Should Pakistan sign agreements with MBS?

News Analysis

Crown Prince Mohammad bin Salman is due to visit Pakistan this week on a two-day visit for a series of investment talks. The meetings will be a follow up on PM Imran Khan’s visit to Saudi Arabia last year.

The meetings will consist of $10 to $12 billion investment projects in Pakistan, pertaining to some mega-projects, such as the establishment of an oil refinery in Gwadar and the investment on solar plants in Bahawalpur.

Economic Perspective

The series of investments from the Saudis will prove to be beneficial for the Pakistani economy as, at least for the short run, Pakistan will see economic development in terms of high Foreign Direct Investment (FDI) and the reduction in unemployment in the regions where such projects are being carried out as there will be a need for an increased labour force.

As of the last fiscal year, Pakistan had witnessed the worst current account deficit of nearly 5% of the overall GDP, which, in layman’s terms, means that Pakistan’s expenditures were far higher than its revenues, therefore the Balance of Payments (BoP) also suffered greatly. These investments from the Saudis, if anything, will help curb the slow pace of economic growth in the country. As a result the country will be able to get back on the road for economic stability. However it would be futile to admit that accepting the investments won’t affect the BoP or the current account, because the country will be liable to meet the economic and financial interests of the entities [the Saudis] that provide them with the investment. At the same time, FDI also leads towards rising imports of technology, experienced labour, capital goods and other raw materials in the long run.

According to the article Foreign Direct Investment and Balance of Payments published in Essays, UK (November 2018), “the early[short-term] effect of an inflow of FDI on BoP is invariably positive”, whereas the article also states that, “…FDI inflow tends to increase the imports of (the) host country because the FDI companies import capital and intermediate goods and services that are not readily available in the host country. The increase in GDP due to the inflow of FDI may also be followed by the increase in imports. All these factors cause negative impact on the BoP.”

Despite having mentioned the points above, Pakistan is at a point in time where it is financially poor and requires the assistance of entities like the Saudi investment deals and the Chinese investment projects.

Political Perspective

Historically, Pakistan has always had great relations with Saudi Arabia. Both countries have been linked together through a series of mutual ideals and understandings. Pakistan has provided military assistance to Saudis in the past, while the Saudis have provided financial assistance to the country.

Keeping in mind the ties that make the alliance between the two countries so strong, when it came time for Pakistan to seek some financial assistance, for economic growth because of the horrible effects of the last fiscal year, PM Imran Khan approached Crown Prince MBS for a series of talks, which resulted in Riyadh granting Pakistan a $6 billion lifeline.

The talks, which were held in November of last year, paved the way for a series of investment talks scheduled to begin this week, with the arrival of MBS.

In an unprecedented step, the Crown Prince will stay at the PM house, which in the past has only ever been reserved for the PM. This also goes to show the extent of the political relations and ties with Saudi Arabia.

Moral Perspective

In the past Saudi Arabia has been subject to many controversies, however, since the arrival of the Crown Prince, into the position of authority, a lot more controversies have been building. Therefore, let us ask the question: Is it morally correct to accept the investments from the Saudis, because of their controversial involvement in provocative circumstances?

On October 2nd 2018, popular journalist Jamal Khashoggi was assassinated at the Saudi consulate in Istanbul, Turkey. The cause of death is still unknown, as the body was never located or examined. According to Turkey, the assassination of Khashoggi was premeditated and several anonymous Saudi officials along with the Central Intelligence Agency concluded that the Saudi Crown Prince Mohammad bin Salman ordered the assassination of Khashoggi.

In foresight, it would be immoral to hold talks or negotiate with an individual who has been accused with a crime such as this, but politics are always strange, as can be seen in the example of the continuous support of the US government in the face of the heinous and immoral acts that Israel has been involved with in Palestine.

Conclusion

At this point in time it is difficult to label anything as immoral or economically ineffective because the sad truth of the matter is that Pakistan is not in the position where it can choose between right or wrong and must constantly rely on the support of other nations.

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