- Saudi Arabia’s $5 billion commitments and SAPICO’s role highlight long-term investment in Pakistan
- Cybersecurity, mobile banking and digital currency adoption demand vigilance while expanding bilateral trade technology
Interview with Dr Ayub Mehar, an eminent economist
PAGE: Tell me something about yourself, please:
Dr Ayub Mehar: I have served as a member/resource person in various committees and working groups formed by the Government of Pakistan, including working groups on Capital Market Reforms (Medium-term Development Framework – Five Years Development Plan 2005-10), CPEC Committee (Ministry of Production and Industries), and Private Sector Credit Allocation Committee (State Bank of Pakistan). I served as a resource person and instructor in advanced-level training programs conducted by the National Institute of Public Administration (NIPA), the State Bank of Pakistan (NIBAF), and the National Bank of Pakistan. I served as Director General in the Federation of Pakistan Chambers of Commerce and Industry for 7 years, where I was designated as ‘Economic Advisor’ in the Economic Cooperation Organisation (ECO-CCI) in 2014 and the SAARC Chamber of Commerce and Industry in 2009. I served also as a research associate in the Department of Economics, University of Massachusetts Amherst in 2006, a panelist/ judge for graduate research awards in finance at Frankfurt University/ Deutsche Bank in 2014-16, FPCCI Nominee and spokesperson in WTO Mission for Trade Policy Review, WTO Resource Center, Commonwealth Investment & Enterprises Association London, GIZ Commission on Non-Tariff Measures in South Asia, UNDP (SS-GATE System) Shanghai, United Nations Industrial Development Organization program for young entrepreneurs and innovators, D8-CCI statute formation committee, Competitiveness Support Fund (World Economic Forum), and Business Support Fund (USAID). The Technology Policy and Assessment Center 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 United States Government. Last year, I contributed 17 chapters on banking and finance in the “Encyclopedia of Monetary Policy, Financial Markets, and Banking” (Major reference works published by Elsevier Oxford), and 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. I have completed various research assignments for the Asian Development Bank Institute, Tokyo, in 2018-25, including
‘Role of monetary policy and prudential regulations’, and ‘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.
PAGE: Your perspective on Saudi Arabia’s investment in the banking sector of Pakistan?
Dr Ayub Mehar: In this question, first of all, it should be clarified what is meant by the banking sector. If it means commercial banking, which is a limited version of banking, then the size of Saudi investment in Pakistan’s commercial banking is negligible. But I think you are considering the broad definition of banking, which also covers merchant banking, investment banking, and several other financial institutions. In this term, the role of Saudi Arabia is significant. The most important institution concerned with the Saudi investment in Pakistan is the Saudi Pak Industrial and Agricultural Investment Company (SAPICO). This company represents a long-standing, majority Saudi-owned financial institution operating in Pakistan. It is a development financial institution, jointly sponsored by Saudi Arabia and Pakistan. The company (SAPICO) has over 40 years of history of investment in industrial and agricultural projects in Pakistan. The company was incorporated in 1981 under a joint venture agreement between Saudi Arabia and Pakistan. The company provides a full range of financial products and services, including project financing, working capital loans, term finance certificates, and leasing facilities.
PAGE: How has the banking sector of Pakistan benefited from Saudi investors?
Dr Ayub Mehar: Pakistan can get the benefits of Saudi investment in both terms: equity and deposits. When Saudi investors initiate or enhance their businesses in Pakistan, they need banking services. Their deposits for business transactions can boost the banking sector. Similarly, Saudi investors can launch their commercial banks or establish branches of Saudi banks in Pakistan. Right now, there is no significant role of Saudi Arabia in commercial banking in Pakistan, except for the experience of Saudi investment in Silkbank in the past. In September 2001, the Saudi Pak Industrial and Agricultural Investment Company acquired Prudential Commercial Bank, which was originally formed in 1994, and renamed it as Saudi Pak Commercial Bank. However, in March 2008, a consortium comprising International Finance Corporation, Bank of Muscat, Nomura, and Sinthos Capital acquired a majority stake in Saudi Pak Bank, and consequently, the bank changed its name to Silk Bank Limited (The smallest bank of Pakistan). Now the process of Silkbank’s merger with United Bank Limited (UBL) through a share-swap agreement has been finalized after approval of the State Bank of Pakistan.
PAGE: How effective is the banking sector of Pakistan and Saudi Arabia for the promotion of mutual trade?
Dr Ayub Mehar: Saudi Arabia has significantly increased its investment in Pakistan, particularly in the trade and banking sectors, with a total investment commitment of approximately 5 billion USD, which includes a 2.8 billion USD commitment in 34 memoranda of understanding in 2024. This investment includes a 15 million USD financing agreement between Saudi EXIM Bank and Bank Alfalah to boost non-oil exports and foster trade relations. Saudi Arabia has also announced it will invest 540 million USD in the Riko Diq mining project. The mine, which is still undeveloped, is one of the largest gold and copper mines in the world. Moreover, Saudi Arabia’s Aramco has been in discussions with Pakistani authorities to invest 10 billion USD to develop an oil refinery in Balochistan. Furthermore, Saudi firms are also looking to invest in energy and solar projects in Pakistan. It is important to note that the expansion of Saudi funding into Pakistan’s energy and mineral sectors is partially linked to Riyadh’s commitment to diversify its global investment base as part of the country’s Vision 2030. As part of this strategy, Saudi Arabia is shifting away from only providing loans, grants, and subsidies to countries like Pakistan to focus on investments that can contribute to its own economy.
PAGE: What is your standpoint on the use of technology for trade?
Dr Ayub Mehar: There is no second opinion that the use of contemporary technology plays a pivotal role in the growth of trade and business activities. Information and communication technology (ICT) has completely changed the process of supply chain and marketing techniques in the present world. COVID-19 in 2020 has accelerated the use of information technology in trade activities. We can observe the use and impact of information technology in business activities in our daily lives. The use of the internet, mobile banking, digital currency, and high-tech financial technology are common ways of adopting contemporary technology. The financial technology, which is a broad term that covers every aspect of the use of information technology in financial dealings, including monetary transactions, banking, and stock market operations, is an inseparable component of today’s banking and finance. However, it requires more prudence, vigilance, and security. Cybersecurity and new regulatory mechanisms are required to take full advantage of the technology, along with security.