Geopolitics is probably the biggest driver of port activity in South Asia, as regional powers invest in facilities to increase influence in the Indian Ocean and develop better access to resources and future markets in Central Asia and the Middle East.

The high-profile China-built Gwadar port in Pakistan, a major One Belt One Road hub, made an effort to demonstrate its purpose in November with a ceremony attended by high-level officials celebrating the first large consignment of goods to travel overland from China and shipped out from the port in the southwest of the country.  The shipment of 160 containers bound for Colombo and Dubai was intended to represent the beginning of a major new overland trade route linking China with the Indian Ocean and the markets of the Arabian Gulf.

Under the original development masterplan, Gwadar was to handle around 100 million tonnes of cargo in 2017, but it is nowhere near achieving that. Just one mainline shipping company currently serves the port, mostly carrying construction materials for China Pakistan economic infrastructure projects as well as some locally produced exports.

A major objective is for the port to become a hub for oil shipments to China and an alternative to the Malacca Strait for the country’s energy needs. Two oil terminals capable of handling 200,000 dwt tankers are being constructed to handle a growing portion of the huge quantities of oil the world’s second largest economy buys from the Middle East. 

The development of Gwadar is provoking response from other regional powers concerned about the boost in influence it is giving China in the Indian Ocean region. This, and the easing of economic sanctions against Iran, resulted in movement by India on the long-discussed development of the Iranian port of Chabahar. 

Like Gwadar, Chabahar is also on the Arabian Sea and located just 70 km from the Pakistani port. Progress on the project is slow but there is commitment from India at the highest level and we can expect more interesting developments in this part of the world over the course of 2017. 

Sri Lanka is another major destination for Chinese One Belt One Road funding for port development. An official agreement that will see state-owned China Merchants buy an 80\% stake in the loss-making Hambantota port for more than USD1 billion is expected early in 2017. The purchase of the loss-making port will complement the company’s existing investment in Colombo International Container Terminal, which is rapidly becoming one of the region’s major transhipment facilities.

Bangladesh is one country in South Asia to watch this year as competition to develop much-needed modern port facilities intensifies. 

After ten years of average annual growth of 6\%, the South Asian country desperately needs modern port infrastructure. Its export sector is expected to eclipse USD50 billion in value by 2021 as global demand for its ready-made woven and kitted garments, frozen foods, jute and leather continues to rise.

Bulk throughput is expected to rise to 44 million tonnes by 2023 and 73.3 million tonnes by 2043. The dry bulk segment is forecast to book average annual growth of 3.9\% to 55.5 million tonnes by 2043, driven by high demand for cement clinker, reflecting the large potential in the construction sector.

More than 90\% of foreign trade volumes are currently handled by the old and inefficient Chittagong port. Located 16 km up the Karnaphali river from the Bay of Bengal, Chittagong has a draft of only 9.2 m, requiring the costly practice of transferring cargo from large to small vessels before berthing and discharge.

Despite ample commercial incentive and a clear need for a modern port, a definitive deep-sea port project in Bangladesh has yet to materialise as China, Japan and India fight for the right to provide finance and with that a ticket to build their influence in the country and in the region.

In India, the mammoth Sagarmala port-led development programme will continue to be the main driver of port development over the course of 2017.

Sagarmala is centered on the modernisation of India’s ports as well as the provision of infrastructure that can move goods to and from ports quickly, efficiently and cost effectively. Port hinterlands are to be industrialised and lead economic transformation of the country’s coastal regions that already account for more than 60\% of national GDP.

The programme is central to prime minister Narendra Modi’s plans to build a manufacturing-led, trade-export growth economy mainly fuelled by private domestic and foreign investment.

The programme envisages spending of somewhere between USD10 – 11billion on port upgrades over the coming five years, adding up to 1,500 MTPA in capacity and including the development of several new greenfield ports. A further USD3 billion or more is to be spent on dozens of last mile port-rail links to increase the efficiency and cost effectiveness of delivering cargo to and from the ports.

Mobilising the necessary funding remains one of the key challenges for Sagarmala.  Maintaining the political ability to implement and deliver projects is the other major challenge.

The government currently has sufficient motivation and the clout necessary to introduce the reforms and policies to successfully deliver Sagarmala and its objectives but it is a situation that is subject to change. Ensuring local populations and governments are onside for the delivery of major economic and social change will be key to the speed with which the programme moves towards its objectives.

Main factors driving change in Southeast Asia’s ports

High GDP growth, particularly in India and Bangladesh. Development potential in Pakistan, Iran and countries of Central Asia, including opportunities to develop resource exploitation.
Poor existing port infrastructure, particularly in Pakistan and Bangladesh. Enormous room for improvement in the quality of infrastructure, cargo handling processes and landside connectivity in

India. 
India’s goals to increase export manufacturing and the desire to control more of its own transhipment business and its Sagarmala programme, which has ports and development of coastal regions at its core. 

Existing investment by major global terminal operators such as DP World and clear signals of interest in the potential for further investment in the region.
A geopolitical hotspot with China, India and Japan all vying for greater influence through port project investment. A key region in China’s One Belt One Road programme.

What to watch for in 2017

Slower rates of project development than most other parts of Asia, as funding and foreign and domestic stakeholder complexities delay and complicate projects.

Security problems causing delays to projects and reducing trade volumes: a key risk for the development of Gwadar in the volatile Balochistan region and CPEC infrastructure in general.

Slow but continuing improvement in productivity and the management structure of ports in India.

New investment and projects, particularly in India and Bangladesh.

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