China Expands its Regional Reach

There is little more graphic evidence of the tightening hold of China on a hinterland well beyond its borders than the takeover in 2013 of Pakistan’s Gwadar Port, which they assumed control over last year to serve commercial traffic to and from the Central Asian states and Afghanistan, the Middle East, the Persian Gulf, China, Iran and Southeast Asia.

China has been attaching increasing importance to regional cooperation through a series of economic corridors that include a Bangladesh-China-India-Myanmar Economic Corridor as well as another uniting the Greater Mekong Region to integrate Southeast Asia into China’s sphere as well. As such, the Gwadar project serves both China’s “look west” and Pakistan’s “look east” policies. For Pakistan, handing Gwadar over to China is one of the most visible manifestations of Pakistan’s own “regional pivot” attempts, especially against the backdrop of possible NATO withdrawal from Afghanistan.

For China, using the transport corridors to develop its landlocked western region is of prime importance. For Pakistan it is the development of Baluchistan in particular. The re-opening of the ancient trade routes and expansion of new ones from China not only reduces Pakistan’s own isolation, but also makes it one of the most feasible ports in the region given the fact that, as a report of Asian Development Bank has detailed, Gwadar, given its geographical advantages, has the potential to replace Dubai for China.

Gwadar not only is designed to facilitate trade among more than 12 states of these regions – the Silk Road spinning ever farther afield – but also to become an integral part of China’s international trade and make Pakistan its hub. As such, Gwadar has numerous imperatives for a number of states.

Gwadar reduces China’s distance from the Persian Gulf, from which China sources 60 percent of its energy needs, by several thousand kilometers, even for eastern China, once the oil pipeline materializes. In other words, with Gwadar providing China a land-based crude supply that is controlled by an ally, , and with China set to develop a China-Uzbekistan-Kyrgyzstan railroad link and another line linking Kashgar to the port, Gwadar is expected to play an extremely critical role in regional development.

Gwadar is already connected to Karachi through the Makran Coastal highway, built with US$200 million in Chinese assistance. Pakistan and China also plan to connect the port via the Indus Highway – around 414 km from the China-Pakistan border and further reaches to Tajikistan, Kyrgyzstan and Kazakhstan.

All these states – Pakistan, China, Kyrgyzstan, Tajikistan and Kazakhstan – are signatories of quadrilateral trade agreements to use this land route for regional trade. The pact became operational in 2004 when Pakistani goods were exported to Kazakhstan through Kashgar for the first time over the Khunjerab Pass, a distance of more than 2,500 km. The highway was completed in 2012 at a cost of Rs18 billion (US$170.6 million), according to figures given by the deputy chairman of the Planning Commission of Pakistan, Dr Nadeemul Haq.

A joint plan to make Gwadar an energy corridor by constructing an oil refinery abandoned in 2009, is also to be revived. When completed, the facility will also be linked to Kashgar by pipeline, which not only massively reduces the distance by several thousand kilometers but also avoids the Strait of Malacca and maritime routes through the South China, East China and Yellow Seas.

Trade and energy transport from the Persian Gulf and East-African states through Pakistan will reduce a distance of about 15,000 km to just 2,500 km. It is not only cost effective but also safe and secure in comparison with the maritime route. Currently Chinese oil tankers take 20 days in reaching the Gulf. However, after the completion of the high-speed rail and road networks across Pakistan, oil tankers from eastern China would reach Gwadar, on the mouth of the Gulf, within 48 hours..

With the completion of the 900-km long road to link Gwadar Port with the Indus Highway and eventually to Xinjiang, the distance from Xinjiang to the sea will also be reduced by more than 4,500 km. Saudi Arabian oil may also be transported via Gwadar as Saudi Arabia reportedly has asked Islamabad in 2006 to help extend oil exports to China.

China is set to build other ports in the region in order for facilitating its exports and imports: these include a ‘dry port’ at Lhasa, near Tibet, a deep-sea port in Bangladesh, one in Sri Lanka, and also a similar plan for a port in Myanmar. But none can give China that very strategic location whereby she can link itself to South and West Asia as well as Central Asia.

An additional factor that makes the Gwadar port more feasible is the level of mutual trust between the two countries. It is perhaps for this reason that they have planned to convert the entire region, from Gwadar to Kashgar, into the Kashgar Special Economic Zone (KSEZ), which is ideally located to become a hub for trade, logistics and tourism between Pakistan and China.

The development of Kashgar City also provides good opportunities for the Pakistani business community. Under the program, Kashgar – an ancient Silk Route town – will become a regional logistics center, a financial and trading hub and a key processing center for internationally traded goods. Pakistani businessmen will be treated to a five-year tax holiday.

As such, Gwadar would thus be a blessing for Pakistan because it would place the country at the hub of regional trade as one of the chief beneficiaries especially in the wake of extremely diminished foreign direct investment as well as its sore relations with the US in particular and the West in general.

Pakistan naturally benefits from increased Central Asia-China-Pakistan trade, the much needed foreign direct investment from China, transit revenues, economic and infrastructure development and consequently becoming a regional trade hub and energy transit corridor bringing huge transit revenues and employment opportunities. This in turn can result in industrial, agricultural and overall sustainable economic growth and development of Pakistan.

Pakistan wants to use the port for trade and energy transportation to China, Afghanistan and Central Asia. A rail line between Gwadar and Kashgar has been proposed. This would be a milestone in increasing not only bilateral trade but also integrating the regions of Central and South Asia economically.

The expected revenues from oil and gas transit and land to sea trade via Pakistan can total around US$1 billion annually, according a feasibility report on the Economic Significance of Gwadar. For Pakistan the economic returns stem from the port’s proximity to the Strait of Hormuz as a key shipping point and trade hub once road, rail and air links connect it to the rest of Pakistan, Afghanistan, China and Central Asia. Furthermore, around 95 percent of Pakistan’s total trade is sea-borne and its economy is heavily dependent on sea-borne trade as it contributes around 40 percent to national GDP.

Salman Rafi Sheikh is a Pakistani academician.