The “Quad” and the Gwadar Port

The Gwadar port (GP) is the hallmark of the BRI and the crown jewel of the CPEC. Since its announcement as part of the CPEC projects, China, and Pakistan (the Iron Brothers), both have poured in their numerable resources and utmost attention for its timely completion. Right from the very beginning, the GP has been planned to upgrade its old infrastructure and to streamline its entire operation. Under the CPEC, its entire maritime ecosystem has been completely revamped to meeting the stringent demands of the modern times navigation by incorporating the digital technology (Ai, ML & Robots) in its 24/7 operations. According to CPEC authority chairman, Lt. General (Retd) Asim Saleem Bajwa, GP is fully operational since May 31st, 2021.
Now, this is the beginning of a new chapter in the history of the GP and will be a pivotal force for the trade and commerce between the BRI member countries. In this regard, the “Quad” (Pakistan, Saudi Arabia, Oman, & Iran) of the BRI can play a very strategic role not only to benefiting themselves but also to helping their trading partners. The Quad countriesare not only members of the BRI but also share many common bonds with each other and are all located in the close proximity of the GP. Saudi Arabia, Oman and Iran do significant export of their oil & gas, in addition to the petrochemicals, to the Asian countries. They also heavily import consumer goods, machinery, and other items from the same regional players for their domestic markets. Having the GP, the only deep-water port in the region with all the latest infrastructure for seamless operation (remote monitoring, tracing, transloading, tax-free zones, SEZ, bonded warehouses for duty & tax advantages, etc.), the Quad can benefit significantly in reducing their freight costsas well as the transit time with their trading partners.
GP being a deep-water port can handle megaships/Panamax vessels that are becoming very popular for transporting containerized goods from Asia to Europe and rest of the world. From this perspective, the GP is not only strategically located on the maritime map, but its ~46 feet depthgives it the competitive advantage asthe only port in the region that is designed to handle the megaships/Panamax vessels. Thus, it can be the most ideal port for the transloading of the containerized goods from the regional international seaports of Saudi Arabia, Oman, and Iran (once the embargo is lifted).
Oman, in addition to benefiting from its close proximity to the GP for its trading activities, it can further enhance its GDP servicing the ships arriving in the area. Oman has vast knowledge and experience in the shipbuilding and servicing ships; thus, it can leverage its experience for further diversifying and benefiting it’s economy through providing the maritime services to the shipping industry.
Asia is heavily dependent on the energy supply from the Middle Eastern (ME), particularly from the GCC. According to some energy experts, about 75% of the crude oil in this region is coming from the ME/GCC countries. The three members of the Quad being the major producers of the oil & gas are the PREFERRED energy suppliers to the major Asian countries (China, South Korea, Japan, Indonesia, Philippines, and other developing countries of the region). As a matter of fact, in 2018 Japan imported 2.6 billion barrels per day (~950 BBL in the entire year) from the Middle East. During the same period, China was importing four billion barrels per day (~1,440 BBL), South Korea importing rate was 2.2 billion barrels per day (~790 BBL) while Singapore imported 800,000 barrels per day (~280 MBL) from the Middle Eastern countries. Similarly, Indonesia, Philippines, and Vietnam, all are heavily importing their energy supplies from the same region. In addition to the crude oil, LNG is also heavily imported from the ME/GCC countries by these Asian countries.
Recent market studies show that the containerized trade and commerce is the fastest growing segment of the economy in every country. According to some estimates, there will be 60-70% increase in the maritime transportation trade through the use of the containerships. With the strong sentiments of the globalization and connectivity (TPP, RCEP, CPEC, BRI, etc.), there is a robust push for the new phase of the industrialization, equally by the developing as well as the underdeveloped nations of the world. During the first phase of the industrialization, the advanced countries were importing the raw materials from the developing/underdevelopednations for manufacturing of the consumer goods. However, with the continued momentum of the globalization, and heavily supported by the multinational corporations, new factories are being built at the sources of the raw materials, thus literally eliminating one leg of the manufacturing & delivery cycle from start to finish.
According to the global trade statistics, in 2019(prior to the Covid) global trade reached to all time high of about $19 trillion and is projected to grow at an average rate of 10% during the next decade. Out of this, global containerized segment trade for the same period was about $13.5 billion.According to another source, currently 80% of the global trade by volumeand greater than 70% by valueis carried out by maritime. This means that with the continued increase in the global trade, there will be more need of the megaships/Panamax vessels to transport large volumes of the commodities from one region to the other. Currently, there are about 180 megaships that can carry more than 15,000 containers (TEU) per ship. There are at least 47 ultra-large ships that can carry 25,000 and higher number of the containers (TEU). It is projected that with this continued trend, by 2025 up to 90% of the global trade will be carried out by the maritime vessels. However, currently most of the container ports are not ready to handle these megaships, as they are not deep enough, nor they have the infrastructure and the equipment to handle the flood of the containers on their docks. In other words, the megaships require deep water ports to accommodate their sheer sizes and weights for loading and unloading of the containerized goods on the dock sides.
According to a regional study, the Gwadar port and its CPEC maritime ecosystem will open new venues for a robust exports and imports for the Quad countries and other BRI members, stretching all the way from the ME to Asia, Europe and reaching all the way to Africa. This robust trade and commerce activities will be happening at an unprecedented rate due to the significant cost savings and the transit time reductions by giving a competitive cost advantages not only to the Quad and China but also along the way to the Central Asian nations and the other BRI partners in their exports and imports. These are the dividends that will be benefitting everyone who will be using this strategic gateway (GP) for their global trade & commerce expansions and for making their economies resilient and thriving in the coming years.
Through the GP gateway and its ecosystem, total costs and the transit times will be reduced significantly. An in-depth study carried out in 2018-2019 (trade through Shanghai port) shows that trading through the GP gateway will bring significant cost savings not only to the Quad members but also to the other BRI members. According to the study, Saudi Arabia on the average is spending $23.7 billion on its imports while exporting $26.4 billion of the commodities outside Saudi Arabia. This makes a total trade value of $50.1 billion. By using the GP and the BRI infrastructure network, Saudi Arabia will achieve a combined cost savings of $7.5 billion, resulting from the shipping cost reductions and time savings. Similarly, Oman’s combined trade value during the same period was of $13.7 billion and by using the GP and its network, it will gain a total savings of $2.05 billion. Beyond the ME, European countries will also benefit significantly by trading through this strategic gateway! For example, Germany, the major exporting country of the EU, was doing $202.8 billion trade during the same period but by going through the GP/BRI network, it will enjoy a total savings of $30.42 billion. Similarly, France another major trading country of the region with a total trading value of $73.6 billion will benefit withmore than $11 billion savings. The third biggest trading EU country, the Netherlands, did about $73.5 billion of the trading during the same period will pocket savings of more than $11 billion as well.
These studies clearly show that how pivotal Gwadar port will be in the trading not only forthe Middle East and Europe, but also to and from the African region. Trading through the GP gateway will reduce about 3000-kilometer distance compared to the current maritime voyage of 12,000 kilometers through the strait of Malacca. This new gateway (GP) will not only bring cost savings to the users but in case of any threat or hostility through the strait of Malacca, the GP will be proven as the most strategic route for the continued safe passage of the trade and shipping for all the nations who have vested interest in the BRI. In other words, in the event of any conflict through the strait of Malacca, Gwadar port will keep flowing the trade and shipping of the oil &gas from the Middle East to the Asia, Europe and Africa.