Is Pakistan prepared to seize Saudi investment opportunities?

In the rapidly shifting global investment landscape, where bilateralism has become the dominant approach and Return on Investment (ROI) is the foremost consideration, Pakistan faces challenges in positioning itself as an equitable partner.

The long-standing relationship between Pakistan and Saudi Arabia has been built on mutual trust and cooperation, providing unwavering support during periods of economic hardship and political uncertainty. However, the evolving global dynamics now require a shift from cooperation to active collaboration, with a stronger emphasis on feasibility over sentiment.

This is where Pakistan must enhance its approach to secure a more attractive investment climate. In this context, two critical pillars for economic growth stand out: facilitating existing investors and targeting Foreign Direct Investment (FDI). While I will explore the former in a forthcoming article, today’s focus will be on the latter, particularly with regard to Saudi Arabia.

The Prime Minister of Pakistan, Shehbaz Sharif, recently attended the Arab Islamic Summit in Riyadh. He held consultations with the leadership of the Organization of Islamic Cooperation (OIC) and the Arab League to strengthen mutual relationships across various domains – from economic ventures in solar power, mining, and agriculture, to robust investment partnerships.

The visit created positive momentum, particularly with Crown Prince Mohammed bin Salman’s strong expressions of support for Pakistan’s development goals. This followed productive defence and security discussions between the Chief of Army Staff (COAS) of Pakistan, General Asim Munir, and the Saudi leadership, including the Crown Prince.

Khalid bin Abdulaziz Al-Falih, Saudi Arabia’s Minister of Investment, recently visited Pakistan, further strengthening the deep-rooted ties between our nations. He is not only a valued friend and brother but also one of the most ardent advocates for a resilient and long-lasting bilateral relationship.

Our connection goes beyond the formalities of diplomacy; it has evolved into a bond of genuine brotherhood. This close relationship has significantly enhanced our collaborative efforts and has, Alhamdulillah, facilitated ongoing, constructive communication on matters of mutual interest that impact both countries.

The several meetings with Crown Prince Mohammed bin Salman and key ministers of Saudi Arabia in Riyadh over the last few months, along with the recent visit of the Saudi Investment Minister to Islamabad, were of immense national economic importance.

However, despite these encouraging developments, I am left with pressing questions that Pakistan must address to safeguard its economic future.

Saudi Arabia’s Vision 2030 presents a golden opportunity for Pakistan’s resilient private sector. With its proven ability to thrive despite challenges, Pakistan’s business community is uniquely positioned to collaborate with a nation like Saudi Arabia, which is undergoing rapid transformation.

But there are significant gaps in how we engage with Saudi Arabia. For instance, key private sector organizations such as the Overseas Investors Chamber of Commerce and Industry (OICCI), the Pakistan Business Council (PBC), and many of Pakistan’s leading business houses were notably absent from discussions with the Saudi delegation in Islamabad. This omission highlights a larger issue: the underutilization of our business acumen by the public sector.

An audit of Pakistan’s delegation in these meetings would expose the deficiencies in competent teams across various ministries – deficiencies that hinder effective engagement with a sophisticated partner like Saudi Arabia.

The Saudi delegation, comprising 130 members from their business community, was a platinum opportunity that Pakistan’s lack of preparation failed to fully leverage. Instead of cultivating meaningful business partnerships, the outcome was a series of Memorandums of Understanding (MoUs), totalling a staggering USD 2.8 billion on paper.

While this sounds impressive, we must be cautious. MoUs are often little more than expressions of intent and not binding commitments.

To illustrate this point, consider that over the past fourteen years, Saudi Arabia has invested only USD 432 million in FDI in Pakistan. In contrast, a young economy like Uzbekistan has secured over USD 21 billion in FDI in just the last five years.

While I hope some of these MoUs will materialize, the truth is that many similar MoUs have failed to actualize globally, and we must be realistic about our expectations. Celebrating MoUs without critically assessing their potential to translate into actual investments can mislead leadership and distort our understanding of Pakistan’s true investment climate.

I am excluding the Reko Diq project investment here, as it is a Government-to-Government (G2G) deal, with a 15% shareholding by the Saudi government.

Despite the good intentions behind these engagements, it is clear that Pakistan’s current approach is flawed. Saudi Arabia’s commitment to investing in Pakistan is genuine, amplified by the tremendous opportunities stemming from its rapid transformation.

However, relying solely on the strength of our brotherly bonds will not sustain us. Failing to capitalize on these opportunities due to lack of preparedness will come at a steep cost – a cost Pakistan can ill afford.

Saudi Arabia is looking to collaborate with Pakistan in the broader investment landscape, not just offer aid or loans. The days of unreciprocated support are over; the path forward lies in a partnership grounded in mutual benefit and with a comprehensive and sovereign policy framework. Pakistan stands to gain immensely from this evolving relationship.

It is essential to recognize that the State’s role is to create policies and an enabling environment for businesses to thrive. It is the responsibility of the private sector to take the lead in driving Business-to-Business (B2B) investments with Saudi Arabia and other nations. This approach is standard practice in other rapidly growing economies, and Pakistan must adopt this mindset to harness its full potential.

On the global investment stage – a grand chessboard of ever-changing dynamics – Pakistan’s continued stalemate is perplexing. Whether this is due to strategic oversights at the leadership level or the quality of counsel surrounding decision-makers remains unclear. What is evident, however, is that Pakistan stands at a critical juncture. Decisive action is required to reshape our economic trajectory, and we cannot afford to remain passive observers while others seize opportunities that could have been ours.

To move forward, we must confront uncomfortable truths about our institutional inefficiencies and misleading narratives, aiming for an accurate portrayal of our investment landscape. Acknowledging these shortcomings may be a bitter pill to swallow, but it is a necessary step toward securing a prosperous future for Pakistan.

As the saying goes, ‘When the going gets tough, the tough get going.’ Pakistan’s future is not predetermined; it is up to us to shape it.

Copyright Business Recorder, 2024