Pakistan’s key CPEC port a long way from trade hub vision

There are big plans for Pakistan’s southern coastal city of Gwadar. Pakistan and China are making a considerable effort – and pledging close to USD 700 million in investment – to transform what was once a sleepy fishing town into a vibrant trade hub, complete with a seaport, airport, major road connections and a trade zone. But the pace of development is slow, and business even slower.

“[It] must be because they [the developers] do not have the blessings of the people of Gwadar,” said Abdul Rasheed Isa, a fisher of the Khulgari Ward settlement in the port city.

A visit in April this year revealed that the only real activity at Gwadar port was undertaken by two small crabs, which had made a gargantuan effort to haul themselves up from the crystal-clear water of the Arabian Sea onto the dock. The towering blue and red cranes, brought there to load and unload shipping containers, were still.

The port is the crown jewel of the USD 62 billion China-Pakistan Economic Corridor (CPEC), which connects China’s western Xinjiang province to the Arabian Sea. It is where both countries hope the logistics of incoming and outgoing cargo will be handled for an international market.

The Gwadar port dream started in 2013, when a little-known state-owned company, the China Overseas Port Holding Company (COPHC), acquired the port for 40 years on behalf of Pakistan. About 90% of the port’s revenue is contracted to go to the Chinese company.

On paper, the port’s potential is promising. At present, it has space to berth two or three large ships with a capacity of 50,000 deadweight tonnage. By 2045, it is expected to berth 150 ships and hold up to 400 million tonnes of cargo. According to the Pakistani government, a functional Gwadar port, the country’s third deep sea port, will meet the “increasing demand for trade” that the existing Karachi and Qasim ports are “unlikely to keep pace with” on their own.

Though parts of Gwadar have had a visible facelift, the lives of its 265,000 residents, the majority of whom are poor fishers, have barely improved. In some cases, the construction of these projects has added to their problems. Most struggle with access to basic necessities such as electricity and have limited options for education.

Slow business coupled with delays to major CPEC projects in Gwadar – such as the main expressway road, coal power station and new airport – could mean that their lives are unlikely to improve any time soon.

An idle port

Naseer Khan Kashani, the chair of the Gwadar Port Authority (GPA), which oversees construction and maintenance, outlined the problem with a frank admission.

Despite Gwadar’s “strategic positioning” as one of the “best deep sea ports” at the mouth of the Persian Gulf, which facilitates the movement of “one-third of global oil every year”, he said the port has failed to bring business.

“It is ready for anyone to use. It’s up to investors and traders to use it to do profitable business. We cannot trade for them,” said Kashani, adding that the creation of demand is “up to the market forces”. Incentives such as competitive handling charges, improved security and safety of cargo at the port and also during transport, speedy customs clearance and free storage for up to three months have failed to beckon traders.

Kashani said factory owners and traders in Faisalabad and Lahore have shown interest in the GFZ, and that the tax exemptions and concessions introduced in September 2019 will “trigger economic activity”.

Yet The Third Pole’s visit revealed very little activity was happening.

Only 24 hectares of the 9,200-hectare site were termed “operational”, according to Kashani. There were buildings, sheds and godowns (warehouses) on the land, but no people in sight.

“Your impression is incorrect,” insisted Zhang Baozhong, the chair and chief executive of COPHC, when asked about the lull in activity by The Third Pole. “A lot of progress has been made. Over 1,000 locals are employed at the port as well as the Gwadar Free Zone.”

Zhang said that since last year, every month up to 5,000 tonnes of liquefied petroleum gas from Qatar and Oman reaches Gwadar and is transported upcountry.

“The port is actively engaged in transit trade for Afghanistan [too],” said Zhang, adding that “up to 30-50 containers are being shipped to the port every month.”   

But within the GPA corridors, there are whispers of disenchantment with the Chinese company, which is responsible for bringing the business.

“According to the agreement with GPA, marketing was COPHC’s responsibility,” said an employee, who asked to remain anonymous. “They are doing a lot of corporate social responsibility, opening a school here, a hospital there, but we don’t see the real work for which they are here,” he said, visibly irritated.

Infrastructure still missing

The reason for the slow pace in trade is not just poor marketing. Gwadar still does not have power, water, road connectivity, internet and cellular networks or gas.

When visiting the port in early July, Prime Minister Imran Khan highlighted “common issues such as supply of water, electricity and gas, and connectivity with other areas” as responsible for the lack of progress.

Unlike Karachi and Qasim ports (also in Karachi), whose infrastructure expanded as they became major global freight hubs, little development had happened in Gwadar before the CPEC project’s launch in 2013.

Zhang and Kashani acknowledged that infrastructure was a problem.

“This is bound to affect our work at the port and the GFZ,” said the COPHC chair.

“The [cellular] connectivity issues need to be overcome, so investors come here and do not turn to Oman or Dubai,” said Kashani.

But even if the port overcomes these connectivity challenges within its boundaries, it will still not be able to increase trade until more roads beyond Gwadar are constructed. Moreover, air connectivity will not happen before 2022.

The problem is exacerbated by the lack of power supply, which Zhang said was the most “crucial component” for the establishment of industries inside the GFZ.

At present, the GFZ is running on increasingly expensive diesel fuel generators, he said, adding that the timely completion of the power station would “boost the confidence of foreign and local investors”.

Coal again

Zhang was referring to the construction of two 150-megawatt coal-fired power plants at Karwat, about 40 kilometres from Gwadar. At a price tag of USD 540 million, this coal project approved during the previous government will be executed by China Communications Construction Company, which is awaiting a nod from Pakistan’s top economic decision-making body.

Despite the provincial government’s reservations to the power plants, which will burn imported coal, a No Objection Certificate was coughed up by the Balochistan Environmental Protection Agency, and the tariff consumers will pay for the power agreed upon.

Though the groundbreaking of the coal plants took place in 2019, officials are reluctant to talk about them. This could be in part because in December 2020 Imran Khan’s government announced to the world that the country would scrap any new coal power plants, especially those run on imported fuel.

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In fact, Malik Amin Aslam, special assistant to the prime minister on climate change, assured the international community during the US-led Earth Day virtual summit that Pakistan would shift to 60% clean energy by 2030.

“[The Karwat power station] was agreed upon by the previous government,” Kashani said, shifting the blame. However, according to the CPEC website, the GPA is one of the supervising agencies of this project.

The East Bay and Gwadar’s underbelly

Past the Shahi Bazaar, on the East Bay where the port lies, is a fishers’ settlement called the Khulgari Ward.

It opens into the vast expanse of the sea. The port can be seen on the far right.

In the months prior to The Third Pole’s visit, the construction of the Eastbay Expressway, a major road connecting Gwadar to the main highway, had been right at the doorstep of this settlement. It has also affected two adjacent housing colonies, the Baloch and Guzarwan wards. The expressway has blocked these communities’ access to the sea on the East Bay side.

The Khulgari settlement is a shockingly dilapidated sight. Stray dogs scavenge through huge heaps of rubbish and open sewers swarm with mosquitoes.

“Road construction has damaged three septic tanks, and now the entire area is filled with leaked sewage from the tanks,” said Haji Anwar Umar, a resident of Khulgari Ward. He pointed to the piles of garbage and pools of sewage. “Earlier, the colony’s garbage went straight into the sea.”

The authorities view the road as a critical part of Gwadar’s accessibility, as it connects the port and its free zone with the network of national highways to transport goods.

The USD 168 million, 19 km, four-lane road, “which can be expanded to six lanes” will be sufficient to convey port activity for many years, according to Kashani.

When asked about the problems the expressway has created for locals, Shabbir Ahmed, the private secretary to the GPA chair, said it has also “directly or indirectly” created over 500 jobs for them. He is one of the longest-serving employees at the port, having been employed there since 2004.     

Initiated in 2017, the expressway was due to be completed by October 2020, but has been delayed.

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Kashani explained the delay. “We had to change the design to accommodate three bridges and a jetty to address the grievances of the fishers.” He said 85% of the work was complete and the road should be ready in “less than a year”.  

The changes were made at the eleventh hour although fishers had been protesting since 2018. The protests had gained momentum in the last six months, forcing politicians as well as the Gwadar deputy commissioner to take notice.

“Don’t get me wrong, we are not against development; we had been telling them for the last three years to hear us out, to include us in the plan,” said Umar, the resident of Khulgari who is also the president of the Muttahida Mahigeer Gwadar, an organisation fighting for the rights of the fishers in Gwadar. He said fishers make up 80% of the district’s inhabitants, but have largely been ignored.

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“Fortunately the old town remained undisturbed and we did not have to displace anyone,” said Kashani. In Pakistan, development projects often come at the cost of displacing the poor, with little offered as compensation.

Fishers blocked from sea

While Umar acknowledged that no evictions had taken place, he pointed to another problem: that the expressway took away the community’s 2 km of free access to the sea. This had a major impact on both their social and economic wellbeing.

In addition to this, he said the construction of the expressway has caused structural damage to many houses in the three settlements.

Describing the damage as “minor cracks”, Kashani said a detailed survey was carried out by the GPA in collaboration with the building and road department and the deputy commissioner’s officer. He added that compensation of “PKR 48 million [about USD 300,000] has been estimated” and will “soon be paid to the affectees”.

“We have been told we will be compensated but we don’t know when,” said Umar.

He added that the community experiences long hours of power outages, which become impossible to endure when “mosquitoes keep everyone awake till the early hours”.

“Stay a night and experience it yourself!” said Ataullah Baloch, another fisher.

The road has also damaged the social fabric of the community, bringing “misery and disease” in its wake, said Baloch.

“We would sit along the shore every evening to watch the youth play cricket and football matches,” he recalled, adding that three years ago the expressway ended that recreation.

Because of this, said Umar, the fishers have been demanding a link road running parallel to the expressway so they can carry on with their lives like before.

More than anything, the expressway has destroyed their livelihood.  

“The sea used to be five minutes away,” said fisher Abdul Rasheed Isa, as he pointed to the strip of tarmac in front of the settlement. “Our access to the sea has been completely blocked.”

“Are we mere insects that they can trample under their feet?” he asked.

“We cannot bring our boats to the shore and if we leave them in the sea, they break into pieces crashing against rocks.” He added that, between January and April, up to 40 boats were damaged.

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The rocky seabed of the East Bay, with its nurseries of shrimp and prawn, used to be a steady source of income for these fishermen, but the Gwadar port has affected their livelihood. It is off limits for the fishers as the area is classified as a high-security zone.

“We could fish here all year round,” said Isa. A single day’s haul, he said, can fetch PKR 5,000-10,000 (USD 32-65).

Several fishers complained that the maritime security guards were “downright insulting”, and that they “used foul language” and often “struck” the fishers with batons if they argued.

Most felt affronted that they are denied access to waters that “historically are ours”.    

The hurt is being somewhat addressed with the construction of a jetty so the fishermen can unload their catch.

The future for fishers in Gwadar city

The COPHC acknowledged that the people of Gwadar live difficult lives.

“It is a very neglected area with huge challenges not only on the health and education fronts but also as far as electricity and water are concerned,” said Zhang, the chair of COPHC.

For the young people of Gwadar, the future remains bleak.

For the past 15 years, scant progress has been made on an under-construction degree college. A university campus affiliated with the University of Turbat is located on the college’s campus, but has a very limited faculty. Gwadar University, which China wants to link with a Chinese university, has not progressed since its groundbreaking due to the absence of funds, according to local journalist Behram Baloch.

“Those who can afford it send their kids to Karachi to study or relocate as a family,” he said. Three of his children study in a boarding school in the city of Bahawalpur, in Punjab. 

The COPHC is trying to make small changes to lift local people out of poverty.

These include setting up a vocational institute, building a 100-bed modern hospital that will be functional by the end of the year, providing over a million litres of freshwater to local people every day as well as planting trees. COPHC has also managed to get a Chinese NGO to build a new middle school in an impoverished settlement of Gwadar to provide free education.

“Gwadar is special,” said Zhang, adding that he found the people “hardworking, friendly and peace-loving”.