Pakistan: Strategic Importance of Gwadar Port In Regional Trade – OpEd

Gwadar Port, located in Pakistan’s southwestern Balochistan province along the Arabian Sea, is a key element in the region’s geopolitical and economic landscape. As one of the central attraction of the China-Pakistan Economic Corridor (CPEC), Gwadar Port has gained significant attention due to its potential for transforming regional trade dynamics.

This deep-sea port, with its strategic positioning, offers advantages for both regional connectivity and global trade. Its development has created opportunities for Pakistan, China, and the broader region, thus reshaping global shipping routes besides affording new opportunities for alliances.

Geopolitical Location and Strategic Positioning

Gwadar’s location near the mouth of the Persian Gulf, just 400 kilometers from the Strait of Hormuz, makes it a critical point for global oil and energy flows. The Strait of Hormuz handles approximately 21 million barrels of oil per day, which accounts for around 20% of the world’s petroleum demand. Gwadar’s position allows for the bypassing of traditional, congested routes like the Strait of Malacca, which is prone to geopolitical tensions and piracy, offering a more secure and efficient route for global trade.

Additionally, Gwadar offers direct access to the Arabian Sea and Indian Ocean, reducing Pakistan’s reliance on the Karachi Port, which handles over 60% of the country’s seaborne trade. The potential for Gwadar to manage larger vessels (up to 100,000 DWT) enhances Pakistan’s regional connectivity and transforms it into a key player in international shipping.

Key Component of CPEC

Gwadar is a linchpin in CPEC, a $62 billion infrastructure development project that connects China’s Xinjiang province to Pakistan. CPEC, which constitutes the broader Belt and Road Initiative (BRI), offers China a strategic alternative to the long and vulnerable trade routes passing through the Strait of Malacca. By cutting the distance for Chinese goods to reach the Arabian Sea from 12,000 km to approximately 2,500 km, CPEC and Gwadar provide an efficient and secure trade link.

The port itself has seen significant Chinese investment, with over $248 million allocated for its development. Additionally, the Gwadar Free Zone, a 2,292-acre economic area surrounding the port, has attracted further investment, particularly from Chinese companies. In 2021, Gwadar’s Free Zone Phase 1 was completed, creating over 1,200 jobs, and is projected to generate $1 billion annually in economic output by 2030. The second phase, covering 2,200 acres, is expected to increase job creation and boost Pakistan’s GDP through foreign direct investment (FDI).

Gwadar’s Role in Regional Connectivity

One of Gwadar Port’s primary roles is to serve as a hub for regional trade. The port’s development opens new avenues for trade between South Asia, Central Asia, and the Middle East. It provides landlocked countries like Afghanistan and Central Asian states, such as Kazakhstan, Uzbekistan, and Turkmenistan, with a direct maritime outlet.

Gwadar’s infrastructure, including its road and rail links, will facilitate the movement of goods from these landlocked countries to global markets. Moreover, Gwadar has the potential to serve as a vital link in the energy supply chain for China, which imports more than 80% of its oil through maritime routes. By linking China directly to the Arabian Sea, Gwadar will help streamline energy imports, reducing costs and transit time for Chinese goods and energy.

Competition with Other Regional Ports

Gwadar Port is poised to compete with regional ports like Dubai’s Jebel Ali, Iran’s Chabahar, and India’s Mumbai Port. Among these rivals, Chabahar Port in Iran presents the most direct competition, particularly as India has been heavily involved in its development. India views Chabahar as a way to bypass Pakistan and gain access to Central Asia and Afghanistan. The Chabahar port was envisioned as part of the India-Iran-Afghanistan International North-South Transport Corridor (INSTC).

Despite such tough competition, Gwadar has a distinct advantage due to the depth of its waters, which can accommodate larger vessels compared to Chabahar. Gwadar’s position as a deep-sea port allows it to handle the world’s largest container ships, a critical factor in global maritime trade. Furthermore, the political backing provided by China ensures Gwadar’s continued growth and strategic importance in regional trade.

Economic Implications for Pakistan

Gwadar is expected to be a game changer for Pakistan’s economy. By 2030, the port is projected to handle 13 million tons of cargo annually, compared to its current 1.2 million tons. The associated industries, including logistics, shipping, and manufacturing, could generate billions of dollars in revenue for Pakistan. 

The port is also expected to boost local industries in Balochistan, Pakistan’s least developed province. The Gwadar Free Zone has already attracted over 30 companies, with investments expected to reach $1 billion by 2025. The Pakistan Board of Investment forecasts that Gwadar’s development could create up to 47,000 jobs, reducing the unemployment rate and contributing to social development in the region.

Security Challenges

Despite its economic promise, Gwadar faces significant security challenges. The port is located in Balochistan, a region that has witnessed decades of insurgency and unrest. Local nationalist groups have opposed the development of Gwadar, citing concerns over the displacement of local populations and the lack of economic benefits for indigenous communities. Attacks on CPEC projects and Chinese nationals have raised concerns about the security of the port and its surrounding infrastructure.

In response, Pakistan has established a 15,000-member security force dedicated to protecting CPEC-related projects. China has also invested in security measures, including the construction of a Chinese-built naval base near Gwadar to ensure the safety of its investments.

Conclusion

Gwadar Port holds immense strategic importance in regional trade due to its prime location, its role in CPEC, and its potential to serve as a key trade hub for South Asia, Central Asia, and the Middle East. As it continues to develop, Gwadar could redefine global shipping routes and regional trade dynamics, offering Pakistan new economic opportunities and further solidifying its role in the Belt and Road Initiative. However, challenges related to security and competition from other regional ports remain significant, requiring coordinated efforts to fully realize Gwadar’s potential.