Karachi Fish Harbour Restructuring

DRAFT
Karachi Fish Harbour: Roadmap for

Restructuring Harbour
Management and Operations
Karachi Fish Harbour showing the overcrowding among the fishing boats
Competitiveness Support Fund
Karachi Fish Harbour - Roadmap for Restructuring Harbour Management and Operations
Abbreviations
Beopari A moneylender and middleman
BOT Build, Operate, Transfer
CSF Competitiveness Support Fund
EOI Expression of Interest
EU European Union
FCS Fishermen’s Cooperative Society
GoS Government of Sindh
Ha Hectare
KFH Karachi Fisheries Harbour
KFHA Karachi Fisheries Harbour Authority
Mole Same as Mole holder, though perhaps not officially
sanctioned
Mole holder A seafood commission agent. Sometimes a boat
owner and exporter, and a moneylender. “Official”
moles are sanctioned at the KFH
PR Pakistani Rupee
STOFA Sindh Trawler Owners & Fishermen Association
TORs Terms of Reference
Currency
On 26th May 2008 US$1.00 bought PR 69.36 (State Bank of Pakistan)
ii
Contents
Executive Summary..............................................................................................................iii
1. Introduction........................................................................................................................1
2. Objective.............................................................................................................................4
3. Rationale.............................................................................................................................5
4. The process of privatization of the management of KFHA............................................8
5. Timeframe.........................................................................................................................11
6. Getting consensus...........................................................................................................13
7. Nature of the management agreement for KFH.............................................................15
8. Contractual and legal matters.........................................................................................17
9. Tendering and award of contract....................................................................................21
Executive Summary
1. This Roadmap report is part of a continuing process undertaken by the

Government of Sindh in cooperation with the Competitiveness Support
iii
Fund (CSF) and Federal Government to upgrade Karachi Fish Harbour

and restructure the management of the Harbour1.
Purpose
2. The purpose of the Roadmap is to provide the stakeholders with the

steps that they have to take in order to bring the Harbour up to a standard
that complies with international requirements.
3. It is important to emphasize that the work has to be undertaken by the

stakeholders; CSF can facilitate the process of change and indeed
provide guidelines (such as this Roadmap), however CSF will work with
the stakeholders, including the Federal and Sindh government to take the
necessary steps suggested here.
Aim
4. The aim of the process of change and restructuring agreed with the
Government of Sindh is to move forward the privatization of the KFH in
respect of an international management company to be brought in to take
over and manage the operations and assets in the Harbour. This should
improve the quality of the fish passing through Karachi Fish Harbour by
improving the management of the Karachi Fish Harbour, and through this
improvement in management2 also address income, infrastructure and
quality control issues.
Findings
5. The key finding of all the work undertaken by CSF related to the
Karachi Fish Harbour is that the problems there are not purely physical or
technical; the technical issues (e.g., condition of the auction halls, sewage
1
The work commenced in early 2007 with CSF’s initial report on the KFH and resulting Action
Plan. In January 2008 a Prime Ministerial Committee confirmed CSF’s approach. Other
related work has been undertaken by UNIDO in conjunction with the Federal Marine Fisheries
Department of MinFAL
2
The ADB (2007) Port Reform Toolkit (363 pp) has been used as the main guide to practical
issues.
iv
systems, condition of boats, provision of ice etc.) have tackled countless

times without lasting success. The fundamental issue is one of
management of the facility and the desire and capacity of owners and
managers to actually undertake their work in compliance with well-known
and accepted international standards.
6. It is important to be frank about this matter, the technical or physical

aspect of the KFH can be upgraded time and again. But there will be no
lasting impact if the stakeholders themselves (in particular the so-called
“moles” – the holders of auction licenses - do not recognize financial value
in upgrading the Harbour. So far they have not done so. If KFH is to be
upgraded and exports to international markets (specifically the European
Union) restored, then it is principally up to the Government of Sindh (as
owner of the Harbour) to convince the stakeholders of the value of the
changes proposed by CSF.
Next steps
7. A number of specific steps have been agreed. The Government of

Sindh must take ownership of the programme by designating an
implementing agency. This agency needs to be empowered to take all the
necessary actions which can only be taken by the GoS. The agency could
be the Sindh Secretariat, Livestock and Fisheries Department or the
Karachi Fish Harbour Authority itself.
8. Once an implementing agency and its primary staff are chosen, then
certain key things will need to be done by the agency on the GoS side
before CSF can continue its work on the project. These are:
a. Notification of a reconstituted Board of KFHA as per previous

agreements (See Government of Sindh No.EC(Fish)(L&F)/15(15)2007.
Minutes of the meeting regarding Competitiveness Support Fund –
Action Plan for Karachi Fisheries Harbour Authority held under the
Chairmanship of the Chief Secretary, Sindh on 22.1.2008. Karachi
dated 24th January 2008)
v
b. A meeting of the newly reformed Board to pass a resolution to offer a

contract to a private management company in line with your decision to
privatize the KFH;
c. The stakeholders have to be consulted in order to build consensus.
Consultations including a series of Stakeholder Workshops and Formal
Consultative Meetings will build a consensus about the way forward –
we believe that it would be futile to pursue this project unless a full
consensus of all the stakeholders is reached.
9.Once these steps have been taken, CSF can move forward with the next
activities on the Roadmap for restructuring the KFH, such as preparing a
lease agreement, seeking possible management partners and developing
a PC-1 for federal funding if required.

Islamabad
June 2008
vi
1. Introduction
10. The Competitiveness Support Fund (CSF) is an independent body

established in 2006 to reposition the Pakistan economy on a more
competitive global footing. It is a joint initiative of the Government of
Pakistan, Ministry of Finance and the United States Agency for
International Development (USAID).
11. A study3 in 2007, designed to address the Pakistan fishing industries’

main and most pressing problems identified two areas of great concern.
These were:-
• Overfishing, due to the open entry nature of Pakistan’s oceanic and

coastal fisheries.
• A failure to maximise the value of the catch due to quality control
problems, particularly at Karachi Fish Harbour.
• Serious issues related to the development of the fishery in
Baluchistan including development of Pasni and Gwadar ports
3
Competitiveness Support Fund (2007) Action Plan for Fish Quality and Value Adding at
Karachi Fisheries Harbour
1
12. Furthermore regarding the failure to maximise the value of the catch;
the situation at Karachi Fish Harbour was identified as critical, in that the
infrastructure and management of the harbour was inadequate for the
needs of the fishing industry and required strengthening before significant
progress towards alleviating quality control problems could be achieved.
13. The 34.4 hectares comprising Karachi Fish Harbour is situated on a

prime area of industrial land in West Karachi. It is the hub for all fisheries
exports and local fish marketing. Karachi is the major port of the country,
the city with the largest population (20 million estimated) the Competent
Authority, fish processing establishments, road, air and rail links to the
rest of the country, a busy international airport; and which is also the
centre of manufacturing and finance in Pakistan. 40% of the catch of
Pakistan passes through the Karachi Fisheries Harbour and at least
another 20% through the city, though much of this is fish for fishmeal.
14. Export fish generally passes through the Karachi Fisheries harbour,
around which the 32 major fish processing companies are concentrated,
and which has three auction halls. Some export fish and shrimp, coming
from Baluchistan, and the Indus delta, and possibly Ibrahim Hyderi on
Korangi Creek in Karachi, does not pass through the landing and auction
facilities and goes straight to the processors. Some fish is exported
directly to Iran and the Middle East from the Western ports of Baluchistan.
2
15. KFH needs to deal with a number of disparate activities: the movement
of large numbers of fishing boats (large and small), the loading and
unloading of fishing boats to the various auction halls, management of the
auction houses, allocation of space to fish processors, vessel repair
facilities, boatbuilding activities and administration. Berths, warehouse
and other storage spaces have to be allocated and released. Many
thousands of people also rely on the KFH for their livelihoods. The
efficient management of KFHA involves managing these activities and
resources, managing the flows of money involved between the agents
providing and using these resources, and providing management
information to users and administrators.
16. In principle (or on paper) the Sindh Provincial Government owns the
KFA. The Karachi Fish Harbour Authority (KFHA) is the agency of the
Sindh Provincial Government that is responsible for managing the
harbour. KFHA receives money from Government of Sindh (GoS)
budgets and additional income from the hire of space on the harbours
already crowded site, for boatbuilding and for processing, and from the
use of the slipway, though this is rarely used for fishing boats.
3
17. This system has not worked in reality and the facilities at the harbour
are deteriorating (though there has been some investment to improve
auction facilities). Many of the businesses operating out of the harbour
are not contributing adequately to the upkeep of the area and there are
serious shortcomings in the collection of dues. This has contributed to a
reduction in the quality of the fish landed and its value.
18. The intention is therefore to modify the management regime by

contracting out the port management function to an expert port operator.
2. Objective
19. The main objective of the process is to improve the quality of the fish
passing through Karachi Fish Harbour by improving the management of
the Karachi Fish Harbour, and through this improvement in management 4
also address income, infrastructure and quality control issues.
20. This much has been agreed already by the Government of Sindh
(GoS), assisted by the Competitiveness Support Fund (CSF), and
memoranda have been issued to this effect. Regarding management it
has also been agreed that5, inter alia :-
Minuted agreement Comment

The ownership of the harbour will This is fundamental to the privatisation
1 remain with the Government of Sindh process as it defines the type of
and the Karachi Fish Harbour Authority management agreement that can be entered
(KFHA) will continue to exist into.
2 The Board of the KFHA shall be This requires a “Notification” to the issued
reconstituted. and the new members co-opted
The KFHA will outsource the This will require a change to the legislation,
management of the entire facility to an which is not too complicated.
3 international/reputed company by open The current agreement with the FCS to
competition manage the auction will also have to be
rescinded
The KFHA will prepare the TORs and This is extremely complex and technical and
4 recruit a management company to will also require a change in the legislation.
manage the KFH with the assistance of
CSF.
5 The management company will The situation of the various stakeholders,
4
The ADB (2007) Port Reform Toolkit (363 pp) has been used as the main guide to practical
issues.
5
Gov Sindh. No. EC(Fish)(L&F)/15(15)2007. Minutes of the meeting regarding
Competitiveness Support Fund – Action Plan for Karachi Fisheries Harbour Authority held
under the Chairmanship of the Chief Secretary, Sindh on 22.1.2008. Karachi dated 24th
January 2008.
4
privatise the auction of fish, with the particularly the mole holders will have to be
proceeds being split between the carefully worked out, and enshrined in new
Fishermen’s’ Cooperative Society and legislation, otherwise the privatisation will
the Management Company/KFHA. face legal challenges and serious lack of
cooperation.
The CSF will continue to assist the Dependant on success of the above.
6 KFA and also through their place on
the board, monitor and evaluate the
functioning of the harbour
3. Rationale
21. Karachi Fisheries Harbour is obviously not run efficiently, does not
cover its running costs and provides a very poor service to its users. This
is accepted by all stakeholders, and is obvious to even the casual
observer. The whole country pays for these inefficiencies in that the price
of fish is not maximized due to poor quality, affecting fishermen
(incomes), traders (export earnings) and the consumer.
22. The harbour, 34 Ha of land in West Karachi should be an asset

producing dividends for the Sindh Government. Currently the Sindh
Government subsidises the harbour. The opportunity cost to the Sindh
Government of having these 34 Ha of valuable land as an inefficiently run
fish harbour is enormous.
23. Some of the reasons for the lack of efficiency, and its costs lie with
poor management, in that the administration by the various bodies
charged with management of the various functions is lax, overweight and
reported to be corrupt. Reform would overcome many of these
shortcomings and also remove the long term financial burden for
infrastructure investment, maintenance and some recurrent costs
presently lying with the GoS6.
24. The elimination or reduction of political interference and misuse of

funds is a very real reason for action. A private company, orientated
towards financial probity and commercial results will give a focus on the
market and its changing needs.
6
Through attracting foreign investment, reforming labour practices, making the harbour a
commercial entity etc
5
25. The auction of fish at the Karachi Fish Harbour site began in 1959
when the fish market moved from Karachi town to the harbour.
Responsibility for the auction was given to the FCS7 as the MFD, as it was
then, did not have the capability to run it.
26. The ownership of the KFH assets passed to the Sindh Government
when the responsibility for fisheries passed to the Provinces after 1973.
FCS claimed that an earlier understanding that they had with the Federal
Fisheries gave them ownership of the KFH but this claim was thrown out
after a court case.
27. The Karachi Fish Harbour Authority has been in existence since the
early 1980’s. It was constituted to receive a grant from the EU but has not
been disbanded since. Under its management the harbour has not been
well maintained over the last few years. Facilities are run down and there
has been a serious lack of investment in plant and equipment. Staff strive
to manage but their actions are constrained by the structure of the KFH
management (with the auction, the main revenue stream, controlled by
the Moles and the FCS) and a lack of will to change from above.
28. Although the Sindh Government and various donors have made
piecemeal investments to improve the facilities for handling and
auctioning fish (such as K1 Auction Hall and refurbishing K2 Auction Hall)
there remain many infrastructure problems. Recently GoS has made
available more than Pak Rupees 200 million in development funds, mostly
for maintenance and equipment, and the improvement of vessels fishing
to the harbor.
29. KFH has not in the past maximised its incomes. Some examples
(there are probably several others) include:
• rents for plots on the Harbour Lands are much lower than commercial
rents elsewhere in West Karachi
• no dues are collected by KFHA from boats entering or leaving the
harbour, or unloading, or just tied up in the harbour
7
With the FCS came the moles.
6
• the FCS owes more than Pak Rupees 30 million for rent of the auction
halls which remains uncollected.
30. KFHA is striving to collect outstanding rents and other receivables, and
is having some success. They are however, problems since many of
those owing money claim they have no money to pay. The fishing
industry has not been as profitable of late as in recent past years.
31. It is only relatively recently that there has been the political will in the
GoS to tackle the problem apparent at KFH, rectify the shortcomings in
management of the harbour and lack of investment in facilities.
32. Various vested interests, most notably the moles, have sound
economic reasons not to support change.
33. The EU has, through the de-listing of Pakistan processing units, made
it impossible to export directly to the European Union; but at the same
time brought the failings of the KFH to public attention and to the attention
of the Federal and Sindh Government. The Competitiveness Support
Fund has been instrumental in maintaining the high profile of the need for
change.
34. Ultimately the Government of Sindh Province (GoS) is attempting to

improve the management of the KFH to assist the general development of
both the Province and people of Pakistan, and specifically increase the
returns from fishing, which will support the fisherfolk of Sindh and
Baluchistan. At the level of the harbour the GoS seeks to ease the
financial burden on its budget by transferring part of harbour investments
and operating costs to the private sector, and raising its own revenues.
35. The task therefore is to design a Management System that will allow
the assets of the KFH to remain with Sindh whilst transferring the day to
day management of the whole harbour activities to the private sector.
36. These are admirable aims.
7
4. The process of privatization of the management of KFHA
37. Privatizing the management of the KFHA will not be a simple nor quick
process8. Port and harbour privatization has occurred in many parts of
the world, including Pakistan, and a body of experience has been built up
which shows that the process is both more involved and more drawn out
than at first appears.
38. Preparing for privatization has to be done properly, or there might be

nobody prepared to take on the job of management, and any badly
prepared privatization will put back the process of reform for many years.
39. For KFH the concept of a “landlord” port9 has generally been accepted
as the best model to follow. If GoS, in the light of the possible difficulties
of getting consensus on introducing private management to the KFH
would prefer another arrangement, this could be re-considered, though
the alternatives do not offer the same advantages.
40. The first stage is the acceptance of all parties that change is to happen.
There is already a widespread recognition in the higher echelons of
decision making at Provincial and Central Government level that the
present situation cannot continue. KFHA is financially compromised, the
harbour is a drain on the public funds, development funds do not reach
the intended destinations, vested interests hinder change and the
financial losses to the fishing industry through continued failures in the
cool chain from capture to consumer are catastrophic. The management
structure of KFH has not changed significantly since 1984 when it was
formed, 24 years ago; the structure of the auction has not changed since
1958, 50 years ago when the harbour opened, and this was merely a
8
See: Port Reform Toolkit, World Bank Transport Division. (2007).
9
In the landlord port model, infrastructure is leased to private operating companies. The
lease to be paid to the port authority is usually a fixed sum per square meter per year.
Depending on the lease conditions the private port operators may provide and maintain their
own superstructure including buildings (offices, sheds, auction halls, factories etc). They also
purchase and install their own equipment on the port grounds as required by their business.
In an established harbour such as KFH arrangements for the labour, infrastructure and
revenue have to be decided.
8
continuation of previous practices at the town market, from the colonial

era.
41. Unfortunately it is still not certain that some of the powerful vested
interests, nor even the labour force of KFHA and FCS or other
stakeholders are fully convinced of the benefits of privatization.
Consensus must be obtained through negotiation and compromise
because a confrontational approach is unlikely to be successful.
Currently (May 2008) many people claim never to have heard that there
was a proposal that the management of the harbour might be privatized.
42. Very importantly, the contractual and management arrangements for

the private sector entity that will takeover the management of the harbour
must be scoped out and agreed upon before the privatization process can
go ahead. The size of the task must not be underestimated. The various
powers of the parties, procedures for solving disputes, rules, rents and
labour issues must be consistent with the public interest, but also defined
so as to allow the new management to manage in an efficient and
effective way.
43. Finally this all has to have a solid legal basis, particularly since the
management company or institution will require that its investment is
protected by law, as will the GoS who will retain ownership of the assets.
44. The GoS, through the KFHA has access to legal advice and services
which will allow it to alter, at little cost, the current legislation related to
changing the composition of the board of directors of the KFHA and
introducing more stakeholder participation.
45. Similarly the change of the ordinances and regulations relating to the
change of management of the KFHA can probably be addressed via
these channels.
46. Where the GoS and KFHA will probably require bringing in outside
legal advice or assistance is in the drafting and preparation of the TORs
and contract to engage the Management Company to manage the KFH.
9
This is not uncommon in harbour or port privatizations, though in the case

of the KFH some of the common difficult problems are to be avoided,
partly by its relatively small size but also by deciding on a concession or
lease with the GoS retaining the assets and land. However, the
concession/lease arrangement will not be simple, far from it, because the
arrangements for dealing with the existing and ingrained vested interests
in the KFH remain to be sorted out. The Mole holders and Beoparis, for
instance, must be mollified by whatever arrangements are made.
10
Karachi Fish Harbour- Roadmap for Restructuring Harbour Management and Operations
5. Timeframe
47. It is advisable if a timeframe is placed on the various actions that have to be completed. This gives targets and helps the
planning process. For the KFH the following timetable may be appropriate:-
To be Responsibilities
Activity complete
by KFHA Government of Sindh CSF
Ideally the GoS would publicise the

Continues with investigating aspects of intention to privatise the management of
the privatisation process particularly the the KFH, through either a notification or
Ends
preparation of TORs of the future through the media. Following this the Continues to provide assistance in the
Preparation August
management company. Getting objections and opinions of the various form of a consultant to aid progress
2008
consensus and the role of the vested interests in the harbour will be obtained
interests are most important. and can be discussed in various forums,
leading to consensus.
Prepares, with Fisheries Department,
Starts modifications & amendments to the
Sept 2008 existing ordinances so that the law Legal Department will check the Will not intervene at this stage as these
Basic Legal allows the privatisation to go ahead. proposed modifications and ensure that actions are well within the capabilities of
aspects End they are consistent with current the GoS, its various Departments and
October VERY LIMITED FUNDING REQUIRED legislation, before they are passed the KFHA.
2008 from Sindh Government or KFHA
resources
Starts end KFHA engages a suitable legal drafting CSF provides funding for the
Preparation Sept 2008 company to prepare the TORs and Assists KFHA with information and
engagement of a suitable legal drafting
of TORs for contract agreement. administrative back up in the preparation
Ends Feb company to prepare the TORs and
contract of the TORs.
2009 FUNDING REQUIRED contract agreement
Request for CSF assists by arranging media publicity

Jan 2009
EOI in regional and “Port” publications
Shortlist Depends Government of Sindh procedures Assists KFHA where appropriate CSF consultant assists as required
11
Karachi Fish Harbour- Roadmap for Restructuring Harbour Management and Operations
Tender
Provisional
On
award
Progress
Negotiations Must be fully transparent
With
Final Award
of tender to TORs
winning
company
Handover
Dispute with
Forever!
the moles!
The CSF envisages continuing assistance to the GoS to help progress towards the ultimate goal of privatisation of the KFH.
12
6. Getting consensus
48. It is futile to attempt to privatize KFH if it is not agreed to by the

stakeholders that this is an appropriate way forward. There will always be
dissenters, but a general consensus can usually be achieved. A top down
approach can only be followed if the power to make and adhere to
decisions is available and will be enforced. This does not appear to be
the case in KFH, which is susceptible to political interference and
backtracking on earlier decisions, particularly with a fluid political
landscape. Thus consensus is a necessity.
49. A brief list of the main stakeholders and their main concerns in the KFH
includes:-
Stakeholder Concerns
Currently 2000 boat owners land to Karachi
1. 2000+ fishing boat owners, all Fish Harbour. They wish to continue to do so
members of the Fishermen’s and also to be guaranteed a reasonable price
Cooperative Society (FCS) who fish to for their labours. If possible they would like to
the harbour. Also their crews, see price rises for landings coming from any
probably another 70,000. privatisation. The crews are worried about
their jobs.
2. The Members of the Sindh Trawler

Owners & Fishermen Association The STOFA needs a landing place for their
(STOFA), which represents the vessels. Many are tied to the moles but the
interests of the larger domestic boat market/harbour must continue to serve them.
owners.
3. The administration and numerous They are concerned about their jobs.
junior employees of the FCS (380)
4. The KFHA staff and its numerous KFHA staff is concerned about their jobs and
employees (~200) long term future.
5. The various fish processors, (Pakistan

Seafood Industries Association) their The fish processors are concerned about
administrative staff and employees profits, so wish to see more and better fish
(no reliable figure for employment in landed, whilst the staff is concerned about
these industries is available, but it their jobs and long term future.
must be considerable).
These individuals are concerned about the
6. The Official Moleholders, who are also
continuation of the status quo, which is heir
financiers to the industry, owners of
livelihood. They will not allow changes that
boats, auctioneers and though loans
affect their businesses, leading to reduction
get sole access to some fish landed at
of incomes. Mollifying these individuals is a
the harbour.
necessity. Politically & financially these are
very powerful people.
13
They may also be boat owners

Not as powerful as the Moles, but will
7. The Beoparis; money lenders who nevertheless oppose strongly any changes
finance the fishermen, usually through that reduce their access to or dealings with
loans to the vessel owners fishermen.
8. The large number of other middle-

men and traders who deal in the fish, Not as powerful as the Moles, but will
between it leaving the harbour and nevertheless oppose strongly any changes
being retailed in the various markets that reduce their access to the harbour or
in Karachi and the other major cities in dealings with fishermen.
Pakistan.
These industries are concerned abut the
9. Suppliers to the fishing industry (nets, general health of the fishery, in that servicing
engines, spares, bunker, ice etc) and supplying this segment is the basis of
many of their livelihoods
10. Ship repair and building businesses

who hire land from the KFHA for their They will wish to be reassured that they can
businesses, and other similar carry on their businesses on the KFHA land.
businesses
Wish for a continued supply of good quality
11. Retailers in markets and shops fish and shellfish to supply to their customers
12. Consumers of marine fish from the Want a supply of good quality healthy food
KFH
Wishes to protect its assets whilst reducing
13. The Government of Sindh, which the KFH reliance on recurrent and
owns the KFH assets development funding. Would like a return
from the 34 Ha of land.
Nothing to be done is allowed to “rock the
boat” politically. The politicians do not wish
14. Local Politicians for a large disaffected group to be created in
West Karachi.
50. There may be pressing reasons, un-envisaged by the planning process

so far, why the form of change planned (a landlord port, with private
management of Government owned assets) is inappropriate; there may
be such grassroots revolt that it cannot be carried through; there may be
vested interests10 of such political and economic power that they can stop
the process. None of this will be revealed until a full stakeholder
consultation is undertaken.
51. It is thus incumbent on the GoS, through the KFHA to ensure that
change is on the agenda at all levels. The GoS must appoint a person or
10
It was obvious on 22.5.08 that nobody had spoken to the Moleholders about privatising the
auction.
14
group of people to address the issue of getting consensus. GoS must,

through a very public consultative process, advise all the stakeholders of
their plans and make the whole process transparent, right from the start.
This will have several affects:-
a. It will flush out the dissenters, who will be encouraged to put forward
their objections early on in the process; enabling the GoS/KFHA to
incorporate changes to the privatization process to satisfy their worries.
b. It will avoid problems, particularly with the diverse labour groups
employed at the harbour, who are already fearful that changes may
impact adversely on their livelihoods, because they will receive
reassurances.
c. It will convince the public, the stakeholders themselves and Aid Donors
that change is on the way and the problems of KFH are to be
addressed. This will lead to conformity of decision making in
investment and development options.
d. It will convince potential bidders for the management contract that the
GoS has approached the privatization process in an open and
transparent way.
52. The consultation process will also crystallize in the minds of the
decision makers at the GoS, the nature of the arrangements they wish to
make to privatize the operations of the harbour; what parts can be
privatised and what, if any, cannot.
7. Nature of the management agreement for KFH

53. Currently, though it is not yet formally approved by all stakeholders,
GoS and CSF have proposed that the KFH will be managed and the day
to day operations of the harbour controlled by a private company under a
lease, but guided by the board of the KFHA (who would presumably
control Government Development Funds expenditure, and act as a
moderating agency in any disputes between the GoS, the management
company, and any stakeholders). The KFHA as the arm of the GoS
would not be involved in the day to day running of the KFH. The GoS
would grant a “concession” to the management company. This is a
15
contract (or lease), legally binding, whereby the GoS will transfer
operating rights to the Management Company for the KFH. The
Management Company will then manage the harbour and the assets in
the 34 Ha of land of the harbour under the terms of this contract.
54. The assets, land, buildings and other infrastructure currently owned
by the GoS will remain the property of the GoS, though depending on the
decision of the GoS, it may be leased to the Management Company for a
period not yet determined, though 20 years would seem appropriate.
55. The main point about any contracts that the GoS enters into regarding
management of KFH is that all are legal documents, and if not watertight
and clearly defining the rights and responsibilities of both sides, they are
practically worthless, since no responsible private company will be
attracted to sign up to a contract that does not make clear its
responsibilities.
56. A private Company will evaluate its involvement in KFH on several

criteria. These include the return on investment that can be expected,
proper financing for infrastructure and investment, a watertight contract
and legal and transparent support from the public sector. The obligations
and rights of each party to the contract must be explicit. The Company
will also expect to receive equitable treatment in the bidding process and
will have had to be allowed to make its own feasibility analysis based on
an examination of the past and current records of the KFHA and other
operators whose responsibilities it is going to take over (FCS and the
Moleholders11 for instance). If these criteria are not met then none but
charlatans and “get-rich-quick” merchants will reply to the Expression of
Interest (EOI) that will be issued.
57. It may be possible to privatize the actual operations of the KFH, and
lease out the infrastructure, but major investment in infrastructure must, in
the short term at least, come from the Government (of Sindh, or Federal)
so as to allow the harbour to be privatized. The lease contract could
11
This latter most unlikely to be granted!
16
perhaps allow for capital investment from income when harbour income
reaches a pre-determined level.
8. Contractual and legal matters
58. The first matter to be addressed is whether the legal structure currently
existing in Sindh allows for the reconstitution of the KFHA board as
agreed and minuted12 in the agreement between GoS and CSF in January
2008. Apparently (Junaid Farooki, KFHA Advocate, Pers comm) this
does not constitute much of a problem and does not require a change of
legislation, merely a “notification” which is easily arranged.
59. The current legislation is inadequate to allow for a concession or lease

on the KFH assets and land. (Junaid Farooki, KFHA Advocate, Pers
comm). Legislation allowing this arrangement must be enacted, through
amendments to the existing legislation, to change the Karachi Fisheries
Harbour Authority Ordinance, (1984) and the Karachi Fisheries Harbour
(Control and Management) Regulations (1991).
60. The lease agreement between the FCS and the GoS pursuant to
Agriculture, Livestock and Fisheries Department, GoS, Notification
No.2(5) SO (FISH)/1996AL&F/2002 dated 13th February 2002, will have to
be cancelled. FCS are in breach of a large number of the clauses in this
lease agreement and the lease agreement in any case has clauses
allowing GoS to take back the assets after giving adequate advance
notice, or in the case of a breach of the lease clauses straight away
without compensation. The FCS currently owe Pak Rupees 30 million in
unpaid rent.
61. Work on the contents of the future lease agreement with the private
company could go ahead in anticipation of the passing of these various
amendments.
12
Gov Sindh. No EC(Fish)(L&F)/15(15)2007. Minutes of the meeting regarding
Competitiveness Support Fund – Action Plan for Karachi Fisheries Harbour Authority held
under the Chairmanship of the Chief Secretary, Sindh on 22.1.2008. Karachi dated 24 th
January 2008.
17
62. One of the valued features of a landlord port agreement is the

possibility of a clear division of responsibilities between the authority
(KFHA) and the Management Company, and the importance of getting
this right when the lease is prepared cannot be over-emphasised. GoS
may require expert assistance in preparing these documents.
63. Depending on the specific situation, a concession agreement for a

harbour such as KFH may consist of a single contract or a combination of
legally binding contracts covering:-
i. The meaning of terms. A definition of all technical and legal terms

in the contract.
ii. The length of the concession/lease on the harbour
iii. The kind of lease (a landlord concession is envisaged)
iv. The arrangement of the lease, where either a rental ($/sq yd) is
paid by the Management Company for the concession to run the
KFH, or the KFHA shares the profits from operating the harbour.
This share may be on a sliding scale, where the first few years allow
the Management Company to make more money whilst it gets the
harbour under control, and rises later as cash flow improves.
v. Payment of any other fees, royalties and revenues, and any other
rentals to the KFHA.
vi. Once the management contract is granted how much can the GoS
through the KFHA board interfere in management of the harbour?
The relationship between the GoS, the KFHA board and the
Management Company has to be clear at the outset.
vii. The exact relationship, responsibilities and representation at all
management levels of the Management Company with FCS, Moles,
Sindh Trawler Owners Association and other stakeholders.
viii. Activities permitted to be carried out in the KFH.
ix. Arrangements for financing infrastructure in the harbour must be
clear. Some financing may come from income, in which case this
must be defined in the contract, and some of this may come from
Government development funds provided by either Federal or
18
Provincial Government. Yet more may come from the management

company depending on the agreement entered into. The exact
nature of the arrangements for disbursing development funds, and
who has the say on how the money is spent (including awards to
sub contractors etc) must be defined in great detail.
x. Maintenance requirements for infrastructure and equipment
currently owned by KFHA.
xi. The relationship between the various premises and service
companies on the 34 Ha of KFH land in West Karachi and the
Management Company must be crystallized. (This includes boat
building plots, ice making premises, processing plants, offices and
workshops etc). Details (rent, duration of lease, special conditions,
maintenance clauses etc) of every sub-lease, or lease arrangement of
each of the operators paying rent to the KFHA have to collated,
presented in detail, and reassessed in commercial terms. The
possibilities and methods of increasing rents to commercial levels (far
above current levels) have to be detailed and their feasibility included.
Ultimately the Government’s investment in KFH land is going to have
to realize commercial returns. GoS cannot continue subsidizing the
large number of premises presently enjoying low rents and as landlord
the Managing Company will have to address this problem very soon
after establishment.
xii. The Managing Company is going to be responsible for day to day
operations of the Karachi Fish Harbour. These day to day operations
will require definition, since the new Management Company will be
expected to take them over. The KFHA must therefore prepare an
audit of its day to day management activities and relate them to what
is written in the Karachi Harbour Authority Ordinance (1984)
xiii. Human resources development and training for workers at the port,
fishermen and the employment of former KFHA and CSF employees
and staff, if applicable.
xiv. Provision of utilities, power, water and sewage. The present
arrangements should be compared with an ideal situation, and the
responsibilities of the Management Company, and the KFHA, in
19
reaching that ideal should be defined, as well as cost recovery

methods, billing and payments systems for users.
xv. Arrangements for auction of fish13 in the harbor must be confirmed,
and then enshrined in the lease agreement. The currently
proposed shift in management of the auction halls from the FCS
and the mole holders to a private body is critical to the success of
the whole privatization process and any shortcomings in this part of
the lease will be catastrophic. This means the FCS and Moles must
agree to co-operate (probably under some mitigating conditions)
prior to any management contract being established.
xvi. Harbour use fees. Currently nobody pays harbour fees on entering
or leaving the harbour, or for tying up there. This clearly must
change to free up space in the harbour and the Management
Company has to be given the mandate to both charge commercial
rates and regulate vessel movements.
xvii. The statutory powers and duties of the harbormaster that will be
appointed by the Management Company. The legal basis for these
powers. (Related to many other issues below).
xviii. Ability of the harbour master to issue rules and regulations for the
better organisation of the harbour activities.
xix. The regulatory environment and the enforcement of marine safety,
environmental regulations, international shipping regulations and
the like. Who is to enforce these regulations and what are the
penalties? How is enforcement to be funded? Role of harbour
master?
13
The auction has the potential to be one of the prime income generators in the harbour.
Auctioning is currently undertaken by the moles (less than 30 in number) who raise 6.25% of
the value of the catch and split this with the FCS, the FCS using their share to undertake
social works with the fishermen members and to pay (or not as the case is) Rp10 million
annual rent for the auction halls to KFHA. It has been proposed that the auction will be sub-
contracted by the management company who will collect the 6.25%, providing half of this to
the FCS who will withdraw completely from the KFH and restrict themselves to their social
works with their members. The balance of the auction fees will pay for the sub-contract and
provide income to the management company as revenue to be split up between it and the
KFHA as agreed in the contract. The moles will no longer be responsible for auctioning the
fish. FCS and the moles are yet to formally agree to this. There may be difficulties in getting
their formal agreement and this has already been indicated in very strong terms by the senior
mole holder.
20
xx. Cooperation with policing, customs and health authorities. The role
of the KFHA and the Management Company.
xxi. Dredging of the harbour. Who decides and how is this to be paid
for?
xxii. Access agreements with the GoS and municipal authorities for
people, boats and vehicles to the harbour area.
xxiii. Award of building contracts between the Management Company
and a construction company for construction or development work
(with the KFHA exercising some form of quality control?).
xxiv. Access for KFHA staff and other statutory bodies to the harbour
environs and what they are allowed to do there.
xxv. More esoteric activities such as the promotion of the harbour,
restaurants, tourism etc
xxvi. Arrangements for violations of the lease agreement by any of the
contracting parties and a dispute resolution path, clearly laid out.
xxvii. Arrangements for the termination of the lease, either at the end of
its term or prior to that, in the case of gross violations of its clauses
by one of the two contracting parties. This would cover the return of
assets, among other things
xxviii. Any other issues that may become apparent during either the
preparation of the draft leases or the contractual negotiations.
9. Tendering and award of contract
64. This is a long way ahead in the future.
65. The GoS will enter into a contract with a Management Company to
provide the management services required. This process has to be
completely transparent, or potential bidders will be put off.
66. The exact procedure will be in line with GoS standard tendering rules.
It will involve advertised invitation to make Expressions of Interest (EOI), a
shortlist, tender, assessment of tenders, decision on preferred bidder,
negotiations with preferred bidder and award of tender.
21
67. Expert TA may be required to assist this process.
22
Appendix 1
References
ADB (2006) Technical Assistance Consultant’s Report. Pakistan: Sindh

Coastal and Inland Community Development Project. Project Number: PAK
37188. December 2005. (& appendices). Prepared by ANZDEC Limited
Consultants.
ADB (2007) Port Reform Toolkit (363 pp)
CSF (2007) Action Plan for Fish Quality and Value Adding at Karachi
Fisheries Harbour
Fishermen’s Cooperative Society Ltd (2005) FCSL (an information sheet on

the Fishermen’s Cooperative Society Limited.)
Fishermen’s Cooperative Society Ltd (1969) Bye-Laws of the Society as

Corrected up to 12th June 1969
Government of Sindh (1984) Karachi Fisheries Harbour Authority Ordinance,

1984. This law provides the legal basis to carry out efficient operation of
harbour facilities and for periodic inspection of hygienic conditions of
processing plants, ice plants, cold storage and other related activities.
Government of Sindh (1991) Karachi Fisheries Harbour (Control and

Management) Regulations. 1991. Came into force 30th Jan 1992.
Regulations set up under the Karachi Fisheries Harbour Authority
Ordinance 1984. Lays down the regulations for the proper management of
the Karachi Fisheries Harbour.
KFHA (2008) PowerPoint presentation “Briefing to Minister for Fisheries

Sindh”
23
Appendix 2
Significant People met during assignment.
Abdullah Khoso - Communication Officer, Pakistan Fisherfolk Forum

Aisha Moriani – Deputy Sec MinFAL
Allan Kelly – ADB Principal Rural Development Economist. Central &
West Asia.
Anis Soomro – Dep Dir KFH
Anwar-ul-Islam - Director Fisheries Sindh
Arsala Khan Niazi – President STOFA
Baboo Ismail – The Senior Moleholder
Badar ul Islam - SME Expert, UNIDO
Capt Ajamal Khan Ghoury – KFHA Harbourmaster
Dr Ali Abbas Qazilbash: - Expert, Lab Accreditation, TRTA. UNIDO
Dr Ian Goulding – Consultant for UNIDO/EU
Dr Khawajh – Administrator for FCS
Dr Muhammad Hayat: - Fisheries Development Commissioner, MFD
Fazal Sajidi Baloch – President KFHA Employees Union
Gulam M’d Mehar - DG Fisheries
Hasim Mahmood Shosa – Chief Secretary, Government of Balochistan
Hussain Jarwar – Manager Programmes PFF
Javed Ishrat - DG Fisheries (MFD)
Lt Gen Muhannad Zubair – Executive director IMU
M. Habib Sangji – Al-Noor Enterprisees. Diesel/bunker provider,
processor
M.Junaid Farooqi –KFHA Advocate
M’D Ali Shah – Chairman PFF
M’d Ghazanfar Ali – FCS Manager
Major Iqbal Ehmad: - Executive Director, Board of Investment
Memon. Shuneed. Executive Engineer. KFHA
Muhammad Iqbal Lakho – Staff officer to ACS
Muhammad Suleman Niazi – President of the Ice Dealers Association
for Fisheries
Nazar Hussain Mahar – ACS Planning Sindh
Professor Mike Dillon – Consultant for UNIDO/EU
Quamruddin Baloch – Freelance Consultant (Fisheries)
24
Sagheer Ahmed – Public Relations Officer KFHA

Sahoor Hussain Abbasi – Dep Dir KFH
Samir S. Amir – Director Research, Pakistan Business Council
Sarwar Siddiqui – Chair STOFA
Sarwar Siddiqui – Chairman STOFA
Shahbaz Anwer – MD ABC Gold Ltd and General Secretary of Deep
Sea Fishing Trawler Operators Association
Shahid Gulzar Shaikh – MD KFHA
Shaukaat Hussain Dir F & T MFD. MD KFH –
Shoaib Siddiqui – Sec, Livestock & Fisheries. Sindh
SM Tarique – Executive director Korangi Fisheries Harbour Authority.
Steffen Kaeser – Industrial Development Officer UNIDO
W.M. Malana – Law Dept Sindh Province
Yasir Abbas Syed – Al Noor Enterprises
Zahid Burghary – Sindh Minister for Fisheries
Zawdu Felleke: - Chief Technical Officer TRTA UNIDO
Zazi Jan M’d – Dep Sec Livestock & Fisheries Sindh
25
Appendix 3
Terms of Reference for the Project
1. Karachi Fish Harbour
a. PHASE 1 - Groundwork
Broadly the CSF will support the Government of Sindh in:
1. Defining the objectives that the GoS wishes to achieve in the KFA
2. Identifying the basic public functions and public responsibilities that will
remain with the GoS and which will define the role of the KFHA in
management of the public assets.
3. Identifying the functions and responsibilities that will be suitable to be
privately managed, either through concessions or under leases, and
thus to be managed through the proposed management company.
4. Identifying the assets needed to support each of the functions, their
adequacy, available funding and improvement schemes.
5. Defining the methods of oversight so that the public interest is
protected: strategic planning, technical and economic regulation of the
port management and the port itself.
6. Addressing labour issues
7. Ensuring that the legislative base for the new management structure is
compliant with existing Pakistan and Sindh laws, decrees and by-laws.
8. Ensuring that the proposal fits in with International law, environmental
legislation and any coastal zone management issues current in
Pakistan and the region.
9. Ensuring that the various actors (notably the GoS and its subsidiary
body, the KFHA, together with the Auctioneers and Co-operatives)
accept the responsibility for port reform at KFH, though a suitable
legislative act.
It will be necessary for the various parties to be aware of and support the
reform process, so the CSF will organise a series of meetings to explain the
process, involving all the stakeholders at the KFH. Feedback from these
meetings will be incorporated into any plans.
26
b. PHASE 2 - Establishment
Further assistance from CSF will then be necessary so that a suitable

management structure can be initiated; a management company recruited
and suitable oversight can be arranged. Once the detailed preparation has
been done the GoS can proceed to identifying suitable companies as
candidates for the management function in the KFH.
The CSF will support the GoS in:-
1. Outsourcing to a suitable Pakistan based body the responsibility for the

preparation & completion of tender documents for the management of
the KFH, including within the documents the results of the discussions
and consultations of Phase 1 and ensuring that the tender
documentation is compliant with Pakistan and Sindh laws and
regulations.
2. Advertising for suitable companies (internationally) to be short-listed for
management of the KFH
3. Assisting GoS with providing adequate background information to
potential bidders and assisting with site visits by potential bidders.
4. Assisting with negotiations with the various bidders, the selection of the
successful bidder, and the award of the tender. ( All to be transparent,
open and competitive).
27

Karachi Fish Harbour Restructuring

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Karachi Fish Harbour Restructuring

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DRAFT

Karachi Fish Harbour: Roadmap for

4. The process of privatization of the management of KFHA............................................8

7. Nature of the management agreement for KFH.............................................................15

8. Contractual and legal matters.........................................................................................17

9. Tendering and award of contract....................................................................................21

1. This Roadmap report is part of a continuing process undertaken by the

Fund (CSF) and Federal Government to upgrade Karachi Fish Harbour

2. The purpose of the Roadmap is to provide the stakeholders with the

3. It is important to emphasize that the work has to be undertaken by the

systems, condition of boats, provision of ice etc.) have tackled countless

6. It is important to be frank about this matter, the technical or physical

7. A number of specific steps have been agreed. The Government of

a. Notification of a reconstituted Board of KFHA as per previous

b. A meeting of the newly reformed Board to pass a resolution to offer a

Competitiveness Support Fund

10. The Competitiveness Support Fund (CSF) is an independent body

11. A study3 in 2007, designed to address the Pakistan fishing industries’

• Overfishing, due to the open entry nature of Pakistan’s oceanic and

13. The 34.4 hectares comprising Karachi Fish Harbour is situated on a

18. The intention is therefore to modify the management regime by

Minuted agreement Comment

22. The harbour, 34 Ha of land in West Karachi should be an asset

24. The elimination or reduction of political interference and misuse of

34. Ultimately the Government of Sindh Province (GoS) is attempting to

36. These are admirable aims.

4. The process of privatization of the management of KFHA

38. Preparing for privatization has to be done properly, or there might be

continuation of previous practices at the town market, from the colonial

42. Very importantly, the contractual and management arrangements for

This is not uncommon in harbour or port privatizations, though in the case

Ideally the GoS would publicise the

Request for CSF assists by arranging media publicity

48. It is futile to attempt to privatize KFH if it is not agreed to by the

2. The Members of the Sindh Trawler

5. The various fish processors, (Pakistan

They may also be boat owners

8. The large number of other middle-

10. Ship repair and building businesses

50. There may be pressing reasons, un-envisaged by the planning process

group of people to address the issue of getting consensus. GoS must,

7. Nature of the management agreement for KFH

56. A private Company will evaluate its involvement in KFH on several

8. Contractual and legal matters

59. The current legislation is inadequate to allow for a concession or lease

62. One of the valued features of a landlord port agreement is the

63. Depending on the specific situation, a concession agreement for a

i. The meaning of terms. A definition of all technical and legal terms

Provincial Government. Yet more may come from the management

reaching that ideal should be defined, as well as cost recovery

9. Tendering and award of contract

64. This is a long way ahead in the future.

67. Expert TA may be required to assist this process.

ADB (2006) Technical Assistance Consultant’s Report. Pakistan: Sindh

ADB (2007) Port Reform Toolkit (363 pp)

Fishermen’s Cooperative Society Ltd (2005) FCSL (an information sheet on

Fishermen’s Cooperative Society Ltd (1969) Bye-Laws of the Society as

Government of Sindh (1984) Karachi Fisheries Harbour Authority Ordinance,

Government of Sindh (1991) Karachi Fisheries Harbour (Control and

KFHA (2008) PowerPoint presentation “Briefing to Minister for Fisheries

Significant People met during assignment.

Abdullah Khoso - Communication Officer, Pakistan Fisherfolk Forum