ISLAMABAD, Pakistan (AP) — In a series of trips over the past three months, Pakistani Prime Minister Shehbaz Sharif has tried to convince the country’s three closest allies — China, Saudi Arabia and the debt-ridden United Arab Emirates — to invest in the country. Its economy, in a precarious situation, is about to have green shoots.
In June last year, during Sharif’s first term as prime minister, the government formed a Special Investment Facilitation Council (SIFC), a tough framework made up of Pakistani civilian and military leaders, to promote investments in Pakistan.
Following visits to Beijing, Riyadh and Abu Dhabi, Sharif’s government is talking about a series of memorandums of understanding signed on those trips as signals of possible investments in Pakistan.
However, analysts warn that attempts to attract foreign direct investment (FDI) will succeed if Pakistan can promise a strong political landscape and introduce structural reforms to its economy.
So what has Pakistan gained from Sharif’s travels, and what can it do to attract investment as it prepares to negotiate with the International Monetary Fund (IMF) to participate in its twenty-fourth lending program since 1958?
After traveling for the second time in March, Sharif made two visits to Saudi Arabia in April. These tours were followed by a series of visits to Pakistan through senior Saudi officials, including defense and foreign ministers. In early May, a 50-member Saudi business delegation also visited the country to participate in an investment conference.
During his two meetings with Saudi Crown Prince Mohammed bin Salman in April, Sharif discussed opportunities for economic cooperation between the two countries and explored the option of a $5 billion investment program.
“We have known spaces for cooperation, whether between governments or between companies, and this has been known in a transparent way. Now we have a transparent path forward,” Sharif told Al Arabiya TV News in May.
Last year, interim Prime Minister Anwaar-ul-Haq Kakar also claimed that Saudi Arabia had agreed to invest $25 billion in Pakistan’s sectors, without giving any details.
Ali Farid Khwaja, investor and chairman of KTrade Securities, said Pakistan has presented Saudi investment opportunities in six other areas, adding an oil refinery, agriculture, mining, energy sector, generation and aviation project.
“There is no doubt that Pakistan wants investment. Just 18 months ago we were on the brink of default, but through those dialogues and engagements with friendly countries, we let them know what we can offer,” he told Al Jazeera.
A senior Pakistani government official who took part in the negotiations with Saudi delegations said Pakistan expected Riyadh to invest from its Public Investment Fund (PIF), the kingdom’s sovereign wealth fund with assets estimated at more than $900 billion. investment opportunities and the search to maintain its vision,” the official said on condition of anonymity.
Negotiations on the $5 billion investment proposal are ongoing, he added.
“Lately we are in a phase of discussion that has begun. As those negotiations mature, things will become clearer and we will see what the final agreements will look like,” he added.
Sharif continued his stopover in Saudi Arabia by making a one-day stopover in the United Arab Emirates, another former partner of the country, in late May, where he met with President Sheikh Mohammed bin Zayed Al Nahyan.
Following the assembly among the leaders, the Office of the Prime Minister of Pakistan announced that the UAE has committed to making a $10 billion investment in Pakistan in areas.
The UAE Ministry of Investment has shown this commitment, but a month later, few major points remain on which sectors the UAE can invest in and whether the two sides have agreed on a timeline for investments.
But it was Sharif’s five-day layover in China in June, the first of his tenure, that analysts say was the most critical of his stays.
He accompanied through army leader Gen. Syed Asim Munir, and Pakistani leaders held talks with Chinese President Xi Jinping, Premier Li Qiang and other leaders in Beijing.
This comes two months after gunmen attacked a bus carrying Chinese engineers driving through a major hydroelectric power plant in northern Pakistan, killing at least five Chinese nationals and one Pakistani.
The attack is part of a series of setbacks against projects built as part of the ambitious China-Pakistan Economic Corridor, a $62 billion project introduced a decade ago when Sharif’s older brother Nawaz, himself a three-time prime minister, became the country’s prime minister. . .
Over the past decade, Pakistan’s dependence on China has grown dramatically, as the dates have shifted from military ties to the economic realm: Pakistan owes China only about $30 billion of a total foreign debt of $30 billion, about $130 billion.
The country’s economic officials are under pressure that unless there is significant foreign investment, Pakistan will not be able to reach its ambitious expansion rate of 3. 6 percent, which the country has set for the next fiscal year.
After Sharif’s return from Beijing, the Chinese and Pakistani governments issued statements on improving security as well as advancing an “enhanced edition of the CPEC” to better help Pakistan’s economic and social progress.
But despite the signing of 23 memorandums of understanding in various sectors during Sharif’s visit, there was no concrete agreement, beyond expressions of intent, on projects that the two countries could simply prioritize.
Since the creation of CFIS last June, the government has credited the organization for helping facilitate investment opportunities outside the country.
The central bank’s latest insights show that from July to April this year, Pakistan earned $1. 45 billion in investments, a paltry 8. 1% increase from last year.
However, analysts say that while the three recent visits have demonstrated Pakistan’s desperation to get monetary support, whether in the form of bank deposits or investment projects, the failure to substantially implement the projects was due to Pakistan’s volatile outlook.
“The explanation for the non-materialization of any such investment or project lies in the country’s chronic political instability and structural upheavals plaguing Pakistan’s economy,” Umer Karim, a research associate at the King Faisal Center for Islamic Research and Studies, told Al Jazeera. . .
Economic analyst Uzair Younus agrees that the basic factor for Pakistan remains the factor of the country’s overall environment.
“At a time when domestic corporations are reluctant to invest in the economy, foreign capital will be even more conservative. For Pakistan to attract capital flows, it wishes to embark on comprehensive reforms and provide a credible roadmap that excites domestic and foreign investors. So far, this seems to be the case under Sharif’s government,” the Washington-based analyst told Al Jazeera.
The challenge for Sharif stems from political instability in the country after the election, marred by allegations of manipulation and fraud.
The escalation of attacks on law enforcement officials over the past 18 months has added another point of challenge to the country’s overstretched military, which will have to protect its eastern border with rival India and its western border with Afghanistan.
But KTrade Securities’ Khwaja, meanwhile, painted a more cautiously positive picture.
The London-based investor said Pakistan’s top three lenders were obviously competing together for a broader investment plan in the country.
“Pakistan presents itself as a country where Saudi software is installed on Chinese hardware, and now the links are clearer,” he said.
However, Karachi-based economist Khurram Husain points out that the three countries Sharif visits are also Pakistan’s largest bilateral creditors.
“Pakistan is perceived by all foreign investors as a high-risk country, which is why the state is looking for a way to make big deals between governments. The challenge is that they want monetary money right now, and those deals, even if they go through, would probably not bring in much money,” Husain told Al Jazeera.
The analyst added that the way out of Pakistan’s existing economic difficulties lies in internal reforms and not in external support.
“In reality, Pakistan deserves to try to manage its external debt profile instead of seeking more money from its bilateral creditors,” he added.
However, Riyadh-based Karim said the foreign visits have evolved into a political facet in which Pakistani governments use optics as “signs of foreign confidence and support,” but that some attention must be paid to domestic investors to revive the economy.
“In fact, FDI remains a vital detail of economic expansion and growth; However, the government could simply, by helping local investors and businesses, expand a roadmap that could then be presented to foreign investors,” he said.