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‘Allowing Afghan Transit Trade can unleash full potential of Gwadar port’


 RECORDER REPORT  APR 27TH, 2019  ARTICLE

Interview with Mir Naveed Baloch, Chairman Gwadar Economic Forum, Leader of Gwadar Chamber of Commerce and Industry 

Trained as a mechanical engineer from the Balochistan University of Engineering and Technology, Mir Naveed Baloch is a member of the Pakistan Engineering Council since 2003. Following his engineering education, he ventured into diversified commercial interests such as real estate; and shipping, transport & freight.

Currently, he is serving his third term as the President of Gwadar Chamber of Commerce and Industry (GCCI) and has been the President of Zameendar Association in Gwadar for last 15 years. His past stints include serving as Vice President of FPCCI and as member of caretaker cabinet in Balochistan during the last interim government. He is also the founder Chairman of Gwadar Economic Forum and CEO of Gwadar Global Gateway, a real-estate company.

In this interview, BR Research picks Mr Baloch's brains on recent developments in Gwadar, current state of business activity at the port, and his plans as President GCCI to encourage commercial enterprise in the city. Mir Naveed offered brief but important insights on how to kick off growth and investment in Gwadar. Below is the edited transcript.

BR Research: What is your assessment of the new Gwadar master plan?

Mir Naveed Baloch: Gwadar's master plan has been prepared by the same company that has drafted master plans for several Chinese cities in the past. The new master plan envisages One Gwadar. This means that there will be no distinction of "Old Township". In coming days, you will notice concerted government efforts to develop and improve the existing infrastructure of the erstwhile old township area.

As far as the new areas are concerned, work on the expressway to airport is expected to be completed by mid-2020. Similarly, East Bayway, along with other projects, is expected to be completed within next three years. BRR: What has been the progress of soft infrastructure development such as in health and education services for Gwadar city?

MNB: One must appreciate that Gwadar is still very much a fishing village. While GDA Hospital is very well managed, more medical facilities shall be added as the city grows. Darmaan Jah Navy Hospital in Ormara town also falls within Gwadar district. It features among the top care centers in the province.

So far as education is concerned, we are lagging. Currently, Cadet College, Ormara is the only higher secondary level institute in the district. However, once infrastructure projects mature and commercial activities at port pick up in earnest, population will grow in tandem. Schools and colleges will only mushroom once population reaches a threshold.

BRR: Has there been any respite in Gwadar's chronic water shortage problems?

MNB: Gwadar's water shortage is close to resolution. Back when I was the minister, I had undertaken water supply planning for the entire Gwadar district. The plan had envisaged construction of both waste treatment and desalination plants to address long term shortage of water in Gwadar. These need to be complemented with improved access to surface water, along with increased availability of tube wells.

Thanks to rain, dams and reservoirs in the region have filled. The city is being connected with Shadi Kaur dam in Pasni district, where surface freshwater is available in abundance. We expect the supply to begin in a month's time. Current water levels in Shadi Kaur are sufficient to service Gwadar city's requirement for at least the next three years.

Similarly, agreement has been reached with the Chinese, and they intend to increase supply from three to five hundred thousand gallons per day. In addition, one desalination plant with capacity to supply seven hundred thousand gallons per day has already been set up at Sur Bandar. Another desalination plant - and this is a megaproject under the auspices of GDA - shall come online within next two years. It will have a capacity to supply 5 million gallons per day.

Other than supply constraints, the district also lacked infrastructure in water distribution. Flurry of activity has been taking place to address this, and we expect distribution system to be fully revamped within one year. I would like to add that both the Chinese and COPHC are planting trees and green belts across the city. In next couple of years, Gwadar's green landscape shall be fully transformed.

BRR: Do you believe Iran's Chabahar port poses a threat to Gwadar's commercial potential?

MNB: We view Chabahar as a sister port, and not as competition. It may be able to service Iran's trade with Central Asian countries. However, it is incorrect to compare it with Gwadar, which is a deep sea port and connects China with Middle Eastern countries, African continent, and Europe.

The proximity of two ports can magnify the trade potential for the region; for example, smaller ships should head to Chabahar whereas Gwadar may service larger vessels.

BRR: What kind of Pakistani and foreign businesses are most likely to or have already shown interest in setting up factories and expo centers in Gwadar industrial and free zone?

MNB: While many foreign investors had shown interest, we were unable to cater to all due to limited availability of land in the first phase.

Nevertheless, several ghee manufacturers have set up shop in the zone, as have a manufacturer of battery powered electric motorcycles. Due to Gwadar's historic fishery potential, seafood packaging units have expressed interest as well. We believe such mushroom growth in a limited time speaks volumes about industrial zone's potential.

During an official visit, I asked a French senator for his views on Gwadar and CPEC. He responded that if Europe as a region does not become a part of OBOR, they will be net losers in global trade.

Returning to your question, allotments have begun for the second phase of industrial land. GCCI welcomes foreign and local investors alike to come visit Gwadar and take part in the investment activity.

BRR: How soon do you expect commercial activity in Gwadar to finally take off?

MNB: Gwadar's connectivity has been completed to both Punjab on the eastern corridor, and up to Afghanistan on the western corridor. While it will take another three years for the commercial activity at the port to fully take off in earnest, some level of trade should begin by the end of this year.

In my opinion, the day Afghan Transit Trade via Gwadar begins, full potential of the port shall be unleashed.

Moreover, IT infrastructure is also fast evolving. For example, WEBOC system has also come online at Gwadar port. This should signal to investors that Gwadar port is ready for business.

BRR: Bao steel had expressed interest in setting up industrial units in Gwadar. What is your pulse reading? Have they lost interest?

MNB: It needs to be appreciated that an erstwhile fishing village is undergoing a transformation into commercial hub. Therefore, construction activities in Gwadar region shall grow by leaps and bounds very soon. And that in turn has the potential to make the city a hub of cement and steel export to regions such as Africa.

Even though lease has not been issued, industrial land has already been allocated to Bao Steel in the master plan. Therefore, I am certain that the company will soon setup shop here. Moreover, many manufacturing units are already branching out to Pasni region, which is a testament that Gwadar will also transform the industrial landscape of neighboring regions.

BRR: Please apprise us of Gwadar chamber's activities in recent years?

MNB: Gwadar Chamber has become very active in recent times. For example, last year, we launched an initiative in partnership with Rawalpindi Chamber which invited leadership of business chambers from across the country to Gwadar. Soon we shall hold another national level consultation, planned for mid-2019.

BRR: Given Gwadar is the most important node of CPEC, what role does the chamber expect to play in coming years? For instance, how do you plan to increase the number of GCCI revenues, and strengthen GCCI's research and advocacy wing?

MNB: The foremost goal that we have set for Gwadar Chamber is to facilitate ease of doing business for prospective investors and industrial units alike. At the same time, we see it as equally important that local businesses and investors do not lose out in the process. In this regard, Gwadar Chamber can be a bridge to resolve future differences between local and external commercial interests.

If handled carefully, Gwadar Chamber can ensure that it creates an enabling environment which is a win-win for all. Similarly, Chamber can ensure that commercial interests of foreign investors are protected, by establishing an exemplary repertoire with the government and regulatory bodies.

Coming back to ease of doing business, our goal is to offer a one-window operations facility to prospective investors, domestic and foreign alike.

So far as R&D is concerned, it is unfortunate that we do not have a dedicated wing to this effect in place currently. However, once commercial activity takes off, so will revenues of the Chamber. And that will facilitate us in establishing an R&D wing. 

BRR: Gwadar's real estate has become the new home for speculators in the sector. What would be your advice to real estate investors in terms of how to avoid getting trapped in a fraudulent scheme?

MNB: Let's not point fingers at Gwadar. The way real estate sector functions in this country, investors must exercise caution whether it may be the property market of Islamabad, Lahore, Karachi or Gwadar. Moreover, due to the anticipation of commercial activity, returns on investment in Gwadar's property market have been phenomenal over the past couple of years.

Investors should bear in mind the maxim that "seeing is believing". Before investing in any property scheme, they should visit the parcel of land in person, and examine the property documents physically. As long as basic precautions are undertaken, investors will hopefully not incur losses.

BRR: Speculation in Karachi's property market has priced-out well-meaning industrialists. When prices are too high because of speculation, it often does not make business sense for real industrialists to purchase land for factories. What is the situation of industrial real estate in Gwadar and what measures would you suggest to ensure that Karachi's experience is not repeated here?

MNB: I will be honest. The situation of Gwadar's privately held land is not quite dissimilar. However, genuine investors can approach the government with detailed plans and set up units in industrial land owned by the state.

Similarly, pre-determined rates of property in Gwadar Port Free Zone are notified on the website. Genuine buyers may approach the authority and can avail land if they have detailed investments in place.

BRR: GCCI had also set up Gwadar Economic Forum. Please describe its mandate?

MNB: Gwadar has several governing bodies for a variety of commercial interests. Other than GCCI, these also include Zameendar Association; Real Estate Association; Gwadar Developer Association; Trading & Shipping Association etc.

Gwadar Economic Forum is a group of indigenous business community that has won elections for governing bodies of almost all associations. We are proud to state that GEF has representation of all ethnicities and spiritual leanings, which has been instrumental in its success and popularity.

BRR: Some sections are of the view that Chinese logistics and trucking companies will benefit the most from CPEC whereas domestic logistic businesses will be at a loss. Do you agree? 

MNB: Frankly, this depends on the policy course our government takes. If local banks begin to offer soft loans to indigenous trucking and logistics businesses, there is no reason why these should not be able to compete with their Chinese counterparts on an equal footing. Please remember that Chinese state offers a lot financial support to their indigenous logistics firms.

Having said that, it is true that due to their sheer financial muscle and networks, the ability of Chinese firms to take advantages of the opportunities in shipping and logistics is better. That in no way means that Pakistani firms will not be able to reap the dividends as well.

For example, Chinese personnel will be at a disadvantage in terms of not being able to deploy their personnel on-ground as truckers. To this end, they will require local resource which not only have a training in domestic land routes, but practically speaking, face less security risk than foreign truck drivers.

This presents an opportunity for local businesses. In my opinion, even if Chinese state-owned companies enter the logistics businesses here, they will be interested in entering into joint-ventures with local counterparts. Moreover, once trading activities take off, Pakistani manufacturers and merchants will also be well-positioned to take advantage of the connectivity through land routes.

In the end, it will all depend on how well placed are indigenous companies to take advantage of their unique local knowledge. With requisite government support, Pakistani logistics businesses shall be equally competitive.

BRR: Why isn't Afghan transit trade being routed through Gwadar as yet? What is the trade potential, challenges faced and proposed solutions?

MNB: Proposed land route for Afghan trade transit will extend from Kandahar to Chaman and finally to Gwadar in the south. Because its obviously shorter, it is better suited for trade with Afghanistan than existing route. 

However, there are several challenges. For example, domestic shipping lines require advance payments from buyers. Similarly, clearance of goods at Customs is also very delayed. Thus, trading parties from Afghanistan prefer to trade via Iran, where they do not face any issues; and get their freight cleared from Iranian Customs within three days only.

Everywhere else in the world, countries are making serious efforts at facilitating trade, whereas we are making it more difficult. For example, globally most states have moved to TIR Convention to ease trade by land. No initiative has been taken to this end over here.

If Pakistani policymakers are genuinely interested in capturing the trade potential from Afghanistan and other Central Asian countries, they will have to get serious about fixing these issues, and streamline Customs at port. Otherwise, we may stand to lose whatever remaining transit trade volume that we have.

BRR: Does the GCCI also represent small traders in Gwadar?

MNB: Currently, Chamber mostly represents small traders only, because large-scale activity is yet to get underway in the city. And it not only represents traders but also other local businesses and units from Gwadar.

At the same time, GCCI has been equally welcoming of new and upcoming commercial interests, whether real estate developers from other parts of the country, or industrialists and foreign investors such as the Chinese.

Copyright Business Recorder, 2019


https://fp.brecorder.com/2019/04/20190427467803/

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