On the 22nd of June, the AD Ports Group of the United Arab Emirates (UAE) signed a concession agreement with Pakistan’s state-owned Karachi Port Trust (KPT) to lease 4 berths of the Karachi Port for 50 years. As per media reports, the company said, “AD Ports Group of the United Arab Emirates (UAE) signed an agreement to take over the running of a part of Pakistan’s main Karachi docking facility in a deal worth an immediate $220 million.”
The deal will provide Pakistan with much-needed funds as the country is facing a massive financial crisis and desperately needs money to pay back loans and import critical commodities.
AD Ports Group has formed a joint venture with a US-based company, Kaheel Terminals, to operate and develop the KGTL berths 6- 9 at Karachi Port’s East Wharf. It is important to note that Karachi Port is Pakistan’s oldest and busiest port with around 33 berths in operation. Now, after this agreement with the UAE, the new joint venture will lease four berths out of these 33 berths in operation for the next 50 years.
The deal involves an upfront investment of Rs50 million, after which investments will be made in Pakistan International Containers Terminals (PICT) and Port Qasim.
In its official statement, the AD group announced that the Joint Venture will undertake significant investments in infrastructure and superstructure over the period of the next 10 years. However, the majority of said investment will be done in 2026.
The company in the statement further noted that the infrastructure development plan includes deepening the berths to allow bigger ships to dock, extending the quay wall, and increasing the container storage area.
Resultantly, the terminal will be able to accommodate Post Panamax class vessels of up to 8,500 TEUs (Twenty-Foot Equivalent Units). Additionally, the terminal’s capacity will rise from 750,000 to a million containers annually.
This expansion and improvement will consolidate the terminal’s and Karachi’s position as significant contributors to the maritime industry. Syed Syedain Raza Zaidi, chairman of the Karachi Port Trust, said the landmark agreement holds “big potential” for the growth of the Port of Karachi.
The Karachi Port agreement follows the signing of a Memorandum of Understanding between the UAE and Pakistan in May this year. AD Ports Group also signed three memorandums with the government of Pakistan to improve transportation infrastructure and reduce logistics costs.
The deal has been criticised by the opposition parties in Pakistan, calling it a sold-out. PTI leader Hammad Azhar alleged that the port is leased out for just $50 million and profits from the port will move out of the country. However, Maritime Affairs Minister Faisal Subzwari rejected the allegations and said that the port is not being handed over to anyone as alleged. “Concession Agreements do not mean the transfer of property or selling off berths,” he said.
Financially Strained Pakistan Leases Asset in a Bid to Avoid Bankruptcy
Cash-strapped Pakistan is desperately searching for options to pool resources to stay financially afloat and not declare bankruptcy on its debts or loans. The port deal will provide it with some much needed fund.
Historically, the Karachi Port terminal has consistently proven to be a lucrative asset for Pakistan, yielding approximately $55 million in revenue and an annual EBITDA of approximately $30 million. Now, Islamabad decided to lease out 4 berths of the port to the UAE-based AD Ports group, which will expand the capacities of the port.
In the past as well, the UAE has been helping Pakistan to postpone the inevitable economic collapse or default on its loans. For this, the Gulf nation has been a major contributor to Pakistan’s economy in the form of grants, loans, and direct investment.
Apart from this deal, Pakistan PM Shehbaz Sharif recently met IMF Managing Director Kristalina Georgieva in Paris in an attempt to unlock withheld funds under the bailout package. The said meeting took place on the sidelines of the Global Financing Summit in Paris. The timing of it was important as only a week is left before the IMF’s Extended Fund Facility (EFF), which was agreed upon in 2019, expires on June 30.
Pakistan’s PM had gone there to attend the Summit for a New Global Financial Pact.
