Saturday January 22, 2022

Amplifying port benefits

May 14, 2020

Amidst the daily grind of grim news relating to Covid-19 infections and deaths has come one welcome development, showing that life goes on.

The news relates to the federal government’s decision to open the Gwadar Port for Afghan Transit Trade. This is a very positive development for several reasons. To begin with, it will enhance capacity utilization of the port. However, the accrual of full benefits of this decision will need a number of allied measures to develop Gwadar’s comparative advantage vis-a-vis Karachi.

There are two routes for Afghan transit goods: Karachi-Quetta-Chaman-Kandahar and Karachi-Peshawar-Torkham-Jalalabad. Relatively, Gwadar can be more viable for the former destination.

The distance from Karachi to Quetta and from Gwadar to Quetta is 690 kms and 915 kms, respectively. In the event, transporters would be reluctant to use a route that is longer by 225 km. Additionally, the Gwadar-Quetta route passes through somewhat desolate terrain and offers few facilities for rest and meals compared to the Karachi-Quetta route. Security will also be an overriding concern.

Gwadar can overcome the above relative handicaps and enhance its economic viability significantly if a direct route is created between Gwadar and the city of Sangin in the southern Helmand province of Afghanistan. The 1,800 kms route is proposed to run south to north from Gwadar to Nokundi in Chagai district and onward to Sangin. The route will pass through Turbat and Panjgur and curve around the Hamun-e-Mashkel seasonal lake.

Sangin, across the Pakistan-Afghanistan border, is a junction town on the highway that connects to Kandahar 150 kms to the east, to Herat 500 kms north-west via Farah, and to Mazar-e-Sharif another 750 kms to the north. The highway network is recently built and reported to be of excellent quality. The Gwadar-Sangin section will open a third route for Afghan transit trade and lead to the development of Sangin as a major commercial centre to the benefit of southern and south-western Afghanistan.

The benefits to Balochistan and Pakistan will also be manifold. Expanded economic activity in southern Afghanistan will benefit the population of north-western Balochistan via greater trade opportunities and also generate opportunities for the development of Turbat and Panjgur. Gwadar will offer a shorter and faster route from the Saindak and Rikodik copper mines; thereby, further enhancing capacity utilization of Gwadar port.

A major benefit will be to curb the smuggling that Afghan transit trade has spawned, to the immense detriment of Pakistan’s manufacturing sector. Either some of the goods are off-loaded before reaching Afghanistan or they are recycled back to Pakistan. The Gwadar-Sangin route will be at a distance from the markets of Karachi, Lahore, Islamabad and Peshawar and the higher cost of transporting the off-loaded goods will rein in some of the economic incentive to smuggle.

The benefits of the Gwadar-Sangin route will be further enhanced if a railway line is laid along the track. Admittedly, railways are highly capital-cost intensive and the volume of traffic may not justify the monetary rates of return for the particular section. That, however, would be the conclusion of a narrow financial cost-benefit analysis. A broader socio-economic feasibility study is likely to produce a different result.

Relative to road transport, the railway will reduce the time cost of transporting goods to and from Gwadar and Sangin and from the Saindak and Rikodik mines. And railways use one-third less fuel per kilometer of tonnage compared to road transport; thereby, saving foreign exchange.

More specifically, a railway will be instrumental in containing smuggling. A truck can be half emptied while the driver and staff make a shortstop for tea or a meal. A train does not make unscheduled stops; and if it does, it can be monitored via satellite. Flow back of goods to markets in Pakistan will be uneconomical on account of the cost imposed by distance. The net beneficiaries will be Pakistan’s industries.

The security and political benefits need to be taken into account as well. The expansion of economic activity across western Balochistan and across southern Afghanistan will create jobs and raise incomes in both countries, reducing deprivation and disparities. After all, bombarding the area with jobs instead of with drones and gunfire is a more secure method of curbing insurgencies.

The writer was economic adviser to the chief minister Balochistan and also has experience of working in Afghanistan.