THE opening of the Suez Canal in 1869 provided the British with a much shorter route to access their colonial possessions in India. With that, the importance of Aden as a transit and refuelling stop multiplied — sitting as it does, at the point where the Red Sea enters the Indian Ocean. The British made Aden part of its Indian holdings and by 1937 had turned it into a full-fledged crown colony. With that, Aden became one of the most important ship bunkering, trans-shipment and duty free ports in the world.
By 1967 decolonisation had almost run its course. Arab nationalism also peaked. When a local rebellion and uprising in Yemen forced the British to evacuate their naval base and ultimately get out of Aden, it was clear that its age of maritime pre-eminence was over.
Even before the oil riches had started to arrive in his little emirate, Dubai’s Sheikh Rashid Al Maktoum was envisioning Dubai as the alternative to Aden. As the British were evacuating from Aden, he began constructing a deep water harbour, one that could service the world’s largest vessels. Six years later, in 1972, Dubai’s Port Rashid opened. A few years later as the oil riches arrived, the world’s largest man-made port was constructed at Jebel Ali, opening Dubai’s second port in 1979.
That was followed in 1985 by the Jebel Ali Free zone, a veritable entrepôt; complete with a free zone, an industrial area and sprawling warehousing and logistic facilities. Dubai’s rise followed. Driven by political vision, executed on a master plan and enabled by a corporate structure, DP World, Dubai transformed itself into one of the world’s largest trading hubs that it is today.
Of course, Japan’s economic ascendency, followed by the Asian ‘Tiger’ economies and after 1980, the Chinese economic miracle, only bourgeoned Dubai’s fortunes as world trade also flourished. The key trade corridor now ran along the Southern Eurasian rimland, which starts in Aden and runs all the way to Hong Kong. Now sitting on this corridor, waits Gwadar.
Its military utility apart, from a commercial perspective Gwadar can claim three distinct advantages over Dubai and the other Gulf ports that have followed a similar template. It lies on the main route, without vessels needing to enter the Straits of Hormuz. It has a large hinterland, which includes Pakistan, Afghanistan and at some point in future, Central Asia. Third, it offers a direct conduit to western China, which could be many times more valuable in the event of a blockage in the Straits of Malacca, a critical bottleneck. Dubai on the other hand enjoys the huge advantage of incumbency.
Gwadar’s game plan needs to be ambitious, grandiose even. But hoping for things to fall in place by themselves is not good business strategy. ‘Build it and they will come’ is a dangerous mind trap. Gwadar’s success will depend on the quality of the commercial strategy it pursues.
The first key will be crafting Gwadar’s business model. This will detail how to make it a viable destination. It will include a marketing plan and an associated traffic forecast explaining how it will be achieved. Why will they come? What will they gain from coming here as opposed to going to other competitive ports in the region? Why would they switch from their traditional preference? The best consultants in the world cannot build your business models. That is a job the government’s own ‘Team Gwadar’ must do.
The second key to success will be to build the critical mass of vessel traffic and cargo handling volumes needed for the port operator to break even. Gwadar port’s business plan must achieve break even quickly. The port will drive the whole port city ecosystem, but only after it commercially takes off. The hard truth is that either it will achieve early commercial success or it will languish forever; like the railways where you have the infrastructure and even ready traffic but can’t seem to make it work.
As I see it now, critical missing pieces include rail and pipeline connectivity, a processing zone, a cargo break-bulk area as well as a coherent investment attraction strategy that would lure break-bulk operators from neighbouring ports to relocate to Gwadar.
As it proceeds to operationalise the port the government must think about the answers to questions like who will use Gwadar. For instance, why will a container destined for Afghanistan or China opt to land in Gwadar as opposed to say Karachi or the neighbouring Iranian port of Chah Bahar? The time to play in the sand is over. It is time to start talking specifics. And that means talking business.
2015 – Dawn Media Group