Gwadar in Focus

Gwadar has had a turbulent yet lonely history. Though it has been visited, and even nominally managed at times, by the Macedonians, the Ummayad Arabs, the Omanis and even the British, it managed to retain its own identity till the turn of the last century. It goes to the credit of the inhabitants that they didn’t permit the Portuguese to establish a foothold there in the late sixteenth century, at a time when the latter’s grip on the maritime trade of the entire Indian Ocean region was virtually uncontested. Gwadar’s modern history can however be traced to the sanctuary given there to Sultan Said when he had lost out on a power struggle with his brother for the throne of Muscat across the Strait. Though the Sultan eventually managed to wrest control of Muscat 14 years later in 1797, he never really let go of Gwadar and continued to exercise jurisdiction there through an appointed Wali. Imprints of the Omani slave trade are still visible.

Some semblance of modernity was introduced to the region in the form of the telegraph, postal services and even port calls by the ships of the British India Steam Navigation Company, after the British stationed an Assistant Political Agent there in 1863.

Gwadar, at the time of Pakistan’s independence, was considered a backwater, not worth paying much attention to. The uncertain legal status of Gwadar presumably came to the notice of Government functionaries when news reports started trickling in of India’s hobnobbing with Oman for a stake in the region. It was then that Pakistan decided to annex Gwadar in September 1958, thereby forcing Oman’s hand in consenting to a £3 million payout to legitimise the transfer. It was however on 1st July 1977 that Gwadar was accorded the status of a full district of Makran.

The first time I visited Gwadar on a naval vessel was in early 1973, when we had to wade in knee-deep water on to the shore, hauling the ship’s boat behind us. Fish of queer shapes could be seen strewn on the beach, some carcasses and some salted and left to dry. Gwadar at the time was a sleepy little town with hardly any activity visible. One couldn’t find much to eat or drink at the nearby market either. Though a British era solar desalination plant did exist, it apparently was ill-maintained, as most of the potable water was being extracted through wells dug up in the sand and then sealed when dry. Due to lack of any refrigeration facilities, the fish caught had to be either consumed or dried for later use. Fishing appeared to be the primary occupation, though a number of men were recruited for working in Oman. It may seem strange but the only ‘pucca'(stone or brick built) buildings visible from the anchorage were a centuries old shrine, an Omani fort and the well-preserved structure that used to be the residence of the British Assistant Political Agent.

Everytime I visited Gwadar thereafter, some change for the better was visible, triggered presumably by the prosperity of those working abroad. In 1977, while in command of a Gunboat, I got the chance to explore the area in greater depth by virtue of being regularly deployed there for weeks at a stretch. A lot had changed: refrigeration and fish storage facilities were now available, the boats were larger and sturdier, a new town centre had come up and some recreational facilities were visible. The Coast Guard had become well entrenched by now, but despite their visible presence, unregistered vehicles, particularly motorcycles, could be seen plying on the newly prepared roads, and smuggled Iranian goods were also on display. It was apparent that exposure to the outside world had done the residents a world of good.

By the early eighties, the navy had gained a permanent foothold by establishing a small base on the south eastern corner of the hammerhead and linking it to the makeshift jetty below as well as to the main town through a road traversing the entire length of the ridge before winding its way down. By this time, the residents of Gwadar were also connected to Karachi through the sea and buses plying on the katcha track along the coast. Thus when PIA started regular weekly flights to and from Gwadar, the service proved exceedingly popular. The Navy’s humanitarian assistance in the form of annual free medical camps helped in making the people feel a part of the broader Pakistani community.

Ever since a US surveyor identified its potential as a prospective deepwater port in 1954, the national focus has been on Gwadar. But since the past 60 years, it’s development hasn’t exactly kept pace with our lofty vision. The construction of a fishing port in the early nineties did little to lessen its export dependence on Karachi. Despite a number of abortive attempts and periodical inaugurations, the construction of a proper port at Gwadar couldn’t make much headway till May 2001 when the President of Pakistan personally appealed for assistance from the Chinese Prime Minister. Within 10 months of this meeting at Beijing, the Chinese had prepared a master plan for the port, signed an agreement for pledging $248 million for construction of the first phase and had commenced the groundbreaking work. This phase, inclusive of dredging and reclamation work, was completed in Dec 2004, well before its projected target date.

At the Pakistani end however a completely different narrative emerges. It boggles the imagination that not one of the bevy of experts on our side could point out that for a port to be functional, a lot more was needed than just berths and a dredged channel. It appears that someone finally woke up to this reality, just as the port was nearing completion, that a system also needed to be in place for handling ships and their cargo, which had to include a Port Operator, pilots, pilot boats, tugs and gantry cranes. Instructions had to be thereafter belatedly issued for the immediate procurement of the aforementioned equipment from the Chinese, which increased the project cost by a further $50 million. The dredged depth of the channel was also found to be insufficient to even cater to a medium sized ship, and hence orders were again issued for dredging it further to a depth of 14.7 metres. Instead of holding anyone responsible for such glaring oversights, crude attempts were made by government functionaries to fob it off as force majeure: sabotage, terrorist acts, floods and rains. It is possible that such gaffes may have led the Government to conclude that the specialised job of port management needed to be entrusted to an experienced foreign operator. Port of Singapore Authority(PSA) was accordingly selected for the job through a bidding process in January 2007, which paved the way for arranging the formal inauguration ceremony within two months. Presence of a PNSC vessel MV Sibi carrying only a symbolic load was ensured at the venue to add a touch of authenticity and grandeur to the proceedings.

Once the port had become officially functional, the general expectation was that ships would now be coming in regularly. It however took nearly 14 months for the first cargo ship to be diverted there. Since the move had presumably not been planned in advance, the ship’s draught was found to be incompatible with the existing depth of the channel. A PNSC vessel had thus to be specifically tasked to offload some of the ship’s cargo at the anchorage to enable it to enter. During the next seven years, the few ships that touched port were the ones that were forced to. The 6 million tons of cargo, mainly wheat and urea, that they carried, had again to be taken to Karachi via the coastal road, thereby incurring a far greater expense than if the ships had proceeded directly to Karachi.

Having constructed the port at a strategic location and having entrusted its management to an experienced operator, the planners must have been non-plussed to see that, let alone becoming the economic miracle it was touted to be, the port was actually losing money by the day. It took many years for the simple message to sink in that though a port is indeed meant to handle ships and cargo, but its viability becomes questionable if no cargo is being received for export and the cargo being imported cannot be taken to its inland destination because of a lack of hinterland access.

Gwadar’s master plan incorporated a Free Zone for which around 923 hectares had been set aside. In this area adjacent to the main port itself, companies were to be facilitated in setting up various industries, including petrochemical complexes, churning out goods, products and services, primarily for export. Along with Port Control, management of this Free Zone was also handed over to the Port of Singapore Authority at the same time. When no investment trickled in during the next five years, it was endeavoured to divert the blame to PSA. Since the agreement with PSA was binding for a period of 40 years and since our local authorities weren’t blameless either in not fully meeting the terms of the contract, a way out was found when China Overseas Port Holding Company(COPHC) managed to persuade PSA to willingly waive its legal rights in favour of the latter in mid-2012. After that, it was a matter of time before Pakistan signed a fresh contract on similar lines with COPHC for Port Management in Feb 2013 and for management of the adjacent Free Zone in Oct 2015.

It is now over ten years since the first phase of the port was completed by the Chinese. The port stands virtually idle; the few ships that have ventured in to discharge cargo and leave empty-handed didn’t make much commercial sense. No investment has poured in either, in the Free Zone. We seem content that a port has come up in a strategic area where none existed before, without realising that a non-functioning commercial port is a constant drain on the public exchequer. Without losing much sleep over the dissipation of a dream that was, we are now reimagining it as part of a much grander scheme of things, one in which Gwadar is expected to dominate the region. We like to think that the well-established ports of Salalah, Jebel Ali and Khalifa and budding ones like Chahbahar and Sohar are running scared of the competition Gwadar is expected to provide. Most Pakistani analysts are seemingly convinced that both Iran and UAE are involved in fomenting trouble in Baluchistan.

My personal opinion is that this premise isn’t entirely sound. Ports in the Gulf initially started to develop to cater to the export needs of the oil bonanza in the region. Petrochemical complexes producing refined products subsequently started sprouting adjacent to these ports. It was but natural for additional terminals to crop up thereafter: essentially meant to service the import demands for consumer goods and construction materials of these nouveau riche countries. Investor friendly policies coupled with a safe and secure environment are key motivators for growth and investment. Ports in and around the Gulf are not simply resting on their laurels. They are continuing to sprout and expand in line with rising demand. While a port such as Mina King Abdul Aziz in Dammam is primarily designed to cater to the requirements of the Eastern and Central provinces of the Kingdom, those in UAE in particular have established themselves as the finest in the region.

Ever since it was constructed in 1979, Mina Jebel Ali, which is arguably the largest man made harbour in the world, is now the busiest in the region, playing frequent host to even naval vessels, including aircraft carriers, of the US Fleet. Mina King Zayed is expanding at a mind-boggling rate. UAE is also promoting cruise tourism; major cruise lines are home-porting in Dubai this season, with the port expected to attract upto half a million cruise tourists during the current season lasting till June this year. Sharjah’s Khorfakhan container terminal, lying just outside the sensitive strait of Hormuz has cemented its place as arguably the finest container transshipment port in the region, since it offers major shipping firms a one-stop shop scenario for all their Middle-East needs. The nearby Omani port of Sohar is also attempting to regain its long lost glory. The new Qatari port of King Hammad, recently completed at a mammoth cost of $7.4 billion, is also now in business. Salalah’s success story began in the nineties when it capitalised on its strategic position to become a major transshipment hub and it has retained its standing through the facilities that it provides and the efficiency that it displays. It seems to me a bit presumptuous that a port which has been idle for 10 years can now pose much of a threat to these well-entrenched ports, especially when we take into consideration the fact that everything about the port from its funding to its management is solely dependent on China.

Let alone UAE, we are also led to believe that Iran too is so scared of the competition Gwadar is expected to provide to Chahbahar, a port sited in close proximity, that it has gone to the extent of fomenting strife in Baluchistan. More close to the truth is the point which authorities in Iran are stressing upon that the two ports actually complement each other. While Gwadar provides a convenient route to China’s western regions, Chahbahar ensures easy connectivity with Central Asia and Europe. Though Chahbahar offers ample scope for expansion, the reason it hasn’t lived up to its potential is because of the limitations imposed on Iran’s maritime trade through nuclear- related sanctions. Bandar Abbas and the adjoining container port of Rajai are capable of handling most of Iran’s own trade as well as that of Central Asian states. With the sanctions having been lifted, a number of countries are showing interest in investment in Chahbahar. Indian plans for investment in a container terminal there had been put on hold owing to the sanctions. It thus spent the past decade developing a road network within Afghanistan right up to the land border with Iran and Tajikistan. Following Pakistan’s refusal to allow land access to Indian transit trade, India has zoomed in on Chahbahar for providing connectivity to Afghanistan and Central Asia, infrastructure for which is sufficiently in place.

The hype surrounding Gwadar has not succeeded in converting it into a fully functional port and won’t do so in the future either. Our focus may be on Gwadar, but the unpleasant fact is that unless we learn to focus on the vital aspects associated with the success of the endeavour, we are not likely to get anywhere.

First and foremost, we need to analyse our past mistakes and learn from them. The blatant flaws I have already outlined above; the obvious lesson in all this is the necessity of meticulously preparing a phased and sequential plan of action prior execution. We have somehow to ensure that a realistic approach, which doesn’t get overshadowed by the hype, is adopted.The problem with hype is that a sense of direction is invariably missing. As an example, if we wanted Gwadar to be a transshipment port, the obvious solution would have been to go in for a customised terminal and have the channel and berths sufficiently dredged to accommodate container vessels with a carrying capacity of 10,000 TEUs at least. Similarly, if we wanted Gwadar to handle Afghanistan’s transit trade requirements, we should have concentrated on road and rail connectivity between Gwadar and Chaman. Since we did neither, we are still at square one.

Secondly, we have to recognise that since all major investments and loans are expected from China, the country will obviously be looking out for its own interests. We have to look out for ours, which so far we haven’t. The terms and conditions under which we ceded control of the port and its adjoining Free Zone are extremely one-sided, from which we cannot hope to extract much revenue for the foreseeable future. Disturbing reports are also trickling in about construction contracts for some sections of the eastern corridor being exclusively given to Chinese firms at exorbitant rates.

This brings me to the all-important subject of transparency which has been found to be lacking thus far. Though the $46 billion Chinese investment was announced amidst great fanfare, it’s details are still sketchy, with nothing being revealed about the ratio between debt and equity, which economists find most worrying; more so since even the Governor of the State Bank of Pakistan expressed ignorance about it. Burdening the public exchequer with additional debt, aggravated by lavish expenditure on projects with little hope of recovery, is certainly not a recipe for success. From what little is known, the bulk of the Chinese investment, upto five-sixths of it in fact, is to go into power projects in Punjab, where both the eastern and central corridors, as well as the Karachi-Multan motorway, all converge. A Chinese firm is also expected to commence the construction of a gas pipeline joining Gwadar to the existing North-South network, along with a regasification plant for LNG imports. The original idea was to discard the expensive gasification facility once Iranian sanctions were lifted to enable this pipeline to be utilised for import of Iranian gas. During the run up to the withdrawal of sanctions, the gasification plant deal is apparently still figuring in the discussions. However much we may like to think and talk of Gwadar as a game changer, the unfortunate fact is that such talk is presently incompatible with the progress on ground. The emphasis is currently on what is being euphemistically referred to as ‘Early Harvest’ projects. The remaining sections of the Karachi-Peshawar motorway are expected to be completed by the end of 2017. Plans also include the upgrade of rail links between Karachi and Havelian. This can meet the short term needs of providing direct trade access to the relatively underdeveloped western regions of China, completely sidestepping Gwadar for the moment.

Three trade corridors, eastern, western and central, originating from Gwadar, have been announced by the Government as the cornerstone of CPEC. While the Gwadar to Basima link is common to all three corridors, the Basima to Sukkur link is common to both the central and eastern routes. In principle, all the economic corridors are supposed to incorporate a combination of roads, railways, power generation, IT network, gas and water facilities; in reality, the present focus on routes originating from Gwadar is only on a two lane highway. The rest is reportedly expected to be taken up in the third phase, commencing 15 years hence.

Both the Baluchistan and KPK administrations, being visibly troubled by the lack of emphasis on the western corridor, which passes through some of the country’s least developed regions, have repeatedly tried to bring this to the notice of the government without receiving any coherent response. The special committee appointed by the Chairman Senate also sadly came to the same conclusion that our current focus is solely on the ‘Early Harvest’ projects.

The Senate Committee correctly pointed out that the development of national cohesion was a far more pressing objective. This agitates in favour of devoting maximum resources towards uplifting the most marginalised segments of our society, keeping provincial sensitivities in mind. Resistance is bound to mount against current policies which essentially tend to favour the status quo.

We shouldn’t forget that the one thing which is vital to economic growth and investment is the presence of a safe, secure and conducive environment. This cannot be achieved through military means alone. The first step is to step up efforts to phase out radicalisation from our society in line with the objectives of the National Action Plan and secondly, to engender a participatory feeling amongst all the stakeholders. Let not a State Bank Governor say that he is ignorant about the debt-equity component of the Chinese investment, and let not a Gwadar MPA say that that he hasn’t been taken onboard.

For the sake of transparency, the following aspects deserve to be brought in the public domain:

a. Debt and equity ratio of the Chinese investment of $46 billion.

b. Precise destination of this investment.

c. Impact of each phase on national economic growth and social welfare.

In our eagerness to outdo each other in singing praises, let us not overlook the basic fact that the first phase of the port could only be completed through Chinese investment and that it remained idle for the next 10 years through simple incompetence. Gwadar in particular and Pakistan in general are also not the sole recipients of Chinese largesse, which is far more visible in Africa and Latin America. The level and tempo of aid is also directly proportional to Chinese interests. That the port of Gwadar holds promise is undeniable; the benefit we choose to derive out of these economic opportunities is upto us. National interest demands that we pursue a sound, all-inclusive, transparent and participatory approach to convert hype into reality.





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