MAKING GWADAR PORT FULLY FUNCTIONAL

SYED FAZL-E-HAIDER
(feedback@pgeconomist.com)

June 4 - 10, 20
12

The federal government has expedited its efforts to make Gwader Port fully functional. About 80 per cent work of the Gwader-Rato Dero Highway has been completed at a cost of Rs15 billion and remaining work would be completed within a couple of months. Gwadar is still not functional as a hub port. Its emergence as mother port of the region is still a dream. It still lacks road and rail connectivity. Its usage has so far been restricted to bulk cargo such as wheat and urea.

Balochistan government has 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.

Last year, the Supreme Court 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.

Critics term the Gwadar port's operation deal signed with PSA a complete disaster and strongly recommend 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 actually 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.

China, which provided 80 per cent 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 offered Balochistan government that it would construct 20 more berths from the present five and make the port fully operational if it takes charge of Gwadar Port. 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.

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.

Ports and shipping sector plays a vital role in the economic development of a country, as efficient ports and terminals lower the cost of imports, bring revenue through exports, increase our foreign exchange reserves, and enhance tax collection. Recent trends in the shipping industry have shown that cargo ships are becoming larger. These vessels have enhanced capacity to transport cargo in bulk quantities, which make commodities cheaper for the end consumer by reducing transportation costs and time to reach the market. Long-term investments in ports and shipping industry can make Pakistan a strategic hub for regional trade. Pakistan can only avail the opportunity by enabling its ports and shipping channels to accommodate large vessels, which are called as Super Panamax.

Former government proposed to set up two giant shipyards with a capacity of 600,000 DWT at its ports of Gwadar and Bin Qasim at an estimated cost of $500 million. It had sought Chinese help and advisory services from international firms for the purpose. In view of the growing demand for new ships around the world, the strategically located Pakistan is a takeoff point for such projects. 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 was planned to be set up at Gwadar East Bay. It was proposed to spread over 500 acres of land with at least two dry docks of approximately 600,000 DWT. The shipyard was supposed to provide the facility of ship repairing and 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 would be one of the trigger industries for bringing up Gwadar port and development of the region.

The country should take advantage of the emerging opportunities in shipbuilding, including engine and equipment manufacturing. According to one 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 at Gwadar can ensure accommodation of giant vessels and the development of shipbuilding industry in the country.