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After Seven Years in Development, Gwadar Handles First Afghan Cargo

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By The Maritime Executive 01-23-2020 07:36:00

The shipment of goods from the recently-built port of Gwadar, Pakistan to customers in Afghanistan has begun, according to Pakistani media. The boxship Diyala has offloaded two containers of fertilizer for Afghan customers at Gwadar, and the cargo will be trucked overland to the border town of Chaman, Kandahar.

The transformation of the port of Gwadar began in 2013 and has proceeded gradually over the intervening years. It is the linchpin in the China-Pakistan Economic Corridor (CPEC), a $60 billion collection of infrastructure projects intended to connect Pakistan's seaboard with inland markets.

The port is substantially Chinese-built and Chinese-operated. In 2017, Pakistan’s government gave state-owned China Overseas Port Holding Company a forty-year lease for its operation. Under the terms of its long-term contract, the firm retains over 90 percent of revenue from Gwadar’s marine operations, plus 85 percent of the revenue from the management of an adjacent free zone. It also benefits from deep tax exemptions that Pakistan has granted to Chinese companies for CPEC projects.

CPEC is a controversial development, both locally and internationally, as it is debt-financed and its future profitability is uncertain. 

“CPEC is not about aid,” said Alice Wells, U.S. acting assistant secretary of state for South and Central Asian affairs, at an event in Washington last year. “Now together with non-CPEC Chinese debt payments, China’s going to take a growing toll on the Pakistan economy, especially when the bulk of payments start to come due in the next four to six years. Even if loan payments are deferred, they’re going to hang over Pakistan’s economic development potential, hamstringing Prime Minister [Imran] Khan’s reform agenda.” 

Gwadar's detractors point to the fate of the Chinese-financed, Chinese-built Sri Lankan port of Hambantota, which has been transferred to a Chinese operator on a favorable 99-year lease in order to satisfy debt. In addition, some analysts note that Afghanistan already has access to seaborne freight via the Pakistani ports of Qasim and Karachi, though Gwadar is closer.

Civil unrest is another concern for the project. Last May, separatists with the Baloch Liberation Army attacked a luxury hotel in Gwadar, killing five Pakistani citizens and one soldier. The attack followed just one month after the same group killed 14 people on Gwadar's Makran Coastal Highway - including 11 military servicemembers - and six months after an attack on the Chinese embassy in Karachi killed two policemen and two civilians. 

The ethnic Balochi homeland (Balochistan) straddles the Pakistani-Iranian border between Karachi and Bandar Abbas, extending inland as far as Afghanistan. It was an independent kingdom until British conquest in the 1800s, and Baloch nationalists would like to see the region regain its political autonomy. The construction of the Gwadar port and the associated CPEC projects have relied heavily upon Chinese contractors, and Baloch groups assert that they have been excluded from the jobs and economic benefits of the project.