Gwadar Harbour, Key to the Sino-Pakistani Partnership

In Baluchistan, on the Arabian Sea-board, Pakistan has been developing for the last two decades a large-scale harbour project in the town of Gwadar. After an initial phase, terminated in 2007, the development is currently carried forward by the Chinese who see it as a key component of the China-Pakistan Economic Corridor. An historic project which obeys various imperatives but has produced tensions between the two partners.

Gwadar Port from the top
Madihasalam/Wikimedia Commons

Henceforth at the heart of Pakistan’s infrastructural development, Gwadar was for many years litle more than a fishing village, which belonged nether to the British Raj nor to the State of Pakistan, created in 1947 after the division of India. Gwadar remained part of the Sultanate of Oman throughout the 19th and 20th centuries. In 1954, the United States Geological Survey identified the site as ideal for the construction of a deep-water harbour. In 1958, with the intention of developing harbour facilities there, the Pakistani authorities investigated the possibility of purchasing from the Sultanate of Oman the peninsula of some 800 square kilometres for 3 million dollars (the equivalent of 27.5 million dollars in 2021)

However, it was with the idea of developing another harbour, located near the historic port of Karachi, that the Pakistani authorities made their move in 1973. For while Gwadar is located on the sea-coast of Baluchistan in the Western part of the country, Port Qasim was preferred, since it fitted nicely into Pakistan’s backbone. The latter coincides more or less with the course of the Indus River, running from the Himalayas and the Hindu Kush to its delta, which flows into the Indian Ocean. Port Qasim has the country’s largest industrial zone and is closely connected to the rail and highway networks which run across the country and carry its merchandise to Lahore and Islamabad-Rawalpindi. Today, Port Qasim and the port of Karachi handle 99% of Pakistani sea-trading.

However, enthusiasm for exploiting the potentialities of Gwadar resurfaced in 1993, when another study confirmed the site’s suitability for the creation of a deep-water harbour. The possibility of building harbour facilities to the West of the Indus delta was included in the political agenda of Pakistani authorities because of the increasingly pointed criticisms aimed at the routing of all the country’s foreign trade through the ports of Karachi and Port Qasim. Aside from geostrategic considerations, linked to the proximity of the Indian border, the possible expansion of the two harbours was limited by their respective locations: at the centre of an extremely dense metropolitan area for Karachi, and on the edge of a mangrove forest of 820 square kilometres for Port Qasim. Pakistan, with its population of 220 million (which should be close to 350 million by 2050) must absolutely renovate its outdated harbour system, all the more so as the authorities regard stepping up the export trade as a priority.

What is at stake in Baluchistan

Aside from this essential modernisation of the harbour sector, of which Gwadar will be the keystone, this harbour project had from the very start a political goal: stabilising the province of Baluchistan. While its natural resources and its borders shared with Iran and Afghanistan make it particularly strategic, the province suffers from volatile security problems and structural socio-economic difficulties. Moreover, Baluchistan has had to bear the main brunt of the civil war which has waged for decades in Afghanistan. Besides the gun-, drug- and hydrocarbon-trafficking, plus the influx of hundreds of thousands of Afghan refugees, the provincial capital Quetta served as base for the Taliban movement starting in 2001.

To these recent challenges must be added an endogenous instability. Indeed, Pakistani Baluchistan is replete with natural resources which the Baluchi feel are exploited for the benefit of the provinces of Punjab and Sindh. The gold and copper mining operations at Sendak and the exploitation of the natural gas deposit at Sui are regularly invoked by protestors. Moreover, recent discoveries have confirmed the presence in the province of rich deposits of rare earths, including chromite, magnesite, gypsum, manganese, as well as zinc, iron and granite. Thus the port of Gwadar would seem to spell out an infrastructural grammar which is only one of the many versions of the policies implemented by Pakistani authorities in order to strengthen their grip on Baluchistan.

A vital project for both Islamabad and Beijing

For a long time this harbour project was in abeyance because of the lack of resources and technical skills for such an undertaking. It was only after a long series of negotiations that in the year 2001, Pakistani President Pervez Musharraf persuaded Chinese Premier Zhu Rongji to join the harbour project. The China Harbour Engineering Company (CHEC) was chosen to be responsible for the development of the site and work was begun in March 2002. Conceived, financed and built by the Chinese, port Gwadar adhered to Chinese norms of harbour construction. The first phase of development officially cost 248 million dollars. It was financed in part by a 50 million dollar budget allocation from the Pakistani federal government, and the remaining 198 million dollars were provided by China’s Export-Import Bank.

At first the harbour was operated by the Port of Singapore Authority (PSA) starting in 2007 under a construction-operation-transfer lease, but then the harbour operator decided to withdraw from the project in favour of the China Overseas Port Holdings Company, Ltd (COPHC), a State-owned firm. Made to measure for Gwadar harbour, this change of operators was the result of various difficulties encountered by PSA in running the port. The fact that a Chinese firm was the beneficiary of this change is evidence moreover of the determination to make Gwadar the keystone of the China-Pakistan Economic Corridor (CPEC) announced that same year by Xi-Jinping.

A large-scale geo-economic matrix, one of the six major corridors of the Belt & Road Initiative (or “New Silk Roads”), the CPEC consists of a constellation of energy projects, transport systems, infrastructures and free-trade zones, all structured around a corridor linking the Indian Ocean with the Chinese province of Xinjiang. With investments planned originally to amount to 46 billion dollars and later revised at 62 billion, the CPEC is meant to benefit both the Chinese and Pakistani economies.

The management of the new harbour by the Chinese authorities seems to mark a real turning-point in the development of Gwadar. Henceforth the idea is to make it an integrated hub harbour, along the lines of Shaku, the port complex at the heart of the Shenzhen special economic zone in South-East China. In order to carry out this integrated project, the Chinese firm operating the harbour facilities also signed a 43 year lease for the development of an industrial zone, logistics, warehousing and duty free exports, entitled Gwadar Free Zone and involving a variety of financial incentives meant to attract public and private investors.

While the first phase was more or less limited to the construction of a modern deep water harbour, with the ambition of becoming a trans-shipment hub, this second phase marks a real break. Through its role as maritime interface making possible a solution to the Malacca dilemma1 via the opening up of Xinjiang province, Gwadar has become the key project of the CPEC. There are also plans for the development of a refining zone meant to offset the difficulties encountered in the energy supply sector. The city’s connectivity with the rest of the country is also being extended via a link with the freeway network and the construction of an airport. All in all, the plans for Phase 2 involve investments of 1.02 billion dollars. These were originally provided by Chinese financial institutions in the form of concessional loans, before a share of the out-standings were transformed into outright gifts and interest-free loans in August 2015.

Reciprocal blames and security challenges

Nonetheless, the port Gwadar project has run into many difficulties which have delayed its development. While a greater integration into the country’s economic exchanges remains the declared objective, the under-use of the harbour has been sharply criticized. Indeed, until now, harbour-activity at Gwadar is very limited, despite the publicity devoted to the project in the Chinese and Pakistani media. According to the Pakistani Ministry of Maritime Affairs, the flow of goods has diminished since the signature of a new operating lease with the COPHC in 2013. Between 2013 and 2017, only 2.42 million tons of freight and 99 ships have made use of the harbour facilities at Gwadar. Under Singaporean management, harbour operations were more intensive. For example in 2009 a total o 2.35 million tons of freight were imported via Gwadar. Thus harbour activity at Gwadar is today mainly auto-centric, restricted to the supplies necessary for its own development. And this under-utilisation is a source of friction in the Sino-Pakistani partnership.

As relayed by the news-media, declarations made by the Chinese and Pakistani authorities attest to many stumbling blocks affecting the advancement of the harbour project. The former fault the latter for the red-tape of their different institutions whose complex procedures are seen as the cause of delays. As a further sign of these dissensions, the Gwadar sewage treatment plant, which was originally part of the integrated project, will finally be financed by the Pakistani federal government and the province of Baluchistan. China had been meant to contribute 30 million dollars, 90% of the cost of this project, but never answered the Pakistani request to provide this sum in the form of a concessional loan.

Besides questioning the degree of confidence inspired by the Pakistani authorities on account of the administrative shortcomings and the country’s macro-economic failings, it is chiefly security challenges that are handicapping the Gwadar harbour project. Presented as an initiative capable of benefitting the Baluchi population through the development of infrastructures and job-creation, the Gwadar harbour project has on the contrary been the object of harsh criticism from the population. According to these critics, most of the jobs have gone to workers from Punjab and Sindh, which inevitably contributes to the feeling of spoliation which has fuelled the political opposition and armed rebellions for decades. Thus, during the last few months, protests hostile to the presence of the Chinese have brought hundreds of people into the streets. The harbour seems to have become the focus of a two-fold protest, aimed at the federal government and at the presence of Chinese personnel.

Now, the destabilisation of Baluchistan raises the threat of a degradation of the bilateral relationship. Recently, many observers have spotlighted a radicalisation of Sinophobia in Pakistan, urging Chinese authorities to rethink the security of their nationals in that country. On 14 July 2021, an attack on a bus carrying personnel working on the development of a dam in the Khyber Pakhtunkhwa caused the death of nine Chinese workers. Chinese officials are also under threat, as shown by the attempted murder of the Chinese ambassador in April 2021 when he as travelling through Quetta, the provincial capital of Baluchistan. The multiplication of these attacks has brought about a noticeable deterioration of Sino-Pakistani bi-lateral relations. Following that bus attack, the second meeting of the CPEC Joint Co-operation Committee was postponed, a symptom of the on-going re-evaluation of the bilateral relationship undertaken by the Chinese authorities.

1TRANSLATOR’S NOTE: The Malacca Dilemma is a term coined by Chinese president Hu Jintao (2003) and refers to the over-reliance on the Malacca Straits sea-route where 80% of China’s oil-imports pass en route from the Middle-East, Angola, etc.