ISLAMABAD, June 16: The government has decided to allow China and South Korea to set up their tax-free special industrial development zones (SIDZs) in Gwadar. The step is aimed at attracting more foreign investment in the region.

Officials told Dawn on Thursday that more concessions were being offered to foreign investors for the second phase of development of Gwadar, which includes dragging and deepening of the port. The second phase began this month.

The officials said that with the beginning of the second phase, a long-term process had started to set up industrial zones in the port city along with the development of new roads for which the government had earmarked thousands of acres of land.

The second phase would facilitate trans-shipment of Central Asian states, Afghanistan, Iran, China, India and many other countries.

“A number of tax concessions and facilities had already been made available to the local and foreign investors in Gwadar, but we are considering more such concessions not only to have a harbour there but also a complete port city which would be as important as the Karachi Port,” said a senior official of the ministry of finance.

He said that there existed a huge potential to build an oil refinery at the Gwadar port on the pattern of Singapore port for facilitating trans-shipment.

The official said that a number of countries, including those of the region, had expressed their willingness to establish duty-free industrial zones in Gwadar. However, he confirmed that initially China and South Korea would set up their industrial zones for which more concessions could be contemplated.

The port will generate foreign exchange earning as the vessels registered under foreign flags are required to pay some portion of charges in foreign exchange through their local agents for cargoes. The amount earned will not be reflected in the Gwadar port account but will contribute to national foreign exchange earnings. In the present rate of Karachi Port Trust tariff, the foreign exchange percentage is estimated at 33 per cent of charges payable to the port authorities.

Gwadar has an edge over the Port Salalah of Oman and Iran’s proposed upgradation of Port Chah Bahar. However, Gwadar will have to compete with both the foreign ports.

The sources said that Gwadar was expected to serve as a ‘mother port’. The port situated at the strategic location opposite to Straits of Hormuz and on the mouth of Persian Gulf would provide port, warehousing, trans-shipment and industrial facilities for trade with over 20 countries, including Gulf states, Central Asian republics (CAR), Iran, East Africa, Red Sea countries and North West parts of China and India.

The Export Processing Zone (EPZ) has also been planned for assembling plants and other industries which are to be set up by the prospective manufacturers for marketing in the region of Gulf and Central Asian republics.

Oil storage yard and refinery have also been proposed in the north of Gwadar town near the East bay for which an area of 1,000 hectares has been identified. Initially, a storage tank farm will also be constructed followed by a refinery in future.

“Gwadar is going to be one of the major centres for sizable local and foreign investment in this region,” another official said, adding that with improvement of law and order in Balochistan, interest of the local and foreign investors was increasing to make new investment in the province, especially in Gwadar.

The government last month released the first instalment of Rs16.3 billion to help undertake deepening of the Gwadar port which would cost $865 million.

China has promised to provide $50 million soft loan for the second phase of the Gwadar port development. The second phase — Gwadar Deep Water Port Project — was expected to be completed by 2010.

The sources said that the phase-II will be executed by the private sector to accommodate 50,000 dwt container ships, 100,000 dwt dry bulk carriers and up to 200,000 dwt oil tanker, three container terminals (2010m quay length), one bulk cargo terminal (305m length), one grain handling terminal (305m length), one twin-pier oil terminal (688m length), breakwater (600m length), approach channel (16.0/ 20.0m deep), back-up areas, craft and equipment and building, etc.

The phase-I was built by the public sector with the Chinese assistance at a revised cost of $298m. It included three multipurpose berths (602m quay length, one service berth (100m length), 4.35km navigable channel (11.6/12.5m deep), roads, plinths and transit shed, operational craft and equipment, including navigational aids and shore-based port buildings and allied facilities.

The sources said that the completion of phase-II will also help meet strategic needs and standby facility to the Port Qasim and the Karachi Port in case of emergencies arising out of any mishaps. The construction of phase-II will be completed on build-operate-own (BOO) and build-operate-transfer (BOT) basis.