Pakistan is taking initiative to develop Gwadar Port in Balochistan as a duty-free port with free economic zone on the lines of UAE’s Dubai. Present government led by Prime Minister Imran Khan plans to provide exemptions from income tax, sales tax and custom duties to the Gwadar Port for 20 years. The Economic Coordination Committee (ECC) has approved a proposal for amendments to various laws that would provide exemptions from income tax, sales tax and custom duties to the Gwadar Port for 20 years- until 2039. The proposal in this regard was submitted by Ministry of Maritime Affairs and sought changes in the country’s tax laws in line with the concession agreement between the Gwadar Port Authority and China Overseas Ports Holding Company Pakistan. The ECC has asked the law ministry for a legal way out in order to provide a legal cover for the amendments. The initiative will benefit those who intend to set up industries in Gwadar. As a result of this initiative, business activities in Gwadar will get a boost from next year.
The tax incentives as announced by the government would mobilize the private sector for setting up the manufacturing and assembling units in the new port city of Gwadar. The country has already announced a 15-year tax holiday for the proposed Export Processing Zone (EPZ) that has been planned near the Gwadar port for local and foreign investors. Pakistan automobile market is dominated largely by Japanese and Korean manufactures like Suzuki, Honda, Toyota, Hino, Hyundai and Mazda. Many foreign manufacturers including Chinese are reportedly in negotiations with Pakistan to start assembly operations in the country. These incentives will attract manufacturers to establish the manufacturing and assembling units in Gwadar. Serious efforts on the part of the government will start at least assembly operations in Gwadar. The assembling units in the country are already assembling most of the world leading brands and the government can facilitate the private sector to set up assembling units in Gwadar.
Prospects are bright for China for setting up automobile units in Gwadar. China’s vehicle market is the world’s third-largest behind the United States and Japan, but the after-market segment is in its relative infancy. In the United States and Europe, after-market sales account for roughly 70 percent of the auto industry. According to an estimate, after-market sales accounted for one-third of the total industry in 2002 in China. It totaled roughly $23.7 billion in 2004. The sector has been growing at 8 percent a year and is on track to reach $31 billion this year. China’s auto market has gone into overdrive in the last five years as millions of Chinese bought their first cars. Now, the market for replacement parts and service centers is racing to catch up.
After the formal handover of the free trade zone to China, all business affairs of the Gwadar port in Balochistan are currently being carried out by Chinese authorities. In 2017, Pakistan formally handed over the 2,281 acres free trade zone of Gwadar Port to China on a 43-year lease. Pakistan has already declared Gwadar port a free trade zone for the next 23 years. China is deeply interested to pour huge investments in Gwadar, which is located at the mouth of the Gulf and close to the Strait of Hormuz.
The $60 billion China-Pakistan Economic Corridor (CPEC) and Gwadar Port are expected to usher in a new era of industrial development in the country. The opening of Free Trade Zone and EPZ will open the doors for development of small, medium and large scale industries generating revenue for the government and providing profitable avenues for both the skilled and non-skilled workforce in the province. The potential investment areas in Gwadar include fish processing, crabs processing, cold storage, ice factories, sea-water reverse osmosis desalination plants, shrimp farming, boat building and naval architecture institute, oil storage tankers, ferry service for Karachi Ormara-Pasni-Gwadar and up to Oman and Dubai.
Gwadar Port has the potential to become the industrial crown of the country. It can transform the Pakistan’s economic status forever. It will enjoy prime importance because of its geo-strategic location marking the confluence of South Asia, West Asia and Central Asia. The proposed industrial zones in the port city of Gwadar would contribute to the harnessing of Balochistan’s potential in natural resources and development of heavy and large-scale industries, petrochemicals and manufacturing.
The Gwadar Free Trade Zone will open up many more possibilities for the region. Gwadar, after completion of port project is expected to become the ‘boom’ town in the next few years. A special industrial development zone with an area of 4,000 hectare has been proposed for setting up various industries in Gwadar. The export processing zone has also been planned for assembling plant and other industries. Oil storage yard and refinery have also been proposed in the north of Gwadar town. Gwadar is poised to emerge as a hub port providing facilities of warehousing, trans-shipment, transit and coastal trade and the commercial and industrial openings for international export-import trade.
Gwadar Port would help bring Balochistan’s coastal areas into the economic mainstream of Pakistan. It will catalyze the development process in the province bringing it at par with other provinces. Development of an integrated transport system and future road and rail links to CARs and rest of the country will enhance the local peoples’ access to new vistas of development and prosperity. Gwadar Port will open up the hinterland. Besides, serving as transshipment hub, it would promote the development of a refinery and petrochemical complex and other industries. ECO highway, coastal highway and other mega projects in road sector will connect Gwadar Port with Central Asian states, Gulf sheikdoms and rest of the country.
What has so far impeded China to carry out its ambitious plans to turn the port into a hub port is the worsening security situation in Balochistan. Presently, Balochistan faces multi-faceted violence. It suffers from a separatist insurgency and violence on ethnic and sectarian lines. It is not the ports and economic zones which will bring peace and stability but it is peace which will actually materialize the projects vital to economic progress and prosperity of the country.