July 28 - Aug 03, 2008

China and Pakistan plan to link the Karakoram Highway to the southern Pakistani port of Gwadar in Balochistan through the Chinese-aided Gwadar-Dalbandin railway, which extends up to Rawalpindi in Pakistan. The two countries are gradually advancing toward establishing a trade and energy corridor that has been under discussion of the two sides. The development of road links between Gwadar and China's Xinjiang province will give distinction to Gwadar port of becoming the gateway port for western China.

In the year 2005, Xinjiang reported trade worth $340 million with Pakistan showing an upward trend in their economic interactions. Pakistan emerged as the third largest trading partner of the region after Central Asian states. Kyrgyzstan was the second largest trading partner of Xinjiang in 2005, with a trade turnover of $740 million, up 60 per cent year-on-year. Pakistan's entry into the Shanghai Cooperation Organization (SCO) has also opened new avenues of economic interaction with China and Central Asia, especially through the land route. Xinjiang expects more trade with Pakistan, with the implementation of special tariff package under Pak-China FTA. The economic activities between the two stepped up after the signing of the Early Harvest Program.

Urumqi, the capital of Xinjiang is at a distance of 4,000 km from various ports of China. With the condition of roads and railways in China, it will take millions of Yuans of manufacturers to transfer their goods to ports and even after this expenditure the short time of travel is not guaranteed. As western China is only around 2,000 miles from Gwadar, it makes business sense to make goods for Middle East and EU in western China and then export it through Gwadar. Moreover, western China and Pakistan can also serve as energy corridor for the booming provinces of eastern China. It will not only provide eastern China with cheap and secure sources of energy for its rapid development but also provide a boost to the economy of western China and Pakistan.

While Gwadar port project is going to make Pakistan the gateway to Central Asia for trade, Xinjiang will emerge as gateway to Central Asia for China. The completion of Gwadar seaport project and establishment of port-related communications and links on regional level will bring China and Pakistan in the regional as well as global mainstream of geo-politics and geo-economics in near future. Gwadar has all the natural advantages that can play a major role in serving as a corridor for trade between Central Asia, the Gulf and other surrounding regions. Western China can benefit from the Gwadar seaport through the Sost dry port, which will also create a ribbon of economic activity along the proposed highway linking Gwadar with the Karakoram highway in the north. The movement of oil and trade between Pakistan and China will obviously gain momentum when Gwadar is linked to the Karakoram highway.

Gwadar port will act as a trade connection between the two least developed provinces of China and Pakistan. It would serve as a launching pad for the fast-track development of both the provinces- Xinjiang & Balochistan and help bring the two regions at par with other developed regions of China and Pakistan. The port will open new vistas of economic development and new avenues for trade and business in the two least developed provinces.

Gwadar is strategically located at the crossroad of Central Asia, South Asia and West Asia. Islamabad has already committed that it would do all to turn Pakistan into an energy and trade corridor for China. There are several proposals floated in this regard. The first one and most likely to be implemented is a pipeline from Iran to China. The feasibility study of this project is already underway. Another one is to initially establish a rail link and transfer LPG from Middle East to China by using railway carriages, as billions of dollar investment will be required for the pipeline. Railway link will also provide a cheap way to transfer other goods to and from western China, changing it from a remote region to a station that will transfer goods and commodities worth billion of dollars every month.

The dry port at Sost on the Pak-China Border in northern areas is the latest Pakistani dry port established with the help of China. Situated in Gojal Tehsil of Hunza subdivision, some 300 km north-east of Gilgit, the Sost Dry Port has become a hub of trade activities in recent years. The Chinese have built dry-port facilities at Sost to facilitate customs clearance and other formalities for goods coming in from China on the Karakoram highway. The facilities at Sost can also be used to handle goods going from Pakistan to China. Gilgit has acquired the status of gateway to Central Asia after Pakistan-China barter trade agreement and accords with Central Asian States. The establishment of Sost Dry Port has also multiplied border trade between the two countries.

China has been focusing on building the strategic transport links between Pakistan's Northern areas and its remote western regions including Xinjiang. The number of road links between Pakistan and China has risen to eight after an agreement signed between Islamabad and Beijing two years ago. Under the accord, China and Pakistan opened four new passenger and cargo road links. While the two cargo routes run from Kashi in southern Xinjiang to Pakistan's ports of Karachi, Bin Qasim and Gwadar. The passenger lines run from Kashi and Taxkorgan, also in southern Xinjiang, to Pakistan's Northern Gilgit and Sost Pass respectively.

The Asian Development Bank has agreed to provide $1 billion for the National Trade Corridor (NTC) project that would link Karachi to Gwadar and Khunjrab in Northern Areas. The highway will be made commercially viable by encouraging commercial and industrial activities and the revenue generated by these activities would contribute towards the cost of the NTC project. It is worth mentioning that the World Bank and other lenders have already agreed to provide $1.8 billion for the Karachi-Gwadar-Khunjrab section, which is estimated to cost $2.8 billion. The World Bank will provide $300 million a year.