China Overseas Ports Holding Company Pakistan (COPHC-Pakistan), the company building Gwadar Port – the centerpiece of the CPEC and a key node of China’s OBOR – is a company of unknown credentials at best, or a fishy one at worst.
On its website (cophcgwadar.com), COPHC-Pakistan says it is “a branch company of COPHC which is an emerging and fast growing company in Hong Kong”. That is the only thing the company has to say about its profile, background and key management.
Documents submitted by COPHC-Pakistan to the Securities and Exchange Commission of Pakistan (SECP) reveal that save for three shares - one each for its three directors - the rest of its total 10 million shares is owned by COPHC Limited based out of Hong Kong.
The COPHC-Pakistan has not submitted its annual documents for FY17; nor has it submitted its annual accounts to the SECP for all the years since its incorporation in Pakistan in October 2014. Under Pakistani law, companies that have a capital of Rs10 million or more are required to submit their annual accounts to the SECP.
BR Research is told that the SECP, which has recently signed MoU with COPHC-Pakistan to set up a facilitation office at Gwadar Port, has sent a show-cause notice to COPHC-Pakistan (on Feb 9, 2017) for not filing the annual accounts and other updated documents. But this is a small matter. The real deal is about the company’s origins and profile.
In its dated annual documents (2016’s Form-A) submitted to the SECP, COPHC-Pakistan mentions the following address of its parent company: Room D, 3/F Thomson Commercial Building, 8-10 Thomson Road, Wanchai, Honk Kong. BR Research has obtained documents from the government of Hong Kong and those documents confirm this address.
That an “emerging and fast growing company” is based out of a single room is a red flag - often indicative of a classic paper company - especially if that room is shared by at least four other companies, one of which featured in the Panama Leaks.
The four companies registered in the same room as COPHC-Pakistan’s parent firm in Hong Kong are as follows: Acota Limited (https:// offshoreleaks.icij.org/nodes/262770); Chums Asia Limited (http:// www.chums.jp/company/en/); China Dynasty Trading Limited (https:// panjiva.com/China-Dynasty-Trading-Ltd/44033963); and a certain auto parts company (http:// www.auto-bee.com/Contact-us.html). To re-confirm, BR Research randomly selected two companies (Acota and Dynasty) and purchased their documents from the government of Honk Kong - and both have the same addresses as COPHC-Hong Kong.
It may be possible that COHPC-Hong Kong is a vehicle for a consortium of Chinese companies operating in the businesses of port operations, port development, port financing and so forth. But even if that may be the case, then those involved in the port’s handover to COPHC and those overseeing the port ought to know and disclose the details of the consortium. After all, they are building the central pillar of the CPEC, and sharing the details of consortium parties is not uncommon: the strategic stake sale of Pakistan Stock Exchange is one such recent example.
Upon sighting the red flag, BR Research reached out to a host of stakeholders to find the profile and background of COPHC-Pakistan’s parent company and its key management. Most stakeholders, from the Planning Commission to the signatories of the concession agreement signed in 2013, said it was a Chinese state-run company. But when pressed for evidence, they said they didn’t have any, and that theirs was only an “assumption” that COPHC is a state-run company.
BR Research also sent letters/emails and made phone calls to both COPCH-Pakistan and Gwadar Port Authority officials, asking for the profile of COPHC’s Hong Kong based parent company. But nearly a week has passed, and no one has officially responded so far. For a piece of information that is standard and usually readily-available, the silence is disturbing.
China has been shopping for ports around the world. The matter has caught the interest of both international media – the likes of The Financial Times and the Economic Intelligence Unit – as well as of international research firms such as Drewry maritime and shipping consultants. Several detailed reports and studies have been published on the subject in recent months.
In those reports, three Chinese ports and terminal buyers feature the most: Cosco, China Shipping, and China Merchants. The COPHC does not feature in any of those studies, even though, according to Hong Kong government documents, the company is not entirely new; it was incorporated in August 2012. So much for “emerging and fast growing”!
When Pakistan invited bids to develop Gwadar port in 2006, leading seaport operating companies from Dubai, Saudi Arabia, China, and Singapore took part in the bids for the award of the build-operate-transfer (BOT) contract. The tender committee back then was headed by Farooq Rehmatullah – a seasoned and well-respected energy professional - in consultation with Arthur D. Little, the original consultant for Gwadar Port. The PSA International of Singapore had won that bid.
In 2013, when the COPHC was given port concessions after years of non-performance by the PSA International, there was no such list of contenders. If there was, it wasn’t surely made public. The port was simply handed over to the COPHC with the media reporting silence over the profile and background of the firm. Most observers assumed that it is a Chinese state-run firm. But no one really knows for sure. Will a Chinese state-run company have a shared single-room office?
At the one end, one is inclined to think there is something fishy about COPHC-Pakistan, considering that it is based out of a single room in Hong Kong. Yet at the other end, one would like to give benefit of the doubt that perhaps this is the way how Chinese work, especially considering that the Chinese government is also closely involved in the development of Gwadar.
This column fully supports the CPEC. But not at the cost of transparency. The CPEC is the flagship project of the OBOR. Gwadar is the raison d’être of the CPEC. And while the development of Gwadar as a city is critical, the successful development of Gwadar Port is what will breathe life into CPEC. No amount of urban development will turn Gwadar into an emerald unless its port is successful. Yet Pakistanis, individuals and businesses alike, have no idea about the firm that holds the concession for Gwadar port for 40 years.
The Chinese may not be used to answering the public. But here in Pakistan, the public is becoming sensitive to democratic standards of transparency and accountability. As a private company, the COPHCL may be well within its rights not to disclose its key corporate particulars, but the government of Pakistan cannot afford such secrecy. Ports are strategic assets. And therefore, the public, especially businesses, have the right to know in whose hands rests the fate of CPEC before they go about making grand business plans.
The Chinese government, too, should consider that it is at the risk of making OBOR an international joke with the central pillar of its flagship project (CPEC) being built by a firm that has unknown credentials at best and questionable at worst.
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