Pakistan’s Gwadar port was intended to be a flagship success for China’s Belt and Road Initiative. However, nearly two decades later, it remains largely unused. In November 2016, Gwadar port symbolized stability, peace, and prosperity for Pakistan, according to then-Prime Minister Nawaz Sharif.
“This day is the dawn of a new era,” Sharif declared at the opening ceremony, where a line of Chinese trucks arrived to load cargo onto the first container ship to use the port.
The ceremony marked the official launch of the port’s operations, nearly a decade after its completion, and the beginning of the prestigious China-Pakistan Economic Corridor (CPEC), part of China’s global Belt and Road Initiative (BRI). Yet, eight years later, this new era has to materialize. An analysis by DW reveals the reasons behind the failure.
Investors Thought Gwadar Would Become Dubai
The CPEC was designed to connect China’s western Xinjiang province with the sea via Pakistan, shortening trade routes and avoiding the contentious Malacca Strait, a narrow passage between Malaysia and Sumatra linking the Indian and Pacific Oceans. Pakistan was expected to benefit from increased trade, infrastructure, and industry along the 2,000-kilometer corridor (1,240 miles), all financed by China. Alongside the established port of Karachi, Gwadar was chosen to connect the corridor to the global shipping network. The small fishing city is located near the Iranian border, about 500 kilometres from Karachi.
Gwadar’s deep-sea port, completed in 2007 and handed over to a Chinese operating company in 2013, was to be the heart of the CPEC. It was planned to be integrated into a new special economic zone that would transform Gwadar into a bustling port city.
The port has potential, says Azeem Khalid, an assistant professor of international relations at COMSATS University Islamabad, who studies Chinese investments in Pakistan.
“It is a natural deep-sea port capable of accommodating larger ships than Karachi. It sits at the crossroads of the global oil trade and could consolidate China’s regional interests,”
he told DW.
China has already shown its ability to transform sleepy fishing villages into economic powerhouses. Shenzhen, China’s first special economic zone, is a prime example, with its population growing from around 60,000 to more than 17 million in just four decades.
“Back then, investors thought Gwadar would become the next Dubai,”
Khalid noted.
China Investing Heavily in Its Belt and Road Network
Pakistan is not alone in pursuing this vision. Governments worldwide are hoping to boost their economies through new and expanded ports and other infrastructure projects, with Chinese banks providing substantial financing. Chinese companies often build and operate the ports as well.
DW has gathered information on at least 38 ports built with Chinese investment since 2000, with an additional 43 ports planned or under construction. Seventy-eight existing ports also have Chinese stakeholders.
These deals are lucrative for China, says Jacob Mardell, a former analyst at the Mercator Institute for China Studies, a German think tank, and journalist covering the BRI.
“This model acts almost like a subsidy for Chinese companies,”
he told DW. Chinese banks loan money to governments, which then use those funds to pay Chinese construction companies, repaying the loan over time. This means the money essentially remains in China, while the bill is ultimately paid by taxpayers in other countries.
A common pattern is the construction of new ports close to existing ones, as seen with Gwadar and Karachi. The new ports are intended to supplement or replace the older, less efficient ones over time.
This pattern is also evident in Cameroon and Nigeria. In Cameroon, the newly built Kribi port is set to replace the congested and shallow Douala port, while in Nigeria, the newly opened Lekki deep-sea port, less than 100 kilometers from Lagos, supplements the existing port. Both ports were financed and built by Chinese state-owned companies.
Similarly, in 2017, Sri Lanka granted China a 99-year lease and a majority stake in its relatively new Hambantota port, originally intended to supplement the main port of Colombo.
Gwadar Performs Worse Than Other New Ports
Lekki port received 26 ships in 2023, its first year of operation, according to MarineTraffic, a ship tracking and maritime analytics provider. While this is a modest number compared to larger ports, Gwadar, despite being completed in 2007, has only logged 22 ships in its best year to date. It has also failed to attract any regularly scheduled deep-sea shipping lines.
This means Gwadar processes almost no cargo that could generate income for Pakistan or the Chinese operating company. The port operates at a very limited capacity, with its three berths handling just 137,000 standard 20-foot shipping containers per year. In contrast, Karachi, with its 33 berths, can handle the equivalent of 4.2 million 20-foot containers annually.
While ports like Kribi and Lekki are comparatively small, they outperform Gwadar, the supposed new centrepiece of trade for South and Central Asia.
Khalid told DW that although Gwadar has the potential to surpass Karachi eventually, a lack of investment is holding it back. A $1.6 billion (€1.5 billion) expansion was promised in 2015, but progress at the port appears minimal. Much of the necessary supporting infrastructure, such as roads and railways to transport cargo, is also missing. Publicly, investors like the China-Pakistan Investment Corporation claim Gwadar port is “becoming a focal point for trade and investment in the region,” but the empty port site suggests otherwise.
Both Mardell and Khalid indicate that behind the scenes, both Pakistan and China have become disillusioned with the project.
“Promises of jobs, industrial development, and business opportunities for Pakistanis were not fulfilled,”
said Khalid.
“China promised nine special economic zones. Not one is fully functional to date.”
CPEC Hampered by Political and Economic Instability
The development of Gwadar mirrors the broader situation in the China-Pakistan Economic Corridor. “CPEC has faced problems since its inception,” said Mardell.
Some of these issues are specific to Balochistan, where Gwadar is located. It is one of Pakistan’s poorest regions and has strong separatist militias that frequently attack, including targeting Chinese nationals. The militias have been violently suppressed by the Pakistani military. At the national level, Pakistan has faced a severe economic crisis in recent years and is still struggling to stabilize politically after the ousting of former Prime Minister Imran Khan in 2022.
“Since the political and security situation in Pakistan has deteriorated, it has further hampered CPEC,”
said Mardell.
China Learning from Its Mistakes in Pakistan
Mardell believes Chinese decision-makers might have miscalculated.
“When it comes to investment decisions, the Chinese are famously not risk-averse,”
he told DW. He notes that “basically unlimited” state backing for state-owned investment and construction companies, coupled with the political will to rapidly compete with Western economies, has led China to fund risky projects in less stable countries worldwide.
“I don’t think they fully understood the situation in Pakistan,”
said Mardell, though he believes this might change for future projects.
“I think they’ve learned from their mistakes with the BRI and CPEC and are likely to be more cautious with capital commitments.”
In recent years, particularly during the COVID-19 pandemic, China’s spending on BRI projects has slowed. While China may now be more selective in its investments, it is beginning to invest more again, with total BRI investment amounts reaching pre-pandemic levels.
Unsustainable Investment Pushes Countries into Debt
Countries like Pakistan are now burdened with large amounts of debt to Chinese lenders.
“Pakistan has to repay billions of dollars in loans due to reckless investments in the name of CPEC,”
said Khalid.
Similar cases have led to criticism that China is engaging in debt-trap diplomacy, allowing partner countries to incur unsustainable debt to gain political influence. Additionally, part of the revenue from these projects returns to China. “China takes the lion’s share of everything,” Khalid said, referring to CPEC investments. For example, with Gwadar port, 90% of the limited revenue goes to the Chinese operating company, while the Pakistani government receives only 10%, and nothing goes to the Balochi regional government.
Mardell believes that despite its issues, CPEC and Gwadar Port will likely continue.
“China will not lose face and admit the project is a disaster. Abandoning CPEC and Pakistan isn’t an option; they are too deeply invested, and Pakistan is too important an ally,”
he said.
Instead, Mardell thinks China will likely continue to delay large investments in Pakistan but will make token efforts to keep the project ongoing. However, he noted that there is still a chance for Gwadar.
“If the situation in Pakistan improves, CPEC might still make progress.”
