ISLAMABAD: Pakistan and Saudi Arabia have reached an agreement for a bilateral legal framework required to pave the way for huge Saudi investment here.

A source in the government said a formal agreement was expected to be signed in the near future. Authorities here see it as a big achievement. “The major barrier for Saudi investment has been removed,” the source said.

The Special Investment Facilitation Council (SIFC) played a key role and finalized a detailed investment framework for Saudi investment in Pakistan in consultation with Saudi authorities. The caretaker cabinet, the source said, had already given approval to changes in the legal framework for investment as per international standards.

In view of some investment disputes lost by Pakistan in international arbitration tribunals in the past, Pakistan has been hesitant for including provisions relating to international arbitration in new investment agreements. However, foreign investors generally want provisions relating to international security to their investment.

Pakistan’s foreign investment environment was badly marred by interference from courts and the National Accountability Bureau (NAB) that in the past led to international arbitration. Pakistan was fined $6 billion by the World Bank’s International Centre for Settlement of Investment Disputes for cancelling a mining lease for the Reko Diq project to Australia’s Tethyan Copper Company. Foreign investors are not willing to bring major investment without having concrete guarantees and the international arbitration option. Saudi Arabia’s concerns were no different.

Pakistan expects around $25 billion in investment from Saudi Arabia. It also eyes huge investment from the UAE, Kuwait and Qatar for which the SIFC is keenly working on creating an investment-friendly environment in Pakistan.