- Saudi Arabia and Pakistan’s Multi-Faceted Relationship
- Saudi Arabia has been providing extensive financial aid to Pakistan
Interview with Dr. Ayub Mehar — an eminent economist
PAGE: Tell me something about yourself, please:
Dr Ayub Mehar: Currently, I am serving as a professor at Iqra University Karachi and also associated as an economic Advisor’ with the Employers’ Federation of Pakistan. I have been serving as ‘Economic Advisor’ of the Economic Cooperation Organisation (ECO) Chamber of Commerce for 3 years and also ‘Director General’ in the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) for 7 years.
I have completed and worked on various research assignments for Asian Development Bank Institute Tokyo, including ‘Covid-19, digital transactions, and economic activities: The puzzling nexus of wealth enhancement, trade, and financial technology’, jointly published by the University of Cambridge (Judge Business School) and Asian Development Bank, ‘Measuring impacts and financing infrastructure development’, ‘Economic integration among CAREC member countries’, and ‘Environmental, social, and governance investment: Opportunities and risks for Asia’. Development Financing, Macroeconomic Policies, International Trade, and Finance are areas of my interest.
I have completed several policy research studies on strategic issues including, ‘Bridge financing and fiscal policies during Covid-19 pandemic crisis’, ‘Ineffectiveness of ESG policies and incentives: Impact of GSP plus on central and South Asian countries’, ‘Infrastructure development and public private partnership: Measuring impacts of fiscal policy in Pakistan’, ‘Economic integration in CAREC member countries: Financing economic corridors and sovereign bonds market’, ‘Infrastructure development by liberalising economic policies: The straight path of economic prosperity’, ‘Financial cooperation in South Asia: Recent development and challenges’, and ‘FDI, infrastructure development and CPEC: Is there a connection?’ for various national and international institutions including World Bank, Asian Development Bank Institute, Friedrich Naumann Stiftung (Fur Die Freiheit), SAARC Chamber of Commerce and Industry, and ECO Chamber of Commerce and Industry.
The Technology Policy and Assessment Centre at Georgia Institute of Technology acknowledged my membership in the distinguished panel of international experts for Indicators of Technology-based Competitiveness, which is a project of the US National Science Foundation, United States Government.
I am also an alumnus of the IAL Gummerbach Germany, where I got training in Public Finance. Recently, I completed a study on ‘Nexus of debt financing, investment, and policy intervention’ for International Business in Times of Crisis (16th volume in the PIBR series) in tribute to Prof. Geoffrey Jones, the Harvard Business School.
PAGE: How would you comment on the bilateral relationship between Pakistan and Saudi Arabia?
Dr Ayub Mehar: Since 1947, Pakistan has been considered the closest non-Arab Muslim ally of Saudi Arabia. Both countries have developed deep economic, religious, political, and strategic relations. Now, Saudi Arabia is the largest source of petroleum for Pakistan. More than two million Pakistani workers in Saudi Arabia form the second-largest migrant community in the Kingdom of Saudi Arabia. These workers remit around $6 billion to Pakistan. Their remittances provide a major source of foreign exchange for Pakistan.
Other than their bilateral relations, Saudi Arabia and Pakistan are leading members of the Organisation of Islamic Cooperation (OIC). By their leading role in OIC, these countries are participatory in the Islamic Development Bank, Islamic Chamber of Commerce, Industry and Agriculture, and several other subsidiaries of these organisations. Moreover, Saudi Arabia is planning for the development of trade relations with Pakistan through the Gulf Cooperation Council.
Despite several criticisms of recent Indo-Saudi relations, it is important that these relations cannot be interpreted as anti-Pakistan tendencies. The nature of these relations is economic and the economic relations in today’s contemporary world are not based on religious or political ideologies.
One should not ignore that Saudi Arabia was one of the strongest supporters of Pakistan during Pakistan’s wars with India in 1971. Saudi Arabia was the only country that was taken in confident in Pakistan’s decision to perform the atomic test in Chagai in May 1998. Saudi Arabia and the United Arab Emirates were the only countries who congratulated Pakistan. At that time, Saudi Arabia promised to supply 50,000 barrels per day of free oil to help Pakistan face the hardship of economic sanctions in the aftermath of those atomic tests.
PAGE: What is your standpoint on the Saudi investment in energy, IT, banking, and mining sectors in Pakistan?
Dr Ayub Mehar: The Saudi Crown Prince and the Prime Minister of Saudi Arabia, Mohammad bin Salman Al Saud, visited Pakistan in February 2019, when he was going to China. During his visit, an agreement to establish a $10 billion oil refinery and petrochemicals complex in Gwadar was signed.
Now in 2023, Saudi Arabia and Pakistan signed a memorandum to build this oil refinery. It will be one of the biggest oil refineries in Pakistan. Recently, both countries have exchanged high-level delegations and developed plans to expand bilateral cooperation in trade, education, real estate, tourism, information technology, communications, and agriculture.
The rich mineral resources, young educated population, strategic location, and well-experienced financial sector in Pakistan provide an attractive destination to investors. There is no doubt that because of ill planning, corruption, the law and order situation, and the incapability of ruling elites, the country has been facing severe deterioration in the economy. However, the existence of fundamental resources that are required for fast growth and development can attract investors subject to improvement in political scenarios. A restructuring in economic governance is also required.
Certainly, investment in Pakistan can provide an opportunity to Saudi investors for long-term attractive returns which will also be beneficial for the infrastructure development of Pakistan.
PAGE: Food security has become a perennial stumbling block for the entire world. How could Pakistan benefit from Saudi investment in the agriculture sector?
Dr Ayub Mehar: There is no doubt that food security is one of the top five global issues identified by the World Economic Forum. The drastic effects of insufficient food supply are now transformed into food inflation. The food inflation has become a worldwide phenomenon. I am very clear about this that significant improvement in agriculture productivity and yield is required for food security. This improvement requires advancement in agricultural technology and financing for agricultural infrastructure. The small farmhouses or farmers cannot achieve the targets. Now, corporate farming is required.
It is very important that corporate farming is a neglected area in Pakistan. Perhaps, the socio-cultural factors in South Asian countries do not allow corporate farming. This becomes more problematic when a Western-origin multinational corporation is involved in corporate farming, dairy farming, and food processing.
Nestle Pakistan is the only corporation which is succeeded in Pakistan after participating in and promoting Pakistani culture. The other multinational companies in the food sector attempt to build their image as Pakistani companies, and actively participate in cultural activities. This will not be a hurdle in the case of Saudi companies. The people in Pakistan will warmly welcome Saudi-origin companies in the food industry and agricultural farming.
PAGE: What is your take on Saudi deposits in SBP to shore up foreign exchange reserves?
Dr Ayub Mehar: Saudi Arabia has been providing extensive financial aid to Pakistan. This year, Saudi financial cooperation includes $3 billion in loans, of which $1.5 billion was deposited in the State Bank of Pakistan to maintain the IMF conditionalities. Of course, Saudi Arabian monetary assistance helped Pakistan to escape from default. But ultimately Pakistan has to arrange sustainable financing.
There is no such thing as a “Love affair” between the countries. It is a matter of economic participation. If economic participation improves competitiveness, it will be a win-win situation that will bring the countries closer to each other. We should adopt a rational attitude. It is not important which country has invested in Pakistan or helping to Pakistan.
The most important economic principle is that economic relations are not established between governments. The private sector always invents and establish these relations through mutual trade activities, cross-the-border investment, joint ventures, merger, and acquisition of companies. The role of government, public sector organisations, and governmental agencies is to facilitate those relations. If such relations ensure sustainable economic prosperity and development the public sector organisations must support and facilitate those contacts and actions.