DEVELOPING AUTOMOBILE INDUSTRY IN GWADAR PORT CITY

SYED FAZL-E-HAIDER
May 19 - 25, 2008

Gwadar port project is currently in its second phase of development. The 15-year physical development program of the port includes the construction of multipurpose terminal, container terminal, LNG terminal, chemicals terminal and clean dry bulk terminal and liquid bulk terminal. An industrialization process will get a boost in the second phase, as the private sector gets actively involved in the development activities. With the functioning of industrial zone, Gwadar would become a hub of industrial activities. The government has reserved 3000 acres of land for the development of Gwadar Industrial Estate (GIE) to meet the demand of industrial plots and to cope up with the needs of modern industrialization in the future port city.

Strategically located on the mouth of Persian Gulf, Gwadar has the potential to emerge as a strategic manufacturing and assembling hub for the country's automobile industry. Pakistan automobile industry has set the target of manufacturing half a million cars and one million motorcycles by 2010. The industry is currently enhancing its production capacity due to the rising demand. Pakistan automobile market has witnessed a rapid growth and hefty expansion over the last five years.

Located at Karwat on Mekran coastal highway about 40 km from Gwadar port, the Gwadar Industrial Estate (GIE) is the first industrial estate of the emerging port city and the biggest one in Balochistan. Over 1,100 plots have been allotted to industrialists in the estate. About 3000 acres of land has been reserved for the purpose. Federal government has already decided to establish an export processing zone (EPZ) on a 1,000-acre plot in Gwadar for providing better import and export facilities. The EPZ has also been planned for assembling plants and other industries which are to be set up by the prospective manufacturers for marketing in the region of Gulf and Central Asian republics.

Gwadar offers greater scope for the development of automobile, which is an export driven-industry providing lucrative investment opportunities for foreign investors. Pakistan automobile market is dominated largely by Japanese and Korean manufactures like Suzuki, Honda, Toyota, Hino, Hyundai and Mazda. Many foreign manufacturers including Chinese are reportedly in negotiations with Pakistan to start assembly operations in the country. These manufacturers may be lured to establish the manufacturing and assembling units in the new port city of Gwadar.

Development of automobile industry in the port city would not only help achieve the automobile vision 2010 of 500,000 units, but it would also help diversify the provincial economy. It would also create more employment opportunities to the people of the province. The province however lacks the essential infrastructure and skilled workforce for the development of automobile sector. The government should create such conditions in the province that could attract over two dozens Pakistani manufacturers and assemblers, who have technical collaborations with Japanese and Korean manufacturers.

The free zones, which would be set up in the port city of Gwadar, would contribute to the harnessing of the province's potential in natural resources and development of heavy and large-scale industries, petrochemicals and manufacturing. The government can mobilize the private sector for setting up the manufacturing and assembling units in the new port city of Gwadar. It has already announced a 15-year tax holiday for the proposed EPZ that has been planned near the Gwadar port for local and foreign investors. The assembling units in Pakistan are already assembling most of the world leading brands and the government can facilitate the private sector to set up assembling units in Gwadar.

The government should take advantage of the geo-strategic location of Gwadar and make serious efforts to start at least assembly operations in Balochistan. The Engineering Development Board (EDB) should help the provincial government and private sector to develop auto sector in Gwadar. The EDB was established in 1995 for the uplift and up-gradation of automotive parts and components industry under public-private partnership. The former government of Prime Minister Shaukat Aziz had decided to turn the EDB into the Engineering Development Authority (EDA). Moreover technical assistance may also be sought from Technology Up-gradation and Skill Development Authority, which was also established under the public-private partnership. The authority has already taken a number of steps for improvement in production and design capabilities of the automobile industry in the country. It can also help in establishing the technology up-gradation centers in different districts of the province.

Pakistan can gain from China's significant success in launching 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. 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. 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. Shenzhen is a centre of 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. Like Shenzhen, Gwadar under Chinese is likely to emerge as boomtown in Balochistan.

The private sector should come forward and make investments for the development of automobile industry in the new port city. The provincial government should provide them land and other facilities and also offer incentive packages to attract the local and foreign investors. The major constraints in the industrial development of the province have been the lack or the absence of infrastructure, scattered nature of population, vastness of area, dearth of skilled labor, social structure, tribal feuds and lack of marketing facilities. The federal government may also provide technical and financial assistance to the province for developing essential infrastructure in this regard. The technical institutes need to be set up in different districts of Balochistan to provide skilled workforce to the industry at local level.