On June 2, was announced the decision taken by Saudi Arabia to shift its $10 billion oil refinery from Gwadar to Karachi. Pakistani officials may ask the Saudis to reconsider their decision, but it is still a big blow for Gwadar’s development strategy. It may be the right time for Pakistan to review plans regarding Gwadar and make some adjustments.
The refinery project was first unveiled in February 2019 during Crown Prince Mohammad Bin Salman to Pakistan. However, some delay occurred because of growing tensions between Riyadh and Islamabad in summer 2020 regarding the Kashmir issue. But soon, the two countries found some appeasement and the project was back on the table.
However, for Saudis, relocating the refinery to Karachi, the largest city in Southern Pakistan makes more sense, as Gwadar still lack some basic infrastructure including a pipeline connecting the port to Karachi and other big cities, where energy is consumed. Security is also another concern for Saudis as Balochistan still suffer from terrorist threats.
Too big, too fast?
This decision may delay Pakistan (and China)’s plan to transform Gwadar into an energy hub connecting South Asia to the Middle-East. According to the city’s masterplan, Gwadar is set to become Pakistan’s 3rd most populated city by 2050 with 2 millions inhabitants, and one of the richest with a $15,000 GDP per capita. But these impressive figures may not be achieved without sound regional policies.
In their strategy, Pakistan and China are looking at the Shenzhen model to replicate in Gwadar. Shenzhen, a rather small city (but which was more than just a fishing village) has become one of the most innovative and richest cities in China thanks to bold policies and SEZs. However, Gwadar and pre-reforms Shenzhen enjoy very different conditions. While Shenzhen was closed to wealthy Hong Kong and many vibrant cities in Guangdong (such as Guangzhou), Gwadar is quite isolated. Even before the reforms, Guangdong was a rather rich province thanks to an abundant agriculture and also a very extensive diaspora all around the world. On the contrary, Gwadar is located in Balochistan, one of the poorest region in Pakistan. It is important now to work on achievable objectives for Gwadar, and Balochistan. It may take some time to transform the port into a new Singapore or Dubai.
Gwadar’s main challenge is to promote harmonious and balanced development. It would be useless for the city to host the largest airport or the largest refinery if other infrastructure and housing are not built. A step-by-step approach, with smaller but reachable objectives will help the city to become more attractive to foreign investors. Gwadar is not an easy destination, but it still has many opportunities to offer to foreign companies.