Building a sustainable economic partnership between Pakistan and Saudi Arabia
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Prime Minister Imran Khan’s upcoming visit to Saudi Arabia on the invitation of Crown Prince Muhammad bin Salman is significant as the region is embracing major geo-political shifts and also fighting the serious impacts of the ongoing pandemic. One may also link this visit to Pakistan’s hectic diplomatic engagement with neighboring countries to build support for Afghanistan as US troops have begun their exit. However, the key to a long-term sustainable relationship between the two brotherly countries lies in increasing complimentary economic stakes and laying a new foundation for a shared and prosperous future. This will be a major transformational transition from historic relations based on deep religious affinity, supply of unskilled labor force from Pakistan and more importantly, security partnership.
Both countries are going through an economic transition. Saudi Arabia is clearly diversifying their economic base to create jobs and to reduce the large share of oil production in their GDP. Saudi Vision 2030 is an ambitious program that focuses on opening up of the economy, human capital development, regional investments and leveraging country’s mining and natural resources to develop a strong industrial base. The results are visible with new economic zones, relaxation in visa policies and development of tourist resorts. In the case of Pakistan, China-Pakistan Economic Corridor (CPEC) is impacting the economic, social and political landscape with emerging regional connectivity and infrastructure development.
Pakistan’s leadership is clearly signalling a desire to make a structural shift in foreign policy from traditional geo-strategic to geo-economic relations. This message is also endorsed by China who are keen to see a stable regional market to achieve the objectives of Belt and Road Initiative (BRI). However, this transition is not easy for Pakistan as for years, the country has remained a proxy state for international geo-political interests. This would require fundamental changes in the institutional structure, huge investment to enhance capabilities to undertake economic transactions and significant improvements in the mindset of the bureaucracy.
Being the Chairman of Pakistan’s Board of Investment, I quickly worked on developing a strong follow-up process to facilitate Saudi investors. I was impressed with the degree of professionalism and clarity about the economic value proposition shown by the Saudi economic managers.
Haroon Sharif
Being the Chairman of Pakistan’s Board of Investment, I quickly worked on developing a strong follow-up process to facilitate Saudi investors. I was impressed with the degree of professionalism and clarity about the economic value proposition shown by the Saudi economic managers.
Pakistan and Saudi Arabia had a fantastic start toward strengthening bilateral economic ties with the visit of PM Khan to Riyadh and a reciprocal visit of Crown Prince Muhammad bin Salman to Islamabad in early 2019. Saudi Arabia offered a generous investment package including balance of payment support, deferred oil payment facility and some $21 billion worth of project financing in the shape of an oil refinery, renewable energy park, stake in LNG based power plants and mining sector projects. Being the Chairman of Pakistan’s Board of Investment, I quickly worked on developing a strong follow-up process to facilitate Saudi investors. I was impressed with the degree of professionalism and clarity about the economic value proposition shown by the Saudi economic managers. Despite the high degree of goodwill at the political level, timely implementation of these commitments did not happen due to bureaucratic lapses and institutional fragmentation in Pakistan. This visit provides a good opportunity to reflect on the situation and come up with a practical economic partnership roadmap to build confidence.
My Saudi counterparts and I have remained in regular contact even after I left my office. During my recent meeting with His Excellency, Ambassador Nawaf Saeed Al-Malkiy, I emphasized the need to look for relatively small and doable investment propositions which will not only show quick results but will also help both countries understand the terms of an economic engagement insulated from overall diplomatic relations. It is important to structure commercial transactions professionally and leading to mutual profits. Saudi Arabia remains interested in making investments in renewable energy, hospitality, mining and logistics sectors. It will be advisable that the Saudi side also considers investments in emerging technologies, agriculture and food sectors. Pakistan does not only offer a huge market potential of more than 100 million youth, but it is also becoming a gateway to western China and Central Asia. A timely positioning in this emerging new economic geography will reap long-term economic and strategic benefits for both countries.
Timing is critical. To fast-track investment transactions, Pakistan should prioritize the agreed projects and hand over structuring of these initiatives to private sector professionals. I am afraid that the current structure of bureaucracy is not ready or equipped to handle international investments. Both countries should have a flexible project oversight structure with direct access to the highest political offices for quick resolutions of issues. In addition to the investments, both countries should also set up goals of enhancing trade ties. At the moment the balance of trade is totally tilted toward Saudi Arabia due to huge oil and petrochemical trade.
Pakistan needs to increase its exports and there is significant potential for export of textiles, livestock, and information technology products. As Saudi Arabia moves toward more industrialization, the demand for managerial skills will increase significantly. Pakistan could offer excellent opportunities for providing highly skilled professionals to Saudi Arabia.
A cross cutting theme to achieve long-term sustainable economic partnership will be investments in knowledge, research and skills development. Without having enough evidence about dynamic economic trends, regional economies and sector specific dynamics, it will be difficult to scale up trade and investment to the desired level. It will be a great signal toward a progressive shift in bilateral relations if Saudi Arabia invests in setting up a new economic zone and technology university in Pakistan in partnership with China.
CPEC provides huge opportunities in trade logistics and other sectors of comparative advantage for Saudi Arabia. As mentioned before, a few carefully designed pilot projects in collaboration with China will open up huge space for trilateral partnerships. Such investments will be key to ensure regional stability and mutual learning opportunities.
- The writer remained Pakistan’s Minister of State and Chairman Board of investment in 2018-19. He is currently member of the Prime Minister’s Task Force on Economic Diplomacy and a Visiting Fellow at the University of Sussex, UK.
