Our overland trade links

Published Jul 26, 2012 02:03am

CAN Pakistan’s overland trade links eventually grow to compete with Karachi as conduits for the country’s imports? A clear answer is yes, but it will take some work.

Pakistan has five functioning land-based border crossings, and a sixth that is currently dormant. Taftan connects Chagai district of Balochistan with Iran. Chaman in Balochistan and Landi Kotal in Khyber Pakhtunkhwa connect with Afghanistan. The town of Sust serves as a customs post for trade with China that comes by road over the Khunjerab Pass while Wagah connects central Punjab with India.

Another overland link — the Khokhrapar-Munabao rail link across upper Sindh — is currently dormant but able to start up at short notice.

With five functioning overland border crossings connecting us with four different countries, two of which are high-growth economies, it’s very surprising that Karachi remains our only port of entry for the bulk of our external trade.

Of course at one level there is no surprise in this. Pakistan has looked to distant lands for an economic relationship, and looked at its immediate neighbours exclusively in strategic terms. This is the exact reverse of how most other countries have it, where immediate neighbours are your economic partners, and whatever ‘Great Game’ fantasies they want to pursue are usually pursued in distant lands.

Each of our overland border crossings carries tremendous potential. Consider for the moment the largest item in our import bill: oil. Most of the oil consumed in Pakistan arrives by sea at Karachi, and even a short drive through Keamari reveals the enormous oil storage infrastructure that dominates the landscape in the area.

But can at least some of these imports come through our land border crossings? Balochistan, for instance, runs on Iranian oil almost entirely. It’s of poor quality and engines with fuel-injection systems can have difficulty with this fuel, but it’s almost all that is available over there. And all this fuel comes into the province in tankers that cross at Taftan.

Can the northern crossing at Sust eventually also service oil imports from China? There are at least two refineries within a 48-hour driving distance of the border — Urumqi Petrochemical Refinery and Dushanzi Refinery — in Xinjiang province of China. Between them, they have a little more than a quarter of a million barrels per day refining capacity, only slightly less than the total refining capacity in all of Pakistan.

But there are three big problems preventing the growth of this potential. One is the poor state of the Karakoram Highway, which has been ripped up and turned into a jeep track for three years now. Second is the Attabad ‘lake’. Formed as a result of a massive landslide in the winter of 2010 that blocked the Hunza River, the lake today covers an area longer than 20km and has completely cut off all areas north of the Hunza valley from the rest of the country. Whatever links exist today are through makeshift boats that ferry food, fuel and medicines for the population that lives above the lake, in Passu and beyond.

The third major challenge in developing this overland route is the sectarian strife that keeps rearing its head in Gilgit and Kohistan. This is the same problem facing the Quetta-Taftan road as well, where repeated sectarian attacks and the poor state of the road infrastructure are preventing this very important link from growing.

Given an improvement in the Karakoram Highway, and once the conundrum of the Attabad lake has been resolved either by draining the lake or by tunnelling a new road above it, the potential for the customs post at Sust to become a transit point for oil trade is definitely real. We know that a feasibility study for a railway line across the Khunjerab Pass is in process. Therefore in the longer term, given a rail link and the creation of storage depots either in Gilgit or Jaglote, the overland link with China can develop into an important trade conduit to supplement Karachi.

Same is the story with Wagah. Two refineries are in driving distance, one in Panipat and another in Mathura. The added advantage that Wagah presents is its location in the very heart of Punjab. If Pakistan can purchase some of the output from these two refineries, the pressure on Parco and the three smaller refineries in Pakistan can be relieved and their output can be used to help build some reserves and provide more robust supplies to areas in Khyber Pakhtunkhwa, southern Punjab and upper Sindh.

And all this potential is only in one import item, albeit the largest one in our import bill. When we consider machinery imports, the second-largest item, followed by chemicals the potential grows bigger and bigger.

With this in view, it’s sad to see such overwhelming oil-import infrastructure in Keamari, and the sickly and anaemic state our border crossings are in. By comparison to Karachi, these five border crossings look quaint and rustic, whereas in reality they should be thriving points of trade, with road and rail links and large warehousing and oil-storage infrastructure.

Three things are essential to rectify this imbalance. First, a change in mindset is required where we start to look at our neighbours through an economic lens instead of a strategic one. The conflicts that mar each of the points are in some measure the product of the Great Game fantasies Pakistan has nurtured for too long now.

Second, the software of economic engagement needs to be put firmly into place, some of which already exists in the form of a transit-trade agreement with Afghanistan and a free-trade agreement with China. These need to be improved first and supplemented with accelerated movement on freeing up trade with India as well.

Third, and very importantly, the infrastructure to support the growing volumes of trade needs to be put in place, storage and transport in particular.

In the days to come, when the globalised economy centred on the Western democracies falls further into depression, it is these overland trade links with our neighbours that will help carry us through.

The writer is a Karachi-based journalist covering business and economic policy.

Twitter: @khurramhusain


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Comments (8) (Closed)

Jul 26, 2012 01:58pm
When we go to market, our every rupee counts and we buy the goods which are best suited to us and at most economical price. This is irrespective of cast, creed or religion of the seller. Our every rupee counts to us and we think only of regular supply and services. This is the power of financial sovereignty, trade and business exchanges across the borders and over generations. Trade is an activity where both trading parties gain. If we bring other factors, it is we only who will lose, the international trade will go on. Yes we have to analyze what we can sell to others. Doston, Baniya Dhande Kee Baat Jaldee Samajhta Hai ..:-)
abdus salam khan
Jul 26, 2012 07:56pm
Bringing oil by road all the way from China over Khunjerab pass! you must be joking! It is clearly economical unprofitable and obvious even to a layman like me. Our best bet for augmenting sea imports is the Wagah border, only a stone's throw away from the heartland and the city of Lahore.
Jul 26, 2012 03:01pm
To start off Pakistan should open up border trade. Border trade rules under WTO/GATT are fairly generous because these were incorporated from European practices. Opening up border trade would at least make maintenance of custom posts economically viable. That would be pretty good start.
Qutubuddin Qureshi
Jul 26, 2012 11:30pm
All other routes are fine except India.
siraj Ulmulk
Jul 27, 2012 01:51am
I would have wished that the writer would have considered yet another trade route. This one lies unexplored but is the shortest route into Central Asia. The route is through Chitral. With the Lowari Tunnel in place this route must be considered seriously. Long before the KKH came into existence this route was used by pilgrims from Tajikistan and Kyrghyzstan going to Saudi Arabia through the port of Karachi. They used to sell their crockery and carpets to us in Chitral to get Indian (later Pakistani) rupees. Anyone looking at the map of Pakistan and Tajikistan will not need to be convinced that this is a very viable route. Why nothing is being done about it is part of the misterious ways that things happen in our country.
Jul 26, 2012 02:18pm
Its a fantastic analysis. Thank you khurram for writing on such a vital issue.Isolation of communities and lack of reliable road and rail network is our biggest problem. At the moment Pakistan is confined to towns and cities connected through the motorway. Whats left outisde is outside Pakistan as you rightly pointed out people in Balochistan rely more on trade and supplies from Iran and Afghanistan than on mainland Pakistan. Same is the case of KPK as well. If there were proper roads and an efficient rail network criss crossing the country, we would not only have overcome our economic problems but that of national integration as well.
Jul 26, 2012 05:04am
A very informative and well-written piece.
Jul 26, 2012 08:08am
"------In the days to come, when the globalised economy centred on the Western democracies falls further into depression, it is these overland trade links with our neighbours that will help carry us through.----" After these ancient overland trade is re-established in a 21st century setting, will not the next major problem be , about how to avoid being adversely effected by global economic depression ?