Growing Pak-Saudi trade relations – Pakistan & Gulf Economist

  • New insurance policies mandatory to spice up bilateral commerce connections

Pakistan has loved a cordially relations with Saudi Arabia since its beginning. The relations are rooted within the centuries previous non secular, cultural and business hyperlinks. Pakistan and Saudi Arabia have an unprecedented relationship, prepared to assist one another at wanted time and house. These relations are based mostly on stable foundations of Islamic ideology and conventional Islamic values. The religious affection the folks of Pakistan have for the Holy Locations (the Kaaba Tullah and Masjid al-Nabawi) and with the folks of the Holy land reinforce the bilateral relationship between each international locations.

The ideological foundations of Pakistan additional contributed to bringing each international locations collectively and their folks. Quickly after its independence, Pakistan attained an distinctive and really high-ranking political standing among the many Muslim world. Ranging from virtually zero in 1947, Pakistan prolonged political and financial help to many international locations within the Sixties. Apart from, it developed its armed forces matching the worldwide requirements of navy professionalism and a excessive diploma of competence. However, King Abdul Aziz and his successors developed the Kingdom and Saudi nation from a scattered desert area to a contemporary, dynamic and progressive nation-state.

Foundation for cooperation

A Treaty of Friendship was signed by the 2 international locations as early as in 1951, laying the idea for cooperation. Bilateral relations had been buttressed over the approaching many years by a convention of robust monetary and strategic help prolonged to one another by the 2 brotherly international locations each time required. As a pioneer treaty, it outlined the longer term path of the connection between each states and laid down the formal foundation for bilateral cooperation. The treaty additionally readdressed historic connections, religious affiliations, strategic partnerships, and social relationships.

Within the Center East, the newly shaped nation-states had been in turmoil after WW II. Saudi Arabia performed a serious position within the regional stability, peace, and financial prosperity of the Arab world. From its institution within the early Nineteen Thirties to the current day, the Kingdom handed by means of quite a few home and exterior challenges, which had been dealt with with knowledge, nationwide resolve, and deterrence from any exterior aggression. As a member of the OIC, Pakistan supported Saudi Arabia and the remainder of the Arab world of their wars in opposition to the Israeli unlawful occupation of the Arab land (Palestine). Inside the scope of the Treaty of Friendship and different bilateral understandings, Pakistan helped Saudi Arabia to beat a few of the worst home upheavals and exterior safety threats it confronted. Pakistan navy performed a contributory position within the growth of Saudi armed forces and cooperation is constantly prolonged up to now.

The political management of each international locations incessantly seek the advice of one another on regional and international points in a well-defined cooperative mechanism. On the financial entrance, there was mutuality between each states ever for the reason that Nineteen Eighties.

The elementary bases of a strategic relationship between Pakistan and Saudi Arabia are historic, pragmatic, and mawkish. This relationship emerged a lot earlier than the Kingdom turned oil-rich, which rejects the analogy that the economic system is defining issue of the Pak-Saudi relationship.

On the financial entrance, Anwar Ali, a Pakistani economist, was Governor of the Saudi Arabian Financial Company (Saudi Central Financial institution) from 1958 to 1974. Saudi economic system was boosted beneath the ready management of Anwar Ali, who gave it a brand new imaginative and prescient and future orientation. Over the many years, Pakistan has had an unique standing in Saudi strategic calculus, which speaks about their mutual trustfulness and constant relationship. The strategic nature of the Pak-Saudi relationship is additional fortified by frequent geopolitical pursuits, as Pakistan armed forces are all the time able to help Saudi Arabia in case of any exterior aggression on its soil.

From the navy archives, it’s evident that Pakistan’s armed forces have been aiding Saudi Arabia for the reason that Sixties with their bodily presence within the Kingdom. They performed a key position within the basis and subsequent coaching of the Saudi armed forces. Each militaries have had shut cooperation and collaboration for the reason that Nineteen Seventies. Pakistan navy trainers are imparting coaching to Saudi armed forces as nucleus workers. Apart from, officers from all three companies of Saudi Arabia are attending navy programs in Pakistan navy establishments at a mid-career stage to the upper stage of nationwide safety.

Pakistan and Saudi armed forces collaborate at virtually all ranges, together with navy coaching by means of joint workouts and drills. Other than strengthening the prevailing ties, the 2019-visit of Crown Prince and Prime Minister of Saudi Arabia Mohammad Bin Salman Al Saud has opened many new and long-term avenues for Pak-Saudi relations involving future generations. The inspiration of this very relationship will assist each international locations to reorient their strategic relations preserving in view the quickly altering geopolitical state of affairs and new alliances within the making.

New method

There’s a dire have to strengthen the prevailing bondage of the Pak-Saudi relationship beneath quickly altering regional and international geopolitical situations. Strategic relations want new approaches and mechanisms which might complement the normal bondage. The stableness and perpetuity within the Pak-Saudi bilateralism should have wider institutional and other people’s participation as reinforcing elements. The evolving nature of the Pak-Saudi relationship warrants a brand new dynamism and diversification by means of enhanced political engagement, institutional collaborations, and diplomatic overtures.

Pakistan and Saudi Arabia can proceed extending unwavering help to one another’s stance on international and regional points apart from taking care of the nationwide pursuits of one another.

In financial cooperation, Saudi Arabia has been an important supply to appendage Pakistan’s economic system. Many Pakistani expatriates are employed within the Kingdom. They play two roles; first, they contribute to the event of the host nation. Secondly, they participate within the financial growth of Pakistan by sending remittances again house, which moderately reduces stress on the job market of Pakistan. Because the Sixties, Pakistan human useful resource has began pouring in Saudi Arabia.

The estimated numbers of Pakistani expatriates within the Kingdom are greater than 2.7 million. They work in virtually all fields of economic system, reminiscent of building, medical, engineering, lecturers, and the IT sector. Saudi authorities thought-about Pakistani docs and paramedics as extremely skilled of their job with dedication. The folks in Saudi Arabia really feel very snug with docs from Pakistan due to their cultural and historic background.

Pak-Saudi bilateral commerce within the first half of the twenty first century (2002 to 2012) has been over $30 billion and from 2012 to 2013, commerce change between each international locations remained $5 billion. Based on the United Nations COMTRADE database on worldwide commerce, Pakistan’s exports to Saudi Arabia was $402.81 million throughout 2021.

Saudi Arabia has performed an vital position in supplying Pakistan’s oil imports for many years. In recent times, with sponsored charges, it has met virtually 1 / 4 of the wants and has performed an vital position in sustaining the financial stability of Pakistan. In truth, the long-term reimbursement facility for Saudi Arabia’s oil exports to Pakistan has considerably decreased the stress on Islamabad for different international funds. Riyadh supplied oil for a full yr with delayed cost in 2019 and has continued to permit Islamabad credit score. The Saudi Fund for Improvement (SFD) supplied US$5.4 billion value of oil derivatives to Pakistan between 2019 -2023.

Nonetheless, with the strengthening of political relations, the renewed consideration of the 2 international locations to finalise the US$14 billion contract for the development of an oil refinery with the presence of Saudi Aramco and different companions in Gwadar port, evidently the development of a contemporary refinery in Pakistan and the refining of 350-450 thousand barrels of crude oil per day and building of a petrochemical complicated have been finalised. In truth, a number of Pakistani oil firms are cooperating with Aramco within the refinery building mission, whereas Aramco will initially have a 30 per cent stake on this mission.

As well as, Saudi Arabia’s participation in offering a mortgage of US$240 million to Pakistan for the development of the Mohmand Dam (a fancy of 800 megawatts of electrical energy capability within the northwest of Pakistan) can play a significant position in offering water for agriculture, resisting floods, and sustaining power and meals safety in Pakistan.

Extra cooperation

In different joint growth programmes, hydrocarbons, electrical energy, clear applied sciences, localisation of power merchandise and provide chains, renewable power, photo voltaic power, and wind power have all been accelerated.

Pakistan’s economic system is dealing with intensive monetary and financial bottlenecks reminiscent of financial stagnation, unemployment charge, lack of water and power, and international debt. The depreciation of the Pakistani rupee in opposition to different currencies, and from the Saudi perspective can assist resolve Pakistan’s issues. Plainly Pakistan intends to strengthen its place in dialogue with worldwide establishments with the services of Riyadh.

Saudi Arabia has already supplied beneficiant monetary help to Pakistan. From 2018 to 2022, Riyadh’s help to Pakistan has exceeded US$22 billion {dollars}. Riyadh’s method has really made Pakistan extra engaging to potential buyers.

Saudi Arabia has already invested within the chemical, monetary establishments, banking companies, agriculture, dairy and data know-how, and human sources growth sectors. The sovereign Saudi Improvement Fund (SFD) has financed 41 growth tasks and programmes in Pakistan. Moreover, air service contracts, financial, business, and technical cooperation contracts, and double taxation avoidance agreements have performed a proportional position in increasing relations.

Future alternatives

A number of latest agreements between Pakistan and Saudi Arabia embrace mineral exploration, photo voltaic power in Balochistan, and the presence of two Saudi IT firms in Pakistan are more likely to be carried out. Along with the exercise of about 400 Pakistani firms engaged in building, structure, chemical substances, metal, metals, and data know-how sectors in Saudi Arabia, the inhabitants of expert and unskilled Pakistani immigrants (almost two million folks) performs an vital position in constructing the infrastructure of contemporary Saudi Arabia.

Their annual remittances of billions of {dollars} in remittances again to Pakistan performs the largest position within the diaspora and concerned the lives of 15 million Pakistanis again house. Now, Islamabad expects that the Saudi Imaginative and prescient 2030, and the Inexperienced Saudi Center East Initiative plans can present alternatives for Pakistan in a variety of sectors reminiscent of the supply of expert manpower and premium capabilities.

Along with internet hosting regional occasions, inventive and sports activities investments, and contracts within the discipline of sports activities, the Saudi method may also assist additional develop enterprise. For instance, investing in small sports activities industries in northern Pakistan, infrastructure and tourism has commerce impacts between the 2 international locations, and particularly as cricket mad Pakistan is seeking to develop the game in Saudi Arabia and the Center East. Saudi Arabia is an acceptable marketplace for Pakistan’s potential in textiles (half of Pakistan’s complete international exports), leather-based, and sports activities items. The FIFA World Cup soccer used in the course of the Qatar World Cup Finals final yr had been all produced in Pakistan.

Along with the late 2022 Saudi Arabia-Pakistan Bilateral Funding Treaty, you will need to admire the negotiations regarding a full Saudi Arabia Free Commerce Settlement, which can additionally contain the GCC. Negotiations have been sluggish attributable to adjustments of Authorities in Pakistan and the impacts of Covid. Nonetheless, ought to an FTA materialize, the general Saudi-Pakistan commerce image shall be considerably enhanced.

In 2021, Pakistan ranked 87 within the Financial Complexity Index (ECI -0.55), and 66 in complete exports ($32.7B). That very same yr, Saudi Arabia ranked 31 within the Financial Complexity Index (ECI 0.9), and 26 in complete exports ($256B).

In 2021, Pakistan exported US$472 million to Saudi Arabia. The primary merchandise that Pakistan exported are rice, bovine meat, and spices. In 2021, Saudi Arabia exported US$3.4 billion to Pakistan. The primary merchandise that Saudi Arabia exported had been crude petroleum, ethylene polymers, and propylene polymers. Over the past 26 years the exports of Pakistan to Saudi Arabia have elevated at an annualised charge of 4.62%, from $146 million in 1995 to $472 million in 2021. In similar yr, Saudi Arabia exported $3.4 billion to Pakistan. The primary merchandise that Saudi Arabia exported to Pakistan had been Crude Petroleum ($1.88 billion), Ethylene Polymers ($335 million), and Propylene Polymers ($302 million). Over the past 26 years the exports of Saudi Arabia to Pakistan have elevated at an annualised charge of 12.9%, from $146 million in 1995 to $3.4 billion in 2021.

Pakistan and Saudi Arabia’s commerce volumes elevated to $4.6 billion {dollars} in 2022, with an expanded portfolio that additionally included plastics, textiles, espresso, and tea.

Problem forward

Pakistan and Saudi Arabia’s bilateral commerce relationship faces two primary challenges which incorporates:

Inner Challenges:

Pakistan and Saudi Arabia have loved a protracted and affluent financial relationship, however there are some inside challenges that might probably disrupt the bilateral commerce between the 2 international locations. Firstly, Saudi Arabia’s financial pursuits within the area are a lot broader than simply Pakistan, and this might result in Saudi Arabia searching for to diversify its financial companions and cut back its reliance on Pakistan.

Secondly, Saudi Arabia’s giant inhabitants and huge sources make it a extremely engaging marketplace for different international locations within the area, which might result in a lower in demand for Pakistani items. Moreover, Saudi Arabia’s strict visa necessities and foreign money change insurance policies could make it tough for Pakistani companies to entry the Saudi market.

Lastly, political tensions between Pakistan and Saudi Arabia have been recognized to come up, which might result in commerce restrictions and additional complicate bilateral commerce relations. One of many important inside challenges of Pakistan is its speedy inhabitants development, ranked because the fifth populated nation on the earth. Based on United Nations Inhabitants Fund’s knowledge, Pakistan’s inhabitants is 230 million.

Current knowledge favors no Pakistan relating to commerce with Saudi Arabia as Saudi exports greater than it imports from Pakistan. Thus, a commerce imbalance exists. The enterprise of Pakistan with Saudi Arabia is value$3,520 million. Pakistan imports commodities and merchandise greater than it exports to Saudi Arabia. The Worldwide commerce centre stories point out low Pakistan exports to Saudi Arabia value $304 million. The commerce deficit of Pakistan is estimated at $2,910 million. Within the final 15 years, Pakistan’s commerce quantity with Saudi Arabia declined, particularly in 2008, 2011 and 2013. It turned on the lowest stage of $3 billion throughout this era. Nevertheless it began to change into steady in 2020. Nonetheless, exports to Saudi Arabia have elevated from $336.9 million to $446.18m from 2017 to 2020. However imports from Saudi Arabia to Pakistan declined from $3.213bn to $1.735bn from 2018 to 2020. 99

Exterior Challenges: Pakistan and Saudi share no frequent border, contributing to low commerce between the 2 international locations. Saudi Arabia lies within the Center East, removed from Pakistan. Nonetheless, cross-border commerce assist improves the economic system of a nation.

Most European international locations join by means of a standard border which exempts them from commerce limitations. Saudi Arabia requested Pakistan to ship its troops to struggle Iran-backed Houthi rebels in 2015. Making the wise resolution, Pakistan refused to take part within the battle in Yemen. Islamabad mentioned becoming a member of the coalition might have penalties for home politics and bilateral relations with Iran.

Battle between Iran and Saudi Arabia has extreme implications for regional politics in West Asia. Saudi Arabia finds Iran’s rising presence in regional politics a safety menace that disturbs regional safety stability. Pakistan considers Saudi’s rising curiosity in the direction of India a menace. Even India has been capable of keep pleasant relationships with Center East international locations. Nonetheless, Pakistan prefers to retain its neutrality, and the Saudis should not proud of the detachment of Pakistan from Iran-Saudi relations. Conversely, India has obtained elevated consideration from the Gulf Cooperation Council (GCC) international locations lately.

The writer, Nazir Ahmed Shaikh, is a contract author, columnist, blogger and motivational speaker. He writes articles on diversified subjects. Mr. Shaikh can be contacted at

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