Executive Briefings

China Expands Footprint in Port Operations in South Asia

By recently taking charge of the Gwadar port in Pakistan, China has increased its presence in Southern Asia's port sector, much to the concern of the Indian Government.

The transfer in February of the Pakistan Government's 40-year concession to manage Gwadar port from Singapore-based PSA to China Overseas Port Holding Company (COPHC) is described by Pakistani leaders as a new economic opportunity and milestone in Pakistan-China bilateral relations. China has agreed to finance more than 80 percent of the $248m cost of the port. Although PSA originally agreed to manage the project, it withdrew from the deal due to lack of clarity over the development of related infrastructure.

However, other neighbouring countries and political analysts outside of Pakistan see it as a strategic gain for the Chinese.

This is because Gwadar is located in Pakistan's western province of Balochistan, 70 km east of the Pakistan-Iran border, so just outside of the Strait of Hormuz, a major choke point of the Middle-East Gulf. Any politico-military blockage in the Hormuz strait should not immediately affect its operations, therefore. Gwadar's container terminal is expected to have three to four berths dredged down to 14 metres alongside, along with other necessary infrastructure. Given the importance of the location, the port is expected to be both a gateway into Pakistan's hinterland and border with China, and a transshipment hub for the Middle East and Indian Subcontinent. It could also serve as an oil corridor between the Middle East, including Iran, and China.

China is also investing heavily in the southern Sri Lankan port of Hambantota, which is also strategically well placed for main line services between Asia, the Indian Subcontinent, Middle East and Europe. Total estimated construction cost of the Phase 1 of the project is $361m, out of which 85 percent has been funded by the Ex-Im Bank of China. The basic infrastructure in the port has been completed, and ro-ro operations started in June last year.

Although container operations have yet to start, Sri Lanka's Port Authority has designed the third and fourth phases of the Hambantota Port with more than 20 million-TEU annual capacity. The proposed terminals will definitely act as a supplement to the existing port of Colombo and cater to the growing demand on the East-West shipping routes.

The Sri Lankan Government is clearly comfortable with China, as the first phase of its South Harbour Container Terminal, due to open in July with a capacity of 2.4 million TEU, is funded by Hong Kong-based China Merchants Holding International to the tune of $500m.

China is additionally investing in a container terminal in Chittagong (Bangladesh), as well as a number of other infrastructural projects.

As India last went to war with China as recently as 1962, it is naturally uncomfortable with this increasing presence of China in the region.

India has always wanted to have a dominant presence in South Asia, especially in the India Ocean region. Up to now China has been no match to this, but many fear, rightly or wrongly, that China's aggressive port strategy might be a stealth attack through the back door.

On the other hand, China argues that all of these projects are only commercially driven, so should be seen by local governments as just a helping hand in infrastructure development. That may well be so, but it is interesting to note that the UN has also voiced concerns over the true intentions of the Chinese in Gwadar. Shipping and politics, it seems, are still heavily entwined.

Source: Drewry


Keywords: international trade, transportation management, supply chain management, Chinese hipping operations, Chinese port operations, China Overseas Port Holding Company, Gwadar Port, Drewry, Logistics Management: Ocean Transportation

The transfer in February of the Pakistan Government's 40-year concession to manage Gwadar port from Singapore-based PSA to China Overseas Port Holding Company (COPHC) is described by Pakistani leaders as a new economic opportunity and milestone in Pakistan-China bilateral relations. China has agreed to finance more than 80 percent of the $248m cost of the port. Although PSA originally agreed to manage the project, it withdrew from the deal due to lack of clarity over the development of related infrastructure.

However, other neighbouring countries and political analysts outside of Pakistan see it as a strategic gain for the Chinese.

This is because Gwadar is located in Pakistan's western province of Balochistan, 70 km east of the Pakistan-Iran border, so just outside of the Strait of Hormuz, a major choke point of the Middle-East Gulf. Any politico-military blockage in the Hormuz strait should not immediately affect its operations, therefore. Gwadar's container terminal is expected to have three to four berths dredged down to 14 metres alongside, along with other necessary infrastructure. Given the importance of the location, the port is expected to be both a gateway into Pakistan's hinterland and border with China, and a transshipment hub for the Middle East and Indian Subcontinent. It could also serve as an oil corridor between the Middle East, including Iran, and China.

China is also investing heavily in the southern Sri Lankan port of Hambantota, which is also strategically well placed for main line services between Asia, the Indian Subcontinent, Middle East and Europe. Total estimated construction cost of the Phase 1 of the project is $361m, out of which 85 percent has been funded by the Ex-Im Bank of China. The basic infrastructure in the port has been completed, and ro-ro operations started in June last year.

Although container operations have yet to start, Sri Lanka's Port Authority has designed the third and fourth phases of the Hambantota Port with more than 20 million-TEU annual capacity. The proposed terminals will definitely act as a supplement to the existing port of Colombo and cater to the growing demand on the East-West shipping routes.

The Sri Lankan Government is clearly comfortable with China, as the first phase of its South Harbour Container Terminal, due to open in July with a capacity of 2.4 million TEU, is funded by Hong Kong-based China Merchants Holding International to the tune of $500m.

China is additionally investing in a container terminal in Chittagong (Bangladesh), as well as a number of other infrastructural projects.

As India last went to war with China as recently as 1962, it is naturally uncomfortable with this increasing presence of China in the region.

India has always wanted to have a dominant presence in South Asia, especially in the India Ocean region. Up to now China has been no match to this, but many fear, rightly or wrongly, that China's aggressive port strategy might be a stealth attack through the back door.

On the other hand, China argues that all of these projects are only commercially driven, so should be seen by local governments as just a helping hand in infrastructure development. That may well be so, but it is interesting to note that the UN has also voiced concerns over the true intentions of the Chinese in Gwadar. Shipping and politics, it seems, are still heavily entwined.

Source: Drewry


Keywords: international trade, transportation management, supply chain management, Chinese hipping operations, Chinese port operations, China Overseas Port Holding Company, Gwadar Port, Drewry, Logistics Management: Ocean Transportation