“Twenty hours, $20 billion, and the next 20 months”. While praising the productivity of time spent by the Crown Prince of Kingdom of Saudi Arabia (KSA) who signed off MOUs worth $20 billion between the kingdom and Pakistan during his twenty-hour stay in Islamabad, many are asking how many of these MOUs would be converted to fully functional agreements within the next twenty months.
Many say (and I mostly tend to agree with them) that MOUs between heads of governments are mere photo opportunities. However, this time I am optimistic. My optimism is because – unlike our earlier economic engagements with the KSA, which were transactional in nature –this time we are talking of long-term engagement. Another difference is that this time relations between the two countries are not only confined to the ruling families from both sides, but are being institutionalised. Key Saudi ministers in the crown prince’s delegation immediately engaged with their Pakistani counterparts to start following up on what was agreed upon by their respective leadership. State-level engagements will be further institutionalised through a high-powered Supreme Coordination Council.
Having said that, one must also keep in mind that the current Saudi MOUs will not turn around Pakistan’s economy overnight. The output of these MOUs would depend upon effective follow up and how best they resonate with the Saudi growth plan – Saudi Vision 2030. The crux of Vision 2030 is to diversify KSA’s economic dependency from petrodollars and focus on the manufacturing and services sector as alternative sources of revenue. Renewable energy, health, education, tourism, agriculture, and hospitality industry etc are some of the sectors identified in Vision 2030.
Thus, it does not surprise me that an MOU for investment of $4 billion in a “concentrated solar plan” (renewable energy) by ACWA Power is considered among the low-hanging fruits. This project should be on ground within the next two years. KSA is also interested in buying two RLNG plants. These plants would be privatised after fulfilling all procedural formalities and the Saudi companies may invest here if they give a competitive bid. Private sector engagements, initiated by the Board of Investment – especially in agro-based industries – are other possible low-hanging fruits.
In the medium term, Pakistan needs to think of devising a plan to remain relevant with Saudi Arabia’s new growth strategy. How to prepare our blue-collar emigrants to take up white-collared jobs in the kingdom is an important question if we want an uninterrupted flow of remittances from KSA. Matching the HR requirement for the non-traditional job market in KSA is a big opportunity as well as a challenge. We would have to rethink and redesign our vocational trainings and professional certifications to grab these opportunities.
The flagship investment from Saudi Arabia would be in the petrochemical sector, a state-of-the-art oil refinery in Gwadar. However, it is a long-term plan. Just the feasibility of setting up a refinery takes 18 to 24 months, and then comes the installation and operationalisation of that refinery. However, the Saudis are serious about this project. The Saudi energy minister has already visited Gwadar, weeks before the crown prince’s visit, and the terms of reference for feasibility work are being prepared.
Apart from the above-mentioned outcomes of the Saudi-Pak MOUs, there are two more areas where Pakistan can benefit from its Saudi friends. First is Saudi presence on the IMF’s Board of Directors. In our negotiation for the forthcoming IMF package, we need the board members to support our “home-grown solution” – ie, economic adjustments at our own pace. This is where Saudi Arabia and China (another board member) may be lobbied to strongly support Pakistan’s case.
The second and the most crucial area where Saudi Arabia can help us is deradicalisation of society. Saudi Arabia, under the leadership of the crown prince, is opening up and promoting moderate Islam. We should utilise the influence of Saudi scholars to deradicalise some of our religious hardliners.
Pakistan’s renewed friendship with KSA should not be considered as something happening at the expense of our relations with China. To me, Saudi investment is a sequel of CPEC. We met our infrastructure and energy requirements through CPEC phase one. The Gwadar Port, where the petrochemical complex is proposed to be built, is a direct outcome of CPEC and the two would complement each other.
I hope that Pakistan’s potential as a stabiliser and growth hub for the region would be a common point of discussion between the crown prince and the Chinese leadership when both of them meet later this week.
PM Khan’s economic strategy is unfolding: arranging balance of payments; efforts to improve ease and cost of doing business; and bringing in long-term investment through institutional engagement with our friends is the way to go. The economic team and economic ministries have put an impressive show as for as far as the visit of the Saudi crown prince and Saudi investors is concerned.
The government is also planning to attract investment from Qatar and Turkey, two states that have political differences with KSA. We also resolve to maintain friendly relations with Iran that has huge political differences with KSA.
It is up to us how well we can play our cards. The best-case scenario is where we can be a stabiliser in the region, and the worst-case scenario is where we, God forbid, mishandle and witness another proxy war on our soil. The worst-case scenario is certainly not an option. Let us spend our energies for the best-case scenario.
The writer heads the SustainableDevelopment Policy Institute.