Prospects of Gwadar Port becoming a regional Trade hub

Prospects of Gwadar Port becoming a Regional Trade Hub



By. Salman Anwar
Assistant Professor
Higher Education Department, Khyber Pakhtunkhwa, Pakistan
PhD, Scholar
Area Study Centre (Russia, China and Central Asia)
University of Peshawar.
















Introduction
Gwadar is a seaport covering an area of about 307 square miles with 600 km
long coast. It is situated on the southwestern coast of Pakistan, close to
the important straits of Hormuz, through which more than 13 million barrels
oil passes daily.
Gwadar deep seaport is strategically located at the crossroads of three
increasingly important regions of the world: the oil-rich Middle East
heavily populated South Asia and resource rich Central Asia. Ever since the
construction of Gwadar deep seaport has been undertaken, there were two
opinions that the port would help bring Balochistan, s coastal areas into
the socio-economic mainstream and will serve as a catalyst for the fast
track development of the province. China is helping Pakistan to build the
port with the initial investment of 248 million U.S dollars. One phase of
the port has already been completed which include three berths and one ramp
600 meter long capable of accommodating several ships at a time. In the 2nd
phase 10 more berths would be constructed.1
This paper is an attempt to trace the geo-strategic and economic importance
of the Gwadar port not only for Pakistan but for the whole region.

Geography
Gwadar port is developing warm water, deep seaport situated at Gwadar in
Balochistan province of Pakistan at the apex of the Arabian Sea and at the
entrance of the Persian Gulf about 460 km west of Karachi and approximately
75 km east of Pakistan's border with Iran. The port is located on the
eastern bay of a natural hammerhead-shaped peninsula jutting out into the
Arabian Sea from the coastline.2
Topography
Like ormara further east, Gwadar is situated on a natural hammerhead-shaped
peninsula forming two almost perfect but naturally curved semi-circle bays
on either side, namely the Gwadar west bay and Gwadar east bay. Gwadar is
largely flat barren land with two hills, the Koh-e-batil (449 ft) and Koh-e-
mehdi (1112 ft) to the east of the city. Gwadar is 300 meters above sea
level and is mainly dry, arid and hot. The ocean influence keeps the
temperature lower in summer and higher in winter as compare to the interior
area of Pakistan. The mean temperature in the June remains 31c0 and that in
the month of January remains 18 c 0
A brief history of Gwadar
In ancient time the makran region surrounding Gwadar was occupied by an
ancient Bronze Age people and later became region of achaemenid Persian
Empire. It is believed that these areas were conquered by the founder of
the Persian Empire Cyrus the great. Alexander also ruled the area and the
region came under the local rule round about 303 B.C.3
The Muslims came via makran to South Asia at the time of Hazrat Usman (r.a)
the third caliph of Islam. In 711 A.D under the leadership of a young Arab
General Muhammad bin Qasim, Muslims for the first time captured the area,
than the safavids and the Mughals came from the west.
The Portuguese captured, sacked and burnt Gwadar in 1581 and this was then
followed by almost two centuries of local rule by the various Baloch
tribes.
In 1783 the Khan of kallat granted suzerainty over Gwadar to taimur sultan,
the ruler of Muscat.
On 8 Sep 1958, Gwadar enclave was purchased by Pakistan from Oman for 3
million U.S. dollars. At that time Gwadar was a small and under developed
fishing village with a population of a few thousands.
In 1977 Pakistan integrated Gwadar as a district of Balochistan province.
In 1993 the Government of Pakistan formally conceived the plan to develop
Gwadar into a major port city with a deep seaport and connect it with
Pakistan's Highway and rail networks.
In 2002 Pakistan national highway authority began construction of the 653
km long makran coastal highway linking Gwadar with Karachi via pasni and
ormara and onwards with the rest of the national highways of Pakistan. It
was completed in 2004.
In 2002 the Government of Pakistan with the help of China's 248 million
U.S. dollars began construction of the Gwadar port.
In 2003 the Gwadar development authority was established to oversee the
planning and development of Gwadar.
In 2004 Pakistan national highway authority began construction of the 820
km long M-8 motorway linking Gwadar with Rato dero in sindh province via
turbat, khoshab, Awaran and khuzdar and onwards with the rest of the
Motorways pf Pakistan.
In 2005 phase 1 of Gwadar port project completed and the inaugural ceremony
of the Gwadar port was attended by the Chinese premier along with General
Musharaf the then president of Pakistan.4
In 2006 the Gwadar development authority conceived, developed and adopted a
50-year master plan for Gwadar.
In 2008 first ship anchored at the port, bringing 52000 tons of wheat from
Canada.
Geo-Strategic and Economic Significance of Gwadar port
This is a brilliantly planned project and a great strategic move by
Pakistan. Apart from Gwadar port a network of roads, connecting Gwadar with
Karachi, pasni, ormara and turbat will be constructed in four phases, while
M-8 section of Motorway will connect it with Peshawar via Punjab. The
network of roads will finally be connected with china through the Indus
highway. Under an agreement Pakistan, China, Kazakhstan, Kyrgyzstan and
Uzbekistan are already committed to develop extensive rail road links from
Central Asia and the Chinese Province of Xingjian to the Arabian Sea coast.
In this scenario, Gwadar port emerges as a place of great strategic value,
giving tremendous boost to Pakistan's importance in the whole region,
extending from the Persian Gulf through the Indian Ocean to Southeast Asia
and the Far East.5 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.
Pakistan's strategic interests
Gwadar is located only 180 nautical miles from the Strait of Hormuz through
which 40% of world's oil passes. Gwadar could thus emerge as the key
shipping hub in the area providing mass trade to Central Asian republics as
well as across Pakistan and China. A road from Gwadar to Saindak is
completed. Saindak already connected to the RCD Highway (N35) and through
Quetta-Chaman it provides the shortest route for trade with Central Asian
republics.6
Pakistan also needs a deep seaport away from Karachi so that in times of
hostilities Pakistan Navy doesn't get blockaded. With all the navy ships
concentrated at Karachi port, a blockade of Pakistan had been quite easy in
the past. With Jinnah Navel Base at ormara and Gwadar port, Pakistan Navy
should be able to spread out its assets. For reference, Gwadar port is 450
km further away from Indian border than Karachi port.
Gwadar port will directly bring lots of wealth, trade and infrastructure
advancement to the area which has been traditionally left behind in
development.7 Compare it to how Karachi port transformed a once sleepy
fishing village to a metropolis.

Chinese interest in the Gwadar Port Project.
It also widely claimed that there is a Chinese interest in reaching the
deep warm waters of the Arabian Sea. This is cited as a strategic move by
Chinese as they funded 248 million US dollars and also provided 450
engineers on site to finish the project on time. It is said that China is
trying to develop its western regions at par with its Eastern regions to
reduce the economic gap with in China and to stop the internal migration of
the people from west to east. It is famously called their 'Go West' policy.
To market products produced in western china, ports of Shanghai or other
eastern ports are almost 4000 km away from the western production centers
where as Gwadar provides access to a port at just 1500 km.
there is another dimension to this project where Gwadar port is considered
as the naval outpost for the Chinese. It has been called part of 'string of
pearls' strategy of Chinese where they've got hold of strategic ports in
Gwadar, Bangladesh, Srilanka, Burma, Thailand, Cambodia, and south china
sea etc. on the world map, these ports form of string of pearls which may
form as Chinese line of defense to control oil movement. 80% of oil used in
china goes through shipping lines of Malacca straits.8 this strategy of a
series of ports along the oil shipment routes gives china a forward
footing. It is said that china is also wary that USA may cut off its
supplies through Malacca straits in case of any increase of hostilities on
Taiwan issue.
China has however, always denied that Gwadar will ever be used by Chinese
military. Publicly they always call it a civilian port of Pakistan.


Iranian and Indian interests in the region.
Gwadar port is also making regional players nervous. Iran which is only 75
km away from Gwadar considers it as an economic threat taking business away
from Iranian ports. So in competition to Gwadar Iran has developed its own
port called Chabahar with the help of India. Chabahar is located in Iranian
province of seestan. India is also building 213 km long road to connect
this Iranian port with Afghanistan. India is eyeing this Iranian port as
its shortest route to Central Asian markets and may be a counter balance to
Chinese influence in Gwadar.9
India may also consider the Chinese influence in Gwadar as a move by china
to encircle India. That's why they are more interested in developing
Chabahar port of Iran.

Baloch nationalist's interests.
Balochi people in whose province this port has been developed are not 100%
behind the project. Their apprehensions are that other provinces will reap
the real economic benefits of this development. There is also resentment
against the labor for the port coming from other provinces as well as the
real estate boom that Gwadar is seeing is going to people from out side
Balochistan. This has resulted in some violence in the area including some
attacks even targeted against the Chinese engineers.
The attacks against the Chinese also gives rise to the speculation that our
neighbors may be inciting balochi nationalism for their own economic agenda
but there has to be some truth that balochis deserve more shares in their
province resources. We hope our political leadership will use their insight
to pacify feelings of alienation among balochis otherwise Pakistan will see
the benefits from Gwadar port scaling down to none.10
The Gwadar port has been given to Port of Singapore Authority (PSA) through
a concession agreement for 40 years extendable for further 10 years, free
of cost. PSA is a global leader in the ports and terminal business,
operating 20 port projects in 11 countries i.e.
1. Singapore.
2. Belgium.
3. Brunei.
4. China.
5. India.
6. Italy.
7. Japan.
8. Netherlands.
9. Portugal.
10. South Korea.
11. Thailand.
Salient Features of the Agreement.
1. Transfer of all assets, facilities, buildings, infrastructure and
superstructure along with all facets of port operations and
management.
2. Exemption from various taxes, duties, levies, charges etc. for a
period of 40 years as specified.
3. Commitment to invest 525 million US dollars in port expansion over
next 5 years.
4. Commitment to expand port further eastward to 4.2 km in next 15 years.
5. The investment, revenues and income received from Gwadar entire
operations during 40 years, have been estimated at between 23.6
billion and 42.2 billion US dollars.
Nonetheless, 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 Gwadar port Authority (GPA). In a
nutshell, GPA has provided PSA with a lot of concessions and no significant
commitment was taken from them in return. That's why the agreement is
considered skewed in favor of PSA and hence appears unnatural. It was
expected that PSA would bring in trade, but it has not done so and turned
the whole port into a white elephant.11
The maritime experts have called for a review of the contract to run
Gwadar with PSA because the port was operating to the desired expectations.
It will be beneficial for Pakistan, if the agreement with PSA is cancelled
and tie up with the Chinese, who are interested in trade corridors and in
gas and oil pipelines in the region. In doing so, Pakistan should not
hesitate to pay reparation for doing away with PSA. Sources point out that
PSA had no operational activity in the entire Middle East region after it
abandoned the Aden port few years ago. Having such a track record, PSA
should not have been given the contract in the first phase. It is
understandable that Chinese management of Gwadar would be more viable for
future handling of the port.12


Conclusion
For Pakistan, the economic returns from Gwadar port stem from its location
near the Strait of Hormuz, through which 40% of the world's oil passes.
Gwadar could emerge as a key shipping point, bringing Pakistan much needed
income, and when combined with the surrounding regions, could become a
trade hub, once road and rail links connect it to the rest of Pakistan,
Afghanistan, China and Central Asia.
China funded 80% of the Gwadar project's (248 m US $) initial development
costs. It was expected that the contract for operating the new port would
also be given to China, but it went to the Port of Singapore Authority
instead. Like all the Pakistanis the balochis also realized that prosperity
hinges on the development of Gwadar port. They believe that Chinese should
administer or handle the port, as they feel friendly with them.
There are a number of reasons which suggest that the Chinese may be more
natural and profitable partners for Pakistan at Gwadar. They could not only
bring shipping but they have the potential to develop oil and gas terminals
as well as infrastructure. Pakistan and China have already inked an
agreement for a feasibility study of a rail link roughly parallel to the
Karakoram Highway (KKH). It is no stretch of the imagination to see that
link running from Kashghar to Gwadar in the next 5 to 10 years.









References.
1. www.gwadarport.gov.pk
2. Ibid.
3. Iftikhar ud din khan, "Gwadar port" Daily Aaj, 2006-06-23.
4. Ibid.
5. Stephen Blank, "Central Asia's energy Game Intensifies" Eurasia net,
September 2, 2005.
6. "Gwadar port becomes fully functional" Dawn Media Group. 22-12-2008.
7. Ibid.
8. "China loses its luster" Today's News, 28-1-2006.
9. Ibid.
10. Ibid.
11. Khalid Khokhar, "Gwadar Port needs change of Hands" The Dawn, 27-10-
10.
12. Ibid.