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CPEC and Port Efficiency

CPEC and Port Efficiency

The overall Global market activities are firming as anticipated. Manufacturing and trade are gaining momentum, investment confidence is improving, and international financing conditions also remain benevolent. As per the Global Economic Prospects (2017) the international growth is projected to increase to 2.7 percent by the end of year 2017. Whereas, it is also expected that the year 2018-19 would witness a global growth of approximately 2.9 percent. In emerging markets and developing economies (EMDEs), growth is predicted to recover to 4.1 percent in 2017 and reach an average of 4.6 percent in 2018-19, as obstacles to growth in commodity exporters diminish, while activity in commodity importers continues to be robust.

In all of this China’s role in the developing global economy has increased and contributed in taking world trade to record levels. China for the first two quarters of 2017 has enjoyed a 6.9 percent growth, managing to surpass the 6.7 percent mark attained in 2016. If the same trend continues no doubt 2017 would be the first year for China’s growth rate to accelerate on the preceding ever since 2010. Interestingly this does not end here as China has initiated a grand revivification of the Silk Road based on land and maritime logistics; communication networks connecting Asia, Europe and Africa through “One Belt One Road”.

This vision of One Belt One Road reflects China’s desire to form strong ties with its neighbouring countries in order to access more strategic manoeuvring space in Asia and Europe as well as establishing of new markets for China and its partners. Indeed, China has injected a notable level of investment to boost integrated economic growth in the Eurasian region through mega infrastructure projects across 6 corridors peddled to offer a crucial connection amongst economic and commercial nodes that are usually centres in an urban landscape.

The geographical location of Pakistan is a godsend for global powers in pursuit of expanding their economic interests and firming their regional connectivity. The China-Pakistan Economic Corridor which is one of the six corridors offers both countries an opportunity to unite their economic and financial strength in the emergent South-Asian region. It also offers Pakistan with distinct prospects of developing its industrial base whilst utilizing its human capital to reduce economic inequality. The total investment value of first phase of CPEC projects has reached to over US$30 billion while overall investment has exceeded US$60 billion. Notably, the CPEC stretches across 3000 kilometres, originating in Kashgar, far-western China to Pakistan’s port city of Gwadar, hence, carries great significance for both the countries.

This economic and transportation corridor traverses extremely harsh landscape and weather conditions which consequently pose a number of infrastructure challenges to the Government of Pakistan. November 2016 marks the passage of the first convoy of around 100 truckloads of imported consignments from China to Gwadar Port. The shipment was cleared at Sost Dry Port in Gilgit-Baltistan. And this exercise was indeed a key learning experience for not only the Government of Pakistan but also for other stake holders like; Security forces, Port handling authorities and Customs of Pakistan.

The Sost Port that is designed for clearing a limited number of consignments i.e., 30-40 containers per day, faced quite a few of operational challenges. As it is the beginning of a larger project it is pretty much expected that such contests may be encountered. However, what we learned from the entire process is that the efficient operationalization of CPEC is largely dependent on the productivity of dry ports and sea ports situated at various nodes on supply chain routes to facilitate imports, transit trade and export functions. Based on the overall empirical analysis the existing port-related facilities are not equipped for the imminent pressure that would come in the future. A lack of infrastructure at border ports (like, Sost Dry Port) would cut the Port’s efficiency in terms of speedy clearance of CPEC consignments and can possibly result in upstream supply chain disruption. Since CPEC would become a permanent part of the total landscape of Pakistan and in order to meet the demands of the project it is vital to enhance facilities and infrastructure across all ports of Pakistan. These facilities would have to include bonded warehouses for temporary storage, assessment halls, goods examination sheds, fumigation and quarantine sheds, forensic and sample testing laboratories, cranes and weigh-bridges, cold chains, and ICT communication infrastructures in the form of e-facilitation centres, offices and residences for Customs and terminal operators that are functional throughout the year without interruptions.

In addition, ease of Customs clearance procedures through bi-lateral arrangements and expertise in Customs brokerage would be determining factors in enhancing efficiency of port services. So much so, provision of port services in extreme weather at border ports along with the availability of bonded carriers would result in an improved port efficiency. Therefore, learning from the pilot testing of November 2016 it is important for the Government of Pakistan to seriously rethink of having a complete dedicated incoming and outgoing route (for the CPEC containerised traffic) from Khunjerab Pass to Gilgit – Baltistan, thereupon, improving the overall port efficiency of Pakistan’s dry and sea ports. In brief, the transportation route may be improved in a manner that it can pass through the most optimal distance from all the CPEC supply chain nodes like; ports/terminals, Special Economic Zones (SEZs), Warehouses, bulk-storage depots and transit trade terminals and so forth. Likewise, establishment of the proposed RFID-enabled Customs Check-posts at regular intervals at the Western, Central and Eastern CPEC supply chain routes passing through the Country will also aid in preserving the integrity of the CPEC cargo thereby contributing to overall port efficiency. Lastly, the potential development of Sost Port by National Logistics Cell (NLC) will certainly facilitate in opening new avenues for upgrading logistics suprastructure at the Port for handling the mammoth CPEC cargo in near future.

Undoubtedly CPEC is a game changer and the commitment of the Government and all the other stakeholders is indeed remarkable and impressive. Nevertheless, by being a little more vigilant of the current challenges of CPEC and addressing them in advance can surely improve the sustainably of the overall project.

“….It is not about winning and losing; it’s about every day hard work and about thriving on a challenge….” (Summer Sanders).

Author: Dr. Omar Khalid Bhatti, Associate Professor, Antalya Bilim Üniversitesi – Turkey and Iqra University Islamabad Campus – Pakistan