Prime Minister Shahbaz Sharif has announced that agreements and memorandums of understanding worth over two billion dollars are set to be signed with Saudi Arabia. The purpose of the Saudi delegation’s visit is to enhance bilateral cooperation and positively invigorate mutually beneficial economic partnerships. Additionally, during the first half of the current fiscal year, bilateral trade between Pakistan and Saudi Arabia reached a record 2.4 billion dollars.
Undoubtedly, Pakistan is a preferred country for investment by the Saudi government and companies. Both Pakistan and Saudi Arabia are actively working together to enhance mutual trade and investment agreements. The two countries share strong trade, defense, and cultural ties. Millions of Pakistani expatriates live in Saudi Arabia, serving as a significant source of remittances for cash-strapped Pakistan. Historically, Saudi Arabia has frequently assisted Pakistan. Saudi investors have great confidence in Pakistan’s economy, geographical position, natural resources, and capabilities.
Pakistan and Saudi Arabia have collectively signed investment agreements worth 21 billion dollars, including approximately 10 billion dollars for establishing an oil refinery, one billion dollars for a petrochemical complex at Gwadar Port, and five billion dollars for commercial investment. Saudi oil company Aramco is set to launch its first branded retail gas station in Pakistan by the end of the year, having completed the acquisition of 40 percent of Gas and Oil Pakistan Limited in May. These projects are expected to not only strengthen Pakistan’s economy but also address the issues faced by ordinary citizens.
While agreements are being made and ongoing, our institutions and government should not rest on their laurels; rather, they must provide foreign investors with any necessary facilities, including the provision of land required for projects. There is a need for not just ample energy availability but also reduced energy prices. Furthermore, ensuring a stable law and order situation is essential. Some time ago, many of our investors relocated their businesses to other countries due to energy shortages, exorbitant prices, and the menace of terrorism. If issues regarding energy and law and order are resolved in Pakistan, it could attract significantly more investment.
Certainly, increasing exports is crucial for boosting foreign exchange reserves and stabilizing the economy; we must enhance the export rate through both domestic and foreign investments, with the private sector seeking new opportunities. Specifically, special measures need to be taken to increase Pak-Saudi investment and exports, requiring our institutions to enhance their capabilities to boost exports and reduce unemployment through investment.
Currently, there is potential for investment in agriculture, textiles, information technology, pharmaceuticals, mobile devices, sports goods, minerals, and various other sectors. On the other hand, if the local industry becomes capable of exporting, it should receive incentives to export its products. These processes will highlight the production capabilities of the local industry, lead to increased investment, generate employment through production and exports, and provide the government with much-needed revenue.
Additionally, the State Bank of Pakistan (SBP) released details of workers’ remittances for September 2024. Remittances from Saudi Arabia amounted to 680 million dollars in September, while the United Arab Emirates sent 560 million dollars during the same period. The inflow of workers’ remittances will help keep the current account deficit under control. Official statistics indicate that approximately 2.5 million Pakistanis are residing in Saudi Arabia for employment, sending billions of dollars home each year, which is crucial for Pakistan’s economy.
Just as a stable government and economic and social cohesion are essential, it is equally important to foster economic growth, which can be achieved through investment in technology and value-added industries while aligning the policies of international financial institutions with local needs. Furthermore, we need to adopt the concepts of the World Bank and the International Monetary Fund (IMF) while considering local conditions and the needs for economic enrichment, harmonizing international thinking with local commitments.
For instance, the automotive industry can be nurtured to meet international competitive standards. Over the next five years, Pakistan can earn between 20 to 30 billion dollars in profit from foreign investment in agriculture, with a potential 42 billion dollars in profit from exports. The agriculture sector is expected to create 300,000 new jobs. In minerals, Pakistan is projecting revenue of 51 billion dollars from increased foreign investment and exports over the next five years. It is moving towards a direct foreign investment deal worth 25 billion dollars with its two friendly nations, Saudi Arabia and the UAE, in minerals, with a possible 14 billion dollars in profit from exports. Exporting from the minerals sector could yield a profit of 16 billion dollars, while this sector is anticipated to create 200,000 jobs.
Moreover, Pakistan is expecting 51 billion dollars in investment in the IT sector through increased foreign investment and exports, with the potential to earn 20 billion dollars from direct foreign investment in IT. It is imperative that rulers communicate their needs and constraints while acknowledging the challenges faced by the common man, instead of solely accepting the conditions of financial institutions. Energy prices are already higher than in all other South Asian countries; if further increases occur as per IMF directives, the rising production costs will make Pakistani goods expensive and uncompetitive in the global market.
The government measures for economic improvement differ from those of the public. The government considers rising stock exchange values, decreasing interest rates, and fluctuations in fuel prices as indicators of economic improvement, whereas the public believes that the economy improves only when their purchasing power increases. The government has control over fuel prices, adjusting them as needed; however, fuel alone is not everything. There should be a plan for how to reduce the prices of other commodities in proportion to inflation, but no such possibility seems to be on the horizon. The prices of medicines have risen not by a few hundred but by several times.
Pharmaceutical companies have developed a pattern of raising prices every fifteen days, a trend that has yet to subside. This is attributed to high interest rates, general inflation, and barriers to raw material imports. Does the health department or the Drug Regulatory Authority have any method or data that would enable them to issue directives to reduce medicine prices in line with inflation? Anyone believing that the economy operates on an automatic system where prices fluctuate freely is living in a world of dreams.
Here, prices only rise and never fall again. Therefore, can anyone explain how the public can benefit from a reduction in inflation when prices are expected to remain at high levels? In any country, direct foreign investment signifies that the outside world considers its economy a valuable place for investment, which is a positive sign for the country’s economy.
Direct foreign investment provides skills and technology to countries that do not know how to utilize resources to produce goods, which they may not be able to produce without direct foreign investment. The profits from capital utilization can be directed toward infrastructure development, improving healthcare and education, enhancing productivity, and modernizing industries. It is essential to ensure that direct foreign investment ultimately improves the lives of the majority over the long term.