Capitalizing on to the Gwadar Port

By

Dr. Raja Muhammad Khan

Gwadar, the strategically significant port of Pakistan is situated at the mouth of Persian Gulf, in the proximity of the Straits of Hormuz.  Since the major shipping route connecting three main continents; Asia, Africa, and Europe are passing from its vicinity, therefore, it has attained the status of a key strategic and commercial port. Over sixty percent of global trade and transportation of oil tankers takes place through the neighbouring waters of the Gwadar Port. Owing to its “geo-strategic location, Gwadar has the potential to become a regional maritime hub.” In connection with the global trade, Gwadar port presents itself as the best alternative and the storage port, as it can handle the major ships and oil tankers. “The 14.5-meter draft of the port will be able to accommodate up to "fifth-generation" ships, including Panamax and mother vessels.”

The key factors behind the development of the port were; to stimulate the economic growth in the northern and western parts of Pakistan. Besides, the port was also aimed at providing the shortest possible approach to Arabian Sea to the landlocked Central Asian Republics and Afghanistan for their transhipment facilities. Pakistan’s strategic ally and all weather friend China has developed the port in a record period with an initial investment of $248 million.  Upon completion of its development, in March 2007, the port was handed over to the Port of Singapore Authority (PSA), through open bidding for a period of forty years.  As a concession, the PSA was given corporate tax exemption by Pakistan for the entire period of forty years. The otherwise concessional agreement, delimited PSA   to invest $3 billion on the project. PSA was to invest $550 million in the first five years, which it has not done, even after the passage of over three years. Gwadar Port Authority (GPA) was to receive revenue from PSA over these forty years. “The investment, revenues, and income received from Gwadar port's entire operations have been estimated at between US$23.6 billion and $42.2 billion.”

Regretfully, in-spite of having the fame of dealing with the global network of deep sea ports, the PSA has not been able to develop the Gwadar port, as agreed in the bi-lateral agreement. Moreover, it failed to invest the agreed amount as of today. This Singapore Government owned company is considered the global leader in the ports and terminals business, operating over 20 port projects in a number of countries ranging from Belgium to Brunei, China, and Italy to Japan and India.  Regrettably, the efficiency of this globally known port authority has remained much below the expectations. This could be imagined from the fact that, not a single commercial vessel could reach the Gwadar port in last three years. The problem is likely to persist for a foreseeable future, if the administration of the port remains with the PSA. In the wordings of the former Deputy Cchairman of the Planning Commission Sardar Aseff Ahmed Ali, “the Gwadar port project is a disaster, as the 40-year concession agreement with the PSA has not yielded any results in its first three years.”

It is beyond doubt that, “The government and the PSA are in default of commitments,” yet, this national asset cannot be left at lurch for a long. It was in the same milieu that, the Naval Chief, Admiral Noman Basheer clearly declared that the port is not serving the purpose for which it was built; therefore, the agreement with PSA should be cancelled.   Otherwise, the agreement was “one-sided and a lot of incentives have been given to the PSA,” in March 2007, which did not develop the port any further as agreed. He even criticized the apologetic role of the Ministry of Port and Shipping for being less assertive to compel this foreign company for doing what it must have done until now. Although there have been other compelling factors like law and order situation in the Balochistan Province and neighbouring Afghanistan which have constrained the transhipment and transit. Nevertheless, these factors cannot be presented as an excuse for the development of additional berths and port’s local expansion. In converse to the basic design of the port, still there exist “no facility for supporting the oil industry---even though the port was on the mouth of Gulf. Due to this, Pakistan is unable to attract investment in Gwadar from Gulf countries … in the oil and gas sector”.

Analysts view that, once Gwadar Port is fully operationalized, ports of neighbouring countries would lose their significance. Therefore, these countries have directly or indirectly contributed towards the destabilization of the areas surrounding the port. Local Baloch population was provoked in the name of Baloch sub-nationalism that the Federal Government is compromising their rights over their own land. Upon heavy funding by these countries, some mislead elements of the Province even acted as desired by the powers behind them. Even the basic developers of the port, the Chinese engineers were abducted and in many cases were killed or wounded.

 Fortunately, there has been a lot of change in the perception of the local Baloch population. Gradually they are coming out of the influence of those who never wanted the regional development. They now realise that it was a plot to damage the Gwadar port. Now they desires that Chinese should be back to run the administration of the port. As per a local Baloch nationalist Sardar, Mr. Rauf Khan Sasoli, “The port should have gone to the Chinese, who built it largely from their own investment, in the first place.” Balochs now strongly feel that former Government has handed over the port’s administration to PSA to please the US, which was against the Chinese control of the port. Irrespective of the factors behind this indolence, no commercial activities have taken place through this strategically situated port. In practical terms, these three years of port’s administration with PSA have literally gone waste. Rather, the plotters and the administrators together with some indoors elements have amply relegated the significance of the port. No planned communication network like roads and railways could be developed to attract local or global investment. Similarly, CARs and Afghanistan also remained off the port for the obvious reasons of none availability of planned roads and railways network.

Indeed, more sincerity was needed domestically than from the PSA or all those who have been conspiring. While giving contract of our national assets to other countries or the foreign investors, we should not forget that these are our national assets, being run temporarily by foreign companies. Their performance should be as per our national interests. After all, the Gawadar Port, the land and the people of the area belongs to Pakistan.  Similarly, the concerned Ministry of the Government of Pakistan should have emphasized development of the road and railway communication. We cannot leave the Gwadar Port as a white elephant for another thirty-seven years. The Port of Singapore Authority has given us sufficient grounds to revoke the agreement made in March 2007. Since our own expertise are limited in this field, therefore, let us go back to the basic developers of the port and ask our all-weather friend China to fully operationalize the port. Keeping the port for three years without paying any revenue to Pakistan should otherwise bind the PSA to pay compensation to Pakistan. However, while resolving the practical details, even if Pakistan has to pay some amount; it should not hesitate to do that as a onetime measure to get rid of this issue for the last time. Otherwise, “Apart from its failure to bring a single commercial ship to the Gwadar docks, the PSA has not invested even a fraction of the $525 million it had committed to spend in five years.”

Under the prevailing circumstances, there may be some repercussions of handing over the port to the China. However, for the best national interest, we have to take a quick and rational decision.  Otherwise, there is a realization at the strategic level that the mistake of handing over the ports administration to PSA has to be put right now. Indeed, the denial of the port’s administration to China was part of the “New Eurasian Great Game over Energy.”  US never desired a Chinese role in the exploration, transportation, and future use of the energy resources (hydrocarbon) of the Central Asia, Caspian, and the Middle East. Gwadar has such a geo-strategic and geo-economic significance that can enable China to exploit its future energy needs, much to the annoyance of U.S.     

Analysts view that the Iran-Pakistan Gas Pipeline, previously known as the Iran-Pakistan-India Pipeline (IPI) has the potential to be taken across the Khunjreeb pass to the Chinese territory, thus renaming it as the Iran-Pakistan-China (IPC) pipeline. Similarly, the pipelines from the Central Asia have the potentials to be taken to the Southern Chinese autonomous region of Xingjian through Gwadar. Currently over 50 % of Chinese oil is being imported from Middle Eastern countries, having religious and historical links with Pakistan. This oil transportation through oil tankers can take the form of the transportation through pipeline via Gwadar, the nearest and overland route to the Chinese soil.  

After seeing the non-existence of any development in the Gwadar Port and surrounding areas, it is believed that the only nation, which has the potential to develop this future energy and trade hub, is the China. In the wordings of the prominent Baloch journalist, Mr. Behram Baloch, “China may be the only country which can work under the difficult Balochistan conditions.”  Indeed, apart from the think tanks, intelligentsia and the masses of Pakistan, the Baloch sub-nationalists who have been used against the Chinese in the Province, have developed a feeling that, it is China only that can develop and run the Gwadar Port. Chinese have the experience, will and the capacity to expand the port that includes increasing the existing three berths to 18 by 2014 and completion of the road and railway network. Above all, there is a commonality of Pak-China interests in the development of the port.

The Port provides China (especially its Southern autonomous region) an easy and shortest excess to the Arabian Sea. Economics experts visualize that, “The volume of the Chinese trade is so much that Gwadar can beat regional giants like Dubai hands down if China could divert only a fraction of its trade to pass to its burgeoning western regions through the mighty Karakorum.” Since Chinese experience of industrialization and economic growth is enormous, therefore, we can expect that given the tax exemption and cheap electricity, Gwadar would become an industrial, trade and economic hub in the days to come. Establishment of oil and gas refineries and communication network would further boost the uplift of the area. Through a Pak-China deal, initial work to build a railway line across the Khunjrab pass alongside the Karakorum highway has already started. 

If the administration of the Gwadar Port is handed over to China and thereafter both sides works with sincerity, there is no way that within few years, Gwadar would surpass the neighbouring port cities like Dubai and Oman. However, there would be a requirement of very strict security measures to avoid the backlashes of the interest groups.  Together with the neighbouring countries whose economic interests are threatened because of the Gwadar coming up, the major powers, worried of growing Chinese influence, would resist the smooth development of the port and the region.

We should be mindful of these realities, especially, at a time once we have the presence of extra-regional forces (ERF) in our neighbourhood (Afghanistan) and domestic instability. Moreover, in recent months, these ERF have started frequent incursions into our geo-graphical territory. Furthermore, our eastern neighbour, India; a concurrent ally of US and Russia would covertly resist the Chinese taking over the port’s administration. As now being revealed by Baloch sub-nationalists that, they were provoked to create a law and order situation in the Province by a combination of spying networks, which include; RAW, CIA, Mossad and MI-6. These notorious networks are using the Afghan territory as a harbour area. To prove my arguments, the statement of Robert Kaplan can be quoted as reference, who says that, Gwadar’s development would either unlock the riches of Central Asia, or plunge Pakistan into a savage, and potentially terminal, civil war. It appears that Pakistan’s desires to unlock the riches of Central Asia and conversion of the port to a global economic hub, has invited the wrath of the global conspirators.  However, we have to crush the conspiracies for the promotion of our national interests. In order to do that, the nation will have to differentiate between the covert enemies and the real friends, domestically as well as across the frontiers.