THE Saudi investment commitments to Islamabad seem to be taking tangible shape after months of uncertainty around Riyadh’s promises to invest several billion dollars to help rescue Pakistan’s flagging economy. Crown Prince Mohammed bin Salman had assured Prime Minister Shehbaz Sharif in April that the kingdom would invest $5bn in projects in Pakistan. The Saudi investment minister, Sheikh Khalid Bin Abdul Aziz Al-Faleh, has announced that Manara Mining’s acquisition of a $1bn stake in the Reko Diq project in the next few weeks would be just the beginning of Riyadh’s investment in Pakistan. Besides, the Saudis have also signed 27 MoUs worth $2.2bn of investment in various sectors — 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 do in the economic sphere,” the minister, who was in Islamabad as the head of a large business delegation from the kingdom, told the Pakistan-Saudi Arabia Business Forum this week. Manara would enter the Reko Diq project with Pakistan’s state-owned enterprises as a pilot project before increasing its investments in the country.

Dwindling FDI flows into the country in recent years underscore the deteriorating investment climate owing to political and economic instability. Though the new funding package from the IMF and the implementation of a tough financial and governance reform programme under the Fund is expected to revive investor confidence, private investors will take their time to see the outcome before returning to the country with their capital. Until then, Islamabad has little choice but to depend on official investment flows in state assets from friendly Gulf governments. It is possible that we will woo more official investment flows over the next few years as the authorities sell state-owned companies, but no country can progress or hope to build international reserves without attracting private investment to the economy. In order to remove the concerns of investors from the Gulf countries, the government has created the military-backed Special Investment Facilitation Council as a ‘one-window’ solution to address concerns about policy inconsistency. Nevertheless, actions like the forcible revisions of contracts of private power companies every few years sends a negative signal to both local and foreign investors. And this loss of investors’ trust will be hard to reverse.

Published in Dawn, October 12th, 2024