Over the years Saudi Arabia has
been extending extensive aid, grant and assistance to Pakistan, but economic
cooperation between the two countries has remained far from satisfactory. Some
of the critics applaud the brotherly attitude, but say that Saudi stance has
been contrary to an old saying ‘don’t give me fish, but teach me how to catch a
fish’. However, others say that since the cooperation has been between the two
states the benefits have not trickled down to the masses. Therefore, there is a
need to revisit the existing scenario and come up with a new strategy that
should yield benefits to both the countries.
Pakistan’s economy comprises of
agriculture, manufacturing and services sectors. Growth of all these sectors has
remained skewed due to lack of planning and supporting policies, but above all
inadequate availability of funds. To begin with agriculture in Pakistan contributes
around 20 percent to GDP due to lower production and productivity. On top of
that due to the limited availability of modern storage facilities and
inefficient logistics about 15 percent of food grain and nearly 40 percent of
fruits and vegetables goes stale before reaching the markets. Not only the
growers are deprived of their legitimate return, the country is also deprived
of earning millions of dollars by exporting these commodities.
Therefore, the first step is to
save the produce by constructing modern warehouses and efficient logistic
facilities. Saudi investors should be asked specifically to invest in these two
key areas offering attractive returns. In the past effort was made to invite
the foreign investors to come to Pakistan and initiate corporate farming. The
basic idea was to attract foreign investment for undertaking mechanized farming,
developing water courses and ensuring balanced use of fertilizers and timely
application of pesticides. However, the proposal was resisted by feudal lords
who claimed that this will ruin the small farmers. In fact the ‘absentee land
lords’ know very well that once corporate farming commence in the country they
will not be able to exploit the landless farmers.
Pakistan has a huge population of
200 million people, but does not have modern oil crude refineries in the
country. A huge quantity of POL products has to be imported. Though, Saudi
Arabia is one of the largest producers of crude oil, it is also a big importer
the finished products. Saudi rulers can also follow a model used by the rulers
of Abu Dhabi, of jointly owning with the Government of Pakistan the biggest
refinery, Pak Arab Oil Refinery (PARCO) and two pipelines for the transmission
of black and while oil products. Saudis have two options: 1) to establish
another mid country refinery or 2) construct one near Port Qasim for exporting
the refined products and saving the freight cost. Both the Pakistan and Saudi
governments must also look at the successful operation of refineries in
Singapore, a country that does not produce even a drop of crude oil. The two
governments should also consider constructing ‘naphtha cracker’ in Pakistan. A
huge quantity of naphtha is produced in the country, but the entire output is
exported because of absence of naphtha cracking facility.
Pakistan is among the top
producers of sugarcane and also has the capacity to produce 9 million tons
sugar annually. Every year huge quantity of molasses is exported. Saudi investors
should be encouraged to establish facilities for the production of E-10 (motor
gasoline blended with ethanol). This is also to remind that local mills are operating
at nearly 50 percent capacity due to the shortage of sugarcane. Enhanced
sugarcane production will not only help in higher quantity of refined sugar but
will also help in producing more ethanol and also producing electricity at the
mills. Even today, these mills are capable of delivering 3,000MW electricity to
the national grid. Since these mills are located in the rural areas, the
availability of extra electricity will help not only in improving quality of
life of the rural population, but also to contain migration of people to urban
areas in search of job opportunities.
The State Bank of Pakistan (SBP) is
following ‘financial inclusion program’ because nearly 90 percent of the total
population does not have a bank account. The recent initiative of ‘branchless
banking’ is heavily dependent on technology and requires huge investment. Saudi
investors may be invited to form joint ventures with the local entrepreneurs in
banking and telecommunication which is the backbone of branchless banking. This
is for the information of entrepreneurs from Pakistan and Saudi Arabia that one
of the major stakeholders of Meezan Bank is keen in selling its stake.
Similarly, substantial investment is required in Bruj Bank to meet minimum
capital requirement stipulated by the SBP.
Billions of dollars are required
for revamping the existing infrastructure and construction of new facilities.
It will be right to say that some Saudi investors should establish entities
that can facilitate in floating and managing Sukuk. The experience of Soverign
Ijarah Sukuk floated by the Government of Pakistan has been very successful. If
the companies of international repute come to Pakistan and help in the
flotation of Sukuk for the construction of hydel and thermal power plants, the
requisite amounts can be mobilized without seeking the help of multilateral
financial institutions.
Pakistan also enjoys huge
potential for producing ‘Halal’ food items, which the Middle eastern countries
are buying from non-Muslim countries. If they acquire stake in companies producing
halal products they will be able to ensure quality as well as confirmation to the
Sharaih standards.
