UAE, Saudi Arabia to set up mega refineries to cater to local demand as well as to export surplus products to regional markets

Pakistan will get a $20 billion-plus economic package from Saudi Arabia during the two-day visit of Saudi Crown Prince Mohammad bin Salman to Islamabad, Khaleej Times has learnt.

The government will take up preferential trade agreement and ease of business visas with the Crown Prince, who heads a high-profile delegation to hold talks with Prime Minister Imran Khan on Sunday, according to senior officials of Ministry of Trade in Islamabad.

Pakistan's Minister for Information and Broadcasting Fawad Chaudhry said both the countries will sign at least eight memoranda of understanding to promote bilateral trade and investment in the medium- to long-term period.

"Pakistan is open for business and investment. Prime Minister Imran Khan delivered this message at recent World's Government Summit in Dubai and exchange of top level delegations from the UAE and Saudi Arabia shows that we are on right track," Chaudhry told Khaleej Times on Friday.

The Wall Street Journal reported last month that Saudi Arabia and the UAE have offered Pakistan approximately $30 billion in investment and loans. In addition to offering oil imports worth $6 billion on deferred payments, both countries have already deposited $3 billion each in Pakistan's central bank to ease balance of payments crisis and support the rupee.

"The UAE and Saudi Arabia are going to set up mega refineries in Pakistan to cater to the local demand as well as to export surplus products to regional markets," Chaudhry said.

Last month, Saudi Energy Minister Khalid Al Falih visited Gwadar and inspected the site for the proposed oil refinery and petrochemicals complex that will cost up to $10 billion in five years.

"Pakistan is expected to sign investment deals worth billions of dollars during visit of Crown Prince Mohammed bin Salman, including a multibillion dollar oil refinery in port city of Gwadar," Chaudhry said.

Investment priorities

In a statement, Pakistan's Board of Investment said total Saudi investments is expected to cross $20 billion over the next few years. However, no details were provided.

According to senior officials, Saudi Arabia is expected to announce $7 billion investment in the power sector and $2 billion in renewable energy including solar and wind projects. It is also expected to invest in mineral and mining projects including the Reko Diq, they said.

Islamabad is also expected to invite Saudi Arabia to participate in privatisation of LNG-fired two power plants worth over $2 billion. "An agreement for $3 billion oil facility on deferred payments will also be signed during the visit of Saudi Crown Prince," according to official from Pakistan's Ministry of Trade.

"The Pak-Saudi Coordination Council would be set up to ensure speedy implementation on MoUs to be signed during the visit. Prime Minister Imran Khan would personally monitor the situation," the officials said, adding that the private sector of the two countries would be engaged to promote investments in the agro industry, information technology and hospitality sectors.

Saudi ministers and businessmen will hold meetings with Pakistani counterparts to promote bilateral cooperation in their respective fields as well as discuss opportunities in the private sector, Pakistan's Foreign Ministry said in a statement.

Back in business

Muzzammil Aslam, former CEO of EFG-Hermes Pakistan, said Saudi investments will be ranging from short-term period to medium-term and long-term tenure in key sectors such as power, renewable energy, petrochemicals, infrastructure and mining, among others.

"Approximately $5-6 billion investment deals will be for short-term period while $2-$3 billion to be invested in medium term and another $10-$12 billion investment is of long-term nature. Pakistan will be back to investors' radar and follow up investments from other counties will come through," Aslam told Khaleej Times on Friday.

He said the MoUs will not ease current balance of payment crisis, but it will flag Pakistan as an attractive investment destination.

"The projects will ease Pakistan's long due structural deficit. With the projects' completion, the surplus will encourage value-added industry to set up and encourage local investors to participate," Aslam said.

Analysts said UAE and Saudi investments will provide a new lifeline to Pakistan's struggling economy, which was recently downgraded to B- from B by S&P Global Ratings. They said timely help from Gulf nations and China will help boost foreign investment that dropped by 19.2 per cent to $1.4 billion in first half of financial year 2018-19 as compared to $1.7 billion in the same period of 2017-18.

- muzaffarrizvi@khaleejtimes.com