GENEVA — Pakistan is preparing to make a significant investment to expand its largest port in an effort to establish itself as a regional transport hub for factories producing goods in central Asia and western China.

Prime Minister Shaukat Aziz told reporters here last week that the Pakistani government plans to boost the country’s transport infrastructure to address the growing needs of the 160 million-population country and to take advantage of its favorable location. The Pakistani economy is growing between 6 percent and 8 percent annually, said Aziz, and expanding the country’s role in global trade is seen as a key to keep momentum rolling.

In pursuit of this goal, Aziz said the port of Karachi — the country’s largest — will announce “the construction of a deepwater container terminal, one of the deepest in the region, which would serve mother vessels and large container vessels, which are emerging on the international scene.”

The Pakistani official pointed out that the country’s ports, such as Karachi, are within about 1,200 miles of factories in central Asia and western China, closer than ports on China’s eastern coast.

Aziz, a former top Wall Street banker, said there is “no restriction” for foreign direct investment in the country.

Western China, which is lagging behind the prosperous coastal areas, has been designated as a priority area for development by the Chinese leadership. Moreover, with competition intensifying for land, electricity and skilled workers in the coastal areas among more value-added industries such as electronics and auto manufacturers, many lower-end industries, such as textiles, apparel and footwear, are expected to migrate westward where both wages and overheads are lower.

From a logistics and supply point of view, it would make sense to import, export or transship goods from western China via the port of Karachi rather than Shanghai or Hong Kong, which are too far away, Chinese experts noted. But a hindrance to the rapid development of such a strategic transport corridor is the lack of capacity in Pakistan and western China to carry container cargo.

Aziz said the building of new road links and upgrading of existing ones with China and other neighboring countries enhance Pakistan’s attractiveness.

Pakistan President Pervez Musharraf recently said he asked China to assist with the upgrade of the Karakoram highway. Besides providing access to Pakistani seaports, the highway can also provide an overland route for trade between China and India, “thus linking the largest markets in Asia,” Musharraf said.

This story first appeared in the July 11, 2006 issue of WWD. Subscribe Today.

However, according to United Nations transport experts, the distance to port is not a good indicator. What is more important, they stress, is the flow of cargo, the frequency and the efficiency of connections. Some specialists believe China is likely to focus on integrating its transport systems within the country before jumping to something in Pakistan.

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