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Assignment Topic
Report on Gawadar

Group Members

Zeeshan Maqbool M14BBA045

Talha Shahid M14BBA003
Arslan Ijaz M14BBA002
Usama Ijaz M14BBA040
Tahir Afzal Bajwa M14BBA007
Muhammad Waqar M14BBA032
 China-Pakistan Economic Corridor
(Report on Gawadar)

1. Introduction

Gwadar Port is the third deep sea port in Pakistan after Karachi and Port Qasim. Located
on the western end of Baluchistan coast, Gwadar has 600km long coastal belt with
beaches and bays. It lies just 624 nautical km to the east of Strait of Hormuz, which is an
important rout of oil tankers bound for Japan and western countries out of Persian Gulf.
Once a small fishing town along the Makran Coast is now set to be become a mega seaport
which will fulfill the requirement of three strategically important regions the oil rich Mid-
dle East, heavily populated South Asia and Western China and the economically emerging
resource-laden region of Central Asia. The Gwadar port is expected to generate billions
of dollars in revenues and create at least two million jobs. Gwadar port is the living symbol
of Pak-China relationship. ECO highway, Coastal Highway and other mega projects in road
sectors will connect Gwadar free port with Central Asian States, Gulf States, China and
rest of the country. In 2007 government of Pakistan handed over port operations to PSA
Singapore for 25 years.

The construction of a deep sea port at Gwadar is just one component of the Greater
Gwadar Plan. Under this plan, which will be carried out by Gwadar Development Author-
ity, in addition to Gwadar port, a network of roads, connecting Gwadar with Karachi,
Pasni, Ormara and Turbat will be constructed in four phases.

1.1 Location:

The project was sited in an obscure fishing village Gwadar Pakistan’s western province of
Baluchistan, bordering Afghanistan to the northwest and Iran to the southwest. Gwadar
bounded by the Persian Gulf in the west and Gulf of Oman in the southwest located at
the western end of Baluchistan coast, Gwadar has 600km long coastal belt with beaches
and bays. It lies 624 nautical km to the east of Strait of Hormuz, 460km away from Karachi
120km Iranian border in the west.
2. History:

Gwadar, which in the local language means "The Gate of Air". Pakistan’s dream of having
a deep water port at Gwadar is nearly as old as its existence. It started with the recom-
mendation of Worth Kendrick who was deputed by the US for survey of the Baluchistan
coast in 1954. Realizing the importance of Gwadar, Pakistan paid 5.5 billion in September
1958 to buy back the enclave from Sultanate of Oman. Ending over 200 years of Omani
control, Pakistan identified Gwadar as a port site in 1964. However it was only in 2001
that significant steps towards making the proposal a reality were taken, when China
agreed to participate in the construction and development of the deep sea port.

In 1993, Pakistan started feasibility studies for the development of a major deepwater sea
port at Gwadar. The port project commenced on 12th March 2002 with the first phase
completed in December 2005. The construction of the port has spurred other major in-
frastructure projects in the area. This induces the seven hundred kilometers of Makran
Coastal Highway which is now complete. The road links Karachi with several ports along
the coast including Ormara, Pasni, and Gwadar will be extended to the Iranian border in
the future. The highway has reduced travel time to Karachi from forty eight hours to only
seven hours. Other road projects include the Gwadar-Quetta-Chaman road and a road
link to the town of Khuzdar in eastern Baluchistan.

Pakistan is focusing on laying the Havelian-Kashghar (China) and Quetta-Kandahar (Af-

ghanistan) railway tracks. Gwadar is going to be connected to Pakistan Railway network
at an expected cost of $1.25 billion. The Gwadar deep-sea port emerges as a place of great
strategic value, enhancing Pakistan’s importance in the whole region, extending from the
Persian Gulf through the Indian Ocean to Southeast Asia and the Far East.

The construction of the Gwadar deep-sea port is just one component of a larger develop-
ment plan which includes building a network of roads connecting Gwadar with the rest of
Pakistan, such as the six hundred and fifty kilometers Coastal highway to Karachi and the
Gwadar-Turbat road (One hundred and eighty eight kilometers). This network of roads
connects with China through the Indus highway. Pakistan, China, Kazakhistan, Kyrghistan
and Uzbekistanjmn67 are developing extensive road and rail links from Central Asia and
Xinjiang to the Arabian Sea Coast.
Pakistan has started several projects, with financial and technical assistance from China,
to develop Gwadar as a goods transit and trade point. The primary project is the construc-
tion of a deep-sea port at Gwadar to enable high-volume cargo movement to and from
the landlocked Central Asian states. The new port will also encompass conversion facili-
ties to allow for the movement of natural gas as a part of plans for a termination point for
the TAPI natural gas pipeline. The secondary project is a coastal highway connecting
Gwadar to Karachi, whose $200 million cost will be completely financed by the Chinese.
Gwadar will serve as a port of entry for oil and gas to be transported by land to the west-
ern regions of China.

By extending its East-West Railway from the Chinese border city of Kashgar to Peshawar
in Pakistan’s northwest, Beijing can receive cargo to and from Gwadar along the shortest
route, from Karachi to Peshawar. The rail network could also be used to supply oil from
the Persian Gulf to Xinjiang. Pakistan’s internal rail network can also provide China with
rail access to Iran. The government declared Gwadar port a "Special Economic Zone" in
the budget, 2003-2004. Oman has offered $100 million aid for the development of social
and infrastructure facilities in Baluchistan. Out of $100 million, Oman has provided $7
million for extending of runway at Gwadar Airport, construction of jetties, up gradation
of Gwadar hospital, provision of 100 engines to fishermen and construction of power
house. Oman is also financing the construction of Gwadar-Hoshab Road, water supple
scheme in Gwadar area and construction of irrigation dams. Rice Exporters Association of
Pakistan (REAP) has decided to establish a rice zone in Gwadar to fetch the opportunities
in the area after the construction of new port.

3. Geopolitical Importance:

Gwadar port has great strategic value, enhancing Pakistan’s importance in the whole re-
gion. It extended Pakistan’s importance from Persian Gulf through the Indian Ocean to
Southeast Asia and the Fareast. It is close to the Strait of Hormuz, through which more
than 13 million barrel oil per day passes.

4. A Gateway to Southwest and Central Asia:

The April 2002 inauguration of the Gwadar seaport project on the Arabian Sea coast in
southern Baluchistan with the Chinese collection was a landmark event. When com-
pleted, the port is likely to open up new vistas of cooperation and development in the
region. However, despite its inability to secure needed aid, Pakistan always sustained
hope that some day the port facilities would serve as gateway to the Central Asian Re-
publics. But the continued instability in Afghanistan put damper on these plans. It is ex-
pected that nearly 20 countries of the Middle East, Central Asian, South Asia and China
will benefited from this mega-project. The port will provide facilities of warehousing,
transshipment, transit, coastal trade, provision of commercial and industrial facilities for
international export-import trade, especially that of Afghanistan, Central Asian States,
Oman, UAE, Saudi Arabia, Qatar, Iraq, Iran, China and other countries.
World’s natural energy is mostly concentrated in the Central Asian Republics Middle East.
Countries like China and India, due to there ever growing population and increased indus-
trial activity need additional energy. All these countries are looking for safe, cost effective
and uninterrupted supply of natural energy to sustain their industrial growth and devel-
opment. Pakistan, due to its geo-strategic location at the crossroads of three sub-regional
systems i.e. South Asia, West Asia and Central Asia is in a position to bridge this gap by
providing the shortest possible route for the transportation of this energy. The geo-stra-
tegic location of Pakistan at the interface of Central and South Asia provides these states
the shortest possible route to the warm waters of the Arabian Sea. Pakistani ports of Ka-
rachi and Gwadar are barely 1600km away. Pakistan can provide these CARs with the
transit trade and pipeline routs for the export of their oil and gas to the outside world,
which the CARs desperately need for their economic development.

The Central Asia region has an area of 1.6 million square miles. Total oil reserves of the
Caspian Sea region are estimated at above 200billion barrels. Currently total production
is 1 million barrel per day. It is estimated that this could reach 3.4 million barrel per day
by the year 2012, assuming the increased demand of oil in the world markets. On the
other hand, total gas reserves are over 3,000 billion cubic meters. Natural gas reserves in
the Caspian Region are even larger than the region’s oil reserves. Main reservoirs of oil
and gas are in Turkmenistan, Uzbekistan and Kazakhstan. Due to natural resources politics
of the Caspian Region would continue to dominate the course of events in all regional
countries like Pakistan, Iran, India, China, Russia and other interested stake holders like
US, Saudi Arabia and UAE. The first phase of the Gwadar port at a cost of 250 million
dollars was being built with the Chinese assistance. China had provided 198 million dollar
to Pakistan for the construction of Gwadar port. China also has invested 200million dollar
to building a coastal highway that will connect the Gwadar port with Karachi, Establish-
ment of industrial zone, oil storage and refining facilities adjacent to the port and export
possibility of abundant mineral resources of Baluchistan, particularly from Saindak Cop-
per-Gold Project, makes it more attractive. The Saindak project had also been leased out
to a Chinese firm. Experts believe that even one Agosta 90B submarine deployed at
Gwadar could defend the port due to its geographic advantage. Why the new emerging
super power China has invested heavily in this project? China doesn’t have any port of
hot waters, which can be used the whole year. The Shanghai port is approximately 4500
km away from Chinese industrial areas and takes an additional time. This costs them a lot
in the form of duties and taxes as well. Compared to this Gwadar port is only at a distance
of 2,500 km from China and the port will be working the whole year because of its hot
waters.
China’s decision to finance the construction of Gwadar and coastal highway linking to Ka-
rachi will help its plans to develop western China. The distance from Kashgar to Chinese
east coast is 3,500 km whereas distance from kashgar to Gwadar is only 1,500.

5.Geo-Political and Geo-Strategic ties between Pakistan and China:

Despite having a non-Nato ally status the honey-moon period between the USA and Pa-
kistan is ion the decline. National priorities have been altered and the USA is in search of
new friends and strategic partners, like India in our region. The policy makers in Islamabad
realize the emerging bitter reality and should not act upon the good wishes of Washington
with closed eye any more. Because everyone is following its hot pursuits similarly the
government of Pakistan must look for the safe heaven for the expected rainy days in the
future. Pakistan badly needs energy and , China can provide, or fulfill, our future energy
requirements[2]. According to many regional experts close bilateral Pak-Sino ties may cre-
ate geo-political and geo–strategic equilibrium in region in the days to come.

According to official figures, the annual trade between the two countries has already sur-
passed 7 billion dollars during 2008 and the sides are aiming to 15 billion dollars by 2011.
With the coming of the agreement on trade in 11 services sectors from October 1,2009,
which was signed in February this year during President Asif Ali Zardari’s visit to China,
trade is further going to increase between the two countries .Currently, 70 percent of
Pakistani’s exports to China are cotton yarn and cotton fabric. Pakistan is also exploring
its options with Qatar to construct a five billion dollars gas pipeline project to supply 1.6
billion cubic feet a day. This pipeline would supply natural gas from Qatar’s North Dome
Field to Pakistan via a sub sea pipeline from Oman. China is also exploring ways to tap
Saudi Arabian gas through Gusa Gas Company of Qatar that already has a joint venture
for a deep sea pipeline with Pakistan. China and Pakistan have agreed in principle to build
trans-Karakoram oil pipeline along the Karakorum Highway to connect Middle East with
North-western China through Gwadar. A blue print of proposed 3300 km long Karakoram
oil pipeline was also presented by Pakistan; this entails a 30-inch diameter pipeline from
Gwadar to Khunjerab. The proposed pipeline will be able to handle 12 million tones of oil
per year and would cost between US $ 4.5 and 5 billion.

6. Development of Gawadr Port:

Pakistan, with the partial financial and technical assistance of China, had completed the
first phase of a deep-sea port in the south-western city of Gwadar, located at the opening
of the energy-rich Persian Gulf. The port was formally inaugurated on 20th march 2007
by Pakistan’s President, Pervez Musharraf, and the Chinese communication minister, Li
Shasheng. China has also agreed to participate in phase-2 of the Gwadar Port Project,
which will be completed at a cost of $600 million. Phase-2 will include : four container
berths ; one bulk cargo terminal (to handle 100,000 DWT ships) ; one grain terminal ; one
Ro-Ro terminal ; and two oil terminal (to handle 200,000 DWT ships).

7. Up-gradation of Karakorm Highway:

The decision to up-grade of KKH was taken during President Musharraf’s visit to China in
February 2006, when Pakistan. President Musharraf said, “This road, when up-graded will
provide the shortest route to the sea for products manufactured in China. The same road
can serve to provide overland route for trade between China and India, thus linking two
of the largest markets in Asia” we are talking of Pakistan-China inter-connectivity in terms
of energy and trade, improvement in highways, development of railway link and gas and
oil pipeline linkages and even fibre-optic connectivity along the highway under one pro-
ject”. Pakistan is also constructing a network of highways and railways with the country.
To facilitate a North-South Trans Energy Corridor (TEC) Karachi has been linked with
Gwadar through a coastal highway, and plains are underway to link it to Iran as well. An-
other major 950 km long highway, connecting Gwadar to Turbat, Khuzdar and Ratodero,
will be completed in the next 30 month.

8. Construction of Railways:

A railway line along the KKH, connecting Pakistan and China is being considered as an
integral part of the Trade and Energy Corridor Project. The purpose of building a rail line
is not only for trade purposes but also to transport energy, in case a pipe line is not a
variable option. This rail track will be link to Gwadar, where oil-refining and storage facil-
ities are being constructed. Pakistan railways has short-listed too companies, one from
china and the other one are joint German-Austrian companies, ILF Consulting Engineers,
for the study of 1000 km rail-track.
9. Energy co-operation and Pipelines:

A fame work agreement on Energy Co-operation was signed in Beijing on 29th Feb 2006,
between the Ministry of Petroleum and natural Resources of Pakistan and the National
Development Reforms Commission of China. In the pursuance of this agreement, the first
Energy Forum was held in Islamabad from 25-27 April 2006.at the Energy Forum, a blue
print of the proposed 3300 km long Karakoram oil Pipeline was also presented by Paki-
stani side; this entails a 30-inch diameter pipeline from Gwadar to khunjerab, passing
through Awaran, Pir Muhammad, Khuzdar, Shikarpur, D. I. Khan, Kundian, Mianwali,
Talagang, Pindi Ghaib, Fateh Jang, Haripur, Mansehra ,Patan, Dasu, Chilas, Bunjil, Gilgit,
Sust, and Khunjerab pass.

10. Benefits for Pakistan:

Pakistan can fulfill her energy needs which are beyond her indigenous production, addi-
tionally she can also accrue number of benefits such as:

1.Enhance trade with CARs / Middle East.

2.The relations with neighboring and regional countries can be improved and trade can
be enhanced.

3.Through IPI /TAPI pipelines, relations with India can be normalized and that can also act
as CBMs.

4.Pakistan can earn lot of foreign exchange through transit fee and improve her foreign
exchange reserves.

5.The transit fee can be utilized for development purpose.

6. There will be a gradual growth and improvement in most of the backward areas and
towns / villages.

7.The living conditions and literacy rate of these areas can also be improved.
8.Lot of new jobs would come up due to new projects which would lower the overall rate
of unemployment.

9.Tourism and hotel industries can be boosted as no of foreigners would be visiting Paki-
stan for the construction of these projects.

10.It would improve the overall economy of the country.

11. Challenges:

Although there is an enormous quantum of trade that could flow through the Gwadar
port, it is also faced with the tough and challenging task of competing with developed
ports of the region. Concerted efforts are required for creating a conducive environment
for industrialization of this region based on strategies, program and scientific approach,
and efficient directions to make it a comprehensive and competitive project. If there is no
broad based cooperation amongst regional and extra regional powers, there will be no
security.

The prime objective of Pakistan’s foreign policy is to develop beneficial and strong ties
with all major powers and maintain cordial relations with its neighbors. But the ultimate
success of the port hinges on its usage by the Central Asian Republics and in this respect,
cooperation with Afghanistan, which lies between Pakistan and Central Asia, is critical.
There is need to address genuine grievances, if any, of the stakeholders with regard to
various projects in Baluchistan particularly Gwadar deep sea port. Measures should be
taken to remove the sense of alienation, if any, of the people of Baluchistan and create
local stakes in the province’s development. The interpolation of trade expected to flow
through the Gwadar port suggests that the port can generate enormous revenues, pro-
vided economic and foreign policy options are handled properly.

Since it is a mega project with long term and short term local and regional impact it is
facing many challenges which can be divided into local, regional and international. In this
point in time security situation in the province needs improvement for full pledge utiliza-
tion of the port. The Baluchistan province of Pakistan is also feeling the ripple effects of
Afghanistan`s imbroglio. The menace of militancy and insurgency in the region further
aggravated instability in the north western Pakistan. Though the whole federation is un-
der the spell of terrorism but its impact is very much visible in Baluchistan, FATA and Khy-
ber Pakhtunkhwa. Reconciling divergences of interests of the regional and neighboring
countries is required.
Security and development are two facets of the same coin and reciprocate each other.
One without the other is highly unlikely. Regional development and cooperation is basic
component of all regional organizations like ECO (Economic Cooperation Organization),
SCO (Shanghai Cooperation Organization) and SAARC (South Asian Association for Re-
gional Cooperation). Regional and great powers have interests in peace in the region and
for this physical infrastructural integration creates conducive atmosphere. The South and
Central Asian Region is rich in natural resources like hydrocarbons. Multinational Corpo-
rations as well as powers both regional and global are taking keen interests in the oil and
gas resources of the region.

The new geo-politics or what some observers call the New Great Game is also influencing
the developments in the region. After 9/11 USA and its NATO allies have invaded Afghan-
istan and ousted Taliban from the corridor of power. Regional and neighboring countries
supported USA in its war against terrorism. Russia, China, Central Asian Republics, India
and Pakistan supported USA in war against terrorism. Russia consider Central Asia as it’s
near abroad while China is strengthening its relations with oil and gas rich Central Asian
States. Its domestic energy resources are insufficient for its fast growing energy needs.
Central Asian transportation routes are directed towards Moscow. After the disintegra-
tion of USSR CARs are struggling to develop routes towards South Asia, turkey and China.
The energy requirements of the regional powers will bring them to agree on projects like
TAPI (Turkmenistan-Afghanistan-Pakistan-India Gas Pipeline) and IPI (The Iran–Pakistan–
India gas pipeline). Northern outlets and transportation routes are not sufficient for ex-
port of the Central Asian hydrocarbons and the alternative lies in the south particularly
through Afghanistan and Pakistan and this is a point of convergence which can be devel-
oped

12. India’s Response:

On Feb 6 Indian Defense Minister A.K. Antony said New Delhi was concerned by Pakistan’s
decision to transfer management of the deep-sea port to China. Foreign ministry spokes-
man Moazzam Ahmad Khan dismissed those concerns, telling reporters: "This is not
something that any other country should have any reason to be concerned about."

India has made its reaction explicit over Pakistan’s decision to hand over administrative
control of the strategically located Gwadar Port from Singapore to a Chinese company.
Antony’s statement reflected the fact that they are not happy over this important deci-
sion of Pakistan.

President Zardari said the building of infrastructure around the port would promote eco-
nomic activity in Gwadar and Baluchistan.

But some analysts warn that it may be some time before Pakistan can benefit from China’s
takeover of Gwadar, stressing that the connecting roads and an expanded Karakoram
Highway still need to be finished.

Hence among its critics, India is the most prominent that raised concerns over Gwadar
agreement calling it a threat to India’s maritime security. Indian military analysts are of
the opinion that the port’s only objective for China is to encircle India in the sea through
the famously known concept of String of Pearls, or the Chinese ally ports encircling India.

Gwadar port, if taken in Indian security context, is a port nearest to the West, and thus
serves as an important link to this string of pearls.

In response to such concerns, China’s national People’s Daily wrote that the strategic im-
portance or location of the port is still in its potential stage, rejecting Indian concerns on
the basis of economic arguments.

Indian media and defense analysts have gone to great extents on national TV to target
Pakistan and China for this deal calling it purely a strategic-military maneuver against In-
dian security.

Such concerns apparently are exaggerated and uncalled for as, first, Pakistan is in need of
an economic push to save it dwindling economy. Moreover, Pakistan has rarely expressed
concerns on India purchasing state of the art weaponry from its friends, such as Israel.

The Indians fear that through administrative control of this port, China might get access
to the strategically important Persian Gulf and the Arabian Sea and even extend its mili-
tary clout to these waters by using this port as a naval base.

Although Pakistan and China have made it clear that this port is commercial and would
not be used for military purposes, Indian apprehensions have not been allayed. Each and
every nation is within its sovereign rights to develop its ports and give their management
and control to any country it finds suitable.
Indo-US Strategic Partnership is a threat to the security and strategic interests of some
states in the region but India did not care even an iota for their concerns and apprehen-
sions in this respect. Pakistan is not bound to consider concerns of India or any other state
for that matter.

It made this decision in its own larger interests and handed over the control of the Gwadar
Port to a state with whom it has all-weather and long-standing strategic partnership.

Gwadar Port is a living example of Pak-China cooperation in an area which is beneficial

for both the states. China has provided funds and technical assistance for this purpose.
The need for construction of this port was felt due to rising commercial activities on and
insufficiency of the Karachi port which could not fulfill the requirements of a maritime
state which depends for most of its trade on sea routes.

13. Literature View:

Gawadar is not only going to play pivotal role in Pakistan’s economy but is also
likely to influence others neighboring countries like China, Iran, Central Asia etc.
Gowadar port has huge potential of transforming not only the economy of Pakistan but
also the region.
China investing huge sum of capital, in terms investments, assistance and transfer of tech-
nology in building many mega projects over a long period of time.
Central Asian republic needs to settle maritime borders of Caspian sea as it remains an
object of counting debate between Turkmenistan, Iran and Uzbekistan and Azerbaijan.
(Blank, Stephen J, 2009:1)

The CAR’s need economically feasible pipelines itineraries. There are two routes available
to them, for exporting their abundant mineral and oil resources, one through the Chaba-
har and other is Gawadar.
Due to prevalent international environment Western countries are not in favor of the
trade through Iran. Hence Gawadar emerges as a more valuable alternate port.

In military and strategic terms, Gawadr will help Pakistan to monitor the sea lines of
communications from the Persian Gulf. Gawadr is of strategic importance, lying across
SLOCs emanating out of the strategic choke point of Hormuz, from where 13 million
barrels of oil is transported daily. (Dawn, 2008).

A proposed export processing zone near Gawadr port for local and foreign investors
also includes exemptions on customs, sales tax and excise duty. (I.H. News, 2007).

If a road network were established with the central Asian countries, transit through
Gawadr would be the shortest distance, as in case Tajikistan and Uzbekistan (Jahozed,
2006).

14. Coclusion:

Located at the entrance of the Persian Gulf and about 460 kms from Karachi, Gwadar has
had immense Geostrategic significance on many accounts. The continued unstable re-
gional environment in the Persian Gulf in particular as a result of the Iran/Iraq war, the
Gulf war and the emergence of the new Central Asian States has added to this im-
portance. Considering the Geo-economic imperative of the regional changes, the ADB’s
Ports Master Plan studies considered an alternate to the Persian Gulf Ports to capture the
transit trade of the Central Asian Republic (CAR) as well as the trans-shipment trade of
the region.
It’s amazing that tomorrow’s small fishing village ‘Gwadar’ is fast emerging as a Deep Sea
Port today. This is important to note that the Government of Pakistan, keeping in view its
utmost significance in the area, has declared ‘Gwadar’ as a Duty Free Port and a Free
Economic Zone.
In fact, Gwadar enjoys the status of a third Deep Sea Port 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.