The economic ties between Pakistan and Saudi Arabia have a longstanding history, and the strategic importance of these two countries in the Middle East and South Asia regions cannot be understated.
Pakistan and Saudi Arabia have been engaged in diverse trade and investment activities, establishing a strong groundwork for mutually beneficial business prospects. Both countries share a bond based on cultural, religious, and geopolitical factors. The relationship deepened when Pakistan provided military assistance to Saudi Arabia during the Gulf War.
Further, Saudi Arabia has been a significant source of remittances and financial aid for Pakistan, solidifying their economic partnership over the years.
Trade forms the cornerstone of business relations between Pakistan and Saudi Arabia. Both countries have actively promoted trade through various initiatives, including the establishment of joint chambers of commerce and the organisation of trade fairs and exhibitions.
Further strengthening bilateral trade ties and expanding investment opportunities holds the key to growth. With a combined population of over 320 million, the two countries offer vast consumer markets for various industries. Saudi Arabia primarily imports textiles, agro-based products, minerals, and chemicals, providing significant export potential for Pakistan’s manufacturing sector.
Additionally, bilateral investment opportunities exist in sectors such as energy, real estate, agriculture, and infrastructure development.
Major exports from Pakistan to Saudi Arabia included textiles, rice, fruits, vegetables, and various other commodities, while Saudi Arabia primarily exports petroleum products, fertilisers, chemicals, and machinery to Pakistan.
The energy sector has been instrumental in fostering economic ties. Saudi Arabia is one of the largest oil suppliers to Pakistan, and the two countries have entered into several significant energy-related agreements.
For instance, Saudi Arabia has shown interest in investing in the construction of an oil refinery in Pakistan, which would not only enhance Pakistan’s refining capacity, but also create job opportunities and contribute to the country’s economic growth.
Additionally, Saudi Arabia has granted Pakistan financial support and oil supply on deferred payments, which has provided crucial relief to Pakistan’s economic challenges.
Moreover, Saudi Arabia has made substantial investments in Pakistan’s infrastructure development. One significant example is the China-Pakistan Economic Corridor (CPEC), a flagship project under China’s Belt and Road Initiative (BRI). Saudi Arabia has expressed its intention to invest in CPEC projects, particularly in the energy and petrochemical sectors.
These investments have the potential to significantly transform Pakistan’s infrastructure landscape, boost industrial growth, and create employment opportunities.
Beyond the traditional sectors of trade and energy, there is immense potential for diversifying and deepening the business collaboration between the two nations. Tourism is one such sector that offers promising prospects. Saudi Arabia’s recent initiatives under Vision 2030 plan to develop its tourism sector, including the opening of tourist visas, can pave the way for increased tourist inflow from Pakistan, as the country is home to diverse tourist attractions, including historical sites, scenic landscapes, and cultural heritage and if the two countries collaborate, they can establish joint ventures for hotel chains, travel agencies, and promotion of religious tourism. Direct air connectivity between the major cities of Pakistan and Saudi Arabia can also facilitate the growth of tourist traffic.
Further, both countries can explore opportunities in the fields of agriculture, information technology, healthcare, and education. Pakistan’s agricultural sector, renowned for its diverse range of products, can benefit from Saudi Arabia’s expertise in modern farming techniques, while Saudi Arabia can tap into Pakistan’s software development and IT services.
Collaboration in education and healthcare can encompass student exchange programmes, joint research projects, and the establishment of educational institutions.
With both countries sharing a commitment to Islamic principles, the prospect of expanding Islamic banking and finance is highly favourable. Pakistan’s well-developed Islamic finance industry can collaborate with Saudi Arabia’s expertise in Shariah-compliant finance to strengthen bilateral financial ties.
Joint investments in Islamic financial institutions, infrastructure development, and Sukuk (Islamic bond) issuances can boost economic activity and attract foreign investments from other Muslim countries.
Challenges and the Way Forward
Despite the immense prospects, there are constraints that need to be addressed for stronger economic ties. These include bureaucratic hurdles, regulatory frameworks, and the need to encourage more direct investments. Efforts should be made to foster a business-friendly environment, simplify visa processes, and enhance mutual understanding through cultural exchange programmes.
Pakistan and Saudi Arabia possess immense potential to strengthen their economic ties and create a win-win situation. From trade and investment to energy cooperation, Islamic finance, and tourism collaboration, both countries can significantly benefit from a deeper engagement. By addressing the challenges and leveraging their respective strengths, both can lay a solid foundation for prosperous and enduring business partnerships.
Despite positive momentum, there is still untapped potential for expanding trade between Saudi Arabia and Pakistan and with concerted efforts, such as removing trade barriers, facilitating business visas, and increasing direct investments, the trade volume can witness substantial growth.
Further, the strategic location of Pakistan as a gateway to the South Asian region provides an additional advantage to Saudi Arabia. Enhanced trade and economic ties with Pakistan could potentially create opportunities for Saudi Arabia to access regional markets.
Over the years, the trade relations between the two countries have witnessed substantial growth and have become a cornerstone of their economic policies. In 2020, the total bilateral trade volume reached approximately $2.14 billion, demonstrating a steady increase from the previous years. This reflects the mutual commitment and trust between the two nations to expand their economic collaboration.
With bilateral agreements, diversified trade portfolios, and continued collaboration, there is significant potential for further expansion and mutual economic benefit.
In addition to trade in goods, there has been an increase in collaboration in the field of services. Pakistani professionals, particularly in the healthcare, engineering, and Information Technology sectors, have found lucrative opportunities in the Kingdom. This migration of skilled labour has not only contributed to the growth of the Saudi economy but has also helped in remittance inflows to Pakistan.
Further, Pakistan and Saudi Arabia have signed several agreements and memoranda of Understandings (MoUs) to promote trade and investment. The establishment of the Saudi-Pak Joint Ministerial Commission on Trade and Investment signifies mutual efforts to enhance bilateral economic ties. By leveraging each other’s strengths and exploring untapped sectors, both countries can foster even more fruitful trade relations in the future.
