Saudi Crown Prince MBS to visit Pakistan for investment deals

Islamabad, Pakistan – Saudi Arabia‘s crown prince is due to arrive in the Pakistani capital for a state visit to a key strategic ally that is expected to see the Gulf kingdom sign investment deals worth more than $10bn, government officials said.

Mohammed bin Salman will land in Islamabad on Sunday for a two-day visit that will see him hold talks with Pakistani Prime Minister Imran Khan, army chief Qamar Javed Bajwa and President Arif Alvi, Pakistan‘s foreign office said in a statement this week.

Prince Mohammed (also known as MBS), a powerful figure in the Saudi hierarchy who has wielded control over the country’s policies since his elevation to the role of Crown Prince in 2017, will also hold talks with Pakistani senators.

The visit comes at a time when Saudi Arabia is seeking to diversify its economy and investments in foreign countries, with falling oil prices hitting the Kingdom’s economy hard.

The country has also faced a degree of diplomatic isolation after the killing of journalist Jamal Khashoggi in its consulate in Istanbul last year.

MBS leaves Pakistan on Monday, with Malaysia, India and Chinanext on his itinerary. 

During his stay, “Pakistan and Saudi Arabia will be signing a number of agreements and MoUs related to diverse sectors, including investment, finance, power, renewable energy, internal security, media, culture and sports”, Pakistan’s foreign office said on Wednesday.

High on the agenda will be agreements that would see an oil refinery established in the southern Pakistani port of Gwadar, as well as the possible acquisition of two major power plants by Saudi companies, officials and analysts told Al Jazeera.

“The projects, if they materialise, they will be in the double digit billion dollars,” said Haroon Sharif, the head of the Pakistani government’s Board of Investment.

Sharif stressed that the trip was also aimed at spurring private Saudi investment in Pakistan, which has been struggling with a balance of payments crisis and a faltering domestic economy.

“The crown prince is also bringing about 25 businessmen with him and these men will now have meetings in other sectors like food processing, IT, the finance sector, construction and hospitality,” added Sharif.

“They will be having business-to-business meetings during the visit and then we will have a follow up investors conference after this.”

A drop in the ocean

Since last year, Pakistan’s economy has struggled to regain momentum, with foreign reserves dwindling, exports falling and inflation rising.

On Thursday, Pakistan’s central bank said foreign reserves were down to $8.2bn, which covers less than two months of imports. Pakistan has approached Saudi Arabia, the United Arab Emirates and China for loans to cover the gap.

Saudi had previously pledged $6bn in financial support to Pakistan, including a $3bn loan and $3bn in deferred oil payments. It is unclear if those pledged funds are part of the agreements that will be signed in Islamabad.

Analysts, however, say the support from Saudi Arabia and other countries is just a drop in the ocean.

“[Those funds] can help Pakistan survive the next six months, until June perhaps,” said Saad Ali, head of research at Karachi-based Inter Market Securities. “We have already received $3bn from Saudi, and the foreign reserves are still only at $8bn. We are at a burn rate of $1bn a month. This is not a sustainable formula.”

Pakistan is in talks with the International Monetary Fund (IMF), and is expected to avail a programme of reforms that would see it receive roughly $6bn.

Oil products form one of the country’s major imports, at $13.2bn in the last financial year, according to central bank data. Pakistan relies on Saudi Arabia for roughly 23 percent of its oil imports while it exported goods worth $317m to Saudi Arabia in the same period, as per the central bank. 

The oil refinery in Gwadar has been earmarked as a major project that could emerge from Prince Mohammed’s visit, boosting the country’s ability to process oil and possibly adding the ability to develop petrochemical products, if such a complex is included in the final agreement.

“The importance of that project is significant,” said Ali, who placed the expected value of the deal at between $5-10bn, depending on whether the petrochemical complex is included.

Pakistan imports 69 percent of its oil, according to government figures. Setting up another refinery would allow it to import cheaper crude oil, as opposed to refined petroleum products, Ali said.

Saudi Arabia is also expected to sign contracts that would see it acquire two liquified natural gas-based power plants, both of which the government has been aiming to sell as part of a privatisation drive, Reuters news agency reported.

A further $4bn is expected in deals on developing alternative energy plants, as well as on mineral mining enterprises, Sharif said in a statement.

He warned, however, against expecting any of the deals to reap immediate rewards, as they would need months of technical work before implementation.

“In the immediate term, there is a feel good factor, which is very badly needed,” said Sharif. “It increases investors’ confidence in the market.”

‘No strings attached’

On Thursday, Pakistan’s foreign minister said Saudi investments would have “no strings attached”.

Saudi has long demanded that Pakistan take an increased role in its war in Yemen, add troops to the Saudi-led Islamic Military Counter Terrorism Coalition (IMCTC) and participate in its blockade of Qatar.

General Raheel Sharif, the chief of the IMCTC and a former Pakistani army chief, arrived in Islamabad on Monday to hold talks with the prime minister and his successor as Pakistani army chief, General Bajwa.

Analysts, however, expect that the investment agreements will not significantly affect Pakistan’s position on those issues, which has generally remained one of neutrality.

“Pakistan is already a strategic partner, so what else would change?” said Zahid Hussain, an Islamabad-based analyst. “Pakistan is already very clearly siding with Saudi Arabia on many issues.”

Nevertheless, Hussain says the visit is “significant” in that it shows a diversification of the relationship beyond one seen as based on security and strategic imperatives.

“Saudi Arabia and Pakistan had a long-term strategic relationship, the basis of the relationship has always been security driven,” he said. “Pakistan has seen Saudi Arabia has a protector.

“Now with Saudi investment coming in for the first time at this level, that is a changing dynamic, it is a dimensional change.”

Asad Hashim is Al Jazeera’s digital correspondent in Pakistan. He tweets @AsadHashim.