ISLAMABAD: Without any bidding for competition or price discovery, the government on Monday approved a draft framework agreement for the transfer of Bulk and General Cargo Terminal and associated infrastructure at East Wharf Karachi Port to Abu Dhabi (AD) Ports through negotiations on a G2G basis.

The decision was taken at a meeting of the Cabinet Committee on Inter-Governmental Commercial Transactions (CCoIGCT) presided over by Finance Minister Ishaq Dar. “The CCoIGCT considered a summary of the Ministry of Maritime Affairs (MOMA) regarding the G2G agreement with the Government of UAE on Cooperation for the Development of Bulk and General Cargo Terminal at East Wharf at Karachi Port under Inter-Governmental Commercial Transaction Act 2022.

The committee approved the G2G draft Framework Agreement for the ratification of the Federal Cabinet”, said an official statement.

Karachi Port consists of three wharves East, West and South containing five terminals. Three docking terminals are outsourced to Terminal Operating Companies (TOC) while the remaining two i.e. Oil Terminal and Clean Bulk Cargo Terminal (CBCT) are presently operated by the KPT. The CBCT was handed over to KPT in 2016 after it was built with a loan from the World Bank.

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In 2019, KPT proceeded to outsource the CBCT by inviting expressions of interest (EoIs) from TOCs. In the pre-qualification stage, 11 TOCs were declared qualified by NESPAK whereas only Q-Terminal submitted a technical proposal.

It was decided to go for international bidding and the consultants finalised the tender documents, the AD Ports approached Government of Pakistan and KPT through UAE’s ambassador expressing its interest in the operation of the two terminals on East Wharf.

KPT further informed that the gross revenue of CBCT stood at Rs3.1bn per annum and repayment of the loan was Rs3bn besides Rs675 million operating expenses. The KPT ends up deficit amount of Rs575m.

The Ministry of Foreign Affairs (MoFA) “has also been tracking the progress of KPT’s outsourcing efforts since 2022 for offering CBCT to the State of Qatar. In May, the SAPM for Foreign Affairs informed that CBCT can be offered to Saudi Arabia. The KPT also on its own approached the Q-Terminal which indicated interest to the extent of participating in the bidding.

In the meantime, MoFA forwarded the UAE ambassador’s letter enclosing G2G agreement between the governments of the UAE and Pakistan for the development of Bulk and General Cargo Terminal at East Wharf. The proposal was submitted to the CCoIGCT in its last meeting held on July 19. The CColGCT constituted a Framework Agreement Committee for a G2G agreement comprising secretaries of law and maritime affairs and additional secretaries of foreign affairs and finance.

The committee met on July 20 and was joined by the UAE team led by Rashid Abdelrehman Al-Ali, Deputy Head of Mission of the UAE Embassy. Participants agreed on the terms of the amended framework agreement for the CCoIGCT to clear it for approval by the Federal Cabinet.

On the instruction of the CCoIGCT last week, the KPT also suggested some yardsticks for valuation and price discovery including terms of agreement, construction cost of the terminal, life span of the terminal, maximum capacity for cargo handling, length of quay wall, per tonne royalty, land rent per meter, storage charges, upfront payment (both adjustable and non-adjustable) and quantum of investment. An unnamed committee would negotiate the price discovery for the port facilities.

Some members had questioned if the AD Port was actually a UAE government entity. Therefore, the MoFA reported back after engaging with the deputy head mission in Abu Dhabi that “Abu Dhabi Port Group works under Abu Dhabi Development Holding Co (ADQ) which is a UAE Government owned entity”.

Published in Dawn, July 25th, 2023