KARACHI: Pakistan’s maritime ministry has said a proposed $3 billion investment by Hong Kong-based Hutchison Ports to expand container handling facilities at Karachi’s ports raises legal, contractual and regulatory concerns, after Arab News reported last week that the project had stalled amid concession agreement and procurement-related hurdles.
The proposed investment would expand operations at South Asia Pakistan Terminal (SAPT) and Karachi International Container Terminal (KICT), develop new logistics facilities and increase container-handling capacity as Pakistan seeks to position itself as a regional transit and transshipment hub linking South Asia, Central Asia and the Middle East.
In interviews with Arab News published on June 19, Hutchison Ports officials said progress had slowed because of restrictions linked to a concession agreement governing Karachi Gateway Container Terminal (KGTL), operated by UAE-based AD Ports Group, and questions over whether Public Procurement Regulatory Authority (PPRA) rules would require the project to be competitively tendered.
Responding to questions raised in that report, the maritime ministry shared a statement outlining Karachi Port Trust’s (KPT) assessment of the proposal.
“Hutchison proposal has been evaluated at appropriate levels and it has been noted that subject offer raises legal, contractual and regulatory issues as it would also materially alter terms of existing Implementation Agreements (IAs) for KICT and SAPTL which are already being operated by Hutchison ports,” the statement said.
The ministry said KPT’s assessment found that the proposal involved expansion beyond currently leased areas and development of some infrastructure outside the port authority’s jurisdiction.
“Hutchison’s plan also includes physical expansion beyond currently leased areas (with no such provision in present Implementation Agreements) and development of some infrastructure outside KPT jurisdiction, which would require approvals from other relevant authorities,” the statement said.
The maritime ministry also said KPT had concerns about the proposal’s implications for competition and procurement requirements.
“KPT further said Hutchison’s proposal seeks extended concession rights and preferential treatment that would limit fair competition and conflict with public procurement and transparency requirements,” the statement said.
One of the issues highlighted by Hutchison officials in the June 19 report was the impact of the KGTL concession agreement on future expansion plans. Company officials told Arab News they had been informed that provisions in the agreement restricted the establishment of a new terminal until certain throughput levels were reached.
The maritime ministry said KPT had signed a G2G concession agreement with UAE’s AD Ports in June 2023 for the KGTL.
“That agreement includes certain concessional clause restricting establishment of new terminal at the port ... KPT said it is legally bound to honor already agreed terms & conditions with international firms,” the statement said.
In the June 19 report, Hutchison officials argued additional capacity would be needed if Afghan transit trade resumed, Central Asian trade expanded and commercial links with Iran recovered. They also said major container terminals in Karachi and Port Qasim, including SAPT, KICT, KGTL and Qasim International Container Terminal, were operating at up to 80 percent capacity.
The maritime ministry said there was no immediate capacity shortage at SAPT.
“Currently there is no urgent capacity shortfall at SAPTL as terminal annual handling capacity is about 3.1 million TEUs while present throughput is roughly 1.5–1.6 million TEUs, or about 50 percent utilization,” the statement said.
The ministry also said the area identified in Hutchison’s proposal had attracted interest from other international investors.
“Hutchison ports (B2B) has shown its investment interest, however, other renowned international contenders have also shown their keen interest, who are willing to invest massively within far less timeframe as compared to Hutchison within G2G framework,” the statement said.
The response further noted that Hutchison’s proposed $3 billion investment would be spread over a prolonged period and involve certain conditions.
“It is worth highlighting that Hutchison Ports offer of $3 billion investment spread over prolonged period of more than 50 years along with certain concessions/conditions and exclusivities,” the statement said.
The ministry said KPT valued its partnership with Hutchison Ports and other operators but maintained that any future arrangement would need to comply with existing agreements and Pakistani law.
It added that KPT remained committed to engaging with Hutchison Ports and other prospective investors interested in the long-term development of Karachi Port and Pakistan’s maritime sector.
