Pakistan, Malaysia eye stronger economic ties through investments

Bilateral Pakistan-Malaysia ties may witness an improvement in the coming months as both parties gear up to explore avenues of collaboration. In a recent Facebook post, Malaysian Prime Minister Datuk Seri Anwar Ibrahim encouraged the inflow of investments from Pakistan into the Southeast Asian country.

Reports suggest that Anwar Ibrahim engaged in discussions with Prime Minister Shehbaz Sharif. The Malaysian premier believes that Pakistani investors could pour their funds into the agriculture, biomass and petrochemical sectors of the Malaysian economy.

This might be an attractive prospect for Pakistani businesspersons and investors given how the State Bank of Pakistan has slashed policy rates by a staggering 1,000 basis points over the past few months. Furthermore, political instability, coupled with the rise in terrorist violence, could push domestic investors to pursue ventures in Malaysia.

As per credible reports, Pakistan’s investments in Malaysia have already surged to approximately $397 million. Anwar Ibrahim’s call for deepening bilateral economic ties could allow for this number to witness a rise.

Shehbaz Sharif has reassured that Pakistan remains committed to strengthening ties between the two nations. While foreign investments yield great returns for investors, the outflow of funds required for these investments may serve to the detriment of cash-strapped Pakistan.

Given Pakistan’s low foreign exchange reserves of $10.61 billion, large foreign direct investment (FDI) outflows could exert depreciationary pressures on the rupee by increasing the demand for foreign currencies. Moreover, such outflows may trigger a loss of investor confidence in the wider economy, as the outflows could be seen as a sign of economic weakness.

This could prompt further capital flight and financial instability in the economy. To clarify, capital flight in this context would refer to the accelerated movement of financial assets from Pakistan to Malaysia.

Alternatively, if Shehbaz Sharif can navigate further discussions by successfully attracting Malaysian investors to park their funds in Pakistan, the bilateral investment imbalance could shrink. As per reports, Shehbaz Sharif is expected to visit Malaysia in May 2025 and could secure these investments for Pakistan.

Reports indicate that the Malaysian side has already begun preparations to welcome Shehbaz Sharif’s visit to Kuala Lumpur. Both leaders expect Pakistan-Malaysia economic ties to deepen during Shehbaz Sharif’s visit to the Southeast Asian nation.

According to reports, Shehbaz Sharif eagerly awaits his trip to Malaysia as his visit could yield beneficial outcomes for Pakistan.