Gwadar Free Zone: Irked by rupee slide, Chinese for accounts in RMB

ISLAMABAD: Disturbed with frequent depreciation of the Pak Rupee (PKR), Chinese investors in Gwadar have sought permission to maintain their bank accounts in RMB in Gwadar Free Zone without converting their money into Rupees, well informed sources told Business Recorder.

This issue was raised by Chairman, China Port Holding Company Limited (COPHCL) at a meeting of Federal Steering Committee on Gwadar Initiatives held on July 6, 2022 under the chairmanship of Prime Minister Shehbaz Sharif.

“Most important issue that deters Chinese investment in Gwadar relates to currency devaluation. Chinese Investors should be allowed to maintain accounts in RMB in Gwadar Free Zone without getting their invested money converted into Pak Rupee,” sources quoted Chairman COPHCL who attended the meeting as saying.

Prime Minister, sources said, desired that the Finance Minister and Governor SBP meet Chairman COPHCL and try to resolve the matter on priority. He also desired for a report in this matter to him.

The meeting discussed 16 issues in detail, after which Prime Minister issued directions to the concerned authorities in each individual matter. The details of meeting and decisions taken are as follows:

(i) Delay in the commencement of the project for the construction of Breakwater at Gwadar Port. The Prime Minister expressed his displeasure on delay in the construction of breakwater despite availability of funds from the Chinese government in the shape of grant and soft loan. He directed Chairman Prime Minister’s Inspection Team to conduct an inquiry to find out the reasons and fix responsibility for delaying the materialization and execution of the project for construction of breakwater at Gwadar Port.

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Ministry of Maritime Affairs, Planning, Development and Special Initiatives and Economic Affairs have been directed to facilitate the conduct of the inquiry by ensuring timely availability of the information and documents required for the inquiry.

(ii) With respect to construction of breakwater at Gwadar Port, Prime Minister was informed that the PC-1 for construction of breakwater at Gwadar Port is ready for placement before the CDWP and on its clearance to ECNEC. The Prime Minister desired that the Ministry of Maritime Affairs and the Ministry of PD&SI ensure that the PC-1 of the project is placed before the CDWP for consideration in its next meeting. He also desired that Ministry of Maritime Affairs should ensure that the project is awarded to a qualified and reputed contractor after proper prequalification and tendering in a transparent manner and its quality execution is ensured through regular monitoring and third party evaluation. He also desired that all efforts be exhausted to complete the project within two years.

(iii) For maintenance, dredging of the Gwadar Port Secretary Maritime Affairs apprised the PM that tender was floated on July 5, 2022 and international bids will be called on August 8, 2022. On the request of the Secretary, Prime Minister approved notification of a Steering Committee with representative of Ministry of Maritime Affairs as convener and representatives from the Ministry of PD&SI and Pakistan Navy as members besides any other member(s) the Committee may require co-opting to oversee the project and verify quantities of dredging. He desired that Ministry of Maritime Affairs should notify the Committee immediately. The Prime Minister directed Ministry of Maritime Affairs to do the pre-qualification process and ensure third party evaluation of the whole contracting process to ensure transparency.

(iv) For 1.2-MGD Reverse Osmosis Desalination Plant Prime Minister was apprised that Chinese contractor (CHEC) has been mobilized and work has started and as per contract; the project is due for completion in March, 2023. Prime Minister was further informed that on his direction the contracting firm has been asked to make concerted efforts for completing the project by October 30, 2022. Chairman, COPHCL assured the Prime Minister that he will do his best to complete the project within the stipulated timeline. Prime Minister appreciated the effort and desired completion of the project by October 30, 2022 without any compromise on quality.

(v) On-Grid and Off-Grid solar solutions for Gwadar Chief Secretary, Balochistan informed the Prime Minister that companies capable of doing solar and desalination projects have been invited to Karachi on July 18, 2022 to finalize modalities for providing on-grid and off-grid solar solutions besides setting up of small sized desalination plants where provision of drinking water through pipes is not feasible.

The Prime Minister desired that Government of Balochistan should expedite project proposal finalization and its execution. Secretary Power advised the Chief Secretary to identify lands near grid stations for on-grid solar projects to facilitate power evacuation. Prime Minister desired that the Power Division should be taken on board particularly on the on-grid solar projects and that the Power Division ensures that requirements at the Federal end for execution of the projects are expeditiously finalized and completed.

(vi) For provision of boat engines to poor fishermen in Gwadar, Prime Minister was informed that bids for procurement of 2000 boat engines have already been invited for July 20, 2022 and these engines will be distributed to the fishermen through a transparent mechanism for which criteria has already been developed. Prime Minister directed that Secretary, Maritime Affairs, Chief Secretary, Balochistan and Secretary PD&SI will review and finalize the criteria for distribution of boat engines among fishermen in a transparent manner.

Prime Minister also desired that Ministry of Maritime Affairs shall ensure institution of a mechanism for third party validation for securing quality of the procured boat engines.

(vii) For cross stuffing for Afghan Transit Trade containers at Gwadar Port Secretary Maritime Affairs apprised that regulatory framework to allow cross stuffing at Gwadar Port is ready and FBR be asked to indicate the date of inauguration. The Chairman FBR noted that cross stuffing rules are pending in Law & Justice Division for vetting besides software for managing cross stuffing is under preparation. He assured that cross stuffing will be ready for inauguration after 1st August, 2022. Prime Minister desired that Law Division should expedite vetting of the draft rules while FBR should ensure completion of all regulatory and operational requirements for making cross stuffing of containers possible by August 1, 2022.

(viii) In Oil blending facility through ship-to-ship transfer at outer anchorage of Gwadar Port Secretary Maritime Affairs apprised the Prime Minister that stakeholders have agreed to facilitate implementation of the project; however, Pakistan Navy had reservations and desired to vet the final proposal. Prime Minister desired that Secretary Maritime Affairs follows up with Pakistan Navy and try to address its concerns and expedite the approval process for extending oil blending facility through ship-to-ship transfer in consultation with stakeholders within the next 15 days.

(ix) In cultivation of king grass for export Chairman, COPHCL presented business plan for population of Gwadar Free Zone. He emphasized the need for inclusive development in the context of local population. He shared that his company is supporting local population in cattle farming by giving them free seeds to cultivate king grass. He further contended that cultivation of king grass on a least 5000 acres can provide enough fodder to sustain a large cattle population and that existence of large cattle population is essential for exporting meat to China without disturbing local demand. He also briefed the Prime Minister on his plans to provide technical support to the local population through establishment of small sized desalination plants and provision of off-grid solar solutions. Prime Minister appreciated Chairman, COPHCL for his efforts in making Gwadar Port successful. He urged the Chairman to exhaust efforts in catalyzing relocation of labour intensive and export oriented industries from China to Gwadar.

On the proposal of growing king grass, the Prime Minister desired that Secretary NFS&R with input from Chief Secretary Balochistan and other stakeholders should have a feasibility conducted on the proposal on priority basis and intimate progress in the next meeting. The Prime Minister also asked the Chairman COPHCL to prepare a proper business plan/ feasibility on the economic and financial viability of growing king grass to support extensive cattle farming and export of meat and share it with Ministry of NES&R.

On the issue of off-grid solar plants and small sized/ mobile desalination plants, Prime Minister desired that Chief Secretary, Balochistan should take input from the Chairman, COPHCL and ensure execution of these projects on ground.

(x) For establishment of a 5-MMT per annum oil refinery and other petrochemical project at Gwadar Chairman, COPHCL in his presentation informed the Prime Minister that investors from China are keen to invest in establishing an oil refinery and other petrochemical projects in Gwadar. Secretary Petroleum informed the Prime Minister that he has already held a meeting with Chairman, COPHCL and asked him to share details of the investors and their proposal with the Petroleum Division.

Prime Minister desired that Chairman COPHCL immediately provide details of potential investors and their proposal to the Petroleum Division and Secretary Petroleum should try to attract and facilitate investment in oil refinery and other petrochemical projects.

(xi) With respect to law and order in Balochistan during the presentation, Chairman NHA pointed out the vulnerabilities in the law and order situation of the province. He highlighted incidents where contractors were assailed and kidnapped. At this juncture, Secretary, Ministry of IT & Telecom also narrated incidents where telecom-related contractors had to suffer at the hands of miscreants. The gravity of the situation received further corroboration when Secretary Railways also pointed out some unfortunate events concerning Railway’s contractors. Prime Minister directed the Chief Secretary to map sites of all the major development projects in progress across the province and take measures to provide foolproof security to the personnel working on those sites.

He directed Ministry of Interior to immediately constitute a Committee with Minister Interior as convener and Secretary Interior, Chief Secretary Balochistan, IGP Balochistan, and representatives of other law enforcement agencies as members with the remit to review the law and order situation in Balochistan and ensure measures for its improvement. This Committee should also look at the project sites mapped and take measures for ensuring safety and security of the work force. The Committee shall submit its report to the Prime Minister within 15 days.

(xii) On connectivity of Gwadar with Up-North via Eastern, Central and Western alignments of CPEC routes Chairman, NHA apprised the Prime Minister on the award of contract on Naal-Awaran sections and shared that it would be completed within three years. Prime Minister urged that the project may be expedited and completed within two years. Chairman, NHA further shared that road connectivity from Gwadar Port to Up-North already exists through the Western route besides Gwadar is also connected to the Eastern route through Gwadar-Hoshab- Basima- Khuzdar-Ratodero-Sukkur road segments.

Chairman, COPHCL shared that Basima- Khuzdar segments of the road are incomplete and not available. The Chairman, NHA assured that the Basima-Khuziar segments of the road are traffic pliable although some sections of the road are under completion and will be completed by the end of September.

Prime Minister directed that Secretary, Communications/ Chairman, NHA to ensure that a team comprising of representatives from Ministry of PD&SI, Ministry of Maritime Affairs and NHA conducts a holistic route survey from Basima to Khuzdar to assess quality of road. He shared that survey report should also include a video of the route visit which should particularly highlight the quality of road segments where they are dilapidated or are under construction and shared with his office soon after Eid holidays.

(xiii) With respect to rail connectivity with Gwadar Port Secretary Railways briefed the Prime Minister on the initiatives Railway Division is taking to connect Gwadar with existing rail network. He apprised that land acquisition is the main challenge that is thwarting speedy project execution. He particularly highlighted that despite making payment, GDA has not mutated land measuring 165 acres required for the freight terminal. DG, GDA noted that the land for use of Railway has been identified and changed as per integrated Gwadar Master Plan and; therefore, the matter needs further deliberations for resolution. Prime Minister desired that CS Balochistan and Secretary Railways should closely coordinate and together ensure resolution of all pending issues that are slowing the progress of the project.

(xiv) With respect to illegal trawling by the fishermen in Gwadar Minister Maritime Affairs apprised the Prime Minister that he will be scheduling a meeting of the Committee constituted to resolve matters regarding illegal trawling shortly and would take steps for its early resolution.

Prime Minister desired that the meeting be scheduled within one week after Eid holidays and all issues be resolved to address the complaints of illegal trawling.

(xv) With reference to Foreign Exchange currency issues of COPHCL in Gwadar Free Zone Chairman, COPHCL briefed the Prime Minister that the most important issue that deters Chinese investment in Gwadar relates to currency devaluation. He requested that Chinese investors be allowed to maintain accounts in RMB in Gwadar Free Zone without getting their invested money converted into Rupees.

Prime Minister desired that the Finance Minister and Governor SBP meet Chairman, COPHCL, and try to resolve the matter on priority. He also desired a report in this matter within next seven working days.

(xvi) With respect to prequalification of contractors and third party evaluation after the presentation of Secretary/ Chairman, NHA, Prime Minister stressed the ways and means to ensure quality of the executed work. He urged the Ministry of PD&SI to take measures to ensure that all big projects are awarded to contractors who pass through the process of prequalification to ensure that only serious contractors capable of quality work participate in the bids. He further emphasized that Ministry of PD&SI ensure that in all such projects system of third party evaluation is introduced for ensuring quality of the executed work. Prime Minister Office has directed all the concerned Ministries/ Divisions/ Provincial Government to share progress on priority.

Copyright Business Recorder, 2022