OBG talks to Shaukat Aziz, Former Prime Minister of Pakistan

Interview: Shaukat Aziz

How do you assess the bilateral relationship between Pakistan and Saudi Arabia?

SHAUKAT AZIZ: Pakistan and Saudi Arabia have a strong, multifaceted strategic relationship that is driven by several factors. First is a common faith. For every Muslim county, Saudi Arabia represents the two holy mosques. Second, we have a large diaspora here, working in all facets of business – from CEOs to taxi drivers. Third is religious tourism. People in Pakistan, whether rich or poor, have a desire to come to Saudi Arabia to perform their religious obligations. In short, it is a deep relationship: we have cooperation in every field, including security, defence, diplomacy and economy. The relationship is strategic, reflecting the values that both countries share. Governments have come and gone in Pakistan, but Saudi-Pakistan relations have stood the test of time.

What does the increased focus of GCC economies toward Asian markets mean for Pakistan?

AZIZ: The GCC-Pakistan relationship in terms of trade and investment is significant. Notably, Middle Eastern investors have been involved in many of the privatisations of our state-owned businesses. For example, the national telephone company was bought by Etisalat of the UAE. We have banks that are owned by investors from the Middle East, as well as major property investments from Saudi Arabia and the UAE. There are Pakistani joint investment companies with investors from Saudi Arabia, Kuwait and other parts of the Middle East, and they have been successful in attracting private capital into Pakistan. The business sector here is sophisticated and comfortable dealing overseas. There is also a lot of trade flow between Saudi Arabia and China, ASEAN and South Asia, which is a positive sign.

Are emerging economies adequately represented at the transnational financial institution level?

AZIZ: I think that emerging economies are quite poorly represented. The first reason for this is that when the Bretton Woods institutions were founded, the money came from the developed world. The developing world did not, at that time, have the resources. Today some countries have enough equity that they can veto anything, which damages the fabric of a multilateral organisation. Second, developing countries should put more capital into these institutions, if allowed to do so. Third, since these are global institutions, we should not look at the passport of the individual.

These institutions must promote meritocracy, and there should be objective criteria, not a situation where at the end of the day, the country with the veto will decide. That may have been the situation when these organisations were established, but today the world has changed. The World Bank, the IMF and other institutions should promote merit and allow every part of the world to be represented. When this happens, it will improve, enhance and enrich those organisations. Multinational financial institutions will always perform better when they make merit the primary criteria.

What steps could be taken to further liberalise the capital markets in Saudi Arabia?

AZIZ: The Saudi capital markets are already quite liberalised. It is easy for people to buy and sell shares, and the markets are growing well. Like any market, they have had their ups and downs, but generally speaking, Saudi Arabia has a very good economic framework that over the last 30 years has overseen an impressive rate of development, growth and sophistication. I would say that the Saudi Arabian Monetary Agency and Capital Market Authority are among the best regulators in the region. They have avoided any major crisis and have tried to improve governance and transparency. I have always been very impressed, having both lived and worked here, with the quality of people with whom I have dealt in the government. These days capital markets are all global, but you have to keep some order in terms of speculative activity and hot money inflows. You need circuit breakers to make sure that does not happen. Apart from that, I think that the markets are very open.