Free Trade Zones

Gwadar fast growing gateway



Gwadar, once a backward and impoverished area, is emerging as a hub of connectivity and development.

Numerous studies have established that after the completion of the China-Pakistan Economic Corridor (CPEC) road, Gwadar will be one of the most competitive connectivity hubs in the region and beyond.

China, the Middle East, North Africa and many Western countries will be the main beneficiaries.

The Advanced Journal of Transportation published a study in 2019, which analyzed Gwadar’s possible impact on China’s competitiveness and trade with six countries namely Oman, Saudi Arabia, France, Kuwait, Germany and the Netherlands.

The results of the study suggest that travel time would be reduced by 20 days for Oman, 21 days for Saudi Arabia, 24 days for Kuwait, 21 days for the Netherlands, Germany and France by making of trade via Gwadar.

In addition, the study results highlighted that trading through the port of Gwadar would help trading partners save $ 1,857 for Oman, $ 1,457 for Saudi Arabia, $ 1,457 for Kuwait and $ 1,357. for the Netherlands, Germany and France on each container. It will strengthen the competitiveness of each trading partner on foreign markets. Trade through Gwadar will also create economic opportunities for Pakistan. It has been predicted that Pakistan can generate revenues in the range of $ 7-8 billion to $ 10-12 billion per year in the form of services and fees.

Local industry and the service sector along the route will also benefit. Job creation will be the added benefit. In addition, the Central Asian states are also looking to connect with the world through the port of Gwadar. They showed an extreme interest in the port of Gwadar and allied installations.

According to an analysis by the Asian Eco-Civilization Institute, Gwadar will provide an opportunity for Pakistan to attract foreign investment, especially in special economic zones and free economic zones of Gwadar.

The analysis pointed out that by establishing industrial units and enterprises in Pakistan, ASEAN countries would be more competitive.

The main contributing factor would be a substantial reduction in travel time. For example, the journey time from Port Klang (Malaysia), Bangkok Modern Terminal, Pulau Sebarok (Singapore), Bekapai Terminal (Indonesia) and Port of Hanoi (Vietnam) to Hamburg (Germany) is 39.4 days, 43, 7 days, 40.1 days, 45 days and 47.1 days respectively.

On the contrary, by using Gwadar, the journey time will be reduced to just 29.4 days, which will help to reduce transport costs and improve competitiveness.

ME investment

Pakistan can also urge Middle Eastern countries to invest in the South Asian country, especially in oil, refinery and related sectors. It will be a win-win proposition.

Currently, Saudi Arabia is China’s largest oil supplier, and Kuwait is among China’s top eight oil sellers. By establishing a refinery and other facilities in Pakistan, Saudi Arabia and Kuwait can increase their profit margins.

It will also create opportunities for Pakistan to develop the refinery and related activities. China will benefit from importing petroleum and other products cheaply and through a safe route. In short, the investment of ASEAN countries and the Middle East will help Pakistan on several fronts. It will be a good source of employment for locals and young people as Pakistan is home to a large young population.

It will also provide opportunities to increase Pakistan’s merchandise exports and add to foreign currency reserves, which are needed to repay loans from international lenders. These are just a few examples and a side of Gwadar. On the other hand, Gwadar presents excellent national development opportunities, especially in Balochistan. Pakistan is fully aware of the fact. Therefore, in recent years, he has intensified his efforts to develop Gwadar and other parts of Balochistan.

A few days ago, Prime Minister Imran Khan visited Gwadar, inaugurated many projects and witnessed the signing of memoranda of understanding. The important projects that were launched were the Gwadar Expo Center, a fertilizer factory, an animal vaccine factory, the Henan Agricultural Industrial Park, the Hengmei lubricants factory and the phase 2 of the Gwadar Free Zone.

Federal Planning Minister Asad Umar pointed out that phase 2 of the Gwadar free zone was 35 times larger than the free zones in phase 1.

Agreements for a 1.2 million gallon per day desalination plant and a China solar generator subsidy for southern Balochistan have also been signed.

All of these initiatives will create hundreds and thousands of jobs for the local population. Jobs are desperately needed in Balochistan as there are not many job opportunities. These projects will also help improve the agriculture and livestock sectors in Pakistan through the provision of quality and timely inputs.

The animal vaccine plant will be useful in controlling diseases in animals, which hamper the export of meat and dairy products.

Areas of attention

However, to take advantage of all these opportunities and the potential of Gwadar, Pakistan needs to work in two areas.

First, the country should strengthen the Authority of CPEC for smooth cooperation, planning and execution of plans. The authority has proven itself even during the Covid-19 pandemic and has continued to deliver.

Thus, it is suggested to strengthen it by delegating decision-making and executive powers.

The government should make it a focal point for international business and investment opportunities. It should have the power to facilitate the obtaining of the required services, licenses and authorizations. Second, the equal distribution of jobs between young and talented people will be another area that will require dedicated efforts.

The government will need to ensure that there is no job capture by elites, especially retired government personnel and those close to the ruling class. Youth engagement is extremely important, especially in the context of the Fifth Generation War. Young unemployed people deprived of opportunities will be a real challenge, which will be beyond the control capacity of the state.

Thus, the government should establish mechanisms that ensure fair competition and take into account the special needs of marginalized people.

The writer is a political economist

Posted in The Express Tribune, July 12e, 2021.

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