Two more Karachi port terminals to be signed off to UAE

Pakistan gave initial approval on Monday for signing a framework agreement with the United Arab Emirates (UAE) to hand over two more Karachi port terminals, including the development of a new multipurpose cargo terminal.

Federal Minister for Finance Ishaq Dar chaired the meeting of the Cabinet Committee on Intergovernmental Commercial Transactions (CCoIGCT), which
made the decision.

The CCoIGCT considered a summary of the Ministry of Maritime Affairs regarding an intergovernmental agreement between the governments of UAE and Pakistan on Cooperation for the Development of Bulk and General Cargo Terminal at East Wharf at Karachi Port under Inter-Governmental Commercial Transaction Act, 2022, according to
an announcement by the finance ministry.

The committee approved the G2G draft framework agreement for the ratification of the federal cabinet, as stated by the ministry. The agreement will be signed between the governments of the UAE and Pakistan, it added.

This will be the second major seaport terminal deal that Pakistan will sign with the UAE in less than two months.

After the approval of the cabinet, the government will set up a price negotiation committee for the price discovery.

Under the deal, the berths from 11 to 17 will be handed over to the UAE Company, Abu Dhabi Ports, for the development and management of two cargo terminals initially for a period of five years.

The general cargo terminal will comprise berths 11 to 13, and the clean terminal will include berths 14 to 17.

The new terminal will be managed for handling food cargo and other commodities, including fertiliser. The contract will also include the up-gradation of Pakistan International Container Terminal (PICT) facilities and the development of associated infrastructure.

Earlier, Pakistan 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 out of the total quay length of 3,124 meters of East Wharf KPT, as shown in the official documents.

Abu Dhabi Ports already acquired 800 quay meters last month under the Karachi Gateway Container Limited (KGCT), and after the new contract, it will control 85% of the quay length of East Wharf.

Pakistan has preferred to enter into a negotiated deal instead of following the competitive bidding
process.

The parameters for the price discovery have also been proposed to the ECC. The cost of the contract will be signed based on the term of the agreement, cost of construction, lifespan of the terminal, maximum capacity to handle
cargo, length of the quay wall, royalty per tonne, land rent, storage charges, dock labour charges, upfront payment, and quantum and type of investment, according to the officials of the Ministry of Maritime Affairs.

They said that the maritime ministry wanted the ECC to also constitute a price negotiation
committee. But the ECC decided that the committee would be set up only after the approval of the
framework agreement by the federal cabinet. This may push the signing of the Concession Agreement with the UAE beyond the government’s term.

However, the spadework has been done by the Ministry of Maritime Affairs, and it is expected that the deal will
be signed very soon.

There are three wharves at the Karachi Port, the East, West, and the South. The government is going to hand over 85% of the East Wharf to the UAE company under a concession agreement.

The Karachi Port Trust earns about Rs3.1 billion in annual revenue from these two terminals of the East Wharf. It also has operating expenses of about Rs675 million and is paying roughly Rs3 billion annually in interest on a loan that it took from the World Bank to construct these terminals in 2016.

The KPT runs about Rs575 million deficits after paying interest cost and operational cost, according to the Ministry of Maritime Affairs officials.

On June 28, the UAE government expressed interest in the development of the port. The UAE government will arrange financing, use the latest technologies, materials, 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. There was a proposal in the ECC to extend the Concession Agreement period to more than five years, said the officials.

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