Pakistan’s cabinet gave its preliminary OK to signing a framework deal with the UAE to transfer control of two additional Karachi port facilities, including the construction of a new multipurpose cargo facility. The decision was taken by the Cabinet Committee on Intergovernmental Commercial Transactions (CCoIGCT), which is chaired by Federal Minister for Finance Ishaq Dar.
According to an announcement made by the Ministry of Finance, the CCoIGCT has reviewed a summary prepared by the Ministry of Maritime Affairs on an Intergovernmental Agreement between the Governments of the United Arab Emirates and Pakistan on Cooperation for the Development of Bulk and General Cargo Terminal at East Wharf at Karachi Port under the Intergovernmental Commercial Transaction Act, 2022.
According to the ministry, the G2G draught framework agreement has been approved by the committee and sent on to the federal cabinet for final approval. It was also noted that the agreement would be signed by officials from the United Arab Emirates and Pakistan.
Pakistan and the UAE are expected to sign their second major seaport terminal agreement in less than two months. The government will form a committee to negotiate prices after getting cabinet permission.
Abu Dhabi Ports, a company based in the UAE, will be given control of Berths 11 through 17 for a period of five years in order to build and operate two cargo terminals. Berths 11–13 will be part of the regular cargo terminal, and berths 14–17 will be part of the clean terminal.
Fertiliser and other commodities, including food, will be managed at the new port. The deal includes calls for the improvement and expansion of the Pakistan International Container Terminal (PICT).
Pakistan has previously transferred control of the East Wharf’s five slots (6-10) to their new owners. According to the documentation, Abu Dhabi Ports has recently expressed renewed interest in purchasing 1,833 metres of East Wharf KPT’s total quay length of 3,124 metres.
With the new contract, Abu Dhabi Ports will have control over 85% of the quay length at East Wharf, up from the current 15% it has under the Karachi Gateway Container Limited (KGCT). Pakistan has chosen to bypass the competitive bidding procedure in favour of a negotiated contract.
The ECC has also been presented with a recommended set of parameters for the price discovery process. Officials from the Ministry of Maritime Affairs have stated that the contract’s price will be determined by the following factors: the length of the agreement, the cost of construction, the lifespan of the terminal, the maximum capacity to handle cargo, the length of the quay wall, the royalty per tonne, the land rent, the storage charges, the dock labour charges, the upfront payment, and the quantum and type of investment.
The marine ministry apparently wanted the ECC to double as a price-setting body, as was reported. However, the ECC agreed that the committee wouldn’t be established until the federal cabinet approved the framework agreement. The signature of the Concession Agreement with the UAE could be delayed as a result.
Pakistan and UAE will strike a deal soon
The Ministry of Maritime Affairs, however, has already laid the groundwork, and a deal is expected to be finalised very shortly. The Karachi Port features three piers: one each to the east, west, and south. As part of the concession arrangement, the government would give the UAE firm control of 85% of East Wharf.
These two East Wharf terminals contribute roughly Rs3.1 billion in annual revenue to the Karachi Port Trust. It borrowed almost $3 billion from the World Bank in 2016 to build these terminals, and its yearly running costs are nearly the same. Officials from the Ministry of Maritime Affairs estimate that after factoring in interest expense and operational cost, the KPT has deficits of over Rs575 million.
The government of the UAE showed interest in the expansion of the port on June 28. According to the Ministry of Maritime Affairs, the United Arab Emirates would secure funding, and employ cutting-edge technology, materials, equipment, and goods in the building of the port terminals.
The initial length of the agreement will be five years, and it can be renewed for as many further five-year periods as the United Arab Emirates and Pakistan agree upon. The Concession Agreement term was reportedly proposed to be extended by the ECC to more than five years. The Karachi Port Concession Agreement between Pakistan and the UAE was signed on June 22 for berths 6 through 10.
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