PAGE Blog Business Weekly Magazine
Ports and shipping sector plays a vital role in the economic development of a country, as efficient ports and terminals lower the cost of imports, bring revenue through exports, increase our foreign exchange reserves and enhance tax collection. Recent trends in the shipping industry have shown that cargo ships are becoming larger. These vessels have enhanced capacity to transport cargo in bulk quantities which makes commodities cheaper for the end consumer by reducing transportation costs and time to reach the market. Long-term investments in ports and shipping industry can make Pakistan a strategic hub for regional trade. Pakistan can only avail the opportunity by enabling its ports and shipping channels to accommodate large vessels, which are called as Super Panamax.
One thing has become clear about Gwadar port in the year 2012. The port will be run by Chinese and the Singapore will quit the project. This new development brightened the prospects about still non-functional hub port, once dubbed to change the destiny of underdeveloped Balochistan province. The port is critically important from trade and investment point of view. It is strategically located close to the Strait of Hormuz- an important route for oil tankers bound for Japan and western countries out of Persian Gulf. Gwadar port could not become fully operational as hub port due to the unsettled issues between the government and the Port of Singapore Authority (PSA). PSA is now going to sell its shares to a Chinese company. China provided financial and technical assistance to build the port on Pakistan’s southwest coast. The PSA had signed a 40-year port management and development contract in 2007. The Singaporean firm decided to quit the project after Pakistani government failed to transfer it the land for development of free zone, as committed under the agreement.
Gwadar is still not functional as a hub port. Its emergence as mother port of the region is still a dream. It still lacks road and rail connectivity. Its usage has so far been restricted to bulk cargo such as wheat and urea. The PSA was unwilling to make further investment in Gwadar port without getting free of cost land, that would cost the federal government at least Rs15 billion.
In June 2006, a Chinese company had also expressed its interest to operate the port but it could not win the bid for running the port. In 2010, China offered Balochistan government that it would construct 20 more berths from the present five and make the port fully operational if it takes charge of Gwadar Port. Some experts believe that the key functions of Gwadar port should have been given to Chinese company, as China desperately needs port facilities located outside the sensitive Strait of Hormuz but close to the Arabian Gulf for its fastest growing economy. The experts argue that even if the Chinese companies and exporters handle their own cargo it would make Gwadar port as one of the busiest and most active port of the region.
The country should take advantage of the emerging opportunities in shipbuilding, including engine and equipment manufacturing. According to one estimate, internationally the demand for new ships will increase from around 30 million DWT a year at present to around 90 million DWT a year in 2055. The establishment of two new shipyards with bigger docks at Gwadar can ensure accommodation of giant vessels and the development of shipbuilding industry in the country.
Former government proposed to set up two giant shipyards with a capacity of 600,000 DWT at its ports of Gwadar and Bin Qasim at an estimated cost of $500 million. It had sought Chinese help and advisory services from international firms for the purpose. In view of the growing demand for new ships around the world, the strategically located Pakistan is a take-off point for such projects. Gwadar can turn into an ideal place for a facility for repair and maintenance of bigger local and foreign ships and vessels.
The proposed Gwadar shipyard was planned to be set up at Gwadar East Bay. It was proposed to spread over 500 acres of land with at least two dry docks of approximately 600,000 DWT. The shipyard was supposed to provide the facility of ship repairing and undertake state-of-the-art shipbuilding of bigger size and high-tech ships like Very Large Crude Carriers (VLCCs) and Ultra large Crude Carriers (ULCCs). The capacity in the Gulf for such repair of vessels is limited and such a facility at Gwadar would be one of the trigger industries for bringing up Gwadar port and development of the region.
Balochistan offers access to new resources and markets and the prospect of more rapid growth. The province’s geo-strategic location makes it the most attractive for transit traffic to the landlocked Central Asian Republics (CARs). Gwadar port can provide Afghanistan and the CARs the shortest and fastest access to the warm waters of the Arabian Sea. The port can also provide them with warehousing facilities along with transit and possibilities of import of goods. The port and its related planned regional highway projects will help Balochistan become a world-class mining center. For landlocked Central Asian economies, Balochistan offers enormous opportunities in oil and gas sector for foreign investors.
Strategically located Pakistan could function as an energy corridor linking the oil fields of Iran and possibly even Iraq with the Chinese market by means of a pipeline that would cross the Himalayas above Kashmir. This would give China a guaranteed land-based oil supply not subject to Anglo-American naval superiority, while also cutting out the 12,000 mile tanker route around the southern rim of Asia.
Pakistan can only serve as an energy corridor between the Gulf and China and the Gwadar port is to become a major outlet for trade between the China, Central Asia and the Gulf region if Islamabad pays attention to the development of ports and shipping sector, improvement of logistics and security situation in the whole country in general.
Critics say that Gwadar port only needs serious and sincere efforts of the government to emerge as a regional transshipment hub, as the port has full potential to become one of the most user, and trade-friendly ports of the world with its 4.7-kilometres long and 206-metre wide approach channel, 595-metre diameter turning basin, three 600-metre long multipurpose berths and other state-of-the-art cargo handling equipment.
