Islamabad, Pakistan – In a series of trips over the past three months, Pakistan’s Prime Minister Shehbaz Sharif has tried to convince the debt-laden country’s three closest allies – China, Saudi Arabia and the United Arab Emirates – to invest in the country, as its precariously positioned economy looks for green shoots.
In June last year, during Sharif’s first term as prime minister, the government formed a Special Investment Facilitation Council (SIFC), a high-powered body comprising Pakistani civilian and military leaders, to promote investment in Pakistan. .
Following trips to Beijing, Riyadh and Abu Dhabi, the Sharif government points to a series of memorandums of understanding signed on those trips as indicators of potential investments coming to Pakistan.
However, analysts warn that attempts to obtain foreign direct investment (FDI) will only work if Pakistan can promise a stable political scenario and bring structural reforms to its economy.
So what did Pakistan take away from Sharif’s travels and what does it need to do to attract investment as it prepares to negotiate with the International Monetary Fund (IMF) to enter its 24th loan program since 1958?
$5 billion from Saudi Arabia?
After taking office for the second time in March, Sharif made two visits to Saudi Arabia in April. These trips were followed by a series of visits by senior Saudi officials, including the defense and foreign ministers, to Pakistan. In early May, a 50-member Saudi business delegation also traveled to participate in an investment conference.
In his two meetings with Saudi Crown Prince Mohammed bin Salman in April, Sharif discussed opportunities to improve economic cooperation between the two countries and explored the possibility of a $5 billion investment package.
“We identified areas of cooperation, both at a government-to-government and business-to-business level, and this was clearly identified. We now have a clear path forward,” Sharif told Al Arabiya TV news in May.
Last year, caretaker Prime Minister Anwaar-ul-Haq Kakar also stated that Saudi Arabia had agreed to invest $25 billion in various sectors in Pakistan, without providing any details.
Ali Farid Khwaja, investor and chairman of KTrade Securities, said Pakistan has presented possibilities for Saudi investment in six different fields, including an oil refinery project, agriculture, mining, energy sector, technology and aviation.
“There is no doubt that Pakistan needs investment. Just about 18 months ago, we were on the verge of default, but because of these dialogues and engagement with friendly countries, we are letting them know what we can offer,” he told Al Jazeera.
A senior Pakistani government official who participated in the talks with the Saudi delegations said Pakistan was hopeful that Riyadh would invest from its Public Investment Fund (PIF), the kingdom’s sovereign wealth fund with assets estimated at more than 900 billion. of dollars. “They are obviously looking for investment opportunities and trying to follow their vision,” said the official, on condition of anonymity.
Negotiations on the proposed investment of US$5 billion are ongoing, the official added.
“We are currently in the discussion phase, which has already begun. As these negotiations mature, things will become clearer and we will see what the final agreements will look like,” he added.
And $10 billion from the UAE?
Sharif followed up his visits to Saudi Arabia with a one-day visit in late May to the United Arab Emirates, another of the country’s long-term partners, during which he met with President Sheikh Mohammed bin Zayed Al Nahyan.
After the meeting between the leaders, the Pakistan Prime Minister’s Office announced that the UAE has committed to investing 10 billion dollars in Pakistan in various fields.
The UAE Ministry of Investment confirmed the promise. But a month later, few details are available about the sectors the UAE might invest in and whether the two sides have agreed on a timetable for investments.
The Chinese MoU List
But it was Sharif’s five-day visit to China in June, his first of this term, that analysts considered the most critical of his stays abroad.
He was accompanied by military chief General Syed Asim Munir, and the Pakistani leadership held talks with Chinese President Xi Jinping, Premier Li Qiang and other leaders in Beijing.
The visit came two months after gunmen attacked a bus carrying Chinese engineers working at a major hydroelectric plant in northern Pakistan, killing at least five Chinese citizens and one Pakistani.
The attack was one of a series of setbacks for projects built under the ambitious $62 billion China-Pakistan Economic Corridor, a project launched a decade ago when Sharif’s older brother Nawaz, himself a three-time prime minister, minister, he was the country’s prime minister. .
Over the past 10 years, we have seen a significant growth in Pakistan’s dependence on China, as the relationship, which once centered on military ties, has largely expanded into the economic arena: Pakistan owes China almost 30 thousand million dollars of its total external debt obligations. almost US$130 billion.
The country’s economic managers have emphasized that unless there is significant foreign investment, Pakistan will not be able to achieve its ambitious growth rate of 3.6 percent, which the country is targeting for the next fiscal year.
Following Sharif’s return from Beijing, the Chinese and Pakistani governments issued statements on increasing focus on security, as well as creating an “updated version of CPEC” to better aid Pakistan’s economic and social development.
But despite the signing of 23 memorandums of understanding in various sectors during Sharif’s visit, there was no concrete agreement beyond demonstrations of intent on any project that the two nations could prioritize.
What does Pakistan need to do?
Since SIFC’s creation last June, the government has tasked the organization with helping facilitate investment opportunities from outside the country.
The latest data available from the central bank reveals that, from July to April this year, Pakistan received $1.45 billion in investments, an increase of an insignificant 8.1% compared to last year.
However, analysts say that while the three recent visits have demonstrated Pakistan’s desperation to obtain financial support, be it in the form of bank deposits or investment projects, the failure to carry out the projects was substantially due to the volatile scenario. of Pakistan.
“The reason for the failure to materialize any investments or projects of this type lies in the chronic political instability in the country and the structural issues plaguing Pakistan’s economy,” Umer Karim, associate fellow at the King Faisal Center for Research and Islamic Studies, told Al Jazeera. .
Economic analyst Uzair Younus also agrees, saying that the fundamental issue for Pakistan remains the question of the broader environment within the country.
“At a time when national companies are hesitant to invest in the economy, foreign capital will be even more conservative. For Pakistan to attract capital flows, it must embark on holistic reforms and provide a credible roadmap that encourages domestic and foreign investors. So far, this does not appear to be the case under the Sharif government,” the Washington, D.C.-based analyst told Al Jazeera.
The challenge for the Sharif government stems from the political instability in the country following the elections, marked by allegations of manipulation and fraud.
Increasing attacks on law enforcement officials over the past 18 months have added another layer of challenge to the country’s overstretched military, which has to man both its eastern border with archrival India and its western border with Afghanistan.
But Khwaja of KTrade Securities, on the other hand, painted a more cautiously optimistic picture.
The London-based investor said Pakistan’s three major lenders are evidently working together for a broader investment plan in the country.
“Pakistan is considered a country with Saudi software coming to Chinese hardware, and now the connections are becoming clearer,” he said.
Karachi-based economist Khurram Husain, however, points out that the three countries Sharif visited are also Pakistan’s largest bilateral creditors.
“Pakistan is seen by all foreign investors as a high-risk country, which is why the State is focused on finding a way to conclude major agreements between governments. The problem is that they need financial support right now, and these deals, even if they happen, will not bring in much money,” Husain told Al Jazeera.
The analyst added that the best way out of Pakistan’s current economic difficulties is internal reforms, not foreign support.
“Realistically, Pakistan should try to manage its external debt profile rather than seeking more cash-based support from its bilateral creditors,” he added.
However, Riyadh-based Karim said foreign visits have developed a political aspect where optics are used by Pakistani governments as “signs of international confidence and support” but some attention must be paid to domestic investors to revive the economy.
“FDI certainly continues to be an important component of economic expansion and growth; however, the government could have started by making it easier for local investors and businesses to develop a roadmap that could then be offered to foreign investors,” he said.
This story originally appeared on Aljazeera.com read the full story
