Can Pakistan leverage strengthened Saudi-US economic ties?
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Saudi Arabia’s recent announcement of a $600 billion investment in the United States, with the potential to grow to $1 trillion has implications far beyond the US and Saudi Arabia. For countries such as Pakistan that have deep economic ties to Saudi Arabia through labor exports, remittances, investments and trade, this development offers an opportunity to integrate into the evolving Saudi-US partnership.
The core idea is that Pakistan stands to gain significantly from the Saudi-US economic partnership, not merely due to its close ties with Saudi Arabia but because these strengthened ties create new opportunities within global value chains (GVCs). Pakistan’s established relationship with GCC economies provides it with a head start in navigating the demands of US firms that work with Saudi Arabia. This familiarity reduces information costs and builds trust, both critical for integrating into GVCs. By positioning itself as a preferred supplier, Pakistan can upgrade its capabilities and benefit from collaboration with advanced US firms.
Modern trade increasingly revolves around networks and hubs rather than geography alone. If Saudi Arabia strengthens as a trade hub due to its closer ties with the US, Pakistan’s existing “virtual proximity” to this network positions it advantageously.
The interaction between Saudi and US firms will likely generate knowledge spillovers, particularly in sectors like high-tech agriculture, renewable energy and advanced manufacturing. Pakistani businesses and workers in the GCC region are well-placed to absorb these spillovers.
Deepened Saudi-US ties can also promote regional economic integration in the Middle East, creating new opportunities for Pakistani firms in logistics and transportation. Pakistan’s “relationship capital” with Saudi Arabia can lower transaction costs— such as search, negotiation, and enforcement costs— when engaging with US firms in the Saudi market. To capitalize on this opportunity, Pakistan must adopt a proactive, strategic approach that brings together the government, private sector, and key institutions like the Special Investment Facilitation Council (SIFC).
While labor exports and remittances are vital, Pakistan must also focus on diversifying and expanding its trade relationship with Saudi Arabia. Saudi Vision 2030 emphasizes food security, creating a prime opportunity for Pakistan’s agricultural sector. With vast and abundant lands and an established livestock industry, Pakistan can supply halal meat, dairy products, and other agricultural goods to Saudi markets. Establishing joint ventures with Saudi firms in food processing and cold storage can further enhance Pakistan’s competitiveness.
Deepened Saudi-US ties can also promote regional economic integration in the Middle East, creating new opportunities for Pakistani firms in logistics and transportation.
Dr. Vaqar Ahmed
Saudi Arabia’s deeper integration into US value chains provides Pakistan with a unique opportunity to position itself as a re-export hub. Pakistani manufactured goods could also gain access to US markets through Saudi intermediaries. This strategy leverages Pakistan’s existing strengths while reducing any market entry barriers.
The SIFC may take a central role in guiding Pakistan’s response to this opportunity through: identifying industries with the highest potential for collaboration within Saudi-US value chains; facilitating connections between Pakistani and Saudi firms, as well as exploring opportunities in US markets; simplifying procedures to attract Saudi investment in Pakistan and support Pakistani exports; providing support for Pakistani businesses to meet international quality and compliance standards.
There is a need to evaluate past interactions with Saudi business delegations that visited Pakistan. There is limited information on whether the signed expressions of interest from these visits have materialized. Islamabad needs a more structured follow-up mechanism, ensuring that feedback is gathered, and a full-circle process is completed. It is crucial to understand if delegations expressed initial interest and did not return and how the Board of Investment can address their concerns. An improved mechanism for tracking and supporting such engagements would strengthen Pakistan’s credibility.
Pakistan’s business associations and chambers of commerce and industries can play a key role in unlocking new economic opportunities. By increasing business-to-business engagements with Saudi counterparts, advocating for trade agreements with Saudi Arabia, US and other GCC economies, and facilitating knowledge-sharing initiatives, these associations can equip Pakistani firms to navigate international markets.
At the same time, Pakistan must address broader global trade and investment shifts. The EU’s Green Deal offers opportunities in renewable energy and sustainable agriculture, while the ongoing US-China trade tensions necessitate a careful positioning to benefit from evolving trade patterns. The EU’s Carbon Border Adjustment Mechanism (CBAM) underscores the need for Pakistani industries to adopt green technologies and sustainable practices to maintain access to key markets. ASEAN’s Digital Masterplan 2025 offers the growing opportunities in e-commerce, digital connectivity, and social innovation partnerships.
For ensuring long-term international trade and investment sustainability, Pakistan must diversify its economic relationships, reduce dependence on few select markets, and align with these global trends by investing in logistics, simplify trade and investment regulations, enhance SME capabilities, and ensure a stable political and economic environment.
- Dr. Vaqar Ahmed is an economist and former civil servant.
