The Saudi investment commitments to Islamabad appear to be taking tangible shape after months of uncertainty surrounding Riyadh’s promises to invest several billion dollars to help rescue Pakistan’s struggling economy. In April, Crown Prince Mohammed bin Salman assured Prime Minister Shehbaz Sharif that the kingdom would invest $5bn in projects in Pakistan. The Saudi investment minister, Sheikh Khalid Bin Abdul Aziz Al-Faleh, recently announced that Manara Mining’s acquisition of a $1bn stake in the Reko Diq project in the coming weeks would be just the beginning of Riyadh’s investments in Pakistan. Additionally, the Saudis have signed 27 MoUs, totaling $2.2bn of investment across various sectors, including industry, agriculture, IT, food, education, mining and minerals, health, petroleum, energy, and other areas of mutual interest.
“I think there is essentially no limit to what Saudi Arabia and Pakistan can achieve in the economic sphere,” the minister, who led a large business delegation from the kingdom to the Pakistan-Saudi Arabia Business Forum this week, remarked. Manara would enter the Reko Diq project alongside Pakistan’s state-owned enterprises as a pilot project before expanding its investments in the country.
Dwindling FDI flows into the country in recent years highlight the deteriorating investment climate caused by political and economic instability. Although the new funding package from the IMF and the implementing of a stringent financial and governance reform program under the Fund are expected to restore investor confidence, private investors are likely to take their time to observe the outcomes before returning to the country with their capital. Until then, Islamabad has little choice but to rely on official investment flows into state assets from friendly Gulf governments.
Pakistan may attract more official investment flows over the next few years as the government sells state-owned companies. Still, no country can progress or hope to build international reserves without attracting private investment into its economy. To alleviate the concerns of investors from Gulf countries, the government has established the military-backed Special Investment Facilitation Council as a ‘one-window’ solution to address worries about policy inconsistency. Nonetheless, actions like the forcible revisions of contracts with private power companies every few years send a negative signal to both local and foreign investors. Rebuilding the lost trust of investors will be a difficult task.
