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Why all this fuss over Gwadar?

Farooq YousafFebruary 22, 2013

Gwadar not only provides an important sea trade route and centre but also joins Pakistan - or in

current case China - with most of the oil producing countries. PHOTO: REUTERS

It came as no surprise when, on Monday, the Pakistani President Asif Ali Zaradrihanded

over the operating rightsof the Gwadar port officially to China in a high profile ceremony

arranged at the President house in Islamabad.

A memorandum of understanding (MoU) was signed by Pakistani officials and the Chinese

Ambassador to Pakistan, Liu Jian, which meant that the world renowned, yet little functional,

Gwadar port was transferred from the Singapore based Port of Singapore Authority (PSA),

which had initially signed a40 year lease dealin 2007, to the Chinese state-owned ChinaOverseas Port Holding Company (COPHC).

Pakistan tagged it as the second most important investment by Chinain the country after theKarakoram Highway.

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So why did the PSA leave?

One is forced to ponder as to why a firm like the PSA, having all the capital and a 40 year leasecontract, left within five years of its contract.

The reason is simple and obvious; frustration.The firm was demanding a piece of land annexedto the port, belonging to the navy, in order to develop the port and industrial estate but thenavy

refused to vacate,citing security reasons, and thus leading to PSAs exit as it meant the

government failed to fulfill its promises made while signing the agreement with the PSA.

It will now be imperative to see whether China also demands the same piece of land and if thenavy will change its stance considering Pakistans ties with China.

Global attention

From East to West, the event gathered worldwide media attention. The western media, in

particular, gave high profile coverage to this deal solely on the basis of Gwadars strategiclocation coupled with Chinese involvement in the project. The concern and focus laid by thewestern media on this issue was particularly seen in various headlines of mainstream

newspapers, such as The New York Timeswhich titled the story as Chinese Company Will Run

Strategic Pakistani Port.

An interesting fact, overlooked by most, is that even after this supposedly multi-billion-dollardeal, the ownership of the port still remains with Pakistan. China would initially be investing

huge sums of money to make the port completely functional after which the question of its

productivity would come into the equation.

Strategic Location of Gwadar

(Image Source: The New York Times)

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As seen from the image above, Gwadar is indeed located at a very strategic location. It not only

provides an important sea trade route and centre but also joins Pakistanor in current case

Chinawith most of the oil producing countries through the Strait of Hormuz.

This means that the port can serve as a key for solving major trade woes not only for China, by

reducing thousands of trade miles, but also for Pakistan, which once deemed Gwadar as apotential answer to Dubais international port.

Ironic though, Gwadar is far from even being labelled as a fully operational port as it lacks basicinfrastructure facilities such as roads and storage houses.

Indian concerns

Among its critics, India is the most prominent that raised concerns over Gwadar agreement

calling it a threat to Indias maritime security. Indian military analysts are of the opinion that theports only objective for China is to encircle India in the sea through the famously known

concept ofString of Pearls,or the Chinese ally ports encircling India.

Gwadar port, if taken in Indian security context, is a port nearest to the West, and thus serves as

an important link to this string of pearls.

In response to such concerns, Chinas nationalPeoples Dailywrote that the strategic importance

or location of the port is still in its potential stage, rejecting Indian concerns on the basis ofeconomic arguments.

In the past three days, the Indian media and defence analysts have gone to great extents on

national TV to target Pakistan and China for this deal calling it purely a strategic-military

manoeuvre against Indian security.

Such concerns apparently are exaggerated and uncalled for as, first, Pakistan is in need of an

economic push to save it dwindling economy. Moreover, Pakistan has rarely expressed concerns

on Indiapurchasing state of the art weaponryfrom its friends, such as Israel.

Catch for China?

The Gwadar port, which was on the verge of becoming a White Elephant for Pakistan, has

received the economic push it required to fulfill its potential. Even though it is still unclear when

a complete takeover of the port and development work would take place, such an agreement is a

positive omen for a country that is currently constrained by its socio-economic woes.

The agreement is good for Pakistan as long as it can manage the project, whereas for China, itopens up a wide array of opportunities in terms of energy trade with the Middle-east and the

West. If things go according to plan, the port can help in improving Chinas security for

maritime energy trade along with providing support to Chinese naval fleets active in counterpiracy operation in the Arabian Sea and the Gulf of Aden.

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Whats next?

One can hope that learning from mistakes committed in the PSA deal and not investing ininfrastructure for Gwadar, the Pakistani authorities will focus on this aspect in order to bolster

cooperation on the project with China and help develop a potential sea-trade centre for the

region.

On the other hand, Gwadar port also presents a bleak picture and dark side of Pakistans lack of

management potential and inability to manage mega projects itself. It would be in Pakistansfavour if China and COPHC do not face the same hurdles as PSA did because Gwadar, even

today, holds an important key to Pakistans socio-economic prosperity.

Read more by Farooqhereor follow him on Twitter@faruqyusaf

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