Pakistan’s Military Extends its Role in Economic Decision-making Through the Special Investment Facilitation Council

June 2023 saw the establishment of the Special Investment Facilitation Council (SIFC) in Pakistan. The country’s economy has been in a dire state for over a year, which has been exacerbated by complications with an IMF loan of $1.1 billion that Pakistan was scheduled to receive, but did not meet the IMF’s requirements necessary to acquire it. This economic condition has also led to a huge reduction in Pakistan’s foreign exchange reserves, which the government responded to by introducing stringent import restrictions that helped alleviate the issue in the short-term, but that have since led to a surging of inflation (which peaked at 38% in May 2023), and the industrial sector that relies on these imports going into recession.

The SIFC has been introduced in this context of economic turmoil and has the primary goal of encouraging an increase in FDI to Pakistan from ‘friendly countries’, with a particular focus on Gulf Cooperation Council (GCC) countries. The initiative is part of Pakistan’s broader ‘Economic Revival Plan’ that intends to generate $1 trillion in FDI by 2035. It is also intended to offer a solution to Pakistan’s complicated domestic bureaucracy, which is seen to be off-putting for potential investors who are not keen to engage with Pakistan’s complex regulations. The SIFC works as an intermediary for investors so they can easily bypass the traditional bureaucracy and operate in a more favourable business environment.

On the surface, the SIFC has been advertised as a ‘hybrid Civil-Military forum’ for stimulating economic growth. It is composed of a hierarchy of three committees: the Apex Committee, the Executive Committee and the Implementation Committee, each committee comprised of both civilian and military representatives. Although there appears to be equal representation, some of the most powerful positions appear to have been given to military personnel, such as National Coordinator of the Apex and Executive Committees and Director General of the Implementation Committee.

It should also be noted that while the Apex Committee, which presides over the programme, is run jointly by the Prime Minister and the Chief of Army Staff (COAS) Asim Munir, the COAS seems to have a much more active role and has been directly negotiating with GCC countries to secure the SIFC’s first deals. Some have concluded that the SIFC therefore institutionalises the army’s increased role in economic decision-making in a way that it had not been previously.

Back in 2019, the National Development Council was established in which former COAS General Bajwa was given a key ‘economic driving seat’ position, which can arguably be seen as a precursor to the SIFC in the way it began to extend the army’s role in financial decision-making. The initiative was focused on increasing regional cooperation to aid economic development nationally. While Pakistan’s army has historically been involved in matters of foreign policy and national security, they have not had such a central role in the economic sector until more recently. A report recently produced by the Policy Research Institute of Market Economy has also warned that the military’s increased role in economic decision-making could destabilise the country’s economy due to their lack of expertise in this sphere.

Although a large proportion of media publications currently available about the SIFC programme originate from partial parties that describe it as a ‘vibrant economic initiative’ and present the army’s role as almost philanthropic, there are a growing number of indications that this portrayal not accurate. It should first be observed that during the same month that the SIFC was introduced, the government also announced nearly a 16 per cent increase to its defence budget, including an allocation of 280 billion rupees for military development programmes. This was a bold move considering that defence overspending is a key factor that has caused much of Pakistan’s economic instability. The decision to increase defence spending has been encouraged by certain Pakistani economics analysts, some of who have claimed that those criticising the spending are ‘ill-informed’ or are political adversaries of the state. These arguments have been followed by criticism of social safety net programmes like the Benazir Income Support Programme, which they argue should have its budget cut. Such arguments seem to contradict the goals of the SIFC, which is meant to help the same people the income support programme gives aid to.

The government’s decision to increase defence spending when the economy faces an existential crisis is revealing of firstly the level of influence the military has over government policy and secondly suggests that the SIFC is being used more as a military fundraising project than an initiative helping the welfare of Pakistani citizens. Although a number of investment projects have been approved by the SIFC and offered to GCC countries (including in the food, agriculture, IT, mining and energy sectors), which have the potential to bring in collectively more than $28 billion, not much attention has been paid to how these profits will be directed to those most in need besides the Prime Minister stating the projects ‘should’ have a trickle-down effect. It remains to be seen whether this will materialise in practice.

It is also essential to note that it was not the army alone who ensured they would take a central role in the SIFC. There was also a significant level of external pressure from Saudi Arabia, Qatar and the UAE to make the army the ‘guarantor’ of this new economic policy to help restore investor confidence. These Gulf countries have a long-standing relationship with Pakistan’s military and there is a history of personal relationships between the Gulf’s royal families and Pakistani military elites. In times when trust between Pakistan and the Gulf has eroded, it has been the Pakistani military which has worked to restore the relationship. Military representatives have often travelled to meet with members of the Saudi and Emirati royal families after clashes to smooth over tensions.

Munir, the current COAS, has particularly close relations with the Gulf region and spent time serving in a Pakistani military detachment in Saudi Arabia. Some have suggested that his brief time as ISI director and his experience working in intelligence have increased his awareness of how to manage the Pakistan-GCC relationship in a way superior to his predecessors. It is notable that the financial packages Munir has recently secured from Saudi Arabia and the UAE as part of the SIFC were almost the exact same deals civilian Pakistani representatives had already unsuccessfully tried to obtain. This suggests that interpersonal relationships matter a great deal to GCC countries and that their provision of aid seems to depend on who is asking more than what they are asking for.

The Gulf countries have a history of looking for financial opportunities in Pakistan and it seems they see the military as the best mediator for this relationship. The SIFC has further consolidated this collaboration, with initiatives such as a $25 billion investment negotiated by Munir and Saudi Arabia’s Prince Salman in September, aimed at developing Pakistan’s agricultural sector. Farming contracts were given in exchange for this advanced fund, exemplifying the kind of financial opportunity the Gulf countries are receiving. Pakistan’s military already owns large tracts of the country’s land and has recently asked the government for another million acres of land for ‘corporate agriculture farming’. It appears as though the military wants to ensure they are in control of this financial relationship with the Gulf and are starting the initiative by giving contracts in a commodity they have considerable control over. Tracking which sectors the SIFC is prioritising and who this is benefitting is likely to be one of the best ways we can decipher how the SIFC is being used.

In recent weeks, a secret arms deal between the US and Pakistan has also come to light in which Pakistan agreed to provide munitions for Ukraine in exchange for US help securing the IMF bailout loan, even though Pakistan has officially taken a neutral stance on the Russia-Ukraine war. These kinds of covert deals may be another form of military fundraising that should be monitored.

Pakistan is receiving funding from the IMF, arms deals and SIFC initiatives through contracts with GCC countries, but it still remains to be seen whether this capital will bring about lasting economic stability and reach the people who need it. The announcement of an increase in defence spending in this context of economic hardship seems to be indicative of the extent to which the military is prioritised in financial decision-making.

It is also important to understand the role of the Gulf countries and their monarchies in the maintaining of military power. These countries have ensured the military took a central role in the SIFC, promised funding to the COAS after denying the same requests from civilian representatives and have chosen to invest in industries the military has significant control over. Moving forward, it will be important to further explore this relationship to better understand what both sides are aiming to gain from this cooperation.

It currently appears that certain Gulf countries have been given access to investment opportunities in Pakistan in exchange for providing the military with a sturdy source of funding, but the SIFC is still in its early stages and it remains to be seen how this initiative will manifest in the long-term. With this initiative not so far providing the prospect of national economic recovery, the government will likely need to find other ways to create sustainable economic stability. As it currently stands, the SIFC certainly does not appear to be the ‘vibrant economic initiative’ it was advertised to be and while it promised to assist all the people of Pakistan, so far only the Pakistani military and GCC countries seem to have benefitted.

[Photo by Prime Minister’s Office, Pakistan]

The views and opinions expressed in this article are those of the author.

Bangladesh-France Bilateral Relations in 2023: Issues and Directions

Since February 1972, after France officially recognized Bangladesh as an independent nation, both countries have been relishing an efficacious relationship over the years. In...

Phenomenon ‘Pork Barrel’ Politics in Indonesia

Recently, Indonesian people have been shocked by the film Dirty Vote, a masterpiece that provides the public with an understanding of the fraud that...

Why Muslim Countries Are Holding Back Against Israeli Aggression

The Israeli government has been bombing Gaza for some time now.  They are also increasing their attacks on the West Bank. Most of the...