The Truth about Gwadar

[Samudra]

Sorry Gentlemen, but I've told you this before....

This gentleman Abdul Majeed is presenting a lot of facts - numbers, to support his claims.And he's your guy.

The government claims that the Gwadar project will change the face of the earth and the fate of Balochistan; that it will turn the area into a special economic zone where banks will open their branches, five star hotels will be built, offshore banking will begin, factories, warehouses and storage will be set up, and the tourism industry will be promoted in the area. An export processing zone will be set up making Gwadar a regional hub of trade and investment activities, a very attractive place for direct foreign investment. Most important of all, it is regarded as a panacea for the social, economic and political problems of Balochistan, although the people of the province have realised the fallacious nature of these claims. It is also considered of strategic importance, an alternative to Persian Gulf ports, and a gateway to Central Asia. A new addition to the potentials of the project is that it will be an energy corridor for China.

There are no facts and figures to support these claims or to indicate how the benefits will be realised. The ground realities are different from the official claims. The facts are briefly as follows.

The Gwadar port is already a failed project. A mini-port was built in 1988-92 at a cost of Rs1,623 million including the foreign exchange component of Belgian Franks of 1,427 million, equivalent to Rs749 million, arranged by the contractor. The port facilities included 3 berths of 3.5 meter depth capable of accommodating ships of up to 1000 DWT, one 80 ton crane, two 25 ton cranes each, a dredger and support equipment. No ship worth the name ever called the port. No investigations were carried out to identify the causes of the failure of the port which still hold good.

The viability of a port depends on its hinterland. Gwadar has none. The area behind the coast for a 600 km depth is barren, and comprises a desert and hilly terrain. It does not generate or attract a single ton of sea worthy traffic. Hence all exports or imports will come from and go to other areas of the country.

So far, Gwadar is linked with Karachi only by a 653-km-long coastal highway which takes off from N-25 between Sonmiani and Uthal and goes 80 km west of Gwadar up to the Iran border. The correct distance between Karachi and Gwadar is not known. It varies from source to source. A most favourable figure of 650 km is used for evaluation. Other links are under construction. All traffic to and from Gwadar will have to pass through Karachi and incur an additional cost of carrying goods for another 650 km by road. No sane person will by-pass Karachi just to avail port facilities at Gwadar 650 km away. The other two links, namely, Gwadar-Ratodero motorway and Gwadar-Turbat-Hoshab-Panjgur-Surab road, are under construction and will take years to complete.

Even after completion of under-construction road links and proposed rail links, all areas proposed to be served by Gwadar port will remain closer to Karachi. The nearest point of transit trade of Afghanistan and Central Asian States is Chaman. Its distance from Gwadar by the shortest route (Gwadar-Panjgur-Surab-Quetta-Chaman) will be 1,066 km as compared to 816 km from Karachi to Chaman, 250 km longer than from Karachi. The nearest point where Gwadar is proposed to be linked with the rest of the country is Ratodero on N-55 (Indus Highway). Its distance from Gwadar is 892 km as compared to 494 km from Karachi, a difference of 398 km.

In the case of a rail link, the distance of 515 km between Gwadar and Dalbandin via Panjgur is an underestimation. The direct distance by road from Gwadar to Panjgur is 411 km. From Panjgur to Dalbandin, the air route distance on the map is 212 km. Thus the distance from Gwadar to Dalbandin will be more than 623 km. Quetta is another 343 km from Dalbandin and Chaman is 142 km from Quetta. If the distance between Gwadar and Dalbandin is taken as 515 km, the distance of Chaman from Gwadar by rail will be 1,000 km as compared to 1,003 km from Karachi via Rohri, a difference of only three kilometres which will be more than offset by higher speeds on the main line. If the distance from Gwadar to Dalbandin is taken as 623 km, which is more likely to be the case, the distance to Chaman will be 105 km longer.

It may be noted that Karachi and Chaman are located on the same longitude and Karachi and Gwadar on the same latitude. As such, Karachi Chaman and Karachi Gwadar make two sides of a right angle triangle. Gwadar-Chaman is the hypotenuse of the triangle which will be longer than any of the two sides. This means that the distance between Gwadar and Chaman will remain longer no matter how direct and straight a route is followed.

It may also be noted that three roads linking Gwadar with the road network of the country join N-25 (Karachi-Kalat-Quetta-Chaman) at Uthal, Khuzdar and Surab and km 120, 385 and 477 from Karachi respectively. In comparison to the coastal highway, the 650 km Gwadar Khuzdar road will save the 148 km distance to Quetta whereas the Gwadar-Panjgur-Surab route (727 km) will save only 15 km over the Gwadar Khuzdar road. The relative costs and benefits of competitive road facilities do not seem to have been considered at all.

Besides the increase in the cost of transport because of longer distances, unit rates would also be higher for movements to and from Gwadar as compared to Karachi. The latter is a big industrial and commercial city and generates a large volume of passenger and goods traffic. A large number of goods' vehicles are always available and return loads are often available to and from upcountry. Therefore, charges are competitive and minimal. In the case of Gwadar, imports and exports, if any, would not be so synchronised as to provide return loads to all trucks visiting the town. Transporters would cover round trip costs from one direction. As such, unit rates could be 50 to 100 per cent higher than for Karachi.

Although roads have their own utility and are the sole means of transport for upcountry movements, water transport, is more than 10 times cheaper than road transport. Where both land and water transport are available, water transport would have a far greater cost advantage over land transport. Movement of many bulky commodities which cannot bear the cost of land transport would become feasible by sea. Existing berths in Gwadar can handle ships of 1000 DWT.

Therefore, goods to and from Gwadar can be carried by sea to Karachi and distributed to inland and foreign destinations, at far less cost than the coastal highway. If one is to indulge in such absurdities as to import goods at Gwadar and carry them to Karachi for onward distribution, it should be done at a lower cost by using coastal shipping rather than road transport.

http://www.thenews.com.pk/daily_detail.asp?id=17800

 

[Samudra]

Part II

The Afghan transit traffic passing through Karachi makes up hardly 5-10 per cent of Pakistan’s exports and imports. No ship would call on Gwadar port for transit cargo and Karachi for Pakistani cargo. If Afghan transit cargo is forced to shift to Gwadar, the advantage of distance which Pakistan has over Iranian ports will be lost and Afghanistan would prefer to use Iranian ports of Bunder Abbas and Chah Bahar where transportation links are far better than Pakistan.

There will be no saving in shipping costs by using Gwadar. Shipping charges are more often than not the same for a region and a group of ports. For a ship coming out of the Suez Canal, there is little difference in distance to the ports at Karachi, Bombay or Madras. For calling at Gwadar port, the ship may have to turn back a little. The time and distance would not be less than Karachi.

The only saving in distance will be to and from the Persian Gulf ports. Since there is no consumption or production in Gwadar, all cargo would have to be carried to Karachi and further inland. In this case, movement by sea will be substituted by road transport which is 10 times more expensive.

The point about the Gwadar port providing an outlet to China is misleading. :read:

Karachi ports are nearer and can provide better facilities if there is any traffic to and from China. China is linked with Pakistan by the Karakorum highway, across the Khunjrab pass which is 17,000 feet above sea level and is snow covered most of the year. The border is open for 3-4 months in a year. If China had any need for a port in Pakistan, she could have used the Karachi port. The fact of the matter is that the south-west of China is as barren, sparsely populated, and under-developed as the north-east of Pakistan adjoining China. There is little economic activity for more than 1,000 km on either side of the border. Most of the trade with China takes place by sea. Another port in Pakistan, with a more difficult approach, would be of little help to China.

Handling of transit trade of the Central Asian States is another faux-pas. In the first instance, the Central Asian States are double landlocked. Kyrgyzstan and Kazakhstan can be approached through China while Tajikistan and Uzbekistan can be approached through Afghanistan. The use of Pakistani ports by these countries would have to make transit arrangements not only with Pakistan but also with China and Afghanistan. Goods through China would have to pass through the Khunjerab pass which is open for three to four months in a year. Trade through Afghanistan will pass through Quetta and Peshawar which are already connected with Karachi which is closer than Gwadar, with well established means of transport and communications. Had there been any potential of transit trade by these countries, they would have used Karachi port.

The economies of the Central Asian States are quite small. Their population is nearly half the size of Pakistan and the GDP is about 60 per cent of Pakistan. However, their exports and imports are of the same size as of Pakistan, but most of their foreign trade is among CIS states. They are also linked by rail with Moscow, and East and West Europe. There is thus little potential of transit trade through Pakistan.

The wish list of the authorities includes shipping related industries, oil storage, refinery and petrochemicals, export processing and industrial zones. Since there is no local market, anything produced here would require additional transhipment costs for movement to other places. Not worthwhile.

For location of industry, one or more factors of production should be available at a cost lower than at other places or there should be savings in distribution costs by way of proximity to the market. Gwadar does not have any factor of production, nor is there any market. Even basic necessities of life like water, power, and communication facilities are not available. There is no raw material of any kind, no skilled or unskilled labour, not even population. Existence of barren land and harsh climate are not sufficient to attract any kind of industry to such a location. It is not possible to import everything from outside and export products. No industrialist is going to risk his capital at such a barren place. If any industry is established with government incentives, it would be uncompetitive and suffer losses.

(i) On the basis of economic and operational considerations, the Gwadar port project is a non-starter. No commercial ship is ever likely to call the port, no matter what level of facilities are provided. Handling of transit trade of Afghanistan, the Central Asian States and China is out of the question. The location of industry is a pipedream.

(ii) When the port is not operational, all other projects, plans and programmes, based on busy port activity, will fall to the ground like a house of cards. Money being spent haphazardly on public sponsored projects is going to be wasted. At the end of the day, there will be nothing but disappointment.

(iii) If, to justify the actions of the authorities, operation of the port is forced artificially by tax exemptions, duty rebates or requiring government controlled imports and exports to be made through Gwadar, the port can become a dumping ground of foreign goods and a smugglers den. There will be loss of revenue to the government and damage to the local industry and the economy as a whole. If this is the objective, it can be achieved at any nearby place without any investment.

(iv) The reason why poor countries are not developing in spite of huge grants and loans from international institutions and developed countries is because it is a waste of money on useless projects. Investment is made to generate income and create employment. If we invest Rs100 and earn Rs110, it is development. If we earn Rs90 only, we are getting poorer. This is the case with most of the public sector projects and Gwadar port is no exception.

(v) Development of a place or an area is not an objective in itself. It is improvement of the lives of the people that matters. Therefore, the best course would be to improve the capabilities of the people of Gwadar. Their supplies and products can be carried to and from Karachi in small ships, with no extra capital cost and very low operating costs.

(vi) Transport is not a thing of personal use like a palatial house or a fancy dress of which one can feel proud. It is an intermediate good, a cost item in the process of production, which should be minimised. There is no use in investing money to do something which can be done at nominal cost without any investment. This is not development.

(vii) The investment on port and related projects is exceeding Rs100 billion. Its interest cost at 10 per cent will be Rs10 billion per year at least. To earn Rs10 billion, there will have to be a turnover of Rs100 billion or more. Would facilities at Gwadar create that much activity? Not possible by any means. The chances are that after investing Rs100 billion, the government will have to spend Rs10 billion per year on the maintenance of those facilities. Today the biggest drain on national resources are so-called development projects like Gwadar port.

(viii) Then why there is so much enthusiasm? Fools rush where angels dare not tread. There are vested interests, consultants and contractors. There is money for everyone in the implementation of projects. It is none of their concern if such projects are viable or not. The authorities, who are presenting the project at international forums and to rulers of Middle East countries, must have something at stake.

Concluded

The writer is a transport economist and served as chief of the National Transport Research Centre in Islamabad. Email: abdul.majeed@dsl.net.pk

http://www.thenews.com.pk/daily_detail.asp?id=17889

 

[Bull]

thanks for the article.
Surprisingly no reply

 

[sparten]

Been posted and debated endlessly. Especially back in the 90's when the whole thing was just a propasal. Most of what he says has been either, refuted or is no longer relevent.

It must be a slow news day.

 

[Samudra]

Sparten,

The article is dated as July'31 2006.
Did'nt know that the objections mentioned debated and beaten to death already.Atleast I have not seen any in this forum.

Still, I'd like to know how Gwadar will help improve Sino-Pakistani trades.

 

[Bull]

A lot of Chineese money has gone into Gwadar and they are people whoare know to make things work.So there has to be some purpose.

 

[Samudra]

Nothing on the economy side.

A naval base makes sense...if and when PLAN is prepared to venture so far...

 

[sigatoka]

Concluded

The writer is a transport economist and served as chief of the National Transport Research Centre in Islamabad. Email: abdul.majeed@dsl.net.pk

http://www.thenews.com.pk/daily_detail.asp?id=17889

The problem with his analysis is that he ignores the fact that this new port can serve as a sort of insurance policy if Karachi is blockaded.

Secondly building the pyramids in Balochistan makes sense if just to reduce unemployment and generate flow on economic activity. At least building the ports does have some economic value in easing imports and exports. (secondly the author says there is little economic activity in the area and hence the port will be useless. He doesnt address the reason that economic activity might be low precisely because there isnt world class infrastructure to support exports.)

Also if this port is the reason that new roads are built and old ones upgraded, for gods sake more Gwadar's are needed. China's economic success is built on world class infrastructure (which includes ports and roads) which have helped its exporters become the best of world.

Secondly the primary complaint of Balochistan is that even with massive gas reserves their region is the poorest, such projects help bridge the gap and make the nation more cohesive.

 

[sparten]

Sam,
He simply posted up a lot of old objections. The m ain arguement is infrastrucrure, and while that is what stopped the place from being built for 30 years, it is no longer an issue today, makran highway, Balochitsan's natural riches etc, etc.

 

[Neo]

I'd run into this article the day it was published but decided not to post it here or elsewhere since the author lacks knowledge.
Problem is not Gwadar but his own negative views and he's ignoring major facts.
More on this later...

Neo

 

[Samudra]

I'll wait Neo.
At the end of the day it is possible that the author is a bean counter.

 

[RAPTOR]

I'd run into this article the day it was published but decided not to post it here or elsewhere since the author lacks knowledge.
Problem is not Gwadar but his own negative views and he's ignoring major facts.
More on this later...

Neo

Seems like this author is trying really hard to convince people that Gwadar isnt a viable project...

Is he working for RAW??:idiot:

 

[Bull]

Seems like this author is trying really hard to convince people that Gwadar isnt a viable project...

Is he working for RAW??:idiot:

Yeah last time i checked he was.

Anyways,
The main reason given by the author for the non viability of the port is the lack of economic activity.

If Neo could clarify what portion of the minerals excavated are exported/domestically used,we might get a clearer picture.As if majority of it is used for export,then the port could be used in a more viable way.

Sig,
Pakistan cant afford to just keep a port open and oil ,so that it can use it as a buffer in case In bockades karachi.What if no war breaks up for another 50 years.Then?

Any investment has to be economically viable.

 

[sigatoka]

Sig,
Pakistan cant afford to just keep a port open and oil ,so that it can use it as a buffer in case In bockades karachi.What if no war breaks up for another 50 years.Then?

Any investment has to be economically viable.

Bull u wud pay for house insurance agaisnt fire when it is very likely that your house will probably never be burnt down. However you are willing to pay good money to the insurance company for it, the value of Gwadar has two components.

1. Economic Value
2. Insurance (military) value

The military value can be calculated and valued in much the same way you decide how much to pay for house insurance. (the author specifically ignores the insurance value)


Secondly UAE is a dessert, however govt. building world class infrastructure has brought the commerce to the dessert.

 

[Awesome]

Sorry Gentlemen, but I've told you this before....

This gentleman Abdul Majeed is presenting a lot of facts - numbers, to support his claims.And he's your guy.




http://www.thenews.com.pk/daily_detail.asp?id=17800

The loooong tantrum against the Mekraan Coastal highway is nothing new. But aren't we ignoring the fact that Gwadar is ALSO to be connected to the National Highway which runs from south to north?

It's not done yet. Karachi is basically the closest big city and the base of operations in getting Gwadar up and running. The City ain't done yet... Connectivity would be Gwadar's TOP trump card when it's done.

And the other fact that for 600 km there's nothing there? Hmmm well that's not true tens of projects are underconstruction its not just a port that we're building we're building a port city. Of course people never thought Dubai would get off either but it did. Fact is when the ports come in, port related businesses come in too.

Virtually all the commercial property in Gwadar is already sold, what does that tell you about it?

And the third rant that there's little activity for 1000km around Gwadar, well then, hello that IS the point. Gwadar will be the center, unchallenged, uncontested. It's not like the Pak government is relying on people to come in with their money and build a city. We're building a city and making it easy for people to come in.

Nothing but ancient rants.