GWADAR’S coastal location endows it with a potential for development as a world-class port within the framework of the China-Pakistan Economic Corridor to serve as a conduit for sea-borne trade between Pakistan and rest of the world.

The level and reach of the resulting economic and social transformation will be in direct proportion to the dynamics of development and ensuing momentum, in line with the dictates of contemporary maritime economics as followed by leading ports of the world. This is inevitable to meet the emerging needs of global trade and transport and to promote the development of port-based industrial and commercial activities.

Shenzhen in Guangdong province in China can be taken as a template for Gwadar’s role in CPEC’s context. Till 1979, Shenzhen was a sleepy fishing village with a population of 20,000. Today, it is China’s leading city and its population is in the millions. It hosts top global industrial, commercial and financial multinationals. It is the leading container port of the world and its stock exchange is vying with Shanghai for second position in Asia after Tokyo.

This assigns a critical and creative role to a seaport as an interface between sea and land modes of transport as transport by sea is the cheapest and most extensive means of moving merchandise to global markets. The primary and conventional role or function of a seaport universally has been to provide a platform for transfer of trade merchandise between sea transport and land transport, as in the case of Karachi port. Port Qasim was the first bulk and industrial port of Pakistan. It functions as an industrial port in addition to its commercial operation, as in the case of the Karachi Port Trust. Whereas a commercial seaport plays just a passive role by handling sea-borne imports and exports, an industrial port assumes a proactive role by generating additional imports and exports by inducing investment in industrial and commercial undertakings by providing developed land in the port area. The direct access to the waterfront results in savings in time and the cost of transport of imports and exports between the port terminal and the location of the processing unit.

The areas around an industrial port complex are ideal locations for carrying out industrial and commercial activities, which rely on imports as inputs and need to export their output totally or partially.

The commercial and industrial roles of a seaport contribute to their mutual growth and development and thus lead to prosperity and uplift of the region. An industrial port offers ideal location for industries that rely on massive volumes of import of raw materials for production, undertake first generation conversion (steel mills, smelters, oil refineries etc), production, and energy plants (which require a massive amount of water for cooling purposes).

This marks the main constituent of development strategies of almost all emerging modern seaports (China, the Persian Gulf etc). The dynamics of the modern world port industry and trade require that a seaport is adequately equipped to play an industrial function along with a commercial one.

Equally distinct yet a concomitant role of a modern seaport is the transit function of a port. Inherently, a seaport has to carry out a transit function by providing transit shed (short-term) and/or warehouse (long-term) facilities for inward- and outward-bound cargo.

A transit port may serve land-locked neighbouring countries or it may be more cost-effective and logistically convenient than the home port, as in case of Hong Kong vis-à-vis China for trade by sea.

Traditionally, the transit function as a prime port activity has been articulated within the framework of customs-free port mandated by national law. As long as merchandise is within the ‘free port’ territory, it is not subject to national customs. Once imports enter the national territory, they are subject to the rules and regulations on the same pattern as those applicable to customs ports, as in case of the KPT or the PQA.

The concept of a ‘free port’ has further been applied to promote entrepot trade, whereby goods are imported in bulk/commercial quantities (while the supply conditions are favourable), stored in the port with the expectation that their prices will go up at some point in foreign markets and the stored goods can then be sold at higher prices.

The time of stay in the port without any interference by national customs contributes to higher profits, while meeting demand in the foreign markets and ensuring relative price stability.

The entrepot trade under the transit function of a seaport generates additional trade volume as well. The transit function of a port with facilities like warehouses and vast storage areas with respective operative rules and regulations can greatly add to the commercial performance of a seaport. Free ports in continental Europe and South East Asia have greatly contributed to the affluence of their respective port cities.

The size, scope, vision and mission underwriting the Gwadar Port project as the seaward terminal of CPEC calls for a merit-based deploying of manpower equipped with the best talent, professionalism, skills, commitment and integrity available in the country.

The special economic zones in China contributed to that country’s unprecedented economic growth and development because its top leadership was committed to not allowing any impediments to adversely impact the objectives underlying the SEZs.

Published in Dawn, Business & Finance weekly, September 21st, 2015

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