SHENZHEN MODEL FOR DEVELOPING GWADAR

Port starts operations

SYED FAZL-E-HAIDER
July 02 - July 08, 2007

Port of Singapore Authority (PSA) has started port operations at Gwadar in Balochistan after President General Pervez Musharraf inaugurated deep-sea port project on March 20. The total cost of the Gwadar seaport project is estimated at $1.6 billion and China has so far contributed about $198 million to complete the first phase of the project. On what lines Gwadar would be developed? Dubai, Hong Kong and Singapore have been the popular seaport models for developing Gwadar in Islamabad's official circles. China however had planned to develop Pakistani seaport of Gwadar on the pattern of its Shenzhen port from the very beginning.

In 2001, Beijing had pledged $50 billion investment for two-phased mega seaport project at Gwadar. The lion share of the investment had been planned for the petrochemical industry. Today, a Chinese company is carrying out the feasibility study of the US$12.5 billion strategic project of petrochemical city at Gwadar. The new port city of Gwadar is likely to evolve on the lines of China's Shenzhen if the things go as have been planned by Islamabad and Beijing.

Located in China's southern province of Guangdong, the boomtown of Shenzhen is a key gateway to the country's huge Pearl River Delta manufacturing base. Like Shenzhen, Gwadar under Chinese is likely to emerge as boomtown in southwestern Pakistani province of Balochistan. Shenzhen, once a fishing village of 20,000, has emerged today a synonym for the success stories of economic zoning. For the past three decades, Shenzhen has been the fastest growing city in China and rapidly evolving city in the world. Since the establishment of the Special Economic Zone (SEZ), Shenzhen has seen tremendous economic activity and rapid increase in its population. According to the official estimates, its population is at around 9 million. Independent sources however, estimated its population at a total of 17 million in 2005.

Presently, Gwadar is also a small fishing village of 100,000 people on the Arabian Sea in Balochistan. After completion of deepwater port and several projects related to this mega seaport project, it is likely to emerge as Pakistan's great boomtown on the pattern of Shenzhen, the busiest port in China.

Located at the border with the Hong Kong Special Administrative Region http://en.wikipedia.org/wiki/Hong_Kong , Shenzhen was initially set up to provide a new low-wage manufacturing base for Hong Kong-based companies, and later on it was joined by investors from Taiwan and multi-nationals from all over the world. It has fully exploited the advantages of its proximity to international markets like Hong Kong, Taiwan and Macao. Shenzhen Port handled a record number of containers in 2005, ranking as the world's fourth-busiest port. During the 5-year period (2001 to 2005), Shenzhen has witnessed on average an economic growth of 16.3 percent annually. It ranked the fourth in GDP among mainland Chinese cities in 2001 and it is still in the top ranks in terms of comprehensive economic power. It is the second in terms of industrial output.

Gwadar is situated atop the shipping lane through which at least 60 per cent of the world oil passes. Dubai is about 500 nautical miles from Gwadar. A vessel takes more time and money for calling at Gulf ports. After the first Gulf war, Islamabad realized the need of constructing a deep-sea port at Gwadar that would have the potential of handling traffic from the ports of Bangladesh, Sri Lanka, East Africa, Oman, UAE, Qatar, Bahrain, Saudi Arabia, Kuwait, Iran, Iraq and the land-locked countries of Afghanistan, Tajikistan, Kyrghyzstan, Uzbekistan, Turkmenistan and Kazakhstan. Pakistan and China had planned to develop Gwadar port as a landing point for international cargo heading to western China. It is expected that the port would cut down the sea journey time for imports to China and save the country's millions of dollars. It can also give China access to the ports in the Gulf region.

Shenzhen is the China's most successful special economic zone (SEZ). The zone comprises of a financial and trading centre called Luohu; the municipal government area called Futian; the centre for high-tech industries called

Nanshan and the deepwater container terminal called Yantian, which is knownfor logistics <http://en.wikipedia.org/wiki/Logistics>. The Chinese government allows Shenzhen to accelerate market access for foreign investors. In China the central government gives SEZs special policies and flexible measures, allowing SEZs to utilize a special economic management system. SEZs are listed separately in the national planning and have province-level authority on economic administration. Foreign investors enjoy special tax incentives and greater independence on international trade activities in the SEZs.

Pakistan has already declared Gwadar as a special economic zone (SEZ) and all imports coming through this zone would be exempted from customs duty and sales tax along with sufficient concessions on income tax. Islamabad has also decided to give a seven-year tax exemption to industrial and commercial establishments in the Gwadar Special Economic Zone (GSEZ). A special industrial development zone (SIDZ) with an area of 4,000 hectares has also been proposed for setting up various industries. The SIDZ project is of great importance in the development of Gwadar. It would help in increasing import and export of the country. Moreover, an export processing zone (EPZ) on a 1,000-acre land at the SIDZ has also been planned. It will provide better import and export facilities.

In November last, Shenzen Administration Bureau of Bonded Zone had reportedly submitted a plan to the provincial authority for turning its bonded logistics zone into a free port. Shenzhen is qualified to become a free port however, the industrial experts doubt whether the upgrade could have a real impact on the growth of the ports. The China already has three free ports including Yangshan at Shanghai, Dongjiang at Tianjin and Dayao Bay in Dalian. Shenzen as free port can work together with Hong Kong to compete with other Asian ports, including Pusan of South Korea and Singapore. The cargo and container throughput handled by Shenzhen ports is expected to rise due to the booming foreign trade in the Pearl River Delta.

Islamabad's initiatives like establishment of Free Trade Zone and 40-year corporate tax-exemption to port operators, reflect its plan to develop Gwadar on lines of free port. It has become a virtual tax-free port to the extent of its development and operations. With the exception of Chahbahar port in Iran, Gwadar will be the only free port between Dubai and Colombo providing container storage and warehousing facilities.

Shenzhen is a centre of foreign investment http://en.wikipedia.org/wiki/Foreign_investment. In the past two decades, outsiders have invested more than $30 billion in Shenzhen for building factories and forming joint ventures. Investors in Shenzhen are expanding to take advantage of rising volume. Hong Kong-based Hutchison, the international port operator, and its mainland Chinese partner have recently announced their plan to add six berths at Yantian http://en.wikipedia.org/wiki/Yantian by 2010. China Merchants, a State-controlled port manager plans to pay its parent company US$265 million for land at Shekou http://en.wikipedia.org/wiki/Shekou to expand its cargo business.

Pakistan can gain from China's significant success in the launching of special economic zones like Shenzhen, which has undergone steady growth, achieved great successes and accumulated experience in its pioneering and exploratory work. It has been successful in attracting foreign investment, introducing advanced technology and producing readily marketable and highly competitive products to expand exports.

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.

sfazlehaider05@yahoo.com