Foreign Direct Investment (FDI) is when a company, investor, or government from one country puts money into a business or project in another country. But it’s not just about buying stocks, it means owning a real stake, managing operations, and bringing in new technology and expertise. FDI is a game changer for economies because it creates jobs, builds infrastructure, and strengthens international ties.
Why Are Saudi Arabia, UAE, India, and Other Gulf States Attracting So Much FDI?
Saudi Arabia, the UAE, and India have become magnets for FDI. With business-friendly policies, economic reforms, and a massive consumer market, India has pulled in over $1 trillion in FDI since 2000. Most sectors in India allow 100% FDI, making it easy for investors to enter without excessive government hurdles.
Saudi Arabia, on the other hand, is using its Vision 2030 plan to reduce dependence on oil and attract foreign investments in non-oil sectors. Although FDI inflows in Saudi Arabia declined slightly in 2024, the country still attracted SAR 54.4 billion ($14.5 billion) in just the first nine months. The country is pushing massive projects like NEOM, a futuristic city designed to lure global businesses.
The UAE is another FDI powerhouse. It issued 200,000 new business licenses in 2024, making it one of the most attractive places for foreign investors. With over 1.1 million companies operating, the UAE is proving that its low taxes, stable business climate, and strategic location make it an investment paradise.
In the broader Gulf region, FDI projects in 2023 were valued at a massive $47 billion, proving that the Middle East is no longer just about oil. Countries like Qatar and Kuwait are also expanding their investment potential, capitalizing on logistics, tourism, and technology.
Where does Pakistan stand?
Pakistan, unfortunately, has been struggling to attract and retain foreign investment. In FY23, Pakistan’s total FDI was just $1.6 billion, increasing slightly to $1.9 billion in FY24. While China, Hong Kong, and the UK are the top investors, Pakistan is still far from becoming a major FDI destination.
There have been some promising announcements. Saudi Arabia and the UAE had initially pledged $25 billion each, but those figures later dropped significantly. UAE President Sheikh Mohamed bin Zayed recently reaffirmed $10 billion in investment, but Pakistan’s investment climate remains shaky. Investors seek stability, clear policies, and strong legal frameworks, factors that Pakistan has yet to address fully.
During July- August FY24, Pakistan attracted $350.3 million, with the power sector leading at $210.2 million and oil & gas exploration at $44.2 million. However, given the country’s economic crisis, foreign investors remain cautious.
Pakistan’s Special Investment Facilitation Council (SIFC) was created to fast-track investments, but results have been mixed. Saudi Arabia pledged $5 billion in expedited investment, yet major deals remain stuck in bureaucratic delays. The government aims to hit $100 billion in exports within five years, but without significant FDI and infrastructure development, this target seems far-fetched.
Pakistan: The Graveyard of Memorandums of Understanding (MoUs)
Pakistan has mastered the art of signing Memorandums of Understanding (MoUs) with countries and corporations, promising billions in investments. But when it comes to actual execution, most of these deals vanish into thin air. Over the years, Pakistan has signed countless MoUs with Saudi Arabia, UAE, China, and others, yet only a fraction have turned into real projects.
For instance, Saudi Arabia initially committed $25 billion under the SIFC but later revised this figure. Recently, the country pledged $2.8 billion, but only $600 million has materialized so far. Similarly, Pakistan signed 28 MoUs with Saudi Arabia, but only seven have been turned into actual agreements.
This pattern has led to growing skepticism among investors. While Pakistan offers a huge consumer market, a young workforce, and strategic geography, it lacks the political and economic stability needed to convert MoUs into reality. Until the country focuses on policy consistency, legal reforms, and investor confidence, it will remain a graveyard of big promises but little action.
While India, Saudi Arabia, and the UAE are racing ahead in attracting FDI, Pakistan is still trying to find its footing. The difference? Clear policies, economic stability, and real commitment to reforms. Pakistan has the potential to be a major investment hub, but without immediate reforms, it risks being left behind. The question remains—will Pakistan learn from its neighbors or continue making empty promises?
