Pakistan Vision 2025 Regional Connectivity Initiative

Working group on Strategic Regional Initiative to develop the vision for

Modernisation of Infrastructure and Regional Connectivity

Pakistan Vision 2025Planning Commission, Islamabad

December 11, 2013

Karachi Port

East Wharf and West Wharf

Pakistan Vision 2025 - Moazzam Husain

Benefits of Regional Integration

• Economic growth and development

• Investment & Trade

• Reduce confict• Examples

– EU

– ASEAN

– NAFTA

– ECO

– SAARC


Benefits of Strategic Regional Initiative(Present exercise)

• Materialise benefits of regional integration

• Open up strategic space

• Widen policy options and policy flexibility


Regional Connectivity Outcomes/Output Indicators

• Flow-in, flow-out of :

– Bulk and container traffic

– Oil flow

– Passenger/ visitors traffic

– Regional water sharing

– Electric power and regional grid inter connectivity

– Regional trade in services

– Labour mobility across region


DP World

Port Qasim, Karachi


Expected outcomes 2025

Scenario Outcome

Business as Usual Present volumes will organically grow at 6 – 8 % p.a

Medium Resource Present volumes would balloon to 10 times present size by 2025

Ambitious Exponential growth crossing $ 250 billion in goods and services flowing each year


Opportunities & Strengths for regional connectivity

• Opening trade with India

• Allowing Indian goods access to Iran and Afghanistan and charge a transit fee

• Realise Gwadar port’s potential as a bulk break facility serving countries on Indian Ocean rim

• Connect another 100 m people with Pakistani ports– Xinjiang, Western China (20 m)

– Punjab, Haryana & Himachal Pradesh (60 m)

– Growing Afghan Transit trade

– Outlet for mineral resources of Afghanistan (copper, iron ore)


Our building blocks: Endowments with which to create opportunities

Let’s talk reality without grandiose geostrategic delusions

• Population resource

• Food production potential

• Water availability

– Storage capacity and seasonality are issues

• Mineral deposits

– Limestone, gypsum, rock salt, silica

• Landlocked Afghanistan


Other working groups are working on how to address this

Challenges

• To our West and North, thinly populated regions of Iran and China. Implies long distance overland haulage– Cost per ton km: If Sea is 100 then rail is 200 and lorry is 600

• Energy deficiency

• Conflict– Low intensity but continuous

• Weak industrial base– Technical

– Financial


Instruments to attain the Outcomes

1. Extend MFN to India and implement free visa regime2. Open borders for trade

a) Wagah – Atarib) Ganda Singhwala, Kasur – Ferozepurc) Link Badin to Ahmedabadd) Open display centres & bonded warehouses on both sidese) Currency swap and bank branches on both sidesf) Prepare SME’s & sectors to take maximum benefit of 1.2 billion Indian

marketg) Allow border markets for fresh produce and livestockh) Karachi – Mumbai ferry

3. Upgrade Nankana Sahib to a top international destination for religious tourism

4. Grid connectivity between NTDC and Indian counterpart agency

– Contd next slide =


Gwadar to Kandahar Rail link, connecting to Afghanistan ring road



Linked with Bandar Abbas to Mashad railway

Instruments to attain the Outcomes

5. Rail line from Gwadar to Kandahar –branch lines to Reko Diq/ Saindak6. Upgrade PR main line and put the freight back on rail7. Build following strategic rail segments:

• Link Gwadar port with PR main line at Ratodero• Rohri – Quetta upgrade• Connect Gwadar with Chahbahar (Iran) 70 km rail line• Quetta to Taftan road is in terrible condition. Rebuild

8. Develop river barges on Indus river• Mari Indus/ Kalabagh upstream to Tarbela• Downstream to Taunsa• Movement of cement & indigenous gypsum , coal & iron ore deposits

9. A roadmap to making Gwadar port a functioning bulk breaking facility for Indian Ocean rim states

10. Iran Pakistan pipeline11. Feasibility and Financial plan for road/ rail link with Iran to access Caspian region12. Identify possible vertical linkages with Urumqi Technical and Economic Development Zone13. Leverage Horgos Free Trade Zone as a springboard to Central Asia14. Havelian – Kashgar link

• Develop Havelian as a nodal railhead• Develop dry port and container terminal at Havelian• Container trucks from Havelian to Kashgar & Urumqi on KKH


A reality check …

• Transporting crude oil from Gwadar to Kashgar as is being suggested is not feasible• At any rate western China is located in an oil rich region and pipes oil to the

Eastern seaboard• China’s population is located on the Eastern seaboard and the Gwadar – Kashgar

route is inconsequential except :– To 22 m population of the Xinjiang region– Possibly to Kazakhstan that is situated to the west of Xinjiang

• Pakistani goods already enjoy an FTA with China. – Currency swap is also in place– Chinese importers can open an L/C– Sending goods whether overland or by sea via Karachi is not an issue– The main job is marketing our goods to procure orders !– Shipping time for a container Karachi to Shanghai by sea is 14 days

• Is a rail link really feasible across the Karakorams? – More daunting than the recently inaugurated Qinghai – Tibet railway– Cost can approach $ 30 m per km ( as opposed to $ 1m on flat land) – Who will finance it?


The counter geostrategic angle: China fears a wartime blockade of the straits of

Malacca


Caspian / Central Asian region is rich in Oil & Gas

TAPI Pipeline is a possibility. However, Iran is more practical


Suggested Priority initiatives

1. Upgrade PR main line2. Extend MFN to India3. Make Gwadar port a functioning bulk breaking facility4. Open borders for trade with India

a. Wagah – Atari (already opened)b. Open the border at Ganda Singhwala to connect Kasur with Ferozepurc. Link Badin to Ahmedabadd. Open display centres & bonded warehouses on both sidese. Currency swap and bank branches on both sidesf. Prepare SME’s & sectors to take maximum benefit of 1.2 billion Indian marketg. Allow border markets for fresh produce and livestockh. Karachi – Mumbai ferry

5. Build the strategic rail segments:a. Link Gwadar port with PR main line at Ratoderob. Rohri – Quetta upgrade c. Connect Gwadar with Chahbahar (Iran) 70 km rail lined. Quetta to Taftan road is in terrible condition. Rebuild

6. Connect Havelian with Kashgar1. Develop Havelian as a nodal railhead2. Develop dry port and container storage facility at Havelian3. Run container trucks from Havelian to Kashgar & Urumqi on KKH


Estimated resource requirements for the prioritized instruments/Intervention

Initiative Resource requirement

Upgrade PR main line Approx $ 500 m

Extend MFN to India Legislation and policy

Make Gwadar port a functioning bulk breaking facility

Public private Partnership mode

Open borders for trade with India • Land for display centres/ bonded warehouses•Wet markets infrastructure•Upgrade ferry terminal at Keamari•$ 50 m for border crossing/ road improvement

Build the strategic rail segments •New lines cost $ 1m per running km•Cost of 4 intiatives: $ 700 m approx

Connect Havelian with Kashgar •Public Private Partnership mode•$ 50 m for dry port (Benchmark is Rajasthan dry port)


Risks that need to be mitigated

• Baloch insurgency

• Jihadi/ militant groups’ cross border adventurism into India

• Sectarian groups and TTP violence along Karakoram highway

• Rail infrastructure susceptible to sabotage

• Afghan civil war effects


BUILDING A ROAD MAP FOR FUTURE:KEY INITIATIVES FOR REGIONAL INTEGRATION


(MEDIUM RESOURCE SCENARIO)


Short Term : 2-3 years

• Extend MFN to India

• Open Kasur – Ferozepur border

• Allow border markets for fresh produce and livestock

• Currency swap and bank branches on both sides


Medium Term : 3-5 years

• Prepare SME’s & favoured sectors to take maximum benefit of 1.2 billion Indian market

• Karachi Mumbai Ferry

• Link Badin to Ahmedabad

• Allow Indian goods overland access to Afghanistan and Iran and charge a transit fee

• Open display centres & bonded warehouses on both sides


Long Term : 10 years

• Upgrade PR main line

• Make Gwadar port a functioning break bulking facility

• Connect Havelian with Kashgar


(AMBITIOUS RESOURCE SCENARIO)


Short Term : 2-3 years

• Extend MFN to India

• Open Kasur – Ferozepur border

• Allow border markets for fresh produce and livestock

• Currency swap and bank branches on both sides

• Link Badin to Ahmedabad


• Rebuild Quetta to Taftan road


Medium Term : 3-5 years

• Iran Pakistan pipeline

• Upgrade PR main line

• Prepare SME’s & favoured sectors to take maximum benefit of 1.2 billion Indian market

• Karachi Mumbai Ferry

• Allow Indian goods overland access to Afghanistan and Iran and charge a transit fee


• Link Gwadar port with PR main line at Ratodero

• Rohri – Quetta rail line upgrade

• Connect Gwadar with Chahbahar (Iran) 70 km rail line


Long Term: 10 years

• Make Gwadar port a functioning break bulking facility

• Develop Havelian as a nodal railhead

• Develop dry port and container storage facility at Havelian

• Run container trucks from Havelian to Kashgar & Urumqi on KKH

• Upgrade Nankana Sahib to a top international destination for religious tourism

• Grid connectivity between NTDC and Indian counterpart agency


THANK YOU

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Pakistan Vision 2025 Regional Connectivity Initiative

Economy & Finance

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