The global economic landscape is undergoing a profound transformation and the Middle East – long defined by oil rents and labour imports – is now emerging as a dynamic hub of diversification, investment, and innovation.
Saudi Arabia’s Vision 2030, the UAE’s technology-led expansion and Qatar’s logistics and green transition strategies together signal a clear pivot: this region no longer trades in oil alone; it trades in opportunity.
For Pakistan, this transformation is a lifeline. The Middle East has always been central to Pakistan’s economic story, accounting for over 60 per cent of its remittances and nearly one-fifth of total trade. But for decades, the relationship has remained transactional – limited to labour exports and energy imports. As the Gulf economies diversify away from oil and toward knowledge, technology and sustainability, Pakistan faces a critical question: will it adapt fast enough to join this transformation, or will it remain a bystander?
The good news is that Pakistan holds strategic and economic advantages that few countries in the region can match. It has one of the world’s largest labour forces, vast agricultural potential, proximity to the Gulf and strong cultural and religious ties with Saudi Arabia and other GCC nations. Yet, despite this, Pakistan’s trade with the Gulf remains underdeveloped and its investments in human capital and knowledge exchange remain far below potential.
In this shifting landscape, a new era of partnership appears to be emerging. On September 17, 2025, Pakistan and Saudi Arabia signed a Strategic Mutual Defence Agreement (SMDA) – a historic accord committing both nations to treat any act of aggression against one as an attack on both. While this agreement primarily focuses on defence, it also lays the foundation for a deeper, multidimensional partnership. It symbolises trust and interdependence, creating the political and institutional space to expand cooperation into trade, technology, agriculture and human development.
If both countries use the SMDA as a platform to align economic and strategic priorities, Pakistan can transform its role from a peripheral partner into a central player in the emerging Middle Eastern growth story.
The Middle East is opening new windows of opportunity for regional cooperation and Pakistan must learn to navigate through them. The shift from aid to partnership, from remittances to revenue and from labour exports to knowledge exports must now form the core of Islamabad’s economic diplomacy.
Three sectors can anchor this transformation. First, agriculture and food security. The Middle East imports nearly 85 per cent of its food, with Saudi Arabia and the UAE together spending over $60 billion annually on food imports. Pakistan, with its fertile plains, water resources and proximity advantage, is uniquely positioned to become a regional food supplier. This requires moving beyond raw commodity exports to high-value agro-processing. A ‘Pakistan–Saudi Agro Corridor’ could be developed – jointly financed through Gulf sovereign funds and Pakistani agribusiness groups – to build cold chains, logistics hubs and modern storage facilities.
Exporting fresh produce, halal meat and processed foods could bring in billions annually, while creating rural jobs and enhancing agricultural resilience. With the right investment in infrastructure and certification systems, Pakistan could supply up to 10 per cent of the Gulf’s food import needs within five years.
Second, human capital exports. Over four million Pakistanis work in the Gulf, contributing more than $25 billion in remittances annually. Yet, these workers are overwhelmingly low-skilled. As Saudi Arabia’s Vision 2030 redefines its economy around technology, energy diversification and high-end services, the demand for engineers, health professionals, data analysts and technicians is growing rapidly.
Pakistan needs to evolve from exporting labour to exporting skills. This calls for a new generation of Skill Mobility Partnerships with the Gulf states, co-designed with the private sector. Technical and vocational education programs should be aligned with the Gulf labour markets, focusing on renewable energy, logistics, construction technology and healthcare services. By exporting skilled human capital instead of low-wage labour, Pakistan can both increase remittances and enhance its global competitiveness.
Third, knowledge and digital exports. The new Middle East is building futuristic digital cities – NEOM in Saudi Arabia, Masdar in the UAE and Oxagon on the Red Sea. These projects are not just about construction – they are about creating knowledge ecosystems. Pakistan’s IT and tech sectors have grown rapidly, with annual exports now exceeding $3 billion. Yet, this remains a fraction of the potential.
Through a ‘Pakistan–Gulf Innovation Bridge’, Pakistan can position its tech entrepreneurs, universities and start-ups to collaborate with Middle Eastern innovation hubs. This bridge could facilitate joint research centres, venture capital funds and technology transfer programmes. Gulf investors, flush with liquidity, are actively looking for scalable technology ventures; Pakistan’s young, English-speaking workforce could be their most cost-effective and innovative partner.
But for this partnership to succeed, Pakistan must undertake institutional reforms at home. First, trade diplomacy needs a reset. The country’s embassies in Riyadh, Dubai and Doha should function as business facilitation centres rather than ceremonial offices. Pakistan should establish a Pakistan–Middle East Economic Council (PMEC), tasked with identifying investment opportunities, streamlining procedures and coordinating private sector partnerships.
Second, the government should revive domestic investment in export-enabling infrastructure. Pakistan’s high energy tariffs, inconsistent tax policies and bureaucratic hurdles have made local industries uncompetitive. The cost of doing business must come down before any meaningful integration with Gulf value chains can occur.
Third, Pakistan should accelerate the development of Special Economic Zones (SEZs) and Village Economic Zones (VEZs) linked to regional trade corridors. These can act as localised export hubs for agriculture, textiles and light manufacturing. Gulf investors could be offered land and tax incentives in these zones, allowing production for re-export to Middle Eastern markets.
Saudi Arabia remains central to this new regional growth dynamic. With over $3 trillion in investment projects under Vision 2030, Riyadh is actively seeking partners for food security, green energy, mining and digital innovation. The Strategic Mutual Defence Agreement provides the trust and framework to now translate this security alliance into a Strategic Economic Partnership (SEP) – anchored in mutual growth, energy cooperation and shared prosperity.
To make this partnership sustainable, Pakistan must offer predictability. Investors need policy continuity, not constant course correction. This means insulating economic diplomacy from political cycles and ensuring that agreements signed today are honoured tomorrow.
Beyond trade and investment, the region’s stability itself depends on greater economic interdependence. The Middle East’s transformation will not be complete without South Asia’s participation, and Pakistan is the natural bridge. With 250 million people, a young workforce and access to the Arabian Sea, Pakistan can become the Middle East’s gateway to Central and South Asia.
As regional alliances evolve, the coming decade could well define Pakistan’s economic future. The Middle East is no longer merely a source of remittances – it is an engine of regional reinvention. If Pakistan continues to think small, it will remain a subcontractor in a changing world order. But if it thinks strategically, it can become a co-architect of regional growth.
The time has come to stop viewing the Middle East through the narrow lens of labour export or financial assistance. It is time to see it as a partner in building shared prosperity. Pakistan’s exports of agriculture, knowledge and human capital are pathways to resilience and renewal.
In a rapidly changing world, nations that trade ideas, not just goods, will define the next century. For Pakistan, that century starts with the Middle East.
The writer is associate professor at the Pakistan Institute of Development Economics (PIDE). He can be reached at: dr.iqbalngmail.com