Pakistan offers a world of opportunities due to its geostrategic location, agricultural potential, and wealth of minerals and natural resources. Moreover, it has a burgeoning young population which is almost 60% of the total population and offers a highly potent resource.
Why do we then find ourselves in this continually rising debt situation with exports on diminishing lines and imports burdening the back of the country to a breaking point? Pakistan today stands at 108th position among 190 countries as an undesirable destination of an unfavorable investment zone.
Pakistan’s economy is expected to grow by only 2 percent in the current fiscal year that ends in June 2023. According to the World Bank’s “Pakistan Development Update October 2022: Inflation and the Poor,” the slower growth reflects damages and disruptions caused by catastrophic floods, a tight monetary stance, high inflation, and a less conducive global environment.
Recovery will be gradual, with real GDP growth projected to reach 3.2 percent in the fiscal year 2023-24. Poverty in the hardest-hit regions will likely worsen in the context of the recent floods; the national poverty rate may increase by 2.5 to 4 percentage points, pushing between 5.8 and 9 million people into poverty.
Macroeconomic risks also remain high as Pakistan faces challenges associated with a large current account deficit, high public debt, and lower demand from its traditional export markets amid subdued global growth.
The status quo is not only from the recent devastations and instability. They represent the lack of consistent planning and vision for Pakistan to develop its industry and trade for the last few decades.
Pakistan, as a result, has maintained a low focus on exports and manufacturing, reduced attention on updating local infrastructure and empowerment of skilled labor, old and often obsolete government education paradigms, an erratic foreign policy, dearth of research in higher education, lack of focus on consistency of policy framework, etc.
Additionally, a change of government would mean stalling ongoing initiatives and restarting afresh, or at times, just shelving the projects. Security concerns and geo-political disturbances have contributed significantly too.
No organization in the world can progress on an ad hoc basis; and the country is the largest and the most important organization, needing a business and development plan for all its employees – us, the citizens.
While this is the basis for picking up my pen today, this is not the guiding theme. Pakistan is facing an economic challenge, not for the first time, but one of the most challenging. Getting out of it will require vision, political will, courageous leadership, and long-term planning. I will be exploring case studies of many regions and countries that can be looked at to make those plans viable and bring in FDI; my focus today, however, is the Kingdom of Saudi Arabia (KSA).
I am currently in Riyadh to attend the Future Investment Initiative (FII) and meet the KSA’s Investment Minister, senior government officials, and the business community, I feel the need to share my thoughts on the important subject of investment and growth for Pakistan as a trading partner for KSA and how this can be the launching pad for Pakistan to multiply our fortune for years to come.
As Minister of State & Chairman Board of Investment (BoI) in 2021-2022 I realized the lopsidedness of our relationship and saw many openings that could be streamlined and set up a base for us to step on the road to mutual progress. Globally, FDI touched 3.13 trillion USD in 2007 and the developing world saw great opportunities to move to the next level.
Covid brought it down to USD 1.4 trillion and the world is now looking towards recovery and reverting to a better financial situation. Talking of FDIs, Pakistan touched USD 5.59 billion in FDI in 2007 and USD 5.44 billion in 2008, but the trajectory since then has been downwards, and despite CPEC, we have not been able to cross the coveted USD 3 billion mark.
The reason is largely the absence of stability and continuity of policy framework and any seriousness regarding its implementation. Additionally, the steps required for decision-making and processing for any foreign investment coming in are relatively time consuming when compared to mere tweets of influencers impacting the international stock markets substantially. Though I ensured the ease of business with a one-window operation during my tenure, sadly discontinuity struck again.
Though passionate and positive, our relationship with KSA has banked heavily on financial aid, grants and debts for Pakistan. The need of the hour for Pakistan is to shift its trade policy from aid-centric to a more mutually beneficial relationship.
Trade is historically a part of Saudi Arabia’s DNA. With massive oil reserves, KSA‘s landscape is stretching golden dunes and occasional oasis with date palm clusters. The need for agricultural imports has always been high. On the other hand, Pakistan is largely an agricultural economy, yet the potential for this bilateral relationship remains underdeveloped.
KSA is a strong economy; their royal family is the richest of the monarchies across the globe. Their Public Investment Fund (PIF) of USD 620 billion is one of the largest funds in the world. PIF has highlighted 13 sectors that it is looking to invest in and has established 55 companies for the same.
Additionally, their recent shift into a westernized format for development is in answer to the changing times and needs of the upcoming generations. Their decisions are farsighted and in the interest of their economic vision.
Pakistan and Saudi Arabia signed the Treaty of Friendship in 1951, laying the basis for future cooperation. This was the beginning of official treatise and many of them followed encompassing social, educational (religious Madrassahs), and economic support that was a continuous response to Pakistan’s military collaboration for training, fighter jets, heavy presence during the Gulf War, combat against Yemen intrusion, and most passionately when Haram in Makkah was under siege.
There, I believe the support and the actions of KSA were above any worldly relationship and will always resound in the memory of every Pakistani. Saudi Arabia is also home to a workforce comprising millions of Pakistanis.
From laborers to high-end professionals, their remittances to Pakistan constitute a fair impact on Pakistan’s reserves and economy. Pakistan and Saudi Arabia’s strategic alliance and relationship have been reiterated in Pakistan’s foreign policy, where their relationship with the Kingdom is described as of one their most important bilateral partnerships.
Pakistan is weaving the finest of textiles and is the 5th largest producer of dairy milk. Pakistan exports rice, cotton, fish, fruits (especially oranges and mangoes), and vegetables. The country is Asia’s largest camel market, second-largest apricot and ghee market, and third-largest cotton, onion, and milk market. Why is this fact sheet not a pivotal point for the Pakistan-Saudi bilateral trade relationship? Where and why Pakistan is missing this link is the point to ponder and explore.
The recent support of USD 1 billion by KSA needs to be turned into a pilot case for future investment. It must act as a test run for Pakistan to utilize the funds in an efficient manner that will allow for further growth and development worth billions of dollars. I had recently written an article on Special Economic Zones (SEZs) and how they can be our gateways to prosperity.
The Saudi government today is looking at Pakistan as a partner for food security. They require productive agricultural farming on an industrial footing and are willing to collaborate with all such countries that can guarantee ROI in terms of high-quality food products, good quantity, and time efficiency; seems like a made-to-order kind of requirement for Pakistan.
On the one hand, it will increase exports and FDI, and on the other, create competitive agricultural standards within the country enabling all to upscale and expand.
In my last meeting with my brother Khalid A. Al Falih, the Investment Minister of Saudi Arabia, I felt two things very strongly. One, Khalid’s passion for Pakistan as he considers himself one of the biggest advocates of our country, and two, his clarity on the economic vision of Pakistan; he was ready to bring ARAMCO investment as an initiative of the Saudi Energy Ministry, not only for the installation of a refinery in Gwadar but also for the upgrading of Pakistan Refinery Limited (PRL).
As of 2020, ARAMCO is one of the largest companies in the world by revenue. Saudi ARAMCO has both the world’s second-largest proven crude oil reserves, at more than 270 billion barrels (43 billion cubic meters), and the largest daily oil production of all oil-producing companies. Saudi Arabia plans to invest billions of dollars in the oil refinery in Pakistan’s deep-water port of Gwadar. The refinery is meant to have a 250,000-300,000 BPD oil refining capacity and a USD 1 billion petrochemical complex. That matter awaits a decisive framework from Pakistan.
Saudi public and private sector leadership is looking into various sectors in Pakistan for investment, including agriculture, oil and gas, petrochemicals, healthcare, technology, tourism, mining, renewable energy and infrastructure. They are also keen to explore the opportunity of Reko Diq, which possesses enormous potential if invested wisely.
The positive investment climate will encourage not only Saudi Arabia, but also other GCC countries to follow and invest more in Pakistan, creating employment opportunities and growing bilateral trade.
Pakistan is an agri-economy with 220 million people, with the roof of the world in its north and a massive coastal line in the south with two deep ports. It has a running border with two distinctive and rising economies Afghanistan and Iran, and two economic giants India and China. Connecting to Central Asia through the Wakhan Corridor is a significant opportunity as well.
With endless tunnels of mines with precious minerals in the southwest and north, massive limestone and coal reserves, large spread of agricultural lands and dairy farms, throttling rivers, and three huge golden deserts - the scope of industrialization and production is limitless. I am reminded of Behzad Lakhnawi’s verses:
Ae jazba e dil gar mein chahoon,
Har cheez muqabil aajaye
If only I could connect to the will of my desire,
The whole world will be there for me to claim.
The present and the future have no room for incompetence, complacency, and adhocracy. Clear roadmaps are needed to stay relevant. It is high time for Pakistan to connect to the ‘will’ inherent in the concept and philosophy of this magnificent country, it rests in the glaciers on its mountain tops and flows like silver shimmer in its countless rivers. The headstrong waves of the Arabian Sea shores ask for their right to rise with pride. I look at the trade landscape of Pakistan and the Kingdom of Saudi Arabia with the hope that others like me, with the power and capacity to change things, will hear the clock ticking.
Copyright Business Recorder, 2022
The writer is a former Chairman Board of Investment. He can be reached at @MAzfarAhsan
Comments
Comments are closed.