Islamabad, Feb 10: A number of major investment deals are expected to be signed during Saudi Crown Prince Mohammed bin Salman’s upcoming visit to Islamabad, according to officials.
Two Saudi sources have confirmed to AFP that the heir apparent to the Gulf kingdom’s throne will visit Islamabad shortly, without giving a date. Officials from both countries confirmed to AFP that a number of deals are expected to be signed during the visit.
Riyadh and Islamabad, decades-old allies, have been involved for months in talks to hammer out details of the deals in time for the high-profile visit.
A record investment package being prepared by Riyadh for Islamabad will likely provide welcome relief while also addressing regional geopolitical challenges, analysts believe.
At the heart of the investment is a reported $10 billion refinery and oil complex in the strategic Gwadar Port on the Arabian Sea, the ultimate destination for the massive multi-billion dollar China-Pakistan Economic Corridor, which lies not far from the Indo-Iranian port of Chabahar.
“The outcome of the talks so far has been very positive and this is going to be one of the biggest-ever Saudi investments in Pakistan,” a senior finance ministry official told AFP.
“We hope that an agreement to this effect will be signed during the upcoming visit of the Saudi crown prince to Pakistan,” said the official, requesting anonymity.
The Wall Street Journal reported last month that both Saudi Arabia and the United Arab Emirates, Islamabad’s biggest trading partner in the Middle East, have offered Pakistan some $30bn in investment and loans.
Riyadh investments are expected to provide a lifeline for the economy which was downgraded in early February by S&P ratings agency from a B to a B-, Saudi economist Fadhl al-Bouenain said.
“Saudi investment to Pakistan comes within an economic aid package aimed at relieving the stress of external debt and a shortage of foreign currency, besides boosting the sluggish economy,” Bouenain told AFP.
The Opec heavyweight also aims to achieve strategic and commercial goals with investments in infrastructure and refinery projects, he said.
Saudi Arabia and its Gulf partner, the UAE, have already deposited $3bn each in the State Bank of Pakistan to help resolve a balance of payments crisis and shore up its declining rupee.
They have also reportedly deferred some $6bn in oil imports payments as Islamabad has so far failed to secure fresh loans from the International Monetary Fund.
Prime Minister Khan has already visited Riyadh twice since taking office in July, and in October attended a prestigious investment conference widely boycotted by other political and economic figures after the murder of dissident journalist Jamal Khashoggi.
Khan also visited Qatar and Turkey, as well as China, seeking investments.
“One of the goals for Saudi Arabia expanding investments in refining worldwide is to secure market share and sustainable exports in the face of international competition,” Bouenain said.
Saudi Energy Minister Khalid Al Falih visited Gwadar in January and inspected the site for the proposed oil refinery at the deep sea port, just 70 kilometres away from Chabahar.
He was quoted by local media as saying the kingdom was studying plans to construct a $10bn refinery and petrochemicals complex in Gwadar.
Like most oil suppliers, the world’s top crude exporter has been investing heavily in refinery and petrochemicals projects across the globe to secure long-term buyers of its oil.
A pipeline from Gwadar to China would cut the supply time from the current 40 days to just seven, experts say.
Developed as part of China’s Belt and Road Initiative with investments worth some $60bn, Gwadar is being billed as a regional industrial hub of the future, easily accessible for Central Asia, Afghanistan, the Middle East and Africa.
“Pakistan needs a rich partner to enter as a third party besides China, capable of injecting needed cash,” Bouenain said.
But so far China has rejected other partners for the corridor that seeks to connect its western province Xinjiang with Gwadar, including Saudi Arabia and UAE, said James M. Dorsey, a senior fellow at Singapore’s S. Rajaratnam School of International Studies.
This is despite calls by Khan “for the Chinese investments to be restructured to include agriculture and job-creation sectors and not only in infrastructure”, Dorsey told AFP.
Any Saudi investment in Gwadar will also have geopolitical dimensions, Dorsey said.
Iran late last year inaugurated Chabahar which provides a key supply route to landlocked Afghanistan and allows India to bypass Pakistan. India has seen Chabahar as a key way both to send supplies to Afghanistan and to step up trade with Central Asia as well as Africa.
But Riyadh is not expected to get involved in any Indo-Pakistani rivalry and the kingdom also has major strategic energy deals with New Delhi, where demand for oil is growing fast.
Indeed in April, the Saudis signed a $44bn deal to build a huge refinery and petrochemicals complex in western India.
