Research Analyst
Jan 17 - 23, 2011

Gwadar has an immense geostrategic significance, as it is located in heavily populated South Asia and near economically emerging resource-laden region of Central Asia.

With a population of 160,000, the Gwadar town on Makran coast is now set to become a hub of shipping, commercial and industrial activities. The main investors in the project are Pakistani government and People's Republic of China.

Pakistan and China signed a comprehensive agreement on March 16, 2002 at Beijing undertaking the task of construction of Gwadar deep seaport of universal standards. The convergence of Sino-Pakistani strategic interests has put the port project onto a fast track to its early completion. In three years since its inauguration, the first phase of the project has already been completed with three functioning berths. The total cost of the project was estimated at $1.16 billion. China pitched in $198 million and Pakistan $50 million to finance the first phase. China also invested another $200 million into building a coastal highway that would connect the Gwadar port with Karachi. The second phase, which would cost $526 million, would feature the construction of nine more berths and terminals and would also be financed by China.

The project is bound to be a vital landmark in the economic development of the region.

The port comes as a much-needed national requirement in the wake of the rise in cargo traffic at Keamari and Bin Qasim, which are operating at full capacity. With the construction of a third port, it is estimated that Pakistan will not only be able to meet its own requirements of the future but also offer its port facilities to the neighboring countries.

Gwadar is now destined to be the most important upcoming coastal town located on the inter-junction of the three most strategically and economically important regions of the world that are oil rich Middle East, South Asia where one fifth of world population lives, and the Central Asian Republics endowed with mineral wealth, educated and highly skilled and disciplined workforce. Pakistan wants to establish a mega oil city at Gwadar port, which is the most strategic project with an investment of $40 billion and with biggest crude and refined oil storage base in the region, for which it had allotted 12,500 acres of land. The government had announced that the required land be made available on lease at nominal rates to the interested parties for setting up refineries or making investment in oil logistics and storage facilities. The Gwadar port is expected to generate billions of dollars in revenues and create at least two million jobs.

Furthermore, China's plan to be engaged in many places along oil and gas roads is evident. Despite occupying a huge area of world's land, it doesn't have any port of hot waters, which can be used the whole year. The distance of Chinese industries to the Shanghai's port is approximately 16000 km and the sea travel of 2-3 months is additional. This costs them a lot in the form of taxes and duties as well. Therefore, the interest of China in the development of Gwadar port is in fact in the interest of Chinese economy. The central Asian states, after the independence from USSR, are trying to develop their economies. These states are land locked and Karachi is expected to provide them the services through Afghanistan. For this purpose, a highway from Peshawar to Karachi was constructed but due to Afghan crisis, this line couldn't be established. Gwadar being near to Iranian border will provide port facilities to Central Asia as well. To connect western China with Central Asia by land routes, Pakistan is working on building road links to Afghanistan from its border town of Chaman in Balochistan to Qandahar in Afghanistan.

In the northwest, it is building similar road links between Torkham in northwest frontier province and Jalalabad in Afghanistan. Eventually, the Gwadar port will be accessible for Chinese imports and exports through overland links that will stretch to and from Karakoram Highway in Pakistan's northern areas that border China's region of Xingjian.

In addition, the port will be complemented with a modern air defense unit, a garrison, and a first-rate international airport capable of handling airbus service. In the meantime, the Chinese petroleum industry has indicated an interest in shifting its excess capacity to Gwadar, bringing an estimated investment of $13 billion.

Dubai is the hub of business not only for Gulf but also for rest of the world including Europe, United States, Africa, China and central Asian states, simultaneously. The gulf region is facing many political conflicts at the moment and huge disturbances in the current administrative structure are expected in the coming years. In such scenario, a substitute of Dubai is essential to be located before the crisis hits the finances of millions. Fortunately, Gwadar proves to be the nearest and in fact more cost-effective substitute of Dubai, from many aspects.


The recent catastrophic floods have serious implications for the macroeconomic stability and growth prospects in Pakistan. However, even before the floods, the macroeconomic conditions and outlook were looking fragile. The Gwadar project is a good sign for Pakistan's economy and it is a brilliantly planned project. In fact, Gwadar enjoys the status of a third deep seaport of Pakistan, which has a special significance with reference to trade links with Central Asian countries, Persian Gulf, East Africa, United Arab Emirates and North Western India.