Gwadar Port to contribute $42.2 billion in 40 years: concession agreement to be inked today
KARACHI (February 06 2007): The Gwadar Port will contribute $42.2 billion, in terms of investment, revenues and income received from its entire operations to the exchequer, over a period of 40 years. According to sources, the concession agreement is going to be inked on Tuesday, February 6, between the Gwadar Port Authority (GPA).
Which represents the Government of Pakistan, and the Concession-Holder Company (CHC), which is a subsidiary of PSA (Port of Singapore Authority) International PTE Limited.
The agreement has a duration of 40 years. Besides, it regulates the rights and obligations of both parties. The GPA will receive revenues (not profit) from the PSA over a period of 40 years. The investment, revenues and income received from Gwadar port's entire operations are between $23.6 billion to $42.2 billion.
Firstly, the GPA expects $5 billion to $8 billion foreign investment in the area of Multi-purpose (MP) terminal and related equipment's to cost PSA at Gwadar Port which would be $1 billion to $1.5 billion; container terminal and others $2billion to $4 billion; the cost of Free Zone development $1.5 billion to 2.5 billion; while the marine services and others would cost $0.5 billion.
Secondly, the GPA to receive revenues from CHC over next 40 years is expected between $17 billion and $31 billion. The expected revenues generated from containers and others would be $10 billion to $18 billion; Free Zone to generate $3 billion to $6 billion; while the MP terminal and others would produce $4 billion to $8 billion revenues during the period.
Thirdly, the GPA would receive income from PSA over the period of four decades between $1.6 billion and $3.2 billion, in which the CHC of containers and others would give $0.9 billion to $1.6 billion (9 percent of CHC revenue); Free Zone $0.45 billion to $0.9 billion (15 percent of CHC revenue); and the MP terminal and others would provide $0.36 billion to $0.72 billion (9 percent of CHC revenues).
The Concession-Holder Company (CHC) will establish separate three operating companies for each of the above business areas. Where appropriate, the CHC can cooperate with strategic partners at the level of the operating companies.
The Port-CHC manages terminal and cargo operation. The CHC will take over the marketing and operations of the current terminal area, which provides 602 metres of berthing and will invest in and expand berthing space in line with demand during the concession period up to a total maximum of berthing space of 14 berths at an area of 4.2 km. These facilities will cater for container cargo and miscellaneous cargo.
The Marine CHC services consist of piloting, tugging, mooring, and vessel traffic control and anchorage management and related marine services, such as bunkering facilities. The CHC shall expand the fleet of pilot and tugging vessels in line with demand.
The AKD Group would have majority CHC and operate the 'Free Zone CHC' and shall develop and operate this area and market its facilities and services. The area set aside within this concession for Free Zone activities related to the port has a size of approximately 923 hectares.
THE ROLE OF GPA: As Port Authority, it will remain responsible for the development and maintenance of common port infrastructure, such as access channels, breakwaters and access roads as well as navigational safety and port security.
The terminal areas under the concession, two terminal areas will be developed including multipurpose terminal area. This terminal includes the existing facilities and the areas will be expanded in easterly direction up to a total length of 4.2 km. It caters for various types of cargoes.
The container terminal area is located along the western and north-western coastline of the 'East Bay' and is to be developed by the CHC. The financial arrangements between the parties are simple and the CHC will pay a fixed share of its revenues to the GPA.
For the cargo operations and for marine services, this percentage is set at 9 percent of the revenues. For the Free Zone business, the percentage is set at 15 percent of revenues. The tax incentives for the CHC are given a complete tax holiday for the first 20 years of the concession. This applies to federal, provincial and local taxes.
The materials and equipment that will be used in the construction and operations of the port will be kept free of taxes. Likewise, the bunker oil used in the port or sold to visiting ships will be kept free of duties. These privileges will remain throughout the concession period.
The purpose of the Free Zone is to develop and operate facilities and businesses that are conducive to and dependent on the development of the port. The companies and business activities that are targeted for operations in the Free Zone, which is a customs-bonded area within the land area of the port, will be given a tax holiday of 20 years.
The concession holder will develop at least 20 percent of required facilities within the Free Zone area. The remainder will be developed by either the concession holder or by other investors.
The exports of goods from the 'Free Zone' into Pakistan are subject to normal import duties. Exports of goods from Pakistan into the Free Zone are subject to normal export duties, if any.
The imports and exports of goods that are only moving through the Free Zone, but do not enter Pakistan (transit and transhipment), are kept free of duties, which is in line with normal practices for such facilities.
THE START-UP: The concession holder has committed that the first ship and the first cargo will be handled in Gwadar port in March 2007. The concession holder has committed to install two additional quayside gantry cranes for the handling of containers within nine months period.
THE SELECTION AND NEGOTIATIONS PROCESS: The international management-consulting firm of Arthur D. Little has overseen the entire process and has acted as technical advisor to GPA during the process. This consulting firm has extensive global experience and expertise in port planning and in negotiations with port and terminal concession holders.
The selection process has followed the normal procedure of invitations for expressions of interests (EoIs), pre-qualification and short-listing of bidders, issuance of tender documents and technical and financial evaluation of tender proposals, followed by negotiations with the winner of the tendering process.
The tender proposals were received on December 4, 2006 and the negotiation process started on December 27, 2006. The entire selection process was started on September 27, 2006, and completed on February 5 this year.
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