UAE signs agreement with Pakistan’s Karachi Port Trust

DUBAI — Pakistan signed over terminal operations of the Karachi Gateway Terminal Limited (KGTL), better known as the Port of Karachi, in a 50-year concession agreement with the United Arab Emirates’ Abu Dhabi (AD) Ports Group on Thursday in an effort by the debt-stricken country to raise critically needed funds and pay back the International Monetary Fund (IMF).  

The agreement came through a joint venture (JV) between AD Ports Group, which is the majority stakeholder, and UAE-based Kaheel Terminals, a company created to manage the logistics and operations, according to the announcement by AD Ports Group on Thursday. The two members of the JV signed the agreement with the Pakistan federal government agency Karachi Port Trust (KPT), which oversees operations at the Port of Karachi. 

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. 

“By joining forces, we are paving the way for a thriving container terminal that will enhance efficiency, attract investment and stimulate the economy,” he said in a written press statement. 

AD Ports Group did not disclose the dollar value of their offer to KPT. The group’s announcement stated that the JV will invest heavily in infrastructure development over the next 10 years, with the bulk of it planned for 2026.

UAE Minister of State for Foreign Trade Sheikh Thani bin Ahmed Al Zeyoudi attended the signing of the agreement and lauded the benefits it will have for the UAE. 

“Enhancing container (shipments) throughout (in) Pakistan will secure vital supply chains and push our (the UAE’s) non-oil trade beyond the $7bn achieved in 2022,” tweeted Sheikh Thani on Thursday. 

The terminal has generated revenue of around $55 million yearly, with net earnings of $30 million after taxes, interest and the like, reported AD Ports Group.

The Port of Karachi agreement follows the signing of a memorandum of understanding in May to drive growth and strengthen bilateral ties between the UAE and Pakistan. AD Ports Group also signed three memorandums with the government of Pakistan to improve transportation infrastructure and reduce logistics costs.

Thursday’s agreement is one of many lifelines that the UAE has extended to Pakistan to help the struggling country overcome its financial woes.

In January, UAE President Sheikh Mohamed bin Zayed met with Pakistani Prime Minister Rahim Shebaz Sharif for a two-day visit, only two weeks after Sharif had visited Abu Dhabi seeking the UAE’s help as Islamabad navigated an economic and energy crisis. The UAE agreed to lend Pakistan $1 billion on top of deferring its previous $2 billion loan during Sharif’s visit to Abu Dhabi at the time. 

During that same month, a nationwide power outage in Pakistan left nearly 220 million people without electricity.

Pakistan’s economy is now reportedly near collapse, with a plummeting currency, rising inflation, catastrophic flood damage estimated to have caused over $30 billion in economic losses — according to the World Bank — and drained energy import reserves that have led to regular nationwide blackouts. 

Foreign exchange reserves dropped to a critical level of $4.3 billion in January, enough for three weeks of imports, according to the country’s central bank. 

The IMF has been working with Pakistan on a bailout package to overcome its financial crisis and avoid default. Pakistan signed a $6 billion deal with the IMF in 2019, with a planned additional $1 billion one year later. Yet as of May, the IMF had refused to release the first payment of $1.1 billion until the organization received confirmation from Pakistan’s allies — mainly the UAE, Saudi Arabia and China — that they can financially back it. 

Pakistan’s Ambassador to the UAE Faisal Niaz Tirmizi told Emirati state media that the UAE is his country’s biggest trading partner and that bilateral trade between the two countries this year is expected to double its 2021-2022 volume of $10.6 billion. 

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