There is a very slim chance that Pakistan may be able to win Saudi Arabian support for the resumption of its IMF programme, but if it does, this will be a temporary respite.
Pakistan will not be able to secure any major package of economic support from Saudi Arabia today or in the foreseeable future because the model for such blanket support simply does not exist anymore. Saudi Arabia has changed rapidly (and for the better) – and its rulers, whilst maintaining very strong feelings for Pakistan, simply do not have the capacity to continue to allow Pakistani elites (military and civilian) to convert those fraternal bonds into unconditional bailouts.
The changes in Saudi Arabia over the last decade, and especially since the middle of 2017, have rendered traditional ways of working in Riyadh obsolete. Pakistani military and civilian rulers can continue visiting Riyadh and asking for the same thing over and over and over again. The absence of the traditional blank cheque from Saudi Arabia should have indicated to Pakistani authorities the drastically different scenario for how this new Saudi Arabia makes decisions. Sadly, just like here at home, Pakistani leaders continue to fumble away the country’s potential abroad. No bilateral relationship captures the incredible incompetence of the Pakistani elite better than the Pakistan-Saudi Arabia relationship.
In November last year, I was invited to moderate a panel of global and Saudi leaders on the idea of embracing social and economic transformation at the Misk Global Forum. The Misk Foundation is a non-profit established by Saudi Arabia’s Prime Minister and Crown Prince Mohammad bin Salman (MBS). I landed in Riyadh after having visited Makkah, Madinah, Jeddah and the incredible headquarters of Saudi Aramco in Dammam. The first impression any sentient person will draw from Saudi Arabia today is the vibrancy and electricity of its young people – a vibrancy and electricity that is being fuelled by a ruling elite fully invested in actualising the potential of its young people.
To many Saudi sceptics, both in the West and among a substantial number of Pakistanis – elites and otherwise – the notion of this new Saudi Arabia is difficult to grasp. But whereas Pakistani memory of the kingdom continues to be shaped by the past, Saudi Arabian aspirations are rocket-fuelled by the future. How and why is this happening?
For starters, when King Salman decided to appoint MBS as the crown prince, he achieved in one fell swoop what at least four Saudi kings before him had not – the transfer of power to a new generation of Saudi Arabians. Still only 37 years of age, the prime minister and crown prince shapes the future of his country as any reasonable millennial would, with a keen eye on the next four to five decades. Perhaps the single greatest advantage millennial leaders have on their Boomer and Gen X counterparts is their lack of connection to the burdens of past practice. When this past practice is widely acknowledged to have not worked very well, the millennial leader finds it easier than his or her elders to do away with such tradition. Enter Vision 2030.
The MBS advantage in Saudi Arabia is hinged on this notion of dispensing with tradition that doesn’t work. A series of bold decisions to break with tradition were made in quick succession in Saudi Arabia. It is important to enumerate some of the most significant of these to understand the scale and quantum of change in the country.
In 2015, the kingdom’s principal sovereign wealth fund, the Public Infrastructure Fund (PIF) was placed under the stewardship of the Council of Economic and Development Affairs, freeing the fund from the traditional bureaucratic machinery that had come to dominate it. In April 2016, the religious police were dispossessed of the powers they had gained during the 1980s and beyond – freeing up society from the harsh restrictions that were imposed, often arbitrarily, on Saudis and foreigners alike. That same year, the country announced its long-term plans through a document titled Vision 2030 that seeks to advance Saudi interests by leveraging its cultural and religious centrality to the Arab and Muslim world, the power of its financial wherewithal to diversify and expand its economic capability, and it strategic location as a hub for connectivity between Europe, Africa and Asia.
In 2017, restrictions on women driving motor vehicles were lifted. In 2019, Saudi Aramco went public, raising $29.4 billion in a single day for a mere two per cent of the company’s ownership stock. In 2022, another four per cent was transferred, then worth $80 billion to the PIF. Full circle? Not even close. The rapid changes have produced eye-popping results. Saudi Aramco posted a profit of $161 billion last year, with nearly $20 billion in cash dividends being awarded to the shareholders (two per cent) and PIF (four per cent).
To the eyes and ears of Pakistani boomer decision-makers, these large sums of money may seem to ring loudly as signs that truckloads of cash await them at King Khalid International Airport in Riyadh. Nothing could be further from reality. The mere publication of these profits is itself a sign that the old unconditional cash transfers that Saudi rulers were able to offer Pakistani elites are simply not available. Saudi Arabia’s wealth is no longer the purview of the whims of its rulers. It is subject to the professionalism, competence and boldness that defines Vision 2030 and the generation of millennial leaders of Saudi Arabia led by Prime Minister Mohammad bin Salman.
In February 2019, MBS visited Pakistan. Excitable Pakistani officials announced $10 billion of Saudi Arabian money would suddenly be invested in Pakistan. That $10 billion figure has since been repeated on numerous occasions. And yet none seems to materialize. Pakistanis should understand why.
Saudi investment in Pakistani assets requires basic paperwork and due diligence. Understand also that Saudi officials have every reason to treat Pakistan as a priority investment destination for two reasons. First, the warmth and familial nature of bilateral ties kind of forces Riyadh’s hand, provided the basic ability of Pakistani authorities to do the deal-making and deal-closing homework. Second, Pakistan is a country of nearly 240 million with a massive youth bulge; even mediocre economic performance in the country will make most investors here seem very smart down the road.
Yet, despite all the incentives for Saudi investments to be formalized and closed, four years after the MBS visit to Pakistan, none have materialized. The reason is simple: Pakistan has repeatedly failed to provide even the very basic paperwork and due diligence required to close divestments of some of the publicly owned assets under discussion. Green field investments like an oil refinery are much more complex. There too basic challenges like protection under the law, land acquisition, and political stability – local and national – stymie any real progress. The harsh truth? Pakistan has neither the bureaucratic capability, nor the decisive national leadership to allow for investments from Saudi Arabia (or the UAE or Qatar for that matter) to materialize.
Meanwhile, Saudi support for Pakistan continues to be available. But a more ambitious and globally competitive Saudi Arabia than what fifty, sixty and seventy something Pakistani decision-makers can conceive demands quick, competent and decisive deal making. Absent this kind of serious engagement, Pakistani elites will be lucky to score a billion here, two billion there. Such funds continuing to trickle into Pakistan’s treasury to help prevent an apocalyptic technical default will, over the longer term, actually erode the quality of fraternal relations between the two countries. It is hard for a soaring falcon to consort too readily with an ostrich that prefers burying its head in the desert sand.
The recent thawing of the Riyadh-Tehran relationship, and OPEC’s consistent denial of US demands for higher output are part and parcel of a coherent and consistent new Saudi Arabia – the compulsion to design its foreign relations in terms that make sense for young Saudis is consistent with this new Saudi Arabia.
Old Pakistanis trying to scrape the bottom of the barrel have already been relegated to embarrassing caricatures as they continue to Jurassic Park their way around the region and the world. There are lessons from Saudi Arabia that need to be learnt and applied in Pakistan. But an elite that never learns from what is right under its nose is unlikely to benefit from the experience of a true friend, ally and now archetype – beyond its borders.Mosharraf Zaidi, "Why Saudi Arabia won’t bail us out," The News. 2023-04-04.
Keywords: Political science , Political issues , Political stability , Bureaucratic , Economics , PM Prince Mohammad bin Salman , Saudi Arabia , Pakistan , PIF , IMF