China: Gwadar Port Leads to Controversy and Expansion
Introduction
In 2015, China and Pakistan agreed to the Chinese-Pakistan Economic Corridor (CPEC), a Chinese financed venture which seeks to construct infrastructure, energy, and telecommunications projects throughout Pakistan. This agreement is part of China’s larger Belt and Road Initiative (BRI) that China is currently invested in throughout Asia, Africa, and the Middle East. The goal of the BRI is to reshape the current international economic system set up by the United States following WWII in order to ensure that China has a larger role in forming future economic policies. As part of CPEC, China has invested heavily in the Port of Gwadar in southwest Pakistan since the inception of endeavor. However, while CPEC has had numerous projects intended to help improve Pakistan, CPEC’s development has faced criticisms from Pakistani citizens, as well as India. In addition, Gwadar Port is not the only port which China has a strong presence, several countries along the India Ocean have also agreed to substantial Chinese investment and aid.
Background of Gwadar Port:
Chinese interest in Gwadar began in 2002 when China announced it would fund approximately $400 million of the needed $1.1 billion to complete phase one of making Gwadar Pakistan’s third deep water seaport. [i] After the completion of phase one in 2007, Singapore took control of most of the port and looked to aid Pakistan in completing phase two of expanding Gwadar port by adding four container berths, two oil terminals, one bulk cargo terminal, along with other additions that would increase shipping traffic. However, this plan stalled and in 2013 Singapore gave control of the port to the China Overseas Port Holding Company (COPHC) who would retain 91 percent of the revenue generated by the port. [ii]
In 2015, China and Pakistan agreed to CPEC that would see China invest $62 billion on infrastructure, energy, and transportation projects within Pakistan. Over $1 billion of this has gone directly to upgrading the Gwadar Port by adding berths, making the harbor deeper for bigger ships, and adding more cargo terminals. Additionally, Beijing has built highways extending from Gwadar to the Chinese border through Pakistan. [iii, iv]
China has expanded its influence in Gwadar since it sees it as a vital strategic location for two reasons. First, China envisions Gwadar as a commercial hub in the overall Belt and Road Initiative that CPEC is a part of. Today, the port handles over 100 million tons of cargo, mostly Chinese products for CPEC and the BRI, and China hopes to develop the port to handle 400 million tons of cargo within the next decade. [v] As part of the BRI, China also envisions developing Gwadar to the point that most of its energy imports can be moved through the port rather than through the Strait of Malacca and then through the highly contested South China Sea. China would be able to import energy resources for cheaper costs as it would be able to move its imports through Pakistan via the highways that China is currently building and operating in Pakistan to Western China. [vi]
Second, China view Gwadar as a potential location for a naval base as the deepening of the harbor and building wider berths enables China to house naval vessels within the port. With this ability, China would enhance its current goal of becoming the prominent naval power in the Indian Ocean and becoming a ‘blue water navy.’[vii]
Benefits of Gwadar Port:
The port of Gwadar provides China with a shorter trade route to the Middle East which reduces shipping costs and time. With Gwadar, China will have reduced reliance on the South China Sea and Sea of Malacca routes as well. [viii] In addition to the benefit of a shorter trade route, COPHC will receive 91 percent of the port’s revenue for the next 40 years, with Pakistan only retaining 9 percent of revenue. [ix]
The port has greatly helped in developing Gwardar from a fishing town by bringing business into the region. According to the COPHC, over 20 companies have joined the Gwadar free trade zone. In the past twelve years, Gwadar’s population has increased from 85,000 to 140,000. The business development and population increase have led to improved telecom services, more health and education facilities, and a water desalination plant. These various developments are a direct result of the port’s success. [ix, x]
Potential Conflicts:
Beijing faces potential conflict regarding Gwadar port on two main fronts: the nearby Iranian Chabahar port and from the Baloch people.
Iran’s Chabahar port is located about 76 nautical miles from Gwadar and is viewed as an effective route to conduct trade with Afghanistan. Due to the two ports’ relative locations, there is competition for business. About a year after China began investing into Gwadar, India began similar investments to grow Chabahar port in an attempt to gain power in the region. Tensions with India have increased as New Delhi is concerned over Chinese encirclement through BRI projects in surrounding Asian countries. While the ports compete for business, Gwadar does have the advantage in the fact that it is a deep sea port while Chabahar must rely on the UAE’s deep sea port for deep sea vessels to dock. [xi, xii] Chinese foreign ministry spokesman Geng Shuang said in 2018 that Beijing hopes “the relevant cooperation (of Gwadar and Chabahar) can be conducive to maintaining regional peace and promoting regional stability and prosperity." [xiii]
China also faces opposition in Gwadar from the Baloch people who are opposed to Chinese development within the Balochistan province, Pakistan’s largest province. The Baloch people desire their independence from Pakistan due to marginalization they face from the Pakistanis and a desire to have full control over the resources from their land. Development of the Gwadar port is seen by the Baloch as an infringement on their people’s future, which lead the Balochistan Liberation Army (BLA) to attempt to prevent the port from becoming operational. [xiv, xv]
The BLA attempted to prevent Gwadar port from becoming functional with covert assistance in the militant group’s actions coming from Iran in opposition of the Saudis. The attacks from the BLA have led to concerns over the safety of Chinese workers and businessmen. BLA armed attackers opened fire on the Pearl Continental hotel in Gwadar on May 11, 2018 killing four. With its close proximity to the port, the Pearl Continental is popular with foreign businessmen and dignitaries. [xv] In November of 2018, three BLA militants assaulted the Chinese consulate of Karachi, killing two police officers and two civilians. [xvi] Due to attacks such as these, the Chinese government has expressed concerns over the safety of their workers requesting security assistance from the Pakistani government on multiple CPEC projects to protect Chinese citizens working on the projects.
Expansion to Other Ports:
In addition to Gwadar Port, China has also invested in Sri Lanka in port developments. Although, in Southern Sri Lanka, the Hambantota port only receives about 175 ships each year, infrastructure developments were considered necessary in order to relieve the strain off of the Colombo port. [xvii] In 2006, China provided Sri Lanka with massive loans to help with development after initially rejecting Sri Lanka’s request for financial assistance months previously. The first phase of the project estimated about $360 million, which China provided 85% of the budget. [xviii] The harbor officially opened in 2010, but slow business could not bring enough profits to repay the loans. By 2015, 95 percent of the country’s government revenue was used to pay off debt. On July 29, 2017, Sri Lanka signed an agreement with China Merchant Port Holdings to lease the port for 99 years while holding 70 percent of equity. [xix]
Sri Lanka and Pakistan are not the only ports that have seen Chinese investment. Myanmar, Bangladesh, Djibouti, Kenya, Tanzania and Sudan also have ports that possess strong Chinese involvement. In 2018, Myanmar agreed to a $1.3 billion Chinese loan for an additional terminal at Kyaukpyu port, with China covering 70% of the construction costs. This new deal only adds to China’s presence since the China National Petroleum Corporation stationed at Kyaukpyu port already operates a crude oil terminal. [xx]
In July 2018, the first phase of establishing the largest free trade zone in Africa was launched in Djibouti, which China owns 40 percent. [xxi] It is a ten-year plan, estimated to cost $3.5 billion, which aims to connect all of Djibouti’s main ports. [xxii] In addition to the free trade zone, China has also invested in two of Djibouti’s ports while holding 23.5 percent stake for each. [xxi]
In 2017, Tanzania and state-run China Harbor Engineering Company signed a $154 million contract to expand Dar es Salaam Port, which is Tanzania’s principle port and handles over 90 stakes of the country’s cargo. [xxiii] In addition to the Dar es Salaam Port, China has also proposed a $10 billion investment for Tanzania’s Bagamoyo Port, however, due to contractual disagreements, the project is currently being stalled. [xxiv]
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