Discussions about Middle Eastern investment have been ongoing for the past two to three years, but now we’re beginning to see early signs of actual inflows. Last week, First Women Bank Limited (FWBL) was acquired by the UAE giant International Holding Company (IHC). About a year ago, Saudi oil giant Aramco bought a small Oil Marketing Company (OMC) in Pakistan.
While the transactions’ sizes are modest, they indicate major Middle Eastern groups positioning themselves in Pakistan. The FWBL deal, valued at $14.6 million, is a rounding error for IHC, which boasts a market capitalization of $240 billion. Still, the valuation is sound — Rs5 billion against a net equity of Rs3.2 billion.
With such big names stepping in, does the government’s optimism about Middle Eastern investors seem justified? Is the tide finally turning? Is this the dawn of a new era for Gulf investment, or just a series of isolated cases?
Following the defence pact with Saudi Arabia, there appears to be a serious Saudi interest. Government-to-government packages are advancing, and business-to-business engagements are growing steadily. Islamabad is hopeful of emerging from IMF programmes on the strength of Middle Eastern loans and investments.
The geopolitical dividend may come from enhanced economic cooperation between Pakistan and the Middle East. Recently, after nearly two years of delay, the Competition Commission of Pakistan approved the Telenor-Ufone merger, resolving Etisalat’s long-pending issue — a positive sign.
Local business groups are optimistic after a recent three-day visit by Saudi business delegations to Karachi, Islamabad, and Lahore. They have expressed interest in new projects across agriculture, data centers, mining, and infrastructure, as well as acquiring stakes in banks and the energy sector.
One of Saudi Arabia’s largest dairy farms expressed interest in corporate farming for animal feed, alongside sheep farming ventures. They’re eyeing animal fattening, cheese production, and other related industries. A local group wants to build a soda ash facility and is seeking a Saudi partner, while a textile retail brand plans to open shops in Saudi Arabia. The Saudis are asking specific questions and seeking joint ventures with local players; it’s an encouraging development.
Earlier, talks focused on refineries and guaranteed-return projects that made little commercial sense. Now, engagement is broad-based and commercially viable. Stock market valuations are at historic highs, strengthening the case for investment in existing assets.
The Saudis could secure stakes in government-owned oil and gas companies or invest in major banks that might be up for sale. Joint ventures with groups like Fauji in energy and mining are also on the horizon.
The onus now lies with local business groups and the government to present viable opportunities. Saudi investors are savvy and have top-level backing to invest in Pakistan. The ball is in our court.
They have the money and the mandate to invest, but we need to showcase projects that are viable and bankable. Currently, the projects on offer feel small. Pakistani business groups need to think bigger. The intent exists, but risks remain in execution.
The Saudi-UAE private investment in Pakistan is likely to kick off soon. While this will help keep us afloat, it cannot by itself lead to sustainable high growth or bail Pakistan out of the IMF’s grip.
If the Saudis are serious about helping Pakistan exit IMF programmes, as Islamabad hopes, then bilateral loans — especially from the Middle East and China — need to be converted into long-term arrangements to avoid the $12–15 billion rollover trap. The big questions remain: Will Saudi Arabia do this? And will it be enough?
IMF policies — like pushing tax hikes on the formal sector without broadening the base, or demanding full cost recovery in energy — aren’t working for Pakistan. Yet, we lack alternative solutions to our tax and energy problems.
Pakistan’s challenge is not a lack of resources; provinces like Sindh and Punjab are rich with fiscal space and natural wealth. The problem lies in governance and corruption. Without addressing these, energy and taxation issues will persist — IMF or no IMF. Sindh and Punjab boast resources, yet Karachi cannot even secure a straight 20-meter road. Public health and education systems are in disrepair. These areas need urgent attention.
Nevertheless, signs of fresh FDI are emerging, driven more by geopolitics than economic reforms. The last significant wave of private-sector investment arrived during Musharraf’s era, led by Western investors. This time, it may come from slightly closer quarters. But to reap real benefits, Pakistan must learn from past mistakes and transform its economy and politics internally.
The Middle East holds the chequebook, but signing the right deal requires Pakistan to fix what’s broken at home. Without bold economic reforms and a stable political environment that ensures sustainable institutional arrangements fostering an internationally competitive industrial landscape, this financial infusion risks becoming another fleeting mirage instead of the oasis we so desperately need.
Copyright Business Recorder, 2025
Ali Khizar is the Director of Research at Business Recorder. His Twitter handle is @AliKhizar
Comments
Comments are closed for this article.