THE Port of Singapore Authority (PSA), the operator of Balochistan’s Gwadar Port, is likely to quit the project after Islamabad failed to meet obligations under the 40-year port-handling agreement signed in February 2007.
The PSA’s exit will brighten the prospects for China, which has already shown keen interest in taking operational control of the port.
What has so far prevented Gwadar, located 70km east of the Pakistan-Iran border, from becoming fully functional as hub port in the region? Both the government and the Singaporean firm are in default of commitments under the 2007 concession agreement. The government had committed to ensure the connectivity of the port through the construction of highways linking it not only to the rest of the country but onwards to Afghanistan, China, Iran and the Central Asian Republics. The government also failed to provide 2,250 acres of land to the PSA for the development of an industrial zone as per its commitment.
The PSA, meanwhile, had undertaken to spend $525m in five years but during the first three it invested nothing. It is unwilling to make any investment without getting free-of-cost land that would cost the government at least Rs15bn.
The government’s failure to give land to the Singaporean operator for the construction of a warehousing facility has turned the port into a white elephant, with both the government and the PSA losing millions. In the absence of a warehousing facility, no trans-shipment of containers can take place as there is no backspace for storage. The port lacks road and rail connectivity and its usage has so far been restricted to bulk cargo such as wheat and urea. The cost of doing business at Gwadar is more than double as compared to elsewhere: cargo-handlers charge double for their services because of the distance.
Last year, the Supreme Court issued a stay order against the Gwadar Port contract barring the PSA from transferring immovable property of the Gwadar Port Authority to any private party and allowed the government of Balochistan to be a party to the case. If the port operation deal with PSA is cancelled by the court, China would likely replace Singapore.
Beijing has been pushing Islamabad to give it control of Gwadar’s seaport. In December 2010, China offered the Balochistan government that it would construct 20 more berths and make the port fully operational if it took charge. In that case, China would simultaneously become the builder and operator of the port, which could become a key strategic node for Beijing to step up its presence in the region.
China has learnt at least one lesson from the US-Iran tension over the Strait of Hormuz and the Syria crisis: without significant naval presence in the Indian Ocean or the Arabian Sea, it will not be able to exercise influence in the oil-rich Middle East.
Gwadar Port could be used for the Afghan Transit Trade and also potentially for direct military supplies to Afghanistan, where China is increasing its stakes. After the drawdown of US forces in 2014, a Chinese naval base in Gwadar would help Beijing to source direct military supplies to Afghanistan. The port could turn from a commercial venture into a strategic asset for China.
China is ambitious about having a significant naval presence in the Indian Ocean. Could it be dreaming of ultimately having a nuclear submarine or aircraft carrier homeport in Gwadar, which would enable it to monitor naval patrols by the US and to expand its regional influence? That would, at the very least, require massive funds; it may not be out of place to mention that China’s defence budget is up to $106bn this year.
Gwadar Port is, however, not viable for trans-shipment and transit until Afghanistan is connected by road and rail. The prevailing uncertainty on the political and security fronts in Afghanistan and Balochistan is a significant setback.
What has so far impeded China from carrying out its ambitious plans is the worsening security in Balochistan. Baloch nationalist parties contend that the proposed uplift programmes in Gwadar reflect Islamabad’s plan to settle outsiders there which, they believe, would change the demography of the province.
Security is the key issue affecting the implementation of mega-projects in the province. In May 2004, three Chinese engineers were killed and nine others wounded in a terrorist attack in Gwadar. In 2009, China shelved its $12bn oil-refinery and oil-city project in Gwadar due to security concerns. China is presently in ‘wait and see’ mode, closely watching developments.
All Gwadar needs to emerge as a regional trans-shipment hub is sincere effort on the government’s part. It was the government’s inaction, meanwhile, that left the military more or less in charge of handling the Balochistan situation, which has further complicated the issues in the province.
Balochistan faces multi-faceted violence, including a separatist insurgency and violence along ethnic and sectarian lines. The SC recently observed its disappointment over the federal and provincial governments’ failure to control the worsening law and order situation.
Yet Balochistan has massive natural endowments which, if used rationally, could give the country an economic fillip. Gwadar Port could facilitate trade among at least two dozen countries, including those in the Persian Gulf, the Central Asian States, Iran, East Africa and so on. The port has the potential of becoming a very trade-friendly facility, with its 4.7km-long and 206m-wide approach channel, 595m-diameter turning basin, three 600m-long multipurpose berths and other cargo-handling equipment.
What is needed is the creation of a secure environment that will serve long-term objectives associated with Balochistan’s economic development. Critical to this is giving the local people a stake and the fair distribution of development gains. In a state of real security, one feels economically, socially, politically and culturally secure: security in all aspects.
The writer is the author of Economic Development of Balochistan.