Harnessing the potential of Gwadar Deep Seaport
Khalid Khokhar
1/31/2013

 

GWADAR Deep Seaport is located on the southwestern coast of Pakistan, close to the important Straits of Hormuz, through which more than 13 million barrels of oil passes daily. Ever since the construction of Gwadar deep seaport has been undertaken, there are no two opinions that the port would not only help bring coastal areas into the socio-economic mainstream, it will also serve as a catalyst for fast track development of the Balochistan province. With the financial assistance of China, the port was programmed to develop in four phases. Phase-I of the port has already been completed in 2006 with the initial investment of $ 248 million that include three berths and one ramp 600-meter long capable of accommodating several ships at a time. Phase-II (2007-present) with $932 million is still underway that will have 4 Container Berths, 1 Bulk Cargo Terminal (capacity: 100,000 DWT ships), 1 Grain Terminal, 1 Ro-Ro Terminal, 2 Oil Terminals (capacity: 200,000 DWT ships each) and approach Channel. Phase-III and IV consist of network of roads finally to be connected with China through the Indus Highway. Under an agreement, Pakistan, China, Kazakhistan, Kyrgizstan and Uzbekistan are already committed to developing extensive railroad links from Central Asia and the Chinese province of Sinkiang to the Arabian Sea Coast. The geographical and strategic location makes the Gwadar Deep Seaport at a much advantageous position than other competing ports, like Rashid and Jebel Ali ports of Dubai, Salalah Port of Oman, Bandar Abbas and Chahbahar ports of Iran.

Ever since its inauguration on March 15, 2008, Gwadar Deep Seaport was handed over to Port of Singapore Authority International (PSAI) for cargo handling through a ‘Concession Agreement’ between PSAI and Gwadar Port Authority (GPA) for 40 years extendable for further 10 years, free of cost. Some of the salient features of the agreement were: (a) Transfer of all assets, facilities, buildings, infrastructure & superstructure along with all facets of Port Operations & Management. (b) Exemption from various taxes, duties, levies, charges etc. for a period of 40 years as specified. (c) Commitment to invest $ 525 millions in Port expansion over next 5 years. (d) Commitment to expand port further eastward to 4.2 km in next 15 years. (e) The investment, revenues and income received from Gwadar’s entire operations during 40 years, have been estimated at between $ 23.6 billion & $42.2 billion. (f) The cost intensive activities like dredging, maintenance of navigation aids, construction of breakwater, capital dredging, maintenance of all port super structures/infrastructure and port water side security etc has been assigned to GPA.
It was expected that PSAI would bring in trade and prosperity in the area, but the Port could not operate to its maximum potential due to inherent defects in the concession agreement-2007. Experts in maritime affairs considered that the concession agreement was a bit skewed and hence appears to be unnatural. Both the Gwadar Port Authority (GPA) and the Singaporean firm PSAI are in default of commitments under the concession agreement. Some of the points of concession agreement over which PSAI and the GPA faltered were: a) the “concession” was essentially over-ambitious, b) both the parties did not make any worth mentioning investment, c) PSAI failed to install cargo handling equipment - no pilot boat and tug boat to handle large vessels at the deep sea port, d) PSAI failed to invite any shipping lines even after the lapse of five years, d) PSAI’s refusal to pay revenue generated from port operations to GDA, e) PSAI could not invest $550 million in the first five years, f) PSAI’s reluctance in setting port operational targets. On the other hand, GDA also failed to undertake projects/work assigned to it under the concession agreement. Some of them are: a) GPA failed to provide connectivity of the port through the construction of highways/rail vide agreement, thus restricting its usage to wheat and urea only, b) Government also failed to provide 2,250 acres of land to the PSAI for the development of an industrial zone as per its commitment, c) The GPA’s failure to give land to the Singaporean operator for the construction of a warehousing facility with both the government and the PSA losing millions, d) dispute between Government and Pakistan Navy over 584-acre land at Shamba Ismail stalled the development work. Although, the piece of land under question was important for Navy from ‘Seaward Security’ of Gwadar Port and Harbour protection, but PN is ready to vacate (in the larger national interest) if it was provided 1000 acres while retaining 84 acres at Shamba Ismail.
The PSAI defended itself by saying that since the cost of doing business at Gwadar is more than double as compared to elsewhere, therefore, development of infrastructure of the port was not viable. On the other side, the government’s reluctance to the development of the required infrastructure for Gwadar Port connectivity was due to insecure situation, Taliban factor and lack of funds. According to the maritime experts, these are good-enough reasons for scrapping the contract. The PSAI’s exit brightened the prospects for China, which has already shown keen interest in taking operational control of the port. It is understandable that Chinese management of Gwadar would be more viable for future handling of the Port. In December 2010, China offered the Balochistan government that it would construct 20 more berths and make the port fully operational if it took charge. In that case, China would simultaneously become the builder and operator of the port, which could become a key strategic node for Beijing to step up its presence in the region. China is already involved in engineering, mining, nuclear energy and construction projects in the country, including the upgrading of the KKH in Gilgit-Baltistan and $ 50 million financed Gwadar Airport project. Awarding Gwadar port contract to China seemed to be logical as well as beneficial for the people of Balochistan province.
Experts say that Gwadar city in future would turn into an international hub of industrial and commercial activity, which would not only play a key role in the economic development of Balochistan, but also the entire country. Education Sector Reforms (ESR) is a complex undertaking, especially in an environment such as Balochistan's, where the education system was weak and where existing social and economic constraints worked against management and delivery of quality education. The literacy rate that is considered as the corner stone in the development of a country is par low in Balochistan as compared to rest of the country. Undeniably, Balochistan has suffered long years of neglect and consequently the province is mired in poverty. The government is spending billions of rupees to provide basic education to the local population. In the same vein, Pakistan Navy has established three Bahria High School at Ormara and one at Gawadar. The school has a strength of over 100 ethnic Balochis students that is likely to increase manifold due to the enormous response from the locals in educating their children for better prospects. The World Bank (WB) is helping the Balochistan government to set up 200 community schools and 100 private schools. The construction of cadet colleges in Qilla Saifullah, Jaffarabad and Panjgur districts, and the PC-I (project concept) for similar cadet colleges in Noshki, Gwadar, Kohlu and Sibbi will go a long way in allaying Baloch grievances. Information Technology (IT) classes in 298 high schools of Balochistan are being initiated to ensure that all students are computer literate. The Bolan Medical College had been completed in 2005, and one poly technical college each in Gwadar, Panjgur, Turbat and Ghuzdar were being set up to cope with the technical needs of the Gwadar port.
Ports and shipping critics say that the Gwadar has been the victim of weak procedural intricacies as well as unprofessional handling by the concerned ministry, undermining the credibility of Islamabad government. There is a strong need for the application of corrective measure coupled with the appointment of sincere and proficient leadership to arrest the issues relating to the development of Gwadar port. What is needed is the creation of a secure environment that will serve long-term objectives associated with Balochistan’s economic development. Critical to this is giving the local people a stake and the fair distribution of tangible socio-economic gains. It is only possible, if one places ‘Pakistan first’ and tries to avoid institutional confrontation - as in the case of Min. of Ports & Shipping’s illogical demands to Pakistan Navy. In a state of real congenial environment, one feels that the benefits showering from Gwadar Port project will become a near dream.