The beginning of Afghan Transit Trade from Gwadar Port marks the conversion of Gwadar into a regional hub port. Last week, a ship carrying first consignment of fertilizer for Afghanistan anchored at Gwadar Port in Balochistan. The port already has the trade related infrastructure to handle bulk cargoes to and from Afghanistan. Afghan traders will have the facility of transshipment and transit through the Port that will give a boost to their trade activities and quick clearance of their goods. Gwadar Port is a crucial part of over $60 billion China-Pakistan Economic Corridor (CPEC) and is considered to be an important link to China’s trillion dollar Belt and Road Initiative (BRI).
Last year, the country allowed the transit trade for Afghanistan from the port .The bulk cargoes imported at the Port for onward transit to Afghanistan will be transported in containers after stuffing/loading the same into containers of international specifications. The landlocked country relies on Pakistani land routes and the two ports of Karachi and Port Qasim for international trade after a bilateral agreement, known as the Afghan Transit Trade Agreement (ATTA), was signed with Islamabad. Now the Gwadar Port offers a shorter overland link to Afghanistan, particularly to southern regions of the country. The Port will increase the transit trade activity between the two neighbours. Pakistan takes roughly 47 percent of total Afghan exports, and some 60 percent of Afghan trade goes through the Torkham border crossing.
Last month, Gwadar Port went operational for export with the departure of a vessel carrying three fish containers worth $50,000 each, for a Far-Eastern country. The departure marked the operationalization of the country’s third deep-sea port for export after Karachi and Bin Qasim. The container line service of China Ocean Shipping Company (COSCO) Shipping Line is an integral part of the CPEC project which connects Afghanistan, the Central Asian states and western China. In September, the first container line service between Karachi, Gwadar and the Gulf was successfully initiated. The seafood export started last month through COSCO’s KGS (Karachi-Gwadar-Gulf Service) service. The KGS has operationally connected Gwadar Port with the world’s seaports.
Balochistan could become the primary beneficiary by exporting multiple commodities especially seafood, fruits, vegetables, marble, minerals, and many other locally available commodities to the world’s markets through Gwadar port. The transit and trans-shipment rules as part of Gwadar port’s development are currently being drafted and the government formed a committee last month for this task. The port has already been included in the transit rules framed under the Afghanistan-Pakistan Transit Trade Agreement 2010.
Gwadar Port is poised to target the large untapped market of coastal trade between national seaports, ATT, regional trans-shipments and exports and imports. Gwadar is the country’s deepest port with its existing three 14-meter deep berths to handle ships. Five new berths will be added to the existing three berths for handling bigger ships under the port expansion plan. Under the second phase of port development, the depth of the Port would be increased to 16 meters to facilitate bigger ships. There are also plans to increase the depth to 20 meters in future that will make it the port deepest in the region. The facilities planned at the Gwadar hub port include warehouses, storage areas, distribution center, offices, trucking and shipping services.
China Overseas Port Holding Company Limited (COPHCL), the operator of Gwadar Port, has been granted tax exemption for 23 years to help establish industrial units at the Gwadar Port. This decision was a step towards rearrangement of the Chinese manufacturing industry in Gwadar, and busying the local labor. In 2013, the concession agreement with the COPHCL included a tax holiday for both the operators of Gwadar Port and the businesses being set up there. The country approved income tax exemption for Gwadar free zone on the income of operating companies from port operations. The income tax holiday was not only extended to COPHC but also to Pakistan Private Limited, Gwadar Marine Services, and Gwadar Free Zone Company.
Last year, the CPEC entered the second phase of development. Pakistan’s President Dr Arif Alvi promulgated two ordinances to set up the CPEC Authority and grant tax concessions to the Gwadar Port and its free zone in a move to show Islamabad’s seriousness in Beijing’s CPEC initiative. The CPEC Authority Ordinance 2019 and The Tax Laws (Amendment) Ordinance 2019 are aimed to set up a new body to oversee and implement CPEC and give income tax exemptions to Gwadar Port and its free zone. The government has fully empowered the CPEC Authority, which would make its own budget and its executives would be immune to legal prosecutions. The CPEC authority will manage and control the development work as carried out by the CPEC secretariat.
Master plan of port city
Gwadar Smart Port City Master Plan is bound to transform the port city into a hub of industrialization, commercial activity and international marine trade. It is a vital part of China Pakistan Economic Corridor (CPEC). In August 2019, the Gwadar Development Authority accorded final approval to the Master Plan while the feasibility study (PC-II) for implementation of Gwadar Smart Port City Master Plan was also approved.
With the growth of the port city would grow, enormous employment opportunities will be created for the local as well as for the people hailing from other parts of the country.
Moreover, the development of the port, free zone and industrial zones will create huge job opportunities. The employed population is expected to reach 9,000 to 12,000 in short term, 24,000 to 30,000 in medium term while 100,000 to 120,000 in the long term. The labor participation will also be increased and Gwadar will become a productive and efficient city.
The contribution of Gwadar’s smart port city in Pakistan’s Gross Domestic Product (GDP) will raise up to US$200 billion to $300 billion by 2050, according to a forecast by Ministry of Planning and Development. Gwadar Port is projected to contribute $6 billion in short term by 2025 and $24 billion in 2035 to Pakistan’s economy. Similarly, the per capita income of the citizens of Gwadar city would be around $2,000 in 2025 while it would rise to $4,000 by 2035. According to the long term forecast, the per capita income of the city would further surge to around $10,000 to $15,000.