KSA and Pakistan: transforming ties

Pakistan and Kingdom of Saudi Arabia (KSA) appear to have finally decided to put their so-called fraternal relations on a path that is expected to lead the two developing nations to achieve shared economic development and prosperity.

In the contemporary world, the nation states behave in line with nothing but their national interest that happens to be the sole criterion for rulers to engage or not to engage with other countries. As the saying goes ‘there is no permanent enemy and permanent friend in international politics, but only interest is permanent’.

Traditionally, Saudi Arabia has been looking at Pakistan as one of the biggest buyers of its crude oil, at least 30% of what the energy-scarce Islamabad consumes in a year.

To Pakistan, Saudi Arabia has been the biggest source of remittances overseas Pakistanis remit back to their country while working in the Kingdom. Pakistanis working abroad sent back home $27 billion last year, almost equivalent to the country’s $27.7 billion exports in the financial year 2022-23.

While the unemployment rate is surging in Pakistan and rose to 7.5% last year and is expected to hit 8.5% in FY25, Islamabad would certainly want its friends in Riyadh to accommodate more and more of its young burgeoning population for mutual good.

The bilateral trade between the two countries has also grown substantially, thus making Saudi Arabia the largest trading partner of Pakistan in the Middle Eastern region.

Pakistan imports oil, petrochemicals and machinery from Saudi Arabia, while its main exports to the Kingdom include textiles, food products and construction materials.

In terms of defence, the two countries are closely engaged and carry out regular war games and military training programs to strengthen each other’s defence capabilities.

Pakistan has joined the Saudi-led Islamic Military Alliance, also called Islamic NATO, that aims to combating terrorism and promoting regional security.

Saudi Arabia has been a strong proponent of peaceful resolution of the Kashmir dispute between Pakistan and its arch-rival India, as well cooperating closely with Islamabad on regional security issues like counterterrorism and peace initiatives in Afghanistan.

The two nations have been cooperating in almost every field ranging from trade to energy and defence to regional security, but one special segment remained out of sight and that is: investment.

As the proverb goes ‘necessity is the mother of inventions’ the current global economic challenges seem to have created a room for the two countries to explore new avenues of bilateral engagement as Saudis are desperately trying to diversify their source of income that has so far been based on selling crude oil to the world.

According to the International Monetary Fund’s estimates, Saudi Arabia’s economy is shrinking, as it grew 6% in FY23 and is expected to contract 0.8% in FY25.

Given the volatile and highly competitive international oil market, Saudi Arabia can be clearly seen to have been embarked on economic diplomacy and visiting and sending her economic teams to every potential country that looks lucrative and safe in terms of investments.

Pakistan must also realize that Saudi Arabia is undergoing a historic, immensely inspiring transformation in its economy and society, driven by the reforms of Vision 2030 under the leadership of Muhammad Bin Salman. These reforms have fundamentally changed the Saudi way of life and impacted the very fabric of society, especially reforms for women, and young people and the development of cultural and social activities including tourism, entertainment, and sport.

For decades, Saudi Arabia has been primarily known as a destination for religious pilgrimages, attracting millions of Muslims from around the world for Hajj and Umrah. However, the Kingdom’s tourism landscape is also undergoing a significant transformation, offering a diverse range of experiences beyond religious tourism. In recent years, Saudi Arabia has emerged as a top leisure destination, particularly for travellers from Pakistan.

Saudi Ministry of Tourism aspires to achieve 100 million visits of foreigners by 2030 enabling sector growth through local and international tourists. The Ministry intends to provide over 800,000 job opportunities across the tourism sector in Saudi, with the aim of increasing the sector’s contribution to GDP by 10%.

The recent visit of a high-powered delegation from the kingdom demonstrates that Saudis have changed their approach toward Pakistan under the vision of their new prime minister and crown prince Mohammad bin Salman, best known as MBS.

MBS and Shehbaz Sharif have met at least twice in April to discuss their current and future course of actions.

The Saudis seem to have realized, and aptly so, that Pakistan is the world’s fifth most populous country that houses more than 240 million consumers for any investment venture they would be initiating in the South Asian nation.

Whereas the dollar-hungry Pakistan desperately needs foreign investment as a permanent source of boosting its dwindling foreign exchange reserves, and that is what the Saudis can cash in on.

Pakistan has offered the Saudis to consider its renewable energy, mining, agriculture, hydropower and information technology sectors for their investments.

Saudi Arabia and Islamabad have already agreed to expedite work on Riyadh’s initial $5 billion investment plans that the former wants to make in Pakistan.

The most prominent among Saudi investments is its plans to invest about $1 billion in Pakistan’s Reko Diq mining project. However, while the Saudis are now taking some practical steps to tap the lucrative Pakistani markets, they would certainly have an eye on the persisting political instability that keeps foreign investors away from the country.