KARACHI: In an important investment deal between the two countries, leading UAE port operator AD Ports Group signed a 50-year concession agreement with the Karachi Port Trust (KPT) on Thursday to operate a terminal in the city, as cash-strapped Pakistan seeks external financing to stave off an economic meltdown.
The agreement takes place as cash-strapped Pakistan, reeling from an economic crisis that has seen its reserves dip low to alarming levels as the prospect of default looms large, is actively seeking external financing.
As per the agreement, a joint venture between AD Ports Group, as a majority shareholder, and Kaheel Terminals, a UAE-based company, has been formed to manage, operate and develop the Karachi Gateway Terminal Limited (KGTL) berths 6-9 at Karachi Port’s East Wharf.
The venture will feature significant investments in infrastructure and superstructure over the next 10 years, with the bulk of it planned for 2026. The development works will include deepening of the berths, extension of quay walls, and an increase in container storage area. As a majority shareholder, AD Ports Group would invest $220 million in new concession and growth capital expenditure over the first 10 years.
“This expansion and enhancement will further cement the terminal and Karachi's position as a key player in the maritime industry," AD Ports said in a statement. "The Terminal’s operations are all dollarised with no foreign exchange exposure to the Pakistani rupee."
The additional capital would allow the terminal to handle Post Panamax class vessels of up to 8,500 TEUs (Twenty-Foot Equivalent Units) while its container capacity would increase from 750,000 to 1 million TEUs per annum.
Historically, the terminal has been generating a whopping revenue of around $55 million and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBIDTA) or around $30 million annually.
Though the offer's details have not been made public, people familiar with the development said the UAE has offered to acquire the terminal for 50 years on lease under which the company would pay around $21 million in fee for the occupancy of berths and royalty and will pay up to $50 million for the current infrastructure.
Under the agreement, the KPT, the largest seaport in Pakistan, will earn around $25 million per year based on the flow of container traffic, according to a KPT official who declined to be named.
Captain Mohamed Juma Al Shamisi, managing director and group CEO of AD Ports Group, said the agreement exemplifies the company's strategy of investing in key maritime trade routes for the UAE.
“This agreement has the potential to unlock a new chapter of growth and progress for both the UAE and Pakistan, enabling us to strengthen ties with key trading nations and leading to increased economic growth and prosperity”, he added.
Pakistan's Federal Minister for Maritime Affairs, Faisal Subzwari, said the UAE and Pakistan both have a longstanding relationship, adding that the bond between the two countries was experiencing a continuous growth in trade and investment.
“The signing of this agreement underscores both our great nation’s shared vision for the development of port infrastructure and sets the stage for a prosperous global maritime ecosystem,“ Subzwari said.
The UAE was Pakistan’s number one regional trading partner in 2021, accounting for over 40% of Pakistan's trade with Arab countries, with non-oil exports from the UAE to Pakistan valued at nearly AED 4.8 billion ($1.3 billion) in 2022 according to Pakistan’s Ministry of State for Foreign Trade.
Additionally, re-exports from the UAE to Pakistan amounted to AED 10.6 billion (US$ 2.9 billion), reflecting a 7.7% growth compared to 202, according to AD Port statement.
