THE terms of reference (TOR) prepared by the Dubai Port World (DPW) for an deal for running the Gwadar port has been criticized by ports and shipping experts.

These include major conditions that deal with the corporate structure and matters related to operation, tariffs, and financial powers as well as development of infrastructure, including nine new jetties (berths) on the east bay of the port.

Plans have been finalised for the second phase of the port to be built by the private sector- nine more berths, an approach channel and storage terminals, is to be finance by China. It will have three container terminals with a quay length of two km—a cargo, a grain and an oil terminal.

The Dubai operator bid for the $865 million phase-II of the port. Other companies in the run include, Hutchison Port Holdings(HPH) (Hong Kong) and PSA International (Singapore), which are considered as the rivals of the DPW. The HPH already operates the two-berth Karachi international container terminal.

The DPW was among companies that had expressed interest in operating the first phase of the port, which was completed with a Chinese loan in April last year. The total cost of the Gwadar project is estimated at $1.6 billion, of which China has contributed about $198 million for the first phase. Pakistan has contributed almost four times for this phase. China invested another $200 million to build a highway connecting the port with Karachi.

The negotiations were approved with DPW as a potential operator in February last and the prime minister constituted a team from the ministries of finance, law, planning and development division and the ministry of ports and shipping to negotiate the terms.

The TOR contains, according to the experts, such one-sided conditions that may force one to rethink about the negotiations. Following are the key conditions laid down in the TOR prepared by the Dubai operator: - With regard to development of new berths, the operator seeks first-right of refusal. Under this demand, a prior approval would be sought from the DPW in case the Pakistan leases or develops new jetties.

The DPW has sought 30 years lease for the site and the port, which could be renewable for two more terms of 10 years for which the option will lie with the operator.

The company seeks full control over development, finance, design, building, management and operations of those nine jetties (berths) which are yet to be built under phase II and have the right to cap the capacity utilization.

It also seeks the right of levying and collection of port tariffs related to “dry” and “wet’ tariffs.

It has demanded that tariffs would not be higher than Karachi Port and the Port Qasim.

The DPW has is not willing to hire or absorb the existing labour force working at the port.

The Dubai operator has sought full powers over shareholding of the port company to be held by them or any other strategic investor chosen by them. It has further laid down a condition where management control will be fully with DPW and the government will have no control over the management and policies of the port.

Experts are of the opinion that the conditions, if accepted, would completely strip off the government of all its rights related to revenue, tariffs, development, expansion and operation matters of the port. The TOR has put all future liabilities and investment costs on the shoulders of the government which includes development of infrastructure inside and outside the port areas and it wants a firm commitment on these terms from the Gwadar Port Authority (GPA), Gwadar Port Implementation Authority (GPIA) as well as federal government.

The government is preparing its TOR and has decided to make Gwadar port functional by June this year and may continue to negotiate with the DPW for reaching an agreement. The additional dredging of Gwadar port channel to 14.5 meters would be completed by June that will make it the deepest port of the country and the trans-shipment port for the region and will also enable it to receive mother vessels.

The cargo dropped by such vessels would be taken to Karachi and other regional ports by feeder vessels or trucks. The government had given additional $50 million to the ministry of communications to complete the much needed first phase of the port at an upwardly revised cost of $298 million.

If the port has to take its right place among the regional hub ports and to achieve proper benefits matching its strategic advantages, some experienced, credible and competent operators need to be appointed.

Why DPW is a favourite contender for the Gwadar port?

Firstly, the government has already proposed to operate Gwadar as a free port along the lines of Jebel Ali terminal of Dubai. Of course, the handling over operations to an international operator will help to develop Gwadar as a regional hub. Despite the recent US opposition to its take over of the management of six American ports, DP World still remains the third largest port operator in the world.

DPW was established following the merger between the Dubai Ports Authority (DPA) and Dubai Ports International (DPI) Terminals. DPW has been in a process to identify and secure competitive tenders for port operations that compliment its network and apply its skills and techniques to every aspect of the business. In India too, the DPW operates two container terminals – Kochi and Visakhapatnam.

Second, the unique ‘integrated port management’ model is the hallmark of DPW. The model brings together container terminals, other cargoes, free zones, infrastructure developments and consultancy services.

Third, DPW’s cross-sector expertise offers solutions in all aspects of port operations. Fourth, DPW has successfully applied the management systems, developed at Port Rashid and Jebel Ali, to its global network of terminal operations. This enables its customers, to experience the same high level of service they have come to expect when their vessels call at Dubai.

Finally, the DPW’s ability to deliver a better level of service to shipping lines is reflected in the company’s performance, achieving double-digit growth annually since the company started operations in 2000. DPW, it has achieved 26.5 per cent growth in 2004 across its network.

Gwadar is strategically located deep-sea port with which Pakistan’s economic future is associated and there is a need to consider all pros and cons of the deal with the DPW before finalizing the agreement.

A Chinese company has also expressed its willingness to operate the port. Some experts say that key functions of Gwadar port should have been given to Chinese company. The fastest growing economy of China would desperately need port facilities that would ideally be located outside the sensitive strait of Hormuz but close to the Arabian Gulf. Gwadar is certainly that ideal port for Chinese. Even if the Chinese companies and exporters handle their own cargo it would make Gwadar port as the busiest and most active port of the region.