Islamabad: China has requested Pakistan to launch a pilot project for the internationalisation of the Renminbi (RMB) in the Gwadar Free Zone to facilitate trade settlements and reduce foreign exchange conversion costs and risks between the two countries, as reported on September 6.
As per details, this proposal was discussed during the 7th meeting of the Joint Working Group (JWG) on Gwadar under the China-Pakistan Economic Corridor (CPEC) framework, despite concerns about the security situation in Gwadar.
Both parties commended the Government of Pakistan’s efforts to route public sector bulk cargo through Gwadar Port, which has significantly contributed to the port’s operationalisation and the growth of the local logistics industry, creating numerous jobs. Pakistan committed to further enhancing this trade flow through Gwadar Port.
Minister Highlights Importance of Gwadar Port
Sources indicate that both countries view Afghanistan’s transit trade as a major growth driver for Gwadar Port’s bulk cargo throughput. They expressed their commitment to transforming Gwadar into a key transit hub for landlocked Central Asian nations via Pakistan.
The discussion also touched upon the benefits of establishing Gwadar Port as an ocean fishing transshipment hub, which would significantly cut transportation costs. Both sides agreed that policy support from Pakistan is needed to expand this business and increase the port’s throughput.
Development of the Free Zone and industrial cooperation were highlighted as critical for Gwadar’s future growth, with preliminary talks held on advancing the mining industry in the region.
Electricity and Water Supply: Critical Infrastructure
China emphasised the importance of ensuring a stable freshwater and electricity supply to Gwadar Port for its seamless operation. The Pakistani side was urged to expedite connecting the power grid to the Gwadar Port and South Free Zone with appropriate infrastructure in place.
The China Overseas Port Holding Company (COPHC) underscored the significance of RMB internationalization in easing trade settlements and minimizing currency conversion costs. They proposed establishing a pilot RMB project in the Gwadar Free Zone, encouraging Chinese and Pakistani banks to offer RMB-related services, such as counter listings, currency exchanges, and cash transactions. This initiative aims to fully integrate RMB pricing, circulation, and settlement in the Free Zone.
Security and Connectivity Concerns
China raised concerns over the security situation in and around Gwadar, urging Pakistan to enhance security measures, promote the construction of Gwadar Security City, and strengthen counter-terrorism cooperation. Additionally, China highlighted the need for improved inland connectivity to Gwadar, specifically recommending the swift construction of the M8 highway to reduce transportation costs and link Gwadar with economically developed regions.
The Pakistani government assured that long-awaited provincial tax exemptions have been secured, and that electricity and water supply issues will be resolved by June 30, 2024. They also emphasised the need to expedite the development of the North Free Zone to attract Chinese industries.
The New Gwadar International Airport (NGIA) project is reportedly in its final stages, with construction over 90% complete. The revised completion target is August 2024, with ongoing efforts to complete mechanical and electrical installations, interior decoration, and outdoor engineering. China is actively coordinating the remaining work to ensure timely completion and handover.
China also appreciated Pakistan’s efforts in energizing the Central Substation of NGIA from the 132kV/11kV grid station in April 2024. The uninterrupted power supply remains a top priority, as it is essential for the final commissioning of all systems.
Channel Expansion and Port Development
The meeting also addressed the need to expand Gwadar Port’s existing channels. The current channel only accommodates one-way navigation of 50,000-ton container ships. With the second phase of berths under construction, China suggested that the channel expansion is vital to meet the demands of the new terminal. Pakistan agreed, proposing to include the project in the preferential financing framework of CPEC.
Efforts will be made by both sides to secure financing for these projects, ensuring the future growth and development of Gwadar Port and the Free Zone.
