Pakistan's Push for Foreign Investment: A Strategy to Revive Its Economy

Pakistan Prime Minister Shehbaz Sharif has been on a busy tour of foreign countries in the past three months. He is trying to convince friendly nations to help his cash-strapped nation. Sharif is focusing on Saudi Arabia, the United Arab Emirates, and China. He hopes these countries will invest in Pakistan.

Sharif believes that large-scale investment can revive Pakistan's economy. Since coming to power in April last year, he formed the Special Investment Facilitation Council (SIFC). This council includes leading Pakistani businessmen and military officials. They aim to boost investment in the country.

Sharif has signed agreements with Saudi Arabia, the UAE, and China. These agreements promise significant investment in Pakistan. However, economic experts say that political stability and security are crucial for attracting foreign direct investment (FDI). The government must also show commitment to structural reforms.

Sharif has visited Saudi Arabia twice since becoming prime minister. His trips were followed by visits from Pakistan’s defence and foreign ministers. Last month, Saudi Arabia sent a 50-member business delegation to Pakistan. During his meeting with Saudi Crown Prince Mohammed bin Salman, Sharif sought a $5bn investment commitment.

Sharif’s predecessor had claimed that Saudi Arabia agreed to invest $25bn in various sectors in Pakistan. However, there was no evidence to back this statement. Sharif has scaled down this figure to a more realistic $5bn. Pakistan has identified six sectors for potential Saudi investment: oil refining, agriculture, mining, power, technology, and aviation.

A Pakistani government official said they are looking at possible investments from Saudi Arabia’s Public Investment Fund (PIF). The $5bn investment from Saudi Arabia is under discussion, and further clarity will emerge as talks progress.

After securing assurances from Saudi Arabia, Sharif travelled to the UAE in late May for a one-day visit. The UAE has been a long-standing partner of Pakistan. During his visit, Sharif met UAE President Sheikh Mohamed bin Zayed Al Nahyan. The Pakistani prime minister’s office claimed that the UAE had pledged to invest $10bn in Pakistan.

The UAE’s Ministry of Investment retweeted the statement but provided no further details. It is not clear which sectors the UAE plans to invest in or over what period of time the investment will be made.

Sharif’s visit to China lasted five days and included meetings with Chinese President Xi Jinping and Premier Li Keqiang. This trip was more significant than his trips to Saudi Arabia and the UAE. Pakistan and China are working on the $62bn China-Pakistan Economic Corridor (CPEC), but the project has faced repeated attacks.

Pakistan owes about $30bn of its total foreign debt of more than $130bn to China. The Economist warned that Pakistan will fail to achieve its 3.6 percent growth rate target unless Sharif can attract investment. Sharif has repeatedly assured China of security for their investments.

The SIFC was set up in June last year to attract foreign investment. According to State Bank of Pakistan figures, Pakistan attracted $1.45bn in foreign direct investment between July and April this year. This is an 8.1 percent increase compared with the same period last year.

Experts say that Pakistan’s history of political instability and structural issues are reasons why projects fail. Umer Karim from the King Faisal Center for Research and Islamic Studies said that Pakistan lacks infrastructure, environment, and skilled labour, making it less attractive for investment.

Economic expert Uzair Younus agrees that internal political turmoil makes it risky for anyone to invest in Pakistan. He said that unless Pakistan undertakes sweeping reforms and presents a credible road map to investors, it is unlikely that Sharif will succeed in attracting foreign investment.

Experts say political turmoil created by a disputed election, an increase in terror attacks, targeted killings of officials, strained relations with India, and risks on its border with Afghanistan provide little comfort to potential investors.

Khawaja from Faysal Asset Management Limited is optimistic about investments from China, Saudi Arabia, and the UAE. However, economist Khurram Hussain said these countries view Pakistan as high-risk and need cash themselves. Even if they agree to invest, it could take years for the money to come in.