Jan 05 - 18, 2009

Gwadar port in Balochistan has officially been declared operational after a vessel carrying 30,000 tons of urea imported from Qatar berthed on December 20 at the jetty of the port. Handling of shipment was carried out with 4,000 tons consignment daily that continued for a week. MV Charlott Bulker was the second commercial operation at Gwadar Port after it had initiated its operation in March. The ship offloaded urea at the port, from where it was shipped to the required destinations by the National Fertiliser Corporation (NFC). Trading Corporation of Pakistan (TCP) had asked some of the suppliers to deliver imported urea at Gwadar Port.

The accord signed in 2007 with the Port of Singapore Authority (PSA) International for handling operations at strategically located Gwadar port will be reviewed and likely to be cancelled, according to the officials. On the other hand, PSA has reiterated its commitment to make Gwadar port fully operational. Gwadar project had come to a standstill and no economic activity has so far been witnessed after the first shipment in March.

The agreement between the two authorities can be cancelled, according to Nabil Gabol, the Minister of State for Ports and Shipping. Addressing a press conference last month in Gwadar, he said that government is reviewing the contract inked with the Singaporean company in the context of Balochistan province. He said that the deal could be canceled if it does not favour Balochistan as he termed Gwadar Port being the property of the local people and vowed to make such decisions that are in the interest of the province. "PSA is ready to fulfill its all commitments regarding Gwadar port operations, reported a local TV channel citing a PSA spokesman.

The agreements signed by the former government on the Gwadar port caused a delay in making the Gwadar port functional, according to the Balochistan Chief Minister. The provincial government has proposed to reconsider or revise the agreements to make the new port fully functional. The concession agreement, signed in February 2007 with the PSA, entails ministerial authority over the operators to fix port fees, to attract shipping lines. The scope of the concession includes obligations to handle mixed and general cargo, containers, dangerous goods, dry bulk, cars and ferries and the obligations to provide and operate bunkering and water supply facilities for visiting ships.

Under the concession agreement, Singaporean firm is bound to set up three different companies to look after various activities at the Gwadar port, including cargo operation, marine operation and the free economic zone. Under the concession agreement, PSA is bound to invest $550 million for improvement of Gwadar Port besides building additional berths. The areas where the concession agreement was to be implemented are terminal and cargo handling operations, marine services and free zone development.

Gwadar port has become a virtual tax-free port to the extent of its development and operations after Pakistan granted 40-year tax exemptions to the Singapore-based operators. Some of the major tax exemptions and incentives given to PSA included complete exemption from corporate income tax for 20 years, duty exemption on import of material and equipment for construction and operations of Gwadar port and development of Free Economic Zone for 40 years and duty exemption for shipping, bunker oil for Gwadar port for 40 years.

Critics believe that 40-year tax exemption to the operators has provided the operators with an opportunity to skim billions of dollars in profits. No exemption could be granted after the award of the contract. Had the former government announced it before the bidding, some other company could have agreed to an exemption for a much less period.

Officials have taken important decisions to generate tremendous business activity at the port to make it functional. Chief Minister of Balochistan Nawab Aslam Raisani has declared that all attempts of making Gwadar a failed project will be foiled. The government has formulated a plan to import wheat and fertilizers and export cement from Gwadar Port. Gwadar Port would be converted into Export Processing Zone, according to Federal Minister for Industries and Production Mian Manzoor Ahmed Wattoo. The government has already allocated an amount Rs.1 billion for establishment of EPZ to support the growth and development activities around Gwadar port.

While the government has decided to use Gwadar as export point for cement, the local transporters and cement exporters deem it not viable, as transportation, security and poor infrastructure are the major hurdles in the export through Gwadar. The cement export through Gwadar Port to Middle East and Gulf countries would increase the cost of export, according to the local cement manufacturers. The cement manufacturers deem cement export through Gwadar seaport more costly as compared to export via Port Qasim and Karachi Port. They have demanded Rs 1,500 subsidy as transportation differential from the government. They have also sought security on coastal highway and adequate infrastructure at road and port. Gwadar will get business as soon as export of cement is shifted to it from Karachi. This will enhance business activities in the province, besides creating job opportunities for the local people.

Islamabad has also offered separate terminals at Gwadar port to capture the transit trade of the Central Asian Republics (CARs) including Kyrghistan, which has shown keen interest in availing the port facility and also in having a terminal at Gwadar. In a meeting with Nurlar Aitmurzaev, Ambassador of Republic of Kyrghistan in Islamabad last month, the state minister said that Pakistan was ready to provide a separate terminal to Kyrghiz republic and would welcome all the neighboring states of the CAR's to use the port as transshipment trade of the region.

Gwadar has the most advantageous location for an alternative port in the region and it could handle mother ships and large oil tankers and capture the transit trade of the Central Asian Republic (CAR) as well as the trans-shipment trade of the region, according to the Ports Master Plan studies of Asian Development Bank. Local experts argue that Central Asia cannot be commercially served, as most of the ports in the Gulf are located on the wrong side of the Gulf. Gwadar port becomes a viable proposition for being located in the vicinity of both the Gulf States and Iran. According to one estimate, a fully functional Gwadar port could earn handsome revenue of $40 billion a year. The port is expected to be a higher revenue earner in terms of foreign exchange for the country, as China, Afghanistan, Central Asian states and Russia would also be using the port where huge cargo ships up to 0.25 million tons could anchor. Initially the port would handle 100,000 containers, 300,000 tons of general cargo and half a million ton of food grains.