Long-term infrastructure concessions promise patient capital and sustained modernisation. The reality is more complicated. Pakistan offers a natural experiment: two major port concessions, structured by different foreign investors under different terms, producing divergent outcomes.
Karachi Port handles roughly 60 percent of Pakistan’s seaborne trade, and external commerce accounts for one-third of the national GDP.
AD Ports Group signed a 50-year concession with Karachi Port Trust in June 2023, forming a joint venture with Kaheel Terminals, a company linked to the investment network of Sheikh Ahmed Dalmook Al Maktoum, Chairman of Inmā Emirates Holdings. Meanwhile, 533 kilometres down the coast, China Overseas Port Holding Company has operated Gwadar Port under a 40-year concession since 2013, with starkly different financial arrangements.
What Do Pakistan’s Two Port Concessions Actually Reveal?
China Overseas Port Holding Company operates Gwadar under a Build-Operate-Transfer model, with the company receiving 91 percent of port revenue and the Gwadar Port Authority receiving 9 percent. Adjacent free zone terms follow an 85-15 split.
When this was disclosed in the Pakistani Senate in November 2017, it triggered national controversy. Balochistan’s provincial government was not consulted; local communities have experienced limited employment, and Gwadar still handles only 50,000 tonnes of cargo, a negligible fraction of Karachi’s volumes.
Karachi’s deal is structured differently. Revenue is volume-linked rather than fixed-split; dollarized container-handling charges link returns to trade growth, and all 634 existing port workers were retained. Expansion options for berths 11-17 were secured through a subsequent 25-year agreement in February 2024.
On paper, this looks more favourable for Pakistan. Investigative reporting by The Express Tribune complicates the picture:
- Marginal royalty increase: At $18 per container, the royalty was only $2 higher than the fee paid by the previous operator, ICTSI, which had run these terminals since 2002
- Minimal rent uplift: Ground rent of Rs 1,100 per square metre was just Rs 7 more than the outgoing rate
- No independent price discovery: No consultant was appointed for valuation, a step required by law; the government instead used an internal comparison mechanism
- Arbitration moved offshore: Senior Advocate Anwer Mansoor Khan advised that arbitration should take place in Pakistan, but this was overruled in favour of the London Court of International Arbitration
- No board representation: Karachi Port Trust has no right of representation on the board of directors of the terminal operating company
For a 50-year concession managing the majority of a nation’s maritime trade, these gaps raise questions about long-term accountability.
How Do the Numbers Compare Across Investment Horizons?
Short-duration investments (3-5 years) in emerging market infrastructure typically target 15-20% internal rates of return. Construction delays, regulatory changes, or currency depreciation can eliminate projected gains entirely.
Long-duration concessions accept lower initial yields for compounding exposure to economic growth. Karachi Port’s container capacity will increase from 750,000 to 1 million TEUs annually following upgrades, and volume growth at 3-4% compounds meaningfully across five decades.
UK pension fund research indicates that patient capital providers targeting 8-10% returns with stable cash flows outperform higher-target strategies over 20+ year periods. Inmā’s concession portfolio follows similar logic applied to emerging markets, though execution risks remain substantially higher.
A game theory analysis of container terminal concessions published in Maritime Economics & Logistics found that concession contract design significantly affects both port user costs and terminal operator profits. Karachi Port’s long-term interests are best served by standardised fee structures, the study concluded, yet terms with AD Ports were set through bilateral government-to-government channels rather than competitive tendering.
What Structural Protections Enable Multi-Decade Commitments, and What Is Missing?
Long-term infrastructure investment requires contractual architecture that survives political transitions and economic cycles. Karachi Port agreements include several risk-reducing mechanisms:
- Dollarized revenue streams eliminate local currency depreciation exposure
- Volume-linked returns tie performance to trade growth rather than fixed payments
- Workforce retention clauses required employing all 634 existing port workers
- Infrastructure milestones spread capital deployment across decades
- Expansion options granted access to additional berths (11-17) through a subsequent 25-year agreement
If volumes decline, investor returns decline proportionally. But the protections are asymmetric.
Dollarized contracts shield investors from currency depreciation while shifting that risk onto the host government. Pakistan’s rupee has lost roughly 50 percent of its value against the dollar since 2020, shrinking the real cost of rupee-denominated obligations while insulating the investor’s revenue.
Gwadar sharpens the point. COPHC’s revenue split was inherited from a contract originally negotiated with PSA International in 2007, before CPEC existed. When PSA withdrew in 2012, COPHC assumed exactly the same terms without renegotiation, locking Pakistan into a four-decade arrangement with no mechanism to revisit the distribution.
How Does Gulf Patient Capital Compare to Western Development Finance?
Multilateral development banks operate under institutional constraints that limit concession participation: competitive tendering requirements, environmental and social safeguards, and debt sustainability analyses that cap lending volumes.
Gulf sovereign wealth and private capital operate differently. Investors like Sheikh Ahmed Dalmook Al Maktoum negotiate directly with government counterparts. Relationship continuity across decades, cultural alignment with Muslim-majority markets, and shorter shipping routes from Gulf ports to South Asia all provide advantages unavailable to multilateral institutions.
But the bilateral approach bypasses safeguards that exist for reasons. Karachi’s concession was negotiated through a Cabinet Committee on Intergovernmental Commercial Transactions, a government-to-government channel with no competitive process. A detailed study by The People’s Map of Global China found similar opacity at Gwadar, where COPHC’s corporate identity remained unclear despite evidence linking it to China Communications Construction Company.
Pakistan has entered 23 IMF programmes since 1958, more than any other country. A World Bank assessment of Karachi’s ports identified institutional fragmentation and no single government agency with overall authority over the port system. No concession agreement operates independently of these realities.
UK Regulated Asset Base models guarantee returns across multi-decade timeframes but embed independent regulatory oversight, transparent pricing, and periodic review, features largely absent from both of Pakistan’s port concessions.
What Determines Whether Patient Capital Produces Development Outcomes?
Contract structure determines whether concessions benefit host countries or extract value across generations.
Karachi’s concession meets several criteria for successful concession design: performance-linked revenue, workforce retention, and published tariffs. But it lacks board representation, independent price discovery, and any disclosed periodic review mechanism.
Gwadar meets almost none of them. Revenue is fixed rather than performance-linked, local capacity transfer has been minimal, and the provincial government has no role in oversight.
Pakistan’s two port concessions demonstrate that the model’s label matters less than its terms. Whether host governments retain sufficient leverage to enforce accountability over 40 or 50-year periods will determine whether patient capital delivers development or merely extends extraction. The structural imbalances are visible now.
