Pakistan Reader# 760, 30 April 2024
Rohini Reenum
PR Explainer
On 28 April 2024, Prime Minister Shehbaz Sharif met Crown Prince Mohammed Bin Salman, Minister for Investment Khalid Al-Falih, Minister for Finance Mohammad Al Jadaan and Minister for Industry Bandar bin Ibrahim Alkhourayef in separate engagements on the sidelines of a special meeting of the World Economic Forum (WEF) held in Riyadh. He succeeded in getting secure guarantees on Saudi investment in Pakistan. Saudi Minister for Investment Khalid Al-Falih hailed Prime Minister Shehbaz Sharif said: “Pakistan is Saudi Arabia’s priority for investment and cooperation in the agriculture, Information Technology and energy sectors.”
Additionally, Saudi Finance Minister Mohammad Al Jadaan reiterated Saudi Arabia’s commitment and support for the economic development of Pakistan terming the latter’s development as “the progress of Saudi Arabia.” Saudi Minister for Industry Bandar al-Khorayef revealed that he was in talks with private companies for fostering investment in Pakistan and emphasized the focus on joint ventures between the private sectors of the two countries as the priority.
What has Saudi Arabia promised?
In September 2023, caretaker Prime Minister Anwaarul Haq Kakar had revealed Saudi Arabia’s plans “to invest up to USD 25 billion in Pakistan over the next two to five years in various sectors,” primarily mining, agriculture and information technology.
In early April 2024, PM Shehbaz Sharif embarked on his first foreign visit to Saudi Arabia and met with Saudi Crown Prince Mohammed bin Salman. The meeting catalyzed the process of disbursement of investment that was promised. Following the meeting, in a joint statement, both countries agreed “to expedite the first wave of a planned USD five billion Saudi investment package for Pakistan.” On 15 April, a high-level Saudi delegation led by Foreign Minister Faisal Bin Farhan Al Saud landed in Pakistan for a two-day visit in order to lay the groundwork and set the tone for the upcoming visit of the Saudi Crown Prince Mohammed bin Salman scheduled for later this year when formal agreements are expected to be signed. This visit, thus, was aimed at initiating formal negotiations on “potential investment projects between Saudi Arabia and Pakistan.”
What are the potential areas/projects for investment?
Though formal announcements regarding investments in specific projects have not been made, The News International reported that Pakistan has identified 25 projects for potential investments estimated at over USD 32 billion. This also includes a rail link connecting Gwadar with major mining sites with an estimated investment potential of USD two billion, the Diamer Bhasha Dam with an equity investment of USD 1.2 billion and a luxury five-star hotel. Earlier Dawn had reported that interest had been demonstrated in the Reko Diq gold and copper mines as a potential site of investment by Saudi Arabia’s Public Investment Fund. The Dawn report also stated that state-owned entities that were under consideration for privatization are also like to be considered for Saudi investments.
Why does Saudi Arabia want to invest in Pakistan?
Saudi Arabia and Pakistan have been long-term allies. They have long shared a “multifaceted relationship rooted in mutual economic interests, strategic military cooperation, and shared Islamic heritage.” After his re-election, Shehbaz had revealed his desire “to transform the deep-rooted, historic fraternal Pakistan-Saudi Arabia ties into a comprehensive strategic partnership.”
In recent times, Saudi Arabia has been an important source of financial aid for Pakistan whose economy has been severely cash-strapped. For instance, in November 2021, an agreement was signed between the State Bank of Pakistan and the Saudi Fund for Development (SFD) in order for the former to receive USD 3 billion with the aim of improving the former’s foreign exchange reserves. The amount was subsequently increased and the term of deposit was also extended multiple times. Saudi Arabia has also provided oil supplies to Pakistan on deferred payments. The foreign minister of Saudi Arabia, in his recent visit, has also highlighted the “importance and strategic depth” of bilateral relations between the two countries and reiterated his country’s commitment “to deepening that relationship through new avenues.” Despite strong statements of commitments from both parties and a concomitant progress in the negotiations, challenges remain.
Saudi Arabia’s Investment in Pakistan: The Road Ahead
An editorial in Dawn titled “Saudi investment” has opined that the promise of Saudi investment from the time of the PTI government has only materialized as “bailouts and emergency deposits,” and “little substantial investment has been made.” The editorial has also highlighted the less than investment friendly environment in Pakistan and has argued that “political stability, security guarantees, and continuity of economic policies” must be ensured in order to secure continuous investments. The editorial has further argued that investments are not charities and seamless “profit repatriation” must be ensured. The editorial also strongly recommends that rather than depending on investments alone, Pakistan must “break the shackles of dependence, and realize its economic potential.”
References
“PM Shehbaz secures more investment assurances from Riyadh,” Dawn, 29 April 2024;
“Pakistan is Saudi Arabia's priority for investment,” Radio Pakistan, 28 April 2024;
Asim Yasin, Khalid Mustafa, Mariana Baabar, Mehtab Haider & Muhammad Anis, “Pakistan offers over $32bn projects for KSA investment,” the News International, 17 April 2024;
“Saudi investment,” Dawn, 10 April 2024;
“PM Shehbaz lands in Saudi Arabia on first foreign visit since election,” Dawn, 6 April 2024;
Baqir Sajjad Syed, “PM Shehbaz hopes for strategic ties with Saudi Arabia,” Dawn, 17 March 2024;
Abdullah Momand, “Saudi FM says Pakistan visit to deliver ‘significant benefits’ in upcoming months,” Dawn, 16 April 2024;
“Saudi Arabia mulls increasing deposit in SBP to $5bn,” Dawn, 10 January, 2023;
“PM Kakar says Saudi Arabia to invest $25bn in Pakistan over next 5 years,” Dawn, 4 September 2023;
Shahid Iqbal, “SBP signs agreement for $3bn Saudi fund,” Dawn, 30 November 2021