Pakistan has established a negotiation committee to finalize an agreement with the United Arab Emirates (UAE) for the transfer of its Karachi port terminals. This marks a significant intergovernmental transaction aimed at raising emergency funds under a recently enacted law.
The Cabinet Committee on Inter-Governmental Commercial Transactions, chaired by Finance Minister Ishaq Dar, has set up a committee to negotiate a commercial agreement between the Karachi Port Trust (KPT) and the UAE government. The negotiation committee, headed by Minister for Maritime Affairs Faisal Sabzwari, includes key members from finance, foreign affairs, and the Karachi Port Terminal (KPT).
The committee has been authorized to draft an operation, maintenance, investment, and development agreement under the government-to-government arrangement with a nominated UAE agency. The goal is to hand over the Karachi port terminals to Abu Dhabi Ports (ADP), a subsidiary of the Abu Dhabi Ports Group. The UAE government expressed interest in acquiring the terminals last year, which were previously under the administration of Pakistan International Containers Terminals (PICT).
PICT, a subsidiary of ICTSI Mauritius Limited, operated the Karachi terminals for 21 years until the concession agreement expired recently. However, the agreement grants PICT the first right of refusal, potentially leading to legal challenges. The government aims to finalize the deal with UAE by June 30th.
To expedite the sale of state assets and raise funds, the coalition government enacted the Intergovernmental Commercial Transactions Act last year. Pakistan, facing a financial shortfall after the expiration of its IMF deal, initially faced refusal from the UAE for loans but later secured a commitment of $1 billion. The government may need transaction advisors for price discovery, as per the Commercial Act.
The negotiations require caution as it is a first-of-its-kind transaction, and the outgoing operator, PICT, may pose challenges. Initially, the Karachi Port Trust (KPT) was planned to oversee the terminals, but it lacks the capacity, necessitating the continuation of operations under PICT until June 30th.
The Ministry of Finance stated that the cabinet committee discussed the management of PICT’s operations, with ADP expressing interest in operating the Container Terminal. Additionally, another committee, led by the Secretary of Maritime Affairs, will negotiate a draft framework agreement between the UAE and Pakistan governments, aiming to strengthen bilateral relations in the maritime sector.
The new committee is expected to meet soon, with the possibility of finalizing the framework agreement promptly to conclude the deal successfully.
