP) that the country’s trade with China is rapidly growing and the Pakistan’s exports to China have reached to 56 percent of Pakistan’s imports (Iqbal, 2013). According to SBP report, United States is the largest exporter for Pakistan’s product reaching US $3.878 billion in 2013 (Iqbal, 2013, p. A1). Whereas China with its growing trade worth US $7.458 billion has appeared as second largest trade partner for Pakistan after the UAE. In the Fiscal Year 2013, UAE traded with Pakistan worth US $6.376 billion while its imports tune to US $1.935 billion and total trade volume reached to US$8.311 billion (p. A1).
Pakistani traditional exports to China comprise of synthetic yarn and fabrics, cotton yarn and fabrics, fish and fish products, chromium and other ores, vegetable and animal products, granite and stone items, marble, sports goods and carpets. Over the year other products like garments, home textiles, copper, plastic scrap, leather, seafood, medical, surgical instruments, chemical, mineral and food have also been included in the bilateral trade. Pakistan imports from China includes polyester staple fabrics, polyester and silk fabrics, mobile communication equipment, fertilizers, tyres, combustion piston engines, gas turbines, motorcycle parts, steel and iron products, electrical appliances and various other products (Exports register 23 pc, 2012, p. A1). China has also made steady progress to cooperate with Pakistan in the sectors of energy, telecom, Neelum-Jhelum and Pakistan’s telecommunication satellite projects (Sabir, 2010).
7.5.3. Expansion of Cooperation Since 2000, bilateral economic relations between Pakistan and China have been constant. A number of initiatives and bold decisions have been taken by both the governments to further expand their bilateral economic and strategic cooperation. Chinese economic investment in Pakistan such as the construction of Gwadar deep sea port, coastal highway, expansion of KKH and ongoing energy oil and gas pipeline etc. are worth mentioning initiatives for broader economic cooperation. Both the nations are also working on short as well as long term strategies to enhance bilateral cooperation in almost all fields including agriculture, infrastructure development, information technology, tourism cooperation, construction of oil pipeline etc. (Rahman, 2011, pp. 2–3). Bilateral cooperation in the following areas are explained in detail.
188.8.131.52. People to People Link Expansion of roads and highways between Pakistan and China will encourage movements on both sides. China under the programme of China Foundation for Peace Development has increased number of scholarships for Pakistani underprivileged students. These students would be provided technical and vocational training to become self-sufficient in their own fields. Pakistan on the other hand is trying to improve its vocational and technical training institutes with financial and technical support of China. This would help young people contribute in the economic development of Pakistan which is considered as low-skills economy (Kazmi, 2007). People to people contacts through educational, cultural or business exchange programmes between Pakistan and China are qualitatively more attractive for middle-class and underprivileged students who could not receive educational opportunities in US, UK, Australia and other western universities.
184.108.40.206. Hydropower Trade Pakistan is passing through a severe energy shortage which is becoming more violent in nature day by day. To meet energy crisis, Pakistan needs to develop its hydroelectric power station. China in this regard has assured to support Pakistan. These power stations would be converted into Gas and the energy corridor will equally be benefitted for Pakistan to secure its energy for domestic use. In Pakistan, energy demand has increased three times greater than supply and the energy shortfall has also risen. All this has worsened industrial output and many businesses have been resulted in closure of operations. Currently, Pakistan’s crude oil import is almost 85 percent of its total oil consumption. Islamabad is heavily dependent on the supply of petroleum products from the Persian Gulf, especially Saudi Arabia being the largest crude oil supplier. Under such scenario, security of energy supply becomes top most priority of the country’s foreign policy along with China to sustain economic growth. In addition, the proposed energy pipeline would also provide sufficient energy to Pakistan to fulfill its energy requirements for domestic and industrial sectors (Khan, 2013, pp. 88–90). Ensuring uninterrupted and enough energy to the industrial and agriculture sectors will, in turn, have positive impacts for achieving sustainable economic growth. Moreover, the energy pipelines will also pave the way for infrastructure development surrounding the pipeline regions which will also convert Gwadar port into energy hub port for Central Asia, Afghanistan and China. It is also under discussion to include China in the Iran-Pakistan-India gas pipeline project. India’s reluctance to join IPI and TAPI gas pipelines could provide China to fill the gap. As discussed by Seher Abbas in his research paper that after construction of Gwadar port, China will construct a gas pipeline from Balochistan and Karakoram Highway to Xinjiang province of China (2012, p. 27).
220.127.116.11. Mining Exploration China’s heavy investment in oil, gas and minerals sectors is to secure its future needs (Sering, 2012, p. 28). Apart from exploring immense rich areas of the Duddar Zinc-led mine and a copper-gold mine at Saindak in Balochistan, Rickodek, is also one of the 4th largest deposit of gold and copper in the world. Rickodek in local language means hillock of gold. It is a mountain adjoining Chagi area which is filled up with costly reservoirs of mineral. According to estimates, the gold and copper reserves account for about US $260 billion. Due to financial constraints and lack of modern technology, Pakistan is dependent on foreign companies for their exploring, surveying, mining and refining. In this context, the economic corridor will play a vital role to facilitate China for the transportation of copper, gold, led etc. from the Rickodek, Duddar Zinc-led mine and copper-gold mine at Saindak. This could be beneficial for Pakistan in the development of its respective underdeveloped regions in the province (Mazhar, Javaid & Goraya, 2012, p. 117).
18.104.22.168. Exploration in Stone and Marble Over the years, Pakistan’s export of marble and granite to China has expanded from US $29.1 million in 2010 to US $63.5 million in 2011 (Pak exports of stones, 2012, p. A1). China offers a huge market for Pakistan’s stone and marble sector and Pakistani exporters find tremendous opportunities in the trade, especially after infrastructure development (Co-op in stone, 2013). In China, Xiamen region has become a hub of stone and marble business. According to the statistics, the region is the world’s largest stone and marble trading centre with over 60 percent transaction volume in China and about 15 percent across the world (p. A1). According to data of the Trade Development Authority of Pakistan (TDAP), China is recognized one of the main importers of Pakistani marble, especially of Balochistan’s marble. China’s import includes granite, basalt and sandstone from Pakistan (TDAP, official website).
7.5.4. Generation of Transit Revenues China’s planned energy pipelines from Gwadar port to its Xinjiang province will help generate transit revenues. A rail line between Gwadar and Kashgar will also be developed to establish a trade corridor (Khan, 2013, p. 89). The importance of railway connection would facilitate uninterrupted transportation between these two countries which is normally suffered due to the Karakoram Highway blockade during heavy landslide. The corridor will be a milestone to expand bilateral trade and further it would integrate regional economic activities of Central, South and East Asia. The development of railway lines, over land energy pipelines, roads etc. will generate transit revenue for Pakistan to improve its economy.
7.5.5. Gwadar-Karakoram-Kashgar Corridor: An Alternate Route to CARs China has recently concluded an energy agreement with Tajikistan and Kyrgyzstan which is known as “Line D”. Under the agreement, Central Asian energy would flow through a new route from Turkmenistan via Uzbekistan, Tajikistan and Kyrgyzstan to the western Xinjiang province of China (Lelyveld, 2014, p. A1). The planned Gwadar-Karakoram-Kashgar Corridor could easily be utilized to avail long awaited energy from Central Asia via Xingjian province. This route would be an alternate energy route for Pakistan while bypassing Afghanistan as reflect in the map 7.2 below. The corridor expansion project would provide Pakistan an alternate route to access Central Asia’s vast energy resources through the western part of China while avoiding politically unstable Afghanistan. Moreover, Turkmen-Kazakh-China gas pipelines are in place which could possibly be extended to Pakistan through the Karakoram Corridor in the near future. Similarly, gas, uranium and Hydel power energy from Tajikistan, Uzbekistan and Kyrgyzstan will highlight the significance of the Karakoram as a viable corridor for the economic development of the entire region. The corridor development project envisages $34 billion investment in energy would connect Central Asia and China to the Asian Highway network (Planning Development & Reforms, Govt of Pakistan, 2014).
Gwadar is strategically located on the western end of Baluchistan coast on the opposite end of the Gulf of Oman which is an important route for oil tankers bound for Japan and western countries out of Gulf. Since outflow of goods from western China and Central Asia reaching Gwadar will pass through this overland trade route, Pakistan could earn millions of dollars a year in terms of port and cargo handling charges and also as freight charges for import cargoes and export goods. According to Arthur D. Little (Malaysia), the main consultant firm of the Gwadar development phases, low-cost land and labour are available, there is proximity to oil and gas resources and Gulf countries, there are some agricultural and mineral resources, while there could be tax-free status for investments and trade. The Gwadar Port is expected to generate billions of dollars in revenues and create at least two million jobs.
Gwadar has the potential to acquire the status of a center piece as a gate to Strait of Hormuz; it can compete with the United Arab Emirates ports by improving the exiting links to Caspian Region, and thus providing a better trade route to the land locked Caspian Region. Gwadar has the potential to be developed into a full-fledged regional hub and a trans-shipment port in the future.
Gwadar Port was featured on the back of the Five Pakistani Rupee currency note, which is not in circulation now.
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