Pakistan is moving in a right economic direction and confident of securing up to $50 billion foreign investment in the next three to five years, says a government official.
Pakistan's Minister for Information and Broadcasting Fawad Chaudhry said it was one of the top priorities of Prime Minister Imran Khan to bring foreign investment into the country. Major chunk of this investment is expected to come from the UAE, Saudi Arabia and China.
Chaudhry was talking to Khaleej Times after signing of $20 billion worth of deals with Saudi Arabia during first official visit of Saudi Crown Prince Mohammed bin Salman to Pakistan last month. The two countries strengthened bilateral trade and investment relationships by signing various agreements in key sectors such as renewable energy, mineral and mining, petrochemicals and infrastructure, among others.
The unprecedented Saudi investment is seen as a 'game changer' and major boost for Pakistan's struggling economy, which now gets a much-needed breathing space to negotiate better terms and conditions with the International Monetary Fund for a multi-billion dollar bail-out package.
The Wall Street Journal reported in January that Saudi Arabia and the UAE have offered Pakistan approximately $30 billion in investment and loans. In addition to oil imports worth $6 billion on deferred payments, both the countries have already deposited $3 billion each in Pakistan's central bank to ease balance of payments crisis and support the rupee.
"Pakistan is open for business and investment. Prime Minister Imran Khan delivered this message at recent World's Government Summit in Dubai and exchange of top-level delegations from the UAE and Saudi Arabia shows that we are on right track," Chaudhry told Khaleej Times in a recent interview.
Prince Mohammed bin Salman, also known as MBS, witnessed the $20 billion investment agreements just a few hours after landing in Islamabad on his maiden state visit to Pakistan during the first leg of his Asian tour that also included India and China.
"It's a big for phase one and definitely it's going to grow every month, every year in big numbers and will be beneficial for both countries. Saudi Arabia cannot say no to Pakistan," he said.
"Pakistan will have a great future ahead. It has witnessed a five per cent growth in its GDP," Saudi Crown Prince added.
'Exciting future' ahead
"We are creating a great future for Saudi Arabia and Pakistan," Prince Mohammed said at a reception hosted by Imran Khan who welcomed Saudi investment in oil refining, petrochemicals, energy and other sectors.
"Pakistan and Saudi Arabia are taking their relationship to a new level. Our relationship is based on investment, which will mutually benefit both the countries," Khan said.
"We have CPEC. We have links with China. So we welcome Saudi Arabia to participate with us. It's an exciting future," the premier added.
China has already invested $19 billion in Pakistan over the past five years and it has plans to invest billions of more dollars to develop industrial zones as part of $60 billion China-Pakistan Economic Corridor (CPEC) project.
Pakistan's Finance Minister Asad Umar said the visit of Saudi Crown Prince would help open new avenues of bilateral trade and investment.
"The existing bilateral economic relations do not reflect the true potential. After the visit, a huge investment is expected from Saudi Arabia which would help further strengthen the trade ties between the two countries," he said.
Work on $10 billion refinery
Chaudhry said visit of Saudi Crown Prince with high-powered delegation of more than 30 public and private companies would exhibit to the investors and businessman around the world that Pakistan is best investment and trade destination.
"This [$20 billion] would be a historical and highest ever foreign investment in the country," he said, adding that Prime Minister Imran Khan will discuss more investment projects in phase two when both the leaders will meet again in February next in Riyadh.
About proposed $10 billion investment deal signed for refinery and petrochemicals complex in Gwadar, Information Minister said work on the refinery is expected to begin within 18 months.
According to officials, the facility will be in place in next three to five years to produce 250,000 to 300,000 barrels refined oil products currently being imported costing approximately $2 billion in foreign exchange annually.
Pakistan has awarded a tax incentive package to Abu Dhabi Petroleum Investment Company to establish a similar oil refinery in Hub (Balochistan) with a production capacity of 100,000 barrels per day.
In a statement, Pakistan's Board of Investment said total Saudi investments is expected to cross $20 billion over the next few years, however, no details were provided.
$4b RE investment
Minister for Power Omar Ayub Khan said Pakistan offers up to $60 billion investment opportunities in power sector. "It includes $38 billion worth of investment in power generation while $7 billion to $8 billion each to upgrade power transmission and distribution systems in the country," he said.
Saudi power producing company ACWA Power showed interest to invest $4 billion in Pakistan's renewable energy sector.
"We are keen to invest in Pakistan's energy sector, particularly in renewable energy as there is huge investment opportunity for production of cheap energy to fulfill the growing local demand," ACWA Power chairman Mohammad A Abunayyan said during a meeting with Finance Minister Asad Umar.
Virgin investment destination
Muzzammil Aslam, former chief executive of EFG-Hermes Pakistan, said Pakistan is due to get first substantial foreign investment outside CPEC in the last 10 years.
"Majority of the CPEC investments are driven by loans. However, Saudi Investments are pure FDIs, which is by any mean bother us in terms of liabilities moving forward," Aslam told Khaleej Times.
He said the FDIs are primarily to bridge trade deficit, as investments are largely tilted in favour of energy sector, which is the main source of deficit in the last decade.
"The press out for $20 billion MoUs will be hear to all investors class globally and Pakistan will be flagged as virgin investment destination," he said.
To a question, he said employments through Saudi investments may not be huge as most investments are capital intensive in nature. However, as these investments will bring balance in economy as more cash flows either from local or foreign source will be created.
"Approximately $5-6 billion investment deals will be for a short-term period while $2-3 billion to be invested in the medium term and another $10-12billion investment is of long-term nature. Pakistan will be back to investors' radar and follow up investments from other counties will come through," Aslam told Khaleej Times recently.
He said the memorandum of understandings will not ease the current balance of payment crisis, but it will flag Pakistan as an attractive investment destination.
"The projects will ease Pakistan's long due structural deficit. With the projects' completion, the surplus will encourage value-added industry to set up and encourage local investors to participate," Aslam said.
Analysts said UAE and Saudi investments will provide a new lifeline to Pakistan's struggling economy, which was recently downgraded to B- from B by S&P Global Ratings Agency. They said timely help from Gulf nations and China will help boost foreign investment that dropped by 19.2 per cent to $1.4 billion in the first half of the financial year 2018-19 as compared to $1.7 billion in the same period of 2017-18.
By Muzaffar Rizvi
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