Pakistan’s Blue Economy: Policy Before Profit

By Dr. Shahzad Ali Gill

There are two numbers Pakistan’s policymakers should learn to say in the same breath. The first is USD 100 billion, which the Ministry of Maritime Affairs (MoMA) believes the blue economy could be worth every year if the country’s coastline, fisheries, shipping lanes and offshore basins were properly developed. The second is USD 5.8 bn, what a single badly handled investment agreement, in a mining project nowhere near the sea, once cost the national exchequer in an international arbitration award. Until we learn to think about these two numbers together, the first will remain a slogan and the second will remain a warning we keep failing to heed.

Pakistan’s maritime endowment is not in question. The country has a coastline of 1,001 kilometres along Sindh and Balochistan, and an Exclusive Economic Zone (EEZ) of 240,000 square kilometres, expanded by a further 50,000 square kilometres continental shelf claim that the United Nations approved back in 2015. And yet, by the MoMA’s own reckoning, the blue economy, shipping, fisheries, offshore energy, coastal tourism and the activity that clusters around them contribute barely 0.4 per cent to Gross Domestic Product (GDP), or about USD 1bn a year. The same ministry has set its sights on USD 100 bn annually through “Maritime@100”, a roadmap to reach that target by 2047, at a time when the United Nations Development Programme (UNDP) projects the global ocean economy will exceed USD 3 trillion by 2030. According to the 2026 report of UN Trade and Development (UNCTAD), the ocean trade has already reached USD 2.5 tn in 2025. The gap between what Pakistan has and what it is leaving on the table is, by any measure, enormous.

Closing that gap will not happen through speeches. It will happen, almost entirely, through two unglamorous legal instruments that include concession agreements and implementation agreements. A concession agreement grants a private party the right to finance, build, and operate a public asset – a port, most often – for a fixed term in exchange for tariffs or a share of revenue, with the asset reverting to the state once the term ends, a model commonly called build-operate-transfer or build-own-operate-transfer (BOT/BOOT). An implementation agreement works differently. It is a direct undertaking between the government and a project company, sitting alongside a commercial contract such as a power purchase agreement (PPA), through which the state offers sovereign guarantees, regulatory consents and tax assurances without handing over rights to any public asset. Every deep-sea port, LNG terminal, and offshore drilling concession Pakistan signs over the next two decades will be built on one or the other. That is precisely why getting their terms right matters the most.

What Gwadar already taught us

We do not need to imagine how this plays out; we have Gwadar. The original Gwadar Port Concession Agreement, signed in 2007 between the Gwadar Port Authority (GPA) and a foreign operator, Singapore Port Authority (SPA), and later transferred to the China Overseas Ports Holding Company (COPHC) in 2013, carried a 20-year corporate tax exemption and a government revenue share of 9% of port income plus 15% from the adjoining Special Economic Zone (SEZ). That should have been the ceiling. Instead, between 2015 and 2020, the Economic Coordination Committee (ECC) of the cabinet extended the income tax holiday to 23 years, widened it to cover contractors and sub-contractors as well, and granted the 923-hectare Gwadar Free Zone a land lease running up to 99 years. Each renegotiation made the deal more generous to the investor, never less. That is the pattern to watch for since the concessions in Pakistan rarely tighten once signed. They only ever loosen.

This should trouble us more than it does, because Article 77 of the Constitution reserves the power to levy federal taxes exclusively for Parliament. Yet most of these concession-era tax holidays and customs exemptions are not legislated at all; they arrive through Statutory Regulatory Orders (SROs) and amendments to existing tax schedules, executive instruments that nonetheless bind the state for 20 to 40 years at a stretch. And Gwadar is not the exception; it is the template. The number of special economic zones (SEZs) has surged from seven to 44, under the second phase of the China-Pakistan Economic Corridor (CPEC), carrying broadly similar concession packages. Every one of them represents a slice of fiscal sovereignty quietly signed away by the executive, on terms that no future Parliament will find easy to unwind.

The warning we already received

If Gwadar shows how concessions deepen, Reko Diq shows what happens when they collapse, and although it is a mining dispute, not a maritime one, the lesson is structural, not sectoral. After Balochistan denied a mining lease to the Tethyan Copper Company (TCC) in 2011 and the Supreme Court of Pakistan voided the underlying exploration agreement in 2013, the International Centre for Settlement of Investment Disputes (ICSID) ruled against Pakistan in 2019 under the Pakistan-Australia Bilateral Investment Treaty (BIT), awarding damages of roughly USD 5.8 bn, one of the largest sums in the history of ICSID. A separate dispute brought by the Turkish power producer Karkey under the Pakistan-Turkey BIT had already cost the country USD 760 million the year before. Both were eventually settled out of court. Reko Diq in 2022, with Barrick Gold taking a 50 per cent stake alongside federal state-owned enterprises (SOEs) and the Balochistan government, each holding 25%, but the exposure that produced those numbers in the first place has not gone away. Every offshore exploration block, port concession, and LNG agreement Pakistan signs carries almost the same treaty protections and the same risk of ending up before the same arbitration tribunals.

The other half of the bargain

There is a second risk that rarely gets discussed alongside the first. The Foreign Exchange Manual issued by the State Bank of Pakistan (SBP) under the Foreign Exchange Regulation Act (FERA), 1947, governs how the profits, dividends, and disinvestment proceeds promised under these agreements can actually leave the country. Pakistan’s 2023 investment policy commits to free repatriation of profits in an investor’s own currency, and foreign portfolio investors are channelled through a Special Convertible Rupee Account (SCRA), with every outward transaction cleared through an Authorised Dealer bank. None of that is unreasonable on its own. What is unreasonable is treating fiscal incentives and repatriation guarantees as two separate conversations when they draw on the same finite pool of foreign currency. With SBP-held reserves at about USD 17.2 bn in early June 2026, still well short of the USD 27.3 bn peak (all-time high) reached in August 2021, and external debt servicing running close to USD 23 bn a year, a strategy that mobilises tens of billions of dollars through unconditional, hard-currency repatriation guarantees is not just a fiscal commitment. It is a forex commitment that future governments will have to honour with reserves they may not have.

Reasons for cautious optimism

To be fair, there are signs Islamabad has started absorbing some of these lessons. In November 2025, the Petroleum Division ran its first offshore exploration bid round since the Kekra-1 well returned dry in 2019, this time anchored in a standardised Model Production Sharing Agreement (MPSA) and new Offshore Petroleum Rules, rather than bespoke terms negotiated bilaterally behind closed doors. Companies have already committed USD 82 million for the first three-year exploration phase, with officials targeting roughly USD 1 bn in offshore investment. The Ministry of Maritime Affairs, for its part, has rolled out the National Maritime Policy (NMP) 2025 alongside the Maritime@100 vision, which includes three new deep-sea ports and a green ship-recycling yard at Port Qasim. A move from one-off, bilaterally negotiated concessions toward standardised, rules-based templates is exactly the direction this sector needs.

What should happen next?

None of this requires Pakistan to stop courting investment; it requires writing better contracts. Open-ended tax holidays should give way to sunset-and-review clauses tied to measurable milestones, not indefinite exemptions granted at signature. Revenue- and profit-sharing formulas should be the default over blanket exemptions, so the state’s fiscal upside grows with a project’s success instead of being foreclosed on day one. Stabilisation clauses should protect investors against discriminatory or arbitrary treatment, not against every future act of a sovereign Parliament, including legitimate tax and environmental reform. The Finance Division and the SBP should have a mandatory, documented sign-off on the lifetime forex exposure of every concession before it is signed, not after the fact. And pre-contract legal due diligence needs to be strengthened enough that we stop discovering, years later and at enormous cost, that an agreement was never enforceable to begin with.

Pakistan’s blue economy will be built on hundreds of contracts over the next two decades, not one. Some of them will be signed quietly, with little public attention, by officials hassled to show that investment is flowing. Whether those contracts deliver the USD 100 bn a year we keep promising ourselves, or another Reko Diq-sized bill a decade from now, will not be decided by how much capital arrives. It will be decided by how carefully we write the fine print before it does.

The writer is a blue economy researcher based in Islamabad, with a background in public administration, public policy, and management.