GWADAR PORT REMAINS PARTIALLY OPERATIONAL IN 2009

SYED FAZL-E-HAIDER
Dec 28, 2009 - Jan 03, 2010

Strategically located Gwadar port in Balochistan began cargo handling from March 15, 2008. It was declared officially functional last December. Presently, three berths of the port are functional. Port of Singapore Authority (PSA), the concessionaire and operator of the port, is however still facing significant issues in making it fully functional.

The port's connectivity with main roads and rail links is still required. In the official circles particularly Balochistan government has criticized the PSA for not taking crucial steps to make the country's prize port on its southwest coast fully functional. They urge that accord signed in 2007 with the Singaporean firm for handling operations need to be reviewed and cancelled if it goes against the province's legitimate interests.

A dozen of ships had been berthed at Gwadar port and some 1007 tons of urea and 344.226 million tons of wheat had been imported at the port by January 2009 since a vessel carrying 30,000 tons of urea from Qatar berthed on December 20, 2008. With a depth of 14.5 meters as against 11.12 meters of Karachi Port, Gwadar has the capacity to handle Panamax ships.

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.

Trucking activity got a boost in coastal Balochistan with the surge in Gwadar port operations during first two months of the year 2009. Transportation of goods into the area has been monopolized by a few contractors. In the absence of truck stand, traffic congestion has emerged as a problem in the port area restraining smooth flow of vehicles.

In the current fiscal year budget, the federal government earmarked Rs 828.81 million for the ports and shipping ministry out of which only Rs 30 million have been allocated for East Bay Expressway project that would cost Rs 3.7736 billion. Gwadar-Ratodero Road project, which will connect Gwadar port with upcountry, is also facing financial crunch for its timely completion.

Mekran coastal highway is the only link which is currently being used by a large number of trucks to transport urea and wheat from Gwadar to Karachi, as there is lack of direct links between Gwadar and the rest of the country.

The federal government plans to establish a tax free zone in the new port city of Gwadar to attract local and foreign investors. There is still found a row between the Ministry of Ports and Shipping and the Ministry of Defence over transfer of 584-acre land to the Singaporean operator for establishment of the long-awaited Free Zone. Analysts say that the Singaporean firm may take Islamabad to the Arbitration Court in London holding the Government of Pakistan accountable for defaulting on its contractual obligations under the Concession agreement signed in February 2007 in case of further delay in the transfer of said land, which is presently in possession of the Pakistan navy. On the other hand, the Ministry of Defence has refused a free-of-cost transfer of the said land to Gwadar Port Authority (GPA) for the proposed Free Zone.

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 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.

The port remained non-functional for more than one year even after its official opening in March 2007. The first ship arrived at the port in March 2008, but the port did not see arrival of any ship for the seven months till December 2008.

Some experts in ports and shipping sector have identified the unprofessional decisions, incompetence and lack of experience on the part of port authorities, which are delaying the project and making it functional 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.

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 Republics (CARs) as well as the trans-shipment trade of the region, according to the Ports Master Plan studies of Asian Development Bank.

The 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 major 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.

An operational Gwadar port on the mouth of Persian Gulf and opposite to the Strait of Hormuz, is not only important for Pakistan but also for the whole Asian region. With a fully operational port, Pakistan will become a key player in the Persian Gulf region and serve as an energy corridor for Central Asia, South Asia and western China.

But what the government has so far done for making this port operational? Without port connectivity through rail and road links, goods cannot be transported to Afghanistan, CARs and other regional countries.