By Saeed Shah
ISLAMABAD (Reuters) -A Saudi business delegation is due in Pakistan this week to kick off what Islamabad hopes is a program of investment following a mutual defence agreement, though major investments may be dependent on reforms, officials and experts said.
Pakistani sources anticipate initial investment plans of about $1 billion, possibly through the creation of a new fund, as a path to a deeper economic relationship mirroring military ties.
Under last month’s defence deal Pakistani forces are expected to be stationed in Saudi Arabia, with Riyadh indicating it will also come under the protection of Islamabad’s nuclear weapons. Gulf Arab states say Israel is a direct threat, after its unprecedented strikes on Qatar in September.
INVESTMENT PAYOFF FOR PAKISTAN?
Less clear is what Pakistan gets out of it, though analysts widely expect a financial payoff.
The Saudi businessmen will be led by Prince Mansour bin Mohammad al-Saud, former governor of Hafar Al-Batin Province. The delegation is modest in ambition, with a much bigger Saudi interest sought by Pakistan in the months ahead.
Pakistan’s commerce ministry and the Saudi government media office did not respond to requests for comment. Prince Mansour could not be reached for comment.
The sectors that the Saudi businessmen will focus on are technology, sports equipment, and food and agriculture, according to a source involved in the process. They are expected to meet Pakistan’s Prime Minister Shehbaz Sharif.
The Pakistani government is seeking large investments in state-owned enterprises and the development of a petrochemicals plant, according to officials.
Saudi Arabia has also shown interest in mining in the past, including in buying part of the Pakistani government stake in the multibillion-dollar Reko Diq copper mine being developed in western Pakistan.
DEFENCE SECTOR, RIVALRY WITH INDIA
Umer Karim, a researcher at the UK’s University of Birmingham, said that Saudi Arabia wanted to put substantial money into Pakistan, but after seeing economic reforms. Defence production was a likely investment target, he said.
“The message from the Saudis is: ‘first clean up your house, develop feasibilities’,” said Karim. “Don’t just ask us for money.”
Past Saudi pledges of large investment in Pakistan in recent years have not delivered.
Among issues often raised by foreign investors is the difficulty of repatriating profits due to currency controls.
A Pakistani official said that the Saudi visit was focused on the private sector and that Pakistan recognised that institutional reforms were needed.
Any Saudi injection of funds into Pakistan will be watched closely in Islamabad’s giant neighbouring adversary, India.
Pakistan’s defence budget is around a seventh of India’s annual outlay, and its perennially struggling economy is also a military weakness, putting constraints on the military budget, personnel numbers, and the purchase of equipment.
New Delhi said last month that it expects Riyadh “will keep in mind mutual interests and sensitivities”.
(Reporting by Saeed Shah; additional reporting by Maha El Dahan, Federico Maccioni and Asif Shahzad; writing by Saeed Shah; Editing by Aidan Lewis)
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