Gwadar Port deal with SPA unlikely to be scrapped

[Naveed Yaseen]

MUSHTAQ GHUMMAN
ISLAMABAD (March 28 2009): The government is unlikely to scrap the Gwadar Port agreement with the Singapore Port Authority (SPA), fearing that the operators would drag it into international arbitration, and would claim reputation damages, sources in the Ministry of Ports and Shipping told Business Recorder here on Friday.

The Minister for Ports and Shipping, Nabeel Gabool, had announced a couple of days ago that the government would cancel Gwadars pact with SPA and hand over the port to the provincial government. "Ports are Federal territories are covered under Federal Legislative List, Fourth Schedule of the Constitution.

For giving Ports in provincial control, Constitutional Amendment is required, with 3/4 majority," said sources. If the government cancelled the contract agreement of PSA, it would effectively imply a default on the part of the GoP, which would incur compensation, to be paid to PSA, under the terms of contract agreement, as well as compensation claim for damages for reputation, which would be handled under international arbitration, they said.

According to the agreement, failing amicable settlement and/or settlement the dispute or differences or claims, as the case may be, shall be finally settled by binding Arbitration under the Rules of the Court of Arbitration of the International Chambers of Commerce by a sole arbitrator appointed in accordance with the said Rules. The place of arbitration will be London.

There are reports that Gwadar Port Authority (GPA) has also defaulted on its commitment to provide 926 hectares land for free zone area at Gwadar Rato Dero road, which is essential to start commercial operation of the port. "GPA has not protected 18,000 hectares land allotted to Gwadar Port free of cost in 1996, as was committed by the Prime Minister," sources added.

Another issue is that the previous Sindh government had demanded KPT and PQA to be handed over to Sindh government. KPT has 4,000 acres; Port Qasim has 10,000 acres and Gwadar needs 30,000 hectares. And, just like any other port, Gwadar needs road and rail connectivity.

Analysts are of the view that in the present case, it is also an attempt to seek political mileage and an attempt to pacify the angry Baloch nationalists who did not have a say in awarding contracts in the province. The Planning Commission, provincial government, and Gwadar District Nazim were fully involved from the stage of conception to construction of berths by Chinese contractors and subsequent award of contract to a world class port operator.

The Master Plan of Gwadar city, the terms of the contract with regard to it and tax holiday period were approved by the federal cabinet which was duly represented by provincial Chief Minister Jam Yousuf. It is pertinent to mention here that Prime Minister Benazir Bhutto had approved the construction of a deep-water port project at Gwadar on BOT terms for 50 years.

Other approved terms included (a) 18,000 hectares of land to be provided by the Government of Balochistan "free of cost"; (b) Wapda to provide electricity; © NHA to construct 895 kilometres Gwadar-Rato Dero Road and Gwadar-Karachi Coastal Highway; (d) free of cost (except development charges) land to be provided for establishing industrial ventures and warehouses and; (e) Offer of concessions comparable with those available to existing free zones in Far East to world class companies.

After military take-over in 1999, the project was, however, cancelled. While celebrating 50 years of Pak-China Friendship in 2002, China agreed to construct the port with $250 million loan on generous terms: phase-I of the project being construction of 600 meters of berths.

In 2006, tender was floated for operation of Gwadar Port, marine services and Free Zone on BOT for 40 years. After due competitive process, GPA signed an agreement with Port Singapore Authority. As per terms, PSA delegated the task to three joint venture companies: two local investors ie AKD and NLC are also the partners of PSA in Gwadar Port.

Analysts are of the view that the slow progress to get Gwadar fully functional has nothing to do with the agreements between GPA and PSA. They say that no port can function without a commercial hinterland attached to it with requisite infrastructure for domestic and transit cargo.

There are questions as to why the 2001 directive of the Prime Minister to freeze allotment of all land in Gwadar city area and transfer of all government land to the port was not implemented? Shaukat Aziz Cabinet, after due approval from President Musharraf had ordered Pakistan Navy to shift to a new location and have the earmarked contiguous area of the port transferred to GPA.

According to sources, operators are demanding, of the government, to make Gwadar port functional; that Pakistan Navy, Coast Guard lands should be handed to them; and Port Master Plan should be strictly adhered to. There are also unconfirmed reports that GPA Chairman (Adm) Saeed has caused GoP to default on Agreement terms. He refused to give Navy land to GPA, and guided Navy to build shipyard on that piece of land.

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