Pakistan has established a negotiation committee to finalize an agreement with the United Arab Emirates (UAE) regarding the transfer of its Karachi port terminals. This development could be the first intergovernmental transaction under a recently enacted law aimed at raising emergency funds.
The meeting of the Cabinet Committee on Inter-Governmental Commercial Transactions, led by Finance Minister Ishaq Dar, resulted in the decision to form a committee responsible for negotiating a commercial agreement between the Karachi Port Trust (KPT) and the UAE government.
This negotiation committee has been authorized to draft an agreement for the operation, maintenance, investment, and development of the Karachi port terminals, under a government-to-government arrangement with a nominated UAE agency.
The Minister for Maritime Affairs, Faisal Sabzwari, will head the negotiation committee responsible for finalizing the framework agreement. Other members include officials from the Ministry of Finance, Ministry of Foreign Affairs, the Prime Minister’s special assistant, the Chairman of the Karachi Port Terminal, and general managers from the KPT.
Pakistan intends to hand over the port terminals to Abu Dhabi Ports (ADP), a subsidiary of the Abu Dhabi Ports Group. The UAE government expressed interest in acquiring the Karachi port terminals, previously under the administration of the Pakistan International Containers Terminals (PICT), last year.
PICT, a subsidiary of ICTSI Mauritius Limited, which is ultimately owned by International Container Terminal Services Incorporated (ICTSI) in the Philippines, operated the Karachi terminals from June 2002 until the recently expired 21-year concession.
There may be legal challenges from PICT based on the concession agreement, but the company’s CEO was unavailable for comment.
In an effort to raise funds, the coalition government introduced the Intergovernmental Commercial Transactions Act last year, which allows for the expedited sale of state assets. Pakistan urgently requires additional funds since its agreement with the International Monetary Fund (IMF) has expired.
Initially, the UAE declined to provide loans and instead urged Pakistan to sell stakes. However, they later committed $1 billion, which remains undisbursed.
Although the new law facilitates the rapid sale of assets, the government may need to engage “transaction advisors or consultants” to determine prices, as specified in section 4(e) of the Commercial Act.
Given that this will be the first transaction of its kind, and considering the challenges posed by the outgoing operator, sources suggest that the government should exercise caution when finalizing the deal with the UAE.
Initially, the plan was for the Karachi Port Trust to manage these terminals, but it was determined that they lack the capacity, and therefore the operations will continue under the PICT until June 30th.
The government aims to conclude the new deal with the UAE by that deadline.
According to a statement from the Ministry of Finance, the cabinet committee reviewed a summary from the Ministry of Maritime Affairs concerning the management of PICT’s operations. It was noted that the UAE government-owned ADP expressed interest in operating the Container Terminal.
The cabinet committee also decided to establish another committee, headed by the Secretary of Maritime Affairs, to negotiate a draft framework agreement between the UAE and Pakistan governments. This agreement aims to strengthen bilateral relations in the maritime sector under the Inter-Governmental Commercial Transaction Act 2022.
Sources indicate that the new committee will meet within the current week, with the possibility of finalizing the framework agreement promptly in order to conclude the deal.
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