The growing economic dimension of the Pakistan-Saudi strategic relationship 

The growing economic dimension of the Pakistan-Saudi strategic relationship 

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Pakistan and Saudi Arabia have long been tied in a strategic partnership that has now taken an economic dimension too. Saudi Arabia has committed to investing $25 billion in Pakistan over the next five years focusing on energy, IT, minerals, defense, and agriculture sectors. The recent visit of Saudi foreign minister, Faisal bin Farhan Al-Saud to Islamabad was part of the new economic initiative. 

Led by the foreign minister, the high-level Saudi delegation which also included ministers of the Public Investment Fund, agriculture and energy, discussed with Pakistani officials the potential for investment in various sectors. The delegation held extensive meetings with the Special Investment Facilitation Council (SIFC) constituting top Pakistani civil military leadership. 

The two sides finalized a bilateral implementation mechanism to closely coordinate and execute investment related matters at the functional level to turn sovereign commitments into tangible economic outcomes. The Saudi foreign minister stressed the “importance and strategic depth” of bilateral relations between the two countries, as well as the kingdom’s commitment to “deepening that relationship through new avenues.”

Islamabad has now assured that with the establishment of SIFC, things will move much faster. 

- Zahid Hussain

The high-profile visit came days after Prime Minister Shehbaz Sharif met Crown Prince Mohammed bin Salman in Makkah, where the two sides agreed to expedite the first tranche of a $5 billion Saudi investment package for Pakistan. 

Constituted of top civil and military leadership, the establishment of the SIFC in 2023 marked Pakistan’s comprehensive ‘Economic Revival Plan’ in response to the economic challenges faced by the country. The organization is a single window interface to expedite project development and implement a consistent strategy for potential investors.

Addressing a press conference at the conclusion of his visit, the Saudi foreign minister described his talks with Pakistani leaders as “very positive” and said the engagement laid the groundwork to achieve all of the potential that exists, adding that there is a “significant opportunity to increase the level of investment that is already on the table.”

Pakistan has assured that all efforts are being made to streamline investment processes and ensured rapid decision-making through the SIFC, fostering a flourishing investment-friendly environment in the country. Islamabad has also emphasized on the need for the two sides to expedite the first phase of Saudi investments in Pakistan under the new arrangement. 

Indeed, Riyadh’s commitment to enhance investment in Pakistan marks the strengthening of the relationship between the two countries. Saudi investment is particularly important for Pakistan as the country desperately needs to bolster its ailing economy. The two countries revamped their bilateral relationship on new and progressive lines, with economic cooperation as a pivot during the visit to Islamabad of the Crown Prince in February 2019. 

 In the past, Saudi Arabia financially assisted Pakistan without direct commercial interests. It supported Pakistan through direct financial support to bail Islamabad out of balance of payment crises. Riyadh had also been providing Pakistan oil on deferred payment. But the Kingdom has now changed its policy of providing direct financial support, and is focused on investment. Riyadh has launched the Future Investment Initiative (FII) as a part of its vision 2030. 

Saudi Arabia has reportedly shown an interest in investing in mining, particularly the Reko Diq mine. The large copper mine is located in the western province of Balochistan. Reko Diq represents one of the largest copper reserves in Pakistan and in the world, having estimated reserves of 5.9 billion tons of ore grading 0.41 percent copper. The mine also has gold mining reserves amounting to 41 million tons. 

In February 2019, Saudi Arabia’s Saudi Aramco and SABIC announced it would set up a $10 billion oil refinery and petrochemical industry in Pakistan’s deepwater port of Gwadar, Balochistan. It would also help refine and store imported oil for onward transportation to China and develop a fuel supply chain for landlocked Central Asian states. 

Unfortunately, the project has not taken off yet because of bureaucratic hurdles on Pakistan’s side. Islamabad has now assured that with the establishment of SIFC, things will move much faster. Most importantly, there is a need for creating a conducive economic and political environment for foreign investors to come in. 

What Pakistan needs is to carry out long-pending structural reforms to stabilize its economy. Foreign investment will come when the economic fundamentals are in place and security for investment is guaranteed. The biggest obstacle in the way of foreign investment is the deteriorating law and order situation, particularly in the regions which are believed to have the most deposits of minerals. 

- Zahid Hussain is an award-winning journalist and author. He is a former scholar at Woodrow Wilson Centre and a visiting fellow at Wolfson College, University of Cambridge, and at the Stimson Center in DC. He is author of Frontline Pakistan: The struggle with Militant Islam and The Scorpion’s tail: The relentless rise of Islamic militants in Pakistan. Frontline Pakistan was the book of the year (2007) by the WSJ. His latest book ‘No-Win War’ was published this year. Twitter: @hidhussain

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