Future of Pakistan

July 09 - 15, 2007

To all economic planners and development strategists, Balochistan by virtue of its geo-strategic location and huge natural resources presents a veritable economic bonanza. Given its rich natural endowment and geo-strategic location, the province has the potential to emerge as Pakistan's new economic frontier. The roadmap for Balochistan's development as drawn under Musharraf administration by launching Mega projects like Gwadar free port was mainly aimed at opening the strategically located province for foreign investments and exploiting its vast natural resources.

Integration of markets across international boundaries is a powerful force for economic development. In the context of emerging geo-economic imperatives, Balochistan's strategic location has enhanced its importance in the region. The development of communication links, network of roads, railways and relating activities, including trade transactions, goods transportation and storage facilities would integrate the Balochistan economy with landlocked Afghanistan and the Central Asian Republics (CARs).

Balochistan is rich in natural resources. Its tremendous mineral potential, wider scope of agricultural development, its water resources, its strategic location of immense geopolitical importance, its sea-resources and the colossal potential in all sectors of economic development has endeared the attention of both local and foreign investors.

In the past four years, the federal government launched mega projects at an estimated cost Rs140 billion for opening the province to foreign investment.

A greater fillip to commercial, trade and economic activities is highly expected after the development of deep-sea port in the province. According to an estimate, the Gwadar port has the potential to generate over $ 50 billion in transit trade annually in future and after becoming fully operational along with strong communication and transport links with CARs, an estimated two-thirds population of Balochistan will become part of port-related activities. The establishment of Free Trade Zone, and Export Processing Zone (EPZ) will open the doors for development of small, medium and large scale industries generating revenue for the government and providing profitable avenues for both the skilled and non-skilled workforce in Balochistan. As a regional hub of business, trade and commercial activity, Gwadar port would provide a solid base for the economic progress of the province. Gwadar Special Economic Zone (GSEZ) would attract foreign as well as local investment giving a big boost to the exports of the country.

Pakistan views Central Asia as its strategic hinterland. Central Asia is home to a significant amount of the world's known oil and gas reserves. It has a rich mineral base, fertile agricultural land, well-educated workforce, and a decent transport network. These assets lay solid foundations for economic growth, investment, and trade. For landlocked Central Asian economies, Balochistan offers access to new resources and markets and the prospect of more rapid growth. The proposed Turkmenistan gas pipeline project (TAP) would develop a regional trading system, by facilitating trade through the Karachi port via coastal highway and through Gwadar port to Afghanistan and through Afghanistan to the CARs. Similarly, the Central Asian states would find ways to transport goods and vast untapped energy resources to Pakistani ports and to the rest of the world.

Balochistan's geo-strategic location makes it the most attractive for transit traffic to the landlocked CARs. Gwadar port would provide Afghanistan and the CARs the shortest and fastest access to the warm waters of the Arabian Sea. The port complex will provide facilities of warehousing, transshipment, transit and coastal trade, commercial and industrial openings for international export-import trade.

The government has prepared a Rs400 billion plan to rehabilitate the country's major road network by 2012 so that quick trade and travel linkages with China and the Central Asian Republics can be provided. The plan has been linked to Gwadar port which has been operationalized. The port will have increased facilities including an international airport, free industrial zone, export processing zone and a housing scheme for local and foreign investors. The Asian Development Bank has also agreed to fund a $455.7 million cross-border infrastructure development programme aimed at creating a sub-regional corridor from Gwadar port to Afghanistan and Central Asia. Under the programme, a Trade Facilitation and Land Border Crossing Authority is being established to supervise significant land border crossings and facilitate freight and passenger cross-border and transit traffic.

Pakistan is developing additional infrastructure, which will serve both bilateral and transit trade with Central Asia. Pakistan will spend Rs12 billion on road sector development, which would include the Gwadar-Karachi, Gwadar-Khuzdar-Quetta-Chaman, Gwadar-Khuzdar-Ratodero highways, opening route to Afghanistan and the CARs. The Asian Development Bank (ADB) already earmarked $500 million for the construction of the ECO Highway linking Gwadar with Turkmenistan. Around $300 million will be spent in Balochistan and the remaining fund in Afghanistan and Turkmenistan.

The planned railway line from Chaman to Spin Bodlak would facilitate the utilization of the vast potential of Balochistan's trade with Afghanistan and through Afghanistan with the countries of Central Asia. A road from Gwadar to Saindak, running parallel to the Iran-Pakistan border will make it the shortest route to reach Central Asia from the warm waters of Arabian Sea.

There are many daunting challenges that need to be seriously addressed if Balochistan is to integrate successfully with the Central Asian economies and to turn its potential into reality. First and foremost is the challenge of infrastructure development. An efficient transportation network is essential for this integration.

An efficient national highway system can contribute largely to the economy by lowering the transportation costs and increasing international traffic once the Gwadar port is completed. The government must place high priority on improving the efficiency of land border crossings to facilitate cross-border and transit traffic.

The second challenge is to nurture an enabling environment that fosters entrepreneurship and private sector development. A competitive base of small and medium enterprises and efficient state-owned firms is a prerequisite for benefiting from this integration. What is critical in this regard is to improve governance and strengthening legal and regulatory frameworks.

The third challenge is poverty alleviation. Balochistan is the poorest province of the country. The ongoing process of economic development, the associated job creation, and the province's rich natural resources have yet to make a meaningful dent in poverty.

Fourth, the Balochistan is to set up market for exporting different items to Afghanistan and concentrate on trade with the CARs through the neighboring Afghanistan.

Fifth and the most important challenge for Islamabad is to create a peaceful and stable environment by improving law and order situation in Balochistan. Tribalism cannot be combated under shadows of army garrisons but it is the educational academies, technical institutes and high-profile vocational training centers that initiate the process for transformation and transition of a closed society. Pakistan's prosperity is linked with an open and developed Balochistan rather than a garrisoned or tribal province. Only the educated, skilled and healthy local population can make the best use of the enormous natural resources of Balochistan.

Syed Fazl-e-Haider,, is a Quetta-based development analyst in Pakistan. He is the author of six books, including The Economic Development of Balochistan, published in May 2004.