Saudi Arabia’s investment in Pakistan and its impact

Mudassir Altaf 03244459192 info@chohanestate.com 19-02-2019

Reading time : 5 minutes

Introduction

The latest news that will affect Pakistan’s real estate sector, economy and development is the news of Saudi Arabia setting up $10bn oil refinery in southwestern city of Gwadar. Our research team at Chohan Estate has come up with a blog that will shed light on, Saudi Arabia’s investment, its effects, Role of China, the role of different politicians in making this investment happen and so on so forth.

Saudi Arabia’s investment

Let’s begin with the investment. Saudi Crown Prince Mohammad bin Salman signed $20 billion plus investment agreements in Islamabad on the very first day of his two-day trip to Pakistan. His arrival has proven to be tremendously vital for Pakistan’s economic stability.  Out of the $20 billion, $10bn is exclusively dedicated to oil refinery in Gwadar. This is a historic moment for both the countries as they venture into bilateral relationship, by which both the countries will get their share of progressive and positive outcome. According to economic analysis, KSA’s investment will give a gigantic boost to Pakistan’s shaky economy.  The prince said “We are creating a great future for Saudi Arabia and Pakistan.” He further said "It's a big for phase one and definitely it's going to grow every month, every year in big numbers and will be beneficial for both countries. Saudi Arabia cannot say no to Pakistan. Pakistan will have a great future ahead. It has witnessed a five per cent growth in its GDP.” This statement reflects hope that even in the coming years KSA will keep investing in Pakistan. It won’t be wrong if assert, that this investment will mark the beginning of a new era for Pakistan and KSA.

 

Background

The news of KSA’s interest in CPEC and Gwadar starting making rounds in 2018. It was the time that Imran Khan’s government had just started taking new steps to stabilize the economy. Imran Khan’s government even announced that KSA could invest in the most ambitious project between China and Pakistan i.e CPEC.  This news raised concerns for various countries for different reasons. Along with this, there were assumptions made that Saudi Arabia was very keen in investing in the port city of Gwadar and other projects under the China-Pakistan Economic Corridor. But there was no confirmation given on official level.

Political Background

If we talk about this issue from a political point of view then it should be noted that The Saudi government’s formal announcement of installing a $10 billion state-of-the-art deep conversion oil refinery in Pakistan is not result of just one government. This Pak-KSA collaboration is a dividend of endless efforts of Nawaz government started in October 2015.

Exciting results

It is already a known and established fact that once CPEC will become functional, it will directly and indirectly affect Pakistan’s economy positively. The progress of project CPEC experienced its share of ups and downs because of the shaky condition of Pakistan in terms of security, stability and economy. But now with Saudi Arabia entry, the dynamics of Gwadar have completely changed. With KSA’S investment in Gwadar Oil Refinery, Pakistan is now in a way better position. If the investment plans materialize, the involvement of Saudi Arabia would further boost Gwadar’s position and have a positive impact on Pakistan’s economy. China already has excellent relations with KSA, so China, KSA and Pakistan can work together and take advantage of the deep-sea port and the land around it.

In the past few years, China has already invested $19 billion in Pakistan and it has definite plans to invest billions of more dollars to develop industrial zones as part of $60 billion China-Pakistan Economic Corridor (CPEC) project.

Work on $10 billion refinery

KSA has signed a $10 billion investment deal signed for refinery and petrochemicals complex in Gwadar.  The work on the refinery will begin within 18 months. According to government officials, the oil refinery will be operational in next three to five years and will produce 250,000 to 300,000 barrels refined oil products. Currently, these oil products are being imported from various countries and is costing approximately $2 billion in foreign exchange annually.

About proposed $10 billion investment deal signed for refinery and petrochemicals complex in Gwadar, Information Minister said work on the refinery is expected to begin within 18 months. According to officials, the facility will be in place in next three to five years to produce 250,000 to 300,000 barrels refined oil products currently being imported costing approximately $2 billion in foreign exchange annually.

Conclusion

According to Chohan Estate’s analysis, With KSA’s active involvement in Gwadar’s development, things will finally pick a speedy pace. Earlier it was only China but now with KSA, GDA will become more alert. They will now get serious towards giving license to number of housing societies that have previously done fraud with countless buyers. Many buyers bought the property and when they went to check the location, the property was not even on the land but on the waters! That was the situation of Gwadar. People initially bought a lot of properties which did not exist. And then everyone stopped paying heed to any news regarding Gwadar. Chohan Estate was one of the very few real estate companies that did not deal in housing societies in Gwadar because we do not believe in the practice of any sort of hoax. Our clients come to us because they know we are the most trusted real estate agency. Our name is our guarantee.

But now with China again fastening the process of CPEC, KSA opening oil refineries, we are sure things will get into the right direction. The government will take GDA seriously and make sure everything happens with transparency. It will be very tough for Gwadar authorities to rebuild their trust of thousands of Pakistanis. But once it is done, there is no stopping. There will be housing societies, educational institutes, recreational resorts, industries etc. Real Estate sector in Gwadar will witness a huge jump. The prices of property will hike. But this will take some time. We will inform all our loyal clients when and where to invest in Gwadar when the right time comes.