SC hears challenge to PSA Gwadar port deal

Balochistan government says port deal with Port Singapore Authority (PSA) is one-sided.

ISLAMABAD: The Supreme Court on Wednesday began hearing a regional government's challenge to a deal with a Singapore company to run a strategic port in which China has a substantial investment.

The chief minister of Balochistan, the southwestern province where Gwadar port is located, is seeking the cancellation of the contract with Singapore state-owned PSA International Ltd on the grounds that it is a "one-sided" deal.

"In the contract, the federal government did not consider the reservations of the Balochistan government, nor were we taken into confidence," advocate general Salahuddin Mengal, who represents the Balochistan government, told the court.

"We ask the court to order the federal government to scrap, cancel the contract."

Authorities have dismissed speculation that the deep-sea port would be handed to Chinese control, after China provided 80 percent of the initial $248 million development costs.

China helped build the port on Pakistan's Arabian Sea coast partly with a view to opening up an energy and trade corridor from the Gulf, across Pakistan to western China.

Analysts suspect China would push for a major say over the port to back its bid to expand its influence in the Indian Ocean. This would upset India, which has already expressed concern over China's influence in the region.

Pakistan, struggling to revive its debt-laden economy, is keen to become a conduit for trade to landlocked Afghanistan and Central Asia. It has three major ports, Gwadar in Balochistan and two at Karachi, 450km to the east.

China and Pakistan call each other "all-weather friends" and their close ties have been underpinned by long-standing wariness of their common neighbour, India, and a desire to hedge against US influence in the region.

China is Pakistan's main supplier of conventional arms and analysts believe China supported Pakistan's nuclear weapons programme in past decades.

"India wants to tell everybody that China is expanding its tentacles and emerging as a maritime threat but it is the perception which is not shared by any of the regional countries," said Riffat Hussein, chairman of the department of defence and strategic studies at Quaid-e-Azam University in Islamabad. "It's a highly exaggerated concern."

Under the Gwadar deal, former President Pervez Musharraf's government gave management and operational control of the deep-sea port to PSA, owned by Singapore sovereign wealth fund Temasek Holdings , in February 2007 for 40 years.

Under the agreement, the Balochistan government, which has been battling a decades-old low-level revolt by nationalists for provincial autonomy, was to develop a free-zone for warehouses and export processing zone and establish road and rail links.

Balochistan Chief Minister Mohammad Aslam Raisani has said PSA International Ltd had neither brought in trade nor expanded the port. But there were no plans to hand the port to China.

Pakistan gets only 9 per cent of the port's total revenue.

In September, Pakistan's naval chief asked the government to review the contract for the same reasons.

Gwadar, 70km east of the Iranian border and on the doorstep of Gulf shipping lanes, was conceived over a decade ago with hopes it would handle transhipment traffic for the Gulf.