Pakistan has enjoyed close relations with Saudi Arabia and both the sides have established time-tested strategic ties. Saudi Arabia has always extended economic cooperation to Pakistan in the hour of need. Workers’ remittances from this brotherly Islamic country play a substantial role in strengthening the balance of payment of Pakistan. When seen in the backdrop of this overall picture, one aspect of the ties i.e. bilateral trade seems relatively less pronounced
and depicts a story of unrealized potential.
Pakistan mainly imports oil and oil products from Saudi Arabia, which accounts for 90% total import bill for the Kingdom. In turn, Pakistan supplies rice, meat, meat products, spices and fruit, home textile products,
chemicals, footwear and leather goods. The total value of the merchandise being traded between the two countries is around $2.5 billion. Pakistan’s exports to Saudi Arabia are worth about $0.5 billion whereas the rest comprises the value of items imported by Pakistan. Pakistan’s exports to Saudi Arabia have seen consistent growth and have tripled in value during 2001 and 2014.
There has been a slight downward trend since 2014, which may be partly attributed to somewhat slowing down of economic activities in Saudi Arabia due to falling oil prices. However, even if one disregards the phenomenon
of temporary slow growth in Saudi Arabia, it is still palpable that the magnitude of trade relations between the two countries is not in sync with their long-established close-knit ties. The fact of the matter is that Pakistan caters to a merely 0.3% of the import market of Saudi Arabia. Considering the manufacturing base of Pakistan and
thriving services sector, Pakistan has much more to offer to Saudi Arabia and actually, there is a huge potential of bilateral trade lying unrealized between the two countries.
Due to Pakistan’s geographical location, bilateral trade is comparatively feasible both through air and sea routes. Moreover, Saudi Arabia hosts the largest expatriate community of Pakistan in the world. Pakistani citizens are employed in almost all the large business groups and companies where they are offering valuable services and are ultimately contributing to the strengthening of the local economy. The presence of this large expatriate community can play a significant role in furthering the bilateral trade relations. There are a number of areas in which the trade volume can be possibly enhanced.
Pakistan specializes in textiles products, which account for more than half of our total global exports. But in the case of Saudi Arabia, textiles comprise merely 20 percent of our export mix. The share of textiles especially value-added garments can see a big jump if circumstances are aligned. Similarly, Pakistan manufactures state-of-the-art
surgical instruments and world-class sports goods, which can easily find their place in the Saudi market. There is also a great scope for food products. Pakistan can easily cater to the rapidly growing sector of organic foods
in Saudi Arabia. Similar potentials exist in the services sector be it financial services, insurance sector, facilities management, IT services, entertainment industry etc.
A free-trade agreement between Pakistan and the Gulf Cooperation Council (GCC) is already on the cards. The agreement will help boost trade between Pakistan and the entire Gulf region. The signing of a bilateral investment treaty between Pakistan and Saudi Arabia is also a possibility in near future. This agreement will liberalize, promote and reciprocally protect investments made by companies of the two countries and will help them capitalize on the
opportunities arising on both sides i.e. the Vision 2030-related investments opportunities in Saudi Arabia and projects related to China-Pakistan Economic Corridor (CPEC) in Pakistan.
In this context, Prime Minister Imran Khan’s visit can be declared enormously helpful and beneficial for opening up new sectors and horizons of cooperation between both the countries to higher their bilateral trade and economic cooperation raise which can drastically change the on the ground economic outlook of both the countries. As a
positive outcome of the Prime Minister’s visit, Saudi Arabia has stepped forward to offer financial assistance of $ 6 billion to Pakistan to overcome balance of payment crisis.
The government struck a deal for a 12-month balance of payments lifeline with Saudi Arabia, which will deposit $3 billion with Pakistan’s central bank and provide a matching one-year deferred payment facility for oil imports. The visit by the premier to the kingdom resulted in significant understandings between the two countries.
Saudi Arabia will provide Pakistan with a deposit of $3 billion for a period of one year as balance of payment support. It was agreed that Saudi Arabia will place a deposit of $ 3 Billion for a period of one year as balance of payment support, the statement said. It was also agreed that a one year deferred payment facility for import of oil, up to $ 3 Billion, will be provided by Saudi Arabia. This arrangement will be in place for three years, which
will be reviewed thereafter. The development came as Prime Minister Imran Khan visited Riyadh where the prime minister launched a charm offensive targeting potential investors as Pakistan seeks to secure funds amid a yawning balance of payment crisis.
Apart from attending the Future Investment Initiative (FII) conference, the Pakistani premier also met with King Salman bin Abdul Aziz and Saudi Crown Prince Mohammad bin Salman to discuss matters of mutual interest. The visit by the Pakistan premier to the kingdom has resulted in significant understandings between the two countries.
Far-reaching decisions on bilateral economic and financial cooperation were also agreed during the meetings with Saudi leadership, the statement said. The crown prince agreed to Khan’s suggestion to reduce visa fee for
Pakistani workers, which is a significant step towards enhancing Pakistani workforce in Saudi Arabia, as well as facilitating travel of people from both countries.
The earlier visit of the Saudi delegation had evaluated the possibility of investing in a petroleum refinery in Pakistan. Saudi Arabia confirmed its interest in this project, and an MoU will be signed after obtaining cabinet’s approval, the statement said further. The kingdom expressed its interest in investing in a petroleum refinery in Pakistan, and an
MoU will be signed after obtaining cabinet’s approval. The earlier visit of the Saudi delegation had evaluated the possibility of investing in the project. Saudi Arabia also expressed interest in development of mineral resources in Pakistan, the statement added. For this purpose, the federal government and the Balochistan government will hold
consultations, after which a delegation from Saudi Arabia will be invited to visit Pakistan.
Earlier a Pakistan-specific session was organised after the inauguration of the FII Conference, in which the prime minister underlined Pakistan’s priorities towards optimizing the economy and attracting foreign investment. Stressing the focus of his government on human resource development, he highlighted the potential of Pakistan’s youth, identified lucrative investment opportunities in the tourism sector, minerals, coal and gas exploration, and information technology. Khan mentioned the successes of Pakistan in the fight against terrorism, which has
brought peace and stability to the country and elaborated the significance of China-Pakistan Economic Corridor (CPEC), including investment opportunities in special economic zones. The prime minister also took several
questions from the audience comprising hundreds of business entrepreneurs.
In his address to the Future Investment Initiative (FII) conference in Saudi Arabian capital Riyadh, Prime Minister highlighted some of the key challenges facing his government and his plans to tackle them, saying whatever reforms we do today the impact will be in three months, six months or a years’ time. Right now we need loans to go through
this difficult period of repaying or servicing our debt for our imports, the premier said while speaking about Pakistan’s current economic situation. Right now we are talking to the International Monetary Fund and also to
friendly countries, he added. Stating that his government has been in power for 60 days, the premier said, the immediate concern for our government is to increase our exports so we can bolster our foreign exchange reserves.
Warning that the next three to six months will be difficult for Pakistan, PM Imran said, our institutions were destroyed as corrupt people were in top positions but we are taking measures to increase exports. Pakistan’s strength is overseas Pakistanis and we have to make conditions favourable for them to invest in the country, he said. The
premier announced, we are working to create a favourable environment for investment in the country and will introduce a one-window operation for it. We need to increase foreign reserves with remittances from the 8 to 9
million Pakistanis working abroad, need to give incentives to exporters and create opportunities for investment, he added. He also asserted, we need to clamp down on money laundering and are taking measures.
Speaking about his Naya Pakistan Housing Programme, PM Imran said, there is a need for 10 million houses in Pakistan and we have embarked on a programme to build 5 million houses in the initial phase. PM Imran also
announced, we are restructuring our duty and tax structure.
The premier further said, Pakistan is a country with great potential and is one of the most diverse countries in the world. This is the best time for investors to come to Pakistan, he added. PM Imran further said he has spoken to Saudi Crown Prince Mohammed bin Salman about boosting investment ties between the two countries. There is a vast amount of mineral wealth in Pakistan. We have some of the largest gold reserves in the world, as well as reserves of copper and zinc, he added. Regretting that mineral reserves in Pakistan could not be extracted due to terrorism
and corruption, PM Imran maintained, this will change now.
There was hardly any investment in our mineral resources and one of the reasons as I pointed out was the war on terror as investors would not return to Pakistan. We also had very poor governance and corruption, he added. Pakistan suffered a lot from terrorism post-9/11 but now, thanks to our security forces and intelligence agencies, we
have controlled terrorism. PM Imran further highlighted. Tourism is also a vital sector and has flourished in recent years. We want to give incentives to people in energy sector. Pakistan’s biggest resources are its people below the age of 30, he maintained.
The premier lamented that information technology was not focused on earlier, but said, our government is giving importance to the IT sector.
Upholding that Pakistan’s two biggest problems are corruption and poverty, PM Imran said, we have asked the Chinese government to help us with eliminating corruption and poverty alleviation. In the past five years, China has clamped down on corruption and we have to look for ways to curb it as white collar crime is hard to convict. Secondly, they have pulled out a large amount of people out of poverty. The premier also hailed the China-Pakistan Economic Corridor as very important for Pakistan and said that the project increased the country’s strategic importance. China is a huge market for Pakistan and economic zones such as Gwadar are being developed.
PM Imran further stressed, what Pakistan needs most right now is peace and stability. One of the reasons we are at this stage is because of instability and war. Responding to a question regarding relations with neighbours, the prime minister said, Pakistan’s relations, especially with Afghanistan and India, are crucial. He, however, expressed disappointment that India did not respond to Pakistan’s initiative for dialogue. We need stability and
that means peace with all neighbours. Our problems right now are with Afghanistan and India but I am afraid we received no response from India, in fact, we got rebuffed by New Delhi, he said. Now what we are hoping is
that we wait until the elections then again we will resume our peace talks with India, he added, referring to upcoming national polls scheduled to take place by mid-May in India.
Regarding the measures his government is taking for the empowerment of women, PM Imran said, you can only empower women if you educate them. When we were in power in Khyber Pakhtunkhwa, we decided that
for every 100 colleges built 70 would be for women. Our housing project will also involve women. Women also do not get their inheritance rights as mentioned in the Shariah law so we are also working to financially empower them and ensure that they get their rights, he said.
In order to take the people into confidence over his recent visit to Saudi Arabia and Pakistan’s political and economic situation, prime minister addressed the nation saying that the assistance provided by Saudi Arabia had lessened the financial burden on Pakistan. We were trying to get loans from our friendly nations so we rely less and less on IMF. We are also in talks with other friendly countries. He hoped to give the nation more good news in the coming days. Khan said that he will try to get Muslim countries together, besides acting as a mediator in resolution of conflicts
between Muslim countries. We are trying our best to act as a mediator to resolve the Yemen crisis.
Published in Melange Intl. Magazine in November 2018.