KARACHI - Pakistan President Asif Ali Zardari has formally handed over
the country's prized port at Gwadar to China. Simultaneously, China
becomes the builder, financer and operator of the Arabian Sea port near
the Strait of Hormuz, through which more than half of the oil imports
for the the second-largest economy after the United States now pass.
State-run China Overseas Port Holdings Limited will purchase all the
shares in Gwadar Port from the Port of Singapore Authority (PSA) and its
local partners under a deal approved by Pakistani government on January
30. PSA sold 60% of shares in the the port, while Aqeel Kareem Dedhi
(AKD) Group and the National
Logistic Cell (NCL) controlled by the Pakistani army sold their 20% stakes.
"Handing over of the operation of Gwadar Port to China is manifestation
of our growing ties and also shows the trust Pakistan has in the Chinese
ability to deliver on our infrastructure projects," Associated Press of
Pakistan (APP) reported Zardari as saying. "We are seeking to expand
our existing areas of cooperation and exploring new avenues for fruitful
Gwadar Port, located in the southwest province of Balochistan, is of
immense strategic importance for China, which imports nearly 60% of its
crude oil from the Gulf countries, a proportion that is likely to
increase in the next decade. China contributed 75% of the initial US$250
million development cost of Gwadar and is taking over from PSA after
the Singapore-based port operator's decision to pull out of the Pakistan
China is taking over the building of infrastructure that the Pakistan
has not yet completed, with the port lacking crucial road and rail
connectivity in Pakistan and north to Central Asia's booming economies
and overland to China.
"Beijing has agreed to spend hundreds of millions of dollars to finish a
900-kilometer (550-mile) road that would link the port with Pakistan's
north-south Indus Highway, facilitating overland transport from Gwadar
to China," a senior Pakistani official was quoted by Associated Press as
saying. Pakistan was supposed to complete the road last year but has
only completed 60% of the work.
Operation of Gwadar port was formally awarded to China at a ceremony in
Islamabad on Monday in the presence of President Zardari and China's
Ambassador to Pakistan. Liu Jian and senior government officials. The
contract was given to China after PSA last year quit a 40-year
management and development contract signed in 2007 after the country
failed to transfer 584 acres of land in possession of Pakistan Navy for
development of free zone.
As a concession holder, the PSA installed two Gantry cranes, 200 meters
of single rails and one sub-station at Gwadar Port. Under the deal, the
PSA was bound to invest $775 million for the development of port, but it
was unwilling to make investment without getting free of cost land.
The port has so far remained a commercial failure, and is operating a
about 15% of its capacity. "[M]achinery originally installed by China is
rusting for lack of use," Associated Press reported a Pakistani port
worker as saying. "On a purely economic basis, the level of trade
through the port should be zero because of its drawbacks, but the
government is spending millions of dollars in subsidies to ship
fertilizer through the facility. It would be cheaper to send the
shipments through the coastal city of Karachi, 700 kilometers to the
An editorial recently published in Daily Times said,
"The Chinese company that has won the contract is expected
to invest further to bring the port online. The problem though with the
port is that no planning or implementation has gone into providing the
inland infrastructure that could really make the port viable and take
some of the pressure off Karachi and Bin Qasim ports to the east.
However, in the absence of road or rail links from Gwadar port to the
rest of the country, goods imported via Gwadar have to travel overland
along the Mekran Coastal Highway to Karachi before being shipped north
to the rest of the country, a route that defeats the very purpose in
terms of cost and time that the Gwadar port was intended to fulfill.
Now that the Chinese have moved back in, one hopes the federal and
provincial governments and the port authorities will ensure that the
Chinese contractor puts in place plans to train and induct local people
to boost employment and allow some of the benefits of the project to
trickle down to local citizens, thereby earning a lot of goodwill and
allaying some of the resentment the project has left lingering in its
Local analysts, however, believe that security concerns will bar China
from making big investments in a country under attack from Islamist
extremists, particularly in the insurgency-hit Balochistan. It is worth
remembering that three Chinese engineers working on seaport project were
killed in a terrorist attack in 2004. It was due to the security
concerns that China shelved its multi-billion dollar Gwadar oil refinery
project in 2009, according to the analysts.
China has become more cautious about big investment projects in Pakistan
due to security concerns, AFP reported, citing Fazul-ul-Rehman, former
director of the China Studies Centre at the Institute of Strategic
Studies Islamabad. There is a long way to go on China-Pakistan economic
cooperation and emphasizes that Gwadar will be a long-term project with
Beijing looking for future alternatives to shipping routes for its oil
and gas imports.
Syed Fazl-e-Haider (www.syedfazlehaider.com) is a development analyst in Pakistan. He is the author of many books, including The Economic Development of Balochistan, published in May 2004. E-mail, firstname.lastname@example.org