Economic and Business Relations between the Kingdom of Saudi Arabia and Pakistan. The brotherly relations between the people of Saudi Arabia and Pakistan are deep rooted and cover a wide spectrum.
Saudi Pak Industrial and Agricultural Investment Company Limited (Saudi Pak) was incorporated in 1981 under a joint venture Agreement signed between the Kingdom of Saudi Arabia and the Government of Pakistan to further strengthen economic co-operation between the brotherly people of Saudi Arabia and Pakistan.
The mandate of the Company is to operate as Development Financial Institution to help in promoting industrialisation, boosting economic activities and providing employment opportunities in the country. It is well known fact that no economy can survive without the presence of well established and well knitted financial / banking system. This system provides fuel to run the economy through effective channelization of resources. The banking sector in Pakistan is divided into various segments and the segment of DFIs is an important and vibrant part of the Pakistan's Financial Market.
DFIs play a pivotal role in the economic and industrial development of a country. In Pakistan, the traditional role of DFIs was to promote industrialisation in less developed areas where commercial banks were shy to provide financing on purely economic grounds. DFIs also played the role of catalyst in the establishment of industries falling within national economic priorities and yielding acceptable rate of return on investment.
Considering the significance and benefits of the DFIs, Government of Pakistan has signed three more joint venture agreements in recent past with China, Iran and Brunei. After establishment of three more DFIs through joint venture agreements at present seven DFIs established through JV agreements are in operations and Saudi Pak, is one of the prominent players amongst the DFIs.
Saudi Pak's corporate vision is to excel in performance and play a leading role in the financial sector in Pakistan while mission of the company is to strengthen economic co-operation between Saudi Arabia and Pakistan and add value for stakeholders through capital formation and investment related activities in Pakistan.
The Share Capital of the Company has increased steadily over the period. As of December 31, 2009 it amounted to Rs 6,000 million, held in equal proportion by the two Governments. The Board of Directors comprises of six directors, three of whom represent the Kingdom of Saudi Arabia and other three from the Government of Pakistan. One of the Saudi Director is Chairman.
Shareholding:
-- Kingdom of Saudi Arabia through Public Investment Fund 50%
-- Government of Islamic Republic of Pakistan through State Bank of Pakistan 50%
Location/Offices:
The Head Office of the company is located in Saudi Pak Tower, Islamabad, a twenty storey building owned by the company. The company has branch offices in Karachi and Lahore.
Credit Rating:
Saudi Pak maintained long term entity rating of AA+ (Double A plus) and short term entity rating of A-1+ (A one plus) with stable outlook for eleven consecutive years. The rating has been awarded by JCR-VIS Credit Rating Company, which is affiliated with Japan Credit Rating Company.
Major Business Activities (Products/Services):
Saudi Pak is engaged in the business of investing in industrial and agro-based industrial projects on commercial basis. Saudi Pak has been making investments under various modes.
The product range of the company is well diversified and comprises of the following:
Loans and Advances:
-- Long Term Loans
-- Short Term working capital loans
Investments:
-- Direct Equity Investments.
-- Capital Market Operations
-- Term Finance Certificates (TFCs)
-- Government Bonds
-- Lease Financing
-- Underwriting of IPO's of Shares and TFCs
-- Guarantees
-- Money Market/Treasury Operations
-- An overview of Saudi Pak's role in the economic development of the country can be gauged from the figures presented in the tables.

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Net Financing and Investment Approved
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                                                                                        (Rs  in million)
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Mode of Financing                 Cumulative*   2010**      2009      2008      2007      2006      2005
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Long Term Finance/TFCs              25,666.9   1,585.6   1,311.6   2,027.9   3,858.6   2,805.9   2,969.3
Lease Finance                        1,821.0         -     137.2         -     127.5     241.6     103.3
Short Term Finance                  13,640.7     720.0     605.0     330.0     873.9   1,314.2   1,501.7
Direct Equity/Investment/Placement   6,029.2         -     265.0     493.8     186.5   1,594.5   1,219.5
Sub-Total(Funded Facilities)        47,157.8   2,305.6   2,318.8   2,851.7   5,046.5   5,956.2   5,793.8
Underwriting of Shares               2,816.0         -      35.0      84.6     350.0     420.0     567.0
Guarantees                           1,778.6         -         -     400.0      11.8         -         -
Sub-Total(Non Funded)                4,594.6         -      35.0     484.6     361.8     420.0     567.0
Grand Total                         51,752.4   2,305.6   2,353.8   3,336.3   5,408.3   6,376.2   6,360.8
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Disbursements
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                                                                                     (Rs  in million)
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Mode/Type of Financing               Cumulative*  2010**     2009     2008     2007     2006     2005
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Long Term Finance/FTCs                 23,902.7    625.1  1,338.5  3,536.7  2,693.3  2,700.1  3,267.4
Lease Finance                           1,743.3     92.0        -     46.1    125.8    242.1     62.8
Short Term Finance                     12,894.9    493.6    544.4    707.3    856.8  1,255.0  1,256.6
Direct Equity/Investment/Placement      1,827.4        -     15.0     93.8    161.4    200.0    244.0
Investment in Associated Company        4,030.6        -    250.0    225.0    890.8    586.2  1,049.0
Share taken up against underwriting       344.1        -        -     18.4     16.6        -      4.0
Total Disbursements                    44,743.0  1,210.7  2,147.9  4,627.3  4,744.7  4,983.4  5,883.8
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Since inception, Saudi Pak has financed over 822 projects. Following the prudent policy, Saudi Pak's financing has always been well diversified into various vital sectors of the economy as is evident from the following Pie Chart.
Saudi Pak was always cognisant of its role in the development of the country and therefore, played its due role in industrial projects. Saudi Pak was amongst the sponsors of Textile City in Karachi and several real estate development projects. Keeping in view the economic significance of energy, Saudi Pak also participated in the financing of several Power Projects.
Saudi Pak's balance sheet stood at Rs 20,503 million as on June 30, 2010. Its gross advances and investments on the said date stood at Rs 7,902 million and Rs 9,494 million respectively. While Saudi Pak has been playing its role in the economic and industrial development of the country, it has also been adding value to its shareholders.
The company distributed total cash dividend amounting to Rs 8,248 million and stock dividend to Rs 2,000 million since inception. During the last five years (2005-09) average cash dividend per year paid to the share holders is Rs 1,230 million. Besides, Saudi Pak's equity has also risen to Rs 9,782 million as on June 30, 2010.
Strategic Investments:
The company did not confine itself to organic growth; rather it has been diversifying and expanding its activities by way of acquiring stakes in other companies and establishing subsidiaries within the ambit of financial sector to take advantages of the operational and financial synergies. Saudi Pak has controlling stake in a leasing company. Besides, it established subsidiaries to undertake the business in insurance and real estate development sectors. Both the sectors offer growth potential.
Saudi Pak has been diversifying its operations and activities by acquiring or establishing subsidiaries within the ambit of financial services with the objective to reap the benefits of synergy. Saudi Pak's first acquisition took place in October 1997, when it acquired 30 percent stake in Standard Chartered Mercantile Leasing Company Limited, now Saudi Pak Leasing Company Limited.
Saudi Pak's second acquisition was made in 2001 when it acquired Prudential Commercial Bank Limited. At the time of acquisition the bank was in bad shape as State Bank of Pakistan had declared moratorium on the bank. After the acquisition, Saudi Pak made significant improvements in the operations, systems and size of the bank. Saudi Pak divested its stake in the commercial bank in 2008 to a consortium of reputed international banks which brought foreign direct investment in Pakistan to the tune of US $168 million.
As borne out from above, Saudi Pak is not only a successful business venture between Saudi Arabia and Pakistan, it is also a symbol of brotherhood, friendship and co-operation between the people of the two countries. The ties of brotherhood and friendly relations would further prosper in the times to come in the wake of historic trade ties, religious affinity, the complementary nature of economic needs and convergence of views and interests of the two countries on most of the regional and international issues, thus creating a strong bondage of trust between Pakistan and Saudi Arabia.