The Gwadar port in Balochistan ultimately went operational for export this month. This was the great news for the country’s economic jubilation in the year-end bearing future prospect. With a functional Gwadar port, the burden on the Karachi port will reduce. Gwadar port is the essential part of the China-Pakistan Economic Corridor (CPEC), and is considered to be an important link to China’s trillion dollar Belt and Road Initiative (BRI).
The departure of a vessel, carrying three fish containers worth $50,000 each, for a Far-Eastern country started the seafood exports through Gwadar port, according to the Adviser to Prime Minister on Trade and Industries Abdul Razak Dawood. The departure marks the operationalization of the country’s third deep-sea port for export after Karachi and Bin Qasim. The container line service of China Ocean Shipping Company (COSCO) Shipping Line is an integral part of the CPEC project which connects Afghanistan, the Central Asian states and western China. In September, the first container line service between Karachi, Gwadar and the Gulf was successfully initiated. The seafood export started last month through COSCO’s KGS (Karachi-Gwadar-Gulf Service) service. The KGS has operationally connected Gwadar port with the world’s seaports.
This month, the government formed a committee to draft transit and trans-shipment rules as part of the port’s development. It is worth mentioning that Gwadar port has already been included in the transit rules framed under the Afghanistan-Pakistan Transit Trade Agreement 2010. Gwadar port is poised to target the large untapped market of coastal trade between national seaports, Afghan Transit Trade (ATT), regional trans-shipments and exports and imports. Balochistan could become the primary beneficiary by exporting multiple commodities especially seafood, fruits, vegetables, marble, minerals, and many other locally available commodities to the world’s markets through Gwadar port.
Gwadar is currently the country’s deepest port with its existing three 14-meter deep berths to handle ships. Five new berths will be added to the existing three berths for handling bigger ships under the port expansion plan. Under the second phase of port development, the depth of the port would be increased to 16 meters to facilitate bigger ships. There are also plans to increase the depth to 20 meters in future that will make it the port deepest in the region. The facilities planned at the Gwadar hub port include warehouses, storage areas, distribution center, offices, trucking and shipping services.
In the calendar year 2019, Islamabad and Beijing expedited efforts to develop Gwadar port and the Free Zone. For example, local tax breaks in Balochistan and the provision of fiber optic communication by the Pakistani side are needed. The two countries agreed to the need of fast execution of Gwadar infrastructure and assistance projects including the New Gwadar International Airport, Gwadar vocational and training centre, expansion of China-Pakistan government middle school and construction of the Pak-China friendship hospital and Eastbay Expressway. Both countries realize the need to advance the integrated development of Gwadar port and the Gwadar region and Gwadar Free Zone. With the completion of the phase-I of Gwadar Free Zone, all plots have been leased out to more than 30 Pakistani and Chinese investors registered in the Free Zone. The two countries have put the development of the Gwadar port on priority. This year, a 300MW coal-fired power plant was opened to relieve power shortage in the Gwadar city.
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This year, the federal government also approved legislative changes to address a longstanding issue of tax concessions for Gwadar port and Gwadar Free Zone. For the last three years, China wanted Pakistan to amend the Income Tax Ordinance, Sales Tax Act and Customs Act. The decision of amendment was recommended by the National Development Council (NDC), which is chaired by the Prime Minister Imran Khan with Army Chief as its member. The new tax concessions have only be granted to the Gwadar zone. China Overseas Port Holding Company Limited (COPHCL), the operator of Gwadar port, has been granted tax exemption for 23 years to help establish industrial units at the Gwadar port. This decision was a step towards rearrangement of the Chinese manufacturing industry in Gwadar, and busying the local labor. In 2013, the concession agreement with the COPHCL included a tax holiday for both the operators of Gwadar port and the businesses being set up there. The country approved income tax exemption for Gwadar free zone on the income of operating companies from port operations. The income tax holiday was not only extended to COPHC but also to Pakistan Private Limited, Gwadar Marine Services, and Gwadar Free Zone Company.
This year, the CPEC entered the second phase of development. President Dr Arif Alvi promulgated two ordinances to set up the CPEC Authority and grant tax concessions to the Gwadar port and its free zone in a move to show Islamabad’s seriousness in Beijing’s $60 billion CPEC initiative. The CPEC Authority Ordinance 2019 and The Tax Laws (Amendment) Ordinance 2019 are aimed to set up a new body to oversee and implement CPEC and give income tax exemptions to Gwadar port and its free zone. The government has fully empowered the CPEC Authority, which would make its own budget and its executives would be immune to legal prosecutions. The CPEC authority will manage and control the development work as carried out by the CPEC secretariat. The authority has been placed under the Planning, Development and Reform Division and it will have the powers to enter into contracts, acquire and hold property, both movable and immovable.
There will be a CPEC Fund at the disposal of the authority to meet all expenses and charges. The authority has been tasked with building narrative of CPEC and undertaking research for long-term planning. The authority will hold at least one quarterly meeting. There is also a plan for setting up a CPEC business council under the authority. On administrative side, the CPEC authority will consist of a chairperson, chief executive Officer, executive director (operations), executive director (research) and six members. The appointing authority of the chairperson, executive directors and members is the Prime Minister who can appoint them for a period of four years. The CEO will be minimum grade-20 civil servant. Complete immunity has been ensured to the authority leadership and no case can be filed against them. The chairperson, executive directors and members cannot be civil servants. The top hierarchy of the authority will be deemed as public servants.