VIABILITY OF LAUNCHING GWADAR STOCK EXCHANGE (GSE)

SYED FAZL-E-HAIDER
Feb 09 - 15, 2009

Present government has made serious effort to make Gwadar deep sea port in Balochistan functional. Operationalization of Gwadar port has brightened prospects for lucrative business and profitable investment in the port city. Port city of Gwadar is being developed into a hub of economic activity not only for Pakistan but also for neighboring Central Asian countries.

International investors are eyeing Gwadar as emerging investment centre on the confluence of South, West and Central Asia. The government should work out a plan to establish a Gwadar financial free zone (GFFZ) and constitute a Gwadar Financial Services Authority and ultimately launch an independent share market at Gwadar. It is the right time for undertaking a feasibility study for these projects, as Gwadar is expected to become fully operational by the end of this year.

After the completion of mega seaport project, a Gwadar Stock Exchange (GSE), if it is launched, would have a greater scope as a platform of choice in the region. It would provide its members a range of equities, bonds, funds and financial products. As an organization GSE would facilitate the brokers and traders to trade their companies' stocks and securities. The securities may include the companies' shares, bonds and unit trusts.

The proposed bourse would provide the financial instruments and facilities to the stock traders for the issue and redemption of securities. The GSE would provide the companies a primary market for listing or at least for recordkeeping. It can become a part of national or global markets for trading of securities. It would provide an opportunity for the investors to invest in South Asia, Western China, Central Asia and the Middle East. A financial free zone needs to be established in Gwadar port city first and the proposed GSE should be established in the financial free zone. The entire operations of the stock exchange with all other financial activities could be regulated by a Gwadar Financial Services Authority.

A stock exchange in Gwadar would help corporate sector to grow in Balochistan. The local investors and companies would be able to list their securities in the GSE. The bourse would have a friendly impact on the local economy. Presently, Balochistan lacks the presence of a vibrant private sector, which is considered as engine of growth for any economy. There is no industrial infrastructure and hence no activity and no investment opportunities for the private sector in the province. It is because of these ground realities that the idea of launching a Stock Exchange in Quetta, the provincial capital, has not been encouraged so much or warmly welcomed by the local investors and business community in the country. Though the province undoubtedly has the enormous potential in all its economic sectors and geo-strategic location, the growth and diversification of the local economy will take a long time. The government needs to develop necessary infrastructure and offer attractive packages in order to mobilize the private sector for its active participation in development activities in the province.

Gwadar has earned an international image for its ongoing Chinese-built seaport project and score of other projects related to the development of a 21st century's port city on southwestern coast of Pakistan. By virtue of its geo-strategic location of immense geo-economic importance, Gwadar has the potential to become a trade and business hub in the region. The government plans to develop Gwadar as a free port on the lines of Jabal-e-Ali port in Dubai.

Jebal-e-Ali Free Zone has been created to attract the foreign businessman accustomed to certain levels of quality and efficiency. The zone is served by a modern infrastructure of excellent roads, water and power. It is the ideal warehousing and distribution hub for a market of some two billion people. Combining the services of the best port in the Middle East with an efficient and dynamic infrastructure, it offers a unique opportunity to do business in the Middle East. More than 2,800 companies from more than 100 countries are already based in Dubai. They include many global brand leaders such as ABB, Black & Decker, PFAFF, Komatsu, Cussons, CIBA-Geigy, Tetra-Pak, Colgate-Palmolive, Nestle, HJ Heinz, Unilever, Nivea, L'oreal, BP, Total Lubricants, Shell, BASF, Honda, Tata, Nissan, Mitsubishi, Bridgestone, Acer, Bose, JVC, Toshiba, Sanyo, Yamaha, Sony, Matsushita, Philips, Siemens, Nokia, and Daimler Chrysler and others. The Dubai International Financial Exchange (DIFX) is a stock exchange that was opened in September 2005.

There are expectations that multi-national companies from across the world would transact their trade at Gwadar and provide the country much-needed foreign exchange. Like Dubai Stock Exchange, Gwadar securities trading market may provide its members with one-stop solution to trading, clearing, and settlement. Dubai international financial exchange had started operation with only four members on the board, but just in one year it had 40 members and it listed 10 to 15 IPOs to gain a market capitalization of US$ 50 million by the end of last year. On the pattern of Dubai, the GSE can also start its operation with a few members to gain a minimum market capitalization in early stages.

GSE can emerge as the leading stock exchange between western China and South Asia. With a view that the strategically located Gwadar port has the potential to serve as mother port of the region, Gwadar stock market should be created to list securities from different countries in the region. It would bridge the gap between South and West Asian markets and the markets in the Middle East and Central Asia. Besides US dollar, the GSE must have the capability to trade in other currencies like Euros and Pound Sterling. It should be operated as an independent stock market with no limits on foreign ownership.

Gwadar is the only district in Balochistan where multi-billion dollar projects are currently in execution stage. Investors from all over the world see Gwadar as gateway port for Central Asia and western China. It is expected that global brand leaders may shift their bases to Gwadar, as it is more economically viable and politically safer than Gulf ports.