Gwadar deepsea port — under construction some 600km by land west of Karachi on the Mekran coast of Balochistan, — by the Chinese and expected to be ready for operation by early 2005 to handle international shipping, is a mega project.

It is expected that with the completion of the first phase of its development, Gwadar deepsea port would be able to handle annually about two million tons of cargo comprising containers (100,000 TEU’s), general cargo, bulk cargo and ro-ro cargo, i.e., vehicles and wheeled cargo whose loading into and unloading from the ship is through driving instead of lifting-on and lifting-off by cranes.

To put the port performance in perspective, this may be compared with the KPT’s 30 general-purpose berths and three bulk liquid, heavy-duty terminals — handling almost same cargo volume as 30 general-purpose berths — altogether achieving annual throughput around 25 million tons of imports and exports; and 10 heavy-duty berths at Port Qasim presently doing 15 to 16 million tons annually.

It may not sound odd to point out that it is the port sector with existing two international seaports that is adequately developed and functionally efficient to forestall any perceivable capacity bottle-necks in the near future while handling our sea-borne trade to match our economic momentum.

Compare the situation with India where few years back, according to a study, the national port sector required investments to the tune of $6 billion in port hardware and infrastructure to keep pace with the trends and pressures of the national sea-borne commerce. This situation assigns a unique role to Gwadar deepsea port. It must generate additional cargo to match its capacity along the path of its development. Equally meriting attention — and caution — are the concerns and worries expressed by public opinion representing organizations of the area as to the economic openings for the local population in the development process to be spurred and supported by the operation of Gwadar deepsea port and its economic spin-offs, and the alleged acquisition of land in and around Gwadar by land mafia with close collaboration of the functionaries in the Provincial Board of Revenue and allied agencies.

Bench-marking Gwadar deepsea port with similar projects in other parts of the world, and keeping in view the contents, contours, scope and impact of the project, Gwadar deepsea port project can rightly be termed to hold potential for a sea-change in the socio-economic destiny of the region. As such it is the dreamscape for the population of region around Gwadar having been condemned to the economic stagnation and social repression for centuries. In terms of socio-economic dynamic, compared to other centres of economic growth during the decades following emergence of Pakistan, Gwadar region has yet to break the barriers of tribalism. Completion and operation of Gwadar deepsea project, in its stated full scope, can herald the dawn of 21st century for the people of the area.

To convert this dreamscape into reality is a mammoth task, a challenge, both for the national leadership and the people of the region. In physical terms, this implies conversion of the Mekran sandscape and wanton Arabian Sea into a first grade industrial environment of a modern integrated seaport. It incorporates three distinct roles of a conventional commercial port — an industrial port through provision of location to industries, manufacturing and processing units and trade activities with undisturbed direct access to water-front to facilitate imports and exports. It will also serve as a distribution centre by attracting multinationals to develop their warehousing yards for storage of bulk import and subsequent distribution of their goods to the countries of the region.

In terms of sociological change, this would imply a strategic march of the respective community from close of 19th century to the start of 21st century. This development in its fullest impact would imply an immutable change of economic landscape and the structure of the community, of attitudes and mind-set of the population, a reflection of the dialectics of the dynamic of development. A fine calibration of the expectations and aspirations of the people of the region with the imperatives and requirements of the development and economic performance of this project is the core requisite.

Those entrusted with the implementation and subsequent operation of this mega project have got to conduct themselves in a manner as to assure the people of the region — the ultimate beneficiaries of the development — that the entire impact of the project is going to improve, in the first instance, their living conditions, with better earning prospects, better education, health and housing facilities for the common man. The people of the region, in equal measure ,have got to come up to the demands of the project in terms of educational standards, professional skills, work ethos, commitment and a positive mind-set to absorb creatively the shocks that are bound to be fuelled by the change from a semi-nomadic-agrarian-tribal social structure to a highly competitive industrial environment of a state-of-the-art all-comprehensive modern seaport.

The potential benefits of its success can be immense; they can,t be allowed to be lost on the rigidities and indifference of the bureaucracy and the tribal passions and prejudices of the common man. It is undoubtedly a tall order, but it is possible as evidenced by the success of similar projects in other parts of the world.

Gwadar deepsea port project as an integrated and comprehensive project as per the perception, goals and mission, will have to play the afore-cited three distinct, but inter-linked and mutually reinforcing and invigorating roles of a commercial port, as the KPT, commercial-cum-industrial port as PQA, and over and above, as Distribution Centre for international trade, as Rotterdam, Hamburg, Hongkong, Singapore etc,.

As a commercial enterprise, a seaport too, must ensure and be assured of its commercial viability. It is only then that it can stay financially afloat. The port has its fixed and variable cost which in the long run must be recovered fully through revenue from services rendered and facilities offered by the port to its clients i.e., shipping and trading communities, in the first instance. This presupposes availability of enough shipping and trade volume to match the level of port facilities and services.

To attract trade and shipping the port tariffs, i.e., charges payable by shipping and trade to port authorities for the services and facilities benefited, have got to be competitive. They reflect the pricing policy of the port based on the terms and conditions of financing.

Port tariffs are the most critical factor, being the prime consideration by the trade and shipping while making a choice of port in a country where more ports are available. They must be so determined at a level that ensures optimal utilization of the port hardware, facilities and services as well as the full recovery of resources invested therein, over the life cycle of the assets.

To understand the implication of tariffs as the corporate instrument to achieve financial viability and assets utilization, example of the PQA can be quoted. It was the PQA that carried a systematic study on port tariffs in 1980 in the run-up to the start of its operation. With 9 per cent rate of return on investment — total government’s equity — deploying capital recovery factor, the conservative ratio between total annual cost comprising annual fixed and variable costs to be recovered through port tariffs from trade and shipping, and total estimated capital cost stood at 12 per cent of the total capital cost. In case of first phase of Gwadar port, being further conservative, put this ratio at 10 per cent. That comes to $25 million i.e., the annual amount to be recovered once the first phase, with three berths, is operative. Gwadar port must earn about $25 million as revenue to break-even. Being generous on business activity side by assuming 2.5 million tons annual throughput, every ton of cargo must pay to the port $10, a level far too high when compared to equivalent range of services and facilities at KPT and PQA, hence the need that first phase of Gwadar port must be followed by the second and third phase as well to ensure the financial buoyancy of this prestigious national project. But to ensure full utilization of the port facilities in time scale of availability, all-out efforts would be required to generate corresponding trade volume.

So for, the moment open-ended questions remain: what will be volume, sources and composition of cargo for next 10 to 15 years from the year of completion of the first phase onwards, and at what level and under what parameters the port tariffs will be determined. Market-competitivity of port tariffs is the core requirement for a successful commercial role of a seaport.

Gwadar is projected to be the port, primarily handling transit trade, i.e., imports and exports of landlocked countries of Central Asia, Afghanistan, and the Western China bordering Pakistan with Korakoram Highway connecting it via inland transport network of Pakistan to seaports, domestic cargo generation would be highly desirable. The Special Economic Zone (SEZ), the Export Processing Zone (EPZ) or the Free Trade Zone (FTZ ) and import and export-based industrialization in the areas of the country closer to Gwadar can ideally cater to the end of optimal utilization of port infrastructure and facilities to ensure financial viability of the huge investments going to be incurred. It is the port-located manufacturing and processing facilities and commercial enterprises using port as the gateway for imports and exports that have massively contributed to the economic pre-eminence of the leading ports of the world. Stripped of the economic role played by their ports, Rotterdam, Antwerp, Hamburg, Singapore and Hongkong would have been economic non-entities. Their pattern of development can serve as guidelines for Gwadar. Pakistan can learn a lot from the SEZs initiated in China in 1979.

A seaport represents interface between sea and land transport modes and can be unique location for consolidation as well as distribution of international trade. This has resulted in the development of huge warehousing complexes within the bounds of the port, as customs-free area, which are used for storage of imported goods from different countries and where goods are consolidated to re-export to other countries as per market demand abroad, without entering the custom territory of the import country. Such distri-function of ports has played a very vital role in the generation of additional cargo for the port as well as in the promotion and expansion of international trade.

The open-ended question is: do we have presently conditions conducive to that? Those entrusted with the operation of and those interested in benefiting from this mega project must ultimately come up with satisfactory answers. This nation witnessed substantial completion of Gwadar Fish Harbour and Miniport in the second half of 1992, without much return so far. Let the Gwadar Deepsea Port not face the same fate.