Pakistan and Kingdom of Saudi Arabia have enjoyed strong bilateral relations since 1947. However, this brotherly relationship has taken a transformational positive turn with the visit of the Crown Prince His Royal Highness Mohammad bin Salman.
Pakistan and Saudi Arabia today are entering in to a new economic partnership which will lead to shared prosperity, regional stability and mutual respect based on long term investment, strategic and social ties.
Saudi Arabia's decision to invest in large-scale infrastructure and private industrial ventures clearly signals Pakistan's shift from a conflict linked state to a country taking leadership on regional stability and economic growth.
Prime Minister Imran Khan's message to "Invest in Pakistan now - do not miss the opportunity" has been taken positively by Saudi Arabia and other neighboring economies. This marks a strategic shift from a transactional relationship to a mutually beneficial economic partnership which will have a significant impact on the lives of the people in Pakistan and the region.
In his very first speech, Prime Minister Imran Khan gave a clear message to international investors to invest in Pakistan and decided to reach out to regional countries.
The Prime Minister took upon himself to lead the initiative on Ease of Doing Business to facilitate much needed investments in the country and he has set the target of achieving EoDB ranking within 100 in a year or two.
In this context, on September 18 2018, PM Imran Khan embarked on his first official visit to Saudi Arabia. This reflects the trust of Pakistani leadership on Saudi Arabia. Pakistan has been receiving generous economic and financial assistance from Saudi Arabia, at times of crises. Recently Saudi Arabia placed a deposit of USD3.0 Billion in the State Bank of Pakistan to support our balance of payment position. In addition, both countries agreed on a deferred oil payment facility to further ease out the pressure on external account.
In 1951 both countries concluded a 'Treaty of Friendship, which laid the foundation for a wide-ranging strategic, political, military and economic cooperation in coming decades. Saudi Arabia, over the years, has been a great partner to support Pakistani economy. There have been many areas of traditional economic cooperation between Pakistan and Saudi Arabia. A huge number of Pakistani diaspora in the Kingdom, who are playing a great role towards uplift of Pakistani economy through their remittances and also by reduction of pressure on Pakistani job market.
In the month of January 2019, the remittances from Saudi Arabia stood at $403.92 Million, which is the highest among remittances from all other countries.
As an estimate, more than 2 million Pakistanis are currently working in various jobs in the Kingdom of Saudi Arabia. These hardworking skilled and semi-skilled work-force have been contributing significantly in building Saudi Arabia's infrastructure and by managing various business sectors.
Although Saudi Arabia has long been making investments in Pakistan, but the recent unprecedented commitments between the two brotherly nations would lead to the highest Saudi investment in Pakistan in the entire history of two countries.
It is important to keep in mind that Foreign Direct Investment (FDI) helps in transfer of technology, facilitates access to international markets and provides the local labor with the training and knowledge required to enhance their skills. Foreign trade and production are also influenced by the inward flow of FDI in the host country. Positive impacts of FDI are recorded on the export industry of the host country as foreign firms have that experience and knowledge which could help them to take immediate actions in response to the fluctuating demands and needs of the globalized business industry. Considering FDI as an important component of GDP growth, our descriptive analysis reveals that average value of FDI net inflows from 1970 to 2018, as a percentage of GDP is less than 1.0, far below that in neighboring countries. If Pakistan needs to grow by 7% to catch up with East Asian Growth levels, this will require an investment to GDP ratio of 25 percent from the current low level of 15 percent. After 2007, there has been a drastic decline in FDI net inflows as a percentage of GDP in Pakistan. The reason for this drastic decline was lack of economic vision, political uncertainty, terrorism, and a weak foreign policy. Further, continuous energy shortfalls, rising cost of doing business, consistent devaluation of the currency and crowding out local investors from the market resulted in declining FDI net inflows as a percentage of GDP in Pakistan.
Recent visit of Saudi Crown Prince, HRH Mohammed Bin Salman, to Pakistan will set the stage for a major strategic shift in relations between the two brotherly Muslim nations, which have always enjoyed an incomparable level of understanding and friendship based on common religious, cultural and social values. This time, however, Saudi Arabia is looking for long-term stakes in the country by undertaking major investments in its economic sectors that are considered most viable by the Saudi state and private enterprises. This is part of its current national efforts to diversify economic linkages across Asia, especially with traditionally friendly and strategically significant countries like Pakistan. The Saudi ministers accompanying the Crown Prince will meet their counterparts to discuss bilateral cooperation in their respective fields. On the sidelines of the visit, businessmen from the two countries will also meet to discuss opportunities of collaboration in the private sector.
During Crown Prince visit, major agreements in various fields, including a multi-billion-dollar oil refinery and petrochemical complex, mining and renewable energy sectors are planned for signing. The Board of Investment (BOI) has remained on the forefront in finalizing these agreements.
This is going to be one of the biggest-ever Saudi investments in Pakistan. It will be instrumental in relieving the stress of external debt and a shortage of foreign currency reserves, besides boosting the economy which is showing signs of recovery. The main gain from this investment would be reducing the gap between developed and less developed regions in the country. The two countries will also discuss ways and means to develop a robust follow-up mechanism to ensure effective implementation and quick progress on tangible areas of cooperation.
Pakistan is aiming to get Saudi investments in energy, tourism, construction, food processing and IT sectors. Today's Pakistan offers fantastic business opportunities through its large market of over 200 million, young labor force and connectivity with the region. Joint ventures between the two brotherly nations could help to improve the overall living standard in the country. These investments will bring along useful employment opportunities for the people of Pakistan and will also improve productivity to improve country's their global competitiveness and in assimilating the domestic economy with the global economy. The recent wave of mutual strategic and economic cooperation between Saudi Arabia and Pakistan will enable both countries to meet the challenges of future and maintain co-operation in economic, strategic and political arenas.
The current Government of Pakistan is totally committed to strengthen long term economic ties with Saudi Arabia. The businessmen from both sides will make every possible effort to achieve tangible results in the best interest of the governments and people of Pakistan and Saudi Arabia. To facilitate Saudi and other local and foreign investors, BOI has established a dedicated unit for Ease of Doing Business and exclusive cell for investors from Saudi Arabia. Our aim is to facilitate investors to materialize their projects in Pakistan in a transparent, timely and efficient manner.
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