ISLAMABAD, June 9: The government is expected to shortly announce a 15-year tax holiday for the proposed Export Processing Zone (EPZ) being planned near the Gwadar Port for local and foreign investors.

Informed sources told Dawn on Friday that the zone would be exempted from customs, sales tax and excise duty with a view to promoting investment in Gwadar.

A special package is currently being worked out by a committee comprising the chief secretary of Balochistan and two other federal secretaries in order to help establish a trade and energy corridor from Gwadar to Central Asia and Gwadar to China.

The sources said that a number of foreign investors had shown interest in establishing mega refineries, building storage capacity and undertaking other businesses in Gwadar to help expedite the process of industrialization in Balochistan.

With the completion of both phases of the Gwadar Port, a special industrial development zone (SIDZ) with an area of 4,000 hectare has also been proposed for setting up various industries. The SIDZ is located on the north of Gwadar town at a distance of about 30km from the port.

The sources said the most of work at the Gwadar Deep Sea Port had been completed and that the port could be fully operational by June 30 this year. They, however, do not believe that the inauguration of the port has been delayed till December this year.

“From our side, there is no delay. However, the government wants a private operator to take the charge of the port for which things are being finalized,” a source said, adding that after Dubai Ports World, the Singapore Port has also shown interest in operating the port. He said the government was currently looking into the terms of reference after which a decision would be taken as to who should be the operator of the Gwadar Port. China, he said, also wanted to have this contract given to some Chinese operators.

However, a source quoting Chief Minister Balochistan Jam Mohammad Yousuf said the government had given the contract to Dubai Ports World to operate the port.

Representatives of the Singapore Port had also met President Pervez Musharraf recently and were told that the consultants would decide on the issue after having gone through all the aspects.

The sources said foreign vessels could come and unload their goods, as over 90 per cent work of port has been completed. They said the first phase of the construction had almost finished owing to the disbursement of additional $50 million to the ministry of communications by the government. The Gwadar Port is being completed at an upwardly revised cost of $298 million.

The additional funding has been provided to urgently install the required equipment, complete the civil work and build roads linking the port with Quetta and other upcoming areas.

However, sources said the government has decided not to allow construction of the second phase of Gwadar port unless its first phase was fully completed, which was originally to be competed in April 2005 at a cost of $248 million.

The Chinese side has completed its work while the local authorities have completed the infrastructure, including the building of a road from Gwadar to Karachi. The sources said the second phase of the project would be undertaken, hopefully later this year, at a cost of $865 million. It will be completed by 2010.

Phase-I was being built by the public sector with the Chinese assistance and 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 pointed out that the completion of phase-II would help meet strategic needs and standby facility to Port Qasim and Karachi Port in case of emergencies arising out of any mishaps. The construction of phase-II will be completed on the basis of build operate own (BOO) and build operate transfer (BOT) basis. "However, if the private sector does not respond favourably, the public sector financing will be required to develop phase-II of the port," a source said.

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

Officials said Gwadar had 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.

Gwadar is expected to serve as `mother port’ at the strategic location opposite to Straits of Hormuz and on the mouth of Persian Gulf and provide port, warehousing, trans-shipment and industrial facilities for trade with over 20 countries, including Gulf states, Central Asian republics, Iran, East Africa, Red-Sea countries and North West parts of China and India.