By Muhammad Naveed Iftikhar and Dr. Liou Xie
Last year’s Nobel prize winner in economics, Paul Romer, a growth economist, has lately focused on the potential of cities for generating economic growth and prosperity. He considers new cities startups and laboratories for urban policy experimentation. New cities offer a great potential to develop new rules of governance and economic activity that may be difficult to implement in existing cities. The city of Gwadar presents the same opportunity to Pakistan even though it is not being built from scratch.
In the wake of CPEC, there has been renewed interest in the future of Gwadar as a new economic and port city. The city’s port provides the shortest route to connect Western China and Central Asia with the gulf and African regions. The Gwadar Port Authority (GPA) has already signed a 40-year built, operate and transfer (BoT) agreement with the China Overseas Port Holding Company Pakistan (Pvt.) Limited (COPHCL). A Free Port Zone is also being established and will be operated by the holding company on 2300 acres of land. There are further reports that Saudi Arabia will also be setting up an oil refinery in the city, which may boost potential industrial and trading activities at the port.
Some are already considering Gwadar as a new Shenzhen – a major port city in China and a gateway to the Pearl River Delta and Hong Kong. However, cities and ports reinforce each other and the rise of Shenzhen cannot be attributed to port operations alone. China deliberately devised conducive investment policies and relatively inclusive governance structures – not available to most other cities in mainland China – to attract and retain businesses. These steps by the Chinese government, turned Shenzhen into competitive destination for foreign direct investment and made it one of the most rapidly growing cities in the world both in terms of population and economic size. Later China extended the ‘Shenzhen model’ to other ‘new’ economic cities.
A recent study on Gwadar funded by the International Growth Center (IGC) however finds that there has not been much progress in the city in terms of introducing innovative governance, socio-economic development of the local population and preservation of the diverse heritage of the old town. The city has the potential to become an important hub for CPEC under China’s Belt and Road Initiative and thus there remains an urgent need to address these gaps.
Pakistan, so far, has been unable to utilize the benefits of rapid urbanization due to its colonial forms of city governance. Gwadar is governed by multiple government agencies at the federal, provincial and local levels. Lack of coordination amongst these agencies is challenging the city’s development. Gwadar still lacks access to safe drinking water, a smooth supply of electricity, proper health facilities, and other municipal amenities. Governance structure of the Gwadar Development Authority (GDA) needs to be streamlined with other functions related to city management to be consolidated under one organization. Moreover, there is a need to include the local population in governance of the city to ensure inclusion and legitimacy. In cities like Shenzhen, most of the governance functions are decentralized to local urban managers even though the central government plays a major role in developing the necessary infrastructure and policy framework.
Globally cities introduce unique incentive structures based on the industries to be pulled in. But in the case of Gwadar, diverse structures are emerging due to multiple agencies involved in the process. Several investment and business regimes – such as the Free Port Zone, Special Economic Zone, Oil City, Export Processing Zone and provincial government’s industrial estate – are complicating decision-making for investors. A local investment promotion bureau can be established to devise, promote and monitor a uniform policy framework across Gwadar.
Gwadar city’s first master plan was developed by a Pakistani engineering consulting firm but has been criticized on several grounds. The local population, for example, would be relocated under this plan which could be detrimental for the city as it would lose the buy-in of the local population. This could also dampen Gwadar’s rich culture shaped by diverse influences for centuries, due to influx of Portuguese, Africans, Omanis and British till the twentieth century. The new master plan being developed by a Chinese firm is expected to focus on the preservation of local culture and integration of local population into the renewed economy under CPEC. Land speculation should also be curtained as it dissuades serious businesses and industrialists that should be offered land at affordable prices.
A drought-like situation in Gwadar since the last couple of years has led to the local population suffering from severe water shortage, health problems, and reduced fishing and livestock businesses. Progress on to address these problems is mixed. The Pakistan Army is running a hospital to provide healthcare to the local population for the first time in Gwadar and is supporting installation of a desalination plant for drinking water. However, efforts to promote education (including technical and vocational skills), increase access to electricity, and provision of support to local small businesses remains weak.
The development and implementation of a unique and inclusive governance structure for Gwadar will help attracting investment and talent and stimulate socio-economic development of the local population. The experience of Gwadar can be replicated to both new industrial cities planned in and the existing rapidly expanding cities of Pakistan.