Gwadar: the future trade hub of the world?

The government is considering giving Gwadar a status similar to Hong Kong in terms of special business incentives. This vision aims to turn tides on the region’s economic horizon.
Prime Minister Nawaz Sharif during his recent visit to China, expressed his intention to develop Gwadar port on the model of Hong Kong. Hong Kong is China’s special administrative region that enjoys specific trade regulations. Gwadar, having a natural hammerhead-shaped geography protruding from the country’s coastline into Arabian Sea, is no longer just a fishing harbour. It is now deemed as an important deep seaport with vast potential of becoming the hub of business activities for the entire region.
Pakistan needs to promote free trade and low taxation in Gwadar on similar lines to Hong Kong, which is regarded as one of the world’s leading international financial centres in addition to being an extremely tax friendly economy.
Necessary legislation would allow Gwadar to set its own financial targets such as economic freedom and competitiveness similar to Hong Kong.
Gwadar is expected to be declared a special economic zone for a certain period to facilitate rapid commercial and economic development.
The specific incentive-regime is likely to be free of Value Added Tax (VAT), capital gains tax and withholding tax, with general tax-holidays and generous incentives for business ownership and employment of foreigners. The establishment of the special economic zone, free trade zone, and export processing zone in the port city would attract foreign investment which would in turn create innumerable job opportunities for locals and consequently raise their standards of living.
The main purpose of this project is to accelerate economic development and investment, both foreign and local. This will in turn increase the port traffic and resultantly spur industrial development.
For the port’s construction and operations Gwadar was officially handed over to the state-owned China Overseas Port Holding Company Limited in February.
According to the contract signed between the two countries, a fully fledged commercial port will be constructed with an initial Chinese investment of $750 million.
In a recent meeting with the company’s President Sun Ziyun, Sharif stressed to not delay the infrastructural development of Gwadar. He assured the Pakistani government’s full cooperation with the Chinese companies engaged in the port’s development. Sun Ziyun told Sharif that the financial assistance for this project would be sought from the China Development Bank.
China will also assist Pakistan in the construction of an airport of international standards at Gwadar.
One of the accords inked during Sharif’s visit to China, which was also witnessed by Premier Le Keqiang, envisages the establishment of an economic corridor between Gwadar and Kashgar. Kashgar is the historic Silk Road city in western Xinjiang region of China. It is connected to Gilgit-Baltistan through the 15,397 feet (altitude) Khunjerab Pass. The ambitious Pakistan-China economic corridor plan will cost approximately $18 billion.
Sharif is of the view that the Gwadar would help bring Balochistan’s coastal areas into the socio-economic mainstream. This would serve as a catalyst for fast track development of the province. It would contribute towards rapid employment generation in the province.
Gwadar will benefit both Pakistan and China. 60 percent of China’s oil comes from the Gulf via ships travelling over 16,000 kilometres in two to three months to its commercial port, Shanghai. Gwadar will reduce this distance to a mere 2,500 kilometres.
Gwadar is termed as “the future of Pakistan”. Due to its location on the channel of Central Asia, Middle East and Asia, it can flourish as the World’s business centre. The Chinese assistance in the development of this port is essential in positively impacting Pakistan’s economy.