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What is the impact of the Gwadar port on international trade?

As announced last month, Afghan Transit Trade (ATT) began in earnest, with Gwadar’s main port now allowing cargo ships to dock. Pakistan and Afghanistan both had to do some careful negotiations to reach this complex trade settlement but the first cargo drop had taken place in May and paved the way for many more. This pivotal moment had effectively shown that the port of Gwadar is making its presence known to the world as a global trade point.

As part of an effort by China to connect trade across countries via the One Belt One Road Initiative, the China Pakistan Economic Corridor (CPEC) project is seen as an epicentre of commerce and cultural change between two different nations. With Gwadar and its main deep sea port being a focus point in CPEC, over the next few years, Gwadar is set to welcome many more docking ships from many neighbouring nations in the Arabian sea region including Central Asia, South Asia and Middle East.

Strategic positioning of the port

The Gwadar port holds significant strategic and economic position within Pakistan. It may even rival the likes of the other established Karachi and Qasim ports. Already, Gwadar is seeing brand new jobs being created for the local population. Foreign investment is boosted by free trade zones (FTZ) and special economic zones (SEZ) within Gwadar. These areas offer attractive rates for businesses to set up in Gwadar that include tax holidays, zero VAT and other incentives for business ownership and employment activity. The goal is to attract huge foreign investment and by all accounts its working with companies such as the Yuling Holding Co.Ltd, who deal with botanical and agricultural services, establishing itself last year.

As a new port. Gwadar does have challenges ahead. Although functional there are still infrastructural issues that need to be addressed in the region, as well as bringing the port to the digital age with greater connectivity. These are all issues that can be rectified over time.

Political challenges are also present with China being so widely criticised by the current US government, this even before the pandemic situation. Tensions with neighbouring India will always increase since CPEC’s intentions are to raise the profile and strategic power of Pakistan. Despite these challenges geo-politically, China is aiming to project a statesman-like image to the world with a grand vision for which world countries can see the benefits of such close co-operation between two countries.

In terms of potential regional trade, Pakistan and other Arabian nations still have untapped oil, gas and mineral resources ready to be exploited. The port of Gwadar could easily serve as a transit point serving all of the Central Asian Republics (CARs comprising Kazakhstan, Turkmenistan, Kirghizstan, Uzbekistan and Tajikistan) and the Persian Gulf states. In 2019, Saudi Arabia announced that it was going to build an $10bn oil refinery in Gwadar. Petrochemical industries and storage will also be established there.

As well as the port, the Gwadar New International Airport currently being constructed will be open in three years time. As well as expected air freight import and export trade, the Pakistan’s largest  airport is expected to bring in tourism. Tourism is detailed in the Gwadar Masterplan and an important trade element for bringing in retail and resort business.

Trade from other countries

Trade between Pakistan and Russia only amounts to around $540 million US. This could have the potential to grow exponentially. Existing trade includes Russian exports of chemical products, wood, fertilizers, metal and paper products etc.Pakistan exports fresh fruit, leather, surgical equipment and textiles for example. There’s plenty of opportunity for this to grow profits. Elsewhere, the European Union is already in talks with Pakistan about boosting trade with the BRI and CPEC. With options being limited for the EU elsewhere for cargo shipping due to political reasons (increased tensions with Iran and Russia), the port of Gwadar could offer a transit point with friendly Afghanistan.

Overall, ports allow countries to prosper and boost industries in vicinity of the shipping docks. Gwadar port is to be no exception, providing abundant potential for profitability and business opportunities to accommodate both regional and international trade.

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