Last month Saudi Arabia has signed an agreement with Pakistan for setting up a $10 billion oil refinery and petrochemical complex in Gwadar port, which is the biggest investment project of Saudi Arabia in the country. The proposed ARAMCO oil refinery, termed as ‘state-of-the-art facility’, will have capacity of 250,000 to 300,000 barrels per day. The site has been identified, and land allocated for the project. The proposed refinery will facilitate to secure long-term buyers of Saudi oil, including China. A pipeline from Gwadar to Kashgar will reduce the oil supply time from present 40 days to only 7 days on its completion.
Construction of the proposed integrated refinery petrochemical complex will further strengthen strategic regional geopolitical importance of Gwadar, providing impetus for further investments, domestic as well as foreign. There are already positive signs. Saudi Arabia has agreed to set up facilities for supply of crude oil and petroleum products to Pakistan. Also, it is expected to invest in RLNG (Regasified Liquified Natural Gas) plants through $4 billion Saudi Fund for Development. Other investment oppor- tunities identified by Saudi Arabia in petrochemical projects are to the size of one billion dollars.
Gwadar is indeed planned to be new Dubai in future. Gwadar is pivotal component of the China Pakistan Economic Corridor (CPEC ) program being implemented across the country. Gwadar district has a 600-kilometer coastline. Gwadar city has an area of 12,637 square-kilometer with a population of 90,762. Gwadar city population is projected to be around 500,000 by the year 2020. It is being developed as a deep-water port for international trade as well as a modern city with all infrastructure and social sector facilities. The Chinese claim that Gwadar is to be expanded on the lines of its trade and industrial hub Shenzhen, rival to Hong Kong.
Gwadar port was developed in 2007 at a cost of $248 million, in the first phase, having three multipurpose large berths of 200-meters long each. Under a concession agreement signed in 2013, the management and operation of Gwadar port was given to the Chinese effective late 2015 for a period of 43 years i.e. until 2059. It was decided by Pakistan to further develop and expand Gwadar port in second phase, under the umbrella of the CPEC, with the construction of additional multi-purpose berths and other facilities, at a cost of $600 million. Thus, Gwadar port was made operational for the container vessels in March 2018, whereas it is scheduled to be fully operational by end of this year. Various projects for Gwadar port as well as the city are being executed under the CPEC program. Construction work of Gwadar East-bay Expressway linking the harbor and coastline is in progress. It is being financed under the Chinese interest-free loan of $143 million, and scheduled for completion by October 2020. Draft business plan is under review for construction of breakwaters and dredging of berthing areas and channels for Gwadar port. Water desalination plant, being constructed on Build-Operate-Transfer (BOT) basis, is in advanced stage (phase-1). Contract for construction of new Gwadar International Airport has been signed. CPEC Emergency Medical Centre costing $1.6 million under the Chinese grant is under construction, while feasibility of China-Pak Friendship Hospital has been completed. Land has been acquired for Pak-China Technical and Vocational Institute. A coal-based power plant of 300-MW capacity is to be established.
Gwadar Port Free Zone is being developed on 2,280 acres adjacent to the Port. First phase of development has been completed, and, reportedly, ten industrial units will shortly start operations. These include Bao Steel Park, petrochemical, stainless steel, auto parts manufacturing, edible oil and other industries. Export Processing Zone is being developed by Export Processing Zone Authority (EPZA) on 1,000 acres on BOT basis, and an Industrial Zone by Gwadar Industrial Estate Development Authority (GIEDA) on 3,000 acres. Gwadar Seaport City Master Plan project covering 130,000 acres, for which Chinese grant of $4 million is provided, has recently been approved by the federal government.
Gwadar port is being managed and operated by China Oversea Ports Handling Company (Pvt) Limited (COPHC), the Pakistan branch company of Hong Kong based China Oversea Ports Handling Company Limited (COPHCL). Also, COPHC Pakistan is developing Gwadar Free Zone, through its subsidiaries namely Gwadar International Terminals Ltd, Gwadar Marine Services Ltd and Gwadar Free Zone Co Ltd. COPHC is also responsible for social sector development in Gwadar, including a university on marine and marine-related subjects and livelihood project for development of fishing, boat-making and maintenance services. The company is also involved in the development of Gwadar city master plan.
However, there are some issues. COPHC Pakistan is a company of unknown credentials. According to media, the parent company COPHCL is not a state-owned Chinese company as claimed, and is a one-room company registered in Hong Kong, having no website address. Also, COPHC Pakistan has not yet been granted the mandatory security clearance by the Ministry of Interior to work in Pakistan, which is pending since November 2014.
This clearance is required by the Securities and Exchange Commission of Pakistan (SECP) where the branch company is incorporated, and by the Board of Investment too. Considered a matter of national security, the National Assembly Standing Committee on Finance, Revenue and Economic Affairs, in its 69th meeting held on March 13, 2018, while discussing Agenda 3 (to discuss the status/registration of COPHC-Pakistan and its role in Gwadar), had directed the SECP to launch an investigation against the Chinese company. There has been no headway since then. In fact, Asad Umar was the one to raise the issue in NA Standing Committee, but there seems to be no follow-up since he became the Federal Finance Minister.
Interestingly, SECP has signed an agreement with COPHC on August 25, 2016 for setting up a facilitation center in Gwadar Free Zone to extend assistance to the investors. Likewise, the Federation of Pakistan Chambers of Commerce & Industries (FPCCI) has signed an agreement with the company in June 2018 to establish its office in COPHC building to be provided free of cost. It is of critical importance for the future of Gwadar and Pakistan too that the government finds out profile, background and working of COPHCL, the parent Chinese company, to establish its credentials without further delay. Perhaps, COPHC has taken advantage of the name of state-run China Overseas Holdings Limited in Hong Kong, which is a subsidiary of China State Construction Engineering Corporation.
The writer is former chairman of the State Engineering Corporation