Pakistan’s investment challenge is turning pledges into capital and productive capacity

Pakistan's investment landscape is shifting from a focus on high-profile pledges to the actual creation of capital and productive capacity. Saudi Arabia's involvement in the Reko Diq copper-gold project exemplifies this shift, as it signifies strategic commercial engagement rather than simply a headline investment. The involvement of international institutions like the Asian Development Bank and the US Export-Import Bank also marks a change in the nature of Pakistan's investment opportunities.

The distinction between a mere interest in a project and actual ownership is crucial. Saudi Aramco's acquisition of a 40% stake in Gas & Oil Pakistan Ltd represents a significant step towards productive investment, as opposed to the more fleeting nature of memorandums of understanding (MoU) and other forms of temporary foreign exchange. Commercial investors seeking long-term returns, strategic advantages, and value look for assets that they can understand, value, and govern.

Pakistan must showcase projects that are transparently valued, backed by credible boards, and have commercially viable business plans to attract these investors. This requires clarity regarding the risks associated with taxation, regulation, security, land, environmental obligations, and changes in government. In the minerals sector, such fundamentals are of utmost importance, as even substantial mineral reserves can remain unrealized without certainty in geological potential, exploration rights, taxation, royalties, environmental responsibilities, and land access.

While borrowing and deposits can provide temporary relief, portfolio investment can quickly depart. In contrast, productive investment, such as a successful mine generating export revenue for decades, a competitive manufacturing plant replacing imports, efficient logistics lowering the cost of moving Pakistani products internationally, or energy investments reducing the cost of imported fuel, is far more durable and impactful.

Recent foreign direct investment (FDI) figures show a decline in net FDI from $2.48 billion in FY25 to $1.64 billion in FY26, a 34% decrease. However, these numbers should not be interpreted mechanically. The focus should be on projects that have reached financial close, generated foreign capital, created productive assets, and resulted in sustainable job creation and additional export capacity.

Investment pipelines should be tracked through clearly defined stages, from expression of interest to commercial operation, allowing the government to measure the actual economic impact and distinguish between commitments and real investment achievements.