The arrival of a Saudi delegation headed by the country’s Investment Minister Khalid ibn Abdul Aziz Al-Fatih is bringing what is expected to be the first phase of Saudi investment in Pakistan, an estimated $2 billion in investment. The eagerness of Saudi Arabia to invest can be seen from the fact that the Saudi delegation has preferred to come before the Shanghai Cooperation Organization Summit, due to start in just five days, on October 15. This reflects the speed of the process, which only started in February, when Prime Minister Shehbaz Sharif visited Saudi Arabia almost immediately after becoming PM. Things started to hum with Mr Sharif’s visit to Saudi Arabia in April, to attend the World Economic Forum there. A high-level Saudi delegation then visited Pakistan. There was a flurry of economic diplomacy between the two countries in the lead-up to Pakistan getting a package from the IMF, because Saudi Arabia had to roll over its deposit with the State Bank. There is also the work of the Special Investment Facilitation Council, and the expected Saudi participation in the Reko Diq project.
This visit is particularly important because it predicates a change in the relationship between the two countries. At present it is a donor-recipient one, where Pakistan was the recipient of Saudi largesse, with Saudi Arabia in turn trying to exert political influence. The episode of Saudi refusal to take up the Kashmir issue, when Saudi Arabia took back $1 billion deposited with the State Bank, leading to Pakistan having to get the money from China, showed that this was not a viable basis for relations. All the aid, and the large number of Pakistanis working in Saudi Arabia, could not make a client out of Pakistan.
Being an investment destination is a better basis for relations. Saudi Arabia will still be giving money to Pakistan, but now its businessmen will be taking away profits. This will lead to mutual prosperity for the two countries. It should have been tried before, for Saudi Arabia, because of its oil wealth, has long had surplus capital to invest. Pakistan has to watch out for a couple of things. First, its government must ensure that investors are duly facilitated, without officials trying to force their snouts into the trough. Second, Pakistan must ensure that investments ultimately lead to exports. If investment is to substitute for aid, it must do what aid failed to: provide a path to repayment. Investment does not need to be repaid, but it must yield profits.
