Understanding Gwadar Port

Recently there has been some criticism of the strategic decision to build Gwadar port. In fact one critic has called the Port a — cruel joke. It is therefore important that we marshal some facts and then decide whether Gwadar was in Pakistan’s interest or not. It is important to get this right because future policies of the new government will depend on how we view Gwadar.

The usual criteria for a port have been listed and it is being said that Gwadar does not meet these criteria. However, there are hundreds of ports which meet these criteria but are of negligible significance. On the other hand some of the world’s most successful ports do not meet these criteria. There was huge skepticism when the 50 – berth Jabel Ali port was conceived. It met none of these criteria. In fact it was just a sandy beach with no infrastructure, no communications network, no population, no thriving hinterland, no areas of production, no water, power, roads, rail roads etc at all. Today it is a hugely thriving port.

The cost of building a port has no relevance to port charges. Jabel Ali’s cost was huge, but port charges are amongst the lowest in the world, less than 20% of Karachi for a big container ship. There are many other such examples around the world.

The fact that we have Karachi and Port Qasim does not in any way mean that another port is not necessary. Look at Western Europe and the number of huge ports within short distances of each other. There are many factors relevant to building a port.

It is a question of what ones objectives are and how they are to be achieved. The blunder regarding Gwadar was that a bunch of “land-lubber babus” with no idea of maritime affairs and port development signed a ridiculous contract with the Port of Singapore Authority ’s independent offshore subsidiary. It was a bad contract.

In principle one can agree that building Gwadar should have had no relevance to defence. Gwadar was not conceived from the defence point of view, as its PC-I would clearly indicate. For defence purposes the Navy has rightly chosen Ormara. Even though Gwadar was not planned for defence purposes, now that it is there it does help national defence significantly.

There is no doubt that both Karachi and Port Qasim have considerable potential for growth. In fact Karachi ’s own potential for growth was substantial when Port Qasim was built. Many people considered Port Qasim unnecessary, as the areas within Karachi harbor could be developed at a much cheaper cost. Yet, today, Port Qasim is a thriving port and has already overtaken Karachi in many activities. Their growth potential has no relevance to Gwadar.

The Pakistan Navy never had reservations on Gwadar. If the Planning Commission’s had reservations then this  is understandable. It is their job to have reservations about any new project until they can be satisfied, which is inevitable before the project PC-I is approved.

Connecting to Central Asia should not be a primary consideration. This is a totally different subject and has no relevance to building a port at Gwadar.

Here are some reasons why a port at Gwadar makes ample sense.

1. The congested port of Karachi has complete facility for importing and storing the entire requirement of Pakistan ’s fuel supply. The port is shallow and cannot take big ships, making cost of transportation on small ships expensive.
2. Every oil tanker steams hundreds of kilometers past Gwadar to Karachi , full of fuel from the Gulf and steams back empty. All that extra steaming costs extra money for every vessel.
3. The extra cost of small ships carrying fuel plus a thousand kilometers extra steaming costs money makes the landed cost of oil high. This ends up making everything in Pakistan more expensive for the consumer. Gwadar is a fine alternative. For this reason alone the port of Gwadar is fully justified.
4. Similarly, all refineries and storage facilities are located in Karachi , which again is not wise. As anyone who has lived in Karachi (or, indeed in Pakistan ) during the 1965 and 1971 wars would have seen, our entire storage capacity went up in flames, exclusively because of vulnerability based on Karachi ’s proximity to the Indian border. This is not a defence requirement. It is a strategic need to ensure fuel supply for the nation’s civilian and military use for as long as a war may last. Today the nations trains, trucks, buses, power plants etc will come to a halt within a few days after destruction of Karachi ’s storage facilities.
5. Connecting the oil terminal at Gwadar to the national hub near Mehmoodkot does not require government funding. The PARCO pipeline from Karachi to Mehmoodkot was built by the private sector and has been making money consistently since it was built. There is no dearth of commercial companies which will gladly put up a pipeline from Gwadar. The pipeline business is a huge thriving commercial business worldwide.
6. Along with the oil terminal one or more refineries at Gwadar is logical. This again requires no government investment. Private sector refineries make much more money worldwide than government ones do.
7. All the above activities of oil terminals, oil storage, refineries and pipelines do not need a rail connection or even extensive road connections, expect for moving people and limited supplies.
8. Karachi is a commercial port. Port Qasim is an industrial port. Gwadar would logically be a logistics port. Besides the oil sector it is ideally suited for consolidation and packaging of a wide spectrum of goods. For example, items packed in different countries cost a lot to transport to and from the Gulf area. Brought in bulk to Gwadar, finished and packaged there and then delivered to existing buyers in the region would reduce the per unit cost of a very large spectrum of consumer items. Here again rail connections are not necessary while road connections would develop naturally for goods destined within the country; but the main purpose of a logistics port is re-export.
9. Being based outside the Gulf it is not vulnerable to all the risks of turmoil in the highly volatile Gulf area. There is no knowing which direction the confrontation of America will lead Iran ; nor how the Arab Spring will effect the Gulf. We have seen marine insurance rates rocket up whenever there is tension in the Gulf. This leads to huge increases in freight for vessels entering the Gulf. Gwadar is immune to that.
10. It is seldom known by even well-informed people that Gwadar has the only Roll-On, Roll-Off berth in Pakistan . Naturally they would not be aware of the advantages of this Ro Ro berth.
11. There is very limited ship building facility in Pakistan . The only ship-yard is in a narrow channel of a shallow part of Karachi port. Gwadar is ideally suited for ship-building, again, exclusively by the private sector. Ship-building, ship repair, fabrication, oil field supply equipment building and maintenance are all vulnerable inside the Gulf. They can easily be undertaken at a port at the mouth of the Gulf, which is attractive for enterprising investors, given correct incentives and facilities.

Now that we have the port it must be used in the best manner. The Chinese have their own plans, as they now hold the new management contract. It is inevitable the Chinese will make a go of the port for their own commercial reasons. That opens up huge avenues for Pakistanis to benefit from the port, particularly as the infrastructure develops. Completing the road from Gwadar to Ratto Dero will almost certainly be a high priority for the Chinese as well as for our own government. That will obviate the need to take cargo from Gwadar to Karachi and will inevitably create new opportunities for generating wealth for the country, as well as bring prosperity to the entire region.

Task Force on Maritime Industry set up by the government was categorical in condemning the Agreement with the Port of Singapore Authority and initiated its successful termination. The Task Force comprised of some of the best minds in our maritime sector and was headed by a former naval officer Naeem Sarfaraz, one of our most experienced mariners. After deep study they were convinced of the long term benefits of Gwadar, but only after Port of Singapore Authority left the scene. A detailed study, by our own Pakistani experts rather than by foreign Consultants, can assist in rapid and successful utilization of Pakistan ’s deepest port where unlimited opportunities have now opened up. But success is possible only if prevailing greed and corruption are replaced by professionalism.