MOVES TOWARD INDUSTRIALIZATION OF GWADAR

SYED FAZL-E-HAIDER
Jan 07 - 13, 2008

Though Gwadar port is still non-functional, yet some steps for industrialization of the port city have recently been taken at official level. Balochistan government has promised maximum incentives and facilities to industrialists in the new port city at Gwadar. According to the official sources, the industrialists have been given possession of 25 per cent of plots in Gwadar industrial estate and some of them have started work on their projects. With the provision of power supply, some industries would start operation this year. A 20MW power plant is also being set up at a cost of Rs100 million.

Islamabad plans to re-draft special incentives for the investors interested in setting up industrial units at export processing zone (EPZ) in its newly inaugurated Arabian Sea port of Gwadar. There will be tax exemption on customs, sales tax and excise duty in the EPZ with a view to promote substantial investment in Gwadar. The former Prime Minister Shaukat Aziz had directed the Ministry of Industries and Production to develop a package of incentives for Gwadar EPZ to promote industrial development in the area. A number of foreign investors have reportedly shown interest in establishing mega refineries, building storage capacity and undertaking other businesses in Gwadar. The federal government is likely to announce a 15-year tax holiday for the proposed EPZ in Gwadar port for local and foreign investors

A Special Industrial Development Zone (SIDZ) with an area of 4,000 hectares has also been planned on the north of Gwadar town at a distance of about 30kms from the port. The federal government is also providing special Rs700 million funding to Balochistan to help meet 15 years water demand of the Gwadar Industrial Estate (GIE) through installation of a foreign assembled desalination plant. There will be approximately 2,000 industrial units in the GIE. Most of the production will be export-oriented and will bring foreign exchange to the country.

The economic co-ordination committee (ECC) of the federal cabinet has already given the approval for tax exemption under which the material and equipment to be used for construction of Gwadar port would enjoy sales tax exemption for 40 years The ECC has also granted 20 years corporate income tax exemption under which three companies, to be formed by Gwadar Port, would be exempted from sales tax. Pakistan has granted 40-year tax exemptions to the Singaporean operators of Gwadar port, making it a virtual tax-free port to the extent of its development and operations.

Gwadar port will unlock the Balochistan hinterland. The770 km long coastal belt of Balochistan extends from the mouth of Hub River near Karachi right up to Gwadar Bay near Chahbahar in Iran. The port would help bring Balochistan's coastal areas into the socio-economic mainstream. It will serve as a catalyst for fast track development of the province bringing it at par with other provinces of Pakistan. The establishment of Special Economic Zone, Free Trade Zone, and Export Processing Zone (EPZ) in Gwadar would open the province to international investment.

Asian Development Bank has agreed to provide $1 billion for the National Trade Corridor (NTC) project that would link Karachi to Gwadar and Khunjrab in Northern Areas, close to the Pakistan-China border. Development of an integrated transport system and future road and rail links to CARs and rest of the country will enhance the local peoples' access to new vistas of their development and prosperity. For landlocked Central Asian economies, Balochistan offers access to new resources and markets and the prospect of more rapid growth. Gwadar port would provide Afghanistan and the CARs the shortest and fastest access to the warm waters of the Arabian Sea. Any movement of goods to and from the province will benefit Afghan transit trade. It will also increase the export of minerals, dry fruit and other goods from the province. The people of Mekran who are associated with the fisheries and agriculture especially the growers of dates would find a market and best opportunities for export of dates to foreign markets.

The process of infrastructure development and human development must go together. Political leaders would be right if they demand of the government for establishing a score of technical training institutes in various districts of the province. Creating technical hands and building capacities among local people, would be a great service to the people of this backward province on the part of both the government and the political leaders.

Gwadar port has been designed to be operated as the hub port and it was decided to offer incentive package better than the regional ports like Jebel Ali, Hong Kong Malaysia and Singapore. It would have to compete internationally to get its rightful share in the world cargo. This requires efficiency on the part of port operators and installation of modern equipment at the port. Islamabad has already declared Gwadar port as petrochemical and POL storage field for what it has sought $12.5 billion investment from China. The professionals with required expertise and know-how should be appointed for running the mega seaport project and the services of best available professionals in their respective fields should also be hired.

It is true that the development of deep-sea port at Gwadar has been delayed for different reasons. Some local experts in ports and shipping sector have identified the unprofessional decisions, incompetence and lack of experience on the part of port authorities has been delaying the operationalization of the new port by the scheduled period of time. The project has been the victim of lethargy and an unprofessional approach. It however picked up pace in the last quarter of the year 2006. In the past, the government had fixed two dates for inauguration of the Gwadar port but could not meet them and this was largely because most of the affairs of the port were run by non-professionals.

While the ports of Karachi and Bin Qasim operate on a royalty basis, Gwadar will operate on the basis of a gross-revenue-sharing formula. Since the Singapore Port Authority (SPA) has taken over the Gwadar port in Pakistani province of Balochistan, it has been facing some problems in making it operational. The port still requires more berths to handle big ships. The Singaporean firm has reportedly overcome its teething problems and the port is likely to become operational in next few months.