ISLAMABAD: The government on Monday formally awarded a multi-billion dollars contract for construction and operation of Gwadar Port to China with the hope that the port’s development would open up new vistas of progress in Pakistan, particularly Balochistan.

Under the contract, the port which will remain the property of Pakistan will be operated by the state-run Chinese firm — China Overseas Port Holding Company (COPHC). Earlier, the contract was given to the Port of Singapore Authority (PSA).

The contract signing ceremony held in the Presidency was attended by President Asif Ali Zardari, Chinese Ambassador Liu Jian, some federal ministers, members of parliament and senior government officials.

“The ceremony was actually held to mark the transfer of the concession agreement from the PSA (Port of Singapore Authority) to the COPHC,” said the president’s spokesman Farhatullah Babar.

The PSA is reported to have abandoned the project on the plea that Pakistan failed to meet obligations under the 40-year port-handling agreement signed in Feb 2007.

Media reports allege that the PSA, which was to spend $525 million on the project in five years, made no investment because of non-fulfilment of its demand for allotment of land worth Rs15bn.

Last year, the Supreme Court issued a stay order on the Gwadar Port contract, barring the PSA from transferring immovable property of the Gwadar Port Authority to a private party and allowed the Balochistan government to become a party to the case.

In Dec 2010, China had offered the provincial government to construct 20 more berths and make the port fully operational if the port was handed over to it.

President Zardari praised the award of the contract to China as an auspicious development in Pakistan-China relations and expressed the hope that it would create new economic opportunities for Pakistan and Balochistan.

The spokesman quoted the president as saying ‘Gwadar will soon be a hub of trade and commerce in the region as it holds the key to bringing together the countries of Central Asia and lends new impetus to Pakistan-China relations.”

He highlighted the strategic importance of the port for China and Central Asian republics and its potential of integrating the economies of the countries in the region.

He said the Chinese provinces of Xinjiang and Tibet were closer to Pakistani ports than to any port in China and development of a trade corridor linking Xinjiang to the Middle East via Gwadar held great prospects.

The president said 60 per cent of Chinese import of crude came from countries in the Gulf and the amount would increase in next decade. “Because of the proximity of the Gulf countries to Gwadar, oil flow from the region to China will be facilitated.” The president praised the role played by Federal Minister for Ports and Shipping Babar Khan Ghori, who did not attend the ceremony, in the transfer of port operations to China.

AFP adds: China paid about 75 per cent of the initial $250m used to build the port but in 2007 the PSA won a 40-year operating lease.

Then president Pervez Musharraf was reportedly unwilling to upset Washington by giving control of the port to the Chinese.

On Feb 6 Indian Defence Minister A.K. Antony said New Delhi was concerned by Pakistan’s decision to transfer management of the deep-sea port to China, which had interests in a string of other ports encircling India.

Foreign ministry spokesman Moazzam Ahmad Khan dismissed those concerns last week, telling reporters: “This is not something that any other country should have any reason to be concerned about.”

President Zardari said the building of infrastructure around the port would promote economic activity in Gwadar and Balochistan.

But some analysts warn that it may be some time before Pakistan can benefit from China’s takeover of Gwadar, stressing that the connecting roads and an expanded Karakoram Highway still need to be finished.