GWADAR PORT

Gwadar Port is a warm-water, deep-sea port situated on the Arabian Sea at Gwadar in
Baluchistan province of Pakistan. The port is a major destination in the China–Pakistan
Economic Corridor. In 11/12/2015, Pakistan and China signed a deal to acquire the usage rights
to more than 2,000 acres of land for a Chinese company, Chinese official media reported. The
leasing would last 43 years.

Location:
Gwadar is located on the shores of the Arabian Sea it is in Pakistan's western province of
Baluchistan. It is about 533 km from Karachi and 120 km from the Iranian border and 380 km
(240 mi) km northeast of the nearest point in Oman across the Arabian Sea. Gwadar Port is
located at the mouth of the Persian Gulf, just outside the Strait of Hormuz, near the key
shipping routes in and out of the Persian Gulf. It is situated on the eastern bay of a natural
hammerhead-shaped Peninsula protruding into the Arabian Sea from the coastline.

The surrounding region is home to around two-thirds of the world's oil reserves. It is also the
nearest warm-water seaport to the landlocked, but energy rich, Central Asian Republics and
landlocked Afghanistan.

Background:
Pakistan identified Gwadar as a port site as far back as 1954 when Gwadar was still under
Omani rule. Pakistan's interest in Gwadar started when, in 1954, it engaged the United States
Geological Survey (USGS) to conduct a survey of its coastline. The USGS deputed the surveyor,
Worth Condrick, for the survey, who identified Gwadar as a suitable site for a seaport. After
four years of negotiations, Pakistan purchased the Gwadar enclave from Oman for $3 million on
8 September 1958 and Gwadar officially became part of Pakistan on 8 December 1958, after
200 years of Omani rule. At the time, Gwadar was a small and underdeveloped fishing village
with a population of a few thousand.

Construction:
Gwadar Port was developed by the Government of Pakistan at a cost of USD $248 million.
Phase I covered building of three multipurpose berths and related port infrastructure and port
handling equipment. Phase I (see below) of the Port was completed in December 2006 and
inaugurated by General Pervez Musharraf on 20 March 2007.

Gwadar Port is being constructed in two phases:

  Phase I (2002-2006): USD $248 million. Status: Completed in December 2006
 Berths: 3 Multipurpose Berths (capacity: bulk carriers of 30,000 deadweight tonnage
(DWT)) and container vessels of 25,000 DWT)
 Length of Berths: 602m
 Approach Channel: 4.5 km long dredged to 12.5m depth
 Turning basin: 450m diameter
 Service Berth: One 100m Service Berth
 Related port infrastructure and handling equipment, pilot boats, tugs, survey vessels,
etc.
 Phase II (2007–present): USD $932 million. Status: Under Construction
 4 Container Berths
 1 Bulk Cargo Terminal (capacity: 100,000 DWT ships)
 1 Grain Terminal
 1 Ro-Ro Terminal
 2 Oil Terminals (capacity: 200,000 DWT ships each)
 Approach Channel: To be dredged to 14.5m depth
OPERATIONS:
Gwadar Port is owned by the government-owned Gwadar Port Authority and operated by
state-run Chinese firm — China Overseas Port Holding Company (COPHC). Earlier it was
operated by PSA International (2007-2012).
 Agreement With PSA International:
Following the completion of Phase I, the Government of Pakistan on 1 February 2007 signed a
40-year agreement with PSA International for the development and operation of the tax-free
port and duty-free trade zone. Agreement signed between Gwadar Port Authority (GPA) and
Concession Holding Company (CHC) a subsidiary of Port of Singapore Authority (PSA) on 05-02-
2007. PSA International was the highest bidder for the Gwadar port after DP World backed out
of the bidding process.
In a highly competitive environment, in order to enable Gwadar to compete with its regional
peers, the port fees was kept low by allowing a wide range of tax concessions to the PSA
International to cut operational and business costs. These include complete exemption from
corporate tax for 20 years, duty-free imports of materials and equipment for construction and
operations of the port and a free economic zone; and zero rate of duty for shipping and bunker
oil for 40 years”. In addition to these incentives, the provincial government of Baluchistan was
also asked to exempt the PSA International from the levy of provincial and district taxes.
According to the agreement, the Gwadar Port Authority, the Government of Pakistan would get
a fixed share i.e. 9% of the revenue from cargo and maritime services, and 15% of the revenue
earned from the free-trade zone. PSA International is expected to invest US$550 million in the
next five to ten years on creating the operational facilities.
Salient Feature:
Salient of the agreement are as under:
 40-year lease agreement for operating and managing Gwadar Port.
 PSA will invest US $550 million during the next 5 years for Port Development. The areas
where the concession agreement is to be implemented are Terminal and Cargo
operations, marine services and Free Zone development.
 GPA will receive the following fixed share of revenues: 9% from Cargo operations and
Marine services. 15% from Gwadar Free Zone business.
 No duty would be imposed on the machinery and equipment to be imported for
development work in this area and for port operations, for 40 years.
 CHC (the port operator) will have complete exemption from corporate tax for 20 years.
 Duty exemption for shipping lines and bunker oil for Gwadar port for 40 years.
 CHC will have complete exemption from all local and provincial taxes for 20 years.
 CHC will take over the marketing and operations of the current terminal area which
provides 602 metres of berthing and will invest and expand berthing space as demand
grows during the concession period up to a total maximum of 14 berths in an area of 4.2
km.
 Marine services to be operated by CHC will consist of pilotage, tugging, mooring, vessel
traffic control, anchorage management and bunkering.
 GPA will be responsible for dredging of approach channel and harbor to maintain the
required depth. All conservancy, security and firefighting services will be provided by
GPA.
 Agreement with COPHC:
In September 2011, the Wall Street Journal reported that Gwadar is doing little business as a
commercial port, and that Pakistan had asked China to take over the operation. A year later,
China confirmed that it would be taking control of Gwadar, which they believe has the potential
to serve as an oil pipeline hub for Chinese energy needs.
Pakistan on 18 Feb 2013 formally awarded a multi-billion dollars contract for construction and
operation of Gwadar Port to China. Under the contract, the port which will remain the property
of Pakistan but would be operated by the state-run Chinese firm — China Overseas Port
Holding Company (COPHC).
The contract signing ceremony was held on 18 Feb, 2013 in Islamabad and was attended by
President Asif Ali Zardari Chinese Ambassador Liu Jian, some federal ministers, members of
parliament and senior government officials. The ceremony was actually held to mark the
transfer of the concession agreement from the PSA (Port of Singapore Authority) to theCOPHC.
Pak-China Gwadar Port Deal Has Economic Rather Than the Military Importance
Pakistan officially kicked off a project last week that will see more than 2,000 acres of land in
Gwadar port leased for 43 years to the State-owned Chinese Overseas Ports Holding Co. The
deal will turn the port into a free port similar to Hong Kong, according to media reports
Monday.
The Western and Indian media have tended to exaggerate the threat of Gwadar port to India,
pointing to its military functions and claiming that the port will be built into a military base for
the Chinese navy in the Indian Ocean. Some Indian reports have even claimed that China's
"takeover" of the port could be a strategic game changer.
The suspicion is partly due to the geographical significance of the port. It is situated in the
southwest of Pakistan, close to the Iranian border and only 400 kilometers away from the Strait
of Hormuz, the world's key oil shipping route, which accounts for more than 30 percent of the
world's seaborne oil exports. Pakistan sees the port as a strategic gateway for exporting oil to
Central Asia, South Asia and western regions of China.
However, these suspicions are unnecessary. Having witnessed the gradual development of the
port over the years, some more sober Indian scholars and think tanks believe that the economic
function of the port is far more significant than its military potential.
The construction of the port is not targeting India militarily. As a matter of fact, it is actually
good news for India. The port can help promote the economic development of the Indian
region close to Pakistan and help bridge China's "One Belt, One Road" initiative with India's
Spice Route and Mausam projects. I believe that the future of Pakistan will depend upon
Gwadar to a certain extent, as the port will play a pivotal role in boosting the country's
economic prosperity and development dream.
As a mainstay of the China-Pakistan Economic Corridor plan, Gwadar port will not only cater to
future trade between China and Pakistan; it will also serve as a vital regional commercial hub
for South Asia, Central Asia and the Middle East, fostering regional economic development
within Asia as well as economic ties beyond the region.
Impact on Pakistan Economy:
Geographically significant Gwadar Port development will be a blessing for the economic
development of Pakistan when the FDI has sharply fallen, poverty has increased to 41
per cent, economic losses due to war on terror‘ are as huge as $35 billion and the
industrial sector is operating at 50 per cent of its potential due to the energy crises.
Situated at the crossroads of huge supplying and consuming markets, Gwadar Port can
play a vital role in the economic revival of Pakistan. Pakistan‘s geographical proximity to
the landlocked and relatively under-developed western China and the mutual trust that
marks Pak-China relations are two of the main causes for Chinese interest in building the
Gwadar Sea Port and developing Kashgar as a special economic zone. The two projects
signal the transformation of friendly relations into economic cooperation. Another
important reason is benefits from increased Central Asia-China-Pakistan trade, the much
needed foreign direct investment from China, transit revenues, economic and
infrastructure development and consequently becoming a regional trade hub and energy
transit corridor bringing huge transit revenues and employment opportunities. The
Chinese interest in the proposed oil and gas pipelines from Gwadar and Iran to Kashgar
across Pakistan would not only generate transit revenues and employment but would
also be instrumental in easing the energy crises in Pakistan. This in turn would have
huge impact on industrial, agricultural and overall sustainable economic growth and
development of Pakistan. It has been suggested long ago to change the IPI (Iran,
Pakistan, India) gas pipeline into IPC (Iran, Pakistan, China) pipeline and similarly, if the
dream of Trans-Afghan-Pakistan pipeline translates into reality, that can also be extended
to China. Pakistan wants to use Gwadar Port for trade and energy transportation to
China, Afghanistan and Central Asia. A rail line between Gwadar and Kashgar has been
proposed by both the countries. This will be a milestone in increasing not only bilateral
trade but also integrating the regions of Central Asia and South Asia economically. The
quadrilateral trade agreement, in operation since 2004, can be used to promote regional
trade and economic integration. Major imports of Central Asian Republics include
consumer goods, electronic items and garments while exports include cotton, oil and gas,
metal ores and machinery. The expected revenues from oil and gas transit and land to
sea trade via Pakistan can total around $1,000,000 per year. 4It was thought initially that
the Gwadar Port will serve only Turkmenistan, Uzbekistan and Tajikistan via Afghanistan
due to geographically proximity 5but now with Kashgar, an economic zone connected to
Gwadar by a land route, the Port will also serve Kazakhstan and Kyrgyzstan while
Afghanistan can gain from the shorter distance it offers for transit. For Pakistan the
economic returns from Gwadar stem from its proximity to the Strait of Hormuz as a key
shipping point and trade hub once road, rail and air links connect it to the rest of
Pakistan, Afghanistan, China and Central Asia. According to the master plan of the Port, it
can capture up to 25 per cent of the national import/export market by 2020, 15 per
cent of Pakistan‘s share of transit trade with CARs, 40 percent for Afghanistan and 12
per cent for Xinjiang. 6This will also develop regional inter-dependencies which in turn
would create direct stakes in each other‘s stability and prosperity and making economic
partners of geographical neighbor’s. More than 90 per cent of the international trade is
transported through sea while 95 per cent of Pakistan‘s trade is sea-borne and its
economy is heavily dependent on sea-borne trade as it contributes around 40 per cent
to the national GDP currently because in 2004, almost ten years back, Pakistan‘s sea
borne trade contributed 36.3 per cent to the national GDP. 7 Pakistan desperately needs
to develop Gwadar Port in order to reduce the burden on Karachi and Bin Qasim Ports
which are operating at their full capacity and also to further boost Pakistan‘s sea borne
trade. Moreover with the development of rail, road and air connection of Gwadar to the
surrounding areas, all trade from and to China and Central Asia is most likely to adopt
the shortest available route via Gwadar multiplying the trade benefits for Pakistan. The
Port would generate billions of dollars in transit revenue and create hundreds of
thousands of jobs for the people. What Pakistan needs is to develop its shipping industry
also to get maximum benefits from maritime economics. An important contribution that
Gwadar with its connection to national highways is going to make is to speed up the
much needed economic development of Baluchistan. This in turn will bring peace and
stability to this backward and restive province of the country. Baluchistan is full of
natural resources of different kinds like precious metals, minerals, oil and gas. However,
these resources could not be utilized due to infrastructure deficiencies and lack of
political will. For this particular attention is being paid to infrastructure developments
keeping expected economic activities from Gwadar Port in view. Gwadar Port has the
capacity to generate necessary resources for developing the required infrastructure for its
operations. But this would imply that a stable, congenial and secured environment is in
place.
Importance for China:
Establishment of mutually beneficial relationship with China is the cornerstone of
Pakistan‘s policy while China mainly aims at developing its relatively backward western
regions, in particular Xinjiang which is restive as a consequence. The ‘Look West‘ policy
serves a dual purpose for China: peace and stability in Xinjiang through economic
development and the use of this province for smooth energy and trade transactions with
energy rich Central Asia.
In 2010, according to a report by the Paris-based International Energy Agency, China had
become the largest energy consumer in the world surpassing USA . China did sustain a
double digit economic growth through the last decade fuelled by energy-intensive heavy
industry and infrastructure construction as well as the growth of the transportation sector.
It plans to diversify, secure and increase its energy supplies. China‘s plan to build an oil
refinery at Gwadar and oil pipeline from Gwadar to Xinjiang will supply Persian Gulf‘s and
African oil to Western China by reducing the distance by several thousand km. The total
length of the proposed gas pipeline from Gwadar Port to Xinjiang via Pakistan is 2500
km while the distance from Xinjiang to eastern ports of Shanghai and Beijing through
inland China is 4500 km. The distance from Shanghai Port to Gwadar and Persian Gulf
via Indian Ocean is 10,000 km as shown in the map (figure 2 above). It is evident that
trade and energy transport from Persian Gulf and East-African States via Gwadar through
Pakistan will reduce the distance of about 15000 km to a distance of just 2500 km. It is
not only cost effective but also safe and secure in comparison to the maritime route.
Currently Chinese oil tankers on an average take 20 days in reaching the Gulf. However,
after the completion of the high-speed rail and road networks across Pakistan, oil tankers
from eastern China would reach Gwadar, right on the mouth of the Gulf, within 48 hours.
10 China‘s interest in Gwadar Port thus becomes apparent. It secures for China‘s oil imports
a safe and short route. Besides, the Port of Gwadar helps China to extend its presence
in Arabian Sea and Persian Gulf from where China imports 60 per cent of its energy.
India on the other hand seeks to secure its oil import routes and counter Chinese
influence in the Arabian Sea, Persian Gulf and Indian Ocean by developing the Iranian
port of Chabahar and Highway linking it with Afghanistan. 11 It seems there is no
American threat of sanctions for India in dealings with Iran in this case as there was in the
case of the IPI gas pipeline forcing India to renege from its support for the plan. The
Persian Gulf and the Arabian Sea remain an area where regional and extra-regional states
have always competed for economic, energy and commercial gains. This competition
would naturally result in a win-win situation for Pakistan and China for two reasons.
Firstly, Chabahar is close to the Strait of Hormuz and constrained by its shallow water
and secondly, Pakistan and China are directly connected through the land routes while
India and Iran are not. Pakistan cannot compete with India in the region all alone and
needs active Chinese cooperation. Gwadar Port serves best both Pakistan and China‘s
interests. Similarly, China also has its concerns about the growing Indian influence in the
Arabian Sea, particularly since the USIndia civilian nuclear cooperation deal which worries
both Pakistan and China with regard to their long term strategic and economic interests
in the region. India cannot bypass Pakistan and Pakistan cannot bypass Afghanistan in
their access to Central Asia. However Chabahar is an alternative which provides India
with an opportunity to further its objectives in the Arabian Sea, Afghanistan and Central
Asia. In 2009 China shelved its $12 billion plan of building an oil refinery and oil city
project in Gwadar due to security reasons. Pakistan desperately needs a stable and
secure Baluchistan to fully utilize the potential of Gwadar Sea Port for trade and
transportation with the whole region including China, Central Asia, Afghanistan, East
Africa and Middle East. In this respect Pakistan may follow China‘s example which is
addressing the Xinjiang unrest through economic development of this comparatively
backward region. Economic development and prosperity will bring peace and stability to
Baluchistan. Government need to move fast in implementing the Baluchistan Package‘. It is
hoped that with the handing over of Gwadar to China‘s Overseas Port Holding, Chinese
interests in the project will be renewed. Gwadar has the potential to serve as an
alternative to Dubai. The Asian Development Bank has termed the Gwadar Port an
alternative to Dubai Port World (UAE) as it is out of the choke point (Strait of Hormuz)
and can handle larger cargo S‘ class ships and oil tankers. 12 The Port‘s location would
facilitate trade among more than two dozen countries of the Persian Gulf, the Central
Asian Republics, Iran, Afghanistan, East Africa, Pakistan and China. In the near future,
Gwadar Port will be an integral part of China‘s international trade making Pakistan a hub
for regional trade. Gwadar offers a two-way outlet to markets of east and west, north
and south. The port has become a milestone in Pak-China economic relations.
Challenges in Operation:
After years of languishing, Gwadar port is finally set to be handed over to a credible operator
who has signaled a willingness to also invest in the associated infrastructure to bring the facility
into operation. This is a good development and deserves to be received with optimism. Thus far
the port is handling less than 3pc of the cargo that Karachi does between its two harbor’s.
Reasons:
 The main reason for this has been its relative isolation from the country’s transport
infrastructure such as roads and railways as well as its inability to serve as a home for a
large number of skilled workers, which are required to operate a port.
 The city of Gwadar lacks the water resources, as well as housing and other services such
as educational and health facilities to provide for a large workforce.
 It is connected to the rest of the country via a single road that leads to Karachi, which
makes shipping goods there more expensive than Karachi since the cost of overland
transport is far greater. Without these investments, as well as warehousing and other
storage infrastructure, the port would be destined to languish.
But all that is about to change, we are told. In February, the port was handed over to the China
Overseas Port Holding company as part of a larger transition towards making it operational.
Issues surrounding the acquisition of land from the navy and coastguard were also resolved,
and over 2,000 acres are set to be transferred to the port authorities for building an industrial
park. Additionally, the Chinese have agreed to build the road infrastructure connecting the
harbor with Sukkur and an international airport, along with a Gwadar Economic Free Zone,
although details of these commitments are not yet known. The agreement was signed during
the visit of China’s President Xi Jingping.
There is little doubt that the move to make Gwadar port fully operational will have a
transformative impact on Pakistan. Still, there are good reasons to keep the optimism
controlled, and to be mindful of the challenges ahead. For one, much of the engagement with
China is being seen in Pakistan through an emotional lens, as friendly assistance by a brotherly
neighbour. In fact, much of this assistance is coming on commercial terms, and the Chinese
have been known to walk away from large projects in Pakistan when they believe that the
authorities here have failed to live up to their end of the bargain. There is much that needs to
be done by Pakistan to make the Chinese opportunity a reality, and there are question marks
hanging over the government’s ability to do so. Instead of undue optimism, it would be better if
more energy were invested in doing the homework that is necessary to successfully see this
project through.
Suggestions for the Betterment OF Economy Using Geo-Strategic Position:
Malpractice, corruption and mismanagement has ruined the treasuries of government and according to
latest report Rs.1.2 trillion has been spent in last 2-3 decades but nothing has changed due to hijacking
of economy by the elite group in the country. More focus should be given to resource generation,
mobilization and to create economic checks and balances in the diversified but integrated sectors of
economy. The hasty and reactionary economic policies, lop-sided policy plans and their implementation,
influence of the donor agencies, inconsistent private-public dialogues, faulty and incomplete statistical
data, bureaucratic hurdles and insufficient infrastructure facilities should be removed at the earliest. The
defence spending should be controlled via increasing the exports of arms. The issues of ‘Karachi and
Kashmir’ are supposed to be responsible for the unsatisfactory economic growth of Pakistan. Violence in
the coastal region of Karachi and the conflict with India, are directly responsible for the rise in poverty,
declining private and public investment and the spread of intolerance in the country, which is polluting
the true picture of Islam and Pakistan.
These macro issues have badly hampered the much-needed enhancement in the national productivity.
Moreover, production of industries should be enhanced, increase and encourage FDI in industrial
sectors, in this regard NBP has offered sick units for sale to foreign investors to foster the industrial
revival programme. Foreign investment inflows are necessary for a developing country to sustain
appreciable levels of growth. Malaysia, Thailand, Indonesia are major recipients of foreign direct
investment and their economic and business policies are highly realistic. China is attracting more foreign
direct investment than any other country. Western and Japanese investors are often attracted by
Chinas’ large and expanding market. FDI and FPI should be encouraged but not on the security or
sovereignty of the nation as did in case of IPPs. There should be vast network of small and medium scale
industries in the country to generate revenue, employment and reduce alarming ratios of poverty in
rural and urban areas. Government should increase the PDSP by 2% to 5% of GDP by increasing taxes
base and borrowing from the SBP on concessional rates rather than from commercial banks.
Shortage of water is posing very serious threats to agricultural output in the country. In Pakistan 90% of
the agricultural output depends on irrigated water. However, almost 50% of the water released from the
canal headwork’s is lost through ooze. If canals and distributaries could be lined with cement, much of
this ooze could be reduced and the water availability to the crops correspondingly increased. The CBR
collected only Rs 1.2 billion as GST on fertilizer whereas the national economy lost agricultural output of
Rs 4 billion. Government should at its earliest lift the imposed GST 15% on fertilizer and pesticides and
subsidize all the utility bills so that Pakistan may also be able to earn as Holland or New Zealand which
are much smaller than Pakistan but are earning much more as % of GDP. If construction of Kalabagh
Dam is not feasible then construction of smaller dams should be initiated as soon as possible because
our national survival depends on it. Alternative sources of energies should also be explored i.e. instead
of hydraulic electricity thermal means needs to be adopted. The solar and the wind energy systems
should be initiated in the coastal areas of Baluchistan.
The micro issues like multiplicity and duplicity of taxes, numerous inspecting agencies, high taxation
rates, high utility cost, high mark-up rates, expensive raw materials, irrational tariff structure, developing
indigenous technological base, sick units and smuggling, sectarianism, intolerance, transparency,
institutionalization of technical education, commonness of IT, and above all self-believe needs to be
enhanced and should be foremost duty of the newly elected government. Without a strong base for
scientific and technological education, the country would not progress. The countries like Korea, Taiwan,
Singapore, Malaysia and Indonesia are prime examples, which have made quantum jump with better,
scientific and technological education and manpower. It is also reality that without improving skills
through acquisition of science and technology, Pakistan cannot have 5 % development growth rate. It is
reality that the social stuff of the humanity has fallen in total disarray in the country. Rise of illiteracy,
denial of health facility, defective judicial system, ambiguous process of accountability, uneven
distribution of wealth, polluted environment, absence of meritocracy have badly tempered the very
confidence of the nation in the leadership of the country.
Economy works in integration but in isolation. The recent rapidly changing regional and international
geo-strategic scenarios, alliances and domestic socio-economic compulsions are casting its dark shadows
on the economy of Pakistan. Conflict and usage of naked power achieve nothings and active diplomacy
is the need of the hour. Political stability is the answer to all socio-economic ills and true but simple
people supported version of democracy may succeed us to fall in doom and gloom. The disparity
between words and deeds is also producing negative results and creating depression and oppression
among the different ranks of the society. Rule of the law, and belief in pure and true merit, tolerance
and harmony can also be vital to foster socio-economic development. The rise of social justice,
elimination of corruption, emergence of accountability and birth of the golden doctrine of equal
opportunity as said by modern bible i.e. “The Das Capital” may be supported by the quick economic
revival strategies of the recent government. The secret of rise and fall of a nation as described by the
famous historic book the “Fall of Roman Empire” lies in self-determination, sincere leadership, patience,
hardworking, merit, harmony, sacrifice, and last but not the least proper system of checks and balances.
Sincere leadership, social adaptability, regional alliances especially with China, Iran, resolution with
India, visionary qualities, and PAKISTAN FIRST make all of us really independent from all socio-economic
strains and financial dependencies.