The Globalization of Gwadar

Via OBOReurope, a look at Gwadar

In early 2019, several states in Middle East announced their interest in the port of Gwadar in Pakistan. The port of Gwadar is the flagship project of  China-Pakistan Economic Corridor (CPEC). With the opening of the CECP to the rest of the world, the port of Gwadar is likely to become a major hub connecting China, South Asia, the Middle East and Africa.

A strategic port for Pakistan and China

It was not until 2007 that the deepwater port of Gwadar was inaugurated by President Musharraf. Built with technical and financial support from China, the development of Gwadar Port became China Pakistan Economic Corridor’s main of project in 2015. One of the aims of China is to create a new route linking its western provinces to the sea of Oman; this ambition involves the modernization of the Karakoram road, the development of new infrastructure in Pakistan and finally the construction of a major port, that of Gwadar.

This strategic function is not really new. It must be remembered that until 1954, the port of Gwadar was under the sovereignty of the Sultanate of Oman.

The Omani presence in Gwadar dates back to 1784 to Sultan bin Ahmad. At the beginning of the 20th century, the British Raj proposed to purchase Gwadar to Oman, but negotiations did not succeed. British demands became more urgent after explorations for oil deposits near Gwadar were made, and the then Omani Sultan would have been willing to accept the British offer in exchange for a military support against rebel movements.

Negotiations resumed in 1939, still without results. It was only after the Second World War that the question of Gwadar resurfaced. After the partition of India in 1947, Gwadar was led by an Indian administrator on behalf of the Sultan of Oman. Faced with growing tensions with the new Pakistani state hoping to recover the port of Gwadar (in 1954, a Pakistan report noted the strategic aspect of Gwadar), and because of the good relations that maintained the sultanate with New Delhi, the Sultanate offered Gwadar not to Pakistan but to India, but New Delhi refused. In 1958, Oman sold the port of Gwadar to Pakistan for $3 millions; Gwadar then was part of Baluchistan province.

The port of Gwadar stayed away from the hustle and bustle of the world and was home to a few fishing villages, so it was not until the 8th Five-Year Plan in 1993 that Pakistan considered the development of Gwadar Harbor. After the collapse of the Soviet empire, Pakistan hoped to turn this port into a commercial and energy hub for the newly-landlocked Central Asian republics. But the civil war in Afghanistan (1992-1996), then the Taliban regime (1996-2001) and finally the second war of Afghanistan from 2001 put an end, for a time, to the dreams of connections with the Central Asia. But at the same time, China was looking for alternatives to the Melaka Straits and helped Islamabad to develop Gwadar.

Chinese investment in Gwadar

China is expected to invest nearly $ 54 billion in CPEV, and since 2015 Gwadar has become a priority for Chinese investment in the region. One of the goals of Beijing is to develop the port, which will be managed by China Overseas Port Holding for forty years, and to create special economic zones that will house factories, logistics companies, hotels …

It’s really about building a new city. China will build a hospital, but also some educational centers.

With 70,000 inhabitants in 2015, Gwadar may be home to two million inhabitants by 2030

An international hub

At the center of Chinese attention in the region, the port of Gwadar is becoming a global hub. The case of Gwadar shows us how the” Belt and Road Initiative” should work. The BRI has for main objective to create the conditions for development, and should in no way be considered as a only-Chinese project. In September 2018, Pakistan and China announced the opening of the CECP to third countries.

Chinese infrastructure and investment in Gwadar make the city more attractive for all investors, especially those from Middle East, who are the first ones to have shown interest in this Pakistani port.

The main investor would be Saudi Arabia, which is expected to build a refinery in Gwadar and thus make Gwadar a major center for energy in the region. The contract is expected to be signed in February, on Prince Prince Mohammad bin Salman’s next visit to Pakistan. Ryad is also expected to announce other projects in Gwadar. The construction of the new Gwadar airport, which is expected to be the largest in the country, will start this year. It is funded in part by the Sultanate of Oman.

Qatar, which faces the hostility of Ryad, is also thinking of developing projects in Gwadar in the agri-food and gas sectors.

It can be seen that the CECP and the first Chinese investment in Gwadar will help make all the future projects in Gwadar more viable

The challenges of Gwadar

To achieve its ambitions, the port of Gwadar faces many challenges. One of them is fresh water supply and power shortage. Until now, Gwadar is not connected to the national grid and relies on electricity supplies from neighboring Iran. But, major investment will quickly resolve this issue and boost activities in this port. After several years of delay, this summer, the central government and Baluchistan authorities confirmed the construction by China Power Company of a 300-megawatt coal-fired power plant. In January 2018, a desalination plant was inaugurated to meet the growing needs of the inhabitants of Gwadar. There is no doubt that other investment of this type will have to be made.

The second major challenge facing Gwadar is the integration and empowerment of the local population. The Balochistan province where Gwadar is located is one of the poorest in the country and suffers from some separatist tensions. Projects in Gwadar will need to be accompanied by social initiatives, so that people benefit from the CECP and work on the new Gwadar sites. It should be noted that this social dimension is taken into account by the Chinese and Pakistani authorities. According to China Power Company, the poorest residents of Gwadar and its surrounding areas should benefit from free electricity to help them out of poverty. According to a Pakistan study, the development of Gwadar port and all CECP projects are expected to create nearly 700,000 direct jobs by 2030

And Europe?

To date, the European states do not have defined strategies regarding the development of the port of Gwadar. However, Gwadar could gradually become more visible from the European authorities.

OBOreurope and the Cooperans, however, are encouraging all European companies to take an interest in this new port, which may become a new Dubai. Although Pakistan unfortunately faces terrorism risks, the country has many assets to attract foreign investors. Modern infrastructure construction and the development of the port of Gwadar will create new opportunities for European companies.



This entry was posted on Wednesday, January 23rd, 2019 at 5:47 pm and is filed under China, New Silk Road, Pakistan, Saudi Arabia.  You can follow any responses to this entry through the RSS 2.0 feed.  You can leave a response, or trackback from your own site. 

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Wildcats & Black Sheep is a personal interest blog dedicated to the identification and evaluation of maverick investment opportunities arising in frontier - and, what some may consider to be, “rogue” or “black sheep” - markets around the world.

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