Foreign direct investment (FDI) for 2008 showed 214.5 million dollars injection by the Singapore Port Authority (SPA), as required under the concession agreement. However, a report compiled by Planning Commission''s Task Force on Maritime Industry recommends that the agreement with SPA be cancelled due to its failure to invest as per the concession agreement.
The Task Force in its report has recommended either revisiting the concession agreement with SPA or cancelling it. "The best option is to cancel the agreement," the Task Force has recommended, adding that the penalty for cancellation of the agreement would be in the range of $8 to $10 million. Pakistan and PSA had signed a concession agreement in February 2007 to operate Gwadar Port.
"(The) government of Pakistan had signed a 40-year concession agreement, but even after the passage of three years no commercial vessel has berthed at Gwadar Port," the report said, adding that there was no possibility of landing commercial vessels at Gwadar Port for many more years to come.
The report notes that the road and rail links to Gwadar Port, critical to boosting its economic activities, have not yet been developed. "Road connectivity will take four years, and rail connectivity around 10 to 15 years," said the Task Force report submitted to Planning Commission.
The only activity at Gwadar Port has been taken by the government. As many as 72 ships, bearing government cargo, have landed at Gwadar Port and the government has paid Rs 2000 per ton subsidy to PSA which has accumulated to Rs 200 million. The main bottleneck is the transfer of land to PSA. According to the agreement, 2281 acres of land on waterfront was to be purchased by the government and transferred to PSA at no cost for 40 years. PSA was to lease it for 99 years to other parties for trade activities.
"The cost to the government for procuring land is approximately Rs 15 billion," the report says. PSA had committed to spend $525 million in the first five years. However, it is unwilling to invest without land, the report adds. Balochistan government had strongly opposed the existing Concession Agreement with PSA and the report suggests that the Baloch be taken on board regarding operations at Gwadar Port.
The report says that Gwadar Port is not a viable port for transshipment between Central Asia and the Middle East until Afghanistan is politically stable and Western China is connected by road and rail links. Despite being at the mouth of the Gulf, no facility exists at Gwadar to support an oil industry, and there is no possibility of providing necessary facilities for oil industry in the near future, the report said.