The ninth session of the Pakistan-Saudi Joint Ministerial Commission held in Islamabad ended on a call to further enhance bilateral economic ties in various sectors including banking, agriculture, investment, education, infrastructure development, energy and health.
Makhdoom Amin Fahim, Pakistan's Commerce Minister and his Saudi counterpart Dr Tawfiq bin Fawzan al-Rabeea jointly addressed a press conference at the end of the session and revealed that decisions during the session included: (i) resumption of talks on Pakistan-Saudi Arabia on promotion and protection of investment, (ii) facilitating entry visas for businessmen, (iii) invitation to Saudis to invest in Pakistan's energy sector, (iv) exploring the possibility of enhancing industrial co-operation including joint ventures, (v) development of small and medium enterprises in Saudi Arabia, (vi) initiating contacts between textile and pharmaceutical companies operating in the two countries, (vii) initiating collaboration in insurance and financial sectors, and (ix) early signing on security co-operation as well as on drug smuggling. As is clearly indicated by these decisions there was no concrete outcome as talks seemed to be focused on the need to develop, explore, initiate or resume discussions on enhancing co-operation on a range of issues. While one would have considered such an outcome with nuclear rival India as a positive development the same cannot be said for Saudi Arabia which has been a time-tested friend and heavily engaged in Pakistan's development in the past.
Pakistan has multifaceted economic ties with Saudi Arabia that include remittances, imports and loans/grants. Remittances from Saudi Arabia have been steadily growing during the past four years: from 1.2 billion dollars in 2008 to nearly 2.7 billion dollars in 2011. Provisional data reveals that the share of remittance inflow from Saudi Arabia is 27.5 percent of our total remittances which grew by 43 percent between 2010-11 and 2011-12.
Saudi Arabia accounted for 11.3 percent of our total imports, down from 13.4 percent in 2007-08, and last year Saudi Arabia's share in our imports declined further to 10.6 percent. The reason for this steady decline is attributed to the decision by the Saudi government not to allow Pakistan to defer payments on fuel purchases. It may be recalled that Shaukat Aziz had claimed that Pakistan had reached the economic take-off stage, a statement that was premised on deliberately manipulated statistics for political point scoring that led to the Saudi decision to withdraw deferred payment facility. That decision has not been revoked in spite of several requests by the PPP-led government to allow Pakistan to purchase fuel on deferred payment given the sustained poor performance of our macroeconomic indicators that can be sourced to ongoing energy crises. However, Pakistan's exports to Saudi Arabia have remained insignificant and there is a need to increase exports.
The third area of economic ties between the two countries is monetary assistance extended by Saudi Arabia to Pakistan. Saudi Arabia, according to Economic Survey 2011-12, provided grant assistance in 2003-04 of 50 million dollars while a year earlier the Saudis extended a grant of 100 million dollars. There has been no grant assistance since. Total loans and credits peaked in 2009-10 at 380 million dollars which declined to 100 million in 2010-11. In this context it is relevant to note that Saudis traditionally extended few loans to this country with 25 million extended in 2002-03, 133 million in 2006-07 and 40 million in 2008-09. In 2011-12 the total principal due to Saudi Arabia was 1.9 million dollars and the interest payable was 1.39 million dollars. In other words, Saudi Arabia is not a major creditor for Pakistan.
One cannot ignore the relevance of global recession and the Arab Spring which led to major investments by several oil-rich Arab countries into their domestic economies. This, in turn, led to belt-tightening with respect to extending assistance to poorly-performing economies of several Muslim countries. Saudi Arabia - as a case in point - invested around 34 billion dollars into its economy which no doubt limited its capacity to help a country like Pakistan.
In addition, it is no secret that no country in the world would extend assistance to a country like Pakistan where transparency in public expenditure remains a challenge, the relevant bill has remained stalled in parliament for over four years, and exemptions allow small revenue generation from the rich and the influential. Pakistan must put its own house in order before it seeks more foreign loans.
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