Under the CPEC, Pakistan has got a golden opportunity and a springboard to leapfrog its progress and prosperity, just like the Panama and Suez canals have done to their respective nations, Panama and Egypt and the port of Singapore has contributed to Singapore. In both these cases, the leaders of these countries gave the topmost national priority to these projects to harness them as the permanent GDP sources for their nations. Just before the recent expansion, the Panama Canal was generating 1 Billion US$ toll revenues to Panama’s national wealth and after the recent expansion, by allowing the megaships (Neo-panamax ships) through, it is close to doubling its revenues and is projected to triple them, soon! In case of the Suez Canal, as of 2015 data, it added 5.37 Billion US$ to Egypt’s economy.
With the Gwadar port (as part of the CPEC project), Pakistan can attract a lot of Foreign Capital (FDI) and Industries that will help the economy so much that its dividends will alleviate the need to beg to the IMF and other donor agencies every year. By playing its cards right, Pakistan can attract Chinese capital and its Industries that are being affected by the current tariff war between the USA and China. In order to do this, first in addition to creating the TAX-FREE zones, Pakistan must publicize its foreign investment (FDI) policies and guarantees SAFETY & SECURITY of the investments by holding conferences and presentations on local and provincial levels in China. Pakistan should emphasize that it has English speaking skilled personnel, low wage labor pool, good infrastructure, newly developed and state-of-the-art modern port, trade free zones, one stop agency for all the approvals and permits compared to other nations in the Southeast Asia (Vietnam, Myanmar, Thailand, Laos, Bhutan, etc.). Pakistan should borrow the business model (the foreign offices bureaucrats & staffs were mandated to learn the local customs/culture to become effective sales person of their country) that has been successfully used by Singapore and South Korea for many years for attracting the foreign direct investments (FDI) in their countries in order to get out of the “third world” rut. However, Pakistan’s foreign service offices (Embassies & Consulates) and their bureaucrats have very little knowledge about Chinese culture, business practices, and most importantly how the current tariff war between the two biggest economies of the world (USA and China) is shaping up? What policy makers in Beijing and Washington D. C. are telling their state-owned enterprises (SOEs), private manufacturers and the USA based corporations and multinationals, how to cope with the current tariff environment and to prepare avoiding it in the future. China is advising its constituents to relocate their factories in the other neighboring countries to circumvent the tariffs in the future. While the USA is asking its corporate executives and the multinationals based in China to come back to the USA by offering them hefty tax incentives.
Even though during the just last few days, the 1st phase agreement has been signed between the USA and China to push back on the additional tariffs and China has agreed to give few concession to USA for importing certain volume of the commodities to help ease the farming communities pressure on the White House. According to the seasoned trade experts, this agreement is just a Band-Aid and it will not change the dynamics of the trade war between China and the USA as the fundamentals issues have not been resolved. Thus, Pakistan should use this golden opportunity (the tariff war between the USA and China) to capitalize on it by devising a strategy/policy to attract the Chinese factories relocation program and the direct investments (FDI) by publicizing the TAX-FREE zones in the CPEC region. Through the state-of-the art Gwadar port, exports and imports will flourish at an unprecedented rate due to the significant costs savings and the transit time reduction, that will benefit not only China and Pakistan but along the way, Central Asia nations will also benefit from it. The port will provide a NEW gateway for the global trade and shipping from China to the Middle East, Europe & Africa and vice versa by reducing the transportation costs and the transit times, significantly. Additionally, it will create a lot of new jobs and bring prosperity to all the nations that are part of the B&R initiative via CPEC (revival of the old SILK Road), stretching all the way from Southern Pakistan (Gwadar) to Western China through the landlocked Central Asia nations (Kyrgyzstan, Tajikistan, Kazakhstan, Uzbekistan and Turkmenistan). The distance from Gwadar to Xinjiang will be reduced significantly (~3000 kilometers) compared to the current sea-route (12000 kilometers) through the straits of Malacca. Thus, in case of any threat through the straits of Malacca by the hostile players, the Gwadar port will also prove a strategic route for the safe passage of trade & shipping for all the nations who have vested interests in the B&RI program. In other words, in the event of any conflict through the straits of Malacca, the port will keep flowing the trade and shipping of the oil and energy from the Middle East to the region.
The Gwadar port is one of the state-of-the-art ports of the region and is the only Deep-Sea port in the area that can handle the Pananmax ships (120,000 DWT and up to 13,000 TEU). Under China Overseas Port Holding Company (COPHC) the Gwadar port has already started its operation and a vessel has recently arrived with the LPG from the Middle East and another ship has also started offloading its cargo for Afghanistan. The state-of-the art (Deep Sea) port just like the Singapore port when it was built. This can be achieved easily by allocating dedicated resources (knowledgeable staff, accountable bureaucrats, experienced consultants, and honest advisors) and a timeline for monitoring its progress, directly by the Prime Minister, Imran Khan.
To realize the full potential of the Gwadar port and its impact on Pakistan’s economy, we should look into the recent past history of the port of Singapore. Since Singapore’s full independence in 1965, it has had to compete with other well-established ports in the region for attracting trade and shipping at its port. It has done so by developing an export-oriented economy (tax free zones, local & national subsidies for manufacturing, reduced energy costs, investment protection, fast track approvals, ease of doing business, reinvestment incentives, etc.) based on value-added manufacturing. It obtains raw or partially manufactured products from regional and global markets and after finishing them, re-exports them back as the value-added products to these markets through the WTO’s market access directives and bilateral free trade agreements. Today, Singapore port is the busiest port for the transshipments in the world and the second busiest port in terms of the shipping tonnage. In 2017, it added ~23 billion USD revenues to Singapore’s GDP.
In conclusion, if the Gwadar opportunity is orchestrated properly, not only it will help everyone along the corridor (as described earlier) but it also offers an excellent opportunity for the relocation of the Chinese factories affected by the current tariff war. Additionally, it will also encourage brand new industries buildup along the Belt & Road corridor going all the way to the Xinjiang region, the old “Silk Road” mecca that was used for trade and exchange of goods. The infrastructure will create a lot of skilled and unskilled good paying jobs for Pakistani youths and will generate hefty Foreign Exchange (revenues) via value added exports and imports activities, in addition to the maritime revenues. In short, by following this strategy, soon Pakistan will become a prosperous nation and a member of the “up and coming” developing nations! There will be no need of run to the IMF or any other donor agencies every year for the bail outs, just like Singapore nation.