September 24, 2010 / 12:52 PM / in 7 years

China in focus as Pakistan urged to review port deal

ISLAMABAD, Sept 24 (Reuters) - Pakistan should review a deal with a Singaporean company to run a strategic shipping port, the Navy chief said, amid speculation the contract may go to key ally China.

Pakistan is keen to become a conduit for trade to landlocked Afghanistan and Central Asia and now has three major ports -- Gwadar in Baluchistan province and two at Karachi, 450 km (280 miles) to the east.

Admiral Noman Bashir, also government adviser for maritime development, was quoted by Pakistan media calling for a review of the contract to run Gwadar with Singapore’s PSA International Ltd [PSAIN.UL] because the port was not operating to expectations.

“I‘m saying this with great concern that the purpose for which the Gwadar port was built is not being achieved,” Bashir told reporters in a news briefing shown on television on Friday.

“We have given them a lot of concessions and no commitment was taken from them in return. That’s why this agreement should be reviewed.”

PSA, which runs ports around the world and is owned by state wealth fund Temasek Holdings [TEM.UL], declined to comment.

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Conceived over a decade ago, Pakistan hoped Gwadar, 70 km (45 miles) east of the Iranian border and on the doorstep of Gulf shipping lanes, would handle transshipment traffic for the Gulf.

Bashir’s comments came on the heels of a media report last week saying the project may be given to China, which provided 80 percent of its initial $248 million development costs.

China is already involved in engineering, mining, nuclear energy and construction projects in the country, and has invested in Pakistan’s transport and mobile communication sectors.

“The expectation was that (PSA) would bring in trade, but it has not done so and turned the whole port -- built with Pakistani and Chinese investments -- into a white elephant,” said Rasul Bakhsh Rais, professor of political science at the Lahore University of Management Science.

He said the admiral’s statements and earlier media reports were “preparing the ground” for cancelling the deal and awarding operation of the port to China.

“I think it would be a wiser decision to cancel this agreement and tie up with the Chinese, who are interested in trade corridors and in gas and oil pipelines in the region.”

If under Chinese control, Gwadar would give Beijing more economic sway in the region and upset Pakistan’s traditional enemy, India, which views China’s ties with Islamabad with suspicion.

PSA International took over management and operational control of the deep-sea port in February 2007 for 40 years.

(Editing by Rebecca Conway and Nick Macfie)

For more Reuters coverage of Pakistan, see: here

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