ISLAMABAD: China has asked Pakistan to establish RMB internationalization pilot project in Gwadar Free Zone to promote trade settlement and reduce foreign exchange conversion costs and risks between the two sides, well-informed sources told Business Recorder.
This proposal was floated during the 7th meeting of Joint Working Group (JWG) on Gwadar under China-Pakistan Economic Corridor (CPEC) amid serious concerns on security situation in Gwadar, the sources added.
Both sides appreciated the efforts made by the Government of Pakistan in routing public sector bulk cargo through Gwadar Port which has been very helpful in operationalisation Gwadar Port; and has greatly promoted the development of local logistics industry while creating a large number of jobs. The Pakistani side will continue to promote the development of this business in Gwadar Port.
Minister highlights criticality of Gwadar port
According to sources both sides believe that Afghanistan’s transit trade business is the main growth point of the bulk cargo throughput of Gwadar Port. Both sides agreed to strive to build Gwadar Port into an important port for transit trade of landlocked countries in Central Asia through Pakistan.
Both sides believe that the ocean fishing transshipment business at the Gwadar Port is beneficial to significantly reduce the transportation costs of ocean fishing. Therefore, both sides should enhance the attractiveness of the Port as an ocean fishing transshipment port, and significantly expand its throughput, through more policy support for this business from the Pakistani side.
Both sides believe that the development and construction of the Free Zone is key to the subsequent development of Gwadar Port, and strengthening industrial cooperation is an important direction for the development of the North Free Zone. The two sides conducted preliminary discussions on developing mining industries.
The sources said Chinese side emphasized the great importance of freshwater and electricity supply for project operation of Gwadar port, and suggested the Pakistani side promote the connection of power grids to Gwadar Port and South Free Zone as soon as possible, with relevant supporting projects in place.
China Overseas Port Holding Company (COPHC) emphasized the importance of RMB internationalization in promoting trade settlement, and reducing foreign exchange conversion costs and risks between the two sides. It suggested establishing RMB internationalization pilot projects in the Gwadar Free Zone, by encouraging Chinese and Pakistani banks to conduct business in the Free Zone, jointly carry out RMB counter listing, exchange, and cash services, and fully realize the pricing, circulation and settlement of RMB in the Free Zone. Support from the Pakistani side is anticipated in this regard.
The Chinese side emphasized that the security situation around Gwadar has a significant impact on the development of projects in Gwadar Port and the Free Zone. It requested Pakistani side to further enhance the security level of the Gwadar Port, promote the construction of Gwadar Security City, and strengthen counter-terrorism cooperation between the two sides. The Chinese side emphasized that the inland connectivity to Gwadar Port is still underdeveloped, leading to high transportation costs, and suggested the Pakistani side build the M8 highway as soon as possible to ensure connectivity between Gwadar and economically developed regions.
The Pakistani side stated that long awaited provincial tax exemptions have been obtained and electricity and water problems will be solved by 30th June 2024. The Pakistani side emphasized that the COPHC Free Zone Company may fast track the development of North Free Zone to relocate potential Chinese industries in the zone.
New Gwadar International Airport: It was stated that currently, construction of the New Gwadar International Airport Project (NGIA) has entered the final stretch, with the completion ratio reaching passing 90%.
Targeting on the revised completion time in August, 2024, the Chinese side is actively coordinating workers, material, and machinery for implementing of the remaining work including mechanical and electrical installation and commissioning, interior decoration, outdoor engineering etc., with a view to realizing the smooth completion and hand-over of the NGIA Project on time.
Since March 2024, several terrorist attacks have occurred in Gwadar and other regions, which result in greater security risks and limited movement for Chinese personnel thus affecting the Project’s smooth implementation. The Chinese side appreciates all security measures taken by the Pakistani side to ensure the security of the Project and staff, and requests the Pakistani side to step up security of the Project.
The Central Substation of NGIA was successfully and completely energized from the 132kV/11KV grid station on 8th 4th April 2024, and the Chinese side appreciates all the efforts taken by the Pakistani side in this regard. Mechanical and electrical installation and commissioning is the top priority of the Project at this stage, and uninterrupted and stable power supply 24-7 is the precondition for the smooth commissioning of all systems.
Thus the Pakistani side is requested to make every effort to guarantee the power supply of the 132kV/11KV grid station, in order to avoid any influence imposed on commissioning or equipment damage due to unstable power supply.
As the completion time in June August draws close, the Pakistani side is requested to fulfill their obligations in accordance with the mutually agreed schedule, including telecommunication, power and water supply facilities at the PCAA complex, flight-testing preparation, etc., so as to ensure the completion and hand-over of NGIA on time.
Dredging of Berthing Areas & Channels: The Chinese side stated that the sixth meeting of the Joint Working Group on Gwadar approved the launch of the feasibility study work on the project, which was originally planned to be completed by June 2023.
Currently, the feasibility study of the project is still in the implementation stage. The Chinese side desired that the Pakistani side could accelerate the feasibility study.
The Pakistani side noted that the joint feasibility study of Capital Dredging of Berthing Areas & Channel for additional terminal was carried out in June 2023, to facilitate port expansion plan and to accommodate large vessels. The Pakistani side further stated that the preparation of PC-1 of the project is underway.
The Chinese side pointed out that the current channel of Gwadar Port can only meet the needs of the fully-loaded one-way navigation of 50,000-ton container ships, and suggested that with the construction of the second phase of berths, the existing channel would not be able to meet the needs of ships entering and exiting the newly-built terminal, therefore it is necessary to expand the existing channel.
The Pakistani side proposed the project to be included in the scope of preferential financing within the framework of the China-Pakistan Economic Corridor, and said it would submit the necessary documents to the Chinese side as soon as possible.
The two sides will make concerted efforts in actively seeking financing support for the above-mentioned project in accordance with relevant requirements.
Copyright Business Recorder, 2024
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