China set to run Gwadar port as
Singapore quits By Syed
Fazl-e-Haider
KARACHI - China will take
over the Pakistan's strategically located Gwadar
Port in southwestern Balochistan after Singapore
decided to pull out of a 40-year port management
and development contract signed in 2007.
Port of Singapore Authority (PSA) and its
partners - Aqeel Kareem Dedhi (AKD) Group of
Karachi and the National Logistic Cell (NCL) - are
ready to sell their share of Gwadar Port to China
Harbour Engineering Co Ltd (CHEC), a state-owned
company, and have been allowed to quit the Gwadar
Port's development
contract after the government
failed to transfer 584 acres (236. 3 hectares) of
land under possession of the Pakistan Navy for the
free zone at the port.
"The denial of land
at Gwadar Port forced PSA to leave the port, which
will be taken over by a Chinese company," Business
Recorder reported Ports and Shipping Minister
Babar Khan Ghauri as telling the senate's standing
committee on ports and shipping last week after
the government issued PSA with a notice to quit
the contract five years after taking up the
challenging project.
The deal between the
government and the Singaporean company was
thwarted by the security situation in Balochistan,
which hindered PSA from investing the money it had
promised for the development of the port and
off-shore infrastructure, but PSA decided to give
up on the project since problems were compounded
by a Supreme Court decision in December 2010 to
issue a stay order against the allotment of Gwadar
land to a foreign company, following petitions
from individuals.
Gwadar Port was built
with Chinese assistance of more than $220 million.
After taking control, China will simultaneously
become the builder and operator of the Gwadar
Port.
PSA, which owns 60% of shares in the
project, and its partners, who own equal 20%
stakes, have asked China Harbour for their
investment plus interest of approximately $25
million, according to media reports, in a proposed
transaction that local experts say is a typical
share-purchase deal. Under a concession agreement,
withdrawal from by any of the parties - either the
Pakistani government or PSA - would mean they had
to pay a penalty. While both were reluctant to
withdraw, the transfer of shares to the Chinese
company resolved the impasse.
Sardar Fateh
Muhammad Hassani, who chaired last week's senate
committee meeting, indicated that China would
invest US$10 billion to develop the port and
manage its operations, without giving details
about the proposed agreement. Negotiations between
the shareholders and Chinese officials over the
sale had been going on since last year, according
to The News. While some amendments will be made in
the concession agreement for the new operator, it
is actually the ongoing land dispute between the
government and the navy that has stalled the
development of the port for the past five years.
The committee recommended that the navy
should take the available 300 acres of land from
the government of Balochistan as an alternative
and vacate 584 acres of land at Gwadar Port. Naval
authorities, however, informed the committee that
the navy was a legal and legitimate owner of 584
acres of land at Shamba Ismail area in Gwadar,
which was allocated to it against payment by the
Balochistan government for defense purposes.
Gwadar port was supposed to compete
internationally to get a larger share in the world
cargo. This required efficiency on the part of
port operators and the installation of modern
equipment. Unlike in Karachi and at Port Qasim,
Gwadar Port was to totally depend on transshipment
cargo. Since it was thought that only experienced,
competent and neutral operators could turn Gwadar
into a regional hub port - with returns to match
its strategic advantage - the government of former
President Pervez Musharraf in 2007 gave management
and operational control of the port to PSA for 40
years.
PSA International operates 20 port
projects in 11 countries including Singapore,
Belgium, Brunei, China, India, Italy, Japan,
Netherlands, Portugal, South Korea and Thailand.
PSA Singapore Terminals is also the world's
busiest transshipment hub, handling about
one-fifth of the world's total container
transshipment throughput, and 6% of global
container throughput. The company says it provides
shippers with a choice of 200 shipping lines and
connections to 600 ports in 123 countries.
The Chinese-built first phase of Gwadar
Port included three multipurpose berths of
602-meter quay length, one 100 meter-long service
berth, and 4.35 kilometers of deep-water channel,
alongside roads, operational craft and equipment
and shore-based port buildings and facilities.
China sees Gwadar as the gateway for its
products to international markets. The port can
play a major role in serving as a corridor for
energy, cargo and services among Central Asian
countries, the Gulf and other surrounding regions.
As the port operator, Beijing may restart a $12
billion oil refinery and oil city project that was
shelved in 2009.
Strategically located at
just 624 nautical kilometers to the east of Strait
of Hormuz, the port is not only China's most
favorable choice for oil trade, but it would also
help it get commercial refueling and repair
facilities. Located at the mouth of the Persian
Gulf, the Arabian Sea port is likely to expand
China's influence in the Indian Ocean, which is
the strategic link between the Atlantic and
Pacific Oceans in terms of communication and oil
transportation in the region. That makes Gwadar a
key node in the new great game, with control of
proposed transnational energy pipelines the name
of the game.
Control over Gwadar Port
offers China a key card in pipeline politics, as
future of all the major transregional pipelines
battles may hinge on having a terminus for major
pipelines, including Iran-Pakistan (IP) and
Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas
pipelines. 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.
Presently, 60% of China's imported oil
comes from the Middle East and 80% of that
transported to China through the unsafe Straits of
Malacca.
Syed Fazl-e-Haider(http://www.syedfazlehaider.com) is a
development analyst in Pakistan. He is the author
of many books, including The Economic
Development of Balochistan (2004). He can be
contacted at sfazlehaider05@yahoo.com.
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