Rescuing Pakistan’s economy: Saudi Arabia’s lifeline
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Pakistan and Saudi Arabia have restated their commitment to accelerating the initial phase of Saudi investment amounting to $5 billion in Pakistan. This investment holds significance for Pakistan as it stands to receive crucial financial support and investment inflows, which are essential for stabilizing its economy and addressing challenges such as high inflation and external imbalances. Simultaneously, Saudi Arabia aims to utilize strategic investments to expand and foster regional economic cooperation. This partnership highlights a shared vision for promoting economic development and mutual prosperity.
Saudi Arabia’s gesture at this juncture carries profound implications for Pakistan’s economy, image, and global positioning. The positive signals emanating from Saudi Arabia, coupled with the possible injection of substantial capital, serve as an affirmation of confidence in Pakistan’s potential. This signals to international investors that Pakistan is emerging as an attractive destination for trade and investment. Moreover, once these investments materialize, they will provide much-needed relief amid economic uncertainties, strengthening investor sentiment and instilling confidence in the new government’s ability to manage a challenging economic landscape. By demonstrating Saudi Arabia’s commitment to ensuring Pakistan’s energy security, this partnership enhances Pakistan’s standing on the global stage and reinforces its position as a future manufacturing hub.
It’s important to acknowledge that Pakistan has previously sought assistance from Saudi Arabia during economic crises. Both Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) and Shehbaz Sharif’s Pakistan Muslim League-Nawaz (PML-N) have turned to Riyadh for financial aid in the past. However, to ensure the sustainability of Saudi investments and business interests in Pakistan, concerted efforts are required to address regulatory hurdles and create a conducive environment for investment. The establishment of the Special Investment Facilitation Council (SIFC) presents a promising avenue for streamlining investment procedures and removing barriers to entry for foreign investors, including those from Saudi Arabia.
Pull-quote: By demonstrating Saudi Arabia’s commitment to ensuring Pakistan’s energy security, this partnership enhances Pakistan’s standing on the global stage as a future manufacturing hub.
- Vaqar Ahmed
The establishment of the SIFC, with active military participation, highlights a unified approach to economic revival and exhibits the government’s commitment to attracting foreign investment. By leveraging the expertise and resources of the military, Pakistan aims to expedite the implementation of economic policies and projects, thereby catalyzing growth and development at both the national and sub-national levels. The inclusion of the military in key roles within the SIFC demonstrates strategic alignment and the importance of national security in driving economic prosperity.
Looking ahead, Pakistan should leverage Saudi Arabia’s expertise and resources across various sectors to unlock new growth opportunities. By seeking Saudi assistance in areas such as renewable energy, climate change mitigation, and artificial intelligence, Pakistan can accelerate its socio-economic progress. Saudi Arabia’s leadership in renewable energy development presents valuable lessons for emerging market economies like Pakistan, offering opportunities to diversify the energy mix and promote sustainability. The Kingdom’s Vision 2030 also includes plans for green agriculture – an approach to farming that focuses on sustainable practices to prevent ecosystem degradation and achieve food security. Pakistan’s network of agriculture universities could stand to gain if cooperation in agri-tech is promoted between the two economies.
Moreover, the potential free trade agreement (FTA) between Pakistan and the Gulf Cooperation Council (GCC) holds economic potential. Saudi Arabia can play a pivotal role in facilitating discussions and addressing concerns raised by other GCC members, thereby paving the way for a mutually beneficial agreement. Both countries are also moving ahead with a Bilateral Investment Treaty (BIT) which could protect the investor interests on both sides and also provide an international forum for any arbitration.
Furthermore, as economic ties between the two countries deepen, Pakistan could leverage Saudi Arabia’s regional influence to normalize trade with India and revive the South Asian Association for Regional Cooperation (SAARC) dialogue. This has the potential to significantly enhance cooperation and connectivity across South Asia, marking a transformative step forward in the region’s economic landscape.
Dr. Vaqar Ahmed is an economist and former civil servant.
