Dubai to gain 85% control of East Wharf

G2G agreement sparks discussions as influence over key port facilities raises strategic concerns

ISLAMABAD:

Pakistan on Wednesday constituted a negotiation committee to finalise a deal with the United Arab Emirates for the construction of a new multipurpose cargo terminal at Karachi port, which will give Dubai 85% control over the East Wharf of the seaport.

The Cabinet Committee on Intergovernmental Commercial Transactions (CCoIGCT) decided to strike a deal on a government-to-government basis while abandoning the competitive bidding process. Finance Minister Ishaq Dar chaired the cabinet committee meeting.

The new terminal will be constructed for handling food cargo and other commodities, including fertiliser.

“The Committee, after detailed discussion, allowed negotiations on the Framework Agreement and constituted a committee composed of the Secretary of Law, Secretary of Maritime Affairs, representatives from the Ministry of Foreign Affairs and Finance to negotiate the draft framework agreement with the Government of UAE,” according to a statement issued by the Ministry of Finance.

Once the draft framework agreement is finalised, the government will set up a price negotiation committee. A senior government official hoped that the commercial agreement for the development of the new multipurpose terminal is expected to be signed by the first week of August.

The cabinet committee took the decision based on a summary from the Ministry of Maritime Affairs regarding the government-to-government agreement between the Governments of UAE & Pakistan on Cooperation for the Development of Bulk and General Cargo Terminal at East Wharf at Karachi Port Trust (KPT) under the Inter-Governmental Commercial Transaction Act, 2022.

Both sides are already in the process of finalising the agreement between Abu Dhabi Ports and Karachi Port Trust for the development of Bulk and General Cargo Terminal and associated infrastructure at the East Wharf of Karachi Port. The draft agreement has already been exchanged between the two parties.

The contract will also include the up-gradation of Pakistan International Container Terminal (PICT) facilities and the development of associated infrastructure.

It will be the second such deal that Pakistan will sign with UAE-owned Abu Dhabi Ports within a month. Earlier, it had handed over the operations of five berths (6-10) of the port on the East Wharf of Karachi port.

Abu Dhabi Ports has shown fresh interest in the acquisition of 1,833 meters quay length (Berths 14 to 17) out of the total quay length of 3,124 meters of East Wharf KPT, as shown in the official documents.

The Ministry of Maritime Affairs was of the view that Abu Dhabi Ports already got 800 quay meters last month under the Karachi Gateway Container Limited (KGCT), and after the new contract, it will have control over 85% of the quay length of East Wharf. Some government officials have advised that a strategic decision should be made about whether 85% of East Wharf of the port should be handed over to one party. Pakistan has preferred to enter into a negotiated deal instead of following the competitive bidding process.

In 2019, the government had advertised to pre-qualify bidders for setting up the new terminal. At that time, 13 parties had shown interest, including Cargill-USA, DP World Dubai, Q Terminals Qatar, Johor Ports Malaysia, Engro Energy Limited, Fauji Foundation, NLC, and some Chinese firms. Due to COVID-19, only Q Terminals had submitted the technical bid, which the KPT found in violation of bidding conditions. In August 2022, Q Terminal Qatar again showed interest during Prime Minister Shehbaz Sharif’s visit, but no progress was made.

In May this year, KPT wanted to give an advertisement to invite bids for the construction of the new terminal. But then the government decided to hold back the advertisement due to engagement with Abu Dhabi Ports.

The Ministry of Foreign Affairs has backed the deal with the UAE, although other countries were willing to participate in the competitive bidding process, mainly Qatar.

A study carried out under a World Bank project had recommended setting up a terminal for handling coal imports at berths 13 to 17 and a general cargo handling terminal from berths 10 to 12. Subsequently, the study recommended setting up a clean cargo handling terminal from berths 14 to 17.

On June 28, the UAE government expressed interest in the development of the port. The UAE government will arrange financing, use the latest technologies, material, and equipment, and products for the development of the port terminals, according to Ministry of Maritime Affairs officials.

The initial agreement will be signed for a period of five years, which may be extended for as many terms as both the UAE and Pakistan mutually agree.

Pakistan and the UAE have already signed the Concession Agreement for berths 6 to 10 on June 22 at the Karachi Port.

Abu Dhabi Ports has committed that it would turn the Karachi Port into a regional hub for trade and logistics through the development of a multipurpose bulk and general handling terminal. The UAE government has offered to develop all land areas and berths lying between PICT and the proposed clean bulk terminal, according to the government officials.

Published in The Express Tribune, July 20^th, 2023.

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