PM Khan needs to reimagine Pakistan-Saudi Arabia ties


PM Khan needs to reimagine Pakistan-Saudi Arabia ties


Keeping in line with tradition, Pakistan Prime Minister Imran Khan will visit Saudi Arabia next week in what will be his first foreign visit to the country as the head of state. Last month, the King had congratulated the PM on his appointment, adding that he hoped to work toward closer socio-economic ties between the two countries. Saudi Crown Prince Mohammed bin Salman also expressed an interest in creating an environment that’s conducive for better investment opportunities in Pakistan and for enhancing bilateral trade ties.
For the past several decades, Pakistan and Saudi Arabia have enjoyed close military cooperation. However, it was the incumbent government’s parliamentarians who moved a resolution against joining the Saudi-led military alliance in Yemen, recently. The Pakistan Tehreek-e-Insaf party was also part of the decision to remain ‘neutral’ in the war between Saudi Arabia and Yemen.
The new PM is rumored to seek Saudi’s support in alleviating Pakistan’s economic difficulties, emanating largely from ever-increasing current account and fiscal deficits. Khan has a golden opportunity to reimagine the socio-economic and cultural ties between the two countries and the easiest way to do this is by playing the current bilateral, trade and investment cooperation to his advantage.
Pakistan’s total trade with Saudi Arabia (exports plus imports) stood at $3.4 billion in 2018, a decline from 2010 when it was valued at $4 billion. Therefore, the first order of the day is to do away with tariff and non-tariff barriers which are preventing an increase in the trade of goods and services between the two states.

Top on the agenda is a reset of the economic relations between the two countries.

Dr. Vaqar Ahmed

Second, on the agenda could be adding fresh blood to the flow of remittances from overseas Pakistanis residing in Saudi Arabia. The remittances – considered one of the bright spots in the bilateral relationship between the two countries – have been a source of comfort for Pakistan’s balance of payments, allowing it to sustain its high level of imports, specifically for industrial raw material and machinery.
However, in the wake of low oil prices and a huge budgetary restructuring in Saudi Arabia, proceeds from remittances have come under the scanner, seeing a decline from $5.6 billion in 2015 to $4.8 billion in 2018. One way for Pakistan to circumvent these issues is to work toward sending highly-skilled workers to Saudi Arabia, making them less prone to business cycles and layoffs as compared to non-skilled workers.
This practice is already in place to some extent with a steady influx and representation of Pakistanis in the education, finance and IT sectors; and could act as the basis for PM Khan to seek more employment opportunities in the manufacturing and services sector, too. At the same time, both governments should reach a consensus which entitles Pakistani workers to a severance package, specifically during an economic downturn.
The prime minister would also need to highlight the economic growth of the country set against the backdrop of the China-Pakistan Economic Corridor and a high domestic demand. This is important to lure greater foreign direct investment (FDI). In 2018, the net FDI from Saudi Arabia to Pakistan was a mere $17.4 million. The Board of Investment and Ministry of Commerce should put together concrete plans and identify sectors where the Saudi private sector is viable for FDI and joint ventures.
One way to do this is if PM Khan can organize a meeting with Pakistanis living in Saudi Arabia and persuade them to invest in the country. He will also need their support in securing donations for the Basha Dam and in case the government decides to raise funds through a diaspora bond.
Finally, the prime minister should discuss what’s on offer in case Pakistan seeks financial help from Saudi Arabia in case of a bailout package from the International Monetary Fund and the difficulties which the country is facing in convincing the financial action task force.
⎯ Dr. Vaqar Ahmed is Joint Executive Director of the Sustainable Development Policy Institute, Pakistan. His book ‘Pakistan’s Agenda for Economic Reforms’ was recently published by the Oxford University Press. Twitter: @vaqarahmed

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