POLITICS LOOMING AROUND GWADAR PORT PROJECT

SYED FAZL-E-HAIDER
Dec 10 - 16, 2007

Port of Singapore Authority (PSA) is poised to undertake the second phase of Gwadar seaport project before the year-end. The Singaporean company is currently working out its investment plan for the second phase, which would be completed by 2010 at a cost of $840 million. The government has already given 16 acres of land to the company. The company has also been provided all the necessary equipment, which are currently being installed.

Imposition of emergency and prevailing political uncertainty in Pakistan has created doubts about sustainability of Gwadar port project. In view of a political crisis presently looming large over the country and the region, the project may be hit by further graver political shocks. Officials however claim that Gwadar project has the economic strength and viability to sustain all political shocks.

Some people say that current political crisis may retard the process of development in Gwadar and the project may go in the background. It is true that during the last two years, the Gwadar development has been carried out with a slower pace due to the uncertain law and order situation in the province. Its inauguration was delayed several times and ultimately it was inaugurated by President Musharraf this year in March amid tight security arrangements. Similarly, the operationalization of the port has also been delayed and now it will probably become operational next year. The killing of another Baloch leader Baloch Mari in Afghanistan has now once again destabilized the law and order situation fuelling unrest in Balochistan.

The mega seaport project is underway in a politically volatile but strategically located province of Balochistan. Any destabilization in the political situation of the country or the region may have severe impacts on the most economically viable seaport development project at Gwadar. The situation in Balochistan has remained uncertain since December 2005 when a military operation for the fifth time was launched to quell a Baloch insurgency in the province. If one could learn from the past was the good lesson that military actions created political instability, centre-province disharmony, social chaos and intensified feelings of frustration and alienation and subsequently retarded the process of economic development in Balochistan. The ongoing military operation, which is going to complete its two-year duration next month, has not been without its human, social, political and economic costs. During the critical period, thousands of people from Dera Bugti migrated along with their families to other districts. According to the official estimates, out of 90,000 people, who had left Dera Bugti during military action, 65,000 had returned to their houses.

Though political stability is vital to sustaining a development process, yet the development of Gwadar has sustained all political shocks unleashing from different critical situations in the province such as military operation, tribal militancy, killing of Nawab Akbar Bugti, resignation of several ministers and members of provincial Assembly and recent imposition of emergency by the chief of army staff in the country. At least 100 projects related to the port city of Gwadar have so far been completed and several other mega projects are in the pipeline. Gwadar Development Authority (GDA) is currently developing a road network that would be completed by next year.

The prospects for foreign investment still seem brighter in the port city. So far China has been the biggest investor in Gwadar. During the forthcoming visit of Chinese president in early 2008, Pakistan and China are set to sign agreements on Chinese investments in Gwadar oil city, incentives for setting-up of Special Economic Zones (SEZs) and Gwadar seaport development programme. All these initiatives are considered to be essential for the success of trade energy, transport and industrial corridor between Pakistan and China.

By virtue of its geo-strategic location, Gwadar has the potential to become an economic epicenter of the region. Its viability gives it economic strength to sustain shocks of domestic and international politics. After the completion of second phase, Gwadar is likely to become a hub port of the region providing warehousing, transshipment and industrial facilities for trade to at least over 20 countries of the Asian region.

Presently, Gwadar has attracted the interest of international investors, who see it as a secure outlet for the Middle East and Central Asia oil and gas supplies through a well defined corridor passing through Pakistan. For being strategically located outside the sensitive area of Strait of Hormuz, Gwadar port could play an important role in future containerized trade in Asia.

Gwadar's viability has further enhanced due to the fact that the present choke point of oil trade at Strait of Hormuz is becoming congested and it could affect global energy security as well as regional peace. The future assessment and projection of oil trade in the region also makes Gwadar a natural choice for major shipping lines. Similarly, for eastbound oil trade for South Asian, Southeast Asian and Asia Pacific markets, Gwadar port is emerging as the most suitable option. It is because of its geo-economic importance that Gwadar was highlighted as the future port of global investors at an international conference on 'Free zones, science and technology parks, enterprise zones', recently held in Brussels. The conference was jointly organized by World Free Zone Convention (WFZC) and World Customs Organisation (WCO).

Gwadar project is likely to receive big shocks from the changing geopolitical realities of the region. If Pakistan enjoys any geopolitical importance in the region, it is largely due to the Balochistan's geo-strategic location that marks the confluence of south Asia, west Asia and central Asia. Some players of geopolitics see a fully operational Chinese-built Gwadar port as a threat to their interests and hence they are conspiring to destabilize situation in Balochistan and to sabotage the ongoing development process in the port city. The target killing of three Chinese engineers in 2004 in Gwadar was the episode of their "sabotage plan". These are the forces, which are fuelling unrest in the province, as a volatile Balochistan does serve their strategic interests in the region.

Balochistan has twice played the frontline role to serve the US strategic interests in Afghanistan. For the first time, it attained the frontline position in 1979 when US-backed Afghan Jihad against the defunct Soviet Union forces was underway in Afghanistan. And for the second time, it emerged out to be a frontline province in the US military campaign against Taliban and Al-Qaeda in Afghanistan after 09/11 tragedy. Would Balochistan emerge as frontline province in the possible US war against Iran serving the US strategic interests for the third time?

Some people say that Tehran's nuclear challenge may lead to a US invasion of Iran. In case of American attack, according to some political observers, the Balochistan may be used to facilitate the US advances against Iran. When the US attacked Afghanistan in 2001 after the trauma of 9/11, Pakistan was left with Hobson's choice and the gravity of circumstances forced Pakistan to provide bases and logistic support for US advance against Taliban-led Afghanistan. Again in case of Iran the US may thrust the same situation upon Islamabad. Islamabad may be asked or pressurized for facilitating US advance against Iran through Balochistan.

Gwadar is being developed into an international port with huge investment of China on Balochistan coast. The new port will pave the way for Chinese to make inroads into energy rich Central Asia. The southern Chinese province of Xinjiang is only 2,500 kms from Gwadar port in Balochistan. This makes it feasible and cost-effective for China to carry out trade through this port, which is close to the Gulf, Central Asia, Europe and Africa. The US is currently pursuing its geopolitical agenda of China's containment and it has been unhappy over the Chinese involvement in Gwadar development. US possible attack on Iran is likely to destabilize situation in coastal areas of Balochistan and it would also preempt Chinese in Gwadar.

AIRBLUE-IFC JOIN HANDS FOR AIRLINE EXPANSION 

Airblue, Pakistan's fastest growing private airline has signed an agreement for support of its expansion plans with IFC, a member of the World Bank Group. The investment from IFC will increase the number of reliable domestic and international flights available to travelers, addressing a key constraint to economic growth and international competitiveness in the country.

The expansion will promote trade, business and tourism in Pakistan. airblue aims to make air travel more affordable to a greater share of the population through discounted fares. Offering safe air travel with modern latest technology planes, airblue's presence in the Pakistani airline market has increased consumer choice and promoted competition. As one of the fastest-growing companies in Pakistan over the past two years, the airline also serves as a model for smaller businesses: over 40 percent of the company's employees are female, an unusually high percentage for the country.

IFC's investment consists of a $22 million loan for the financing of pre-delivery payments towards the purchase of an additional six A320s. The acquisition of these new aircraft will enable the airline to increase the frequency of flights and introduce new international destinations in Europe, Middle East, India, Bangladesh, Malaysia and Thailand.

Airblue was represented by Mr. Ali Siddiqui, Member of the Board, and Syed Nasir Ali, Managing Director, at the signing ceremony in Washington DC. The Ambassador of Pakistan Mahmud Ali Durrani attended the signing and said "We are very proud of what airblue is doing; it proves that the private sector can do wonders".

Rashad Kaldany, IFC Director for Infrastructure said, "The World Bank Group has targeted transport as one of the key sectors for improvement in Pakistan. By supporting airblue's growth, we hope to communicate the availability of financing for young private companies that are expanding to encourage private sector participation in the sector."

IFC, a member of the World Bank Group, fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing private capital in local and international financial markets, and providing advisory and risk mitigation services to businesses and governments. IFC's vision is that poor people have the opportunity to escape poverty and improve their lives. In FY07, IFC committed $8.2 billion and mobilized an additional $3.9 billion through loan participations and structured finance for 299 investments in 69 developing countries. IFC also provided advisory services in 97 countries.

Airblue was launched in June 2004 and currently operates a fleet of six Airbus A320 aircraft in Pakistan. Over the past three years, it has grown to be the second-largest airline in the country, introducing innovations for greater customer convenience such as e-ticketing, wireless mobile check-in and self check-in kiosks. It currently has Flights to 7 major domestic cities in Pakistan; 3 daily Flights to Dubai in the United Arab Emirates and daily Flights to Manchester in the United Kingdom. airblue is also inducting turboprop aircraft in its fleet in the near future. With the induction of turboprop aircraft, airblue will also be able to provide better travel facilities to the people living in small towns and cities of Pakistan.