Islamabad: Pakistan’s Prime Minister Shehbaz Sharif is expected to visit Saudi Arabia soon, his second trip this month to the friendly Gulf kingdom, to advance investment talks as his cash-strapped government has presented lucrative returns on Saudi investment.
According to The Express Tribune, in addition to the enticing prospects of harvesting rich dividends on investment, Pakistan has assured priority in profits to Saudi investors without any hindrances.
Sharif’s government has presented returns ranging from an appealing 14 per cent to an astounding 50 per cent on Saudi investment, the report said.
According to government sources involved in these discussions, the indicated returns on Saudi investment are expected to allow the Kingdom to recoup its invested capital within three to nine years, depending on the nature of the project.
Pakistan aims to advance the Saudi Arabia investment initiative during the April 27-28 visit of Sharif, who will be accompanied by a team from the Special Investment Facilitation Council (SIFC).
Prime Minister Sharif was in Jeddah earlier this month to perform Umrah and met Crown Prince Mohammed bin Salman and discussed a planned USD 5 billion Saudi investment package for Pakistan, according to the joint statement issued by both countries. The visit to Saudi Arabia was the first foreign visit by Sharif since he assumed office in March.
During their recent visit to Pakistan, a high-level Saudi delegation asked maximum questions about projects in agriculture, mining and the Diamer Basha dam, the report said.
These are the areas where the government has indicated maximum returns on the investment.
Although initially eying on a USD 25 billion bonanza, Pakistan has adjusted its expectations to a USD 5 billion investment by June 2025.
One of the concerns of Saudi Arabia was that Pakistan was withholding the repatriation of profits due to external sector liquidity constraints.
However, Pakistan assured that Saudi investors would get priority in the repatriation of profits, said the sources.
Sharif has already instructed the State Bank of Pakistan (SBP) to give Saudi Arabian companies preference in repatriation of the profits.
Pakistan allowed USD 694 million repatriation of the profits during the first eight months of this fiscal year, which was more than double compared to the previous fiscal year but it was still USD 900 million less than the pre-crisis period.
Despite a liberal and attractive investment regime, Pakistan’s annual foreign direct investment has remained in the range of USD 1.5 billion to USD 2 billion.
It had earlier offered special incentives to Beijing under the China-Pakistan Economic Corridor (CPEC) that resulted in a total of USD 25 billion in Chinese inflow, mostly in the shape of loans and a component of investment.
Bilal Azhar Kayani, Pakistan Muslim League Nawaz (PML-N) party’s National Assembly member, said the indicated Internal Rate of Returns (IRR) is based on the assumption of the potential investments.
He said that these indicative numbers should not be construed as offers as the actual returns on the investments would be decided during the technical negotiations.
The maximum 50 per cent return on the investment has been indicated for the Greenfield Mine Development project in Balochistan’s Khuzdar, which is said to be the third largest mining project after Reko Diq and Thar coal, according to the sources.
The government has estimated an initial investment of USD 154 million and with the 50 per cent IRR, the payback period is projected at five years.
Pakistan has also indicated higher returns on investment in the agriculture sector. It has offered Saudi Arabia to set up a cattle farm in Punjab for 30,000 animals with an annual production of six thousand tons of meat.
The initial indicated investment size is over USD 25 million and the payback period is just three years with a 34 per cent return on the investment.
The sources said Saudi Arabia was also interested in getting agricultural land on lease but the details have yet to be finalised. Pakistan pitched Saudi Arabia to acquire 50,000 acres of land on lease for corporate farming.
A government official said the Saudi Agricultural and Livestock Investment Company (SALIC) showed interest in the project and a memorandum of understanding could be signed during next week’s visit of Sharif to the Kingdom.
The semiconductor development and Chip packaging project is also pitched for Saudi investment of USD 270 million with an indicated profitability of 17 per cent, said the sources. This project will have a payback period of seven years, they added.
Pakistan has indicated a 20 per cent return on around USD 1.5 billion investment in the Iron Ore Mining and Steel Mills Complex at Chiniot, Punjab. The project will have a payback period of 9 years, said the sources.
A USD 680 million transmission line project has also been offered to Saudi Arabia with a 14 per cent return on investment and a payback period of seven years, The Express Tribune quoted the sources as saying.
