Minister of State for Finance and Economic Affairs Rana Mohammad Afzal Khan recently chaired several meetings focused on enhancing bilateral economic cooperation with Saudi Arabia. Reportedly signing a preferential trade agreement with Saudi Arabia also came under discussion - an agreement which has remained pending for the past several years. Additionally, it was agreed that during the next meeting of the Joint Ministerial Council (JMC) discussions would be initiated on (i) setting up a display centre in Jeddah (delayed for several years); (ii) single country exhibition in Saudi Arabia; (iii) seeking a market for Pakistani skilled workers particularly in the automobile sector; (iv) exchange programme for university students and faculty; and (v) establishing a refinery in Pakistan.
Around 90 percent of all imports from Saudi Arabia consist of oil and oil products while Pakistan exports rice, meat, meat products, spices, fruits and textile products. The balance of trade is tilted heavily in favour of Saudi Arabia with around 11.7 billion dollar Saudi exports to Pakistan during July-November 2017 while Pakistan's exports to the kingdom were around 3 billion dollars according to the State Bank of Pakistan website. Given that the bulk of Pakistan's imports from Saudi Arabia are of petroleum and products this implies that, subject to international price fluctuations of oil, the volume of our imports from the kingdom are unlikely to decline; thus, the focus of any trade deal has to be on expanding Pakistan's exports to the kingdom.
Pak-Saudi ties are legendary and in the past, the kingdom had not only agreed to deferring payments for our oil imports during periods when Pakistan's foreign exchange reserves dwindled to dangerously low levels, but also provided oil at special rates. The kingdom has also been a major source of remittances for Pakistan and accounted for a little over 29 percent of total remittances received or a total of 4.07 billion dollars in fiscal year 2017. However, disturbingly remittances from the kingdom declined by 6.23 percent during the last fiscal year in comparison to the year before - a decline that is sourced to the economic challenges facing Saudi Arabia today.
Analysts however point to the Pak-Saudi ties having suffered a setback during the ongoing PML-N administration in spite of the Saudis 'gifting' around 1.5 billion dollars early 2014 with the objective of assisting Pakistan to shore up our foreign exchange reserves, meet our debt obligations and undertake mega infrastructure projects. The rupee value was strengthened as a consequence of this 'gift' to a nine-month high of 97.40 rupees from 105.40 rupees against the dollar between March 4 and 12. The setback to these close ties began in 2016 after the former Adviser to the Prime Minister on Foreign Affairs, Sartaj Aziz, while conforming to the resolution passed by Parliament, stated during a briefing to the National Assembly that Pakistan will not send ground troops to Saudi Arabia or any other country. In what was seen as a sign of Saudi displeasure at this decision the then Prime Minister, Nawaz Sharif, was visibly ignored during the US-Arab Islamic summit in Riyadh in May 2017. Later, the PML-N administration approved the appointment of the recently retired Chief of Army Staff General Raheel Sharif to head the 42-country Saudi-led military coalition though there is a consensus that relations between the two countries have not reached the levels that were clearly evident during early 2014.
Be that as it may, one must underscore the fact that economic ties between the two countries have great potential for further expansion and one would hope that an agreement to that effect is reached in the next JMC.