GWADAR PORT: A MEGA PROJECT IN DOLDRUMS

SYED FAZL-E-HAIDER
(feedback@pgeconomist.com)
Mar 7 - 13, 20
11

Unfortunately, Gwadar port, a mega infrastructure project in Balochistan, is still in doldrums. The port is still non-functional. It still lacks road and rail connectivity and its usage has so far been restricted to bulk cargo such as wheat and urea. China, which provided 80 percent of the initial $248 million development costs, has been vying for taking operational control over Gwadar port. In June 2006, a Chinese company had also expressed its interest to operate the port but it could not win the bid for running the port.

China has reportedly offered Balochistan government that it would construct 20 more berths from the present five and make the port operational if it takes charge of Gwadar Port. Balochistan government has already gone to the country's apex court to scrape the deal with Port of Singapore Authority (PSA) under which former President Pervez Musharraf's government gave management and operational control of the deep-sea port to PSA in February 2007 for 40 years. If the port operation deal with PSA is cancelled, it would brighten the prospect for China to run the prize port on the country's southwest coast.

Pakistan's Supreme Court recently issued a stay order against the Gwadar port contract barring the PSA from transferring immovable property of Gwadar Port Authority (GPA) to any private party and allowed the government of Balochistan to be a party to the case. The petitioners contended that federal government neither considered the reservations of the Balochistan government nor had taken it into confidence and also voiced apprehensions that the government might sell the 600 km long coastal belt to the PSA.

Pakistan Planning Commission's task force on maritime industry has termed the Gwadar port's operation deal signed with PSA a complete disaster. The task force strongly recommended the government to cancel the deal with PSA, which had undertaken to spend $525 million in five years, but has invested nothing during the first three years, and it is not likely to even spend during the next two-year period.

Pakistani government and the PSA are in default of commitments. Pakistan could not hand over 2281 acres of land under possession of Pakistan Navy, free of cost to the Singaporean firm by June 2008 on lease for the development of a free zone for the port related facilities at East Bay of Gwadar. The PSA is unwilling to make further investment in Gwadar port without getting free of cost land, that would cost the government at least Rs15 billion.

Under the concession agreement, the federal government is required to purchase 2281 acres of land on waterfront and transfer this land free of cost to PSA for 40 years. The PSA is unwilling to make further investment in Gwadar port without getting free of cost land, that would cost the federal government at least Rs15 billion.

Strategically located Pakistan could function as an energy corridor linking the oil fields of Iran and possibly even Iraq with the Chinese market by means of a pipeline that would cross the Himalayas above Kashmir. This would give China a guaranteed land-based oil supply not subject to Anglo-American naval superiority, while also cutting out the 12,000 mile tanker route around the southern rim of Asia. Some analysts believe that Chinese presence in Gwadar is actually aimed at acquiring the naval control of communications in the Indian Ocean.

China needs a safe passage through Pakistan in order to maintain economic and strategic connectivity with South Asia, particularly after China has become the second largest importer of oil in the world. China is interested both in monitoring the supply routes for its rapidly increasing energy shipments from the Persian Gulf and also in opening an alternative route via Pakistan for import/export trade serving its vast Muslim-majority Xinjiang Autonomous Region.

By virtue of its geo-strategic location, Gwadar is likely to emerge as a free oil port in the south Asian region. It can serve as the future petroleum and petro-chemical hub of Pakistan meeting the oil transshipment requirements of different countries.

Gwadar seaport is not far from the Straits of Hormuz, through which 40 per cent of the world's oil passes. Gwadar port is one of the suitable options for eastbound oil trade for South Asian, Southeast Asian and Asia Pacific markets as it would be impracticable from 2020 onwards to ship increasing quantity of oil through the present route of the Strait of Hormuz.

Islamabad plans to set a giant shipyard with a capacity of 600,000 DWT at its port of Gwadar. According to an estimate, internationally the demand for new ships will increase from around 30 million DWT a year at present to around 90 million DWT a year in 2055. The establishment of two new shipyards with bigger docks would ensure accommodation of giant vessels and the development of shipbuilding industry in the south Asian country.

Gwadar can turn into an ideal place for a facility for repair and maintenance of bigger local and foreign ships and vessels.

The proposed Gwadar shipyard is planned to be set up at Gwadar East Bay. It will spread over 500 acres of land. It will have at least two dry docks of approximately 600,000 DWT. The shipyard will not only provide the facility of ship repairing but it can then be further upgraded to undertake state-of-the-art shipbuilding of bigger size and high-tech ships like Very Large Crude Carriers (VLCCs) and Ultra large Crude Carriers (ULCCs). The capacity in the Gulf for such repair of vessels is limited and such a facility at Gwadar will be one of the trigger industries for bringing up Gwadar port and development of the region.

Some experts believe that the key functions of Gwadar port should have been given to Chinese company, as China desperately needs port facilities located outside the sensitive Strait of Hormuz but close to the Arabian Gulf for its fastest growing economy. The experts argue that even if the Chinese companies and exporters handle their own cargo it would make Gwadar port as one of the busiest and most active port of the region.